COVID-19 Lessons Learned: Overly Lean Organizations Are Less Resilient

Lean is all about simplification, streamlining, and eliminating waste. The pandemic is stressing organizations and we're discovering that too lean could make you less resilient. How to strike a balance between lean and flexible.

Automated filling, labeling and capping at a U.K micro brewery.
Automated filling, labeling and capping at a U.K micro brewery.

Lean is all about simplification, streamlining, and eliminating waste. What could be bad about that? Lean has been found to not only improve consistency and operations but also save a lot of money. Every company likes that. But too lean can be just that - too much. And too lean limits the organization's resilience to forces outside the consistent pattern of business - just like this pandemic.

I’ve seen in over the course of 12 years in manufacturing – heading up global corporate marketing and sales teams – that lean has been not just a mantra, but a SOP (standard operating procedure). Primarily focused within the “back of the house” operations (production line, product development, sourcing, etc.), lean has generated simplicity, eliminated waste and created clean work cells through 5S.

Being lean isn't inherently bad. Lean has many benefits, most notably from an efficiency and cost-reduction standpoint. However, over the years, including following the last recession, organizations have continued to "lean" their organizations, sometimes bringing staff down to a skeleton crew, and putting off major infrastructure changes. The problem is that organizations can go too far in their implementation of lean principles.

Going too far often manifests by an overreach in the original mission of lean. Lean at its core is a process improvement methodology designed to eliminate problems, remove waste and improve working conditions to provide a better response to customers' needs. Here’s where the divergence starts. In the 5 major manufacturers I’ve worked in or with, lean methodology focused on the former rather than the latter. Instead of putting customer needs first, the organizations all targeted the measurable cost savings they could gain from lean.

This caused an excessive emphasis on the financial measurables, over things like employee engagement and customer satisfaction. Programs that focused on creating new innovations were tabled or scrapped all together. These organizations even ended up eliminating some aspects of their business which were strong differentiators – for both customers and employees – under the guise of doing more with less. All of them saw a reduction in their customer base, an increase in employee attrition, and a further commoditization of their business.

Andrea Olson is a strategist, speaker, author, and customer-centricity expert. As the CEO at Pragmadik, she helps organizations of all sizes, from small businesses to Fortune 500, and has served as an outside consultant for EY and McKinsey. Andrea is the author of The Customer Mission: Why it’s time to cut the $*&% and get back to the business of understanding customers and No Disruptions: The future for mid-market manufacturing.Andrea Olson is a strategist, speaker, author, and customer-centricity expert. As the CEO at Pragmadik, she helps organizations of all sizes, from small businesses to Fortune 500, and has served as an outside consultant for EY and McKinsey. Andrea is the author of The Customer Mission: Why it’s time to cut the $*&% and get back to the business of understanding customers and No Disruptions: The future for mid-market manufacturing.

However, this outcome can be avoided. You can strike a healthy balance. There are six principles that should be considered when implementing lean, before you go too far beyond the brink in embracing the methodology:

1) Lean shouldn't mean starving. When organizations think lean, they often think fewer bodies in the organization. This means the process of reducing staff and seeing where the breaking points are. But when you take too much away, you can also lose that subtle, unique value you bring to your customers. A great example is automated phone trees at customer call centers. While there are great internal efficiencies and cost reductions to the company, there's also a differentiation value to having a human answer the phone on the first ring.

2) Lean shouldn't mean wearing 20 hats. Lean can often mean diversity in roles and skillsets however, it can instead degrade into simply an individual taking on two, three, or even four more areas of responsibility in addition to their original role. Having employees taking on more roles than they can reasonably implement actually builds in more potential for problems and failures. Consider that employee who has become the 'single point of failure' in the organization - where if they were hit by a bus, things would grind to a halt.

3) Lean shouldn't mean just because you can, you should. Simplification is all good and well, but when implementing lean, often because something can be changed, doesn't mean it should. Organizations can easily examine processes and cut out wasteful activities, but it's important to understand and examine how those cuts impact other areas of the organization. Or something that customers might like and consider a differentiator but are viewed as a cost to the organization. In short, what's one man's trash may be another man's treasure.

4) Lean should be about taking measured risks. Lean is often centered on process. What can be cut out, eliminated, and simplified. However, it usually doesn't address the need for taking risks. Taking measured risks is incredibly important for organizational innovation and the health of the company culture. If the focus is solely on lean and "eliminating waste", the perception becomes "everything could be wasteful", instead of looking at things through the eye of opportunity, testing, trial, and adjustment.

5) Lean should be about agility. Organizations that become overly lean often become rigid and inflexible. There's very little wiggle room for environmental or business changes that are unexpected. While lean works very well for static environments, too lean can create bottlenecks if the company has to react to a quick and dramatic change. Consider the global pandemic and the ramped-up demand for PPE. Manufacturers had inventory for previous demand, but not the new demand. While you might plan for today's environment, that doesn't mean your lean organization is ready and able to handle tomorrow's environment.

6) Lean should be about learning-focused action. This philosophy of failing fast has spread through Silicon Valley and beyond thanks to Eric Ries’ work, ‘The Lean Startup’. "Learning" should be the essential unit of progress over "simplification". This means any effort that is not absolutely necessary for learning what customers want can be eliminated. So, it's about flipping the question from ‘Can this product be built?’ to ‘Should this product be built?’ and ‘Can we build a sustainable business around this set of products and services?'

Just like any other methodology, the principles are often sound, but implementation separates successes from failures. When organizations "over lean", they miss out on opportunities to grow, innovate, differentiate, and most of all, ensure their company culture is healthy and engaging. Because when you're in that organization that's cut too far, you'll find the risk for disruption is more looming than you think. Find your balance between "lean" and "flexible".

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