Michael Ballé is lean author, executive coach and co-founder of Institut Lean France
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Based on their experience supporting the stellar growth of the Aramis Group, the authors discuss the role of leaders in shaping thought and behavior and constantly challenging themselves to be the best example.
Our book Raise the bar - From zero to 1 billion shares the lessons we learned growing the Aramis Group up to its IPO on Euronext. The title itself summarizes our key insight, with a catch. It is easily interpreted as "raise the expectations of others," but our most important lesson is the importance of having raising the bar for yourself. Balancing between securing today's performance and adapting the company to tomorrow is a constant test of leadership, and as customers, markets and the world evolve, there are no set answers. Best practices can inspire and make you look at your own situation differently, but in fact, they don't help: they are yesterday's best practices, and what we need to figure out is where things are headed in the years ahead.
We were taught that scaling a business is all about structure and processes. Structure as defined by an organizational chart: specialized departments strung together by a hierarchy. Each department head must run his department according to budget targets from above and make the necessary investments to adapt it to current conditions and, at best, to the future. Processes are usually rules about how things should be done to get a repeatable result. Work is generally seen as prescribed. Fixed operations are part of the process, which is constantly optimized to take advantage of economies of scale or automation.
The assumption is that if we set up the right structure, which we drive through the right processes, we will achieve lasting performance. According to this thinking, when things change, we must restructure to adapt to new market conditions and redesign processes. Consulting has become a full-fledged industry to guide organizations through these changes. But are these assumptions true? Or have they become an ideology, a program to be implemented regardless of the consequences?
People were always the problem
Looking back at the 20 years since Aramis was founded, we don't really see hordes of thriving organizations. What we do see are multinationals dominating their markets through sheer financial power, increasingly questionable customer service through inflexible digital systems, and disgruntled employees with no clear mission and sometimes meaningless jobs in which they feel they are no more than a cog in a bureaucratic machine. Within the structure and process perspective, when customers complain, they expect too much. And if the process fails, it must be the employee's fault. In this mindset, processes are the solution and people are always the problem (why can't they just follow the process and be happy with it?).
In the early days of scaling up the Aramis company, which sold new and used cars over the Internet, creating structure (new roles and departments and organizational charts of who reports to whom) and defining processes (with detailed maps and instructions) was also our approach. But as complexity increased and we felt the company was becoming increasingly rigid and unresponsive to clear challenges, we learned to go to the gemba to see problems for ourselves and investigate causes.
Go to the gemba
At the gemba, you hardly see any structures or processes. What you do see are people and systems. People respond to requests from others and do so with the help of systems. Both people and processes are specialized, so at some point a transfer occurs, the sequence of which creates a process. For example, in our case of selling cars through a Web site, the salesperson talking to the potential customer is probably not the same person who removes the car from the truck when it arrives or prepares it for the customer to take delivery. One can imagine such a small outlet that the same person would do all three jobs, but at size it makes sense to specialize.
However, this specialization breaks the smooth, continuous flow of customer experience and work and creates endless friction points in the transfer of processes. Sales associates are constantly juggling the special needs of the customers sitting in front of them and the instructions of their own hierarchy (often expressed concretely as incentives to sell this or that). Preparation staff have to deal with schedule changes, either from customers or logistics, and unforeseen problems on the car that they may or may not be able to solve themselves. And because process segments are desynchronized, employees easily become conflicted about who was supposed to do what, who did what wrong, and who gets blamed for each mishap.
Engaged inquisitive people lead to better performance, not perfect processes
The second lesson of gemba is that performance comes not from perfect processes but from engaged, inquisitive people. Some teams handle perfect hiccups smoothly, taking care of customers first and helping each other in overlapping areas to arrive at the "least worst" solution to intractable problems. They handle conflicting priorities wisely and support each other. Other teams, on the other hand, seem to take every task and responsibility in the narrowest sense, get in each other's way and seem to enjoy playing the blame game. It's fascinating to see the sudden negative impact a single gruff newcomer can have on a high-performing team - it's all about people.
It's all about people's judgment, to be precise. Organizations are full of contradictions because no structure or process can be perfectly designed for today's market conditions - and they are changing faster than organizations can change. But some people, both leaders and employees, deal with these contradictions better than others. They understand the priorities, and make the right choices so that everyone enjoys the experience. We saw how some customer service employees turned customers who were angry about a very real process error on our part into enthusiastic promoters: they listened, they sympathized, they compensated. Yes, it would have been better if the problem had not occurred, but the skill and emotional intelligence of customer service employees can make all the difference.
Just as it is considered common sense that organic growth must be supported by structure and processes, common business thinking states that to grow successfully through acquisitions, you must quickly implement the same systems everywhere and then recoup the synergy costs by centralizing the management of these systems in shared support centers. This theory still prevails, although the success rate of acquisitions remains abominably low. Viewed from the gemba, we realized that what makes people and teams perform is their relationship with their tools. When they understand their tools and systems, how they work, what they show and what biases they have, they make good decisions. Change the system for them and they have to learn a new system from scratch - often unintentionally.
