By Reb Gooding, George Shinkle, and Mike Smith of Direction Associates, Inc.
The fundamental management task is to provide direction and make decisions.
This is accomplished through the management system of the organization, yet many organizations never invest enough time to understand how well their management system really works. Analyzing what you do, contemplating why you do it, assessing how well it is really working, and considering whether there is a better way can be a daunting task.
Lean techniques (emanating from the concepts of the Toyota Production System) have been widely applied to manufacturing methods for many years. The focus has been on eliminating (or reducing) non-value-added activities, and increasing flow through the system. This has led to massive improvements in productivity and quality yielding significant cost reduction and improved customer satisfaction. Improvement rates often exceed 10% per year…year after year. The focus on manufacturing was appropriate because much of an organization’s value-add resides there. It is also because, as a German Manufacturing friend once said, “manufacturing has glass pockets.” It is easy to see cost, quality, waste, and flow issues there. But cost, quality, waste, and flow issues also exist in “back office” or management system processes.
Applying lean techniques to improve the management system provides an excellent opportunity for improvement. Defining a clear focus, reducing waste, and improving process flow – these concepts apply to management as well as to the factory floor.
A management system that facilitates timely decision-making can create significant value to an enterprise. Not only is the decision important, but who is responsible to make the decision and when it must be made can have significant impact on the business. Understanding how required decisions are identified, made, and communicated is often best accomplished by modeling the decision processes as a system.
- Imagine a management system where:
- Decisions are made instantaneously
- Approvals are granted at the moment they are needed
- Redundant activity has been eliminated
- Error checking is not required
It is not likely that this ideal state will ever be completely realized in any organization, but from this ideal concept one can identify important issues and opportunities for improvement, and thus, design an improved management system that reduces wasteful practices.
“Lean Management Systems” is a term that describes the implementation of lean concepts into the management of organizations. In a Lean Management System — lean means utilizing people, material, information, and assets to achieve the optimum value of the total business system to generate maximum customer value and maximum business value in the minimum time and at the minimum cost.
Lean Management Systems improvement begins by diagramming the what, when, and how of the current management system. We call this “Management Systems Diagramming1” (MSD) and it consists of documenting the responsibilities, major tasks, schedule of requirements, meetings, control processes, communication methods, and organizational linkages.
The MSD process captures and documents the requirements, cadence, and alignment methods of the organizational management system:
What – Requirements
- What are our management team responsibilities?
Major Tasks Schedule
- What are our major required activities throughout the year?
- What are the key milestones (business plan, budget, etc.)?
When – Cadence
Schedule of Reviews
- What reviews (approvals, critical evaluations, or information sharing discussions) need to be held to deliver our responsibilities?
- Which reviews require management participation to ensure we meet our obligations?
- How often are these reviews needed?
- What is the appropriate order of these reviews?
- What meetings are required?
- What events drive the requirement for meetings?
- Who should attend which meetings?
- Which meetings are called as needed and which are regularly scheduled?
- How does management make these meetings meaningful, effective, and efficient?
How – Alignment
- How will management ensure that our good intentions are fulfilled?
- How will effectiveness be measured?
- How will management communicate to the organization?
- Is communication uniform?
- Which communiqués are confidential (for internal use only)?
- How do you determine effectiveness of communication?
- What linkage and coordination with other parts of the organization need to be accomplished?
- What does management need to share, and with whom, across the organization?
- When is linkage communication required (prior–to gather inputs and approvals, or afterwards–to communicate results)?
The Management System Diagram is best when depicted in a one page view as shown in Figure 1. The one page view allows the entire story to be easily seen. It also forces succinctness. There is an old saying: I didn’t have time to write a short report so I wrote a long one. The one page report forces prioritization on the most important factors. Learning to write effective one page reports takes practice.
An example of a completed MSD for a Corporate SBU (Strategic Business Unit) is shown in Figure 2.
The purpose of the management system diagramming process is to understand and document how the organization approves, communicates, and controls the flow of people, money, material, information, and activities. This answers the fundamental question: How do we run the business?
Management systems diagramming is only one of the simple, yet powerful techniques that should be used to build a Lean Management System. It appears to be very simple but it can be quite challenging to do in actual practice. (This level of thinking is difficult and many paradigms built up over time may need to be dispelled – so strong facilitation is highly recommended.) The MSD process has been successfully utilized at many different levels in organizations to increase the effectiveness and efficiency of functional groups, teams, and entire companies.
A Lean Management System reduces the waste of the valuable intellectual and managerial resources throughout the entire enterprise, allowing people to focus on strategically important and value-adding activity. In our experience most management systems have between 50% and 90% waste. All of this waste cannot be easily removed but much of it can be. Thus, there is a significant opportunity to improve our management systems and make our enterprises more successful in our challenging and competitive markets.
Note: 1 This process is more thoroughly defined and discussed in the book: Transforming Strategy into Success: How to Implement a Lean Management System by George Shinkle, Reb Gooding, and Mike Smith published by Productivity Press (acquired by Taylor and Francis) Jan 2004 www.taylorandfrancis.com.
About the Authors
Reb Gooding, George Shinkle, and Mike Smith combine many years of industrial, management, and consulting experience to support their highly varied clients through Direction Associates, Inc., an Indiana, USA based international consulting firm that specializes on strategy, alignment, and improvement (www.directionassociates.com).
They support client improvement from the board room to the factory floor, from the executive suite to the customer contact service provider, and from the legislator to the civil servant. They provide strategic, planning, and process improvement in all functions and activities of businesses, non-profits, and government organizations.
Reb can be emailed at firstname.lastname@example.org.
George can be emailed at email@example.com.
Mike can be emailed at firstname.lastname@example.org.
To call Direction Associates, Inc.: 1-765-643-4985