How to Keep your CEO Lean Focused

They often find that, although their CEOs may be enthusiastic at first, their attention is quickly diverted to other matters. And since the focus of any company is whatever is occupying the CEO’s time, a Lean initiative usually devolves into a side activity assigned to a committee with limited influence.

The trick to making Lean principles a more mainstream part of the business is quite simple conceptually, says Peter Martin, vice president of business value generation at Invensys Operations Management (http://iom.invensys.com) in Plano, Texas. It’s a matter of translating the benefits of Lean into the language spoken in the executive suite—that is, the language of profitability.

“When executives get together, they are not having discussions on how Lean they are,” explains Martin. “They are discussing how profitable they are.”  They focus on the fundamental metrics of the business. For this reason, the measures of any Lean initiative must be aligned with these metrics and converted into their units of measure if Lean manufacturing is going to be integral to the business.

Consider a scrap-reduction project around a particular process in a plant. The Lean team should measure the profitability of the process both beforehand and afterward and see how it affects the bottom line. If the reduction is significant, it will catch the attention of the executives. “Once the news rolls up into the executive suite, the discussion will be about how Lean thinking in this one event made us, say, $150,000,” says Martin. “All of a sudden Lean gets pulled into the mainstream.”

Related Editorial—See August 2011's "IT Supports Lean Thinking" for more information on how IT directors are supporting their plant management and business management counterparts to get Lean.

Reporting such results requires identifying the right measures and having a real-time information system in place to collect them. As important as the typical enterprise resource planning (ERP) and corporate financial systems are, Martin does not think that they are the right tools for evaluating Lean projects because they lack the necessary resolution. “They tend to measure plant-wide, on a monthly basis,” he explains. “In order to see the impact of most Lean initiatives, you have to measure much more frequently over a much smaller space, maybe down to a workcell or process unit.”

Luckily, most automated processes already have the necessary infrastructure in place in their real-time instrumentation and controls (see “Real-Time Profitability” on page 26). “These systems tell you everything that is happening in the plant second by second,” says Martin. “We believe that most of this automation is grossly underutilized at only 30 to 40 percent of its potential.” Lean initiatives can release some of that potential by identifying the key performance indicators (KPIs) for the project at hand and converting them into financials. Success, however, will require collaboration among the finance, engineering, and information technology (IT) departments.

A few automation vendors have already done some of the conversion work. Invensys, for example, has developed what it calls Dynamic Performance Measures, a patented approach for extracting business measures from real-time sensor data. It has been in advanced collaboration with Robin Cooper from the Goizueta Business School of Emory University (co-author of Cost & Effect: Using Integrated Cost Systems to Drive Profitability and Performance, ISBN: 978-0-8758-4788-7).

“The approach aligns measurements from the plant floor with measurements reported at the executive level, giving you second-by-second visibility into the impact of changes to the process,” says Martin. “It turns Lean manufacturing and its various approaches into a real-time profit control system that sits on top of the plant control network.” That should captivate your CEO.

Invensys Operations Management (http://iom.invensys.com)