The biggest mistake start up managers make is in playing it safe and copying the old bureaucratic management structure and IT systems that they feel comfortable with. Here is where management has the greatest opportunity for implementation of reforms yet they are sidelined for seemingly more important issues of plant layout and construction.

The following is a simplified overview for implementing reforms at start up.
Reforms can begin immediately by implementing a Lean management team to study supplier and product flows leading to site selection. A second Lean Team studies plant layout flows. Decisions are made on site selection and plant layout when the flows are costed-out.

The first Lean Team upon completion of site selection then moves into management of supplier and customer relations. This team already has much accumulated expertise in this area.

The Second Lean team moves from plant layout into plant construction and eventually into manufacturing equipment purchases and installation. This team then splits into a Plant Management Team and a Plant Support Team with manufacturing Engineering and Facilities Support as sub-teams.
The Plant management team is composed of the leaders of Group Steering Management teams which supervise the activities of several Functional Management teams. Those in industry will recognize this as straight from the book “In Search of Excellence- Lessons from America’s Best-Run Companies” by Thomas J. Peters and Robert H. Waterman Jr., Harper and Row, New York, 1982.

A third IT Lean Team maps out the new Information Technology system. Now is the time to dump the old proprietary software with silos which cannot be integrated for a new Relational Database Management System (RDMS).

A fourth Human Resources Team is organized to hire and train plant personnel. Note they do not hire bureaucratic figure heads to fill in a ridged organizational chart. Employees are hired to perform all the functions in the manufacturing facility. From the first the new hires are given extensive training and are assigned to a Functional Lean team. All activities in the plant including office areas are broken down into functional flows of processes. The first assignment of each Functional lean team is to study the work flow in their areas and find the “best way” of performing the function. Once the “best way” is found the method is costed-out by Industrial Engineering using time study in the shop and Production Control areas.

Work Measurement in office areas is done by analyzing the flow charts developed by each of the Office Functional Lean teams. This can be done either by an Industrial Engineer or a Budget Analyst. The analysis becomes a staffing and expense budget for all functions in the plant. When management staffing and other support expenses are added in the result is a solid bottoms-up budget the true basis for sound management.

What’s different?
The multilevel career path of the former bureaucracy employee is now reduced to one step from the Functional Management Teams to the Steering Management Team. Gone are the hundreds of hours of endless manipulation of employee evaluations. Gone also is the bickering and negotiation over the budget because the real budget is known. It is not necessary to calculate performance in support areas because the functions have been properly staffed and the functional teams monitor their own progress and if they start to fall behind they can take their own corrective action.

The nation loves its darling IBM but the facts are that IBM costs this nation hundreds of $billions through its proprietary obsolete software. This is perpetuated by its domination of the Information Technology market in government and in business and controlled by its IT managers.

How did this Happen?
This came about mostly by the failure of decision makers in the past who were not computer literate and by the piecemeal stop gap fixing of obsolete stand alone computer application programs. Decision makers in many cases were led astray by self-serving IT Managers who wanted to keep their programmers busy by developing new application programs to make the proprietary system work. Another area where they were lead astray is through focusing on the efficiency of an individual application program and not how it could be integrated with the organization’s overall information systems. The result is the creation stand-alone computer applications which must have separate patching programs written to achieve integration with other application programs. System implementation planning failures are generally the fault of the CEO funding the project. It wasn’t but a few years ago when almost none of management in private companies and in government had any computer experience at all. They relied completely on their IT Manager for planning and implementation of computer systems.

Among computer literate personnel an organization’s computer department is known as an “IBM shop” or a “Digital Equipment shop” meaning that the organization only uses a specific proprietary type of computer hardware and software. When the IBM Operating System software is used all application programs are written to run on it. Meaning that if the organization only has IBM computers you will most likely get an IBM proprietary solution and you are unlikely to get a system that can be integrated with other non-IBM systems. I have observed that most IT managers are more loyal to their “shop” whatever it is than they are to their own CEO. Granted that once you have invested in an IBM solution few if any competitive software or hardware can be integrated with the proprietary system.

Most current proprietary application programs are written with the data they need stored within the application. When data is called for during processing of the application the request goes to a numbered storage location within the application, retrieves the data and sends it back for continued processing. The numbered location is a unique part of how these obsolete systems work. With hundreds of application programs used by the organization each with their own data storage, data is duplicated many times. It is easy to see why the maintenance of them can cost millions more than with the following integrated solution a Relational Database Management System (RDMS).

How Does an Integrated Computer System Work?
The integrated Computer System consists of a network of data processing computers each with application programs loaded on them connected through the network to a number of separate databases each with specific related information stored on them. The databases are called Relational Databases and each uses the Structured Query Language (SQL) in the RDMS.

Systems integration is achieved when separate databases for storing data are created using the Structured Query Language (SQL) database language. This allows IBM or Digital Equipment and other proprietary computers using SQL to access the databases using a unique “name” for the data. The process works this way when an IBM application program needs to retrieve or store data it uses an SQL request to find or store the data. A Digital Equipment computer can also retrieve and store data in the same database. This is similar to the database structure used on the Internet and allows queries to be made easily without having to write a program for the query much like Google. Since this software can be universally used on many different computer platforms once it is developed it can be transported to any of the organization’s computer platforms.

