Lean Management: Human Assets and Cooperation Enables Enterprise Excellence

Interview of Earll Murman, Professor, Aeronautics and Astronautics & Engineering Systems Division, MIT(Massachusetts Institute of Technology)，Director of Lean Advancement Initiative (LAI)

Gasgoo.com: As one of the directors of Lean Advancement Initiative (LAI), would you please introduce LAI’s development and how it contributes to “enterprise excellence”, or how to accelerate the transformation of complex enterprises?

Mr. Murman: LAI is a learning organization. It’s a consortium of industry, government and academic members, focused initially on  aerospace but now, broader industries are included. It actually includes one of automotive company from Spain. The purpose of the consortium is for MIT to work collaboratively with the industry and government members to understand how they are transforming themselves to lean organizations and then to report those findings back to the companies and government agencies. LAI also develops useful tools  based on the research it conducts. So the way we’d like to think about LAI’s added value is that these organizations are going to transform to lean organizations, even if LAI was not there.  LAI can  help to accelerate that transformation by sharing the knowledge and sharing the experiences of best practices. And we do that through student-based research. We have had about 250 students perform their graduate thesis, master, PHD thesis research since LAI started in 1993 by going to the companies and observing what’s happening, doing case study and things like that. Of course one of the benefits is the 250 students are graduated. They join the work forces as knowledgeable people.

Gasgoo.com: As the author of “Lean Enterprises Value”, what is your opinion on the principles and practices of the lean management? As the economic recession has happened, how is lean management developed and applied to complex enterprises?

Mr. Murman: Lean principles seem to be broadly applicable to many different enterprises. When enterprises tend to not be successful, they often view lean as just a tool  to use. Lean is a way to thinking. And part of the way thinking is to be flexible to change in situations. So in a down turn economy the business may have to reduce their expenses because of not having as much sales. But it’s also an opportunity to continue their transformation to become more efficient because eventually the business will come back. So it will be a mistake in a down turn economy to turn away from a lean transformation because it will be a shortsided step to take. An interesting example is Southwest Airlines, which is one of the most successful businesses in the United States Unlike   most airlines, it didn’t  reduce its staffs after 9/11 event when the air line business dropped. Southwest Airlines knew that the employees were so valuable with the knowledge and experience they had. . They may not be able to recover afterwards if they fired the experienced employers. You know, one of the tenents of Lean Management is  “respect for people”. We don’t have a way in the accounting of the assets in organization to value human assets. We count for equipment and plants and money in the bank. But we don’t count for the assets of the organization related to your workforce.

To me the whole secret of lean management is humans. I am not TOYOTA person, so I can’t speak from the first-hand observation. My understanding is that all the TOYOTA employees are problems solvers and all are continuing to make the system better. If you have a company with 100 employees, you need each one of them to make the system better. That’s a massive amount of talent devoted to improving the system.. One of the organizations that we take our students to learn as course is the New Balance Shoe Company. They are the only athletic shoe company in the United States that makes shoes in the United States. The other companies make shoes in China or Taiwan or somewhere like else like that.. But New Balance makes some of their shoes in the United States. They organized themselves so that every worker is a problem solver, and they continually suggest how to improve their manufacture system in many little ways, which cumulatively adds up. They can respond to an order in three days.  Shoes primarily sell over the weekend Friday to Sunday at the malls. So Monday they get the call for more shoes, they can deliver these shoes by Friday. That puts them at a competitive advantage.

It’s interesting that the principles  TOYOTA developed have nothing to do with cars. When we first started LAI there were a lot of skeptics about whether principles developed by the automotive industry would apply to aircraft, because aircraft are much lower volume production, much more complex products. But we found the Lean fundamentals still applied and it is essential they be implemented across the entire enterprise.

Gasgoo.com: Lean Management emphasizes on the understanding and supports from the high-level management team. Excellent companies, such as GE, Rockwell Collins, have their own long-term sustainable lean management system. Here in China, as there is different company culture and developing stage, what kind of challenges do you think these companies will meet? Do you have suggestion on the practice solution?

