the

president’s

diagnosis

The lean executive’s concise guide

to managing by walking around

by Thomas L. Jackson

in association with
The Caledonia Group
Ford Motor Company
LeanPress
The president’s diagnosis: the lean executive’s concise guide to managing by walking
around. By Thomas L. Jackson, Ph.D.  Ford Motor Company 2002.
Published by LeanPress, Portland, Oregon

The information contained herein is Ford proprietary information and may include Ford
confidential information, as defined in Ford's Global Information Standard II.
Reproduction of this document, disclosure of the information, and use for any purpose
other than the conduct of business with Ford is expressly prohibited.

ii
 Contents

Acknowledgements iv

What is the president’s diagnosis? 1

And the winner is … 2

Origins of the diagnosis 3
Audits and assessment 4
Relationship to the business operating system 4
Figure 1. The business renewal and operating cycles 5
Relationship to strategic change management 6
Figure 2. Strategic transformation scenarios 7

Step 1. Build a useful scorecard 9

Figure 3. The Toyota Production System facsimile 10

Table 1. Sources of production systems and diagnostic scorecards 11
A balanced scorecard 12
Figure 4. x-type matrix 13
Choosing your list of methods 14
Measurement and scoring systems 14
Figure 5. Likert scale diagram 15
Figure 6. Worldwide lean implementation in 2000 16
Figure 7. Percentage of completion diagram 17
Figure 8. 100 points with weighting 17
Figure 9. Hybrid system diagram 18

iii
Step 2. Orchestrate the exercise 19

When to go 19
Figure 10. Annual president’s diagnosis 20
Who to take with you 20
Where to go 21
Who to talk to 21
How long to stay 22
What to talk about 22
The pre-visit report 25
Figure 11. Pre-visit report format 26
Additional pre-visit items 27

Step 3. Go to gemba 29

Diagnosis as coaching 29
Formal presentations 30
Walking around 30
Figure 12a. Work unit control board—work cell 31
Figure 12b. Work unit control board—project control 33
Figure 12c. Work unit control board—problem solving 34
How to interpret visual management systems 35

Step 4. Respond in a helpful way 38

Scoring the work unit’s state of development 38

Giving constructive feedback 39
Figure 13. Worldwide lean implementation in 1980 40
Figure 14. Worldwide lean implementation in 1990 41
Figure 15. Worldwide lean implementation in 2000 42
Receiving feedback constructively 43
Confirm the communication 44

iv
The managers’ diagnosis 46

How often managers diagnose operations 46

Figure 16. Annual managers’ diagnosis 47
Figure 17. Policy verification program 48
Figure 18. Annual managers' diagnosis 49
Figure 19. Diagnosis as part of implementation 50
Figure 20. Likert scale diagram for changeover 51
The supporting role of assessments and audits 52

Getting started 55

Figure 21. Visioning 55

Resources 59

About the author 61

v
 Acknowledgements

This booklet is based on my work in the field of lean manufacturing, particularly my work in the
area of strategic planning for lean transformation. I have drawn extensively from my previous
book, Corporate Diagnosis (Portland, OR: Productivity Press 1996), in which I first described the
practice of the president’s diagnosis and related it to a diagnostic system I created based on a
comparative study of leading quality and productivity prizes and the diagnostic systems of lean
companies, including Toyota. My thanks go to co-author Connie Dyer.

I have also drawn from notes on my experience in constructing “production systems” for (and
facilitating the diagnostic exercise with) my clients. In the automotive industry, these clients have
included The Ford Motor Company, Nissan Casting (Australia), Tenneco Automotive, and Lear
Corporation. To all I acknowledge a debt of gratitude for what they taught me.

I am especially indebted to Peter Tassi and Graham Loewy of Ford’s Lean Resource Center.
Beginning with my work with Peter at the Ford Production System Institute, and continuing with
both Peter and Graham at the Lean Resource Center, I have been privileged to witness (and from
time to time contribute to) the transformation of one of the world’s most important and historic
manufacturing organizations. Now that’s what I call a learning experience.

I thank Sean Jones, Don Wills, Michael Ryder, and Lorraine Millard of LeanPress for editing my
manuscript and converting it into this user-friendly little e-book.

Tom Jackson
Portland, Oregon
August 2002

vi
 What is the president’s diagnosis?

It isn’t enough for a business to perform well today; it must also build new capabilities to
perform even better tomorrow. This has been the thrust of strategic thinking for at least the
last ten years.

You compete based not upon how profitable you were last quarter, nor upon how
accurately you forecast earnings, but more importantly upon the tangible and intangible
strategic assets of brand, technology, business process, and people. The very life of a
business enterprise depends upon your ability to build, maintain, and develop these assets
over time.

So, how can you know if your company is growing strong enough to compete in the
future? To understand the assets that underpin your competitive capability, you must do a
little fieldwork. You must get out of your office and, as the Japanese say, “go to gemba.”

Fortunately, there is a well-established process to help you get the job done: the president’s
diagnosis. The president’s diagnosis is an annual inspection, review, and evaluation based
upon highly detailed criteria of the development of your brand, your technology, your
business processes, and your people. The defining feature of the diagnosis is your personal
visit to each of your facilities—or at least as many facilities as you can reasonably visit
each year.1

1
If your company is small enough, by all means visit more than once a year!

1
And the winner is …

Essentially, the president’s diagnosis makes you the chief examiner of your own internal
Baldrige Award or Shingo Prize. In the case of the president’s diagnosis, however, there is
no difference between the criteria of your internal “prize” and the performance criteria
embedded in your own business operating system.

The purpose of the diagnosis is to determine three things:

1. How well the organization is adhering to existing operational standards that govern the
maintenance and use of strategic assets.
2. How organization is continuously improving those assets in the course of daily work.
3. How well the organization is adapting strategically to its competitive environment by
upgrading these assets or developing entirely new assets.

There are four distinct steps to conducting a successful president’s diagnosis:

Step 1. Build a useful scorecard.

Step 2. Orchestrate the exercise.

Step 3. Go to gemba.

Step 4. Respond in a helpful way.

Each step is discussed in detail in the chapters that follow. Briefly, Step 1 results in the
creation of your own “prize” criteria that you will use to evaluate your company’s
performance and the development of strategic assets that determine performance. Step 2
involves careful planning of a companywide diagnosis, involving potentially a cast of

2
thousands, in which you play a starring role. Step 3 is a road trip to physically see and hear
the state of your facilities, systems, and people. Step 4 is your chance to positively
influence in a personal way the strategic direction of your company.

Using this guide, you should be able to conduct a diagnosis of your own company.
Through the process of diagnosis you identify strategic gaps, not only the gaps between
your current performance levels and levels that satisfy your shareholders, but—more
importantly—gaps in your capabilities, gaps in the efficacy of your strategic assets, gaps in
your development that explain the gaps in your performance. And the ultimate prizewinner
in this contest is: you.

Origins of the diagnosis

If you have ever applied for the Baldrige Award or Shingo Prize you are already familiar
with the technique of diagnosis. The Baldrige and Shingo are constructed upon a
foundation adapted from Japan’s Deming Prize, which requires a company to
systematically review its own operations with an eye to systematic improvement. Some
companies have adopted—or adapted—one of these major prizes as the basis for their
business operating system. In addition, six sigma companies such as Motorola and GE
have employed the technique of diagnosis to develop strong quality systems, including
systems for the concurrent engineering of new products. Toyota has employed similar
techniques, including the Deming (in the early 60s), to evaluate the soundness of its own
systems. Consultants from the Toyota Supplier Support Center (TSSC) regularly employ
diagnostic techniques to evaluate their suppliers’ progress toward becoming lean.

