Lean Methods, Lean Planning

Increase sales, reduce waste by applying Lean principles to business planning

Wednesday, November 1, 2006

Can Lean techniques, mastered on the factory floor, drive costs from the front office?

How much money is your company losing due to wasted effort and low productivity of knowledge workers employed in your business processes?  How many opportunities are lost?  How many customers are irritated?  Teaching your knowledge workers effective planning techniques based on Lean principles can solve these problems.

Imagine running a production line without knowing each day what to make and in what quantities.  Crazy, right?  The lack of that critical information guarantees uneven production, overburdened workers, and waste – a disaster in the world of Lean.  Yet this is precisely the situation for most knowledge workers, even those in Lean organizations.

Whereas Lean line workers and managers have learned how to plan their workflow to keep the manufacturing process running smoothly and efficiently, knowledge workers generally don’t plan effectively, if at all.

The only way to manage the multiple value streams that flow through them is to plan their work like a Lean production line.

Lean Principles Apply To The Front Office Too

Whether workers are building spacecraft assemblies or budget spreadsheets, they must know their production schedule in order to level the flow of work.  Heijunka is central to Lean philosophy because it plays a critical role in avoiding the 3 M’s – mura, muri, and muda – that are anathema to Lean.  Leveling production, of course, requires Lean workers to plan their output properly, which means knowing what they’re going to build, what materials they’ll need, and when they’ll need them.  Lean plant managers understand this fact well.

Surprisingly, few knowledge workers seem to understand this.  Although they work with ideas and information instead of physical materials, the rules are identical.  Poor planning (or no planning) among the majority of knowledge workers results in the same terrible mura, muri, and muda that manufacturing workers face.

No Plan? Lost Sales and Worthless Inventory

With knowledge workers, however, the 3M’s take a different form.  For example, the Director of sales at a small footwear manufacturer in Southern California didn’t plan her work and allocate time to provide input on an IT upgrade; as a result, the project was delayed one week, which led to lost revenue at a key trade show.  Similarly, at a NJ-based manufacturer of semi-custom homes, the VP of construction didn’t accurately assess the time needed to write new specs for bricks or schedule that time in his calendar.  When the brick supplier delivered the old bricks, the company lost money on the unneeded bricks, and had to delay production until the new bricks were delivered.

To be fair, multiple value streams flow through knowledge workers, making it difficult for them to move value forward smoothly.  In addition to their primary jobs, they sit on committees, get roped into meetings, manage special projects, and must always be available to handle the inevitable crisis.  Moreover, the accelerating speed and volume of information that they must process constantly increases the turbulence of the value stream.  But with an increasing amount of work to do and a finite amount of time in which to do it, planning of their workload is not a luxury; it’s a necessity.  Planning is the only tool that enables them to effectively “level their production” and avoid mura, muri, and muda.

So how do knowledge workers implement heijunka for their jobs?  Just as production managers work backwards from the target delivery date to plan shipping schedules, production runs, material preparation, and material ordering, knowledge workers in a business process must work backwards from the target completion date and schedule time for editing and revising, drafting proposals, presentations, meetings and research.  Most importantly, just as production managers need to accommodate capacity constraints in the manufacturing process, knowledge workers need to accommodate constraints in their work as well.  In their case, of course, the critical constraint is time.

Breaking Projects Down

A “project implementation plan” is the tool that gives knowledge workers the ability to manage their complex work.  A well-written project implementation plan breaks complicated and/or long-term projects into simple, sequenced, discrete steps with clearly assigned responsibilities and interim due dates. Workers schedule time in their calendars to complete each task for which they are responsible (or to follow up with the person responsible for a given task).

Of course, since knowledge workers either manage or participate in multiple value streams simultaneously, every project, every meeting, and every action that consumes time must be rigorously entered into the calendar.  Only by doing so can they see the total demand on their time, identify capacity constraints in advance, and by applying heijunka, adjust their commitments appropriately.  The result is fewer crises, better allocation of resources, and lower stress for everyone.

