ART BYRNE: Full Interview

full interview Transcript

The transcript has been lightly edited for clarity…

Lin Stiles: We’re fortunate today to have an old friend and colleague with us who has just written a very good book called The Lean Turnaround. Art Byrne is the author and is also the best-known author of a resurrection of a firm in the United States called The Wiremold Company. Art, it’s good to have you here.

Art Byrne: It’s nice to be here.

LS: I haven’t seen you in a while [laughs].

AB: Yes, I’ve been busy [laughs].

LS: Yes, you have. What prompted you to write a book?

AB: Well, I’ve been doing this since early 1982, so I have a lot of experience. I’ve done Lean in a lot of different companies in a lot of different countries – and I’ve always used the same approach and it’s always seemed to work. I just wanted to pass on my experiences and things that I’ve done so other people can benefit. That’s really what prompted me to write the book. I’m not trying to become a consultant or some sort of global author, but I wanted to pass on to other people because I see needs in the Lean movement I think aren’t happening the right way, and I wanted to see if we can get people to do things a little better.

LS: You’re still very active. You’re chairman of several companies and still participating every day in the Lean movement. You and I were there when this thing started. You were a little ahead of me, but we are now the old folks in the Lean movement. Do you still see things that surprise you in the market?

AB: Well, I wish you wouldn’t use the term, “old folks” [laughter], but I do see things that disturb me. I think we’ve taken something that is a tremendous strategic weapon, and we’ve marginalized it by how we approach it and how we call it. For example, if you think about where this concept of Lean came from, it really started back in the oil crisis of 1979 when Toyota emerged from that better than everyone else. At that time, what we understood coming out of Japan was something called “just-in-time,” but we in the United States couldn’t leave like that – we called it “just-in-time inventory.” Then because we believe we couldn’t take all the inventory out of the supply chain – somebody had to have that inventory – so then it became “just-in-time inventory … go beat the heck out of your suppliers.”

That’s kind of how the whole thing started, and that’s the concept people thought of. And then along came Womack and Jones – they first wrote The Machine That Changed The World – who told everybody the amazing things Toyota was doing. Then people said they should write another book because we don’t make cars and that was a study of the automotive industry. Then they wrote a book called Lean Thinking, and that’s when the term “Lean” came to be. I had been doing this stuff for years before they invented the word “Lean”, but I was happy to see that happen because it was a better term then calling it “just-in-time” or the “Toyota Production System.” But again, we kind of messed it up. The book Lean Thinking described this as a business strategy and an overall supply chain approach, but instead, now when you see people say Lean, they think you mean Lean Manufacturing.

Today, Lean has become known as Lean Manufacturing, and I think that’s a big tragedy because what it does is allow manufacturing companies to think of it as some minor element to their strategy, so it’s something you can delegate. You can say, “Oh Lean Manufacturing? I can give it to my VP of Operations and let him do that stuff. We’ll keep doing all that other stuff over here, the way we’ve always done it because it doesn’t have anything to do with the rest of the business.”

To me, that’s a tremendously negative thing as we’ve gone forward. The other thing that’s happened is just because you call it Lean Manufacturing, people in other industries like hospitals, insurance, banks and professional services figure it doesn’t apply to them at all, so why should they do something called Lean Manufacturing? We take a chunk of the economy that can actually benefit from this approach better than manufacturing – the gains are bigger in non-manufacturing companies – and we kind of eliminate them by what we call it.

Part of the thrust of writing the book was to try and deal with that issue and the lack of leadership in doing this. It’s hard to implement a Lean strategy if the leader doesn’t lead it. A big chunk of the book really talks about what the leader has to do. What’s his role? How does he have to behave to make this happen?

LS: In reading it, I found myself regarding it as a do-it-yourself approach step-by-step to introducing this kind of thinking to a company. The book seems to be organized in that fashion. Did you see it as an instruction manual for somebody?

