For the Last Time: Cost Cutting Isn’t “Lean”

The headline in the Wall Street Journal last week was utterly predictable: “Kraft Deal Fueled by Lean Recipe.” It was only a matter of time after Heinz’s acquisition of Kraft that the business press would refer, once gain, to 3G Capital Partners’ use of zero-based budgeting as something “lean.” This approach, which requires managers to justify spending plans from scratch every year rather than simply modifying the previous year’s budget, is many things, but it is certainly not lean.

Yes, lean organizations relentlessly seek to lower costs. And yes, lean organizations constantly strive to eliminate wasteful expenditures of cash. But the layoffs that accompany zero-based budgeting are most certainly not lean. Neither is the infantilizing, management-directed, and disrespectful (to employees) cost cutting that the Wall Street Journal describes:

After chicken processor Pilgrim’s Pride Corp. adopted it a few years ago, it scrutinized how much paper it used to print documents, how much soap employees used to wash their hands, and how much Gatorade hourly employees at one processing facility drank during breaks.

In my new book about continuous improvement (still untitled, but coming out this September), I draw a parallel between individual physical fitness and organizational “fitness.” You can’t get physically fit simply by dieting—sure, you can lose weight, but that doesn’t make you healthy and strong. Similarly, you can’t get organizationally fit simply by cutting costs. Laying off people and prohibiting color copies doesn’t make a company nimble and competitive. It may boost the share price and profitability in the short term, but it can’t develop the organization’s competitive powers for the long term.

Competitive strength comes from the development of employee problem-solving capabilities and the improvement of operational processes. Zero-based budgeting doesn’t do that. Want to reduce the amount of Gatorade people drink? Teach employees how to attack the “problem” of excessive Gatorade consumption at its root cause, which might very well lead to improvements in ventilation, plant layout, and workflow—and along the way, truly significant cost reductions. Want to cut down on soap consumption (which, honestly, doesn’t seem like a great idea in a poultry processing plant)? Challenge employees to redesign the process in a way to reduce the amount of direct poultry handling. At the very least, having employees figure out how to take costs out of a system is far more respectful of their intelligence and creativity, and far less dispiriting than simply dictating a 30% cut in their Gatorade allowance.

There’s plenty of research proving that cost reduction isn’t sustained in the long run. Just like weight always comes back after drastic dieting, costs always creep back two to three years after drastic cuts, because the underlying processes and capabilities haven’t been improved. As soon as the financial crisis fades, people start buying more Gatorade and making color copies.

Look, I fully support the elimination of excessive corporate privilege. I cringe at the thought of executives flying first class on the company dime while front-line workers fly coach. I can’t stand swanky corporate offices with Persian rugs and fireplaces that serve only to gratify egos and create unnecessary distinctions within an organization. But skinny and starved isn’t healthy and fit, and cost cutting isn’t lean.

Here's why productivity tools waste your time.

Yesterday's WSJ article, "How Productivity Tools Can Waste Your Time" highlights an uncomfortable fact: the infinitely expanding universe of systems, apps, books, and gizmos doesn't seem to be making people more productive.

An explosion in technology aimed at helping people manage their time and tasks may actually be making it harder.

New productivity products "have skyrocketed in the last couple of years. There is way too much out there to make sense of it all," says Whitson Gordon of Los Angeles, editor in chief of Lifehacker, a website on using technology to be more productive.

Speaking as a guy who has published his own time management book last year (A Factory of One), I can say with confidence -- and some degree of knowledge -- that most people love my ideas, but they struggle to actually implement them. As a result, they wallow in the same quagmire of email overload, metastasizing to-do lists, and behind-schedule projects as those who haven't read my book.

The failure of most people to implement classic time management ideas begs for a root cause analysis. I see two causes. First, there's the failure of self-discipline. As the WSJ article puts it,

Improving your productivity isn't about searching for a better app or finding the right software. "Ultimately it comes down to managing yourself."

If people struggle to diet, or exercise, or quit smoking, why should it be any easier for them to shed their lousy time management habits? The self-discipline required is formidable -- and most people, frankly, don't have it.

Second, and perhaps more important, is our work environment. You can try to establish new, more productive behaviors, but the ugly truth is that you'll get steamrolled by the bureaucratic inertia of your organization. Let's say that you vow, in Julie Morgenstern's words, to "never check email in the morning." (Pretty much every productivity coach recommends that.) Sounds great. But that resolution will last only until your boss chews you out for missing a critical email that she sent at 8:15am. The same holds true for running better meetings, for throwing out old/obsolete files, etc. If your work environment punishes you for productive behavior, you'll go back to the old ways of working.