Start Simple

According to the Lean Manufacturing Report 06 by The Manufacturing Research Center, fewer than half of the responding companies have extended Lean principles into business processes, despite recognizing the value of doing so.

But incorporating Lean principles into business processes doesn’t have to start with a major project like value stream mapping, a comprehensive change in accounting methods, or a wholesale restructuring of the company.  Rather, Lean principles can be applied to the individual’s work habits – and many of the same benefits can be realized.

Recently, the CFO of a custom printing company lost a major contract for his firm.  His inability to allocate the time and the staff necessary to determine pricing resulted in a last-minute proposal.  Had he been able to complete his work earlier, the sales team could have negotiated with the customer and made the deal work.  But there was no time left, and the customer went to another supplier.

Can your company really afford knowledge workers who don’t know how to plan?

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How Long Should I Keep My Paperwork?

Before you clear out your files, know the rules on document retention.

Space is at a premium.  You have shoe boxes, folders, and envelopes full of old records used to prepare years worth of old tax returns.  It’s time to clean out the garage or your office or wherever you keep your records.  The logical question to ask is, can I get rid of some or all of these records or saying it another way, how long must I retain records for tax purposes?

Space is always at a premium. You have file cabinets, folders and envelopes full of years’ worth of old tax returns and other paperwork. It’s tempting to clean out the office and just toss all of that stuff, but you don’t want to get rid of documents that you may need later. Here are some guidelines on which papers to keep, and how long to hold on to them.

TAX RETURNS: In the case of business tax returns (such as those for a corporation or partnership, or a Schedule C on an individual tax return), the recommended retention period is typically forever, or until the business ceases to exist plus three years from the filing of a final business tax return. This stems from the obligation to substantiate items contained in a return, including the tax basis in a business entity or in business assets for the purposes of calculating gain or loss at the entity, partner or shareholder level, or simply for owners of business assets, upon disposition.

When records are no longer needed for tax purposes, before discarding them, you should consider whether you need to keep such records for nontax reasons. For example, it may be wise to keep purchase invoices for significant assets for insurance purposes, in case such assets are ever destroyed or stolen. You should contact your insurance company to discuss what records, if any, should be retained to support potential future claims.

BILLS: Bills for equipment and other assets the company uses should be kept for the useful/depreciable life of the assets plus three years. Depreciation schedules should be retained permanently. All other bills for current expenses, such as rent of a building, should be kept for three years. Tax audits take place within three years of filing a return (longer if there is fraud involved), so it’s a good idea to keep anything you’d need to document items included in a tax return.

PAYROLL STUBS, W2s: Employer payroll records and summaries should be kept at least seven years. All W2s should be retained indefinitely to substantiate income for pension and Social Security coverage.
CORRESPONDENCE: Legal correspondence (such as contracts, mortgages, deeds, patents and related files) with potential future impact should be kept permanently. (Contact your attorney for guidance on what has potential future significance). General correspondence should be kept at least two years.

FINANCIAL STATEMENTS: Financial statements should be kept permanently, along with capital stock and bond records, ledgers and transfer schedules. The same holds true for retirement and pension records. If your business is in a regulated industry, the rules on keeping documents may be very different; it’s important to contact your attorney for specific recommendations. Finally, if you have done your cleanup and still find you have too much paperwork, consider saving your paperwork electronically.

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Originally published in The New York Enterprise Report | Download PDF

As a small business owner, wouldn’t you love to increase the number of days that you get through your entire To Do list?  Wouldn’t you love to reduce the days when you bog down in email or phone calls and never finish your work?  Leverage the Premack Principle and make it happen.

Behavioral psychologist David Premack recognized that an enjoyable behavior could be used to motivate animals to perform a less-enjoyable behavior.  In human terms, requiring a child to clean his room before he can watch TV, for example, is an effective way to get the room cleaned.  If parents allowed a child to watch TV first, the room would never get cleaned.