If you haven’t heard of the president’s diagnosis, then maybe you have heard about
“managing by walking around” (MBWA), a term coined at Hewlett Packard years ago as

3
part of its implementation of total quality management. MBWA encouraged HP managers
to get out of their offices and go see for themselves how their company really worked.

Audits and assessments

A diagnosis is not an audit or assessment. An audit, such as an ISO or OSHA audit, is

conducted to reach a judgment about whether or not a system or process is in compliance
with certain standards. An assessment is a study of the current state, relative to a standard
or “best practice,” of a business or a process.

The concept of diagnosis is dynamic. Unlike assessment, which focuses on a static current
state, diagnosis is concerned with the process of organizational development. A diagnosis
is also intended to get to the bottom of things in a helpful way, a way that will lead to a
prescription for improvement. For companies that are already in great shape, the same
process highlights new opportunities for beating their competitors.

Relationship to the business operating cycle

Theoretically speaking, the president’s diagnosis is part of a company’s business operating

system, which governs the annual business operating cycle.2 That cycle is an application of
Deming’s plan-do-check cycle to a company’s strategy. It views companies as learning
organizations--that is, organizations that treat strategic intent as a kind of standardized
work. A learning organization identifies deviations from its strategy and, through a fact-
based process of scientific investigation, fixes them.

4
The president’s diagnosis can be your personal tool for tracking your own effectiveness in
implementing TQM and lean systems and methodologies. It can easily be incorporated into
your existing business or quality operating system. A simple diagram of the strategic plan-
do-check cycle appears below.

Figure 1.

The business renewal and operating cycles

BUSINESS OPERATING CYCLE

annual (6-18 mos.) improvement process
PLAN DO CHECK

Step I Step II Step III Step IV

Visioning policy policy policy reflection &
definition deployment execution preparation
Establish a Establish a Let Execute the Conduct
vision and specific everyone plan; stay the
general strategic know where on course. president’s
strategic heading and you want to diagnosis;
heading. plan in go and analyze
detail. what you what
need to do happened.
to get there.
BUSINESS RENEWAL CYCLE
Multiannual (3-5 yrs.) improvement process

The logic of strategic plan-do-check is simple. Every three to five years a company checks
and then re-establishes its vision or general strategic heading. In step I of the business
operating cycle, every six to eighteen months (depending upon the rate of evolution, or
“clockspeed,” of the industry) a company establishes a highly specific strategic heading
within the context of its vision. In step II of the annual cycle the company communicates

2
In companies that practice total quality or lean manufacturing, the business operating system and cycle are often based
on a technique called hoshin management or policy deployment. Although the Japanese term “hoshin” is not very well
known, the technique has been extremely influential in the TQM, lean manufacturing, and TPM movements.

5
(and confirms) this information to all employees. In step III it executes the plan and stays
on course through regular, frequent meetings at all levels. In step IV it examines the
outcome of strategy execution and finds root causes of any gaps between targeted and
actual performance and development.

The president’s diagnosis takes place in step IV. From a strategic perspective, the
president’s diagnosis is the “check” in plan-do-check. Every year the diagnosis is
conducted to see if your company has developed as well as performed. Before your annual
planning cycle begins, you must determine gaps in both your performance and
development. These gaps become key areas to focus on in the coming year. For each area
you establish firm targets to compel your employees to change and grow. To reach these
targets, you will grow the right new capabilities to ensure both increased customer
satisfaction and future profitability.

Plan-do-check is repeated year after year; and every year before the planning cycle begins
the president’s diagnosis is utilized as you review whether your company measures up to
your targets and expectations.

Relationship to strategic change management

The president’s diagnosis is also an effective way to interact with work units in your
company and to promote common cultural values and practices. The president’s diagnosis
let’s you know your company’s score on the scale of “mass” to “lean.” It tracks your
progress against world-class benchmarks, particularly benchmarks set by your lean
competitors.

The president’s diagnosis is also a highly practical way for top management to “show the
flag,” to inspire the troops, and to demonstrate in a concrete way the skills of leadership to

6
managers at every level of the organization. The transformation from mass into lean can
take years—three to ten years or more, to be exact.

Figure 2.

Strategic transformation scenarios

Phases o f Successful companywide

companyw ide transformation

transformation

5. The company sees 1

2 3 4 5 6 7 8 9 10

itself and is recognized

as world class.
4. Institutionalization of
lean culture creates a
sustainable advantage.
3. Companywide
deployment achieves
major benefits.
2. Pilot projects and
model lines achieve
sporadic results.
1. Creation and
deployment of lean
manufacturing system.

0. No awareness or desire Time in years

to become world class.
1 2 3 4 5 6 7 8 9 10

With strategic plan-do-check

Without strategic plan-do-check

Source: Adapted from Ryuji Fukuda’s Building Organizational Fitness (Productivity Press).

The diagram above, based upon the experience of several leading quality and lean
manufacturing consultants, shows typical transformation paths (as measured on a Likert
scale of 0 to 5) for companies that implement TQM or lean manufacturing. The dashed
lines show the pathways for companies that use policy deployment, breakthrough strategy,

7
or other alignment methods systematically. Solid lines show the pathways of companies
(the vast majority) that do not. Starting from level 0, a company may take approximately
ten years (or longer) to complete the transition from mass to lean. Starting from level 2
(where most OEMs and first-tier suppliers are today), the process takes about six years.
These numbers hold only if top management stays put and perseveres in implementation.

The president’s diagnosis, especially when coupled with the technique of strategic plan-do-
check, can provide both a roadmap and an odometer for the lean journey. As the old saying
goes, you get what you measure. If in addition to staying put and persevering, top
management uses a disciplined plan-do-check process such as hoshin management
(including the president’s diagnosis) to plan, deploy, and implement strategic change, these
times can be shortened to three to five years depending upon the starting point.

In the next chapter I show how to construct a diagnostic scorecard or, as such scorecards
are sometimes called, a “production system,” that defines the scope of transformation and
maps its pattern over time.

8
 Step 1.

Build a useful scorecard

The first step in conducting a president’s diagnosis is to build a useful diagnostic

scorecard. A diagnostic scorecard is used to:

‰ Establish common terms and measures

‰ Diagnose the current state
‰ Benchmark competitors
‰ Plan for the future
‰ Manage by walking around

Your own diagnostic scorecard functions in very much the same way as the detailed
criteria for the Baldrige Award or the Shingo Prize. The major difference of course is that
instead of using generic criteria developed for every type of business, a customized
diagnostic scorecard permits you to monitor and develop unique aspects of your business.

In manufacturing, the most famous scorecard is that for the Toyota Production System.
Below is a reconstruction of Toyota’s scorecard, based on a version by Hirano.

9
 Figure 3.

The Toyota Production System facsimile

Level
Method
1 2 3 4 5
5S
Flow production
Multiprocess operations
Kaizen cost
Pull systems
Visual management
Level production
Quick changeover
Perfect quality
Standard operations
Mistake-proofing
Maintenance and safety

Source: Based on Hirano’s JIT Implementation Manual, (Portland, OR: Productivity Press, 1990), page 25.

Many companies have either copied or imitated Toyota’s system and its scorecard. Note its
construction carefully. It has three basic dimensions:

‰ A set of prescribed methods--in this case, lean methods

‰ A system of common terms or classifications that are easy for everyone to understand
‰ A numerical scale by which to measure the extent of transformation from mass to lean

A serviceable commercial version of Toyota’s scorecard can be found in Hiroyuki

Hirano’s JIT Implementation Manual (Portland, OR, Productivity Press). This two-volume
manual includes basic training modules and an appendix of worksheets for every major
lean method and technique. Several years ago it became the basic documentation for the
Boeing Production System.