Instead of imposing a single system on our acquisitions - as in harmonizing structures or processes - we took a different gemba-based approach to integration (by the way, internally we rarely speak of "acquisitions" and "integration." We prefer to speak of "joining the group" and "working together." We know that words carry weight, and we find it easier to maintain and increase staff involvement). We focused on people. First, we regularly discuss with leadership teams our company's key Lean issues: what really satisfies customers in each culture? How do we buy the right car at the right time to keep lead times and inventories low? How do we avoid excessive costs by focusing on quality and getting closer to right-first-time? How do we ensure that tools and systems work for every team member, wherever they are? And with each of these problems, how do we engage team members in recognizing the problem and finding local solutions?
As frontline teams master these typical problems, we have them share their experiences and local countermeasures through company-wide communities of practice where people discuss their perspectives, insights and initiatives. With such communities of practice, we see that people from different cultures and backgrounds gradually converge and together gain a common understanding of how best to run the company. This in turn leads to a natural convergence of systems and resources, as systems evolve in the same direction and resources are shared across the company. The synergies we seek are those of better judgment across the company, in different local conditions and with people with different track records, but who gradually subscribe to the same theory of success.
The core question of leadership
How can you encourage better judgment across the board? That is the core leadership question. Structures and processes don't help. Good judgment is a matter of interpretation, of seeing the facts differently, often in light of experience, and making the wise choice - not necessarily the prescribed choice. Judgment also means taking risks. It means putting oneself forward to correct a process error. This in turn means running the risk of blaming the structure, which readily sees its role as enforcing compliance rather than serving customers.
At the gemba, you realize that your overall performance is highly correlated with these magical moments when someone has the right insight and takes the right initiatives, saving the moment. Then you also realize that to fix processes you need the same good judgment from people to come up with meaningful Kaizen ideas - which can then be developed into complete process improvements. What you also discover is that such insights and initiatives come mostly from conversations within teams. If they're having the right conversation, they're doing the right thing. If they have the wrong conversation (or no conversation at all), they don't do it.
To understand the view of people and systems, we began to look at relational protocols - the social norms that determine how people interact with each other and with existing systems. Such protocols are as affective as they are cognitive: Who can easily talk to whom? About what? In what tone of voice? What kinds of emotions are considered normal or abnormal within the team? For example, is frustration or anger part of the relational protocol and expressed frequently, or is it a sign of an abnormal situation that needs to be addressed? Is willingness to help and expressing job satisfaction part of relational protocol or are those rare occurrences? As for Kaizen, are suggestions encouraged and followed, or rejected and ignored?
These relational protocols cannot be established by structure or process, no matter how hard proponents of structure and process try. They are purely human interactions, ways of getting along, and they have a strong emotional component. For example, the degree of trust conveyed by protocol, or the sense of togetherness toward opponents, are emotions. Moreover, as business grows in other cultures, what constitutes normal and abnormal emotions varies from country to country.
Leaders - as we learned the hard way - have a disproportionate influence on such relational protocols. Someone brings you bad news and you react with anger, perhaps a little at the bringer of the message? People will conclude that it is okay to react angrily to bad news. You express frustration because a problem is not being solved or handled as you would like? People will think that frustration is okay in their dealings with others, and so on.
Raising the bar for ourselves means deeply understanding what Isao Yoshino, a Toyota Sensei, described to us in Japan as "showing your back," understanding that, as leaders, everyone is always looking at your back while you are looking elsewhere to see how you react - what is considered "ok" or "not ok" in responding emotionally to situations.
Raising the bar essentially means being more patient with people in the workplace describing their activities until we discover the real point of knowledge; responding with more equanimity when we are told that something, for the umpteenth time, is not working as expected; being more generous with validation and thanking employees more often for doing a good job. It means taking responsibility for these invisible relational protocols that underlie every interaction in the company and, ultimately, real performance - as well as our own adaptability.
People are the solution. Processes are the problem
People are the solution, processes are the problem. Years of applying Lean to the gemba has taught us that. What makes Lean Lean , we learned in Japan, is not its bureaucracy or the company's systems, but the elusive Kaizen spirit that some people get and others do not. The sense that when something goes wrong you ask yourself what you could have done better before blaming someone else. The relentless search for muda and unnecessary work, and the effort to engage people in finding new ways to eliminate it. From this point of view, the elements of the TPS - customer satisfaction, just-in-time, responding at every defect, leveling workload, studying standards, trying Kaizen, developing mutual trust through stability - are all relational protocols on how to deal with customers, logistics, hierarchy, workload, procedures, problem solving or systems.
Each element of the TPS provides opportunities for Kaizen by visualizing a clear challenge, such as responding better to customers, reducing lead times and so on. These opportunities can be seized or ignored. As leaders, our job is to create the kind of culture where Kaizen is paramount and is a positive emotion that people experience together (the joy of bringing value closer to customers). This, we now know, does not happen naturally unless we demonstrate and shape it ourselves. If you want a more Lean company, you have to be the change you want to see happen.