For many people the role of a value stream manager is not clearly understood. Others incorrectly use the term value stream manager as a substitute for production manager or supervisor in the factory. A Value Stream Manager has full responsibility for the revenues, costs, and profitability of a major part of the company’s business.
This is the 5th article of a series that shows how to develop a truly Lean Management System. Here is the big picture diagram:
In this article we are primarily addressing “order fulfillment” value streams. These are value streams that get orders from customers, fulfill those orders by shipping the products, achieving profitably and continuous improvement. There are other kinds of value streams. Most companies have value streams to develop new products and services. There are also departments that support the value streams. These include such things as HR, IT, financial accounting, etc..
Our focus is on value streams in manufacturing companies, but similar methods apply with healthcare Service Lines. Lean banking operations use value streams that are largely based around information flow. The same principles and methods apply to all of these.
The Role of the Value Stream Manager
Ideally, the VS manager has full authority and accountability for the revenues, costs, and profits of the his/her product families. The VS manager must be very close the customers, very close the operations that create customer value, and very close to the suppliers. In other words, the entire flow of value creation.
There are eight aspects of the value stream managers’ work that we will address in this article.
The overall Job Description for a value stream manager is:
1. Create more customer value
2. Grow the business
3. Eliminate waste from every process
4. Make tons of money
While this definition is a little tongue in cheek, you can see that the job of the VS manager is a business, executive role. Many companies think that the value stream manager should have a production background. It does not matter what background the value stream manager has, provided they can run a mini, entrepreneurial business within the business.
1. Clearly Distinguish the Value Stream Team
The VS manager’s role starts – of course – with people. The VS manager must have the people that can support and improve the operation. Increase sales to grow the revenues. Improve the processes to free up capacity and grow the business without growing costs. Improve the relationships and performance of the suppliers to achieve high quality, frequent (often daily) deliveries of small quantities. Simplify the processes using lean methods so the business can run largely visually.
There needs to be a balance of skills and experience. The VS manager can not be an expert in every aspect of the process. If the VS manager has a marketing background then it’s important to have strong operations leaders in the value stream. If the VS manager has an engineering background, then the value stream will need strong sales and marketing leaders, for example.
2. Build Your Team
VS managers take very seriously the lean principle of empowerment and respect for people. The culture of continuous improvement and the pursuit of perfection is developed by the VS manager, and supported by company executives.
The VS manager must challenge the entire team to not only serve the customers and create value, but also to make improvement every day, every week, and every month. The VS manager must also “hold an umbrella”over his/her employees so that they are not distracted by corporate and other issues going on in the business. The VS manager addresses these issues and keeps the team focused on customer value and continuous improvement.
3. Build Knowledge Within The Team
The VS manager is responsible for the skills and knowledge of the value stream team. This includes formal training sessions and the follow up and certification of the employees. This is often done by HR, and some companies include an HR person in the value stream team if the company and the value stream is large enough to warrant this. The VS manager is also responsible for the cross-training of the people. The purpose is to provide flexibility within the value stream. The cross-training of the people is often a value stream measurement so as to focus on achieving this flexibility.
The VS manager primary role in building knowledge is through active mentoring of the people. There are many opportunities to do this. Mentoring people during the daily “Gemba walks**” through the value stream processes. Mentoring the leaders and team members working on lean improvement projects. Reviewing the A3 documents are an excellent time for mentoring. Regular review of the Leaders Standard Work outcomes with the people directly reporting to the VS manager. Mentoring during the SOFP executive meeting (Sales, Operations, and Financial Planning) and the strategy deployment “catch all” process.
The mentoring is not done by telling the people how to do things differently. It is done by asking appropriate questions and drawing out the people’s own experience and difficulties. It is better to have a person work out a change or problem solution themselves, the the VS manager to give them the answer. Even if the VS manager’s solution is a better method.
4. Build Customer Value
It is essential for the VS manager to have detailed and deep understanding of how the customers value the VS products and services. Much of the “leg work” is done by marketing, sales, and product development, but the VS manager must be on top of these issues. The customer value changes over time and new products change the value propositions. Additionally, the VS manager needs to work to create cooperative and partnership relationships with the customers.
5. Strategy Deployment
Companies using lean strategy deployment method develop the company-wide strategy and then break that down to the strategic contribution of each value stream. There is a “catchball” process where the VS manager (and their team) review the requirements and critique the plan. During this process the “ball” is thrown backward and forward until there is full consensus across the entire company. This is not the normal management by objectives used by most companies. Consensus means that everyone is genuinely “bought in” to the plan and have developed practical methods within their value stream to achieve it.
6. Daily, Weekly, Monthly Leadership
Unlike senior managers in traditional companies, lean leaders are frequently at the Gemba. While the daily and weekly routine meetings are led by local managers and supervisors, the VS manager has a standard schedule (leaders standard work) to regularly participate in these meetings. The VS manager can not attend each one every time, but over time he/she will attend them all. The purpose is for the VS manager to be highly knowledgable of what is really happening on the shop floor, the sales office, the quality work-stations, purchasing, etc. etc..
The weekly value stream meeting around the visual performance board will always be attended (but not usually led) by the VS manager. Similarly for the weekly income statement review, customer service meeting, etc.. The VS manager is also actively involved in monthly meetings including the SOFP executive meeting, capital review, and strategy reviews.
7. Value Stream Measurements
The operational and financial measurements of the value stream are, of course, key knowledge for the VS manager. The weekly value stream performance measurements are posted on a visual board that shows the results, the reasons for short-falls, and the continuous improvement projects to solve problems and improve the flow. The weekly income statements show simple revenue, costs, and profits for the week. The VS manager and the VS team uses these to understand the financial impact of their work, bring the VS under control, and improve the financial results.
The daily or hourly measurements posted in each work center, office, or other processes are similarly reported visually. The VS manager reviews these as a part of the daily/weekly gemba walks. The “box score” shows a summary of the value stream performance each week. It shows the operational measurements from the visual board, the financial results from the income statement, and the capacity within the value stream.
8. Driving Lean Continuous Improvement
The VS manager must understand the customer value created by the company, eliminate waste throughout the value stream, free-up capacity (people, machines, cash) and use this additional capacity to grow the sales and the bottom line without increasing costs (other than materials). The VS manager will instigate (through the VS continuous improvement team) the development of current and future state maps and to identify what changes must be made to create the growth and profitability.
There are (broadly speaking) four different kinds of continuous improvement processes. Breakthrough improvements achieved through large significant projects. Continuous improvement (often called kaizen) events the derive from the VS maps and the performance measurement boards. Just-do-it improvement are the 100’s or 1000’s of small improvements done every day by people working in the VS processes from sales, to operations, purchasing, accounting, etc.. The fourth improvement method is Target Costing where improvement methods are used to increase value to the customer and reduce the costs of products.
* Gemba means “the place the work is done”. Lean leaders have few meetings in conference rooms. Most routine meetings and discussions occur at the Gemba and the lean leaders are at the Gemba a considerable time every day.