AB: First off, I see it more as a business book, and not a Lean tools book – I’m not trying to tell you how to run a kaizen or how to set up production or any of that – it’s really how to utilize this approach to improve your business. Therefore, I’ve taken people step by step through how you would do it: how would you introduce it, what would you need to know, how do you go about it, and once you get pretty good at it, how do you leverage it in the marketplace and take advantage of the gains it’s going to give you.

LS: I’ve read a lot of Lean books as you have; I don’t think I’ve ever seen one so clear in the order of things. You say the first thing you have to do is train the people – that makes sense. Then the value stream coach, then kaizen, single-piece flow; they all come out at the right place in the end. Very well done.

AB: I thank you for that, but to me it’s all logical. There’s nothing especially deep about this; they’re all pretty simple concepts. The problem we have is they’re simple concepts, but very difficult to do because to go down this path, everything has to change. When you tell someone that you get a lot of resistance: “Well, I can’t be changing everything. Couldn’t I just drop this Lean thing over here?” What’s most common is you’ll have people trying to drop a Lean approach on top of a total batch organization without changing everything that goes on there. You’re in total conflict with yourself when you do that. Yea, you may get some gains in certain parts of your organization, but you’re not going to maximize what your company can do.

LS: Wiremold, prior to you getting there, was a perfect case and point. They attempted to put just-in-time inventory into the works and darn near put themselves out of business.

AB: That’s right. They approached it as a very narrow thing by trying to improve inventory turns and productivity, which is unfortunately the approach most people take. “I want to do Lean. I want to cut headcount.” Why?

Their whole concept was that this was like lowering the water in a pond until you see the rocks, then you fix the rocks then lower the water a little more. The problem was they lowered the water until they saw the rocks then the rocks ate them [laughs] because they didn’t have any solutions for that. They right away raised the water back up again and said, “Forget that, we don’t know how to do that.” It’s too difficult.

LS: You talk about Lean being an unfair competitive advantage. Certainly in its holistic sense that’s true, but given that’s the truth, if you know how to do Lean then 95 percent of your competitors don’t know how to do Lean, why do only 5-7 percent of the companies use Lean? You’d think everyone would be flocking to it.

AB: You would think so, but as I said, the real reason is it’s easy to explain but hard to do. People have the wrong concepts starting out, so they don’t do it. If you think about any kind of company – manufacturing, service, etc. – you can break it down to a very simple thing: Companies are nothing but a collection of people and a collection of processes trying to deliver value to the same group of customers. If my group of people and my processes deliver that value better, faster and cheaper than your company can … I win. The best team is going to win. If you think of it in those simplistic terms, and if you think about it in a way that the only way you can increase the value of an enterprise is by delivering more value to your customers than your competitors can over a long period of time, then you’ll start to understand what we’re talking about here because the focus I’ve been trying to put in this book is focus on your value adding because if you improve your own value adding, your ability to deliver better value goes way up.

LS: And every customer has a different set of values, so learning what the customer values is an important part of that working.

AB: First of all, most companies take their own value-adding for granted. “We’ve always done it this way. This is what it takes. It takes three hours to set up that machine, but it’s always going to take three hours. We have a six-week lead time in our industry, but so does everyone else in our industry.”

So, if you have that six-week lead time and take that for granted, the only option you have is try to have a strategy that has to get around the fact that your customers don’t like the fact you have a six-week lead time. You’re trying to get them to conform to your six-week lead time as opposed to you trying to conform to what they want.

LS: Are customers willing to pay more for something that has more value-added for them?

AB: Absolutely. Think about simplistic things. If you go the post office, you can mail a letter for 50 cents and it’s going to get there pretty much all the time. Or, you can run down to FedEx and spend $13 or $20 for the same thing – and people are lined up at FedEx. The only reason they are is the time element; they’re going to pay a lot more for that time. You can come up with a lot of other examples, but people will pay for that time. They’ll pay more to have something done in a short time and in reliable fashion.

