Tag Archives: five minute lean book excerpt

Five Minute Lean – The Power of Incentives – What is Measured and Rewarded Improves

July 28, 2017Five Minute Lean Excerptcharlie munger quote, five minute lean book excerpt, incentives for the decision maker, lean book, learn lean, the power of incentivesDavid McLachlan

This is an excerpt from the book "Five Minute Lean", by David McLachlan - a wonderful book that blends teaching of the tools, culture and philosophy of traditional Lean with a modern-day Lean parable.

You can get the whole book on Amazon here and enjoy your own copy.

The Power of Incentives – What is Measured and Rewarded Improves

‘If you want to change how someone acts, change what you measure and reward to reflect it.’

When you’re effecting change in an organisation you should be aware of one of the most powerful influences of a person’s behaviour:

Incentives – but it’s not what you might think.

Billionaire Warren Buffett’s business partner Charlie Munger famously said that he continually underestimates the power of a person’s incentives. Think about the global financial crisis in 2008 – it was caused in large part by institutions financing thousands of terrible loans – simply because their incentives were married to how many they sold and not the quality of the loans themselves. Seems so simple now, doesn’t it? But it made no difference to the salespeople if the loans went bad (which they eventually did), and it ended up causing widespread financial havoc.

So our last step when implementing a change in our company or organisation is this:

To change how our team members work and act, change how they are measured and rewarded.

This doesn’t have to mean monetary rewards either – it might simply be the difference between pleasure and pain in a task. If a task is extremely difficult or painful to do the right way, it subtly makes the incentive for our team-mates not to do it. If doing a task the wrong way is easier, the unspoken incentive is actually to do it that wrong way.

Changing what we measure has a similar result. If you want team members to stop passing on mistakes or unfinished products downstream (to the next step in the process), then stop measuring them by the amount they do and start measuring them on the quality instead. Make the focus on zero defects, and tie bonuses or Key Performance Indicators (KPIs) to quality or adherence to a standard process, with the amount they do as a secondary consideration. The same works for any other process output you are trying to change, in business and in life.

If you want better customer service, create a standard process around your customer service interactions then change what you measure and reward to reflect it. Feedback (both good and bad) for these things is best given as soon as possible – the longer you wait the less powerful it becomes.

Understanding the effect of incentives on team-mates’ every day decisions can truly change your business and your life.

Selected chapters from the story within Five minute Lean:

Check out these selected chapters from the teachings within Five Minute Lean:

Five Minute Lean – Put it Together With Design for Ease of Use

July 28, 2017Five Minute Lean Excerptdesign for ease of use definition, five minute lean book excerpt, how to make a product easy to use, lean book, learn leanDavid McLachlan

Put it Together With Design for Ease of Use

‘The most successful companies have products that are easy for customers to use, and processes that are easy to create them with.’

Design for Ease of Use (DFEU) is the idea that both our product and our process should be designed as simply as possible, so that anyone can use and understand it.

Truly, the more people that can use your product, the more opportunities you have to sell it. And the more employees that can perform your process, the easier it will be to find quality, capable staff.

It is no mistake that an average two year old can find their way around an Apple iPad, and that Apple as a result has been an immensely successful company.

This is why Design for Ease of Use is so very important.

The first step is asking our customer, “What is it you are trying to do?” The reason we ask, is because value is always determined by the customer (1.1). Whatever their answer is, we can ensure that our process gets them to that outcome more easily, by answering for ourselves the DFEU questions below:

1. How many steps are in the process?

Can these steps be reduced?

2. Is Value added at each step?

Can we remove non-value added steps?

3. How many wasteful activities take place at each step (3.1)?

Can we remove this waste?

4. How long should each step take?

Can we make them faster, and does it meet customer demand?

5. Why is the step necessary?

What would happen if it was eliminated?

6. Are there any queues or stops?

How long does the process stop for, and can we remove these queues?

7. What can go wrong at each step? Is it possible to make a mistake?

Can we use Error Proofing (4.2) to avoid mistakes?

