FAT Results

from Lean
Implementation:
A Rational Process
by
Arun Shukla Approach to Lean Success

L
ean manufacturing is an accepted vehicle for organization-
al transformation. It brings a bias for disciplined action,
clarifies the intuitive knowledge gained from experience,
and puts an organization on the path to accelerated business
results. Yet industry reports and research indicate that while most
organizations have a reasonable understanding of the technical
pieces of the lean puzzle, they struggle to realize its promise.
 FAT Results from Lean Implementation: A Rational Process Approach to Lean Success

In the quest to attain “flow” with “zero” waste, organizations are falling short on the
people management aspect of lean implementation. As lean gurus swamp the shop-floors,
the people who are actually responsible for sustaining lean programs are relegated to the
background and are not well managed. Their importance in the lean journey to success
is ignored and misunderstood. This often leads to variable and unpredictable process im-
provements and business results that can’t be maintained.
Getting FAT results from lean implementation—it sounds Atkins-approved. The truth
is, like any successful diet, results can be improved by focusing on the person involved
in the program. At Kepner-Tregoe, we frequently help clients integrate the people side of
the equation and improve results. In lean initiatives, focusing on the people pieces helps
organizations solve the lean puzzle. The results can be FAT - Financially triangulated results
that come at an Accelerated pace, and are Translatable consistently across other parts of
the organization.
To achieve FAT results, we must first understand the lean landscape, lean management
practices, and the performance system that drives project team behavior.

Understanding the Lean Landscape

Observe the lean landscape, not as a lean theory expert, but through the eyes of the
people who experience lean first hand as it gets implemented across their organization.
The view can be frustrating and confusing.
It is not uncommon to find that the strategic business objectives of an organization are
at odds with when and where lean is implemented. For example, a consumer products
plant of a large pharmaceutical company decided to transform itself into a “Lean Enterprise”
with 37 distinct projects that focused on improving manufacturing flows and fill rates and
reducing cycle times. While the projects were implemented, the company was being strate-
gically benchmarked against labor costs in offshore countries. In this case, a lean job well
done was at cross purposes with the strategic objective to lower labor costs. Results from
lean projects coincided with the closure of the production facility. For people affected by
the plant closure, going lean did not help. It only created disbelief in lean principles.
Call it Kaizan events, 5Ss, Poka Yoke, or something else; organizations have a tendency
to apply multiple tools simultaneously. This leads to more projects, often beyond the
capacity of the people who must execute them. A manufacturing client had 213 improve-
ment projects identified across its portfolio of three plants in North America. They quickly
learned that this would be unmanageable and would produce undesirable outcomes. In
this situation, the lean program was blamed for the unrealistic overload of initiatives and
was cited as a diversion from core business activity.
The point is frequently made that while individual lean projects are delivered success-
fully, their performance metrics never add-up. The great strides that have been made in
productivity aren’t reflected on a 1:1 basis on the bottom line. This inability to triangulate
results in a multiple-projects environment undermines the credibility of lean at an enter-
prise level.
For the people working in lean projects, their worst fear, on a personal basis, is that
jobs are no more secure than prior to the lean journey. What’s in it for them if they embrace
lean? How and why should they ever get on the lean bandwagon? More importantly, why
should they remain on the lean train?

The Lean Journey

The lean journey chart shows how lean implementation progresses in an organization.
The timeline of a lean implementation is plotted across the horizontal axis. The vertical axis
2
 FAT Results from Lean Implementation: A Rational Process Approach to Lean Success

is a measure of process or busi- The Lean Journey

ness performance. The popula- (Where is your organization today?)
tion curve of projects follows an
S curve with cumulative stages Proactive Management
of lean success. Operations im- of People Resources
provement projects in a variety +

