DailyKaizen

This last Friday we had the great opportunity to host Orry Fiume for a full day workshop focused on “Management Accounting for a Lean Business.”  For those of you that don’t know Orry, he is the former CFO of the Wiremold company, and one of the best known authorities on Lean Accounting.  Orry was part of a team that transformed the Wiremold company during the 1990s, which has been written about extensively in several books including Lean Thinking and Better Thinking, Better Results.  We asked Orry to come out and visit us after his new book Real Numbers was discovered and widely distributed within our organization and is being used especially by our Finance and Measurement teams to challenge how they think about their work. 

During the session we learned a lot about how to transform the purpose as well as processes of the Finance and Accounting functions to support an organization’s Lean strategy.  Orry did a great job of translating stories from the manufacturing industry into healthcare examples.  Overall, the timing could not have been better.  The CFO and the Finance teams are engaged and looking to take a leadership position in the transformational efforts and the tools and the thinking they learned should be put to good use.

While it was valuable to learn about the tools and methods of Lean accounting I found even greater value in the messages about leadership that Orry brought to the workshop. The primary message that Orry reinforced throughout the day was that in order to transform a company you must first transform the people working in the company, one person at a time.  This is not a challenge that can be overcome with a new method or tool.  It is a challenge that can only be overcome by leadership.   At the end of the day I wrote out in my notebook the key leadership messages that I took away from the day and are shared below: 

• Leadership from all functions and most importantly at the highest levels must “plunge” into the Lean strategy and learn by doing.   
• Lean improvement cannot be delegated, it takes active leadership, starting with the top.
• Leaders must create tangible change.  They need to actively participate in kaizen that physically changes the work environment, the value streams and the work of associates. 
• Associates will watch your feet more then your mouth, leadership behavior is worth more then a million words.
• There will be lots of leaps of faith that each leader will need to overcome and staff will be watching them closely to understand how committed they really are. 
• There will always be some that will actively seek to block the Lean strategy and they need to be asked to find work somewhere else.  It is business and not a democracy.  People should be given many opportunities to learn and change, but at some point supporting the strategy in not optional.
• Leaders must understand the difference between mistakes and failure.  A mistake is something someone knows how to do and does incorrectly.  A failure is when someone tries something new and is unsuccessful.  There should be no excuse for mistakes and lots of forgiveness for failure.

In conclusion, Lean Accounting provides us with a set of tools and methods that when applied will support an organizations Lean Strategy.  Yet, like all tools they are only effective when they are guided by the right leadership. 

Hi everyone, I’m still around, admiring the great work of Lee and colleagues at Group Health, and also applying my knowledge at a different level, working with the California Healthcare Foundation, based in Oakland, California. What I’m experiencing in this work is a very different view of health and health care - a societal one, as opposed to one that is based at the level of a health plan / delivery system.

The specific medical issue we’re looking at is the control of blood pressure, which has been really interesting to look at from a societal perspective. Why? Because the health system sees a slice of the impact - expenditures on drugs, office visits, and eventually the devastating outcomes of cardiovascular disease. It does not see the other impacts, on patients’ time, their costs, or the time and costs of their employers and families, which frames how a society might look at managing this condition (which right now is done poorly, with only 35 % of Americans with adequate control, and a third unaware that they are at risk).

This is very tied into LEAN for me, because it’s taught me to look at every problem as one impacting society, whether I am seeing it in an exam room or a board room. I am also using everything I’ve learned to date to help make an impact with this organization and its partners. This includes visibility - I asked if it would be okay for me to publish the plan “in the making” on the public Internet, and the answer was “yes.” I have never done that before.

With that in mind, feel free, if you’re curious, to take a look on my other blog and offer myself, and Californians, some advice on improving a plan that will make a difference for patients managing chronic conditions.

Also feel free to answer this question - why doesn’t every health care organization post its A3’s in progress for community comment? Should patients and their families be part of the nemawashi process? Should we create a forum where that happens?

(I’ve been spending a lot of time studying patient and family involvement in the care system, also thanks to LEAN..)

