Extreme Lean
If you read
about business, you will have read about "lean." It is one of those
buzzwords that has recurred in various guises since Taylor and
Gilbreth's work, about a century ago.
Corporations
that prefer to be "lean" do not always fare so well. Nor do people
on diets. There are reasons for these failures, and we'll address
some of them below.
1.
"Lean" is usually about firing people
Companies may
not believe it, but when employees are asked to help dig their own
graves, the "lean" program is not likely to succeed.
2.
"Lean" treats people like cost items, not investment objects.
Like
unnecessary fat, cost exists only to be pared down. To avoid
cutting its muscle, companies will favor certain types of employees
— the young, the healthy, and the highly educated. That creates
morale problems, to put it mildly.
3.
"Lean" is for workers, not for management.
Labor unions
refuse to cooperate — or even go on strike — when they feel they are
unfairly treated. To experience major layoffs at times when
management pay skyrockets is frustrating, and a bitter pill to
swallow.
How
should a "lean" program be implemented?
First, the
objective is never solely about being "lean" or cutting cost.
The objective is always to improve productivity. It is
productivity improvement that will improve the bottom line. "But in
labor-intensive industries," you say, "workers consume the most
resources. That is where costs must be cut."
That is a much
too simple answer.
The key issue
is about what should be done with these freed resources.
If you have a
cooperating work force, they will tell you that only eight percent
of the work cannot be improved. Ninety-two percent can be screened;
outsourced; and saved through better planning, efficiency and
utilization.
To illustrate,
let's say that you could achieve what you are now achieving with
one-third of your current resources. We know this is a conservative
estimate.
If you then put
the freed resources to work on what you are currently doing,
productivity will increase by 200%.
But the fact
that you were cutting cost to begin with, means that company profits
were not at an acceptable level. Improving productivity by 200%
would surely help. But why limit your sights to what you are
currently doing?
|
|
If the freed
resources were to be invested in something that would double revenue
and profits over the old level, productivity would increase by
400%. And if even better opportunities are found, there may be no
ceiling on the returns on investments from investing in technology,
your own work force, or in new expansion.
Jobs are not lost because people are too productive.
Jobs are lost because people aren't productive enough.
This is the key to Extreme Lean! Start with the
objectives that revenues will double, profits will
increase by 300%, and hiring will increase 25%.
Engage everyone -- from top to bottom. Gather the
crucial information about what can be improved, and what
should be dropped. Put workers and manager together in
working towards a larger vision. And pay people better
when the results show up; you can afford it! And it
will create loyalty, pride and appreciation for a job
well done.
I
just returned from Norway, where the manufacturing
sector now has dropped to 13% of GDP, yet Norway is
producing more than ever before. Norsk Hydro's aluminum
manufacturing plant in Aardal has increased production
per employee by 600% over the last 18 years, and the
picture is similar in other Norwegian industries. But
the country as a whole enjoys full employment, and thus
the major part of the oil revenues that flow from
Norway's North Sea wells cannot be spent in Norway
without undesirable inflation. So, Norway is one of the
most productive countries in the world, yet the work
force is fully occupied. Productivity does not take
away jobs.
I
have worked in Norway on a number of productivity
improvement projects. I found no dissonance between
management and labor when they united in the dignity of
the common goal of improving performance. Norway
exports half of its GDP, so this high-wage country [per
capita income is $40 thousand (US)] must be competitive
with the rest of the world in order to sell its goods
and services. The only way that can happen is through
productivity improvement.
In
the year 1900, Norway was the second poorest country in
Europe; only Albania was poorer. Today, Norway is the
second richest country in the world, and the oil income
only accounts for 17% of the economy.
Productivity and wealth go hand in hand. So do
productivity, jobs and job security. Perhaps we should
look to Norway in these uncertain times?
|