LS: In the book you talk a lot about strategy versus tools. Lean is not a tool it’s a strategy. Can you tell us a little about that?

AB: Sure. If we go back to what I said about improving your own value adding in order to deliver better value to your customers, then when you think about that and how to do it, there has to be three management principles in place before you can be successful. The first is you have to see Lean as your strategy. The second is you have to lead it from the top – whether it’s the CEO, Plant Manager or whoever the leader is of a particular entity, the leader has to lead it. I mean hands-on and out-front in the workplace showing the way – not managing from their office.

The third is understanding the thing you’re trying to transform or turn around is your people. The only asset that can appreciate is the people. The only way you can get them to appreciate is to change how they think about and see things. The other part of the people thing is when you’re implementing a Lean strategy, the best ideas about improving the value adding come from the people who are doing the value adding. Most companies over the years have people giving suggestions to management and they’ve been ignored. After a while, they start getting the message and stop giving you ideas, stop improving and accept the fact that the value adding is what it is.

To be successful, I think those three elements have to be in place: Lean is a strategy, lead from the top and transform the people. The strategy part people seem to have a lot of trouble with because unfortunately, the way Lean has been taught and comes across to people is it’s a bunch of tools and we can decide which ones to use. But that’s not true; they’re all related. Really what I’m saying is that Lean as a strategy is that Lean must be the underlying core thrust to what you’re trying to do. The core of what I’m doing is trying to improve my value adding so I can deliver more value. It doesn’t mean that all the things you can think of strategically now – entering new products and markets and those kinds of things – you can still do those, but if you focus on improving value adding as a core, then the ability to improve the other strategic stuff goes way up.

The best example I can give you on that is let’s say you and I compete against each other and we both have a six-week lead time. If we accept that, then we try to get our customers to deal with that, but if I all of a sudden think I can change my lead time from six weeks to two days, then I’ve got a huge strategic advantage I’ve just built up against everyone else.

LS: I remember you telling me once early in your tenure at Wiremold that the advantage you have over your competitors is you’re there first while your competitors might never catch up. It’s almost like sailing a boat into a breeze while the guy behind you doesn’t have any wind; you gain all that distance.

AB: Right. If you’re the first person to do this in your industry with a three, four or five-year head start and you keep going and don’t stop, it’s almost impossible to catch up so you’re right about that. When we talk about Lean as a strategy, the things you do to improve your value-adding will almost always reduce the time it takes to do anything; the cost it takes to do anything; and improve the quality of what you’re doing by a lot. I think of Lean as a time-based competition strategy. The tools you use allow you to compete on time, where before you couldn’t compete on time. If you’re time-based then you’ll quickly beat the heck out of your competitors.

If you think about Lean in today’s low-growth economy with people struggling – they have material prices increases they can’t pass on – if I’m a time-based competitor continuously improving my value-adding, I have the opportunity to create my own growth and opportunities; and take market share from people in these kinds of economies where other people can’t. I like to think about this in a very simplistic way: productivity equals wealth. That’s been true for centuries for countries, companies and almost any kind of organization. Think about the Industrial Revolution in England – it’s what made them a big power. The United States is the next-best example. It’s been a powerful country and leader of the world because we’ve had a lot of productivity. Take it down another step to a list of microcosms and think about farming in the United States. It started out with a hoe and a rake, then got a horse and hooked a plow to it, then pretty soon we invented a small tractor, then a larger tractor that can plow and plant at the same time, then a tractor to plow and plant at the same time while watching CNN in air conditioned comfort [laughs].

That’s true for a company as well. If you think about productivity from the point of view of just not making people go faster, but improving the value-adding activity themselves: Making things easier, simpler, etc.

LS: And eliminating waste.

