Using Takt Time to Compute Labor Cost

How can I use takt time in computing labor cost?

Sometimes the searches that lead here give us interesting questions.

While simple on the surface, this question takes us in all kinds of interesting directions.

Actually the simplest answer is this: You can’t. Not from takt time alone.

Takt Time

Takt time is an expression of your customer’s requirement, leveled over the time you are producing the product or service. It says nothing about your ability to meet that requirement, nor does it say anything about the people, space or equipment required to do it.

Cycle Time

Cycle time comes in many flavors, but ultimately it tells you how much time – people time, equipment time, transportation time – is required for one unit of production.

Takt time and cycle time together can help you determine the required capacity to meet the customer’s demand, however they don’t give you the entire story.

In the simplest scenario, we have a leveled production line with nothing but manual operations (or the machine operations are trivially short compared to the takt time).

If I were to measure the time required for each person on the line to perform their work on one unit of the product or service and add them up, then I have the total work required. This should be close to the time it would take one person to do the job from beginning to end.

Let’s say it takes 360 minutes of work to assemble the product.

If the takt time says I need a unit of output every 36 minutes, then I can do some simple math.

How long do I have to complete the next unit?  36 minutes. (the takt time)

How long does it take to complete one full unit?  360 minutes (the total manual cycle time)

(How long does it take) / (How long do I have) = how many people you need

360 minutes of total cycle time / 36 minutes takt time = 10 people.

But this isn’t your labor cost because that assumes the work can be perfectly balanced, and everything goes perfectly smoothly. Show me a factory like that… anywhere. They don’t exist.

So you need a bit more.

Planned Cycle Time (a.k.a. Operational Takt Time and “Actual Takt”)

How much more? That requires really understanding the sources of variation in your process. The more variation there is, the more extra people (and other stuff) you will need to absorb it.

If we don’t know, we can start (for experimental purposes) by planning to run the line about 15% faster than the takt time. Now we get a new calculation.

85% of the takt time = 0.85 x 36 minutes = ~31 minutes.  (I am rounding)

Now we re-calculate the people required with the new number:

360 minutes required / 31 minutes available = 11.6 people which rounds to 12 people.

Those two extra people are the cost of uncontrolled variation. You need them to ensure you actually complete the required number of units every day.

“But that cost is too high.”

Getting to Cost

12 people is the result of math, simple division that any 3rd grader can do. If you don’t like the answer, there are two possible solutions.

  1. Decide that 360 / 30 = something other than 11.6 (12). (or don’t do the math at all and just “decide” how many people are “appropriate” – perhaps based on some kind of load factor. This, in fact, is a pretty common approach. Unfortunately, it doesn’t work very well for some reason.
  2. Work to improve your process and reduce the cycle time or the variation.

Some people suggest slowing down the process, but this doesn’t change your labor cost per unit. It only alters your output. It still requires 360 minutes of work to do one unit of assembly (plus the variation). Actually, unless you slow down by an increment of the cycle time, it will increase your labor cost per unit because you have to round up to get the people you actually need, and/or work overtime to make up the production shortfall that the variation is causing.

So, realistically, we have to look at option #2 above.

This becomes a challenge – a reason to work on improving the process.

Really Getting to Cost

Challenge: We need to get this output with 10 people.

Now we have something we can work with. We can do some more simple math and determine a couple of levers we can pull.

We can reverse the equation and solve for the target cycle time:

10 people x 30 minute planned cycle time-per-unit = 300 minutes total cycle time.

Thus, if we can get the total cycle time down to 300 minutes from 360, then the math suggests we can do this with 10 people:

300 minutes required / 30 minutes planned cycle time = 10 people.

But maybe we can work on the variation as well. Remember, we added a 15% pad by reducing the customer takt time of 36 minutes to a planned cycle time (or operational takt time, same thing, different words) of 30 minutes. Question: What sources of instability can we reduce so we can use a planned cycle time of 33 minutes rather than 30?

Then (after we reduce the variation) we can slow down the process a bit, and we could get by with a smaller reduction in the total cycle time:

330 minutes required / 33 minutes planned cycle time = 10 people.

