Lean Leadership - The Invisible Force Copyright 2010

Peter Knorst �”We started our Lean journey at Ford Motor Company in 1983. Inspired and impressed by the success in gaining market share achieved by the Japanese car manufacturer Toyota we went to Japan to study their means and methods, and we came back with the right recipe. With this is at hand we implemented all the good things we have seen, such as: Quality circle, Kaizen, VSM (called MIFA at Toyota), JIT, Kanban-system and all the other methodologies you can read about in the Lean books. We started to pour all our energy into implementing these tools. To our big surprise, however, the tools did not really deliver. We were making good progress but we were not closing the gap to Toyota. So what was wrong, we asked ourselves. Then we made a bold move. We hired some Lean-senseis from Toyota, and only then we started to learn. These senseis told us how Lean is all about behaviour, all about the way we work together in teams; management and employees. We decided to test this alleged �‘need for management behavioural change�’. Thus, in a pilot factory all senior managers were appointed a full-time Toyota-sensei, 7 AM - 7 PM. My sensei was constantly challenging what I did, and he was constantly asking me: �“Why have you done this?�”, �“Why have you not asked this question?�”, �“Why have you missed to go-look-see?�”, �“Why have you not asked for the root-cause?�” and so on. This guy was really a burden to me, and after only 6 weeks I wanted to get rid of him. I was about to resign from my job. But slowly I began to think that there had to be something right about what the sensei said and I started to learn to ask the same questions to my team. And over time this constant sensei coaching, this sensei constantly challenging my leadership behaviour let to my epiphany: The key to Lean success is the daily use of the tools, and how I daily manage the business together with my team.�”

Thomas Thorsted �“I meet Peter in late 2005. At that time we were 3 years into the Lean programme of Novo Nordisk. Until the middle of 2005 we had achieved a lot of very good results, but suddenly we experienced that even though we had appointed the best internal Lean consultants and even though they had implemented the necessary tools in cooperation with line of business we could not sustain the improvements after the consulting team had left the area. Almost all the achieved productivity and efficiency gains disappeared after 2-3 months. What was wrong? We had read all the 25 right books about Lean, change management and transformation. The Lean office consisted of 25 handpicked Lean experts from all over Denmark. Every day we were out in the �‘field�’ implementing our standard Lean toolbox all over the organisation.

After analysing our problems we found out that line-management was missing in driving the Lean transformation on a day-to-day basis. But how to change that we did not know. Lucky for us we had an internal Lean summit in December 2005 with Peter as one of the external speakers, and during his presentation we found out exactly what we needed in our Lean programme. We had put so much energy in rolling out the tools across the organisation that we had totally ignored the need for adjustment of the leadership mindset. After 3 years, management still had the mindset that their daily job was split between managing a Lean-project and managing production. We needed them to understand how to integrate the two and benefit from the Lean philosophy in their daily work. So in the beginning of 2006, Peter and I built the Lean leadership concept together based on his experience from Ford and my knowledge of �‘Novo Nordisk Way of Management�’ (Vision, Charter and Policies). We tested it in two pilots. The result of the two pilots was tremendous. In both pilots we were able to increase performance by approximately 40%. And more importantly, after half a year is was still sustained.�” Change must come from within Knowing from the transformation of management in Novo Nordisk and inspired by automotive learning, we saw that a transformation in leadership mindset and behaviour must come from within. We can be inspired and we can learn from others, but you need to customize and tailor it to your internal needs. For that reason it is important to obtain management commitment, and only if managers and leaders really want it you should go ahead. That will be the difference between failing and succeeding. Where are we now in Ford and in Novo Nordisk? After all these years of experience have we really witnessed a turnaround in management mindset and behaviour? And on the scale, have we overtaken Toyota? Or where is Toyota at all? We may wonder why Toyota have all these quality concerns at the moment. The logic for everyone is that after 70 years of experience Toyota still struggle in achieving the right leadership mindset. The conclusion for all others is that you will become a better Lean leader over time, but it is a constant learning curve and it will never end. You need to accept as a leader that every day you need to aim for continuous improvement of you leadership behaviour and mindset. Let�’s talk about what Lean leadership is The most important part in Lean leadership is to make invisible things visible. Visibility is everything. First, on the tools side 5S, visual factory, performance boards, VSM, Kaizen workshops, TPM etc. The second visible thing is activity. We take action when faced with the demand for it. Third, we ask the envolved parties for their feedback to find out more about their engagement. When we receive an 4,2 out of 5 in a employee survey it makes us happy. But what do we get out of it at all? What do we really need in our Lean environment to achieve sustainable success? We need to create transparency in how our leaders think. We need to really know how they manage the business. We need to make it obvious how much our colleagues really engage. What we achieve with Lean leadership is that every day everyone contributes with good improvement. This and only this delivers continuous improvement. In the Lean environment we create overall transparency. Because we understand the importance of real-time status of where we are. At a glance we want to see the status of our business, defined as the status of problem solving, people engagement, and of how much our leaders support the employees in order to drive the business. The backbone of Lean leadership behaviour Many companies have performance board meetings nowadays without actually having transparency. They can�’t explain why they have �‘good days�’ and bad days�’ when fluctuating in performance. You see a lot of boards with actions that are not followed though by use of the PDCA. By not having PDCA, your counter actions are merely fighting fire and not fixing the root cause.