Process / Business Performance

Reactive Management
of industries in different geogra- of People Resources
phies support this pattern. +
Proactive Management
At the bottom left of the spec- of Process Elements
trum is the “negative zone,” when +
Lean teams witness a downturn (+ive) Reactive Management of
in business performance as a Process Elements
result of a lean implementation Base Line Performance
Serious Program
project. It sounds odd, but it is Review Required
often true; business performance (-ive)
takes a step backwards as the
processes around the targeted Time Line
area within the organization
adapt to change. This negative
trend is transient in nature. Within a short period—at maximum, within a quarter—the
performance should take an upturn towards the desired goal. If not, the program needs
serious review.
The majority of projects are populated around the first zone of performance improve-
ment. These projects are in the “low hanging fruit” category. Processes in this zone tend
to be managed in a reactive mode. However, as process execution matures to proactive
management, process/business performance improves dramatically.
The next quantum leap is made as organizations rise above process management and
acknowledge the importance of people in the project.1 Ultimately, “lean nirvana” is found
when the human performance system is proactively managed at an individual and an or-
ganizational level. The gains here are asymptotic.
Assessing an organization’s maturity on the lean curve and mapping operations im-
provement initiatives on this chart can provide valuable insights. Continuing progress along
the lean maturity curve requires understanding of the dynamics of people vs. processes,
reactive vs. proactive process management, and their interrelationships in lean projects.

Lean Management of
Process Performance –
The People and Process
Connection
Lean projects typically ad-
dress one or more concerns
in these categories: customer
service, flexibility, cost, cycle
time, and quality. These all
What is Lean Management?
• Managing the organization as an adaptive system of processes for
continuous improvement.
• All employees must understand the interrelationship between the
following elements:
Confirm
Strategy
(Goals/Direction)

can be nicely tied back to the

customer-product profitability Identify Conduct Integrate Assess
equation. While the ultimate Key Business People & Process
concern may be to improve Business Process Process Performance
business profitability, we actu- Processes Improvement Performance Results
ally accomplish this by improv-

3
 FAT Results from Lean Implementation: A Rational Process Approach to Lean Success

ing the performance of the processes that constitute an organization’s activity. Since people
work within an organization’s processes, we need to improve the performance of both
processes and people to gain any substantial and sustainable advantage.
Lean management is an adaptive system of continuous improvement of multiple, in-
terconnected processes. Each employee should understand the interrelationships between
the key elements of lean management.
The lean process begins with setting goals that are directed by the company strategy.
Gap analysis identifies the most critical business processes for meeting these goals. The
organization then conducts business process improvement and integrates people and pro-
cess performance. Finally, a post-project review is performed and the cycle is repeated. We
believe that FAT results are generated in a lean program when the “conducting business
process improvement” and “integrating people
Expected Process Performance and process performance” elements of lean
management cycle are administered in proac-
Goal tive mode.
Consider this simple diagram of expected
Acceptable Range Base Line process performance. For any process there
of Variance is an acceptable range of variance. Clearly the
objective of implementing lean is that the lower
Unacceptable end is not acceptable anymore and the future
Past Future should evolve between the baseline and the
goal line.

Understanding Reactive Management of Process Performance

Organizations demonstrate reactive behavior when process improvement is a reaction
to historical performance data.
On the reactive management chart, actual performance can be charted to show if it falls
above or below the baseline or “should.” Any departure from the baseline, whether it is
above or below, can be designated as a “deviation.” If performance is above the baseline,
further opportunities are explored by identifying the root cause for the superior perfor-
mance so that it can be replicated to sustain the improvement. If performance is below the
baseline or there is a trend for downward performance, the gap or deviation in the process
metric is analyzed for root cause so that it can be removed to improve performance. Root
cause analysis is pursued through a three-question lens:
• Is there a deviation?
• Is the cause unknown?
• Do we want to know the cause?
If the answers to all three ques-
Reactive Management of Process Performance tions are affirmative, the organization
should conduct a root cause analysis.
Opportunities
This analysis leads to identification
Identified
Continuous Improvement of causes and development of mul-
Evaluate tiple alternatives. Action is taken on
al