AB: By eliminating waste … then you get productivity. You don’t want people going faster, you want them to go at a smooth pace, but you want what they do to have eliminated all the waste and they’ll get tremendous gains. I look at Lean as probably the biggest wealth creator of all time because of what it can do.

LS: You were bombarded by people wanting to look at Wiremold. In the book you mentioned it became such a frequent occurrence that you had to have a special committee just to take time off work to show them through the shop. Eventually you said, “Don’t come here unless you bring your CEO.” Why?

AB: We had gotten written up in Lean Thinking and other books and articles, so all the “industrial tourists” as we call them were calling up to see how they can learn and understand from that. We felt pretty obligated to do that because that’s how we learned – we went to see people from Toyota and other places that were doing this and learned from that. We felt obligated to show people these plant tours, and we had a business to run. We said, “It’s okay to spend time with a company, but if the CEO is not there – you got to lead from the top – if the top won’t come, then chances are when they go home they won’t do anything. If we spent a day with them and they went home and didn’t do anything, then we wasted our time and their time. We just put in a simple rule that if you don’t bring your CEO you can’t come. All the tours stopped right away because they couldn’t get their CEOs interested.

LS: How do we now get CEOs interested?

AB: When I’ve given talks on this subject in the past, I’ve always said, “Look, if you can’t get your CEO interested then don’t bother starting this because you won’t get any place.” You can make some progress down below but you’re not going to get any place real without the person running the business to drive it.

The simplest way in my mind to get the CEO interested is to explain the results you can get from this. I can use Wiremold as a simple example. We took a small company that was not that profitable – it was declining in sales – we quadrupled the size in eight years; increased gross margin by 13 points, we went from 38 points gross margin to 51 points; increased EBITA by 13 times; and we took six-week lead times to 1-2 day lead times. At the end of the day over the course of the next nine years, we increased the enterprise value of Wiremold by about 2,500 percent. To me, if that’s not enough reason to get a CEO interested why you want to do this, then I think they’re in the wrong job. If I said to you, “Lin, if you employ this approach I’m telling you about, and I think you can increase the enterprise value of your company by 2,500 percent, and you say, “Gee Art, that’s interesting but I’m pretty busy right now, so later I’ll think about it.” Then I wonder, what are you doing? Why are you in that job? Why are you running a company where your whole role is to improve the enterprise value and value for the stakeholders … and you refuse to do it, then what are you doing?

I think that’s the hook. That’s the reason you want to do this. I’ve always thought of this as a business thing. My whole reason for doing Lean in the first place is running a business and this can help run a business. It can help me deliver more value; help me gain market share; help me grow in markets that aren’t growing – why is it I wouldn’t want to do this? The fact I didn’t know much about it or how do it was sort of a drawback, but there are ways around it. We figured out how to explain it in a book. What is it you need to do and the things you need to know.

LS: You also talk about the metrics you need to keep. Can you discuss a few that would work for any business?

AB: If you want to think about implementing Lean in any kind of business, there are four Lean fundamentals that need to be present. The first thing is you have to work to and understand the whole concept of takt time. Takt time is the beat of production. It says if my demand is coming in at 450 units a day and I have 450 minutes in a day, takt time says I have to make one unit every minute. What is the rate of customer demand I need to respond to?

The second thing is I need to think of things in terms of a flow. We’re always talking about things getting into a one-piece flow. A traditional organization is a batch, so you batch your way through everything and things spend a lot of time waiting for their next operation. That’s why companies have six-week lead times. The time it’s taking to process the stuff is 20 minutes to a half-hour, and sometimes that turns into a six-week lead time because of the batching. You got to have work to takt time, one-piece flow and standardized work.

Standardized work means for every value-adding job, I have a standard way I’m going to approach it and a standard way I’m going to do it. It doesn’t mean I’m going to do it that way forever – I should be trying to improve that standard work all the time – but it’s giving me a baseline that says I’m going to do it this way until I improve it then everyone will do it that way, and it just spirals up if you can.