The thinking of a manager with traditional leadership mindset A production manager was explaining that he could not meet the production numbers yesterday. He told that it was because of all these new people at the production line. He thought it was a nice explanation. Talking with him about why he did not train the workers properly and why he did not ensure that the ones he put at the line performed it all of a sudden become obvious for him that putting new people to the line was not the problem, but the way people was assigned to the line was the problem. Traditional leadership behaviour To explain the difference between traditional leadership behaviour and Lean leadership behaviour let us look at how the most common Lean tool, the performance board meeting, is executed when traditional leadership behaviour is used. At these board meetings you will see and hear the manager stand in front of the board explaining why performance has not being achieved and why counter actions have not been taken. He will say that he expects to be back on target, but he does not elaborate his words explaining what actions will be taken, nor does he feel it necessary to do so. That brings us to the question: Who owns the process? In the traditional leadership mindset the classical answer is: �“We own the processes, because we are the fire fighters�”. But that is not true! Who prevents the fires every day? Who keeps the processes under control? Who knows best how to run the business? It is the workers and employees of course. The behaviour from a leader with a developed Lean leadership mindset will be to assign this accountability to his employees, empower them and engage them so they can deliver what is expected. What does the leader then do? The Lean leader will spend 80% of his time daily on the shop floor to coach and teach the people and support them in problem solving. Being on the shop floor the leader will be able to challenge status quo and inspire the employees to be innovative about continuous improvement. In Lean leadership everything else comes in second. The foundation for executing on Lean leadership behaviour will be the board meeting, daily waste walks and process confirmation. Only by doing this the leader will be able to observe and feel his team�’s accountability for improving the processes. Here, he will also be able to get requests on road blocks to remove in the value creation process. The leader�’s finest job now becomes to handle all the problem escalations that the members of his staff address. This means that the employees and their needs now dictate how the leader prioritises his time. One of the dedicated Danish Lean companies has developed a pocket card that the leader always carries with him. This card shows guides on how to behave. The philosophy in Lean leadership behaviour is: �“If problems occur it is not due to the people involved, but because I allow the process to fail�”.