So what’s all this fuss about IBM?
Simply this, IBM is in business to sell proprietary systems that shuts out competitors and forces the customers to use its software. The RDMS is an open software system where an IBM computer could be replaced by a competitor. Computers can be purchased simply for their competitive computing power and not just because it will work with the software. It is obvious that IBM has known about the RDMS for some time but its simply not good business for them.

If you look at what’s different between the top 10 of Fortune Magazine’s “100 Best Companies to Work For.” and most American Companies you will find that it’s not just about pay or perks although these may make a difference it’s a strong dynamic leader and Team Management. So why is this so important? Lean Teams focus their efforts on solving company wide problems customer service, inventory flow and others. They become the idea foundation for Team Management.

If Team management is so beneficial then why does the bureaucratic organization dominate? Many startup companies begin by using teams of highly qualified personnel to analyze supplier and market data, select a site, build a factory and hirer management personnel. This is chaotic period of time for top management. The company is in deep turmoil and they seek to bring things under control by making an organization chart and assigning responsibilities to managers in short they implement a hierarchically structured bureaucracy. This solves a lot of top management’s control problems they can now demand that managers deal with problems in their areas of responsibility and deliver on goals.

So what’s wrong with this? There is nothing wrong with this but it is all the baggage that a bureaucracy brings with it that causes all the problems. What you now have is an array of competitive fiefdoms all competing for the next job up in the organization. With each manager carefully mentoring their replacements and using volumes of employee evaluations to control other employees. Again I hear you say what’s wrong with that? Plenty, nearly all the energy of the company is now focused on employee evaluations and competition for promotion. The competitive environment destroys the cooperation needed to solve interdepartmental problems that would normally be addressed by a Lean Team management approach. The Lean team management approach focuses management’s attention on solving the company’s “Real” problems.

One of the best examples I have for focusing on a company’s real problems is found in Tom Peters’s 1987 book “Thriving on Chaos, Handbook for a Management Revolution” found in nearly every public library. This is a must read for managers who want to shake things up. In the book Peters does everything he can to lessen the influence of the bureaucracy. I would go a step further and eliminate the bureaucracy.

Achieving Flexibility by Empowering People

Involve Everyone in Everything
Use Self Managing Teams
Listen/Celebrate Recognize
Spend Time Lavishly on Recruiting
Train and Retrain
Provide Incentive Pay for Everyone
Provide Employment Guarantee
Simplify /Reduce Structure
Reconceive the Middle Manager’s Role
Eliminate Bureaucratic Rules and Humiliating Conditions

I would start the First Phase by breaking down Departments into their functions. A Function is the name of a part of an organization that uses a unique set of processes to achieve a product or service that satisfies a specific company or customer need. Processes are the steps required to achieve the desired product or service and are studied by the Functional Lean Team using a Process Flow Chart (PFC) to determine the best way to perform the function. Because functions can precisely describe a task, breaking down the budget into functions simplifies the budgeting process. Begin the process by requesting all organizations to make a preliminary break down of their current operations into functions. This is done to prepare the way for identifying and organizing the functional Lean Teams.

In the Second Phase Work Measurement is done by an Industrial Engineer or a Budget Analyst to determine staffing and other functional costs.

In the Third Phase Management assumes the role of a series of Group Steering Management Teams. The top level Lean team and possibly some but not all of mid management may become part of a Group Steering Management Team. Steering Management has the role of guiding and steering a group of functions while Functional Management deals with the day to day operation of the companies business. Steering Management is responsible for telling Functional Management “what to do” but not “how to do it”. This is a loose-tight organization with Steering firmly in control of the budget leaving Functional Management free to determine how best to do the job. This is straight from the book “In Search of Excellence- Lessons from America’s Best-Run Companies” by Thomas J. Peters and Robert H. Waterman Jr., Harper and Row, New York, 1982.

When all this is done what’s different?
The multilevel career path of the former bureaucracy is now reduced to one step from the Functional management Teams to the Group Steering Management Team. Gone are the hundreds of hours of endless manipulation of employee evaluations. Gone also is the endless bickering and negotiation over the group’s budget. See Article 1.

Lawrence Rosier is a degreed Industrial Engineer and a Management Consultant trained by Alexander Proudfoot of Chicago. The Steering and Functional management concept was implemented at the McDonnell Douglas Missile Systems Co. in 1983 after his proposal was accepted and approved by Sanford McDonnell CEO of the McDonnell Douglas Corp. The implementation was warmly received by employees and remained in place for more than ten years until the company was disbanded and sold to Boeing in 1997. Mr. Rosier is known for his work in Government Reform using the best of industry to replace bureaucratic government. His government reform website is: http://managementconsultant.blogsome.com

What is Lean Manufacuring?
Lean manufacturing or lean production, which is often known simply as "Lean", is a production practice that considers the expenditure of resources for any goal other than the creation of value for the end customer to be wasteful, and thus a target for elimination. Working from the perspective of the customer who consumes a product or service, "value" is defined as any action or process that a customer would be willing to pay for. Basically, Lean is centered around creating more value with less work. Lean manufacturing is a generic process management philosophy developed mostly by Toyota.

Lean manufacturing is a variation on the theme of efficiency based on optimizing flow; it is an instance of the recurring theme toward increasing efficiency, decreasing waste, and using empirical methods to decide what matters, rather than uncritically accepting pre-existing ideas.

