I just finished reading Art Byrne’s new book. Mr. Byrne is famous in Lean circles; he’s the leader who pioneered Lean at Wiremold Corporation. The book is called The Lean Turnaround: How Business Leaders Use Lean Principles to Create Value and Transform Their Company (by Art Byrne with a forward by James P. Womack.) It’s aimed at executives in companies striving to achieve Lean Enterprise – the so-called “C-Level Executives.” It’s a good read. Click here for the link to Amazon.
The purpose of the book is to show how business leaders can use Lean principles to create value and transform their companies into powerhouses of growth and profitability. Mr. Byrne addresses every aspect of Lean transformation from the leader’s point of view. While the book does not lay out a lot of tools or methods, it instead is mainly focusing with the leadership of Lean change.
I’d like to put a spot light on two issues Mr. Byrne covers that are near and dear to my heart: value streams and Lean Accounting.
Reorganize Around Value Streams
Mr. Byrne writes, “You cannot just drop Lean on a traditional structure and hope to be successful. You will need to make a fundamental change to a value stream structure. Determine the new roles for value stream leaders or managers, and then announce this to your organization before you begin your first serious kaizen effort.”
He then adds, “The biggest and most common mistake that I see companies make is thinking they can somehow move to a Lean strategy while preserving their traditional organizational structure.”
I was really pleased to see such a straightforward and strong explanation of the importance of a value stream organization. This is what Wiremold did very successfully. In my own experience, working with many companies over the last ten years or so, it is clear that focusing your company around value streams is critical. Why?
- Value streams as where value is created
- The value stream is where the waste is, and the value stream organization makes it easy to “see” the waste.
- The waste is where the flow stops.
- Value streams enable single-piece flow, pull systems, and continuous improvement by the people in the process.
- A value stream organization enables clear accountability for sales, cost, profitability, and cash flow.
I recently wrote an article entitled: WHY CREATE A VALUE STREAM ORGANIZATION which puts forward the many reasons I’ve discovered among BMA Inc’s customers for moving into value streams. Click here to read the article. (BMA Web site.)
Mr. Byrne observes, “Of all the excess baggage that traditional companies carry, the most intractable is standard-cost accounting. This system encourages much of the bad behavior you will be working hard to eliminate. It is the number one thing you DO NOT NEED, and I strongly recommend that you convert to Lean Accounting methods as soon as possible.”
He goes on to show that traditional accounting reports have “useless management information.” He asserts that “absorption accounting … twists behavior by making shop-floor managers more interested in hitting absorption goals than [in] making what the customers want.”
I’ve had direct personal experience with the resistance that comes up when, in my work, I challenge companies to stop standard costing. I tell them it’s like crack cocaine — just stop it. You don’t need it, and it’s bad for you!
Mr. Byrne also observes that “in addition to standard cost accounting, there are many other traditional measurements that you need to change or get rid of.”
Once again, I was very pleased to read this explanation of the imperative need for Lean Accounting to buttress Lean transformation. I have focused my own work with BMA Inc. on helping companies around the world introduce practical methods to transform their accounting, control and measurement systems, so their systems affirmatively support Lean behaviors. It feels good to see one of the giants in our industry make such a clear, concise, and forceful recommendation for Lean Accounting.