Finally, something to energize us about all that we have left to do:

A guest in my home who is from Germany told me today, “Ted, I saw that book (“Overtreated,” by Shannon Brownlee) on your table, and it brought a smile to my face that you were reading it. Why is health care here all about money? When I compare health care to Europe to health care in America, it’s like first class compared to tenth class.” I told her I was doing my best along with others to make a difference, but I felt as disappointed as I ever have at what we’re accomplishing with the $2 trillion we spend each year.

What is our Value Stream?  I hear this question over and over again as I talk with different leaders in different parts of the organization.  As we have deepend and broadened our Lean knowledge base over the last six months people have begun to conceptualize the organization in new and exciting ways.  We are taking our first baby steps away from the only view that matters is the vertical view of the organization to we must begin to think and manage horizontally like our customers experience us in order to bring about breakthrough improvement.   We are beginning to think about cause and effect and through a process view.  And most importantly, their is plenty of evidence that our silos are starting to break apart.

Now back to the question.  We are a fully integrated system that includes both the insurance/financing of healthcare as well as the delivery of care itself.  This is rare in healthcare where most organizations either sell insurance or provide healthcare services.  We do both.  So does that mean that we have two enterprise value streams?  The first being the insurance product we sell?  The second being the delivery system where we see patients?  Many would argue yes.  Other organizations in healthcare have identified their value streams at the service line level like Cardiology, Orthopedics, and Primary Care.  We could do the same?  Does it make sense?

I believe the right answer rest with our customers.  When they choose to do business with us I believe they want the highest quality care, that is affordable and has a minimum cost/headache to consume.  That is why I believe we need to think about our Enterprise Value Stream as being a single stream that weaves together the services provided by both our insurance and delivery systems and operations.  A powerful combination that creates the right incentives if realized.  By conceptualizing and then organizing our organization around this value stream we could do things no others in healthcare can.   The value of truly integrated care where the best patient is the one that never happened, because the disease was prevented in the first place.  The founders of our organization had this vision, but we have never been able to fully realize it.  I believe Lean provides us a path to get there. 

Last week I had a hallway conversation with a manager that has been applying Lean thinking and tools to her area for the last couple of years.  I love the conversations when people talk about those moments in life when things became clear and this was one of them.  I asked her if I could write a blog entry about this experience and she said as long as it was anonymous she would love me to share so here it is.

She told me she had just figured out why they talk about Lean as a never ending journey.  She had heard this many times, but it finally had become real for her and because of this realization she said for the first time in a year she was able to relax.   She had recently completed a rapid improvement workshop and as a result of this work many of the problems in her area had been solved.  Yet, soon after she began to identify a whole new set of problems that were created as a result of the change.  For the last year she had been working hard to solve problems with the hope of being able to solve them all.  As new problems continually popped up she would be frustrated and would only work harder, which over time was exhausting.

So the realization that freed her mind was that there would always be problems.  She was talking with a frontline staff member when this realization hit her.  He was telling her the evolution of a process they had been focusing on over the last year and discussed each of the problems that had come up as they had tried to make improvements.  This process had been a difficult one for the organization and our members and the team had made huge improvements over the last year, yet, changes kept creating new problems.  What was interesting was the each new problem caused headaches and frustration, but it seemed smaller then the problems of the past.  She suddenly realized that they were measuring progress in the wrong way.   That by the very nature of solving a problem the system changes, which will create a whole new set of problems.  That striving for perfection may be the target, but the real goal was to make improvement each and every day.  So as a manager her job was not to try and create a problem free environment, but instead to set up the conditions and system by which problems could be effectively solved.    

It is exciting to think how much more effective and engaged this manager will be armed with this new perspective.  I love these moments…

On Friday afternoon I received an interesting phone call from a gentlemen that I met this last spring at the Lean Enterprise Institute annual summit.  He has been following our journey on the blog and because our organizations are so similar in our business and experience he wanted to see if we could find ways so share knowledge, site visits and other learning’s.  This is one of the reasons I love the Lean community so much, because Lean people are so focused on learning from others and sharing what they have learned.