The fourth element you need is a pull system. You want to be able to pull product at the rate of customer demand. The customer pulls your product all the way through the organization as opposed to a batch organization pushes it out in hopes they can get the customer to buy it. We’re making this stuff hoping someone will buy it at the end of the day.

LS: Well push also is pushing it into inventory where it is pulled out by the order. Talk about inventory turns – probably most companies are in the single digits as far as the number of inventory turns. What were you at Wiremold?

AB: For manufacturing companies, inventory turns are one of the most important measures you can have. I think you can run your whole company on two measures to be successful: customer service percentage (on-time delivery) and inventory turns. If customer service and inventory turns are both going up, everything else has to fall in line. The quality has to be good, productivity is going to be better, you’re going to free up space and time is going to drop. Inventory turns is a particularly important one because inventory hides waste. My definition of inventory is, “Inventory is the root of all evil.” It’s the root of all evil because it hides waste. That’s why they have it there. If they don’t have it, things can go to hell and they can’t serve the customer, people are screaming at them, etc.

Their way to solve it is to build more inventory so they can have a little more cushion, so when stuff goes wrong, they have a backup and can still function. When you start to take that inventory out and push it down, what you’re doing is exposing the problems you have and fixing them. By doing that, you’re going to get better. You’re going to get better quality and productivity, shorter lead times, better response time for the customer – all those things start to happen. Improving inventory turns is the thing that drives productivity, quality and customer service.

LS: It’s a little like teaching a child to swim. You use the water wings for a while, but you start letting the air out of them at a time and before they know it, there’s no air and they’re swimming. That’s kind of what you’re describing.

AB: When I first went to Wiremold, we were turning three times. I said our first target is going to be 20 times, and everyone said, “Are you nuts? Who is this guy?” We steadily went up – we got from three to 10 times turns over the course of two years. That freed up a lot of cash because I looked at the inventory as sleeping money; just sleeping on the shop floor not doing anything for you – you don’t need it and it shouldn’t be there. If you woke it up you could invest it in an acquisition, buy new equipment and do a lot of things with it that otherwise is just out there sleeping.

The source of growth and improvement at Wiremold is largely financed by increasing inventory turns. We didn’t have the strength at a bank to borrow anything but we had all this money laying around the shop floor that was just a question of picking it up. Of course, as you pick it up, you free up a lot of space; we freed up about half our floor space in about two years by picking up all this sleeping money. Then we put it into acquisitions, then those acquisitions were turning inventory three times before getting them over 10, and they were now contributing cash to buy the next thing. At Wiremold, we got inventory turns from three to about 18 times. A couple of my portfolio companies are now turning in the 15 to 25 range in individual plants; and another company that makes labels is just under 20 inventory turns from about eight or nine. That’s all cash that we freed up, and we used that cash for other purposes.

LS: You spend a lot of time today with companies that are not necessarily manufacturing companies. You’ve done hospital work and insurance companies, what’s their inventory? If they wanted to look at something they could judge their performance on, what would you suggest?

AB: Their inventory is going to vary depending on the type of entity it is. For example, a hospital has inventory like anyone else with supplies, sheets, towels, medical supplies, instrumentation and all kinds of stuff, so they’re a lot more like manufacturing. If you get to something like an insurance company, their inventory is all the applications still in a queue to get approved or disapproved in a backlog. The bank might be an application for loans for inventory, or other things that they’re processing that are getting backed up somehow.

You mention working in industries other than manufacturing, to me the gains that are possible in non-manufacturing companies are way bigger than you can get in manufacturing. A part of the reason that manufacturing companies for one reason or another have been trying to improve their productivity forever. That’s what they do; they focus on that a lot. They may be doing it in a way I don’t think is very good, but they have been working on it. Whereas you get to service companies, they haven’t really focused on that too much. Their focus on that is to get a new computer system, which will automate the information. Instead of fixing and reducing the waste first, they just take the waste and the whole system as it is and not improve it – they just automate it. Now, you can waste things faster because you’re on a computer.

