A common difficulty many companies face when embarking on a lean journey is getting people – at all levels – to buy into the philosophy and commit to a new approach to business. Lean generally follows a different way of thinking, and success often requires transformation of leaders as well as a change in behaviors across the organization. Without significant transformation, lean becomes nothing more than a short-lived effort to attack waste on a project-by-project basis.
It is not enough to say that leadership is the key to successful implementation of lean thinking. Without understanding what this means, we cannot truly transform an organization and build a sustained improvement process.
I have come to the conclusion that a critical – and often missing – component of leadership necessary to transform an organization is a deep understanding and application of the Deming system of management. Most lean deployments include training of the management team in basic lean methodology, the categories of waste, and improvement tools, but very few organizations include Deming’s system of profound knowledge as part of the roll-out.
Although there are many people over the years who contributed to the development of the Toyota Production System (TPS), W. Edwards Deming taught the managers at Toyota about leadership, which was critical to the development, success, and longevity of the system. I have been lucky enough to visit Toyota on several occasions and, although I never heard Deming’s name mentioned, his influence on their culture and systems is still readily apparent.
The System of Profound Knowledge
In his final book, The New Economics, Deming presented his System of Profound Knowledge. It basically defines the competencies required for effective leadership. Since transformation of an organization begins with transformation of the individual, a company has no chance of deploying lean thinking unless its leaders completely believe in the need to change and clearly understand what it means to the organization.
According to Deming, there are four areas that anyone in a leadership position must possess and continue to develop in order for the organization to remain competitive and continually improve performance. Being competent in – and actively practicing – these four areas is what separates leaders from bosses.
The four areas that must be part of an organization’s leadership DNA include:
- Systems Thinking: A clear understanding of the organization’s overall system – i.e., the entire process for transforming materials and information into products and services for customers – and how each area (including suppliers) affects its ability to serve customers;
- Knowledge of Variation: Understanding how to use metrics and data to gain insight into the causes of variation in quality and performance. Requires training in basic statistical theory and, among other things, how to separate trends and true changes in performance from normal variation;
- Theory of Knowledge: Continually developing and testing assumptions to gain knowledge is a critical part of management. Applying the Plan-Do-Check-Act (PDCA) cycle improves leadership by enabling learning about the business and clarifying relationships between causes and effects – which is vital to successful planning;
- Psychology: Organizations are made up of people and those in leadership positions need to understand how to hire effectively and motivate people and help them continually develop and improve.
Without a clear understanding of the company’s leadership DNA and faithfully using it to select and develop leaders, a company can end up with such a wide variation in leadership styles that attempting transformation – or pretty much anything else – will be futile. Deming’s System of Profound Knowledge gives us a foundation from which to build a company’s management system and begin the transformation toward lean thinking.