After agreeing to look for opportunities we spent more then an hour talking about where our organizations are and where they are coming from.  It blew me away how similar we are, even though we are in completely different industries (healthcare vs. banking).  They began their journey a few years earlier then we did, started a Model Line and are now adopting Hoshin Kanri, aligning around Value Streams and putting in a Daily Management System.  He shared a story about his organization’s focus on “getting today’s work done today”, a strategy they have recently adopted organization wide that has led to break through performance to everyone’s surprise.  After hearing this part of the story I asked if I could share what he told me on the blog and got the green light.  

The focus on Today’s work Today began a year and half ago after the organization had completed its first year of developing A3’s and deploying Hoshin’s and came out of the reflection process.  After the first year of Hoshin they realized that their processes were so unstable across their organization that attempting to realize breakthrough performance on an unstable platform was unrealistic and chaotic.  They did not hit a single one of their targets.  They needed to get the basics right first and standardize their processes.  At the same time they realized that their biggest obstacle to stabilization was variation in demand coming in from supplier organizations which led teams across the organization to carry large amounts of inventory to buffer their labor.   Thus Today’s work Today was born.

They decided to rollout a standard work program modeled after Toyota’s Daily Management System.  When they realized how large an effort this would be they came to the conclusion that besides adding the new products that they had in the pipeline as an organizaton they had the capacity to do nothing else.  This was a hard sell as the leadership table, because so many of the senior leaders had their own improvement strategies in process.  There was also a deep concern that a decentralized effort could add up to a bunch of point improvements that did nothing to improve the whole.  Despite these concerns they moved forward and all teams were provided training and the charge to reduce inventories, level demand and get today’s work done today.

After a year of focus, organization wide he told me that the results blew everyone away.  Not only had cycle time come down drastically, defects had been reduced by 75% and productivity was up 15%.  They had also grown a very important part of their business organically as customers realized they could get quicker turn arounds by doing business with this company.  With standard work in place they have begun to figure out how to move team members across work units in response to demand, which he believes will save them millions next year. Most impressive he said was just how engaged the workforce had become.  With a Daily Management system in place team members for the first time had a process where they could improve their work outside of an event. 

The reason I wanted to tell this story is because it illustrates just how powerful small improvement can be on the whole when they are added up.  It also illustrates that for organizations, like my own, that are early in their journey their is huge opportunity to be realized by just focusing on the basics and getting waste out of processes one by one.  Grand strategies are not necessarily required to get grand results.  I plan on acting on these learning’s! 

Tom Morgan asked Lee and I about this and we’re doing the natural thing, asking fellow experts for their input. Here’s the question, and Tom, you might want to flesh out a little bit about what the situation is. I’m sure many people here have experienced this lovely challenge:

Hi, Firstly thanks for the great blog.

I am considering the mechanics of implementing Quick and Easy kaizen (ala Norman Bodek) where I work. However I am not sure how it works where an idea involves a change to a key business process that spans several unrelated projects and in some cases geographically dispersed sites.

Any ideas how I might approach this?

Hi Everyone,

We received the following question from a reader.  I thought I would open it up to everyone before I gave my two cents:

We are getting educated about Lean and wonder if you have advice about selecting Consultants (or Senseis) to help us get move ahead effectively and avoid pitfalls?

Any input from others?

About a week ago I picked up on a recommendation a copy of the book Moneyball, by Michael Lewis.  The book follows the story of Billy Beane, the general manager of the Oakland A’s and his incredible ability to win year after year with a ball club that spends fractions less then other big league baseball teams.  Beane’s secret has been to break away from “traditional” baseball practice and thinking, which was heavily focused on finding individual superstars that could dominate opponents.  Beane, working for an organization with very limited resources knew that he could never compete with this type of strategy against the bigger named clubs.  Instead, he focused on the statistics and finding the less known and less expensive players that do small things right all the time.

For those of you that have not read this book I highly recommend it, it took me less then a week to finish and it made me think a lot, not about baseball, but about Lean and what I am working on in my own organization.   It was easy to take Beane’s methods and thinking and translate them from how he thinks about players to how organization’s think about opportunities.  Over the last couple of years working in many different organization I have been in countless forums where leaders dicussed finding the “home run” that if they could only just find it would lead to break through results.  Then off we go out to do significant amounts of analysis in search of this big win and we often end up frustrated, because we either can’t find it, or when we finally get it going it turns out to far less effective then we had thought (Mariners fans I am sure you can relate  :)   ).  This is a strategy that relies on a few people to come through with the big results.  Very unlean.