8. If the mistake cannot be prevented, can it be detected before it goes to the next step (4.2)?

And finally, the big one:

9. Would customers be willing to pay for this step if they knew about it?

To quote a phrase that is attributed to Albert Einstein – “Everything should be made as simple as possible, but not simpler.” Making things easy to use is the pillar behind any great product.

Selected chapters from the story within Five minute Lean:

Check out these selected chapters from the teachings within Five Minute Lean:

Five Minute Lean – Work Towards One-Piece-Flow (and Reducing Silos or Batching)

July 28, 2017Five Minute Lean Excerptfive minute lean book excerpt, how to reduce batching, how to reduce silos, lean book, learn lean, one piece flow definitionDavid McLachlan

Work Towards One-Piece-Flow (and Reducing Silos or Batching)

‘One Piece Flow allows us to create our product or service smoothly and to customer demand, one piece at a time, reducing inventory, queues and work in process.’

One Piece Flow is where, instead of many different departments or processes creating large amounts of material or work, it is done in as close to the one place and at the same time as possible.

It also means that our product moves from step to step continuously, one piece at a time and with no build-up of work in between. In our Line Balancing example (3.4) there would always be one piece (and only one piece) working for each step, and those steps would be balanced to customer demand (Takt time).

One of the main ideas behind this is that by only working on one piece at a time until completion, if anything stops or holds up the process it becomes very clear, as the process simply cannot continue. It reveals problems, which is good as they are opportunities for us to improve, and we can then look at these problems as they arise instead of pushing them aside for later.

Performing the work in the same place and time, whether it is a physical space or using a single computer program, significantly reduces wait time between processes, reduces unnecessary people or tasks, saves on space, machines and resources and gives an opportunity for simpler management.

One piece flow is also opposed to “batch processing”, where items build up in a process causing larger inventories, longer queue times and rework.

Many of the eight wastes (3.1) will affect one piece flow. Unnecessary movement, transport, additional process steps or unevenness in a process can all slow things down. We can use our value stream map to see some of this waste, then root cause analysis to get to the real problem, and Line Balancing to see any variation in timings and balance the process to customer demand.

A Pull system, including Supermarkets and FIFO lanes and Kanban triggers in the next chapter (4.1) can also greatly assist with implementing one piece flow. Before we finish this chapter let’s look at one last thing:

SMED and Quick Changeovers

Just a quick note on Single Minute Exchange of Dies (SMED), which is another way of saying “quick changeover” techniques. Sometimes our process might have long wait times as we change between processes, people, machines, systems or tools.

While it is easy to see how a quick changeover can apply to a manufacturing machine creating two different items, it can apply to an office environment in the form of changing between people or processes as well. Brainstorming ways to change over quickly, based on the instructions below can help reduce this wait time.

The method for quick changeovers is based on two types of changeover operations which should be separated from each other:

Internal, or “hidden” operations, which can only be done separately and when the person, process or machine is stopped, and;
External, or “visible” operations, which can be done in parallel while the person, process or machine is still going.

The aim is to reduce any waste (3.1) in the changeover, and then to:

Convert any Internal (hidden) changeover operations to External (visible) changeover operations.
Perform these changeover steps in parallel to each other (at the same time) or while the process is still running.

Can a client’s details be filled out by someone, in parallel, while they are having their consultation? Or could a person changing roles within an organisation complete some of the changes themselves by making an internal, or hidden process, external and accessible? With a little imagination, we can transform our job and make it easier, which is why our first step would always be to “go and see” at the Gemba. Front-line team-mates often have great ideas on how to make hidden processes visible and complete changeover steps in parallel.

By putting all the steps in this chapter together we are reducing blockages, wait time, employee and customer confusion and unnecessary steps. Just doing this alone has the potential to add massive value to your company, department or business, and there are still more ways in the last two chapters to help you improve your work even further.