Mr. Murman: I don’t consider I know the Chinese culture well enough to be a knowledgeable sociologist, but the things we all observe is that the lean journey is not simple nor quick. It’s not something that might take 3 months or 6 months, it’s something that will to take years. And the reason is that the lean philosophy is to start with the system you have, and then make it better and better, rather than to depose the system and to begin a new one. I think that is part of the secret of lean because as you continually make it better, you learn a lot, which is like anything else, for example cooking. The first time you cook a meal, that’s ok, but next time you cook it better, because as you make more steps, you learn as you go. I suspect that it’s the Chinese culture too.

Certainly something that may be a challenge is the role of management, which is different within the lean company. In a lean company all the managers are spending less time on telling people what to do, and more time on helping them to find out what to do and how to do it better. And that’s culture changing. We have this difficulty in the United States. A leader who understands lean and  retires from company may be replaced by a leader who  doesn’t understand lean. It’s a difficult transition. That’s why education is important. Executive education is important, and it’s important for students to get exposed to this while in colleague. But very few do. That is the main issue I concentrate on as Education Director of LAI.

Typically the way organization start is to find a small group within a large organization that is willing to try the lean principles. You want to start someplace where you can be pretty sure that you can be successful and go through that for cycle for learning and then share that success with another parts of the company. As the company sees that lean can work for them, they can start developing a comprehensive lean strategy and educate their employees.

It needs a system  way of thinking. In your domain you are working with OEMs and tier-one suppliers. They need to work together. The suppliers of the automotive industry are important, because they provide a lot of product value. The OEMs need to work with their tier-one suppliers, to help them and encourage them to become lean, that’s the way we work in the United States. We learned that from TOYOTA. Let me give you a very interesting example of this: the Rockwell Collins company has seen a large amount of cost going into health care for the employees. So the local hospitals are some sense the suppliers to Rockwell Collins, not for the product, but for the employees., Rockwell Collins is paying health care to their employees through health insurances. So Rockwell Collins reached out to the hospitals near by and said that we would like to help them apply lean principles and practices and become better. It’s not just about your direct suppliers but it’s a holistic view. It a win-win lean management.

Gasgoo.com: You’ve mentioned 7 principles of lean transformation enterprises and the transformation map, which are benchmarks. Then what do you think need to be specially focused or adjusted for automotive industry

Mr. Murman: If I was in the automotive companies, I would like to take the 7 principles and  sit down with the management and say let’s compare what you do to this benchmark because each organization has to put those principles to their organization. So it’s the starting point: each organization has to construct its own lean journey, it’s not formula. These are the principles for them apply to their organizations. In taking these principles, you need to see how it fits the organization. Maybe you want to go to visit other organizations and do a benchmark trip and learn from that, and then come back to say, OK now we understand a better organization, do we have other kind of organization of learning? So I would say use the 7 principles  as a starting point to improve the organization

Gasgoo.com: Do you think the lean management in US companies is different from that in TOYOTA Model?

Mr. Murman: I don’t think they are fundamentally different. Each organization has  their own names and call the principles something different.. They want to use an American name instead of a Japanese name. But the basic idea focusing on limiting the waste and increasing value are not different. I see what is different is every company goes through cycles. Things changed, people change. It’s easy to fall back to old habits. So it’s difficult for implementation, and it’s not easily to deploy expert management. It’s a challenge to keep the people focused on continually becoming better. We’ve learned a lot from the automotive companies, and I was very surprised that these principles are very easily applied in aerospace. I am now involved with health care and there is only one real difference I found. I a product application, the product is flowing through the system. But in healthcare, the customer is flowing.  So that changes things a little bit. My local hospital applies these principles and they are the same to TOYOTA. A well-run and lean organization is a very happy organization. If you work in an organization that’s performing well, and you find people are very happy about their work. They feel that they are contributing and they are recognized of what they are doing. That is more important to them than the amount of money they make.. Deep down people really want to feel productive in an organization. And lean brings that up.