Why Do Companies Fail When Implementing Lean Principles?

A deep dive into the success and failure of lean transformation!

I began my lean journey back in 1983. Since then, I've seen many companies come and go. Some implemented lean while many didn't bother. Some went on to earn industry-wide recognition by winning the Shingo or Deming Awards. The problem is that many of these companies who worked and fought hard to win these prestigious awards ended up falling right back to where they started or worse. Why did this happen, and how do I know this to be true?

The only available data about this issue was an Industry Week study conducted in 2007. It found that almost 70% of all US plants employed lean principles. They also found that 24% of those companies that implemented lean achieved significant results but only 2% achieved their defined objectives. Robert Miller from the Shingo Prize committee found that way too many of their past Shingo lean excellence prize winners lost ground and fell behind the competition.

In another study published in 2016 by the International Journal of Quality & Reliability Management it reviewed 56 well-known academic papers published on Lean, Six Sigma and Lean Six Sigma from 1995 to 2013. The study identified 34 failure factors. According to the study, “these 34 covers all identified in other online articles.” The fact is, none of these reasons for failure would be relevant if organizations had a full commitment to, and implementation of, a Just-In-Time system. 

So, has the situation improved? Are more companies having success in meeting their lean implementation and transformation objectives. Sadly, the answer to this question is “it depends.”

Reasons why companies fail at Lean!

One of the main causes of lean failure is the purpose/reason why companies decide to use it. 

Many that implemented lean used it as a marketing strategy to present the image to their customers that our management team is willing to do anything to improve the quality and reduce the cost of our products. 

Other companies implemented lean as a cost-cutting tool to reduce operating expenses which includes headcount. A management team that asks its employees to participate in an improvement project because it needs their knowledge and expertise, then hands them a termination of employment notice does not understand the core principles of lean. Of the 14 principles defined by the Toyota Production System (TPS), the first principle is “Respect for People.”

Another reason for lean failures is management team members “don’t realize they don’t know.” Reading a book or watching a video about lean does mean you are an instant expert. It is simply not about implementing a series of tools and techniques to eliminate waste. Lean Transformation is not a project or program. It requires a paradigm shift in the organizational thinking and approach to continuous improvement. It also requires the full commitment and participation of all levels of the organization from the C Suite to middle management to the shop floor.

Look for these 3 critical elements! 

When I visit a company, or they ask for my consulting help, I always enjoy asking for a tour of their facility. While walking around I will search for, observe and note these 3 critical elements:

  1. Workplace Organization - 5S & Visual Controls
  2. Performance Metrics - Quality, Cost, Delivery and Safety
  3. Strategy/Goals

These 3 elements will demonstrate the commitment level of any management team towards lean transformation. 

Workplace Organization - 5S & Visual Controls

If the company has not implemented any lean principles such as Workplace Organization using 5S and Visual Controls you can understand the current condition of their workplace. 

However, if the management team members are saying "they've been doing lean for a few years", then you need to take notice. The state of the shop-floor is a direct indication of the management teams level of commitment towards continuous improvement. 

If a company's management team cannot implement and maintain a robust 5S program it has not developed the capabilities or the internal discipline to initiate a lean transformation or implement lean principles. 

5S is the foundation upon which all lean principles are built! A lack of commitment to 5S is a clear indication that lean will fail unless they change their thinking and approach.

Where are the Performance Metrics?

Many years ago, one of my mentors shared this statement with me, "We are all judged by results." This statement is true in everything we do in life. A business is no different, the results they are judged by are profit and loss, customer satisfaction and employee morale. 

During my walk around a facility, I will observe and note three critical metrics factors:

  1. What metrics are they monitoring?
  2. How are they measuring/assessing their processes?
  3. How do they use their data?

I work by this simple principle, if you measure the right things, you will get the right results! However, if you measure the wrong things, you will get the wrong results! 

Collecting data and analyzing it for the sake of doing it is pure waste. I'm not looking for fancy visual boards, I'm looking to see how they are collecting process data and utilizing it. I want to understand that they are collect the right data and analyzing it to identify the root cause of an issue, and then developing countermeasures to eliminate the problem. 

What’s your Goal?

A traditional business has a single goal and that is to make the deliveries to customers before the end of the month to meet the budget numbers. Sadly, to reach the end of the month numbers often requires lots of fire-fighting activities to make it.  A traditional company will repeat this process over and over, every month. 

An organization that is interested in Lean Transformation needs to clearly define where it is heading and create a plan to show how it will achieve it. Change does not happen by chance, it must be defined, developed and managed.

A CEO or Manager saying "We have a plan" is not enough!  I ask these questions:

  1. How did they develop their plan? 
  2. Where is the plan currently located? 
  3. Has the plan been shared with their employees? 
  4. Do the employees understand their role in achieving the objectives defined in the plan?
  5. How do you know you're meeting the objectives defined in the plan?

These are some of the critical questions that need to be answered if an organization is serious about their commitment to Lean Transformation. 

Thank you for taking the time to read my article. I truly appreciate it. 

You can access my free video series: Why Do Companies Fail When Implementing Lean Principles!

You can also download a free copy of my 10-Step Model Lean Assessment Tool. This tool was developed by me to assess the current level of lean application in any organization.