10
There are many other places to find off-the-shelf production systems and scorecards, as
illustrated below. Some of these are included in the references at the end of this guide. You
may take your pick.

Table 1.

Sources of production systems and diagnostic scorecards

Home-grown National prize Private label

• Toyota • Shingo • Hirano
• Canon • Baldrige • 20 Keys
• Ford • Deming • Six Sigma
• Chrysler • PM Prize • Corporate
• GM (Japan) Diagnosis
• Mazda
• Cummins
• Lear
• Dana

Many original equipment manufacturers—perhaps they are your customers—are willing to

share their systems and even provide training. Two good examples are the Toyota Supplier
Support Center and Ford’s Lean Resource Center. National prizes such as the Baldrige
Award, Shingo Prize, and the Japan Institute of Plant Management’s PM Prize have long
been a source of standards, systems, and scorecards. Finally, there are what I call the
“private-label” systems of consultants and academics, which are also very popular.

All of these systems are copyright protected, so be sure that you are aware of any legal
restrictions that may apply. All copyright issues may be easily avoided, of course, if you
author your own system and scorecard. This is my favorite alternative, because in drafting
your own criteria for success you will be forced to understand the meaning of total quality
and lean manufacturing as you strive to explain them to your own employees.

11
A balanced scorecard

In addition to a production “system,” companies must establish a new type of strategic

ledger to account for the causes of excellence as well as excellent results. Today the term
“balanced scorecard,” popularized by Robert Kaplan and David Norton, is used by a
growing number of companies to describe the new approach. A balanced scorecard must
include traditional lagging financial measures of performance; but more importantly, such
a scorecard also must include leading indicators of operational improvement and strategic
development.

Interestingly, the method of strategic plan-do-check has produced balanced scorecards for
lean companies such as Toyota for over forty years! Below is a so-called “x-matrix” that
summarizes a typical lean strategic planning exercise.3

The matrix contains all the information recommended by Kaplan and Norton for inclusion
in a balanced scorecard, including:

‰ High-level strategic objectives (left of the x)

‰ Financial performance indicators (beneath the x)
‰ Leading indicators of organizational development (in the unshaded area right of the x).

3
The x-matrix was imported into the United States many years ago by Ryuji Fukuda and Productivity, Inc.
Womack and Jones’s recently recommend it in their book Lean Thinking (New York: Simon and Schuster,
1996), p. 96.

12
 Figure 4.

x-type matrix

POLICIES OBJECTIVES ACCOUNTABILITY

Design for
z six sigma
z z z
Lean
z z production
z z z z z
Six sigma
z DMAIC
z z z

Master black belt

Lean champion
Time to market
Design it right

Dock to dock
Make it right

Engineering
First time

manager
through

OEE
Increased
z z EBITDA
z z z z
Reduced
z z total cost
z z z
Reduced
z z capex
z

In addition, the matrix includes important information that operationalizes the scorecard:

‰ Significant projects and initiatives (above the x)

‰ Responsible individuals or teams (on the far right-hand side of the matrix)

This information would not be found on a normal balanced scorecard. The additional
entries are the result of the detailed deployment process incorporated by hoshin
management. In a very real sense, hoshin management is a balanced scorecard, but a
balanced scorecard properly deployed, implemented, and adhered to.

Choosing your list of categories and methods

The Chinese philosopher Confucius said, “The first step to wisdom is getting things by
their right name.” There is a great deal of confusion about the meaning of words and

13
acronyms like lean, quality, TPM, poka-yoke, APQP, heijunka, and so on. Indeed, you
probably deal with many different diagnostic, assessment, and audit systems, each with its
own unique terminology and time-consuming administrative procedures. In adopting lean
manufacturing, you must eliminate confusion by rationalizing terminologies and
streamlining administrative procedures.

The first thing you need to do is make a list of the fundamentals of the quality or lean
manufacturing game--that is, a list of all the major methods and techniques your company
needs to master. For example, Toyota’s scorecard contains eleven basic methods. You may
wish to include others.

Measurement and scoring systems

Once you have drawn up your list of methods, you need to create a yardstick. In almost all
versions of the president’s diagnosis, a numerical score is calculated for the work units
diagnosed, including the entire company and large departments as well as small
workgroups and project teams.

The concept of scorekeeping is extremely powerful. Scorekeeping connects each player to

his or her work unit and to the game. Everyone on a basketball or soccer team knows the
score. If the team is well coached, every player also knows exactly how to maximize the
score—not necessarily by taking every opportunity to make a basket or a goal, but by
supporting the team by executing the fundamentals of the game.

Three types of measurement systems are worth mentioning: Likert scales, 100-point
systems, and hybrids.

14
Likert scales. The scoring method employed by Toyota and still the most popular
method of all is the Likert scale. Likert scale are used to create data by mapping different
observations to a “number line,” usually with four to ten categories or “points,” for which
distinct types of observations have been carefully defined. A 5-point Likert scale is
illustrated in the diagram below.

Figure 5.

Likert scale diagram

1-sigma 6-sigma
1 2 3 4 5

Above
Below World
Poor Average averag
average class
e

Mass Lean

Likert scales can easily be shown in the form of a radar chart, which makes them easy to
discuss with hourly associates. Below is an example of a radar chart that maps the
development on a Likert scale of 0 to 5 of the development of U.S. and European industry
in nine dimensions of lean manufacturing in the year 2000.

15
 Figure 6.

Worldwide lean implementation in 2000

Leadership
5

Engineering 4 Marketing
3

Maintenance 1 HR
0

Manufacturing SCM

Quality MIS

The chart suggests that in all categories industry had achieved a level 2, leaving three more
levels of development to go. (For the basis of evaluation, see my book Corporate
Diagnosis.)

100-point systems. Another popular scoring method is the 100-point or “percentage of

completion” scale, where 0% is defined as the level of mass production or 1-sigma and
100% is defined as lean or 6-sigma.

16
 Figure 7.

Percentage of completion diagram

1-sigma 6-sigma
10% 20 30 40 50 60 70 80 90 100%

Mass Lean

Another type of 100-point system such as that used by the Shingo Prize inherently weights
different aspects of lean manufacturing by allocating a certain number of points to various
systems or techniques.

Figure 8.

100 points with weighting

1-sigma 6-sigma
Strategy Quality Manufacturing
20 30 50
points points points

Mass Lean

Hybrid systems. Other systems, such as the Baldrige Award, seek to combine the

simplicity of Likert scales and the apparent precision of the percentage of completion
approach. A stylized version of a hybrid system appears below.

17
 Figure 9.

Hybrid system diagram

1-sigma 6-sigma
1 2 3 4 5
Poor Below Average Above World
average average class
10 20 30 40 50 60 70 80 90 100

Mass Lean

Remember that a score is not a trophy. The most important thing about the score is the
information it provides about what to do. No matter the scoring system, diagnosis should
lead to prescription.

18
 Step 2.

Orchestrate the exercise

A president’s diagnosis is not a surprise visit or pop quiz. It’s a major undertaking that
requires careful planning, just like a visit from the Baldrige or Shingo examiners. Everyone
should know when you are coming, exactly whom you will meet, for how long, and the
topics for discussion. And unlike the case of the ISO auditor, there is a real expectation
that the examiner—that’s you—will add value to the operations he or she has come to
diagnose.