Selected chapters from the story within Five minute Lean:

Check out these selected chapters from the teachings within Five Minute Lean:

Five Minute Lean – Add Important Data to Your Map

July 28, 2017Five Minute Lean Excerptfive minute lean book excerpt, lean book, learn lean, swim lane chart example, value stream map data, value stream map example, what information to add to value stream mapDavid McLachlan

Add Important Data to Your Map

‘Including the right information on your process map allows you to see areas where you can improve straight away.’

The last step in “Map” is adding the right information to our Value Stream Map so we can reveal problems and improve the process. This data includes:

Rework or defects
Additional problems or ideas called out by front-line staff
Non-value added steps
Process and customer timing

Let’s look at each one in turn, and then an example at the end.

Rework Percentages

Rework can also be known another way as “First Pass Yield” or “First Time Right”. Basically, this is how many times you need to go back through the previous steps to get additional information or fix a defect, for example a car that needs repainting, or a form that is not filled out correctly and needs more information from the previous department.

If our item goes through correctly 70% of the time, then we have a “First Pass Yield” of 70%. Or, if you prefer, you can note it as rework, which is one of the wastes we go into in (3.1) and in which case it would be reworked 30% of the time.

Kaizen Bursts

You will notice in our Value Stream Map icons that there is an icon called Kaizen Burst. A Kaizen Burst icon is a great way to write down additional ideas or problems called out by our front-line team-mates.

We can then delve deeper into these additional problems and solutions when we move into root cause analysis (3.3) and brainstorming solutions.

value stream map kaizen bursts

Figure 10: Examples of using Kaizen Bursts to call out opportunities for improvement. Note that we number opportunities to correspond with the process step they relate to.

Value Add / Non Value Add Steps

If the process task improves the product, or the experience of the customer and it is something our customer is willing to pay for, we consider it Value Add (VA). Almost everything else is Non-Value Add (NVA) or waste that we can seek to reduce.

We can also note NVAR or “Non-Value Add Required” steps, that might include things like regulatory approvals or audits that don’t add value but are necessary to perform.

Timing our Processes

We can display these value add (VA) and non-value add (NVA) steps with a process timing band. In a Value Stream Map, the timings for our NVA steps stand out on the peaks, and the timings for the VA steps stay in the valleys underneath our map, shown in Figure 11.

value stream map non value add timing

Figure 11: An example of Value Add (process boxes) and Non-Value Add (queues) in a process map, shown by the timing band underneath each process. Value Add steps are shown in the valleys, while Non-Value Add steps stand out on the peaks.

When gathering the timings for our process it is a good idea to time a process at least 10 times, then use the “lowest repeatable time” as the standard – the lowest time that appears three times or more. You may need to time more for fast processes and slightly less for slow processes, but 10 is often a good place to start.

There are also three main types of timings that we need to reveal:

Cycle Time, which is the time of a single process. This is noted underneath the process step.
Lead Time, which is the total time to create and deliver a product or service. This can be noted at the end.
Takt Time, which is the rate of items required as determined by the customer, for each shift.

To get our Takt time, we take the average items sold (or serviced) and divide it by the hours worked. For example if Lisa’s customers called through 40 times a day (per operator) and she worked eight hours (480 minutes), her customer demand would be one every 12 minutes (480 minutes, divided by 40 calls = 12 minutes a call).

Of course, all of these timings relate to “Delivery” in our Customer Driven Metrics (1.2). Now that we have all this information, let’s add it to our Value Stream Map and see what it looks like:

value stream map with data

Figure 12: A Value Stream Map of our Shoe Emporium process, now with rework, process timing separated into Value Add and Non-Value Add as well as the other common icons. The Takt time can be added separately.

swim lane flow chart timings

Figure 13: A Swim Lane Flow Chart of our Shoe Emporium process. Although it is uncommon for a map like this, the important NVA times (the top times) and VA times (the bottom times) are also noted, with the totals on the right.

So well done! There is a lot to take in in this chapter, but you did it.