(See how this is different than just slowing it down? If you don’t do anything about the variation first, all you are doing is kicking in overtime or shorting production.)

So which way to go?

We don’t know.

First we need to really study the current process and understand why it takes 360 minutes, and where the variation is coming from. Likely some other alternatives will show themselves when we do that.

Then we can take that information, and establish an initial target condition, and get to work.

Summarizing:

  • You can’t use takt time alone to determine your labor cost. Your labor cost per unit is driven by the total manual cycle time and the process variation.
  • With that information, you can determine the total labor you need on the line with the takt time.
  • None of this should be considered an unalterable given. Rather, it should be a starting point for meeting the challenge.

And finally, if you just use this to reduce your total headcount in your operation, you will, at best, only see a fraction of the “savings” show up on your bottom line. You need to take a holistic approach and use these tools to grow your business rather than cut your costs. That is, in reality, the only way they actually reach anywhere near their potential.

 

 

 

Toyota Kata: Is That Really an Obstacle?

“What obstacles do you think are preventing you from reaching the target condition?”

When the coach asks that question, she is curious about what the learner / improver believes are the unresolved issues, sources of variation, problems, etc. that are preventing the process from operating routinely the way it should (as defined by the target condition).

I often see things like “training” or worse, a statement that simply says we aren’t operating the way the target says.

Here is a test I have started applying.

Complete this sentence:

“We can’t (describe the target process) because ________.”

Following the word “because,” read the obstacle verbatim. Read exactly what it says on the obstacle parking lot. Word for word.

If that does not make a grammatically coherent statement that makes sense, then the obstacle probably needs to be more specific.

 

 

Toyota Kata: Don’t Change The Target Condition Date

A target condition has three main elements:

  • An achieve-by date.
  • A level of performance that will be achieved.
  • The operational process that will be in place.

The details of the #2 and #3 can take a number of forms, but today I want to talk about the achieve-by date.

Keep the time horizon fairly short, especially at first. For a typical process that is carried out every day, I usually suggest a two week time horizon. My rationale is this: I don’t want the target condition to seem big or complex. Two weeks is enough time to understand and significantly improve a handful of steps in a complex process. It is a short enough time to keep the improver from trying to fix a complex or global issue all at once.

For example, if a process is carried out in multiple departments, two weeks is enough to try experiments in one of them, but not enough to implement a change across the whole organization. Having that time horizon helps establish the principle of small, quick, steps rather than trying to develop some kind of implementation plan.

It is important to set an actual date, not just “in two weeks” – in two weeks from when?

But here is the most important part: Once the date is set, don’t change it.

If the date comes up, and the target condition hasn’t been reached, it is very tempting to say “Just a few more days.” But once a date is slipped, the date means nothing, because it can be slipped again.

Instead, missing the date is time to step back, reflect, and go back through the steps of the improvement kata.

This is the same thing you should do when you hit your target condition.

If you hit your target way early, or miss the date, it is also time to reflect on what you didn’t understand about your current condition when you established that target. Then:

  • Confirm understanding of the direction and challenge.
  • Grasp the current condition. This is important. Don’t just assume you know what it is. Take the time to do some observations and confirm everything is working the way you think.
  • Establish the next target condition. This means erasing the old target condition, starting with a clean obstacle sheet, looking at the current condition and establishing a new target condition. I would discourage you from simply re-stating the old one. List the obstacles that you think are now preventing you from reaching the new target.
  • Pick one obstacle (an easy one, not the one you were beating your head on for the last two weeks!), and design your next experiment. Start your PDCA iteration.

Coaches: Don’t let your learner just adjust the date. There is a learning opportunity here, be sure to capitalize on it.

 

Notes and Thoughts from KataCon 2

The 2016 Toyota Kata Summit developed some interesting themes.

Even though the keynote addresses were not coordinated, one message emerged across them all.

This is about leadership development.