When to go

As illustrated in the diagram below, the president’s diagnosis is an annual event that occurs
as part of phase IV of your business operating cycle.

19
 Figure 10.

Annual president’s diagnosis

Annual (6-18 mos.) Improvement Process

PLAN DO CHECK
Step I Step II Step III Step IV
Visioning policy policy policy reflection &
definition deployment execution preparation
Establish a Plan in Let Execute the Analyze
vision and detail to everyone plan; stay what
strategic build the know where on course. happened.
heading. right you want to
capabilities. go and
what you
need to do
to get there.

Multiannual (3-5 yrs.) Improvement Process

Normally you should plan to conduct your part of the exercise in the first month of the
fourth quarter of your fiscal year. This will leave time to visit your facilities and complete
the analysis involved in phase IV prior to moving on to phases I and II (planning and
deployment) of the next plan-do-check cycle before the new fiscal year begins.

Who to take with you

Your diagnosis will have a higher degree of validity if you bring together a group of
managers drawn from a variety of functions in your company. Normally this includes your
direct reports, assuming that the number is manageable. (The same team should be
engaged in the planning process in step I of the annual improvement planning process.)

20
Where to go

Ideally, you should visit every one of your facilities or sites yearly. In a very large
organization the goal of personally visiting every facility may be too ambitious. In that
case you must choose a smaller number of facilities and projects and then delegate the job
of visiting all other sites to credible representatives of your company. Make sure that your
delegates are carefully chosen to represent you well. They should all be formally trained to
conduct the diagnosis and use the same standards and documentation that you do.

If you cannot visit all your facilities in a reasonable amount of time, rotate facilities
annually so that within a three-year span you physically visit every facility; and then start
the cycle again. If you have more facilities than you can visit in four weeks, though, your
company is probably a conglomerate that is still searching for elusive “corporate
synergies.”

Who to talk to

At each site or facility, plan to visit a handful of work units, teams, or workgroups,
including a work unit from every level of management. At a production facility you might
include the following in your diagnosis:

‰ The plant manager and the site operating committee

‰ A project leader and his or her team
‰ A supervisor and his or her direct reports
‰ A manufacturing cell team leader and his or her team
‰ A cross-functional, multilevel team

21
In choosing work units to visit, there may be a temptation to visit problem areas or groups.
While this may be necessary in some cases, do not underestimate the power of
accentuating the positive. Until you thoroughly institutionalize lean culture, you must
strive to build a critical mass of change agents whose influence eventually overcomes
ignorance and natural resistance to change. If you fail to pay attention to the people who
actually accomplish what you ask them to do, everyone will quickly decide that it’s just
business as usual.

How long to stay

Each interaction should take approximately one to two hours, depending upon the
significance of the operation reviewed. Thus, with planning, you should be able to visit
two sites in a day.

What to talk about

No matter how complex the technology or work process you may be diagnosing, the main
issues are fairly simple. I have summarized them in a series of questions that you may put
to your work units.

As Steven Spear and Kenneth Bowen explained in their Shingo Prize-winning article, The
DNA of the Toyota Production System (Harvard Business Review, September-October
1999), science is an essential part of the DNA of a lean manufacturing system. In fact,
scientific method is encoded in every single method and technique of TQM and lean
manufacturing. Based upon the Spear and Bowen DNA, the questions below are as general
as I can make them. They should apply to your organization whether you are in the service

22
or manufacturing industry. In manufacturing they apply to support processes such as
accounting and finance as well as to normal value-adding operations.

1. Standardized work.4

‰ How is the work process standardized so that it can be and is in fact done in the same
way, in the same order, in the same amount of time, and with the same result every
single time?
‰ How are visual controls or poka yoke devices used to ensure adherence to standards?
Does everyone have all the information they need to do the job right the first time?

2. Micro-supply chain management.

‰ What steps have been taken to make internal and external customer-supplier
connections direct instead of mediated by managers--or (worse) computers?
‰ What steps have been taken to ensure clear, unambiguous, mistake-proof
communication between internal and external customers and suppliers?
‰ Can everyone in the company see, hear, smell, touch, taste, and feel the voice of the
customer?

3. Flow production.

‰ Have workflows been constructed to ensure that product and service pathways are
simple and have as few non-value-added steps as possible?
‰ Has the work unit used value stream mapping or other process mapping techniques to
separate value-adding from non value-adding steps?

4
Standardized work not only stabilizes your processes, it is a necessary step toward ensuring valid statistical
data to support reduction of variation and ensure predictability.

23
‰ Have you identified and taken steps to eliminate the seven deadly wastes:
overproduction, overprocessing, transportation, movement, waiting, defects, and
inspection?
‰ What has been done to eliminate unnecessary steps, and to combine, rearrange, and
simplify remaining steps?

4. Scientific problem solving.

‰ Is everyone, including all hourly associates, involved in the scientific investigation of

their own work?
‰ What training and coaching programs are in place to ensure that people develop and
execute their skills with the proper guidance?

Additional questions related to scientific problem solving might include:

‰ What problems did you encounter in pursuing the company’s annual improvement
policy?
‰ What methods or procedures did you follow to achieve these results?
‰ What have you done to prevent problems from “escaping” to your customers?
‰ What have you done to prevent problems from “escaping” to the next operation?
‰ What have you done to prevent the recurrence of these problems?
‰ What problems do you foresee in the near future?
‰ When do you expect the next improvements?
‰ What information or resources will you require to reach higher targets?
‰ Did you invent a new method of discovery or analysis?
‰ What have you done to publish your results to other work units?

24
Finally, you must ask:

‰ What recommendations do you have for me?

Of course, the more specific and relevant you can make your questions to your own
company and to the work units you will visit, the better the interaction will be. These
questions will be used again when you evaluate and coach the work unit during your visit.

The pre-visit report

At least one month before you visit a site, send the list of questions you have compiled to
each work unit that will be diagnosed. Actually these questions are part of the “DNA” of
your business plan and ideally should already be at every one of your sites. In any case,
here’s your chance to set things right.

The work unit leader completes your questionnaire, with participation from work unit
members if time permits. One to two weeks before you leave your office, work units
submit a short report based upon these questions. The report must be concrete and to the
point. It is not a dissertation; there should be no more than one or two pages for each hour
that you plan to spend with the work unit. So choose your questions carefully.

25
The report might take general format shown below.

Figure 11.

Pre-visit report format

• How the unit standardizes work and ensures adherence

• Construction of the workflow
• Customer-supplier linkages
• What the unit has done to carry out its strategic
improvement activities
• What results were achieved
• What methods were used
• Roles played by hourly associates
• Why the results do or do not meet the stretch targets that
were set
• What countermeasures have been taken to prevent
recurrence
• How the results and methods were shared with other work
units

This report sets the stage for a productive interaction when you arrive. If your company
certifies the progress of individual work units towards becoming lean, the report might be
in the form of an application from the work unit for official certification to the next highest
level of achievement. I will have more to say about this in the chapter on the managers’
diagnosis.

26
Additional pre-visit items

Here are three checklists that—in addition to questions, reports, and the normal logistics of
plane tickets, cars and drivers, menu planning, and so on—should be completed before you
visit.

Just getting started? If you are beginning a lean transformation you should:

‰ Create a lean manufacturing system and scorecard

‰ Publicize the system to all operations
‰ Train all managers in how to conduct a diagnosis, and coach their direct reports
‰ Ensure the managers conduct a round of local diagnoses before you arrive

(See the chapter entitled “Getting started” for instructions on conducting a quick and dirty
diagnosis in advance of creating a formal system.)

