Which first, People elimination or Problem elimination?

It’s a toss up between – Mean thinking or Lean thinking!

Lean thinking is the way of a progressive CEO!

I am often asked why it is necessary for a business to adopt lean thinking! Well, it’s will allow an organization to train its employees about Lean principles and to apply them into their business practices. A business that is not improving on a consistent basis is not growing. A company that is not growing is standing still, it is the same as treading water and it’s only a matter of time before they will sink and drown. This has already happened to many US businesses. It almost happened to the US auto industry and they were suppose to be participating in lean thinking!

I believlean thinkinge that it’s a given in today’s global economy for every company to implement Lean principles into their business practices. Why? Because the results are evident in those companies that use lean thinking to improve their processes. Those business leaders who have followed this advice are finding that  their organizations are improving and staying afloat.

We hear the latest gossip on the 24 hour news channels about how companies are improving productivity. We also hear about how many businesses are reducing their inventories. What we do not hear is why this is happening now, when we know the economy is still going south and will be for a while.

Lean thinking is easy conceptually, but not so easy to put into practice!

When one realizes that according to economists, 70% of the US economy is consumer driven. This means that people are buying things such as houses, goods, cars, etc. The Government and Business leaders alike need to change their thinking about how to overcome the key issue that faces every business today. They need to adopt a process of problem solving using lean thinking. How can consumers go out and buy things, when they do not have money in their pockets to spend? I suggest a dose of  lean thinking might be a good start! What are the root causes of the problem?

One of the root causes is the definition of financial success. The traditional CEO has one goal in life and that is to do everything possible to increase the dividend value to the company shareholders. The traditional way they achieve this is by cutting costs to increase profits. What is the number one method they use to do this? Well, they achieve it through people elimination. This is the worst kind of muda or waste because this leads to a reduction or elimination of the intellectual capital, which is the horsepower that drives service or product innovation. This is why the US is lagging behind many other countries including India and China. These countries have undertaken a paradigm shift by using lean thinking to shape their economy and their future in the global markets.

The traditional CEO will also direct their sales people to go out to find more customers and sell more services or products to drive up sales revenue and increase profits. However, they continue to ignore the simple fact that it is actually costing them 25% to 40% of their annual revenue to maintain the hidden waste that currently exists within their business systems. A 10% increase in sales is a small improvement to the bottom line compared to the effort required to generate it. However, a 10% increase in productivity as a result of eliminating waste will improve cash flow with less effort. Which is better, profit or cash flow?

A CEO of a business that has implemented Lean principles will see it from very different perspective. They will challenge all their employees to find ways to overcome the impact of the downturn in the global economy. The CEO will ask them to participate in kaizen or rapid improvement teams to use problem solving to find solutions to reduce costs and increase value for their customers. These actions will help to ensure long term employment and business prosperity.

These progressive CEO’s have taken on another challenge. They understand that the only successful way forward for any business is to adopt lean thinking and implement lean principles. Today, this is achieved through the implementation of a top down, bottom up communication system, which will encourage collaboration between employees and management. The old methods of management, which are based on a manager having power over the actions of employees is slowly being replaced. The new paradigm is one of shared responsibility and accountability between employees and management. Their focus is to create value for their customers by using lean thinking to improve their workplace.

So, the choice is simple! Increase profits through cost cutting and people elimination? Or, Increase profits through lean thinking and using problem solving to support employment and business prosperity? If you want to learn more …about lean thinking