Lean Leadership Behaviour

Lean Leadership Actions

1. Teach and engage teams 2. Respect people 3. Be process focussed 4. Support and recognise 5. Guide and lead understanding of

objectives 6. Commit to standards 7. Understand long term vision and

principles 8. Support the change process 9. Lead by example

1. Continuously ask for improvements 2. Challenge status quo 3. Control status towards objectives 4. Ask what went wrong �– not who made

mistake 5. Ask 5 x why 6. Always practise go-look-see 7. Be effective and consistent in

communicating 8. Do what you preach �– Walk the Talk 9. Don�’t accept deviation from agreed

standards �– react immediately 10. Take the right containment actions and

control their effectiveness 11. Inspire people and motivate creativity 12. Praise and recognise good work

An other dedicated Lean company has implemented standard work for leadership. 6.45-10.30 AM and 2 -4 PM no meetings are allowed. In the morning shop floor presence, board coaching, teaching and problem solving are on the agenda, in the afternoon waste walks, process confirmation, long-term business board meetings, cross organisational value stream improvement and people development talks are on the agenda. Meetings are only allowed between the two timeslots. Coming back to engage and empower the people Why should we do that? The first reason is that the employees need to know what is expected and how they can contribute. Thus, policy deployment requires every individual to know how to contribute to the next level of goals. They need to know what is expected from them, and they need to know what makes today a �‘good day�’. It needs to be measurable, and it needs to be agreed in unison and committed. This creates engagement. The people involved need to be in control on how to achieve the tasks. Therefore, the leader must tell the people that they are the ones who own the processes. This will create the empowerment. The leader needs to empower people to have everything in place in order to perform, and at the end, only when they know what to do they will feel accountable and take on the ownership of the processes. In companies with traditional leadership behaviour we have seen quite a few policy deployment directions from senior management. The mindset of these leaders is not to involve the people at all. Therefore, people can�’t relate to the KPIs that are cascaded down because they can�’t understand their contribution nor the relevance of the KPIs. People in these companies can�’t engage themselves in supporting their senior management in delivering results. How should policy deployment be implemented? In a Lean leadership mindset, policy deployment works in a way where senior management defines the overall goals. From there the goals are cascaded a top-down. The employees will be involved at every level in the organisation on how to support these goals. When people are asked to define their own KPIs they take ownership. The leaders facilitate the process in building a KPI tree where everyone can see how the goals are linked together. The KPIs are anchored on the boards. These boards create the right level of business talks and when the KPIs are reviewed frequently the leaders get a continuous feedback on how the organisation performs. The leader goes through the board agenda and facilitates the right level of talk encouraging the right behaviour around the board. The employees report on their performance, discussing problem solving and how to get back on track if not meeting the target. They must communicate clearly in order for the leader to be able to take control in helping and supporting to solve the problem. This is not about delegating problem solving to the leader as it is done in traditional leadership culture. The Lean leadership behaviour first takes on action when the leader has challenged the team, and coached the people involved into solving the problem by themselves. Only the problems that people can�‘t solve need to be escalated and the next level in the organisation needs to take ownership. An example from a board meeting On this board meeting the business talk was about how to coordinate the supply of products. The attendees were only discussing why the products had not arrived at the customer at the right time. But no one focused on their role as coordinators. Are the coordinators just to coordinate? Or should they take preventive action to ensure that the products arrive on time? Their job is done when they coordinate in a way that the product arrives at the customers on time. As coaches we have observed a lot of board meetings where the participants around the board including the manager found that they had a really good value discussion under which they decided on a lot of actions. But at the coaching session afterwards they could actually not confirm whether they had made a difference to the business or not. They had taken a lot of actions during the meeting, what we call activism, but we could not see that they really have moved the business further. The point is: All these discussions around the board need to be tendered by performance, and if the team members meet the performance standard everything is nice. If they don�’t meet performance, they need to know and understand with facts what went wrong, and they need to agree on appropriate actions to resolve the root-cause. This differs from traditional leadership mindset where non-fact