Cascade your strategy? If your company practices policy deployment or hoshin

kanri (or cascades its strategy), or has an annual strategic improvement program, you
should:

‰ Procure and review a copy of the site deployment plan and relate the work units’
reports to the plan

Have a balanced scorecard? If your company has created a “balanced scorecard” of

performance and developmental measures you should:

‰ Ensure that the diagnostic exercise can be related easily to the company’s balanced
scorecard
‰ Review any local versions of the scorecard

27
‰ Relate the work units’ reports to the scorecard

28
 Step 3.

Go to gemba

By making you the chief examiner of your own business operating system, the president’s
diagnosis takes you out of the office and into gemba, the real workplace, where your
employees add value to the product or service you provide to your customers.

In a lean company, value is added through meticulously standardized processes and

controlled process conditions. The gap between you and your competitors can only be
increased (I’ll assume that you are a market leader) by improving the standards that define
your brand, your technology, and your business processes. Once again, your job is to
understand how your business processes and support systems either help or hinder
adherence to and improvement of operating standards and the achievement of stretch
targets related to your development of strategic assets.

Diagnosis as coaching

The process of diagnosis is essentially a coaching process. Coaching is observing and

working with others to help them, through demonstration and feedback, master new ways
of thinking or doing things.

As the leader of a lean transformation, your role is to promote lean methods and lean
thinking, and in particular to promote true scientific investigation of your company’s
challenges and problems at all levels within the organization.

29
In diagnosing your company’s operations, therefore, what you must focus on is not results
or even the replication of “best practices.” You must understand whether or not your
management systems in fact encourage and support your workforce in improving your
brand, your technology, and your business processes. You must focus on how (i.e.,
methods and means) your employees gather and process data to improve what they do. If
your people are not working to standard, flowing the process, hearing the customer, or
engaged in the scientific study of these things, it is because you have not provided the right
environment or the resources for this to happen.

Formal presentations

Your visit to the workplace will normally include a formal presentation by the work unit.
The presentation will probably address the questions you sent to the work unit prior to your
visit. To elicit the best information, it is important to avoid canned presentations of all
types. In particular, the use of PowerPoint should be discouraged, except to present
photographs or drawings that cannot be presented in printed form. The main points of the
presentation are likely to have been summarized in the pre-visit report anyway. There is no
reason to watch the same report, as it were, “on TV.”

Walking around

It is essential to visit the actual work environment. You should insist on seeing the work
unit’s control board, project management chart, or problem-solving charts. It is important
to view these in actual context, not in a meeting room (unless that is where they are
actually used). If noise levels permit, the shop floor (or office, as the case may be) is the
place to raise follow-up questions and receive feedback from the work unit.

30
An example of a work unit control board appears below.

Figure 12a.

Work unit control board---work cell

WORKCELL CONTROL BOARD

Standard Team members

processes Safety issues Relevant
diagnostic
&
activities
operating
Engineering &
procedures
changes criteria
First time through
A B C D Target cost Improvement projects/
Dock to dock problem solving
A1 B1 C1 D1
Build to schedule
A2 B2 C2 D2 OEE

A3 B3 C3 D3
Profit Rev Cost

The control board is probably the most significant artifact of a lean culture. Through it, a
work unit gathers data and creates and reports information that governs its daily operations
and improvement activities.
In reviewing control boards, project management charts, or problem-solving charts, you
should look for evidence of active participation by all members of the work unit. These are
not management’s bulletin boards. These boards are created and maintained by the work
units themselves as integral features of daily work. Following are several specific things to
watch for.

31
Control boards:

‰ A picture or drawing of the part being made

‰ Work cell layout and workstation layouts
‰ Standard operating procedure cards with pictures of how to do the job right
‰ Production control chart
• Current schedule and status vis a vis schedule
‰ OEE chart/per shift (monthly/daily)
‰ Autonomous maintenance check sheet
‰ Start-up/shut-down SOP
‰ Engineering and work cell change notices
‰ Changeover SOP
‰ SPC chart and instructions, if necessary
‰ Ishikawa diagram
• Current problems and status vis a vis resolution
‰ Safety data for cell

32
 Figure 12b.

Work unit control board—project control

PROJECT CONTROL BOARD

P R C
Design changes / Target cost / Time to market Team
Relevant
members
diagnostic
J F M A M J J A S O N D activities
task 1 Joe &
criteria
task 2 Jed
task 3 Jan Improvement projects/
problem solving
task 4 Jill
task 5 Jon
task 6 Josh

Project management charts:

‰ Gantt charts used to track projects make it easy to see and interpret the stage of project
completion
‰ The charts are prominently displayed in the work area
‰ At a glance, it is easy to identify what must be done by when and by whom
‰ At a glance, it is easy to identify when delays occur, for what reason, and what is being
done to address the problem

33
 Figure 12c.

Work unit control board—problem solving

PROBLEM SOLVING BULLETIN BOARD

Team members PROBLEM STATEMENT
IMPLEMENTED
SOLUTIONS
TARGET STATEMENT

TARGET EFFECT FACT

FACT IDEA
FACT IDEA IDEA

FACT IDEA
FACT IDEA
FACT IDEA FACT

Problem-solving charts:

‰ The project or problem has been clearly and concisely defined and linked to the
company’s strategic objectives
‰ Appropriate measures of improvement support local decision making
‰ Targets have been systematically linked to the company’s measurement system and
financials
‰ Improvement results are trended
‰ Observations are carefully recorded by hand, including times, dates and the names of
the observers, just like in a real scientific investigation
‰ There is evidence that investigation has been ongoing since the project’s inception, not
just in preparation for your visit

34
‰ The information presented is highly specific to its context, indicating that the
presenting work unit conducted research in the field
‰ Hypotheses and improvement ideas are clearly original, indicating that your employees
are using their brains
‰ Some information and observations should be surprising--not information and ideas
that you would come up with as a casual observer
‰ The information presented is well organized, indicating that the work unit discussed
and analyzed what it observed
‰ Causes and effects can clearly be distinguished from one another, indicating that the
work unit can think logically
‰ There is evidence of a systematic approach to testing hypotheses or improvement ideas
‰ There is evidence, in the best examples, of playfulness and creativity

How to interpret visual management systems

As your company develops in lean techniques, you will find more and more evidence of
visual management on the shop floor and, hopefully, in your offices as well. Visual
management is a simple but subtle technique of presenting information in many forms—
audio and tactile as well as visual—so that people may receive (or retrieve) and assimilate
it faster than, say, information stored in a database or sent via email. Feedback and
corrective action in real time is what makes lean companies so responsive to their
customers.

Visual management is absolutely vital in fast-paced environments where multitasking is

the order of the day. It is an essential characteristic of lean production systems and their
phenomenal throughput (and profitability). The highway system contains many examples
of visual management. No one would even think of replacing a stoplight, policeman’s

35
whistle, or zebra crossings with a computer screen (however helpful it might be to you) in
your car!

Some examples of visual displays, controls, and management devices include:

‰ Systematic, detailed labeling of parts, tools, equipment, physical systems, and

buildings
‰ Color and other forms of visual coding, e.g., color-coded pipes indicating contents,
temperature, etc.
‰ Poka yoke or mistake-proofing devices
‰ Andon or alarm lights, sirens, bells, etc.
‰ Kanban or production scheduling cards
‰ Heijunka or production scheduling boards
‰ Cross-training boards

The lack of rich visual systems is often an indication of a low level of awareness and
development in lean thinking and behavior. On a scale of 1 to 5, for example, the total lack
of visual controls would warrant no higher a rating than 2, and then only if you could find
at least one good example of visual management and control.

