Do leaders see the world completely different?
As you might have noticed the picture above shows the economical view from two different perspectives: the Classical Management view and the Lean Managment view. Leaders are ordinarily brought up and have risen to their current position through Classical Management. I have become aware of this perspective because of the research of Bob Emiliani that has tried to solve this puzzle for a long time: why doesn’t management buy in to Lean Management?
I have to tell you guys that I believe that he is on to something fundamental and why we can’t really get leaders to be interested in creating a Lean organization and adopt the Lean world perspective. Just look at the picture above it already says a lot. Look at the way profit is defined from the perspective of Classical Management:
Price = Cost + Profit
What does this mean? Well it means that the Profit is decided from the level of the Price. Cost is to be kept at a minimum but is not as such something to work dedicated on.
What about in Lean Management? There Profit is defined as:
Price - Cost = Profit
The equation looks similar but has a different angle: we focus on cost and how to reduce it since this is the way to increase Profit. So where Lean focuses on Cost, Traditional leadership concentrates itself on the Price. So if Classical Management is focused on Price where does that leave Lean Management and cost reduction? Well I think the next picture almost says it all. I never really gave it much thought. But look at this picture.
In Classical Management Cost is divided in “Fixed Cost” and “Variable Cost” which to Lean people is a very limited way of seeing Cost. The focal point is to reduce “Variable Cost” especially salary cost and to create lower unit cost by mass producing the items so that the unit cost decreases. Fixed Cost is viewed upon as, well Fixed, so we don’t concentrate so much on that. When getting a higher price is the goal then waste, uneveness and unreasonableness helps the managers in increasing Price. So there is really no incentive for bringing down the 7+1 wastes.
In Lean Management we focus on increasing Value Add (activities that add Value to the Customer) and we try to get rid of all waste and we don’t care about if it is fixed cost (e.g. freeing up space) or variable cost (e.g. removing waste in the processes to free up capacity and bring down the cost). Reducing cost is for us THE way to increase Profit.
I will not pretend to discuss this subject into detail. Because Bob Emiliani has done a splendid job in doing just that. And that is why I have added some links to some of the material I have used to gain a better understanding of why it is so hard to get leaders to prioritize improvements.
I think that the best example is from the video where Bob talks about that there are some 120 different points that adds up how the leaders prioritize and evaluate what to do. In the scene that I am talking about Bob says something along these lines: “… and even if you in your presentation hits all 120 points and the leader says it makes perfect sense, it is a good and sound solution and its good for the employees … But we won’t do it!”. That simply cracked me up! I bursted out in laughter! Then what? What are we supposed to do to get leaders want to improve in the Lean way and adopt to Lean thinking? How do we change this completely different world view of Classical Managment when it has been working for ages and still does?
I urge you all to read the article of Bob Emiliani and watch the Youtube Video. My Gemba thoughts don’t even scratch the surface of the work of Bob. And he even deepens his arguments much further with how Managers in the Classical Management world think and prioritize.
But for me I now understand that it doesn’t really matter how we present our materials or projects because leaders from the Classical Management world will understand quite well what we are talking about but they don’t see the world from our perspective (the Lean perspective) and they don’t prioritize as we do.
So the big question is how do we address this world view? Can we really get through this massive wall of Classical Management? Lean Management goes against almost everything that Classical Management values and praises. Of course I knew that there were differences between the two! But I didn’t really realize how heavily it is grounded in the beliefs and spirit of the Managers and in the whole System.
What are your thoughts on my Gemba thoughts of the week? Do you think I am right? Or do you think I am wrong? Do you have a completely different nuance on my thoughts? Please don't just read my thoughts. Feel absolutely free to chip in. All comments are welcome! I am just trying to highlight a subject that I find important and to get wiser on it.
Here are the links to the material that made me a bit wiser:
Bob Emiliani: Supplement to the book
Help! What to do when your CI role ain’t all what it’s cracked up to be