Why does the Premack Principle matter to you?  Unfortunately, we generally work the other way around at the office: we put off the most unpleasant tasks, preferring instead to do other, more enjoyable tasks.  As a result, we don’t get around to actually doing those things in a timely fashion.  The phone call to the angry customer, the confrontation with our subordinate, the expense report we need to fill out – these are tasks that all too often are postponed.

More pernicious, however, is the way in which this postponement destroys our overall efficiency.  In order to delay as long as possible the ugly reality of tackling those tasks, we actually slow down the pace at which we do the more pleasant jobs – subconsciously, we’re stalling.  We actually work more slowly so that we can avoid the unpleasant jobs, with the result that we get sucked into a seemingly endless batch of emails, or an unusually long meeting, or we end up doing other unimportant and non-essential chores.  When the end of the day arrives, it’s “too late” to call that customer or confront our subordinate.  We’re no different from the child who eats dessert first, and then pushes the Brussels sprouts around the plate for 20 minutes, hoping that her mother will excuse her from the table before she has to eat them.

The solution?  Do the “worst-first.”  When you arrive at the office in the morning, determine the worst task you have and do it first – before email, before phone calls, before coffee.  When you return from lunch, do the same thing: get the most unpleasant task out of the way first.

You’ll be amazed at the difference.  You’ll get your work done more quickly.  You’ll power through your To Do list.  You won’t “run out of time” quite as often.  And best of all, you won’t feel the dread of that nasty task hanging over your head.

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Increasingly, global competition requires that manufacturing companies improve their production efficiencies or face extinction. And indeed, by adopting Toyota’s Lean System, companies have achieved tremendous gains in productivity and profits by removing the waste, or muda, from their production processes. Many firms have realized the same improvements by applying lean principles to their critical business processes.

However, creating a lean business process is only half the battle against muda. The knowledge workers involved in these processes must also develop lean work habits. A firm that only creates a lean process without creating lean work habits is like a sprinter with a track spike on one foot and an army boot on the other — and that’s a sure way to lose the race to satisfy the customer.

Our work with a major manufacturing firm illustrates the difference between a lean process and lean work habits. The labs were immaculate — a model of 5S implementation — but the lab manager’s office was a mess: inventory was disorganized and critical information was difficult to retrieve.

Our company has taught lean work habits to a variety of manufacturing firms, including Toyota, over the past several years. These firms have realized increased employee efficiency, improved worker response time and increased customer satisfaction. Most significantly, by reducing the muda endemic in most knowledge workers’ behavior, employees have gained nearly 10 hours per week for work that creates customer value.

Lean work habits are critical for knowledge workers, because the multiple value streams flowing through them create a constant tension. Without lean habits to guide their work, the critical flow of information in the value stream clogs up. Think of the information bottlenecks in the form of backlogs on their desks, or the hundreds of unanswered email in their inboxes. Think of the enforced waiting throughout a department when decision-makers read but don’t act upon a request. Think unnecessary motion of managers searching for documents amidst the masses of paper piled on their desks. Each of these wastes undermines the gains made by any improvements in the design of a company’s business processes.

And these wastes can be catastrophic: in 1999, NASA’s Mars Climate Orbiter burned up in orbit due to a miscommunication regarding English and metric units. A task force found that a simple, unanswered email about the correct measurement units led to disaster. The total loss to NASA: $327 million.

In response to these problems, we have developed the following principles that create lean knowledge workers and improve the flow of the value stream:

Principle #1: Screening Muda

Knowledge workers are inundated with information each day. Yet most studies show that 50% of this information has little or no value to the worker.

By contrast, production line employees don’t have to deal with this problem. They have limited and clearly defined materials that come down the assembly line to their workstation. They know what to process and how to do it. Imagine the chaos if new raw materials or irrelevant parts suddenly came down the line: they wouldn’t be able to do their jobs efficiently.