Negative
ctu

Alternatives
Base-line the best-balanced choice with risks
+A

Trend(s)
-A Take Action assessed.
ctu Detected
al
Why do we term this as reactive?
Unacceptable Analyze for It is reactive because the process
Cause improvement analysis is based on
Past Now historical data. Some precipitating

4
4
 FAT Results from Lean Implementation: A Rational Process Approach to Lean Success

changes in the past have led to a performance deviation, and attempts to remove it or
replicate it are being made as a reaction to this altered state. This is the low-hanging fruit
of performance improvement. An organization following this route can quickly ramp up its
performance by making the “should” or upper level the “best demonstrated practice.”
The critical success factors for reactive process management include:
• Understanding process performance goals
• Monitoring the baseline
• Being specific! Managing from overly broad or inaccurate data will create costly
cost/time overruns
Typical gains of 15-20% productivity, reductions in work-in-process inventories, and
reduction in floor space and travel times are examples of the low-hanging fruit that well-
executed lean events can reach in the early phases of an organization’s lean journey.

Understanding Proactive Management of Process Performance

Proactive management of processes generally begins in phase II of a lean program.
This can be found in organizations where lean is not an ad hoc, one-off initiative—lean
principles have been embraced and structured programs are in place.
At this point, the improvements from the phase I or “reactive phase” have helped cre-
ate a new, improved baseline. A new “should” is identified for continuous improvement
in the next phase of the lean journey. In this stage, improvement teams work beyond the
previous “best demonstrated practice” and move into uncharted territory.
In the reactive state, the team looked at cause and effect. In proactive mode, attention
shifts to the “likely cause” and “likely
effect.” Lean teams in this phase Proactive Management of Process Performance
spend time shaping the future.
Kepner-Tregoe defines the rational Continuous Improvement Next Phase
processes for these activities as Po-
al
ctu

tential Problem Analysis and Poten- Post Lean Phase I

+A

tial Opportunity Analysis.2 -A

ct
ua
In Potential Problem Analysis, l
the team addresses the likely cause
Baseline before Lean Phase I
of a process performance decline
by taking preventive actions. If the Past Now Future
likely cause does occur, despite
preventive efforts, the team is prepared for damage control with planned contingency ac-
tions. The team sets “triggers” for these actions that act as warning lights or the signal to
launch contingency measures that reduce the impact of the likely effect. 5

Potential Opportunity Analysis helps teams explore the future for better-than-planned
process performance. In such cases, the teams need to decide about promoting the likely
cause—they want more of it so process performance exceeds expectations. They take ac-
tions and set triggers to capitalize on the potential effect. When things do go better, they
are prepared to take full advantage of the opportunity. Unfortunately very few teams are
proactive enough to exploit things that go better than planned.
A lack of data and precedence can be a barrier to proactive management. But data and
precedence exist if you seek information on the cause or effects of the same or similar
processes.
The chart of managing flow time opportunity provides an example of the proactive
management of a process. A lean team charged with improving flow time may focus on

5
 FAT Results from Lean Implementation: A Rational Process Approach to Lean Success

multiple likely approaches that reduce the work content on the critical path or remove
elements from it. Each approach can be analyzed for potential opportunity by identify-
ing likely causes, taking promoting actions, and planning actions that will capitalize on
process flow time improvements.

People Management in Lean Projects

Lean brings change in the way people relate to processes within the organization.
Change can hurt people both with its magnitude and speed, and it can be stressful. This
is especially true if the improved productivity resulting from lean implementation creates
a perception that fewer hands will be required at the workplace.
Expanded responsibilities, team ownership of a process, and the emphasis on disci-
plined flexibility that characterize lean programs often lead to resistance. Monetary rewards
can only go so far to overcome this resistance.
The lean journey can be seamless and less painful when the management of people’s
performance systems are an integral part of the lean program. To fully grasp the reactive
and proactive people management aspect of lean projects, it helps to know the elements
that can affect people performance and the drivers that can help manage behavior.
In its most simplistic fashion, human performance fits nicely into the process track
of low end, high end, and a “should” or baseline level of performance. If there is a per-
formance gap, the true cause should be as identifiable as the gap in any other type of
performance.
Unfortunately this is easier said than done. The challenge in people performance
management is that, while the “actual” can be obvious, the “should” is often not clear, not