For many, Lean is the set of "tools" that assist in the identification and steady elimination of waste. As waste is eliminated quality improves while manufacturing production time and cost are reduced. Examples of such "tools" are Value Stream Mapping, Five S (work place cleanliness), Kanban, (pull systems), and poka-yoke (error-proofing). The Value Stream Mapping tool has the greatest potential for applications in office areas for document flows and in IT application development. While in production areas Value Stream Mapping is used for inventory flows along with Five S, Kanban and poka-yoke.

5S is the name of a workplace organization methodology that uses a list of five Japanese words which, transliterated and translated into English, start with the letter S. This list is a mnemonic for a methodology that is often incorrectly characterized as "standardized cleanup", however it is much more than cleanup. 5S is a philosophy and a way of organizing and managing the workspace and work flow with the intent to improve efficiency by eliminating waste, improving flow and reducing process unevenness.

Kanban is a signaling system to trigger action. As its name suggests, kanban historically uses cards to signal the need for an item. However, other devices such as plastic markers (kanban squares) or balls (often golf balls) or an empty part-transport trolley or floor location can also be used to trigger the movement, production, or supply of a unit in a factory. kanban is a means through which JIT is achieved. It was out of a need to maintain the level of improvements that the kanban system was devised by Toyota. Kanban became an effective tool to support the running of the production system as a whole. In addition, it proved to be an excellent way for promoting improvements because reducing the number of kanban in circulation highlighted problem areas.

Poka-yoke is used by Toyota as a method for error proofing a production set of processes or inventory flows.

Toyota uses Value Stream Mapping primarily to study in-process inventory the flow of automotive parts through the various manufacturing processes in its factories. All automotive parts become more and more valuable as labor is expended on the parts going through the processes. The parts in this case, in-process inventory, just sitting around waiting between processes represents a loss in investment and warrants a Lean team study. The object is to identify all delays and to eliminate them if possible thus shorting the flow time and reducing inventory costs.

The Value Stream Mapping technique is used in office areas to analyze the flow of documents and or materials currently required to bring a product or service to a consumer.

Implementation of Value Stream Mapping
1. Identify the target product, product family, or service that is in need of reform.
2. Draw a current state value stream map, which shows the current steps, delays, and information flows required to deliver the target product or service. This may be a production flow (raw materials to consumer) or a design flow (concept to launch). There are 'standard' symbols for representing supply chain entities. This is time dependent mapping showing the time for all processes and losses due to delays.
3. Assess the current state value stream map in terms of creating flow by eliminating waste.
4. Draw a future state value stream map.
5. Implement the future map.

Where is it used?
Value stream mapping is commonly used in Lean environments to identify opportunities for improvement in lead time. Although value stream mapping is often associated with manufacturing, it is also used in logistics, supply chain, service related industries, healthcare, software development, product development and other functions.

Examples of how Lean is applied?
On the TV show "Extreme Makeover: Home Edition," the team constructs a house in only seven days, as opposed to the nine to 12 months it typically takes to build a new home. How does the team do it? By focusing on all time-wasters and eliminating them. The team doesn't cut corners — the family still gets a roof. But the "Makeover" crew finds a way to work on specific zones of the house while at the same time others are installing the plumbing.

That TV show is a perfect illustration of the opportunities in streamlining a set of processes. For almost any set of process, the actual labor accounts for less than 5 percent of the total time the processes take to complete a function. So in a nine-month permitting process, there may be about two weeks of actual hard labor. A hiring process may involve three days of work stretched out over three to four months. Where does all that time go? Batching, bottlenecks, backlog, checking, re-checking and CYA. A Lean approach works to eradicate the lost time by eliminating these barriers. When the system runs faster, we can get more done with the same resources.

An industry example of a continuous use of Lean
Lean has been used for years by the Boeing Company in its final assembly line to obtain efficiency in production of aircraft using Operation Sequence Charts. Each station in the assembly line has its own OSC which lists each operator by skill and the flow of his work assignment. The flow documents each process and when it is performed by the operator such that he is not working in the same zone as another operator. The OSC is design for a specific production rate and must be rebalanced if the product rate increases shortening the time allowed for the work station.

How Value Stream Mapping is done
The standard form suggests that the value-adding steps be drawn across the center of the map (a long paper) and the non-value-adding steps be represented in vertical lines at right angles to the value stream. Thus the activities become easily separated into the value stream which is the focus of one type of attention and the 'waste' steps another type. This is called the value stream the set of processes and the non-value streams the operations (usually waiting periods). The thinking here is that the non-value-adding steps are often preparatory or tidying up to the value-adding step and are closely associated with the person or machine/workstation that executes that value-adding step. Therefore each vertical line is the 'story' of a person or workstation whilst the horizontal line represents the 'story' of the product being created.

Hand drawn Value Stream Mapping versus using tools
The goal is to create a map, with minimum delay, while observing the target process in situation. Thus, value stream maps are usually drawn by hand in pencil to keep the mapping process simple and allow for simple correction. However, software tools are emerging as an alternative. A variety are available either as stand alone products or stencils/add-ons to products such as Microsoft Visio, allCLEAR and iGrafx FlowCharter.

Lawrence Rosier’s Comments on Getting the Most Out of Lean
I support the use of the lean method in every company and in government. Having said that, there are some issues I have identified, especially with the Lean reformers not going far enough.

In the state of Iowa the Lean hot teams reduced turnaround time for air-quality permits from 62 days to six days, and for wastewater discharge permits from 28 months to four-and-a-half months. This is great news for customers and for the state bureaucracy. Bureaucracies seek out anything that makes them look good to the public because it increases the possibility that their budgets will be increased.

Now let’s take a close look at how this was done. The question is? Were state employees just sitting around waiting for something to fall into their In-Baskets and the lean team organized them to jump in and get the job done. Could the new Lean document processing method be an antidote to the old In-Basket bureaucratic management method where “if your In-Basket is empty you don’t have anything to do” So employees let their In-Baskets build up a good sized backlog. After all it doesn’t cost the state anything only the customer has to wait months.

Clearly something is amiss because if the employees doing the processing of these documents could increase the turn around time by as much indicated in Iowa then there may be too many employees or there is an in balance in staffing. The staffing level could be set for processing the largest volume of documents rather than the average number of documents. I suspect the bureaucracy doesn’t even have clue as to what the staffing level should be. The Lean team ended their study by reducing document turnaround times. But this where the Lean team needs to continue their study to determine not only the best processes but also how to balance the staffing base to achieve the savings not only in the reduction of process time but also in reduced employee labor.

The determination of the proper staffing can be easily done because the Lean team knows the time to do the processes and it now must determine the number of times that the process is done over the budgeted time. If the work load proves to vary significantly such as seasonally the Lean team must find the best way to balance this work load. The best way to do this is to find other functions to work on in the off times. Then group these functions into sets of similar processes matched to the skills of employees and use work planning on a daily or weekly basis to balance the work load.

Of the top 10 of Fortune Magazine’s “100 Best Companies to Work For” nearly all use some form of Team Management. So why is this so important? Team Management engages all employees including new ones to express their opinions as a member of a team. These companies draw the best employees and they know how to keep them. Toyota has employed this management practice for years in Total Quality Management (TQM) at the work place and with Lean tools. But there is a subtle difference between the way Toyota uses TQM and Lean and the way most American companies use these tools. The culture at Toyota allows the company to take full advantage of all the savings from TQM and Lean even when increased productivity means that fewer people are needed.

American companies with bureaucratic organizations will accept increased productivity and better ways of doing functional processes but reject the reduction of personnel in support an office areas. One of the main reasons Lean has been successful is that it is primarily used to reduce in-process inventory costs but efficiencies that result in reduced labor costs are mostly ignored. TQM was never widely used in support areas only in manufacturing production. But where it was used in support and office areas it was deemed as being unsuccessful the main reason being management refused to reduce personnel and no cost savings could be generated. My experience in Management Consulting has shown when looking for efficiency concentrate on support areas because most companies only look for increased efficiency in production.
The idea is to build on the Lean Team concept for the study of high level cross functional process flows and Lean Teams in functional support and production areas. Lean teams study and document process flows. From the process flow data Work Measurement is used to establish a staffing base. Once staffing and costs are established restructuring can begin. Lean Teams become Steering Management and functional Lean Teams become the Functional Management during restructuring.

Establishing a culture of employee innovation through teams is one of the best ways to get an efficient operation with continuous improvement. Because the employee is close to the day to day operation he can detect problems sooner and has the opportunity to come up with an innovative solution before the problem is even known to management. This is an advantage over most bureaucratic organizations where it’s difficult to get employee innovation for three reasons. First employees are generally not asked to be innovative and are intimidated by the culture of the organization. Second if they do have a good idea it is generally ignored due to the competitive nature found at the work place. And the third reason is little or no responsibility is delegated to the employee for making improvements to their work processes.

Preliminary Planning
Company personnel need to be informed about the implementation of Lean Teams both at the cross functional level and at the functional level. The restructuring phase involving reorganization and consolidation is announced as much as six months to a year later after the Lean Team studies have been completed. Instead of disbanding the Lean Teams they become the new Steering Team and Functional Team Management.

The lean teams come from the areas that are being studied. Following extensive Lean training both high level and functional teams are formed.

There will be three classes of employees those that will need retraining for future jobs mostly Lean trainers and facilitators. Those that initiate vocal objections to the reforms will require special attention by answering the objections. Termination rules need to be in place for personnel that refuse to follow directives needed in making the reforms. And after restructuring there will be those that are redundant and the company has no place for them.

Initiating the Lean Training
First step is to obtain agreement with HRM to provide Lean training personnel who will be Lean trainers for the high level Lean Teams and for others to be trained to fill the role of Facilitators for the Functional Lean Teams. The personnel in these groups will come from those who for example used to write job descriptions etc. any area where fewer personnel will be required in the new organization. I expect that many of these trainers will become members of Steering Management Teams in the restructuring phase.

Training Facilitators will include monitoring the organization and the election of a team leader for the Functional Lean Teams and then training them in how to do Process Flow Charts (PFC). Selected Budgeting personnel will also be required to attend the training sessions in how to do the PFCs. Budgeting personnel will be required to analyze the PFCs determine required man-hour and other associated costs such as mileage for each process of the function.
Functional Breakdown

A Function is the name of a part of an organization that uses a unique set of processes to achieve a product or service that satisfies a specific company need. Processes are the steps required to achieve the desired product or service and are studied by the Functional Lean Team using a Process Flow Chart (PFC) to determine the best way to perform the function.

