Cutting costs is not enough: you need higher profits and/or a better financial position. I say this because, on social media and in real-world Lean Management, I often see a lot of emphasis on aspects that are not, or should not be, the end goals of a Lean project. Here are a couple of them.
Engagement and leadership are not enough
There is an excessive (if not exclusive) emphasis on the “human” aspects, from the most appropriate management styles to people engagement. Don’t get me wrong: in Lean Management these aspects are extraordinary and set this approach apart from the “traditional” one found today in most organisations, which has its roots in Fordism-Taylorism, became established in the first half of the last century and still makes up what is taught in schools, universities and MBAs of every kind (with few exceptions). Today you do not even need to bring out the word Lean to find agreement that the “command and control” management style is not appropriate (at least not always) and that operational staff should be involved (almost always) in improving processes, especially with a view to long-term sustainability. These are all fundamental topics (which deserve to be explored further, and here too there is no shortage of distortions), yet they are not enough.
Every Lean intervention must deliver an economic and financial benefit
What is more, if things go well (very well), Lean projects lead to greater efficiency or productivity, or to lower inventories and shorter delivery times (through the well-known “elimination of waste”), but these objectives must be seen as a means of achieving real benefits on the income statement. Lean projects must have an impact on the income statement: they must, for example, increase EBITDA (through higher revenue and/or lower costs) or improve the net financial position, otherwise what are they for? What is the point of aligning activities and improving processes, if not this? Here too, interventions often stop short of a real impact on the income statement, whether because of distorted client expectations of Lean interventions, because consultants are not very good at speaking the language of the income statement in the financial statements, or because they stop at talking to the Operations function (which in turn sits, or is confined, in its organisational silo and often does not know the real economic and financial performance of the company it works for).
The benefits must repay clients’ commitment
Lean projects are a major commitment for our clients, and they must pay for themselves significantly, quickly and lastingly, with real impacts on the business. We must act on processes, on leadership, on engagement and respect for people, on the culture of waste elimination and continuous improvement, on the scientific approach, 5S, kanban, etc., but always seeking impacts that show up in the financial statements and are sustained over time, impacts that “fund” the soft aspects that make Lean so distinctive.
As consultants, we should always set ourselves this goal, for the good of our clients and for the good of the Lean consulting market itself.
