Recession Pain? Leaner Thinking Offers a Better Way
“There is a better way for everything. Find it.” 
Thomas Alva Edison
Turbulent times provide ample opportunities for success, if we approach things with the right frame of mind.
by Adam Zak
In my role as an executive recruiter specializing in helping companies with Lean transformation, I’ve been spending a lot of my time lately speaking with people all over the world who are wrestling with complex decisions. I thought I’d share some of my observations with you, and in turn, hope that you will share your thoughts with me.
Everywhere we turn, there’s advice heralding “How to manage in a crisis,” or “New rules for surviving the crunch.” Just the other day I heard a discussion on PBS involving business writers trying to agree on a title for what the economy is going through. And there was no consensus (imagine that, from business writers).
Crisis Breeds Opportunity
Craig Barrett, recently retired CEO of Intel told Newsweek readers, “There is a general rule in business life: market share is won or lost during transitions. You cannot save your way out of a recession, you can only invest your way out.” No one is denying that cutting costs is essential to surviving 2009, but we Lean disciples have always practiced a different philosophical approach. As we look for ways to eliminate waste and improve productivity, we are always focused on getting better. In early February Muhtar Kent, Coca-Cola’s CEO told the Wall Street Journal “I’ve been through this movie in smaller versions a number of times in the past…times like these are not an excuse to sit back and ride out the storm.” And this week, at a global sustainability conference in Chicago, I spoke with Rick Frazier, Coke’s VP Supply Chain, who told me they were leveraging their Lean & Green efforts even more dramatically during this time of uncertainty.
“A recession creates winners and losers just like a boom,” observed Mauro F. Guillen, a professor of international management at the University of Pennsylvania’s Wharton School in BusinessWeek. Let’s chose to be among the winners.
The Need for Leadership with a Wartime Mentality
I think any Lean practitioner will agree with me that in many companies upper management has spent too much time focusing on quarterly financial statements and not enough time on long-term thinking. Executives have to lead “their people out of a psychological funk and at the same time tailor their business to focus on a new reality,” says management consultant Ram Charan in BusinessWeek.
Cut If You Must, But Keep All You Can
In discussing both strategy and tactics with my contacts, I hear that many are focused on avoiding or limiting layoffs by instating four-day work weeks, unpaid vacations and voluntary or enforced furloughs. Others are implementing flexible work schedules, wage freezes, or cuts to 401(k) and pension contributions. By keeping controls on people costs, they’re keeping the people.
For a strategy that pays returns twice, consider this: a number of Lean companies are bringing back previously outsourced work, thus both retaining skilled team members and removing non-value added transportation and outsourcing administrative costs.
Certainly some Lean companies out there are indeed using these times to reduce staff and make their organizations “leaner” (obviously a total misunderstanding of the Lean concept – so were they really “going Lean” in the fist place?). But most of my clients seem to “get it” and are letting go and hiring too, with an eye to building a better Lean operation and mustering forces to take advantage of opportunities that will most certainly arise, as well as those they can create. That’s continuous improvement with a long-term view.
As Diane Swonk, chief economist at Mesirow Financial said in Newsweek, “So many CEOs are so focused on defense that they may be missing real opportunities. If you only play defense, you will not be on the right side as the economy bottoms, let alone turns. For us, for instance, there was an opportunity to attract talent and clients as our Wall Street counterparts imploded. The new blood is helping to buoy profits today and will put us in a whole new position on the other side of the crisis.”
A blog article from HarvardBusiness.org recently cited three rules that leading companies use to maximize service while eliminating wasteful activities: reduce, redesign and restructure.
Reduce Wisely and Emphasize Talent
Before making painfully aggressive reductions, it pays to keep in mind some potentially serious repercussions: You risk losing valuable contributors inadvertently, damaging internal morale or your external reputation as an employer-of-choice. You may also lose sight of the important training and staff-development programs which are helping keep your key people engaged with your execution strategy. Recently, The McKinsey Quarterly advised “By emphasizing talent in cost-cutting efforts, employers can intelligently strengthen the value proposition they offer current and potential employees and position themselves strongly for growth when economic conditions improve.” Makes sense to me.
Redesign Jobs and Make Them More Engaging
If you want to maximize morale and involvement, Lean practices prove again and again the importance of engaging people. Now is a great opportunity to redesign jobs, and perhaps even career paths, to totally engage the people undertaking them. Adding more responsibility, a greater measure of autonomy, and improved sense of control all weigh heavily on promoting employee satisfaction.
In addition to redesigning roles, companies cutting jobs should carefully protect training and development programs. Again, not only are these essential to maintaining workplace morale and increasing long-term productivity, but they also provide your people with the skills necessary to perform their redesigned jobs.
Restructure the Lean Way
Lean can excel in times of crisis. Focused on basic process improvement, Lean solutions often require no capital expenditures. Frequently, companies turn to Lean after buying new equipment or technology that failed to generate expected improvements. Lean is also scalable — management can tailor the people component to meet specific requirements.
Looking beyond crisis mode, Lean can accelerate the impact of changes by:
- Using existing Lean experience and leadership in an organization to jump-start the turnaround.
- Achieving measurable cost reduction and enhanced value to customers.
- Establishing a framework for improvement that delivers returns to the organization as good times return.
The key is to remember that you’re managing a crisis. The Lean effort can’t become the turnaround; it must work in parallel with efforts to manage cash and reduce costs.
High Commitment, High Performance
A February 9, 2009 article in the Harvard Business School’s Working Knowledge series caught my eye. Uncompromising Leadership in Tough Times featured Q&A with author and Harvard professor Michael Beer who has studied the successes of high commitment, high performance (HCHP) leaders in tough times. What he found was that “they shared the view that a firm has a larger purpose than simply profit and increasing stock price, though they were all laser- focused on profitability and saw it as essential to achieving their larger purpose for the firm. They had a multi-stakeholder view of the firm as opposed as a shareholder view. The purpose was to add value to employees, customers, community, and society-not just shareholders.”
Let’s all of us heed Edison’s advice and find a better way. It will require everyone from the C-suite to the shop floor to think and work differently. But isn’t that what Lean is all about? There has never been a more important time than now.
Excellent thought process, Adam. Again, a demonstration that Lean goes well beyond the shop floor tool box. Womack & Jones had it right when they wrote about Lean THINKING! It’s the thinking – the problem solving part – where the payoff comes, in good times or economic crisis.