On your journey you will notice that different people and organisations might lay out their maps slightly differently. As long as there is an agreed standard within your company, then including the information listed in this chapter at a minimum will give you enough insight to start making improvements.

If you are doing all of this for the first time, it can be a truly eye-opening experience. There might have been something that annoyed you in your job or business that you just couldn’t put your finger on – but when you map it all out you can actually see it. You can see where the hold ups are, the rework, bottlenecks in the process and more. It’s amazing, and it can really improve your work and your life.

Selected chapters from the story within Five minute Lean:

Check out these selected chapters from the teachings within Five Minute Lean:

Five Minute Lean – Use Feedback to Fix and Guarantee

July 28, 2017Five Minute Lean Excerptfive minute lean book excerpt, how to use customer feedback, lean book, learn leanDavid McLachlan

Use Feedback to Fix and Guarantee

‘Fixing and guaranteeing the things our customer finds annoying is an immensely powerful way to gain raving fans.’

Many industries will have their pet hates – things that have become almost clichés as they annoy customers in that industry the most. Perhaps you’ve had the cable technician who never turns up on time, or the call centre operator who moves slower than a glacier. Great companies and businesses that survive the longest are ones that take this into consideration and do something about it.

One of the most simple and powerful methods we can use here is to:

1. Find out what annoys the customer most

Discover what annoys your customers by using the Net Promoter Score “Dissatisfiers”, and collecting customer complaints. Examples of this step might include a tradesperson that doesn’t show up, clothes bought from an online store that don’t fit, or food that is cold when it’s delivered.

2. Fix it

Imagine if your tradesperson actually did show up right on time, every time? Or your clothes were either the right size or you could exchange them? Or your food really was delivered hot and fresh for every order? We can fix what annoys customers the most using the tools in this book.

3. Then guarantee it

Now imagine if your tradesperson showed up on time, guaranteed? Or your clothes were the right size or you could exchange them for free, guaranteed? Or your food was delivered hot and fresh guaranteed, or it’s free?

These three steps are truly one of the fastest ways to get yourself raving fans, and raving fans turn average earnings into outstanding earnings.

The examples above were not just chosen at random either – they are real life examples of outstanding companies. Domino’s Pizza implemented the idea of pizza delivered in 30 minutes or it’s free, guaranteed and the company has gone from strength to strength in business and in its stock price since.

Zappos is an online clothing and footwear company that implemented a 365 day return policy (effectively a satisfaction guarantee), and has grown from a small online store to turning over more than a billion dollars a year.

And lastly, local tradespeople who show up on time, guaranteed, have more work than they need and can often charge more than the average as well.

When you combine all of the five steps in “Define Value” you have a quick and easy way to get insight into what brings your customer value and what they would be willing to pay for. This is truly powerful information, and can save you a lot of heartache down the track, whether you are just starting a business or improving an existing one.

Selected chapters from the story within Five minute Lean:

Check out these selected chapters from the teachings within Five Minute Lean:

Five Minute Lean – Create a New Standard Procedure and Checklist for Quality Control

July 27, 2017Five Minute Lean Excerptchecklist, five minute lean book excerpt, lean book, learn lean, standard operating procedureDavid McLachlan

Create a New Standard Procedure and Checklist for Quality Control

‘When your process can be performed easily by someone straight off the street, then chances are you have an excellent Standard Operating Procedure.’

And now finally we come to the point of it all! A standard, repeatable process that anyone can learn, teach to others, and quality check.

You will find that most businesses, even ones you have worked for, do not have clearly written, standard, repeatable processes for the work that they do. This means that the work is often “hidden”, finishing very differently from person to person and relying on large amounts of expensive training, experience or even highly paid experts. Therefore, by simply articulating a standard process (making it visible) first, and then using the knowledge in this book to improve it, you can see some incredible rewards.

Taking our future state process and ensuring we have tested it well, we can now create a new Standard Operating Procedure (SOP) for people to carry out the same way every time, or use as a new baseline for future improvements.