And by that, I don’t mean it is about further developing those in leadership positions. I mean it is about developing good thinking and leadership skills in everyone who chooses to deliberately learn. The “kata” are a structure for that learning, but learning the kata themselves is not the goal. It is a means to the end.

I know I have said this before, but now I see the beginning of a shift in the larger community, away from “kata as a problem solving tool” and toward “kata as a practice routine” for something bigger than the kata themselves.

Some Quotes and Themes

Improvement cannot be separate from management.

– Amy Mervak

This may well seem obvious. But in the vast majority of organizations, improvement is the job of the Continuous Improvement Department, or the Quality Department, or some other staff department.

If they are working on developing the improvement skills of line management, then all well and good. But if they are working directly on making improvements, then that is the problem at the root of “lack of leadership engagement.”

Intentional practice results in intentional learning.

– Amy Mervak

Put another way, without intentional practice, learning is a matter of luck. If you want your organization to actually learn a new behavior, then people and teams have to deliberately practice it until it is a habit.

What differentiates excellent organizations from their competitors is effective execution of strategy.

– Mike Rother

There is no shortage of effective models. But those models all require shifts in how people respond, especially under stress, to the unexpected.

Even in the best of times,

We want to learn something new, but we habitually follow our [existing] routines.

– Mike Rother

Our brains, and therefore we, are hard-wired to do this. And “under stress” is not the time to try to learn a new response. It has to be practiced in a space where it is safe to screw it up and learn.

This actually goes pretty deep. I have worked with a few organizations, and one in particular, where everyone adamantly agrees what changes must be made. But they don’t take active steps to get there.

Which brings us to:

40 priorities = No priorities.

Strategic priorities must be focused and formally expressed.

– Amy Mervak

It doesn’t do any good to have a Grand Vision if it is vague, or so diluted that Everything Is Important. Your job (management) is to be clear so people don’t waste their time working hard on something that doesn’t make a difference.

Although he was not present, Bill Costantino was quoted:

A long discussion is a symptom of lack of clarity on the current condition or the challenge.

– Bill Costantino

In other words, “What are we trying to accomplish here, and where are we now?” never get asked or clarified.

On Culture Change Modification

An interesting point was made about culture. Yes, we are working to shift the culture of the organization. But “change” may imply that we are changing everything. In reality, we have to consider:

  • What are we choosing to keep, maintain, enhance?
  • What are we choosing to alter?
  • What are we choosing to let go?

If these are deliberate decisions made by the team, then there is an opportunity to make purposeful adjustments, and frame them in the context of “What are we striving for?”

So perhaps the term “culture modification” is more appropriate.

Dave Kilgore’s presentation (full disclosure: I nominated Dave as a keynote) highlighted an organizational culture as the challenge for his advance team.

image

And because they are focused on creating this culture, they are making tangible progress.

Brad Frank asked the audience an interesting question.

If someone brings you a problem, there are two problems. What is the second one?

-Brad Frank

I have alluded to this in previous posts. As a leader, you have to ask “Why was my organization unable to make the correct decision without coming to me?”

Every time someone has to come and ask you something, it means you are an obstacle to their success.

– Brad Frank

Dave Kilgore emphasized the same thing and uses David Marquet’s “Ladder of Leadership” model both as a way to advance the culture, as well as a way to assess the current condition by listening to people.

I wanted to get these notes up there. I’ll cover Day 2 in another post.

Countdown to KataCon

The 2nd Toyota Kata summit is February 18-19 in Fort Lauderdale, and I plan to be there.

imageThis year looks to be more of a cross-section of people and companies that are working on their own versions of the culture shift. There isn’t “one way” and it looks like the keynotes reflect that.

I have a little insight into one of those presentations – Dave Kilgore of Continental Automotive in Newport News, VA. When the community was asked to nominate prospective keynote presenters last fall, I was quick to get Dave’s name up there because I think he has a compelling story. He knows what worked, and didn’t work, for his site and why.

 

  • They’ve tried this more than once, and kept trying. This time it is working. He’ll talk about what they learned in the process.
  • They are focusing on the culture of the organization.
  • He talks about the journey of organizing his advance team, what they do, and why they do it.
  • And they have developed a pretty cool “kata” for coaching coaches that is simple and effective.

The other thing I can say is that the conference organizers are also learning. This won’t be a clone of least year. They are working hard to make sure you are getting a diverse set of speakers with compelling messages. Each speaker has a senior / experienced member of the community to give feedback as they develop their presentation. You are unlikely to see a raw unpolished PowerPoint dump.

And finally, I would love to meet you if you are reading my stuff here. So let me know if you are planning on attending!

And if you are THINKING about attending, but haven’t registered yet, here is the web site: http://katasummit.com/

Mark

Toyota Kata and Hoshin Kanri

Jeff asked an interesting question in a comment to the post Often Skipped: Understand the Challenge and Direction:

[Hoshin Kanri] seems to suggest I reach long term objectives (vision) through short term initiatives/projects as if I can (should?) know the steps. [Toyota Kata] says I don’t know the way to reach my long term vision, so I limit focus to next target condition and experiment (repeatedly) toward the vision.

Seems contradictory to me. What am I missing?

Let’s start out with digging into what hoshin kanri is supposed to do. I say “supposed to do” because there are a lot of activities that are called “hoshin kanri” that are really just performance objectives or wish lists.

First, hoshin kanri is a Japanese term for a Japanese-developed process. We westerners need to understand that Japanese culture generally places a high value on harmony and harmonious action. Where many Americans (I can’t speak for Europeans as well) may well be comfortable with constant advocacy and debate about what should be worked on, that kind of discussion can be unsettling for a Japanese management team.

Thus, I believe the original purpose of hoshin kanri was to provide a mechanism for reaching consensus and alignment within a large, complex organization.

In the late 1980’s and early 1990’s, hoshin kanri concepts emerged out of their Japanese incubator and came to western business. In this process, the DNA combined and merged with western management practices, and in many (never say “all”) western interpretations, the hoshin plan tends to be something patched onto the existing Management By Objectives framework.

That, in and of itself, isn’t a bad thing. Hoshin kanri’s origins are from MBO migrating to Japan where they took MBO and mixed in Japanese cultural DNA.

However, I’m not comfortable that what we have ended up with in the west meets the original concept or intent.

With that as background, let’s get to the core of Jeff’s question.

What is the purpose of hoshin kanri?

Let’s start with chaos. “We want continuous improvement.”

In other words, “go find stuff to improve,” and maybe report back on what you are going to work on. A lot of organizations do something like this. They provide general guidance (if they even do that), and then maybe have the sub-organization come tell and report what they expect to accomplish. I have experienced this first hand.

“I expect my people to be working on continuous improvement,” says the executive from behind his desk in the corner office. Since he has delegated the task, his job is to “support his empowered workforce” to make things better.

image_thumb.pngFlatly, that doesn’t work unless the culture is extremely well aligned and there is a
continuous conversation and stream of consciousness within the organization
. That is very rare. How to achieve that alignment is the problem hoshin kanri is intended to solve. It isn’t the only way to do it, but it is an effective method.*

A Superficial Overview of the Process of Hoshin Kanri

The leadership sees or sets a challenge for the organization – something they must be able to do that, today, they cannot. This is not (in my opinion) the same as “creating a crisis.” A crisis just scares people. Fear is not a good motivator for creative improvement.

Different parts of the organization may get a piece of the challenge, or the leadership team may, as a whole, work to figure out what they need to accomplish. Here is an important distinction: “What must be accomplished” is not the same as a plan to accomplish it. A challenge, by its very nature, means “We don’t know exactly what we will have to do to get there.”

This can take the form of KPI targets, but that is not what you are doing if there is a simple percent improvement expected with no over-arching rationale.

Now comes the catchball.

Catchball is not Negotiation of the Goal

Catchball is often interpreted as negotiating the goals. That’s not it. The goals are established by a market or competitive or other compelling need. So it isn’t “We need to improve yield by 7%.” followed by “Well, reasonably, I can only give you 5%.” It doesn’t work like that.

