Leading the Lean Enterprise Transformation, Second Edition, 2nd Edition

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5

Tactical Organizational Practices

In this chapter, I give an overview of a number of the day-to-day imple-

mentation practices of a Lean transformation. I call these “tactical organi-

zational practices” (as opposed to the higher-level, strategic organizational

practices discussed in Chapter 6), which include the link between double-

digit annual improvement rates in the True North metrics and the pace

of process study/improvement. I cover some guidelines surrounding the

level and type of support resources that make this pace something that

can be sustained for the long term. I also look at guidelines that are spe-

cic to supporting continuous improvement in administrative areas, as

well as redeployment guidelines and practices. is chapter gives you key

Lean practices that are essential to achieving Lean results while building

organizational buy-in and morale. I tried several approaches before set-

tling on the guidelines I discuss here. ese may not be optimal practices,

but they are workable ones that have succeeded consistently.

THE N/10 RULE

Your pace of overall improvement is roughly proportional to the pace of

successful process study and change—in other words, to the pace with

which you implement events in support of your value stream improve-

ment plans. In fact, you can, very roughly, tie kaizen event pace to achieve-

ment of double-digit improvement gains in the four True North metrics

(see Chapter 3). At the very least, there is a normal pace of events/process

improvement required to deliver a given level of improvement results.

From experience at both Danaher and HON/HNI, a good long-term event

pace of roughly n/10 seems to work well. e n is the number of people in

62  •  Leading the Lean Enterprise Transformation, Second Edition

the value stream being worked on (or in the total site under transformation

or in the total company, if an enterprise-wide transformation is under way).

Dividing the population by 10 (n/10 rule) gives you the approximate number

of annual events required (that is, weeklong teams of six to eight people,

studying and improving a process within a value stream). So in a site of

1,000 people, a long-term sustainable rate of process improvement would be

about 100 kaizen events per year. is is a pace that should deliver double-

digit gains in the four True North metrics, something in the range of 10

to 30 percent annual improvement in quality (external customer complaint

rates, internal defect rates, etc.), lead time (customer lead times, inventory

levels, etc.), cost (productivity at the enterprise level), and human-develop-

ment metrics (event participation rates, accident rates, turnover rates, etc.).

At the HON Company’s seventeen business units, we targeted and met

improvement rates that included:

• 20 percent annual accident rate reduction

• 20 percent annual reduction in both customer complaints and

defect rates

• 50 percent annual reduction in lead times until we got to a single-

day cycle (is was a principal strategic objective because improving

customer responsiveness is a means of generating growth through

Lean practices and then absorbing resources—especially people

resources—freed up by the Lean eort.)

• 15 percent enterprise productivity growth (typically as a result of about

15 percent sales growth with the same employment levels each year)

ese improvement rates are aggressive, but they have been exceeded

during other Lean transformations I have witnessed. ey take a lot of

discipline, but a key point here is that you cannot expect these rates of

improvement without doing the hard work of studying and improving

processes—the n/10 rule part. Improving these four True North metrics

at double-digit rates each year will drive every line item on the income

statement and the balance sheet in the good direction. At HON, we basi-

cally grew 15 percent per year without adding new human resource (some

normal attrition allowed for some new blood every year), without adding

oor space (increased ow provided almost all the needed oor space),

without adding much working capital (faster ow means less inventory

per dollar of sales), and with reduced xed capital per revenue dollar due

to better utilization of capital assets.