Once visual controls begin to proliferate, it should be relatively easy for you to read them.
If they are well designed, you will need no help at all interpreting the information to be
found there. If you find it difficult to read, this may be an indication that the visual
management devices are poorly designed, probably by “micromanagers” or engineers.

As in any situation involving top management, be on the lookout for the painting-the-
roses-red syndrome. Ask yourself: Are the visual displays and controls indicative of
scientific investigation and experimentation, or are they just window-dressing? The
president’s diagnosis is intended to help develop an organization’s ability to understand

36
and deal with reality, not to make people—least of all you—feel good about themselves.
Should you find paint on the roses, you must not blame your employees. It’s there because
you failed to communicate to your organization that you strongly prefer to know the truth.

37
 Step 4.

Respond in a helpful way

After visiting the work unit, observing its process, and listening to its presentation, it is
time to respond. Put yourself in the shoes of the plant manager, the project leader, or the
supervisor, and imagine what you would want to learn from a top lean expert. Then
respond in a helpful way. That’s why they pay you the big bucks. Again, you are there to
coach, not to judge. Leave the judging to the stock market. If you’ve done your work, the
outcome will be better than your stock analysts expect.

There are four steps to the coaching process in the context of the president’s diagnosis:

1. Scoring.
2. Giving feedback and encouragement.
3. Receiving feedback.
4. Confirming the communication and establishing new expectation for improvement.

Scoring the work unit’s state of development

After you visit the work unit and environs and listen to the unit’s presentation, you will
calculate a score using your diagnostic scorecard. Be clear about one thing: overrating the
work unit isn’t doing anyone a favor. Indeed, it may obscure important information about
ways to improve the situation.

38
In calculating the score, scrupulously follow whatever rules you have established.
Remember, everyone gets the scorecard and the rules in advance of your visit. If you are
just getting started, you must lead by example to establish the habit of diagnosis in all
employees--especially in your managers. If you have already deployed your own TQM or
lean production system and a diagnostic scorecard, this should not be an issue.

Giving constructive feedback

In discussing the work unit’s score with the members of the unit, make certain that all
feedback is constructive. Calculating and communicating a score is very similar to having
one’s temperature taken. At the doctor’s office, no one feels morally inferior if he or she is
told that they have a temperature of 104 degrees. The doctor is looking for signs of health,
not signs of culpability. What the patient wants to know is the reading, what it means, how
to make it better, and what the physician is going to do to help.

Diagnosis is developmental in the sense that it should provide a roadmap for improvement.
It is not so much the score that matters, but the pattern. If your temperature is 104, it isn’t a
good thing; but it means something entirely different if it is going up or down. In the same
way, the design of your scorecard should enable you to identify a pattern of development
as well as a number. First, there will normally be methods and techniques in which the
work unit has excelled (at least relative to other areas of diagnosis, if not relative to other
work units). Second, there will be methods and techniques in which the work unit lags
behind.

Over time, you want to see work units consolidate their gains and address their
deficiencies. So, while it is important to recognize what the work unit does relatively well,
your job is to encourage them to do everything else well, too—and eventually to do

39
everything better and better, until they have achieved a world-class level of practice and
performance.

For example, in the chart below we see the state of development circa 1980.

Figure 13.

Worldwide lean implementation in 1980

Leadership
5
Engineering 4 Marketing
3
2

Maintenance 1 HR
0

Manufacturing SCM

Quality MIS

The radar chart indicates that in 1980 the lean revolution had just begun, with initial
progress in the areas of quality and engineering (both aspects of the TQM movement) and
human resources, which was absorbing the first wave of interest in employee involvement.
After the onslaught of Japanese competitors in the 1970s these were logical areas to attack
first.

40
Ten years later, the picture had changed dramatically. In the figure below we see the state
of lean implementation in the United States and Europe in 1990.

Figure 14.

Worldwide lean implementation in 1990

Leadership
5

Engineering 4 Marketing
3
2

Maintenance 1 HR
0

Manufacturing SCM

Quality MIS

As the pattern of the radar chart indicates, both the United States and Europe had poured
resources into the quality movement, indicated by the level 3 in quality and the level 2 in
engineering (or design for quality). Meanwhile, implementation in all other facets of lean
manufacturing lagged behind. In 1990, while congratulating everyone for their excellent
work in quality and engineering, a sharp CEO would have focused upon developing the
lagging dimensions of manufacturing, maintenance, and supply chain management.

41
As we see in figure 15, yet another ten years have passed, and the picture has changed
dramatically again.

Figure 15.

Worldwide lean implementation in 2000

Leadership
5

Engineering 4 Marketing
3

Maintenance 1 HR
0

Manufacturing SCM

Quality MIS

A more balanced approach to implementation has been adopted, as companies developed a

strong interest in lean manufacturing, supply chain management, and other aspects of
building a lean enterprise

The point to the illustrations in figures 13, 14, and 15 is the pattern of development. Of
course, it should not take your company twenty years to move two levels. By monitoring
specific dimensions of growth, you can learn to focus scarce resources on those areas that
are in need of attention. If you couple the president’s diagnosis with the discipline of
strategy plan-do-check, you should achieve a rate of development at least as good as the
best times show earlier in figure 2.

42
In the initial phases of implementing total quality or lean manufacturing, work units may
resist receiving feedback. It is doubly important to stress the positive, especially if scores
are low—and they may be very low at the start. That of course is why advocates of lean
manufacturing always insist on discussing “opportunities for improvement,” the new
euphemism for problems. In fact, in companies that take lean manufacturing seriously, it is
common for scores to decline for the first couple of years as the culture of diagnosis takes
hold. As a famous world leader once said, “The truth shall set you free.”

If the work unit is having real difficulties in achieving its objectives, think first of system
failures that stand in the way of success. Except in cases of gross negligence or
malfeasance, it will probably do little good to blame individuals on the work unit for
failure. Deming maintained that more than 90% of failures were attributable to
management systems. Don’t forget, these systems are under your control, not the workers’
or the staff’s.

Receiving feedback constructively

I said earlier that one of the questions you must ask in the diagnosis is: “What can I do to
help?” Once you ask the question, you must be prepared to listen constructively. Even if
the work unit has already made suggestions in its report about how management can
improve, be prepared to hear it again. The simple act of listening can have an enormous
beneficial effect on the work unit, and a motivating effect on you. If you have prepared for
the diagnosis thoroughly, it is unlikely that there will be surprises.

43
Confirm the communication

Communication is a funny thing. In the self-help industry, consultants make millions

teaching dysfunctional couples to listen carefully to each other and then to confirm their
messages, so that they may finally be on the same page. Otherwise partners in a
relationship will each hear only what they want to, and that is the beginning of the road to
perdition. The bad news is, it is no different for you and your company.

The good news is that you’re the boss and you can do the right thing. After hearing the
work unit’s presentation, given feedback, and received feedback, you should very briefly
summarize:

‰ The work unit’s presentation

‰ What you saw in the workplace
‰ The scoring process
‰ The feedback you gave the work unit
‰ The feedback they gave you
‰ Any action plans to be developed

Finally, you should confirm the good effort of the work unit and explain how you intend to
support their efforts in the future. A basic way to confirm is to congratulate individuals and
encourage further study on their behalf. Lean companies have their problems; some even
fail. But anyone who has visited the shop floor of a well-managed lean enterprise will tell
you that the good morale is palpable.