Nor is it “You need to improve your yield by 7%, and if you don’t get it then no bonus for you.” That approach is well known to drive some unproductive or ineffective behavior.

And it isn’t “You’re going to improve your yield by 7% and this is what you are going to do to get there.”

Instead, the conversation might sound something like “We need to improve our yield by 7% to enable our expected market growth. Please study your processes as they relate to yield, and come back and let me know what you think you need to work on as the first major step in that direction.”

In other words, please grasp your current condition, and come back with your next target condition.

That sounds a lot like the Coaching Kata to me.

SIDEBAR:

Toyota Kata is not a problem solving method. 

Toyota Kata is a set of practice routines designed to help you learn the thinking pattern that enables an organization to do hoshin kanri, and any other type of systematic improvement that is navigating through “We want to get there, but aren’t sure exactly how.”

An executive I am working with mentioned today that Toyota Kata is what is informing their policy deployment process. Without that foundation of thinking, their policy deployment would have been an exercise in assigning action items and negotiating the goals.

So what is the difference between hoshin kanri and Toyota Kata?

There isn’t a difference. They are two parts of the same thing. Hoshin kanri is a mechanism for aligning the organization’s efforts to focus on a challenge (or a few challenges).

Toyota Kata is a practice routine for learning the thinking pattern that makes hoshin kanri (or policy deployment) function as intended.

In hoshin planning, you are planning the destination, and perhaps breaking down individual efforts to get there, but nothing says you already know how to get there.

It isn’t an “action plan” and it isn’t a list of discrete, known action items. Rather, it is specific about what you must accomplish, and if you accomplish those things, then the results are predicted to add up to what you need.

What to Do vs How to Get It Done

At some point, someone has to figure out how to make the process do what is required. That has to happen down at the interface between people and the work actually being done. It can’t be mandated from above. Hoshin helps to align the efforts of improving the work with the improvements required to meet the organization’s challenge.

From the other side, the Improvement Kata is not about short-term objectives. The first step is “understand the challenge and direction.” Part of the coach’s job is to make sure this understanding takes place, and to ensure that the short-term target condition is moving in the direction of the challenge.

We set shorter term target conditions so we aren’t overwhelmed trying to fix everything at once, and to have a stable anchor for the next step. It enables safer learning by limiting the impact of learning that something didn’t work.

However, in Toyota Kata, while we might not know exactly how to get there, but we are absolutely clear where we have to end up.

The American Football analogy works well here. The challenge is “Score a touchdown.” But if you tried to score a touchdown on every play, you would likely lose the game. The target condition is akin to “get a first down.” You are absolutely clear what direction you have to move the ball, and absolutely clear where you need to end up in order to score. But you aren’t clear about the precise steps that are going to get you there. You have to figure that out as you go.

Hoshin Kanri focuses the effort – “What to work on.”

Toyota Kata teaches the thinking behind “How to work on it.”


*Though hoshin kanri may be effective, getting it to work effectively is a journey of learning that requires perseverance. It is much more than filling out a set of forms.

Toyota Kata in Health Care

I’m about four months into helping a major regional hospital develop a solid foundation for applying the Improvement Kata and Coaching Kata to learn “improvement thinking.”

They now have active improvement boards running in pre-op, post-op, surgery, radiology, the lab, the emergency department, the cardio-vascular floor, medical-surgery floor, ICU, cardiac rehab, billing, admissions, case management, and supplies. I think that’s everything going right now.

Several of these departments have more than one board, and a few are beginning to get started spontaneously.

We are starting to see the culture begin to shift in many of these departments. Staff are getting engaged in improving the work flows, administration team members are more engaged with the staff.

Directors and managers are starting to reach across organizational boundaries to deal with obstacles and problems at the departmental interfaces.

And the organizations are starting to shift how they talk. When confronted with a list of problems, leaders are starting to ask “OK, which one are we addressing first?” Leaders are asking “What do you expect to happen?” and “What did we learn?” when talking about actions. They are working to engage thinking in their organizations vs. just giving direction.

Is it all rainbows and unicorns? Of course not. But the effort is clearly being made, and it shows. My overall process coaching is getting much more nuanced, because they are “getting” the fundamentals.

