Organic Lean – example of 10% bonus performance
Some years ago a construction firm suffered serious claims as a result of roof construction failures. Combining risk-reduction with cost-reduction, the roof construction department standardized the sizes of the beams to a few sizes (… 10 – 13 – 16 – 20 …). The extra costs of materials were compensated by the discounts. And the design process was simplified. The other departments gave some pushback because the supporting construction became heavier too. As a board decision, robustness prevailed over elegance. And of course the company could not afford any other claim on roof construction.
Classic lean six sigma, morning session:
Prices of industrial buildings are under pressure, and the company lost some bids on medium-sized warehouse construction projects. A young black belt specialist identified a major opportunity in reducing the costs of the roof construction. Not being aware of the history, he just analyzed a few recent construction-projects and demonstrated the business case for improvement. By allowing more size variation for the beam size, costs would be reduced, and at the same time, the discounts would still be possible since the crisis made suppliers more flexible. The black belt proposed extra standard values (… 10 – 11 – 12 – 13 – 14 – 16 – 18 – 20 …).
This would reduce the cost of 10% for the delivered projects. Additionally, there is some soft information that the lost bids are caused by extreme beam size margins in the standardization. Initially, the process of the roof department seems clear, and the potential benefits are too good to be true. The formal process as described in the management system is confirmed in the morning session of a workshop with leading engineers.
New process, from lunch to coffee break:
During a lunch break, one of the engineers hesitantly suggests that the formal way of work is indeed as described. She wonders however if the black belt is interested in the detail processes that will have to change in the new approach. The others support her, revealing a sense of unease that has been suppressed until now. After lunch, the workshop becomes much more vivid, and the team brings the “real process” on the whiteboard. The calculation process is, in reality, an iterative one, requiring a first guess of the beam size. So it is not (as everybody else expects) a fundamental calculation that results in a desired beam size. The margins for snow – rain – material characteristics – and even for decay like corrosion are not so solid after all. And if fully applied, the calculations are time-consuming. Selecting just one standard size higher is common practice under time pressure.
Breakthrough after coffee break:
The CEO of the company walks into the meeting during the second half of the afternoon, just before the coffee break. He compliments the team. And invisible, but maybe even more important: with a cup of coffee he reassures the manager of the roof department, that he will never be blamed for the outcome. The board is fully aware of the historical background and the precious role between cost-control and risk-control for the manager. The CEO visit takes only ten minutes, but is probably vital for the success of the project. The manager is now empowered to take decisions with wider impact.
After the coffee break, the team agrees on the new process, and develops a full understanding of the opportunities. First, the team agrees to replace all old KPIs by a single new one: the extra size-margin caused by standardization. The engineers of the roof department expect that this way it will be possible to visualize opportunities for cheaper designs towards the other departments, thus gaining additional benefits. Until now the roof department acted defensively towards other departments, and the team changed its attitude in a breakthrough way. One engineer expresses it in a very simple way: “we produce the keystone, so we should be ready first in design, not last!”
Another engineer expresses the same observation differently: “we get away with blunt designs because we are missing the deadline, the other departments have no choice!” The team spends a full hour in understanding the meaning of this observation. It is not only an internal department change. It turns the overall process towards the other departments upside down.
Reflection on the improvement project:
The lunchtime intervention proves decisive for the project benefits. The team was initially heading for an improvement of 10%, but when the benefits would have been damped by the engineers adding invisible margins in their so-called detail-process. Would 5% have been a final result? Maybe even less? Now the team engages in the full challenge and takes their full role in the company, rather than only reducing costs. Although invisible for most participants, the CEO makes a second vital intervention in supporting the manager.