If you look at a place like a hospital, they get all these computer systems, but then find out computer system A doesn’t talk to computer system B very well, so we have four or five systems but they don’t talk to each other, so that creates a problem. The idea in service companies of automating systems but not fixing the process itself gives them a lot of problems. It becomes very difficult for them to change and improve because every time they want to think about it, they say, “Well, we got this $8 million computer system that we bought, and it’s driving everything.” To change from that, is not easy anymore. In those kinds of organizations, I find that the Lean approach is going to give them gains they couldn’t even imagine.

LS: Would you put SAP, MRP and all of those predecessors to Lean into the same bucket as you’re putting computers, making waste faster?

AB: Yes and no. I think MRP systems in manufacturing certainly have created some benefits, it’s when you get something bigger and bigger that’s more complex, having a computer help you is a plus. The thing you shouldn’t do however, is use that computer to schedule the production on your shop floor. Unfortunately, that’s what all those systems are designed to do from the beginning – they’re management production control and they make a mess, quite honestly.

Let me give you an interesting example. A guy who used to work for me after we sold Wiremold, he went to work for one of our bigger competitors that decided they were going to start down the Lean path. They had used outside consultants and made progress, but they were going kind of slow. They wanted someone who could help them go faster, so they hired this guy to come in as the head of operations for this pretty big entity. By the time he got there, the IT function had convinced the CEO they should put in a new SAP enterprise software system. He comes in and they’re just starting that. Right away, it goes bad – they lose all the information, they can’t see anything. He spends a year and a half sorting everything out, trying to ship products to customers where they can’t see the order, they don’t want know whether they sent an invoice; everything you could imagine was going wrong. At the end, he gets it all settled down, and the system is okay, and he now wants to go back to Lean.

He goes back and finds this one cell where before SAP, a single transaction – the arrival of a canvan car – would make the product. SAP came in and took a look at it, and changed it so it took 13 transactions to make that same product. He says we have to change that and go back and make that happen, but he was told, “Wait a minute. We spent $80 million on this SAP program and you’re going to use it.” To his credit, he did the logical thing and he quit. That’s the problem with those kinds of systems, there are a lot of good things about them, but you don’t want to schedule your shop floor with one of them. Because now you’re stuck in the old batch method – there’s no reason to go to Lean if you’re going to do that.

Lean with a pull system – you’re trying to connect the customer right to the shop floor – if you think about how most companies work, the one thing they do through those kinds of systems is they disconnect the customer from the shop floor. The customer has nothing to do with the shop floor. The shop floor never sees the customer. They see maybe the production schedule – red ones, blue ones, green ones, pick ones – just make those and be quiet. Whether those things relate to what the customer really wants or not is a different question, and they almost never do. Therefore, what they’re really doing is have the shop floor make it for inventory and hope the inventory they had them make is the right stuff when the customer wants it.

LS: And the right quantity and color.

AB: You wind up saying that wasn’t quite right, so how are we going to solve it? Well, we’ll increase the inventory level. By increasing the inventory level, costs go up, complexity goes up and get less competitive. And yet, those big systems are driving you in that direction all the time.

LS: Accounting is one of your favorite subjects in the book. I’d love to hear a little bit about how and why you moved Wiremold from the standard full absorption type of cost system to what you described as Lean accounting.

AB: Wiremold was easy because I was very lucky. My CFO, Orest Fiume, was already thinking the standard cost system was outliving its usefulness before I got there. Of course, I got there and didn’t even want to think of a standard cost system – they don’t make any sense and you can’t see anything. I need to know what’s really happening, not all these variations that system shows you. Early on, we started to make the transition to now what you can call Lean accounting. Orest wrote a book in fact called Real Numbers, which I think is the standard in that area of how you should support accounting in a Lean transition.