A stronger way to confirm is to arrange for the publication of good results, assuming that
they are worthy of replication in other parts of the company. This should be done as a
matter of course; that is, without your involvement. But in cases of special merit or
importance, the president’s seal of approval can ensure rapid deployment and energize

44
team efforts to excel. This special recognition might take the form of internal “Nobel
prizes” awarded at annual or semiannual improvement conferences (another good way to
ensure deployment of good ideas).

Finally, if you have not connected your development activities to your compensation and
promotion policies, then do it now. There are three ways to get it done:

‰ You can adjust team compensation for every level of development that they achieve.
‰ At the individual level, you can adjust compensation based upon certified cross-
training.
‰ Finally, you can hire, fire, and promote on the basis of experience in development
programs. Six sigma consultants insist upon promoting black belts after two to three
years of experience and the successful completion of important projects. A similar
approach might be adopted for lean manufacturing as well.

Remember in all of this that, frequently throughout the year, the work units you visit will
probably have been diagnosed by their own leaders. The importance of your job is mainly
symbolic. You are also demonstrating good coaching technique to your managers, and
demonstrating to all employees that you are a leader who develops leaders.

45
 The managers’ diagnosis

The president’s diagnosis is not a stand-alone event. It is the capstone of your business
operating cycle. The event of the president’s diagnosis completes a normal round of year-
end diagnosis carried out at all levels of a lean company. Before the president’s diagnosis
takes place, all of your managers, including supervisors, conduct their own diagnosis of
operations using the same criteria and documentation used in conducting the president’s
diagnosis.

How often managers diagnose operations

How often do managers other than the company president diagnose their operations? There
are three basic scenarios:

‰ Diagnose annually in preparation for the president’s diagnosis

‰ Diagnose at completion of individual improvement projects as part of a plan to
implement TQM or lean manufacturing methodologies
‰ Diagnose at regular intervals as part of mature lean system maintenance and
improvement

These activities take place during the third and fourth phases of the annual improvement
cycle, described in figure 16. Together these activities form a program of systematic policy
verification, described in figure 17.

46
 Figure 16.

Annual managers’ diagnosis

Multiannual (3-5 yrs.) Improvement Process

Annual (6-18 mos.) Improvement Process

PLAN DO CHECK
Step I Step II Step III Step IV
Visioning policy policy policy reflection &
definition deployment execution preparation
Establish a Plan in Let Execute the Analyze
vision and detail to everyone plan; stay what
strategic build the know where on course. happened.
heading. right you want to
capabilities. go and
what you
need to do
to get there.

47
 Figure 17.

Policy verification program

Meeting On-Site Timing Purpose Responsibilities

Visits
‰ Perform President's ‰ Personally verify
President’s
diagnosis

Diagnosis implementation of
Departments
CEO

Annually annual policy and

Plants promote world-class
operations.
‰ Review Vision, ‰ Define and deploy
(e.g. R&D, marketing, manufacturing,

Departments Corporate and Business annual/semiannual

Annually
Plants Strategies policy
CEO and Function Heads
Top management team

‰ Perform Managers' ‰
Annually; Diagnosis
distribution, etc.)

Semiannually

‰ Review SBU ‰ Feedback to SBU

Departments scorecards; evaluate management.
strategy execution; ‰ Exception reporting.
support resource ‰ Commitment process.
Quarterly
decisions; identify
cross-functional issues
‰ Theme
‰ Overall Goals &Targets
‰ Review SBU ‰ Feedback to local
Major customers
Project Leaders,

scorecards, evaluate management;

Management

programs; support ‰ exception reporting;

Monthly resource decisions; ‰ problem identification
explain performance
outliers

‰ Review local ‰ Feedback to local

Departments

ment team
manage-

performance; operations;
/Teams

Local

Weekly ‰ interpret SBU priorities; ‰ exception reporting;

‰ evaluate activities; ‰ problem resolution
‰ early warning signals
‰ Review own ‰ Feedback to supervisors;
Workcenters

performance ‰ exception reporting;

Operators;

‰ problem resolution
staff

Daily

48
Annual diagnosis. Generally speaking, the diagnosis of a large unit such as a
company, corporate department, or production facility, as a whole, should be conducted
once a year as part of step IV of the annual improvement process.

Figure 18.

Annual managers’ diagnosis

Multiannual (3-5 yrs.) Improvement Process

Annual (6-18 mos.) Improvement Process

PLAN DO CHECK
Step I Step II Step III Step IV
Visioning policy policy policy reflection &
definition deployment execution preparation
Establish a Plan in Let Execute the Analyze
vision and detail to everyone plan; stay what
strategic build the know where on course. happened.
heading. right you want to
capabilities. go and
what you
need to do
to get there.

49
Diagnosis as part of lean implementation. More frequent diagnoses of limited

scope may be conducted in step III to ensure the achievement of certain developmental
targets.

Figure 19.

Diagnosis as part of implementation

Multiannual (3-5 yrs.) Improvement Process

Annual (6-18 mos.) Improvement Process

PLAN DO CHECK
Step I Step II Step III Step IV
Visioning policy policy policy reflection &
definition deployment execution preparation
Establish a Plan in Let Execute the Analyze
vision and detail to everyone plan; stay what
strategic build the know where on course. happened.
heading. right you want to
capabilities. go and
what you
need to do
to get there.

When a company is developing new capabilities, it should monitor progress frequently.

Let’s assume that a certain discrete manufacturing Company A has decided to implement
lean production. Normally, the operations vice president prepares an implementation plan
to indicate which techniques will be adopted and in what order. In the case of Company A,
the plan calls for all production facilities to first master quick changeover and then
reorganize machines into manufacturing cells. The implementation begins with training in
single-minute exchange of dies (SMED). A stretch target has been set for all work units in
Company A’s plants to reduce changeovers to fewer than ten minutes.

50
Under these circumstances, plant managers or lean champions could apply the diagnostic
criteria for changeover on a monthly or even weekly basis to promote the rapid
development of changeover capabilities. Once work on changeover is under way, a similar
process is followed for stretch targets aimed at implementing manufacturing cells. The
hypothetical Likert scale diagram below shows how this might work.

Figure 20.

Likert scale diagram for changeover

1 2 3 4 5
Under Within
Over 1 Under 1 Under 30
10 takt
hr. hr. min.
min. time

Above
Below World
Poor Average averag
average class
e

Mass Lean

A work unit with a “poor” rating would strive first to reduce changeovers to be under one
hour, then under thirty minutes, and so on. The plant’s lean champion would monitor
progress and give guidance (and training) on how to move from one level to the next.

The importance of diagnostic criteria in implementation is obvious. When developing new

capabilities it is vital to confirm not only that certain results were achieved (changeovers
under ten minutes long), but also how they were achieved. It is one thing to perform a
quick changeover. It is quite another to develop quick changeover as a new standard of
performance and adhere to it day after day.

51
Diagnosis as part of system maintenance. To ensure system maintenance, some

operations vice presidents and plant managers use formal certification procedures based
upon they’re own diagnostic scorecards.

Assume that a certain work unit has submitted an application that documents how they
have performed changeovers consistently in less than ten minutes for the past six months.
Upon verification (by physical observation) the plant manager might certify the work unit
at level four in the category of quick changeover.

Typically a certification of this type is displayed prominently in the work area (frequently
in the form of a radar chart). In some companies, certification may lead to increased pay or
benefits. Certifications should be renewable or revocable, contingent upon further, regular
review.

