The Importance of Sustained Leadership Commitment: Two Examples
The first example is the Wiremold Corporation, which was showcased by Womack and Jones in Lean Thinking as a lean exemplar and more recently has been documented in detail by Emiliani et al. (2003) in Better Thinking, Better Results. Wiremold makes “cable-management solutions” that enclose various kinds of cables. This was a family-owned business, started in 1900 in Hartford, Connecticut, and the family made considerable investments in the early 1980s in Total Quality Management and various lean tools. They got positive results, but realized they were only scratching the surface.
So they hired Art Byrne as CEO, who had a great deal of success in leading lean transformations. Byrne was an exemplary leader in the spirit of the Toyota Way. For example, he taught TPS to employees directly and personally led kaizen events. He hired some experienced lean leaders to report to him and developed others. He enjoyed a great deal of autonomy in running the company. He started with the shop floor, beginning with simple local changes, and then moved to link together operations. Then he worked on the supporting infrastructure of information technology, accounting, purchasing, etc. He also acquired related companies and led lean conversions for those. Business was booming and the company was never more profitable.
Having accomplished so much, Byrne decided it was time to retire and, shortly after that, the family decided to cash in the greatly enhanced value of the company. In June 2000, Wiremold became part of the Legrand Group, a global company that did not understand lean manufacturing. Recognizing that the new focus was on short-term cost reduction and not on the lean enterprise, most of the lean leaders Byrne had developed left the company—years committed to learning and progress in building a lean enterprise stopped.
The second example is a work in progress. Merillat is a leader in the manufacture of household cabinets for kitchens and other uses. Merillat also had dabbled in Total Quality Management and lean methods and decided to get serious. In this case, the CEO realized the need for a first-rate lean leader with the autonomy to run operations. He hired Keith Allman, whose superior leadership skills had helped successfully transform a plant at Donnelly Mirror to the Donnelly Production System with outstanding results (Liker, 1998).
With the enthusiastic support of the CEO, Allman has systematically worked to transform Merillat into a lean enterprise and has made major strides in the manufacturing area as well as the support structures. Ask Allman what it will take to keep the lean journey going and he is very clear. “My role is to drive a system to develop people and promote from within. Leadership development is the key to sustaining a lasting system and culture that drives continuous improvement.” Allman does not own the company, nor is he the CEO. This means that what he’s accomplished is not guaranteed to last unless he develops a successor and the ownership remains stable and continues to support the lean direction. While Allman cannot control the ownership of the company, he can take the opportunity he has to develop a lean leader. He believes he needs to develop the lean successor from within the company.
Collin’s best selling article on eleven “great” American Fortune 500 companies that had stock returns 6.9 times the general market over a fifteen year period found these companies had specific types of leaders (referred to as “level 5 leaders”).The CEOs were unusually ambitious, but for the company, not for themselves. They had an extraordinary will to make the company succeed, yet equally extraordinary personal humility. Personal aggrandizement or enrichment was not the goal. And they worked tirelessly to develop a successor who they set up for success. In short, they were a lot like Toyota’s leaders.
Shows a set of factors that will influence whether top executives are committed to the lean vision. These include:
- Ownership structure. Obviously, who owns the company and how it is financed has a major influence on the ability of the company to focus on long-term objectives. Looking good to Wall Street for the quarter may conflict with long-term investments in excellence. Toyota clearly has a unique situation in being such a large company with a good deal of family control and a keiretsu structure of interlocking ownership among like-thinking organizations that grew up together. And being publically traded so far has not hampered Toyota’s long-term perspective.
- Promote from within. Develop future leaders from within or there is no chance of sustaining long term. When Toyota has brought in outside leaders, this has been only at the upper-middle-management level, such as general managers, with mixed success. But the culture is so strong and there are so many people with the Toyota Way DNA that any “outside” manager will be pressured to learn the Toyota Way or decide to leave.
- Environmental pressures. Unfortunately, there are factors beyond the control of any lean leader that can make it difficult to sustain the lean learning enterprise. One is the market, which can take major downturns or the market for the particular product the company makes can deteriorate. Other factors are wars, radical new technologies, government policy changes, and on and on. Clearly, Toyota has survived and prospered in many different business and political environments and its strong culture and philosophy have helped it navigate through these treacherous environments.
- Experience with lean. The leaders I mentioned above, Art Byrne and Keith Allman, along with many others too numerous to list here, have all had very positive experiences with real TPS. The best lean leaders in my experience worked for Toyota, for someone who worked for Toyota, or for a company that worked closely with Toyota—the common theme being direct exposure to the Toyota gene pool. Obviously, as more and more companies develop real lean systems, there are broader opportunities for learning lean thinking outside Toyota and its affiliates.
So what can you do if you are not the CEO and top management is interested only in short-term financial results? There are three things I know of:
- Find greener pastures, as Convis suggests.
- Participate in playing the game of applying tools for short-term gains and hope you share in the gains.
- Work to build a successful lean model and educate top management by blowing them away with exceptional results.
The third alternative is frankly going to be the most common position of those with a passion for lean. Allman and Byrne were fortunate in coming in with experience, having strong support from the leaders and owners of the firm, and being able to bring in other passionate lean leaders one or more levels below them. Even then, they did not have complete control over the company. If they had not succeeded in impacting the bottom line, they would have lost their support in a hurry.
In both these cases—Wiremold and Merillat—lean leaders had unique opportunities to come in and seriously transform the company with the backing of the very top executives. They were successful as far as they got and produced stunning results. Merillat is a work in progress and we do not know where it will be in 10 years. The Wiremold story took a sad turn when the company was bought by a company that did not understand or support lean. It suffered a serious setback. On the other hand, the lean systems are still there and many people have adopted them as standard operating procedures. Some remnants will remain should the new owners realize the company’s vitality was because of the lean philosophy and choose to rebuild what they allowed to degrade.
Sadly, few top executives today have the requisite understanding of lean thinking that you truly need from the outset to support a learning enterprise. The majority of companies will require a more radical makeover by new top leaders who know how to leverage the Toyota Way. Until then, the “true believers” of lean will simply have to do their best by creating, step by step, lean models that executives can learn from. But no matter what the approach, it will take time for new leaders to understand lean and for the old system and culture to evolve beyond the batch-and-queue wasteland of the past. Even within Toyota, Convis noted:
The Toyota Way and the culture—I think it takes at least 10 years to really become in tune with what is going on and be able to manage in a way that we would like to sustain. I don’t know as you can come into Toyota and in three or four years have it in your heart and your spirit with a deep understanding.