Updated: Jun 9, 2020
There are times when leadership sets their gaze on operations in order to better delight their customers, increase margins, or improve operational excellence. This gaze for many companies has translated into a journey of continuous improvement and the playground for LEAN.
Companies have embraced LEAN principles and practices all across the world and in almost every sector. LEAN initiatives have produced remarkable results and for some created a new “way of organizational life.” Continuous improvement has become a centring force and a means for aligning a company’s workforce with management objectives.
With this success, the mantra of continuous improvement has expanded, along with the LEAN tools and practices, to other areas of the business such as: quality, safety, environmental, regulatory and other compliance functions.
However, in these cases, LEAN has not helped as much as it could and in fact in some cases has made things worse.
The problem has not been with the translation of Japanese words such as “Gemba”, “Kaizen”, “Muda”, “Muri”, and others. Instead, the problem is with the translation of LEAN itself.
The objectives, principles, and practices that have worked on the production floor where improvement is measured by cycle time reductions have not been as effective when applied to areas where improvement is measured by the reduction in risk.
The following are key areas where inadequate translations have caused confusion resulting in a lack of effectiveness when applying LEAN:
When it comes to compliance programs the translation of such things as: “value”, “value stream”, “waste” , “flow” and “customer” are not as obvious or as easy to see compared to what happens on a production floor.
Some LEAN practitioners chose not to do a translation and instead consider everything only from a “manufacturing” point of view. This means that everything that does not directly “touch a product” is considered as non-value added which makes almost everything else “waste.”
Using a “narrow” definition has led LEAN teams to remove essential activities and outcomes such as:
evidentiary artifacts needed to verify compliance
risk measures needed to protect the value stream
activities needed to meet compliance objectives
preventive risk controls
tasks that are occasionally used (ex. risk assessments)
tasks where people have forgotten its purpose
critical to compliance activities
Without an adequate translation for value some practitioners choose "simplification” as a guiding principle for process improvement.
Unfortunately, after simplification has been completed what often remains is a process that does very little to advance any outcome, let alone those associated with compliance obligations.
However, there is one outcome that is advanced and that is the possibility of risk.
Over-simplification (a source of improvement waste) can create new or expose existing vulnerabilities that threaten value creation. Companies may end up with more risk than any productivity improvement they might have realized by the elimination of “waste.”
The value chain is responsible for creating value in the eyes of a company’s stakeholders and it does so in the presence of uncertainty.
Productivity programs serve the value chain by improving margins through operational excellence and LEAN initiatives. Margins are necessary to mitigate the effects of aleatory (i.e. irreducible) uncertainty. It also affords an organization a degree of resilience against disruption.
While the removal of waste can improve financial margins, many LEAN practitioners may not properly recognize the use of margins (extra time, extra capacity, extra resources, ..etc.) put in place to contend with uncertainty. As a result any gains in financial margins will be lost (and often more) to address the disruption when uncertainty does become a reality and there is no margin in place to attenuate its effects.
Compliance is considered as necessary, but a waste from a LEAN perspective. However, compliance programs serve the value chain by mitigating the effects of epistemic (i.e. reducible) uncertainty. It does this by buying down risk through effective quality, safety, security, environmental, and regulatory systems and processes.
Without margins or the buying down of risk companies are less resilient and are more vulnerable to threats to value creation.
LEAN can be applied to all processes provided that effective translations are made to the domain where LEAN is being applied.
When it comes to compliance programs it is important to recognize that the primary objective is to eliminate and reduce risk rather than "waste". You could say that risk is the cause of the waste which LEAN has traditionally focused on eliminating.
The following chart contains translations for other LEAN objectives as applied to the compliance domain:
LEAN practitioners would do well to consider the impact of risk when engaged in process improvement that involves compliance obligations.
At the same time, compliance processes will contain traditional sources of "waste." Therefore, risk specialists would also benefit from applying LEAN to existing risk control processes to improve detection and response times to better prevent risk as well as mitigate its effects.
You might say that since every process operates in the presence of uncertainty, LEAN practitioners should all be risk managers. In fact, that is exactly what is needed to improve the certainty of meeting all the obligations that a company has promised to keep.