Managing FLOW-TIME Opportunity

Process Flow Time
Segment I 4 8
Segment I: 1-4-8-9; Segment II: 1-2-5-7-9; Segment III: 1-3-6-9
Segment II
Theoretical Maximum Time
1 2 5 7 9
Segment III – Critical Path
Segment III
Actual Process Time – Segment III ‘IS’
3 6 Potential Opportunity – (IS – Should); $ Value; Impact Points

LIKELY APPROACHES POTENTIAL OPPORTUNITY ANALYSIS FOR EACH APPROACH

Reduce work content on activities on Segment III
(either all or some of 1,3,6,9)
Eliminate non-value add activities
Speed-up activities (faster equipment, labor
incentives)
Reduce waste/repetition of work
An optimal product-mix which leads to above actions
Move Segment III activities to Segments I or II
Measure float and move 3/6 or part of to segment I
or/and segment II without making them critical
Outsource 3 and/or 6
Identify Potential Opportunities
State the action
% reduction in FLOW TIME
What actions are required to reduce FLOW TIME? Which of these are critical?
List potential opportunities
Reducing FLOW TIME will impact which Strategic Profit Driver(s)?
What is its value to Business Profitability?
Identify Likely Causes
Consider causes for the potential opportunity
What could cause FLOW TIME to reduce?
Take Promoting Action
Take actions to encourage reduction in FLOW TIME
Plan Capitalizing Action and Set Triggers
Prepare actions to enhance reduction in FLOW TIME
Set triggers for capitalizing actions

6
 FAT Results from Lean Implementation: A Rational Process Approach to Lean Success

commonly understood, or not communicated. At Kepner- Managing Human Performance

Tregoe we recommend using a rational approach to increase
the likelihood of getting the “should” behavior—also known High End
as performance—in lean projects. We call this approach the
“Performance System.” Should

How the Performance System Drives Project Behavior

The Performance System model provides a practical, use- Low End
ful framework that clarifies human performance. Using this Past Future

model, managers can construct and analyze each component

as it relates to an employee, team, or work group, and then improve and align it to sup-
port performance expectations. Tracing its roots back to the early years of behavioral sci-
ence research by B.F. Skinner, we’ve validated this model in numerous project and work
environments. The five components of the performance system model are:
• Performer: the individual or group expected to behave/perform
• Situation: the immediate setting or environment in which a Performer works, such
as the project environment
• Response: the behavior (also known as performance) of the Performer
• Consequences: events that follow the response and increase or decrease the
probability the Response (behavior/performance) will occur again, given the same
Situation
• Feedback: the information that Performers receive about progress toward their
goals; it helps guide their Response (behavior/performance)
The five elements of the performance system are interlinked and should not be consid-
ered or administered on a stand-alone basis. Lean projects that impact an entire organization
require a performance system hierarchy that is mapped to the organizational hierarchy.
This clarifies the organizational dynamics and integrates both people goals and organiza-
tion goals.
The Performer is usu- Feedback
How appropriate is the
ally an individual but can Feedback and how well is
it used to influence performance?
have a broader definition
as a team or larger organi- Situation
zational unit. This broader
Fb
How clear are the performance
expectations and how well are
definition is most useful in they understood?
How clear is the signal to perform?
lean implementation. How well does the work
Consequences
How well do the
environment support expected Consequences encourage
The Situation refers to performance? expected performance?

the immediate environ-

ment or setting in which
S P +R C
the Performer works—the -
lean project team, the de-
partment, or business unit Performer Response
How capable is the What is the observed
of which the Performer Performer to meet performance?
the performance How does it compare
is a member. Three key expectations? with expectations?
elements describe the Situ-
ation—performance ex-
pectations, signals to perform, and the work environment. Each element of the Situation
impacts an individual’s or lean project team’s behavior.
Consequences are events or conditions that follow a Performer’s Response and increase
or decrease the probability that the Response will occur again, given the same Situation.

7
 FAT Results from Lean Implementation: A Rational Process Approach to Lean Success

Performance System Hierarchy

Fb
Plant
Manager
S P R C+

Fb
Director
Director Director Director Information
Director Finance Research & Director Personnel
Quality Assurance Operations Systems
Development S P R C+

Fb
Manufacturing Manufacturing
Manager Engineering Manager
S P R C+ Question:
What is the primary
“RESPONSE” being
Fb
Testing Technical Production Production observed?
Supervisor Supervisor Supervisor Supervisor
S P R C+

Answer:
Fb
Process Performance
Testing Maintenance Production Production
Technician Technician Operator Operator
S P R C+

Hence the Importance of Performance System in Delivering

Benchmark Lean Results

Consequences can be encouraging or discouraging to increase or decrease the prob-

ability of future Responses.
Feedback is a critical component of the lean project performance system. It pro-
vides Performers with performance-based information about progress toward the
organizational goal of lean enterprise. Comparison of actual performance to the plan
guides the Performer in maintaining or modifying Responses/behavior.

Understanding Reactive Management of People Performance

Reactive management of each element of the performance system focuses on past
performance of lean project team members. The objective is to keep people performance
above the unacceptable low end and move it upward from the baseline or “should” per-
formance to the high end or goal.
To manage the Performer, the following questions are asked:
• Did the Performer have the necessary skills and knowledge to perform?
• Did the Performer know why the desired performance was important?
• Was the Performer physically and mentally able to perform?
In many lean projects, “the lean guru” assumes that the people can be provided with
the necessary technical skills through training workshops. This not only goes against the
lean philosophy of lean as a way of life and learning as part of the journey, it compounds
the damage because Performers fail to understand why their desired performance is im-
portant and how their Response can have an impact across the value stream.
Managing the Situation element begins by establishing if the Performer had the ap-
propriate operating environment. This is accomplished by asking:
• Did the Performer know the desired output?
• Did process performance standards exist?
• Did Performer consider the standards attainable?

8
 FAT Results from Lean Implementation: A Rational Process Approach to Lean Success

Lean projects that fail to move beyond phase I have their roots in Performers, both
individuals and project teams, not understanding their unique Situation, that is, the com-
bination of products, customers, supply chain partners, and processes that support those
transactions.
The Response from the Performer is validated by asking:
• Which process performance was observed?
• Did the performance met expectations?
• What were the desired, the undesired, and the alternative Responses?
In our observations many lean projects demonstrate a high degree of ambiguity around
performance measures and lack of common understanding on desired, undesired and
alternative responses.
The Consequences for the both the Performer and the organization can be confirmed
by considering:
• How well do the Consequences support the desired performance?
• Were the Consequences meaningful to the Performer? To the organization?
• Were the Consequences immediate enough to encourage the desired perfor-
mance?
Developing effective Feedback mechanisms should be one of the first steps in influ-
encing performance, since improvement will only be sustained if the Performer is able
to detect progress. Feedback mechanisms are established in the ground-rules activity of
project management and are a reflection of how the project manager goes about com-
municating progress to project contributors and sponsors. Managing the Feedback loop
completes the full circle of people performance management. The questions asked about
Feedback must include:
Did Performers receive information about their performance?
• Was it relevant and accurate?
• Was it timely and specific?
• Was it easy to understand?
It is expected that not all questions will have affirmative answers, but ensuring that
concerns are discussed with the Performers and corrective measures designed in place
gives lean projects a much higher probability of improving future results and sustaining
the gains.

