Month: May 2008

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Financial Transparency 2

A couple of interesting comments to the last post (as well as the original question) got me thinking some more. I’d like to go back to basics.

There are no specific practices and behaviors that are “lean principles.”
I believe the principles operate at a higher level. The principles have to do with creating a culture in which people naturally surface and solve problems, supported by the organizational and workplace structures.

In this case, “financial transparency” may, or may not, be found as an attribute of companies that are otherwise doing very well establishing this culture.

Financial transparency is a countermeasure, not a principle.

A countermeasure would be applied against a problem which, if not solved, prevents the organization from taking a step toward the ideal.

Some organizations’ paths may take them to or through a problem where financial transparency is the solution.

Some organizations may take other routes and never need to address that. For example, if they otherwise operate with 100% integrity, and there is solid trust.. is there a need to disclose everything?

So it is entirely possible that two, otherwise similar, organizations may have reached the same point on their journey by doing different things.

Now, there are some countermeasures which are nearly universal because they address issues nearly everyone has. (note that I say “nearly”.. never say “all” in this business.)

Without a culture of trust, for example, people in the organization really cannot contribute. They have to come to work, do exactly what they are told, and go home.. knowing full well that the things they did today are probably stupid. Doesn’t exactly help them feel like winners, does it?

But while financial transparency certainly reflects a degree of trust, it is neither necessary nor sufficient to generate it, and I guess that is the key point here.

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Financial Transparency – Is it important?

Steve Fonseca asks an interesting question on The Whiteboard.

Are lean companies really transparent with their customers and suppliers as to cost/profits. Is this a lean principle or not, or to what extent?

I am going to offer an opinion, then perhaps other readers can chip in.

First, there is no real definition of what is, or is not a “lean principle.”
Second, there are infinite shades of the term “financial transparency.”
Thus, there is no definitive answer to the question.

So, in my view, I don’t really see a correlation. Nor do I see a significantly greater degree of openness as a prerequisite to success with infusing a culture of continuous improvement.

Toyota is publicly traded, and as such, is really restricted by insider trading laws on how much financial information they can share with customers / suppliers short of sharing it with everyone.

Anyone else? What have you seen out there? Does a degree of financial transparency, above and beyond what is normal in business relationships, offer a significant competitive advantage, or drive continuous improvement faster?

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Theological Debates

A frequent topic in the lean.org forums is some version of “what is the difference between lean and ____” where the blank is one of the industry buzzwords. Some of the common ones are various prefixes to “Sigma.” Others are old standards such as TQM, SPC, TOC, etc. These discussions are always interesting as the various camps line up. “Lean looks at waste, while xxx-Sigma looks at variation” is a common one. Apparently “Agile” is about high-tech machinery, and of course, none of that is found in “lean.”

My put on all of this is pretty simple. It’s all the same, people.

There is nothing about TPS that excludes any level of machining technology, so long as that technology is applied as a solution to a problem rather than for its own sake. The last time I checked, Toyota, and TPS, were obsessive about stamping out variation. Constraints? Yup. You bet I know what the constraint is, and you bet I manage it tightly. If I have done everything right, my enterprise constraint is production (rather than sales), but just barely. And internally, if I have done it right, my constraint is manual work rather than technology. Why? Because every Team Member can work on improving manual work cycles. Not the case with an engineering constraint.

In the end, this is all about the rational, deliberate application of skilled problem solving, using the scientific method, aka PDCA.

If you are looking at “which one to implement” stop fretting about it. Go out to your work area, stand and watch a while, see what is stopping your good people from doing a great job, and start fixing it.

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Refuting Lean

On the backside of this site, I get information about things like the search terms that brought people here. One caught my eye today.. “lean refutation.”

Since this site comes up as the 121st item in the Google search, I think I am safe to conclude that the person intended “lean manufacturing” to be the topic. The hit, by the way, was on the “Management Resistance or Poor Process” post, which I suppose has some relevance to the search as well.

I can speculate about a lot of reasons that would cause someone to search for that kind of information, but ultimately I suppose it is someone either caught in the midst of a company (or a consultant) with a distorted view of what it is all about; or someone whose comfort zone is being violated pretty badly (or a combination of both).

Here is a question for my readers:
Inverting the problem, how would you “refute lean?”
Then, based on your answer(s), what countermeasures would you develop?

I think it is important for us to understand that there are both distorted views of what this is about (and those distorted views are being enthusiastically implemented in a lot of places); and there is a good chance that people’s comfort zones can be violated.. and many of those people are ones we want to bring along.