If you think about standard cost accounting, I call that “anti-Lean” because you have an accounting system that incentivizes all the behavior you’re trying to get rid of with Lean. Standard cost accounting incentivizes you to build inventory. Lean, we’re trying to get you to get rid of the inventory. They’re totally opposed to each other. In my private equity work, we’ll see companies for sale and go take a visit, and every once in a while they’ll say, “Oh, we’ve been doing Lean for 10 years and here’s the whole list of stuff.” It sounds pretty good, but then you look at the balance sheet and see nothing happened. What you’re saying about Lean and what I see are very different. Why is that?

What you find out when you dig into it, is the accounting person was strong enough to keep the standard cost accounting system in place. Even though they were doing a lot of reasonable Lean things, they didn’t get very far because the accounting system was driving them to build inventory as opposed to taking out inventory.

LS: Budgeting with a standard cost system is based on how many hours are you going to sell on this machine? All hourly rates are based on some level of absorption.

AB: The problem with that is there are so many assumptions on top of assumptions when you put that together, when you get into the next year, you don’t know whether you’re having a great year or just a having a great year in budgeting. You budgeted the right way, but you didn’t actually improve anything, just the way you did the budget made yourself look pretty good. Standard cost system doesn’t give you very good insight into what ‘s going on inside your company. If you blindfold the management team through the cost system, it’s really hard to make good decisions. They’re going to look at something and think they have a big cost problem, yet the reality is they don’t have a cost problem. What happened was they took down inventory instead of building up, but in the P&L it showed a negative because they lost the absorption from that period.

LS: In the book, you having something very interesting on what you call, “The walk of shame,” which the Japanese introduced you to. Tell us a little about that and how it can be used to tell what the company’s state of the Art is when it comes to Lean.

AB: The walk of shame is a lot of fun [laughs] and it was introduced to me by the shinju jitsue consultants. It’s a very serious thing as well in that you have to make the case for change. How do you make the case that any company, no matter what the status is, can still be improved dramatically. I use the word “turnaround” in the title of the book, but it isn’t the turnaround most people think about. It’s really just drastically improving what you do. Some companies say they’re already doing really well – we don’t need a lot of pressure to change. The walk of shame is one way to make the case for change.

The first time I saw it, one of my portfolio companies in Danaher, they were already making about 30 percent EBITA, so when I tried to get them to move to Lean I got a lot of resistance. I kind of forced them into the start of it, but to get them on top of it we used the walk of shame, which was to walk around their factory with them. We’d stop and point at things and say, “Stop. What do you see over here?” When we took them through their internal warehouses and went to every shelf to look at the tags and dates on these things, and see dates that are two and three years old with dust on them; it makes them pretty embarrassed because they never thought about that before.

What it really did at the end of the walk of shame is someone saying, “Oh gee, I’ve never thought of that before, but boy, they really pointed out a lot of things we could do something about.” It’s really about making a case for change in a dramatic way that makes people pay attention. I could tell you if you’re the Plant Manager, and I’m having the walk of shame in your plant, you’re not going to like it very much and you’ll be very uncomfortable with stuff being pointed out you may not know a lot about yourself and embarrass you, but that’s what we’re trying to do. We’re trying to embarrass you to action. We need you to take action on this stuff. We don’t need you to keep everything like it is.

Kaizen means continuous improvement, so we’re trying to get you into continuous improvement mode. The walk of shame sometimes is a very simplistic thing and is very soft, but it wakes up a lot of people and they get it after that. Before they couldn’t see it or didn’t mean anything to them, but if you take them out and push their noses in their own stuff, it’s pretty hard to deny that there’s opportunity. I think it’s a really powerful tool.

LS: In choosing your value stream leaders and which senior executives you’ve spotted as being the right ones to help you, how do you choose those positions?