based actions are taken and where the PDCA is furthermore ignored because the leader wants to show execution power. The need of expert coaching The coach observes the board meeting and gives feedback afterwards. By doing this people improve their performance around running a board. You sharpen their view by asking them 5xWhy on what went wrong, and you improve their ability to take appropriate actions to fight the root-cause. The coach brings training and guides for the leader on how to run an efficient board meeting ensuring that the leader asks for the root-cause and helps people solve it. The coach also needs to enlighten the leader to see the right things on waste walks and process confirmation. Coaching ensures sustainability. When do we perform? Is it when all our KPIs are in green? It is when we are coached long enough to be able to see the difficulties and the areas we need to work on before performance drops? In a Lean leadership mindset problems are welcomed. These leaders regard problems as an opportunity to improve. In the traditional leadership mindset leaders are green driven, and see red KPIs as a weakness. When they have red KPIs they often respond by blaming others, explaining excuses and covering up the bad news. Deep in the DNA of these leaders there is a desire to always explain why things go wrong. There is a desire for placing the responsibility for why things go wrong instead of proactively fighting it. The bad board meeting In an energy company the manager used half an hour on each board meeting explaining the cause of every red KPI and who he believed was responsible for his miserable performance status. After 3-4 weeks people started to get frustrated and uninterested in the board meeting. The leader left them with the feeling that it was waste of time because it became a meeting focusing on the managers needs and not the needs of people and processes. What did the leader need to change to develop a Lean leadership mindset? Let people involved explain status based on facts collected and analysed in due time before the meeting. People will be happy when all their problems are discussed and the appropriate action is taken. They need their problems to be removed forever. They go to work with a desire to perform. What results have we seen with the implementation of Lean leadership? All our transformations have led to tremendous increases in performance. In focus group interviews we have received very favourable feedback from the shop floor. They feel very much engaged and feel that they are part of the overall Lean ambition in their companies. The leaders say that they have reduced their fire fighting and that they save time. Time is now used for long-term business, strategic initiatives, a lot more shop floor presence, as well as coaching, supporting and challenging their teams. Are all leaders working with Lean ready for changing their traditional leadership mindset? Our experience is that all leaders have the ability to adapt to the new Lean leadership mindset. But not everyone will be capable of doing it without intensive coaching and support from their own leader. Even though initially, some of these leaders will not feel comfortable in being a leader in this new leadership system, not many of them leave or are forced to leave because, over time, most will adapt to the new leadership system. Not every leader nor every company culture is ready for this change in leadership mindset. Despite this many companies have implemented Lean tools and techniques for years, surprisingly. �’Center for Ledelse�’ interviewed 400+ companies concluding that only 7% had realised more than 80% of their expectation in their Lean programme. This only confirms that these companies need to take action now in adapting Lean leadership behaviour and mindset in to their company culture. We believe that every leader deserves a chance, but remember you will have to fight a lot of scepticism down that road. You will convince the team members, by showing them what is in it for them personally. People will change when they realise that their leaders really want Lean leadership. Leaders need to be consistent in what they ask for. They should not reduce their requirements. They should not change their communication. Consistency it required and we must accept the fact that it takes time.

Closing Lean leadership is probably very much aligned to what you call your �‘way of management�’. Much in the Lean leadership definition is probably what you already have in your company�’s fundamentals and in your definition of good leadership. So what is your problem in getting started? Lean leadership will only bring all this good stuff in to action. It brings alive what most companies have already stated in their policies. To get started take a look of these 5 fundamental habits of a Lean leader:

1. Focus on processes, its standardisation and robust execution 2. Really solve root problems and make necessary adjustments to the standard processes 3. Create transparency of performance status at all levels and frequently review status 4. Align operational and long-term business tasks and cascade to all people to exactly know how

everyone can contribute 5. Support people, recognise their need for control over their operational business and the

leader�’s responsibility to coach and challenge Mark it against your present leadership- and business system, and find out where you are right now e.g. 1 to 5, and make a plan for how to change the low scores. That will be a good beginning. Explanation Waste walk Leaders going through their area daily spotting opportunities to eliminate waste. Process confirmation Leaders observe daily how well their people execute the agreed standard processes in order to understand deviations from it and take necessary action PDCA Is a cycle of activities (Plan, Do, Check, Act) designed to drive continuous improvement. Initially implemented in manufacturing, but it has a broad applicability in business.