So, before you download new apps or buy new books, consider whether or not you're disciplined enough to actually implement the ideas, and figure out how to get your company (or at least your boss) to change expectations.

Busy, not burned-out

I was gratified to read some of the recommendations in Joann Lublin's article, "Making Sure 'Busy' Doesn't Lead to Burnout" in the Wall Street Journal last week. Turns out that a lot of people are championing the ideas that I've been preaching about for awhile:

For some time-starved managers, keeping a detailed calendar often makes more sense than making daily to-do lists.

This advice echoes my argument that to-do lists don't work because they agglomerate items with disparate urgencies and complexities, and they don't provide any context: how long will the tasks take, and how much time do you really have available.

The article also recommends that people

prepare a weekly plan for tackling tasks tracked by their boss, such as regular revenue reports—and scheduling of daily items that eventually will land them in trouble if not completed.

This advice, of course, is nothing more than my suggestion to use the calendar as kanban, which enables you to automatically "pull" work forward at the right time -- and to do so automatically, without the cognitive burden of having to remember to do something at a certain time.

The article also points out the danger of taking on too many problems that aren't your own:

Consider [urgency addict] Liz Bishop. In January 2011, the senior vice president of Heffernan Insurance Brokers in Petaluma, Calif., was juggling 280 emails a day and often distracted by colleagues' crises. "I love solving problems,'' Ms. Bishop says. "That's emotional cookies for me." Meanwhile, her customer revenue had plunged 50% during the recession, and Ms. Bishop, whose clients were mainly in the construction industry, found herself without time to bring in new clients.

This situation reminds me of Jamie Flinchbaugh's advice that our direct reports' problems are not our problems:

Your problem is why is the preventive maintenance program not working that allowed all those pieces of equipment to go down in the first place. Or why are your customers not seeing the value proposition. Or do we have a planning problem or an execution problem that allows so many projects to get behind schedule. You have unique problems, and until you understand that fact, and work on the appropriate problems for your role, little progress can be made.

There are no Copernican insights here, which is both good and bad: you don't have to spend money, buy new equipment, or hire new people. On the other hand, you have to  use your calendar assiduously, delegate appropriately, and learn to address system-level issues.

Nothing new -- but not necessarily easy to do.

First, think.

I heard it again from a client this week: "I don't have enough time to work on that." Well, let me be perhaps not the first, but certainly not the last, to call bullshit on that complaint.

There's always enough time to do what's really important to you. If your child got hit by a bus and you needed to take her to the hospital, you'd somehow find the time to do it, because it's more important than preparing your 93-slide Powerpoint deck on which color white to put into the product line next year. (And if the hospital isn't more important than your Powerpoint, then please stop reading now and go back to your well-worn copy of Mein Kampf.)

No, the issue is how you choose to allocate your attention. It's a matter of identifying what's most important. And ironically, that identification takes time.

The Wall Street Journal recently interviewed four CEOs about time management. Jeff Weiner, the CEO of LinkedIn, talked about the value of getting away from daily problem solving and walling off time to think:

Part of the key to time management is carving out time to think, as opposed to constantly reacting. And during that thinking time, you're not only thinking strategically, thinking proactively, thinking longer-term, but you're literally thinking about what is urgent versus important, and trying to strike that right balance.

Steve Ballmer of Microsoft (not surprisingly) takes a more analytical approach: he actually builds a spreadsheet with a time budget for the year.

I budget how much time I'm going to be out of Seattle and in Seattle. I budget what I'm spending my time on -- customers, partners, etc.... I schedule formal meetings and my free time.... I'm not saying when they're going to happen, but I budget all this stuff. I try to make sure that I feel comfortable that I have enough time to...think, to investigate, to learn more, but I have to budget my time.... I give the budget allocation to my administrative assistants, they lay it all out and then anybody who asks for time, they say, '"Steve, this is in budget, it's not in budget, how do you want us to handle it?"

How do you find enough time to do the important stuff? First, make time to decide what's important. And if you don't have time to do that, you don't belong in your job.

Rethinking Performance Reviews for 2012

The first chapter of my new book, A Factory of One, addresses the need to define value in your work. This is a critical first step because, in my experience, organizations often spend time, effort, and energy improving a process that creates no value -- and therefore shouldn't be done in the first place. (Incidentally, you can download a pdf of this chapter for free here.) The flood of performance reviews that come at the end of the year reminded me of how important this step is. A recent SmartBrief on Leadership survey demonstrates just how valueless performance reviews really are:

Incredible: 58% of the responders say that the reviews are pretty much worthless -- and you can bet that a significant proportion of the other 38% has no value either. As the Wall Street Journal reported,

One academic review of more than 600 employee-feedback studies found that two-thirds of appraisals had zero or even negative effects on employee performance after the feedback was given.