The most common inclusions are a set of main tasks, and then sub tasks – simple step by step instructions from the beginning to the end of the process. A good process checklist will also include the takt time, or the rate required as per customer demand, the lowest repeatable cycle time (2.5), and relevant pictures, safety and risk notes.

When team-mates are using the same checklist as the person who is measuring their KPIs (Key Performance Indicators), then everyone is on the same page and their job is made that much better, easier and enjoyable. There is nothing worse than trying to do a good job while being judged or monitored on different rules (or rules that are always changing or are not clearly defined). This step truly has the power to fix these inconsistencies in an organisation.

lean process checklist

Figure 30: A checklist for your standard procedure doesn’t have to be complicated. Keep it simple so anyone can create and follow it. Many people separate their SOPs into a handful of main tasks, and then sub tasks next to each related main task.

It’s a good idea to keep your standard checklists in a central location where everybody has access to them, in addition to making them visible at the workstation and rolling them out to the people performing the process, the people training the process and the people monitoring the process.

Selected chapters from the story within Five minute Lean:

Check out these selected chapters from the teachings within Five Minute Lean:

Five Minute Lean – Organise Your Process with Five S

July 27, 2017Five Minute Lean Excerptfive minute lean book excerpt, lean book, lean five s definition, lean shine, lean sort, lean standardise, lean straighten, lean sustain, learn lean, shadow board, visual managementDavid McLachlan

Organise Your Process with Five S

‘Organising a workplace with Five S reduces risk, increases safety, makes it easy to reach and find things and know when they are running out.’

In Lean, Five S (also “5S”) is a method used to create an organised, clean and safe work area where things are visible, easy to reach and easy to find. This can also help in reducing waste, cycle times, overburden and stress and help implement your Pull system.

It doesn’t just have to be a physical space either – in the world of technology it can mean reducing different and unnecessary programs, sorting out unnecessary fields in your software or forms, or reducing the many folders or areas we keep work, results, forms or code.

The five S’ are:

1. Sort

Sort out and remove any unnecessary items.

2. Straighten

Organise the remaining essential items so team-mates can find materials quickly and reach them easily.

3. Shine

Clean the area and work tools.

4. Standardise

Make the standard process and the designated places for each item clearly visible for all to see.

5. Sustain

Put into place regular sorting and review of the necessary items and the implementation, for continuous improvement.

In other words, we have a place for our necessary things, and our necessary things in their place.

A nice example of 5S in a physical space is a “Shadow Board” – where shadows of the tools are put behind tools hanging on a wall so you know what goes where and can always see if something is missing. This idea can also relate to a Kanban trigger (4.1) to replenish an item. If the marked space is empty, this might trigger the upstream process to produce and place a new item there.

Item “footprints” are a similar idea – outlines and labels to show where items belong. All items should be close at hand, requiring minimal movement.

shadow board visual management

Figure 25: An example of a shadow board, where the shadow behind the tool makes it easy to see what goes where, and when a tool is missing. Great visual management that can be seen at a glance.

Implementing 5S

“Red tagging” items to begin our 5S is one of the easiest ways to start. We tag items with red tags or post it notes, and take them off if the item is used. This way it becomes clear if we have any items that we don’t need, and can “Sort” them out. Doing a tally of how often fields are used in a software program (if at all) is another good way to tell if the field is truly necessary or not.

After we sort, “Straightening” an area can mean clear labels on storage boxes that help keep things in their proper place, and having items or tools within arm’s reach so a team-mate doesn’t have to move far to get them. This helps improve speed and quality.

When we want to “Standardise”, it is also a great idea to show the standard process clearly on the wall of the area, making it visible for everyone to see (4.1). For example, you could place instructions for keeping an area clear or for storing things that come in, or the steps of the actual process performed in this area.

“Sustaining” a 5S effort is often done by making a roster clearly visible, with the date 5S was last performed and the date and name of the next person to perform it.

Selected chapters from the story within Five minute Lean:

Check out these selected chapters from the teachings within Five Minute Lean: