Lean is not cost cutting, or maybe it is?

I often find myself saying lazy people are Lean people because they always find a quicker and better way of doing something, wasting less time. But what is Lean? What does it mean?

The most common definition is that it is therelentless elimination of waste. However I believe it is more than just that.Lean is the way we live and breathe. It is the way we run the business, notsomething on top of what we do every day. While working with theleaders and starting Lean transformation, I often hear “we are already verybusy, so when we are supposed to find time to do this?” And the second: “thetime has come and cost reduction started. Are we or some of our people going tolose the job?”. I believe this is very natural. People intend to be afraid ofany changes and naturally find arguments why they shouldn’t do something.Becoming Lean is about opening up fantastic opportunities, which in the endlead to cost reduction – only in a healthy way. What does healthiness meanhere?

Customer value

According to Lean, “value-added activities”are those the customer is willing to pay for, which physically change theproduct or service, done right for the first time. Everything else is a waste.That is why it is so important to understand what brings value and whatdoesn’t. The more value we bring, the more cost effective a company is, and themore profitable it is. By constantly asking the customer what it is that theyare willing to pay for, and understanding what is behind each complaint,companies can improve processes and products.

So imagine that your company has 100 productsand customers use only 20 regularly which bring 70% of the whole revenue, 10more from time to time that bring another 10% of the revenue. Everything elseis rarely used and generates little revenue. It might be worth rethinking whyyou continue to sell these products. Maybe it is time to make some toughdecisions.

This is just an example but when was the lasttime your company completed such an analysis? By doing so and cutting someproducts, you will have more time to focus on the things that bring value toyour organization.

Elimination of useless costs bywaste elimination

Anything that does not bring value is awaste. And because waste is something that the customer is not willing to payfor, it is a cost to the organization. If it is a cost, then it means thecompany is losing money. In the Lean world there have been eight type of wastesdefined. These are: waiting, rework, overproduction, inventory, overprocessing, motion, transportation and losing people potential. That is why itis worth looking for constant improvement opportunities by eliminating anythingwhich can be connected to these eight types of waste. Each time somethingclassified as waste is eliminated, the cost for the organization is alsoeliminated.

Transparent meanseffective...communication

One of the main fundamentals for everyemployee is to have a secure place to work. Everyone has the right to feel safe.Changing the way people work and how they work can make people start askingquestions, such as, “Am I going to lose my job? What will happen to me?” It’simportant to be transparent in communication and provide all the necessaryinformation to employees. People must be sure that by improving the process, ajob is going to be there for them.

Leaders cannot presume that people know this.They need to clearly communicate the intentions. This is the only way to berespectful to people by making sure that their safety is a number one priority,as well as their constant development. Very often I test this and ask theleaders what will happen with their people after the improvements. This is thecritical moment of verification to understand whether a company has decided touse Lean to “cut people” or really transform the business, having an “army ofproblem solvers” to cut the unnecessary costs.

Looking into company development and cashflow management, there are different strategies of cost reduction. Cost reductionby laying off people is a short term, ineffective strategy. Cost reduction bycutting unnecessary costs which no company wants to have is preferable. Thinkof it like a person with two legs. The first leg is to develop people, teachingthem new tools and techniques to improve processes. The second leg is toincrease customer demand to be able to deliver more. Make sure to walk withboth legs.

How to you deal with teams released byprocess improvements? Have you encountered other elements in your Lean journeybesides these three?