Samuel Culbert, professor of management at UCLA, is probably the leading voice in attacking the pointlessness, ineffectiveness, and immorality of traditional performance reviews; in his view, the performance review should be replaced by the performance preview -- which, from a lean perspective, makes total sense: after all, the PDCA cycle begins with planning, which is what the performance preview is all about.

In light of these results, you have to wonder why companies have reviews in the first place -- and why they'd want to have even more of them. Fifty-one percent of companies conduct formal performance reviews once per year, but now 41% of firms do semi-annual reviews. As Culbert tartly asks, "Why is doing something stupid more often better than doing something stupid once a year?" Or in my language, why improve a process that has no value at all?

I think that a better approach for 2012 is to ditch the performance review and move towards employee performance PDCA:

1. Grasp the Situation: Identify the goal for the week or month 2. Plan: Make a plan for how to accomplish that goal 3. Do: Follow the plan 4. Check: Determine whether or not the plan has been achieved, and why (or why not) 5. Adjust: Make changes as needed to help the employee reach the next goal

This approach may sound mechanistic, but if you think about it, it gives you a fighting chance at achieving that things you really want: better communication. Closer cooperation. More salient feedback and mentoring. Improved performance. Attainment of key goals.

If this sounds like it's too much work, or you don't think it will fly in your organization, fine. Just stop wasting your time -- and more importantly, your employees' time -- on the traditional performance review. Your employees will thank you.

When good data go bad.

Bob Lutz, longtime car guy who held senior leadership positions at GM, BMW, Ford, and Chrysler, tells a story about the feedback that David Davis, an auto industry expert, received on a speech he delivered at GM:

Sometime in the early '80s, he'd accepted a gig as speaker to a large group of GM executives. The speech appeared to go well, and the applause felt genuine. David went home pleased and thought no more about it until he received the following letter:

Dear David:

You asked for feedback on your remarks at our recent conference. The data is just now available.

The rating scale was zero to ten with ten being "best." The five non-GM speakers had scores ranging from zero to ten. Yours ranged from three to ten. The five "outside speakers'" average scores ranged from 5.25 to 8.25.

Your average was 7.35.

Two speakers had higher scores than yours. Your standard deviation from the mean was 1.719 and ranked second among the variances, showing that most people had a similar opinion about your remarks.

I personally enjoyed your remarks very much. Your refreshing candor, coupled with your broad understanding of people, product, and the market, gave us exactly what we asked you for—"widened competitive awareness."

Thank you for your participation.

Absurd, right? Hopefully you didn’t snort the milk from your Cheerios out your nose as you read this. It’s a miracle that GM survived as long as it did with this kind of bureaucratic plaque clogging its organizational arteries.

But before you sprain your shoulder patting yourself on your own back for how much smarter you and your company are than big, stupid GM, think about the birth of that colossal dysfunction. At some point, a diligent, well-meaning employee—or her manager—probably wanted to help improve the quality of presentations. And he probably read in business school that what matters gets measured, so he created a simple 10-point rating scale.

[Stop here. Does your organization use one of these scales to evaluate speakers, or training sessions, or the selection of deli meats in the company cafeteria?]

It’s a short—very short—step from a 10-point rating of an individual event, to a comparison of multiple events. And an even shorter step from that comparison to a deeper, more thorough statistical analysis, replete with r²-values and more Greek letters than you’ve seen since your last purchase of foreign yogurt.

Organizations, and individuals within organizations, drive themselves to the land of absurdity all the time because they don’t ask the first question that lean thinkers focus on: What is customer value?

Learning that a speech was well received with a score of 7.35 out of 10 is valuable, important, and worthwhile for the customers (in this case, the speaker and the people who invited the speaker). The other data, not so much. The Outside Speaker Effective Analysis Group could have identified that value by simply (gasp!) asking the customers what information would be helpful for them. Hell, there probably wouldn’t even be a need for an Outside Speaker Effective Analysis Group in the first place had GM focused on this question.

In my mind, this is where traditional approaches to productivity go wrong. These approaches focus on improving the efficiency of producing these reports without considering whether or not they should be produced in the first place. The lean approach—first, identify the value—is, to me, a far better way to operate. And once you’ve identified the value, you can apply the lean tool of 5S to the information: sort the value from the waste, set it in order, systematize the delivery of the information, etc.