While I do believe that there are some “big hitters” out there for the organization I don’t think they will come easy or cheap (lots of resources and change management).  Maybe, like Beane we need to begin to think about how we find a set of decent hitters that consistently bring in returns without the big thrills, but also without the big organizational costs to get them?   If we take this approach it will take a lot more discipline, a lot more alignment and a lot more people engaged.  It will be less thrilling, with fewer big names, and a lot less resources.  Sounds a lot like Lean…

For the last couple of years we have taken the approach of focusing our improvement and Lean consulting resources in a small number of “strategic” areas.  There are many good reasons why we chose to take this approach.  Senior leadership at that time had not “bought into” Lean as business strategy for the organization and it was still considered process improvement thus much of the Lean work was “voluntary.”  As an organization we still believed in a traditional model of leadership that the leader was the boss and not the coach, teacher and facilitator.  The small number of Lean consulting resources had very limited experience and technical skill.  And the list goes on…

As the organization has broadened and deepened its view of Lean I believe that this approach now needs to be changed.  I would be the first to admit that I have been slow to recognize the need that we now need to find a way to fill.  As we push forward with Lean as our enterprise wide business strategy we must supply the means for people to learn.  We can no longer be selective about who gets to participate in “Lean” activities and thinking.  Everyone must do Kaizen, and as a leadership group we need to figure out a way to provide the level of education to advance 10,000 toward greater improvement.  This is the only way we can reach our long-term goals and fulfill our mission. This does not mean that everyone has to learn at the same pace, but I do believe that everyone needs to know enough to improve.   To not do this will result in the “haves” and the “have nots” taking hold, a dangerous problem at this time on our journey. 

My view on this has changed as I have watched the work in the Model Line advance over the last year.  As you will recall we took the time and provided the resources to ensure that everyone had the chance to learn how to put in standard work, level their work, measure the work, make their work visible and PDCA.  Over time I have watched the culture change, much of which was an outcome of this new learning.  Overall, it was not the consultants and trainers that were most taxed for resources by this effort, but instead the management team.  This is exactly why it worked, because they were asked to not only manage in the new world, but also teach and lead improvement.  To teach and lead improvement they needed to know their processes and so on.  While not perfect, kaizen as a way of life has begun to seep into the Model Line workforce. 

I think there will be some that don’t agree with this approach.  For one, everyone will be for training until they realize that leaders will be the delivery method in this new world.  I expect for some this will be excited and for others terrifying.  Others will be overtaxed by resource constraints and the more proactive world of the future will be very hard to see in the present.  Finally, from a Lean consultancy perspective we need to figure out how we will raise a big enough network of support resources to make this possible, and possible quickly.  A good, and hopefully not optional challenge for us all!

Now

I am currently engaged in a great benchmarking and learning journey that I am taking with the Chief Financial Officer of my organization.  Our challenge is a difficult one and I am looking for some of you, the readers of this blog to help me think through our strategy and approach.  In return, I promise to share with you all our story over the next year.

Our goal is to redesign our financial and performance measurement systems.  As the organization has adopted Lean as an enterprise/management system transformational strategy we have quickly realized that our current financial and performance measurement systems will hinder our efforts for change.   The current systems primary purpose is to put controls on spending within our functions with the primary tool being the budget.  We know this drives all kinds of waste and does not support our efforts to create continuous improvement within every team with year over year cost and productivity improvement. 

Our goal is to develop a total cost framework for the organization that allows us to understand the primary drivers of cost.  This will allow us to focus on specific drivers, prioritize opportunities and align resources to our greatest opportunities.  Once the framework is created we hope to begin to transition the way we think about cost from vertical to horizontal by organizing our measurement systems around our Value Stream.  Additionally, we hope this coming year to deploy cost and productivity targets through our Strategy Deployment process to each of these value streams. 

As we have started our learning process we have found it very difficult to find service related examples that translate into our language let alone healthcare examples.  We have read some excellent materials like the new book by Orry Fiume called Real Numbers, but are hungry for other stories, tools, examples of frameworks and materials.  Please share any information if you can and wish us luck!