OK, so what did we do?

We started out with two weeks of pretty intense “kick-start.” One week was half-days of training and simulation (with a morning and afternoon group), getting a feel for the rhythm of the improvement kata, and a taste of the coaching kata, and culminating with the first round of improvement boards getting set up with at least a direction, if not a clear challenge.

We deliberately did not use industrial examples. And now that I’ve done it a few times, I can incorporate more health care language and examples into the sessions, which just makes it easier.

Week two was pairs of learners/coaches being coached through grasping the current condition, establishing a target condition, and the first couple of PDCA cycles / experiments.

But what made it work is they kept at it.

The next month, we did it again. We coached the established boards to tighten up their game, while establishing a series of new ones.

Because they had kept at it, the first round of boards now had a routine for their improvement cycles and coaching. And once there is a pattern, then we can work on improving it.

What I am learning.

Just get them going, then leave them alone for a while to keep at it. That lets the team establish a baseline routine for how they are practicing. Then I can come back periodically and propose adjustments on one or two items that let them step it up to the next level.

I am finding this much more effective than demanding they get it perfectly from day one. There is just too much to think about.

Establish a target condition, have them practice to that pattern, grasp the current condition, establish a new target… for the team’s practice. Get the improvement engine running, even if roughly, then work on tuning it for performance.

To be clear, this is my normal approach (and it is different, I am told, from what a lot of others try to do), but I am getting a lot of validation for it here.

Results

A member of the administration (leadership team) who is actively coaching shared this chart with me today. I have “sanitized” it a bit. Suffice it to say these three lines represent the percentage of deliveries of three separate (but related) processes within or before the target turn-around time of 30 minutes. Their challenge is to turn 95% of them around in 30 minutes or less.

The vertical red line represents when they started applying the Improvement Kata to this process.

Otherwise, the picture speaks for itself.

image

They have recognized that there is no silver bullet here. Rather, there have been dozens (or more) of changes that each save a little bit of time that is adding up.

As one of my early Japanese teachers said “To save a minute, you must find sixty ways to save a second.” and that is exactly what they are doing here. They are finding a minute here, a few seconds there, and anchoring them in changes to the way they organize the work flow.

Lab Team: “Way to go!”

Prediction Doesn’t Equal Understanding

Lunar Eclipse over Everett, WA. Photo by Mark Rosenthal, © 2015Sometimes people fall into a trap of believing they understand a process if they can successfully predict it’s outcome. We see this in meetings. A problem or performance gap will be discussed, and an action item will be assigned to implement a solution.
Tonight those of us in the western USA saw the moon rise in partial eclipse.

We knew this would happen because our understanding of orbital mechanics allows us to predict these events… right?

Well, sort of. Except we have been predicting astronomical events like this for thousands of years, long before Newton, or even Copernicus.

The photo below is of a sophisticated computer that predicted lunar eclipses, solar eclipses, and other astronomical events in 1600BC (and earlier). Click through the photo for an explanation of how Stonehenge works:

Photo of Stonehenge

Creative Commons flickr user garethwiscombe

Stonehenge represented a powerful descriptive theory. That is, a sufficient level of understanding to describe the phenomena the builders were observing. But they didn’t know why those phenomena occurred.

Let’s go to our understanding of processes.

The ability to predict the level of quality fallout does not indicate understanding of why it occurs. All it tells you is that you have made enough observations that you can conclude the process is stable, and will likely keep operating that way unless something materially changes. That is all statistical process control tells you.

Likewise, the ability to predict how long something takes does not indicate understanding of why. Obviously I could continue on this theme.

A lot of management processes, though, are quite content with the ability to predict. We create workforce plans based on past experience, without ever challenging the baseline. We create financial models and develop “required” levels of inventory based on past experience. And all of these models are useful for their intended purpose: Creating estimates of the future based on the past.

But they are inadequate for improvement or problem solving.