Of course, the waste from not focusing on customer value isn’t always as obvious as having an Outside Speaker Effective Analysis Group (The existence of a department like that is pretty much a dead giveaway.) Sometimes it’s subtler, like having the IT department generate dozens, or even hundreds, of reports per week, most of which go unread (as happened at one of my old employers).

Unless you continually evaluate your own generation of data, reports, and statistics, you run the risk of becoming the punch line to a joke and an object lesson in making good data go bad.

Does the internet make you smarter or dumber? Yes.

Friday's Wall Street Journal ran an interesting feature: side-by-side articles on whether the internet makes you smarter or dumber. Clay Shirky advocated smarter, while Nicholas Carr (who's in the news for the release of his latest book) argued for dumber. My answer to the question? Yes, it does. Both authors make compelling arguments for their point, and I think that both arguments are valid. What's not in question, from my perspective, is that the way we use the internet -- as an always on, constant companion for communication, entertainment, and information -- can be terribly destructive to our ability to get on with our jobs. And our lives.

I'm not a Luddite by any means. I don't propose that we go back to the pre-internet world, or even the 56K dial-up modem. The internet is much too valuable an invention for that. (And having just laboriously completed some rudimentary carpentry work without power tools, I'm all in favor of technology.) But it's important to recognize that there must be a time and place to use the off button. To be unplugged. To be fully present, without distractions. The fact is, as I've (and many others have) written about ad nauseum, we're incapable of multitasking:

When we're constantly distracted and interrupted, as we tend to be online, our brains are unable to forge the strong and expansive neural connections that give depth and distinctiveness to our thinking. We become mere signal-processing units, quickly shepherding disjointed bits of information into and then out of short-term memory.

And yet I see legions of businesspeople and healthcare workers trying to process complex information (spreadsheets, budgets, medical records, etc.) while allowing themselves to be interrupted by the phone or email, or just as damagingly, by self-inflicted interruptions (Hey, I wonder what the score of the Mets game is...). This can't be a good thing. I'm not the only one who thinks so, either: one of the most popular features of the word processing program Scrivener is "full screen mode," which blacks out everything on your computer screen except the document you're working on. And WriteRoom is a word processing program which has as its only selling point, "distraction-free writing."

(I'm not dissing these products, by the way. But I do wonder why we need a product to mimic the appearance of being disconnected when we could just, you know, actually disconnect ourselves. Is it so hard to turn off Outlook and Firefox?)

A few years ago I made a vow that when my wife comes home from work, I close my computer. For the most part, I've lived up to that promise -- and that's something I'm really, really proud of. I don't write that to sound holier-than-thou. (You know, "Look how great I am! I can turn off my email!") I write it because I know how tough it is to unplug the ethernet cable. I also know that as a result, I talk to my wife a lot more than I used to -- and that's a really good thing.

All this is to say that the question isn't whether the internet makes you dumber or smarter. It's whether you can unplug and provide yourself with the time and quiet to focus on whatever it is that's really important.

Four tools for making work visible.

In general, I'm not a big fan of fancy time management hardware or software. As the saying goes, automating a broken process gets you a faster (and more expensive) broken process. Far better to use a simple system to fix the process and then automate as necessary. (Kevin Meyer is the chief apostle of this approach, with his pizza and whiteboard replacement for an ERP system.) Even buying special pre-packaged and printed day planners fits into this category, since you get locked into someone else's proprietary and inflexible system. Having said that, there are some interesting websites that can give you greater visibility in how you're spending your time. They won't actually help you, you know, do anything important, but by making your actions visible, they can help spur behavioral change.

The Wall Street Journal covered four of the services (Slife, RescueTime Pro, ManicTime, and Klok) last week. Each one has strengths and weaknesses, but will no doubt be improved over time. I won't bother reviewing them as you can read the WSJ article for free here.

I'm good with a watch, a piece of paper, and some discipline. However, if new tools will help you get started down this road, by all means read the article and check them out. The important issue, I think, is not so much what tool you use, but rather that you're committed to making the invisible -- i.e., where and how you spend your time and attention -- visible. Once you've done that, you can start to analyze the current state and implement countermeasures to improve it. As the WSJ authors wrote,

All in all, the services really helped us get a handle on how we spend our work time. And having a written account of where our minutes went pushed us to modify our work habits—and get more done.

These tools aren't panaceas. But it might get you started in living the lean principles that you're trying to drive through the organization.