Therefore, we’ve taught knowledge workers at ImagePoint, Ernst & Young, Pfizer and other companies how to screen the information that enters their system in order to identify and reduce the muda. They have removed themselves from unnecessary mailing lists, and proactively told co-workers what types of information they need to see and what types are irrelevant to them. They have learned to discard low- or no-value information immediately, rather than let it clutter their inboxes. They have created rules in their email software to direct mail to appropriate folders so that it doesn’t sit in their inboxes. Employing this lean work habit, they have reduced the amount of time spent handling email by 22%.

Although it’s impossible for them to eradicate the scourge of unnecessary email, memos and magazines, learning to screen the information helps ease the burden and saves time. Even more importantly, reducing the amount of low-value information entering the system improves the “signal to noise ratio”, which enables workers to identify the high-value information more quickly and easily.

Principle #2: Managing The Flow

Receiving, processing, storing, distributing and tracking the information and tasks that comprise their work is a formidable job. Unfortunately, without lean work habits, these tasks pile up until they’re overwhelming. As a result, projects deadlines slip; coworkers wait idly for information and business processes grind to a halt. Muda floods the system.

Production line workers, of course, don’t have the option of leaving tasks undone. The process of manufacturing makes the work flow tangible; they can see the work-in-process inventory building up behind them, and they can see their coworkers farther down the line standing idle. Their muda is visible. They must handle the work as it comes to them, or the line stops.

Knowledge workers have learned to keep value flowing through the business process by applying the “4 Ds” to their work. When something enters their system — an email, a phone call, a memo, a project, etc. — they must take one of four courses of action: they can Do it, if it can be completed in less than two minutes; they can Delegate it to someone better suited to handle it; they can Designate time for it in their calendars, if it’s a more complicated task; or they can Dump it, if it’s irrelevant or insignificant. These are the only options open to them.

When workers rigorously apply the 4 Ds, nothing returns to the inbox; value always moves forward. And indeed, employees who practice the 4 Ds consistently have reduced the amount of time spent working on backlog — which is nothing more than a form of waste in a lean system – by 45%.

Principles #3: Moving Value Forward

The variety of sources of information (email, Blackberries, voice mail, paper, casual conversations, etc.) does increase the speed, volume and access to information. However it also creates serious problems for knowledge workers. They lead to the continual interruptions that fracture the focus needed for efficient, high-quality work.

Mary Czerwinski of Microsoft Research Labs points out that once someone is interrupted, it takes 25 minutes to cycle back to the original task. And 40% of the time, workers wander off in a new direction when an interruption ends. In a five-year study, IBT-USA found that executives lose 4.5 hours per week to interruptions. Basex estimates the loss even higher, at nearly 11 hours per week – which amounts to a staggering $588 billion cost to the U.S. economy.

Production line workers, of course, don’t face this problem. While the line is running, they have to focus on the task at hand — they don’t have the luxury of distractions while working with an arc welder or a circular saw. And when they do handle process improvements or machinery maintenance, they don’t do it while the line is running. They address those issues when they’re off the line and can concentrate. But with the variety of inputs and types of work that knowledge workers address, it’s easy for muda to overtake the business process.

One way that lean knowledge workers reduce the number of interruptions and increase their efficiency is by grouping similar tasks together. They turn off their email alerts and only handle email and phone calls at specific times. More importantly, they designate undisturbed time to concentrate on complex tasks like word processing, spreadsheet analysis, or handling customer service issues. Lean workers report that this increased focus yields higher quality work and has reduced time lost to interruptions by 20%.

Lean methodology, whether applied to a manufacturing or a business process, is a vital tool for improving performance. But changing the process without changing workers’ underlying behavior severely compromises the potential benefits. Muda will never be completely eradicated from any value stream, of course, but it is possible to reduce it with lean work habits and systems. As with lean production, it’s a process of continuous improvement that yields immediate results.

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Originally published in The New York Enterprise Report | Download PDF

Picture your standard morning at the office: you’re checking a complicated formula in a spreadsheet.  Ring!  You turn away from the spreadsheet and take the phone call.  When the call is over, you go back to the spreadsheet.  Ding!  MS Outlook just alerted you to a new email.  You toggle over to your email, read it, and dash off a short response.  Knock!  Your partner ducks in for a quick question.  You feel in control.  You’re multi-tasking, efficiently getting so much work done in so little time.