AB: As we picked our original value stream leaders, there wasn’t anything very scientific about it at all. I got my management team together and said, “Who are the high-potential people in the organization who have the leadership skills, who are problem solvers and who can push forward and improve things? It wasn’t any more sophisticated than that. We picked people from all parts of the company – they weren’t just manufacturing. We put them in charge of value streams on the shop floor and they were all successful.

As we moved along, we started to implement personality testing. Anyone new coming into the company would take this personality test – and it wasn’t very long; probably less than two pages – but it was extremely accurate in telling us what type of person we were going to get. Lean is a team sport, you have to have teamwork, everybody has to work together. What sales and marketing is doing and what manufacturing is doing have to be linked together. If you bring in individuals who can’t work in a team, you’re going to cause problems for yourselves. This personality testing really helped us out a great deal with that.

I’m sure in your business as you’re placing candidates, you have to screen for things as well.

LS: We do. We’ve been using testing, and I can’t remember when you went into Wiremold and I used it or not, but certainly in my mind when I saw you, I knew this was the right guy for Wiremold. I think we’ve gotten a little more scientific since then. We have gotten to a point where we have graphical presentation of who fits and who doesn’t fit. It’s turned out to be pretty predictive.

AB: We’ve found out that’s the case too. As you put me into Wiremold, I learned a lot of things as I went through there and that was one of them, that you can predict the type of person. I remember you and I had a discussion four or five years ago about what is the likelihood that somebody would lead a Lean transition. Can you predict the leader and what the leader would be like? I think we agreed on a lot of those kinds of things.

People have these personality types and those same personality types become CEOs. The person who’s really insecure becomes CEO – and that happens a lot – is going to have a hard time implementing Lean. The next person who’s going to have a hard time is a personality type that is the command control kind of CEO. If you think about the Army – it’s command and control. For that person, when something goes wrong the first question asked is, “Who did that? We’re going to fire them.” When you have that environment, you create an environment of fear. No one wants to tell them what happened.

LS: And the ideas stop coming.

AB: And the ideas stop because the ideas stop filtering up to the top because it’s too dangerous to get up there. You’re going to get fired. On the insecure front, Lean requires a lot of faith from the CEO – you’re trying to get from A to B but your whole team is telling you it won’t work. You have to say, “No no, we’re going to go there.” If you’re insecure and the whole team is telling you not to, you’re not going to go there because you won’t let yourself be embarrassed by having a failure. The right personality type is saying, “But I want the 2,500 percent return. I want to go there. Therefore, I’m going to try it and if we fail, we’ll adjust and try it again.” Certain personality types are willing to do that; others are much harder. It isn’t that they can’t – In the book, I try to explain any personality type can do this – but it’s a factor.

LS: We often talk about patient impatience, persistence …

AB: Persistence is very important in Lean. You have to be persistent. You have to have a goal in mind. When I went into Wiremold I said we’re going to go from three times inventory turns to 20, I didn’t mean we were going to do it next Thursday. I meant step by step in a logical fashion we’re going to get to 20. We got from three to 10 in about a year and half to two years. Then we went from 10 to close to 18 then 20, but it took us a bunch more years – and it got harder as you got higher.

The thrust was always there. The push was always there. If the leader’s not the person making that push, it’ll go back … it’ll always fall back. Understanding the personality types that you’re dealing with and the organizations you’re dealing with to make that match so that the teamwork and personalities …

LS: Making the right choice the first time has a tremendous effect on retention. The most expensive thing you can do is turn people over. Do it right the first time and you’re safe.

AB: Yup.

LS: The book, The Lean Turnaround … where do we find this?

AB: It’s McGraw Hill books so it’s available through them. It’s available through Amazon; the big bookstores have it; there’s an organization called 800-CEO-Read, so there are a lot of place where you can get this book.

AB: Art, thank you for your time, and I encourage anyone who is a CEO, or an aspiring CEO, get this book if you want to run the company the right way. You can’t do it without following the steps in this book.