The Lean Edge: How do you set objectives with lean? By The Lean Edge, – Last updated: Wednesday, October 20, 2010 – Save & Share – Leave a comment

Onjectives setting is a critical part of running a business – how do you do it with lean? How does that differ from traditional management by objectives?

Art Smalley Response:

I think several of the posts on Lead Edge already address the first part of the question regarding how objectives are set but not as much has been said about how it is different from traditional management by objective. I’ll try to focus more on the latter part of the question from a Toyota perspective and then end with some words of caution and play somewhat of a devil’s advocate role regarding the use of ideal states as objectives for the sake of lively discussion.

In Toyota of course a big emphasis is placed upon the topic of Kaizen or continuous improvement. The kanji characters that make up Kaizen (改善) are quite old and the terms is actually of Chinese origin dating at least back to the Qing Dynastic period as far back as the 16th century according to various dictionaries. Japan adopted the term to describe the notion of method based improvement in the early part of the 20th century and of course Toyota made the term famous world wide in recent decades. My former colleague and good friend Isao Kato the retired director of training in Toyota describes some of the history and factual underpinning of Kaizen in Toyota the the recently published book Kaizen Methods: Six Steps to Improvement which I also co-authored.

As we discuss in the book a part of the educational Kaizen process is setting objectives, goals, and targets for improvement. Of course we can quibble over the slight differences in each of these terms but I think that is often a pedantic exercise in splitting hairs. In some cases in Toyota objectives for improvement are simply cascaded down as part of the annual improvement process (Houshin Kanri). For example in production we have to lower the cost per unit (CPU) to produce an engine on an annual basis or reduce scrap and raise productivity, etc.  The percentage varies each year depending upon needs, the maturity of the program, and previous history. There is no one size fits all answer here.

In other cases gaps from standard can suddenly occur in some process (e.g. textbook definition of a problem statement) and we’d have to engage upon problem solving to close that gap. In other cases there may be no traditional problem at all (e.g. we are shipping at 100% on-time to the customer) however we have a lead-time that is excessive. In these cases we might be challenged by management to maintain a 100% on-time delivery objective while shortening lead-time and reducing inventory. That is an example of the technical difference between problem solving and kaizen. Are you closing a gap to a known standard that was previously being met or are you raising the standard of a capable process. Each situation requires slightly different techniques and thought processes.

In product development in contrast for example objectives might include making lighter engines which burn more cleanly and have less noise or vibration. Or producing a new engine family using fewer resources and a shorter development time-line, etc. Each department is different in this regard.

There are other ways that objectives come into play in Toyota but the above description should be sufficient for the point I want to make. It is not simply enough to meet an objective in Toyota…this is the main difference between Toyota’s notion of achieving objectives and traditional management by objective. In the traditional case you have very broad degrees of freedom to achieve your objective. The ends trump the means. In Toyota we had to follow what is now termed the Toyota Way of doing things utilizing certain principles as guiding concepts. In other words we had to achieve results by following a certain process of thinking and acting…

The easiest example to explain might be quality. It is not enough to stop defects from reaching the customer by inspection or whatever other means you might employ. In Toyota you had to do it by building in quality (e.g. Jidoka) into the source process somehow.  Productivity is another such example. You could not raise productivity in Toyota by simply making more parts with the same number of people or by adding people.  To accomplish real kaizen you had to achieve the production plan (i.e. customer demand with no over-production) by utilizing fewer resources and eliminating waste in the process. That was the most unique part of improvement with respect to attaining objectives in Toyota and every department had its local flavor of this requirement.

The cautionary points to readers that I want to emphasize is that you often must walk a careful tight rope between the notion of adhering to a standard process and achieving results or objectives. Merely achieving results may be possible in the short term by sheer effort but it is not sustainable in the long run. Similarly merely preaching to employees to adhere to a standard process (or standardized work) is not always going to generate improvement either – especially if it is a bad process to begin with. I frequently see organizations making mistakes in both directions and achieving no sustainable improvement.

I’ll also play devil’s advocate here and caution readers to not get overly bogged down by mysterious sounding notions of ideal future states, confusing jargon like 1×1 production, or perfect processes. This conceptual technique is often useful for breaking teams out of existing thought patterns or generating break through type thinking. Equally often however I see teams frustrated by an inability to achieve some vague conceptual notion of a perfect future state that has been scribbled on a white board with no real detailed analysis, engineering, or critical thinking behind it. Sometimes small increment steps are okay to get started and gain momentum.

If that seems heretical let’s review some Toyota history for context. Toyota realized that its productivity level was approximately 1/9th that of Ford Motor Company sometime after World War II. In the engine shops Taiichi Ohno did not draw value stream maps or have an ideal state on a piece of paper. The term would have been completely foreign to him and was developed much later inside Toyota (a whole different story). He simply knew that the current system of one man operating one machine was not viable in terms of productivity and drawing upon his years of previous experience in Toyota Loom plants he set out to achieve a system of one man operating multiple machines out of necessity. Incrementally one man operated two machines or three machines by 1950. By 1955 in his engine machine shop one man on average operated five machines. The maximum case in 1955 was 27 machines in one unique example. With this incremental approach eventually Toyota surpassed Ford in terms of productivity.

Quality improvements followed a similar incremental trajectory. I can of course argue that Jidoka or building in 100% quality was a conceptual notion that existed. The term “ideal state” was not used however and did not come into existence much later for different purposes. Regardless of the semantics from a practical standpoint what tactically occurred was different in terms of objective setting. Realizing by way of some trial exports that Toyota product was far too inferior to compete in the U.S. market Eiji Toyoda implemented a corporate wide TQC program in 1962. One objective over several years was to reduce defects in manufacturing by 50% a goal they accomplished by 1965. Product development and other departments had different objectives to meet the competitive requirements of the U.S. market.

In summary every company needs to improve. Objectives are a key step in the improvement process and are generated in different ways. In Toyota however it is not enough to achieve objectives we had to accomplish them in a certain way by improving the process in line with Toyota concepts and in a sustainable manner. Incremental gains from current state are an okay way to get started as Toyota history often shows. Ideal future states or conceptual notions like True North have their value when properly positioned and employed. Just don’t allow them to become barriers or overly trendy words that are continually stated with no real meaning. Objectives, standards, targets, metrics, etc. all play an important role in determining whether or not you are factually improving.