Understanding Proactive Management of People Performance

Proactive process management coupled with proactive people management can pro-
duce benchmark project results. All five elements, the Performer, Situation, Response,
Consequences and Feedback are in the play in a proactively managed human performance
system aimed at influencing the behavioral changes in the Performer. The distinction be-
tween proactive and reactive people management lies between observing past behaviors
and changing future behavior.
This is achieved by designing the performance system from the onset, during the plan-
ning phase of a lean project.
This is accomplished by:
• Determining Responses to be changed or improved by grouping reported
deficiencies

9
 FAT Results from Lean Implementation: A Rational Process Approach to Lean Success

• Identifying Performers whose Responses must be changed or improved

• Modifying the performance system variables (Situation, Consequences, and
Feedback)
• Communicating and implementing changes
The questions in proactive management of people performance are forethoughts, not
afterthoughts.
To empower the Performer to deliver the desired Response, the following questions
help design the performance system:
• What necessary skills and knowledge will be required by the Performer to
deliver the desired Response?
• How would the importance of desired performance be made visible to the
Performer?
• What physical and mental attitude is needed by the Performer?
Proactively managing the Situation element requires asking:
• What is the desired output?
• What performance standards need to be designed?
• How can the standards be made attainable to the Performer?
To ensure that the Response can be measured correctly, the following questions need
to be answered in the design phase:
• Which process performance will be observed?
• What are the desired performance levels?
• How will the desired, undesired and alternative Responses be made visible?
The Consequences for the both the Performer and the organization are designed by
considering:
• How will the Consequences support the desired performance?
• Will the Consequences be meaningful to the Performer?
To the organization?
• Will the Consequences be immediate enough to encourage the desired per-
formance?
Designing the Feedback loop completes the proactive performance system design.
This requires considering:
• How will the system ensure that Performers receive information about their
performance?
• What will make the Feedback relevant and accurate?
• How can Feedback become an element of the project work breakdown
structure to ensure its timeliness and specificity?
• What will confirm that the Performer understood the intended Feedback?
Designing a performance system is not akin to cultural change, but it is a practical approach
to influencing performance in a focused way to get desirable results for projects. Cumulative
successes help build a lean culture without directly confronting the existing one.

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 FAT Results from Lean Implementation: A Rational Process Approach to Lean Success

Conclusion
Most lean programs don’t capitalize on the benefits of managing processes proactively
and forego the steep gains that can be achieved by managing human performance.
Like all journeys, the lean journey requires a roadmap. A good lean roadmap must
integrate the human performance system and management of business processes for
sustainable business performance. Both people and processes should be managed with a
structured, rational approach that includes both reactive and proactive management.
Engaging people in a way that builds positive reaction to lean implementation within
an organization is critical. By creating a performance system that encourages people to
succeed, the lean journey moves into a new territory of significant, sustainable results.

Endnotes
1
Keith Pelkey, “Business Process Improvement and People Performance,” (2002)
2
Charles H. Kepner and Benjamin B. Tregoe, The New Rational Manager, (Princeton,
Princeton Research Press, 1997).

About the Author

Arun Shukla, Kepner-Tregoe practice leader, is responsible for the implementation of
the company’s systems improvement and workplace transformation products and services.
He works extensively with clients on customer-product profitability maximization and fo-
cused projects aimed at reducing business complexity through optimization of structural
and performance costs.
Mr. Shukla’s career includes over 21 years of industry experience in engineering, con-
struction, manufacturing, marketing, and professional services. He is an expert in supply
chain management and has core competencies in supply chain opportunity assessment, and
solutioning collaborative scenarios for profit and service maximization. With his extensive
knowledge of inter-enterprise business systems, Mr.Shukla is able to help clients develop
and deliver functional linkages between business strategy and business systems.
Prior to joining Kepner-Tregoe, Mr. Shukla worked with SAP AG, as industry director
for chemicals, pharmaceuticals, and mill industries with the Strategic Business Unit Manu-
facturing for the Asia Pacific region. His region comprised of working with 12 countries,
including Japan and Australia.
Mr. Shukla holds a master of business management, executive masters program from the
following business schools: J.W. Kellogg, Northwestern University, Wharton, the University
of Pennsylvania; and Sasin from Chulalongkorn University in Bangkok. He is a certified
SAP consultant and also holds a bachelor of technology in civil structural engineering from
the Indian Institute of Technology.

11
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