Let’s say your car has traditionally gotten 26 miles-per-gallon of fuel. That’s not bad. (For my non-US readers, that’s about 9 liters / 100 km.) You can use that information to predict how far a tank of fuel will get you, even if you have no idea how the car works.

If your tank holds 15 gallons of fuel, you’ll be looking to fill after driving about 300 miles.

But what if you need to get 30 miles-per-gallon?

Or what if all of a sudden you are only getting 20 miles-per-gallon?

If you are measuring, you will know the gap you need to close. In one case you will need to improve the operation of the vehicle in some way. In the other case, you will need to determine what has changed and restore the operation to the prior conditions.

In both of those cases, if you don’t know how the car operated to deliver 26 miles-per-gallon, it is going to be pretty tough. (It is a lot harder to figure out how something is supposed to work if it is broken before you start troubleshooting it.)

Here’s an even more frustrating scenario: On the last tank of fuel, you measured 30 miles per gallon, but have no idea why things improved! This kind of thing actually happens all of the time. We have a record month or quarter, it is clearly beyond random fluctuation, but we don’t know what happened.

The Message for Management:

If you are managing to KPIs only, and can’t explain the process mechanics behind the measurements you are getting, you are operating in the same neolithic process used by the builders of Stonehenge. No matter how thoroughly they understood what would happen, they did not understand why.

If your shipments are late, if your design process takes too long, if your quality or customer service is marginal, if the product doesn’t meet customer’s expectations, and you can’t explain the mechanisms that are causing these things (or the mechanisms of a process that operates reliably and acceptably) then you aren’t managing, you are simply directing people to make the eclipse happen on a different day.

“Seek first to understand.”

Dig in, go see for yourself. Let yourself be surprised by just how hard it is to get stuff done.

 

 

Hitting the Numbers by Holding Your Breath

To commemorate the end of WWII, China held a big military parade in Beijing. You can read about it in any number of news sites.

Beijing, though, (as well as Shanghai) is well known for having a serious problem with air pollution.

Here’s my experience: This is a late afternoon photo I took in Beijing in early October 2006… before the pollution was making the international news. Yes, that is the sun. There were days I could not see three blocks from my 6th floor apartment window.

smog

In the run-up to the 2008 Olympics, Chinese officials were determined to present clear skies to the international audience. The same measures were taken again in the run-up to the APEC conference last year. And this article in The Guardian outlines some of the measures taken to present what cynical Beijingers are calling “Parade Blue” skies:

From The Guardian:

Four out of five government vehicles will be taken off the road between now and the parade and private vehicles will be allowed on the roads only on alternate days, based on odd- and even-numbered license plates.

 

Almost all steel mills in Beijing, Heibei and Tianjin are to be shut down in the lead up to the military parade, Xu Xiangchun, chief analyst at Mysteel Research told Bloomberg last month.

What all of this means is they know what causes the smog. This drill, which was first trialed when I was spending time there prior to the Olympics, is now routine.

OK, so what? And what does this have to do with lean thinking?

We can read these articles and shake our heads. But the story here is that many organizations drive the exact same behavior with their metrics driven cultures.

If making the numbers (or the sky) look good is all that matters, the numbers will look good. As my friend Skip puts it so well, this can be done in one of three ways:

  • Distort the numbers.
  • Distort the process.
  • Change the process (to deliver better results).

The third option is a lot harder than the other two. But it is the only one that works in the long haul. The other two are doing what they did in Beijing – holding your breath.

I’ve seen this manifest in a number of ways. Factory managers doubling down producing product that wasn’t selling to “make absorption” and record paper profits for their plants.

A large corporation that needed good 4th quarter numbers.

  • They shut down production in the last month of the fiscal year to get the inventory numbers up.
  • They pulled orders in from 1st quarter to ship early. This booked revenue as soon as the inventory went into “shipped” status, even if it was still in a container at the port.
  • Because they used LIFO inventory cost models, the deeper they dug into their finished goods, the lower the “costs” and the higher the “margins.” (Don’t confuse LIFO physical inventory management with LIFO cost accounting.)