Because functions can precisely describe a task, breaking down the budget into functions simplifies the budgeting process. This allows functions to be easily excluded or included in the budget as a funded entity. To begin the process I would request all organizations to make a preliminary break down of their current budget into functions. This is done to prepare the way for identifying and organizing a function’s Lean Team.
After each of the functional Lean teams has been organized, elected its leader and is meeting once a week, monitored by a facilitator it will begin work on finding the best way to do their function. I have found that the most effective way for the Lean Team to make a PFC is to tape white butcher paper or brown wrapping paper around the conference room walls. After each Lean Team meeting the PFC can be easily rolled and put up at the next meeting. In order to maintain flexibility each process is written on 8 1/2x11in. paper and taped to the wall allowing for changes to be easily made. I would make two PFCs the first one is of the existing PFC and the second right under it the new improved method PFC. When the PFCs are completed and other improvements are known a budget analyst will review the PFCs to determine the cost savings from the new method. To do this the budget analyst will determine all associated costs for each process and enter the results into a spreadsheet. The total expenditures for the function become what I call the Funding Formula for the function. The budget for the function simply becomes the number of times that the function is expected to be performed in the budgeted year. Staffing is done from the calculated man-hours. The reason this can be easily estimated is that you cannot staff with less than a full person. Some functions may not be continuously repeated therefore personnel may be assigned to more than one function. Staffing would then be based on the group of functions performed and how often they are performed.

Role of the Budget Analyst
The Process Flow Charts done by the Lean teams provide a record of the costs associated with each Function. If a Function or one of its processes were to be removed all of its budget will also be removed. When the new and best method has been documented in the Process Flow Chart it is presented to the Group Steering management. This is an important step which signifies Group management’s support and recognition of the Team’s accomplishments. Upon approval of the new method the Process Flow Chart is given over to the budget analyst to cost out the savings of the new method and to identify the proper staffing for the function. The budget analyst then documents the new method and its costs in a spread sheet which will provide input to the next budget.

The organization is now budgeted at the functional level. This I call bottoms up budgeting and when all the functions are totaled with the Steering Management costs you get the group level budget. This is the opposite of the old top down budget method for departments and agencies.

Consolidating the Many into the Manageable Few
To begin restructuring a top level Lean study is initiated for the purpose of grouping functions through similarity of their process flows developed by the Functional Lean Teams. The functions are grouped under new combined Group management names. Note that a Group is not the same as the old Department because the functions within have similar processes which lends itself well to the cross training of employees. We can now initiate the balancing of the work loads for each of these grouped sets of functions. What we are doing is planning the best solution or way of doing this set of functions for a period of time usually a week using a tool called Work Load Planning a common Industrial Engineering technique.

How Work Load Planning works
Group management’s functions are grouped according to similarity of the “processes done” in each function. Note each function takes a different length of time to complete. In planning the work load the back log in each group of functions is balanced out for the day or the week to keep the work load leveled. Employees are cross trained to do the processes in several of the group’s functions.

We know the employee time required to do each function by from the Lean flow process study for the function. The staffing base for each new Group is established by adding the hours required for each function and multiplying by the number of expected occurrences of the function for the year (from data obtained in past years). When all of the totaled hours are added the result is multiplied by 1.25 to allow for normal working conditions rated at 75% not 100%. The Staffing Base or the total number of employees doing the work in the Group is found by dividing the total hours rated at 75% by the number of hours normally worked in a year. This staffing base plus expenses incurred in the year is documented on a spread sheet for each of the Group’s functions. This becomes the budget for the function. The Total of all the function’s budgets plus the Group’s management costs equals the Group’s budget.

Restructuring
The functional Lean Team becomes the Functional Management Team for each of the Group’s functions. Next many of the mid management levels between the Functional management and Group Management become redundant. Group Management now becomes a Group Steering Management Team which has the role of guiding and steering the organization while the Functional Management Teams deal with the day to day operation of the functions. Group Steering Management is responsible for “telling” Functional Management Teams “what to do” but not “how to do it”. This is a loose-tight organization with Steering firmly in control of the budget leaving Functional Management free to determine how best to do the job. Those in industry will recognize this as straight from the book “In Search of Excellence- Lessons from America’s Best-Run Companies” by Thomas J. Peters and Robert H. Waterman Jr., Harper and Row, New York, 1982.

This reform brings a positive cultural change to the organization. Employees become members of Teams and are motivated by empowering them to improve their jobs through innovation. By bringing innovation and continuous improvement there will be savings through increased efficiency in the future. The reform amounts to a win win situation for company and union employees as well as stock holders.

What’s different?
The multilevel career path of the former bureaucracy is now reduced to one step from the Functional Management Teams to the Group Steering Management Team. Gone are the hundreds of hours of endless manipulation of employee evaluations. Gone also is the endless bickering and negotiation over the budget. Performance budgeting is no longer needed once the company has been properly staffed because the Functional Teams monitor their own progress and if they start to fall behind they can take their own corrective action.

The Payoff
Company efficiency is significantly improved by the results of the Lean studies. Inventory costs are reduced. Turn around time for inventory and documents are improved. Staffing is reduced from a minimum of 10% to as much as 20%.

If the driving force for restructuring by a CEO is also shared by the majority of top management and the current economic pressures are stable then a more long term view for restructuring may be examined.

Lean Team studies besides finding the best process flow for a particular function can also be used to determine proper staffing for the function. I employ a method of Work Measurement to develop a staffing base from the Lean process flow data. I have found that in the normal bureaucratic organization where Work Measurement is not done over staffing can be as much as 10% or more. In a short term implementation of Lean Teams and restructuring there exists some conflict within the culture between asking employees to take an interest in their work by promoting innovation and efficiency while at the same time reducing staff. Fear of losing their jobs can cause employees to withdraw and not participate in the new culture. Therefore any discussion of layoffs or staff reductions should be avoided while Lean Teams are making their studies and Work Measurement is completed. There can be a lag in time between knowing what the staffing level actually should be of as much as a year before restructuring and the actual reductions in staff begin. This will allow time for natural attrition to occur in the work force. Reductions in staff can be delayed until pressure on the budget forces the restructuring process to begin.