You’re also wrong.  Multi-tasking doesn’t work.

As a knowledge worker, you simply cannot deploy all your mental acuity and creativity if you can’t focus on the task at hand.  All the interruptions of modern office life – email, Blackberries, pagers, voice mail, good old-fashioned knocks on the office door – destroy your ability to concentrate and focus.

Today’s knowledge workers are interrupted on average every 11 minutes, and it takes them about 25 minutes to return to that task – if they return to it at all.  And of course, even when they return to that task, it takes them a few minutes to get back into what they were doing.  Add that up, and you’ve got a colossal waste of time.  A recent study by Basex revealed that 55% of workers surveyed said they open e-mail immediately or shortly after it arrives, no matter how busy they are.  Similarly, the White Collar Productivity Index by IBT-USA, a corporate efficiency training company, showed that workers lose 4.5 hours per week to interruptions.

So what can you do?  The answer is simple: batching.

Batching your work means doing similar tasks at one time.  For example, rather than reading each email as it comes in, schedule specific time during your day to check and answer emails.  Do the same with your voice mail and your outgoing phone calls.  You should also batch your interactions with people.  Don’t interrupt coworkers whenever you get an idea, but instead meet at regularly scheduled times.  Keep a folder for each key coworker where you can drop notes and reminders for your next meeting.  By respecting others’ time and being mindful of their need to concentrate, they become more respectful of your time — a virtuous circle that leads to improved efficiency.

By batching your work and reducing interruptions, you can more easily maintain your focus on the tasks that need your attention.  You’ll not only do your work better, you’ll do it faster as well.

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Originally published in The New York Enterprise Report | Download PDF of Article

The real downside of poor organization for a small business is simply the terrible waste of time – and money.  Time spent looking for the information or file you need means less time spent on more important things like meeting customer needs or generating billable hours. And if you don’t think that your crammed-to-capacity filing drawer isn’t costing you, consider that in 1997 the Wall Street Journal estimated that executives waste six weeks per year looking for misplace information from messy desks and files. Better organization means that you can apply your skills to the most productive and financially rewarding tasks.

The problem stems from the way most people approach their filing: they focus on filing, not on finding.  As a result, the documents that they work with most often at any given time – the high value documents – are buried in an undifferentiated mass with all the other, low-value documents.

The key to resolving this problem is to separate your paper files into three distinct categories:

Working files. The file drawer in your desk contains your “working” files.  This drawer should only contain the files that you use on a daily basis –drafts of a speech you’re preparing, a meeting agenda, or a preliminary budget.  When these projects are completed, you’ll move them into the “reference” file cabinet.

Reference files. Reference files will mirror your working files – you’ll use the same categories/hanging folders that you have in your working file drawer.  However, these files are kept in a separate filing cabinet away from your desk. In addition to obvious reference items like research reports, you might place the annual budget, HR forms, marketing plans, etc. in this file.  The key is that these files contain items you don’t need to look at everyday, but might look at intermittently, say weekly or monthly.  When you do need these files to complete a project – say, preparing a new speech – then you move the files into the working file drawer.

Archive files. These files should be kept in another drawer in the file cabinet, in a central storage location in the office, or even at an off-site location.  They’re accessible to you when you need them, but they’re out of your way for the 99% of the time that you don’t.  As with the reference files, when you do need these files for a project, it’s a simple task to move them into the working file drawer.

Finally, your inbox and outbox: both should be dealt with in a similar manner. the inbox, whether for paper or for email, contains only those items you haven’t yet read.  Once you read something in the inbox, deal with it immediately—forward to the appropriate person, file in the appropriate folder, or -trash it. Like the inbox, the outbox is not a long-term storage device.  Items placed in the outbox should be distributed or filed by the end of the day.

The 80/20 rule in life applies to your files, too: you do 80% of your daily work with only 20% of your files. Set up this system, use it daily, and you’ll save you and your company time and money.

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