And they put up some pretty good numbers. Here’s the kicker — they actually believed those numbers, confusing their manipulation of the financial models with actual results. Bonuses all around.

1st quarter, though, was a different story. Shortages resulting in missed shipments because they hadn’t made anything for a month. Thin orders because they had already filled all of the orders they had inventory to fill. (It isn’t like new orders magically appear to replace the ones you ship early.) And at the end of Q1, the CEO had to look the analysts in the eye and explain why.

Anyone can make the numbers for a quarter, maybe even for a year, just as Beijing can clean up their skies for a couple of weeks.

But if you want to make those numbers truthfully, then the only alternative is to “change underlying process.”

This is the difference between a “target” and a “target condition.” To most people a “target” is about the numbers, the desired value of whatever is being measured. That “target” can be achieved by any of the three methods: Distorting the numbers, distorting the process, or actually changing the process.

target condition describes not only the goal, but how the process should operate to achieve it. The target condition is set by the improver / learner as a next landing point on the climb toward the overall challenge, but the coach hears it  every iteration of the coaching cycle.

Thus the coach (who should be the boss) is well aware of which of the three approaches is being taken (hopefully “change the process”), as well as the issues and problems which must be overcome to get there. It is no longer just a matter of directing that a number be achieved and “holding people accountable” for hitting it.

This two-way conversation is what strengthens the organization and keeps things from becoming silly exercises that achieve nothing but encouraging people to hide the truth. (Then when someone decides to stop hiding it, we have a “whistleblower.”

Epilogue: As I was working this up, the news has been pouring out about the VW “defeat device” scandal that has now taken out a number of corporate officers, and is going to seriously hurt the company for a long time.

Imagine this conversation in an engineering staff meeting:

Boss: What is the status on reaching the American clean air standards with the TDI engines?

Head Engineer: Don’t worry, we’ve finally got a plan. We are now certain we’ll be able to pass the test.

Boss: Great. Next item.

Contrast that with:

Boss: Where are we on the challenge of reaching the American clean air standards with the TDI engines?

Head Engineer: My current target condition is to pass the test by programming the car to detect when the test is being run, and adjust the engine performance to meet the standards while it is being tested. We’ll met the performance goals by shutting off the emissions controls during normal operation.

Now, that second conversation may well have occurred. But I can see the first case as far more likely.

The question for your organization is which of those conversations do you have? Or is the air too polluted to see clearly?

 

How Do We Deal With Multiple Shifts?

This is a pretty common question.

Today I was talking to a department director in a major regional hospital that is learning Toyota Kata. She picked it up very quickly, and wants to take the learning to the off-shifts.

She (rightly) doesn’t want the night shift to just be deploying what day shift develops, she wants night shift totally involved in making improvements as well. Awesome.

Her question was along the lines of “How do I maintain continuity of the effort across both shifts?” She was jumping into asking how to provide good coaching support, whether there were separate boards, or a single board etc. and playing out the problems with each scenario.

My reply was pretty simple. “I don’t know.”

“What do you want to see your learners doing if they are working the way you envision?”

In other words, “What is your target condition?”

But… how do we coach them, and so on?

I don’t know. But until we understand what we want the improvement process to look like, especially across the shift boundaries, we can’t say. Different target conditions will have different obstacles.

And what worked at Boeing, or Genie, or Kodak, or even another hospital I’ve worked with likely won’t work here in your hospital. The conditions are different. The conditions are different in different departments in the same hospital!

She admitted that she was having a hard time thinking about a target without dealing with all of the potential obstacles first. My suggestion was that this challenge is her improvement board, and the best way to work out a solution was to actually follow the Improvement Kata (that she has been doing such a great job at coaching for the last month).

Trust the process. Once there is a clear target condition for the people doing the work (in this case, the learners / improvers), then we’ll better understand the obstacles we actually have to deal with. That will likely be fewer than every possible problem we can think of right now.

Establish your target condition, then list your obstacles, then start working on them one by one.

The Improvement Kata is exactly the tool to apply when you know you want to do something, but can’t figure out exactly how to do it.

Step by step.

Keep it up, Susan.  Smile

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