The long term view over the short term is not such a difficult problem because employees retire or leave their jobs for other reasons. When doing Work Measurement for the long term and the correct staffing level is known then employees who leave the work place are simply not replaced. The critical point is that for the implementation of Lean to be sustainable it must include Work Measurement. All that is required is that the correct staffing level be recognized by budgeting personnel. This prevents the bureaucratic organization from adding or replacing personnel as the staffing level decreases to that determined by Work Measurement as the proper staffing base. Once Work Measurement is in place staffing power then shifts from the bureaucratic organization to the budgeting personnel.

The CEO and Top Management may at some later date complete restructuring by the final implementation of a Steering Management teams and Functional Management teams eliminating the bureaucratic organization.

In the current recession some companies will want to fully implement my recommendations in the short term by reducing staff to balance their budgets. Others with less budget pressure may want to use the long term approach. The main benefit for the long term approach is that the Lean culture has time to become fully developed and conflict within the culture will be less of a problem.

Business creates two types of jobs service jobs and manufacturing jobs. Both are needed to pull to us out of our current Great Recession. But it is the manufacturing jobs that exports goods and supports the Nation’s balance of payments. America’s is losing the battle the dollar is eroding fast and will could be replaced by the Euro as the world’s leading currency.

The problem is we have not followed “the Principle of Economic Self Interest” at the international level. The Principle of Economic Self Interest is used by cities to compete with other cities for new businesses and government installations. It is also used at the state level for the same reasons. But somehow the understanding of this concept at the federal level has been lost and worst of all tax incentives for outsourcing have been provided to manufacturers who send jobs out of the country. The idea is simple to build the economy by providing jobs which in turn multiplies the economy through worker spending at local businesses. We see the violation of this rule by all the US manufacturing companies that are going to China and other third world countries in search of cheap labor.

Most of these jobs are lost because of two factors, powerful union pressure for a larger piece of the pie and incredibly poor decisions made by manufacturing management.

So what is the nature of these bad decisions? It is not so much bad decisions but the bureaucratic management making these decisions. Most poorly managed manufacturing companies have bureaucratic management that is no different from that found in government. Incapable of reforming its 19th century management practices the company looks only at two factors raw material costs and labor costs. Unable to control its raw material costs it seeks the lowest world wide labor cost it can find. When they talk about Labor costs they are only referring to union labor costs which are diligently measured using Work Measurement (mostly time study). But they never measure overhead employees and allow unnecessary over staffing with multiple layers of management in its bloated bureaucracy. At the same time corporate management is rewarded with huge salaries and other perks.

In contrast the competition Toyota and Honda use the Lean Team Management form of organization to get innovation in its work force. Yes they have unions but the members realize that their fate is closely tied to the fortunes of the company they work for. When sales are not so good the union may even forgo asking for a raise. Most of their corporate leaders use mass transit to get to work rather than chauffeured limos.

Case in point Warren Buffett, who is 78, was intrigued by the entrepreneur behind BYD, a Chinese electric car manufacturer headed by a man named Wang Chuan-Fu. The company itself is frugal. Until recently, executives always flew coach. He was appalled when he learned that Ford, which lost billions last year, had staged a gala at the Hotel George V during the Paris auto show. By contrast, the last time BYD executives traveled to the Detroit auto show they rented a suburban house to save the cost of hotel rooms. Last fall Berkshire Hathaway bought 10% of BYD for $230 million mainly because of its CEO.

The point is that there are serious problems in the way many American companies are managed most are still using the 19th century bureaucratic organization with all its flaws. These poorly managed companies are more likely try to solve their financial problems by seeking cheap labor abroad rather than reforming themselves.

But there is an alternative to just accepting fate and allowing companies to close down. Local governments need to fight to save these jobs by requesting the companies to reform themselves. They should be implementing Lean Teams, using Work Measurement for staffing its overhead employees and reduce the levels of management. Given the cost of a company building a plant in China and increased transportation costs back to the US there is a good chance for a restructured company that the move may not be economically feasible.

To avoid further losses of manufacturing jobs when troubled companies come to local governments seeking tax relief it should be given only if the company can show progress in restructuring itself by shedding its bloated bureaucratic management. Unions should also be prepared to make concessions to save their jobs.

There is an incredible lack of understanding of computer systems mostly of a technical nature among company decision makers who time after time turn to the wrong people for advice on how to fix their computer problems. Bad IT decisions come about mostly by the failure of decision makers in the past who were not computer literate and by the piecemeal stop gap fixing of obsolete stand alone computer application programs. Decision makers in many cases are led astray by self-serving Information Technology (IT) Managers who wanted to keep their programmers busy by patching and developing new application programs for their obsolete systems.

System implementation planning failures are generally the fault of the decision makers responsible for funding the project. It wasn’t but a few years ago when almost none of a copanies leaders had any computer experience at all. They relied completely on their Information Technology (IT) manager for planning and implementation of computer systems.

Even today the situation is not much better. Faced with throwing out all of the present computer applications and implementing what is needed a Relational Database Management System (RDMS). IT managers fight to continue their obsolete systems pointing out the cost of bringing up a new RDMS. This argument pales in light of the losses to the company from the inability to manage company services over and above the added cost for maintaining the present obsolete systems.

Among computer literate personnel an organization’s computer department is known as an IBM “shop” or a Digital Equipment “shop” meaning that the organization only uses a specific type of vendor computer hardware. It also means that only IBM or Digital Equipment software is used. When the IBM Operating System software is used all Application Programs are written to run on it. The result is that if the organization only has IBM computers you will most likely get an IBM solution. And you will not get a system that can be integrated with other non-IBM systems. What I have observed is that most IT managers are more loyal to their “shop” (vendor specific system) whatever it is than they are to company decision makers. The same problem occurs when decision makers seek to contract out services few of them seam to be aware that they are getting a proprietary solution when they contract services to an IBM shop nor do they seam to care about the cost except when there is a major failure and yet they still don’t know what went wrong.

I call this the professional approach as opposed to the Rumsfeld amateur approach found in my Article 3. The professional approach is used by major downsizing Management Consulting firms among them a firm which I was trained by, Alexander Proudfoot of Chicago. The primary method they use is called Short Interval Scheduling. After time-studying both shop and office functions (Work Measurement) a reporting system called Short Interval Scheduling is implemented. The Short Interval Scheduling reports made to management guarantees that production and services will not be interrupted and if there is a problem management will know about it within a few hours. In some of my articles I have called this method the Cost and Schedule approach.

The following is a detailed example of my personal experience using Alexander Proudfoot techniques. This is an example is of a company wide downsizing operation made by Alexander Proudfoot. The client company was Clark Equipment at the Battle Creek, Michigan plant. Clark Equipment is a well-known forklift manufacturer. The company was under heavy competition from Japanese competitors using TQM and had to resort to extreme measures to survive. My assignment was in the Production Control Department and was to analyze the function, “servicing the manufacturing assembly line”. Several forklift drivers were involved in the transporting of parts on a timely basis to the manufacturing areas either to and from individual milling machines or directly to the assembly line of a particular forklift product.

My approach was to time study all the activities necessary to the servicing of the forklift production line. I followed and timed each forklift driver into the storage yards and counted the number of parts loaded on each pallet for each trip making sure that I had missed nothing. The number of parts to be loaded on the pallets was specified by the Production Control Planning System. My job was to be sure that the pallets were fully loaded or contained all of the parts required. At the assembly line the pallets of parts were placed near the assembly line so that they could be easily moved to the assembly line worker as needed. The study of the manufacturing areas took me about two weeks.

Now let’s do the data analysis. I needed to determine what “Product” was being produced by the Function. This appears to be difficult but what you must do is to break down all of the processes observed and find its smallest element. In other words this element or a multiple of it can be found in all the processes being performed in doing this function. Since all processes involved a forklift I found that the shortest process was when a forklift moved a pallet from its dropped location near the assembly line to the assembly line. I called this process a “forklift move” and the name of the element became “Move”, which I determined to be one minute long. This was very convenient because the entire analysis was done in minutes. If the Product “Move” had been five minutes long you would simply divide the total time for each process by five to get the number of move elements. Since each pallet moved had parts on it for more than one forklift and since I had counted and recorded the number of parts on all of the pallets we can analyze each pallet to determine if more than one part is required for each forklift. Adding the total time for the forklift driver to go to the storage area count the number of parts needed put them on a particular pallet and bring the pallet to the assembly area gives us the time to the drop-off place near the assembly line. To that we add the one minute required for a second forklift driver to bring the pallet from the staging area to the assembly line worker. We divide this total time by the number of parts moved (adjusted for the number of parts required per forklift). This process is repeated for all the pallets. When added together we know the total time spent in servicing this particular forklift product’s production line.

We cannot assume that all work will be performed at the standard 100% rate so we assume the actual rate is closer to 75% for staffing which adds 25% more time to the total. Multiplying this total adjusted time to service one forklift product by the current production rate (forklifts per month) gives us the adjusted time spent by all the forklift drivers for the month. When we convert the time in minutes to hours and divide this by the standard hours worked per month by a forklift driver we arrive at the total number of forklift drivers required at this particular production rate.
Given the total adjusted time to service one forklift product we can calculate Staffing levels for any manufacturing rate. It was also determined that since all the forklift products contained nearly the same number of parts the analysis could be used for all of the companies forklift products made on this particular production line.

Now let’s review the actual results of this analysis. During the study I stayed focused on the processes being performed and the time actually being spent. But since the analysis was being done in the cold of winter I noticed that every time I stopped by one of the four or five warming huts five or six people would get up and leave. Since I had no idea what these people were supposed to be doing I paid little attention to them. The results were shocking to the Clark Company senior management when they discovered that the actual number of employees required could be reduced by sixty a more than 50% reduction. The annual savings adjusted for today’s dollars amounted to more than one million dollars. If I had not conducted the study myself I probably would not have believed the results. After the removal of the redundant employees the Short interval Scheduling reporting was implemented.

So what’s wrong with this method of downsizing? Nothing if the plant is in danger of shutting its doors and quick solution must be had. But the method destroys employee morale by such severe measures and may create a permanent problem with unions resulting in ill will lasting for years. The Short Interval Scheduling reporting system forcibly maintains employee productivity. The costs are high in that there is little or no employee innovation for continuous improvement to the work methods. Note that this approach is used by Alexander Proudfoot through out the plant and in the office areas. It’s a real killer for morale and employee innovation. This is a very expensive operation because Management Consultants receive a substantial fee for their efforts.

The Lean and Work Measurement Method

The objective of the amateur method was simply to reduce personnel mostly likely to meet a short fall in the budget. The objective of the Management Consulting secret method is simply to downsize to known level determined by Work Measurement and to maintain production and service levels using the Short Interval Scheduling reporting system.

The objective of the Lean and Work Measurement method is to replace the 19th century bureaucratic structure found in industry and government with a downsized streamlined 21st century organization with fewer levels of management that encourages innovation by empowering both management and employees. To do this I recommend the adoption and use of the best techniques available.

Bureaucratic Organizations have a reputation for resisting change but it is difficult for them to reject a method that brings innovation to the organization. That method adapted from industry is Lean. Value Stream Mapping is the primary useful Lean tool in government. Value stream mapping is a lean manufacturing technique used to analyze the flow of materials and information to bring a product or service to a consumer. Lean brings innovation to high level cross functional processes and to lower level functions. The low level Lean Teams meet once a week to discuss how to improve the processes that they use in their daily work. Their activities bring continuous improvement to the methods used in doing their job. A Lean Team objective is to study their job Function by making a Process Flow Chart of the current job processes followed by a second Process Flow Chart of the improved method. A budget analyst costs out the new method to determine the cost savings and the Team presents these savings to top management of the Organization. See my Article 137. Role of Lean Facilitator and Budget Analyst.

Top management’s role is to encourage the implementation of Lean both at the high and at the functional level. They should send representatives to Team meetings showing complete management support. Each functional Lean Team elects it own leader to chair the meetings and over see the making of the Process Flow Charts. The Top Management must support the Lean implementation or they should be replaced.

The Process Flow Charts provide a record of the costs associated with each process. If a process were to be eliminated all of its costs are also eliminated. A Process Flow Chart is done for each Function and if a Function were to be removed all of its budget will also be removed.
What you have now is the real budget for doing the Functions not that phony bloated budget that the Organization presents each year. True, you must add in the cost of managing the Organization but now for the first time you know what that cost is. This is a bottom-up budget with actual costs for doing the work known. All other costs are for management and fluff (which can be significant). In my experience in industry most unmeasured office areas are over staffed by 10% or more.

Once you know what the real costs are for doing the Organization’s work and top management is working closely with the Teams the reform process can begin. First the functional Team leaders become the Functional Management of the Organization. Second most of the mid management levels between the Functional management and top management become redundant. Top management now assumes the role of a Steering Management Team. Some but not all of mid management may become part of the Steering Management Team. Steering Management has the role of guiding and steering the organization while Functional Management deals with the day to day operation of the Organization’s functions. Steering Management is responsible for telling Functional Management “what to do” but not “how to do it”. This is a loose-tight organization with Steering firmly in control of the budget leaving Functional Management free to determine how best to do the job. Those in industry will recognize this as straight from the book “In Search of Excellence- Lessons from America’s Best-Run Companies” by Thomas J. Peters and Robert H. Waterman Jr., Harper and Row, New York, 1982.

What’s different? The multilevel career path is now one step from the Functional management Teams to the Steering Management Team. Gone are the hundreds of hours of endless manipulation of employee evaluations. Gone also is the endless bickering and negotiation over the organization’s budget. This method requires little investment by the organization by redirecting training efforts to this implementation.

“Five Ways to Downsize Government” By: Donald H. Rumsfeld
Published In: Heartland Perspectives Publication Date: August 4, 1995
Publisher: The Heartland Institute

As Congress grapples with the challenge of downsizing or eliminating bureaucracies that haven’t been critically reexamined for many decades, its Members would do well to consider some of the lessons learned by the businessmen and -women who made their companies more competitive in the 1990s. I have a somewhat unusual perspective on this issue, having spent roughly twenty years in the federal government and another twenty in the corporate world. Here, based on my own experience, are five guidelines for members of Congress:

Donald H. Rumsfeld has served as a member of Congress, U.S. Ambassador to NATO, chief of staff to President Ford, and, from 1975 to 1977, Secretary of Defense. Between 1977 and 1985 he was CEO of G.D. Searle, and from 1990 to 1993 he was Chairman and CEO of General Instrument Corporation.”

Comments by Lawrence Rosier
My readers will note that this article was written before 9-11 and the mid-east wars in Afghanistan and Iraq. Without getting into what has really happened in the Bush Administration in the article Rumsfeld does give advice that is typical among CEO’s in industry. His approach to determining what really needs to be done the elimination of redundant organizations is a necessary first step and is commendable. Many may disagree with some of his Departmental choices for elimination. I agree with Rumsfeld that his advice to “Cut Sharply and Rapidly” and “eliminate Bureaucracy” will bring significant savings to the government but the real question becomes how much do you cut and how do you eliminate bureaucracy.

What you have here is the typical top-down approach to downsizing but I prefer the bottom-up approach through work measurement. The advantage is that while you may get some efficiency in government from the top-down approach you will be able to eliminate all the inefficient activities through the bottom-up approach. I propose using Lean Teams as the best way to do this.

A significant difference occurs when reducing staff during budget cuts. The top down method tends to lay-off those at the bottom usually the most recently employed. The restructuring method which I recommend using Lean Teams keeps in tact those employees that are actually doing the work and eliminates mostly management staff.