The supporting role of assessments and audits

I discussed earlier the difference between diagnosis on the one hand and assessment and
audits on the other hand. Diagnosis focuses on dynamic developmental patterns, while
assessments and audits are relatively static. This does not mean that assessments and audits
are bad. In fact, they play an important supporting role in developing new capabilities for
the future.

For one thing, assessments and audits are an excellent way to ensure adherence to well-
established standards, such as quality, cost, safety, and environmental standards.
Assessments are an indispensable part of fact gathering in preparation for change. They
supplement diagnosis in the planning stage of plan-do-check. Audits, such as 5S, TPM, or
quality audits, play an important part in ensuring adherence to evolving standards. In lean
companies, operators audit their own work; related audit sheets are likely to be found on a

52
work unit’s control board. Thus audits supplement diagnostic and prescriptive work in the
do stage of plan-do-check.

To be most effective, assessments and audits should be carried out in the same helping
spirit of diagnosis. If work units have the resources to respond to the challenges you put to
them (including training in quality and lean tools, proper coaching, and time for
teamwork), they should have no problem understanding that assessments and audit results,
like a diagnostic score, are nothing more than indications of organizational fitness.

Several popular methods are discussed briefly below.

Quality audits and assessments. Quality audits have been around for decades.

Under the influence of lean manufacturing, however, the definition of quality has been
growing over time and now incorporates most lean manufacturing criteria. It is sometimes
impossible to tell the difference between quality assessments and lean assessments. The
chief difference may be the functional organization tasked with carrying out the assessment
or audit. If a quality organization has responsibility, then the assessment or audit will likely
be called a “quality assessment” or “quality audit.” So long as assessors and auditors are
properly trained, there should be no problem.

Lean plant assessments. Lean plant assessments are currently very popular. These

are frequently carried out by external consultants to advise management on the technical
state of lean implementation within a manufacturing facility, on the capability of a supplier
to support lean production with more frequent deliveries of better product, or as part of due
diligence in the purchase of a manufacturing company.

Lean plant assessments can be a good way to prepare for a larger diagnosis, because they
surface recent performance data and information about the organization of work and

53
process flow. They typically focus on the engineering aspects of flow and pull production,
however, and sometimes give supporting systems and capabilities short shrift.

Value stream mapping. Value stream mapping is another popular assessment

technique. Value stream maps focus on product families and identify the stream of value-
adding activities (i.e., activities that add form to material or data), from the delivery of
materials to the shipping of a final product.

54
 Getting started

For companies just starting the transformation process, the president’s diagnosis can also
be useful in the initial phase of development, in which a vision is established for the future.

Figure 21.

Visioning

Multiannual (3-5 yrs.) Improvement Process

Annual (6-18 mos.) Improvement Process

PLAN DO CHECK
Step I Step II Step III Step IV
Visioning policy policy policy reflection &
definition deployment execution preparation
Establish a Plan in Let Execute the Analyze
vision and detail to everyone plan; stay what
strategic build the know where on course. happened.
heading. right you want to
capabilities. go and
what you
need to do
to get there.

If you don’t have a lean manufacturing system, it’s best to begin with an informal
diagnosis as part of the visioning process. An informal diagnosis involves managers in
knowledge gathering and assessment, but without formal interaction with subordinates.
The outcome of this type of diagnosis is a set of baselines for improvement planning.

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To conduct a simple, informal self-diagnosis in your own company, follow these seven
steps.

Step 1. Assemble the right team.

As I said before, your diagnosis will have a higher degree of validity if you bring together
a group of managers drawn from a variety of functions in your company. The same team
might be engaged in the planning process in step I of the annual improvement planning
process. In putting together this team, consider widening the usual circle of participants to
ensure that observations are made from many different perspectives. Otherwise, if
important changes are happening in your industry, you may be the last to know.

Step 2. Choose your diagnostic system.

If you don’t have time to create your own lean manufacturing system and diagnostic
scorecard, pick one from the shelf. In conducting an informal diagnosis you will not need
to deploy this particular system beyond your diagnostic team. You can build your own
system later.

Step 3. Gather performance data.

Because diagnostic criteria frequently make reference to concrete measurables, to make

your diagnosis you will need information about your company’s performance. For
example, you should have estimates of engineering and manufacturing lead times,
changeover times, overall equipment effectiveness, first-pass quality, dock-to-dock, build-

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to-schedule, supplier quality, and so on. Information about your competitors’ performance
will further enhance your diagnosis.

Step 4. Prepare the team.

Conduct an informal training of your team in the significance of diagnosis and explain the
intellectual framework, diagnostic criteria, and scoring system. It is best to ask them to
work an example to demonstrate that they understand these things well enough to apply
them accurately and consistently. Be sure that everyone understands exactly how to apply
the scoring system you have chosen, be it a Likert scale, a 100-point system, or a hybrid.

Step 5. Tour your site.

Your team should take a brief tour of your chosen site or sites to make direct observations.
In a formal diagnosis, this would be a highly structured exercise involving extensive
interactions with selected teams. In an informal diagnosis, the team should walk through
most departments and operations, stopping when appropriate to ask questions of plant
personnel. The main purpose of the site tour is to ensure that all the diagnostic team
members can clearly visualize the current state of the organization’s total operations and
work environment.

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Step 6. Individually diagnose your company’s development.

Each member of your team should diagnose the company’s level of development
individually, remembering to apply the criteria strictly. The point of individual diagnosis is
to generate multiple points of view based upon the technical expertise and personal
experiences of the observer.

Step 7. Report, discuss, and gain consensus on scores.

The team should report and discuss their individual findings, carefully explaining why the
company or work unit did not achieve a higher score. This will identify the gaps in
capability and positively indicate the steps necessary to close them.

Frequently team members will arrive at very different conclusions about the company’s
level of development. Disagreement is a positive thing, because it leads to sharing of
important information about how the company’s systems actually function (or don’t, as the
case may be).

Having shared this information, however, the team should strive to reach a consensus
score. As team leader, you should apply a qualified consensus rule, imposing your own
judgment in cases where the team members cannot persuade each other to reach a single
number. Generally, this means erring in favor of lower rather then higher scores, on the
theory that higher scores obscure rather than reveal information about improvement.

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 Resources

Books

Robert E. Cole, Managing Quality Fads: How American Business Learned to Play the
Quality Game (New York: Oxford University Press, 1999)
A detailed study of how Japanese quality methods have been implemented in the United
States by fits and starts through a series of quality “fads,” including the Deming Prize and
Baldrige Award. Answers the question: Where did all the TQM diagnostic criteria come
from?

Ryuji Fukuda, Building Organizational Fitness (Portland, OR: Productivity Press, 1997)
An indispensable sourcebook for lean experts. As Sony’s quality guru, Fukuda understood
and taught the “DNA” of lean production before the word “lean” was coined.

Hiroyuki Hirano, JIT Implementation Manual (Portland, OR: Productivity Press, 1990)
Commercialized version of Toyota’s own diagnostic scorecard. Includes concise essays on
all major aspects of lean manufacturing, scores of practical forms and worksheets for lean
production, as well as worksheets for diagnosis. Available on CD.

Tom Jackson, Corporate Diagnosis (Portland, OR: Productivity Press, 1996)

A comprehensive diagnostic system including step-by-step instructions for conducting a
diagnosis and highly detailed diagnostic criteria for forty-one control points in nine basic
categories of lean management. Addresses includes nonmanufacturing criteria.

Iowa Kobayashi, 20 Keys to workplace improvement (Portland, OR: Productivity Press,

1998)

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Highly popular, simple-to-use diagnostic system geared for plant managers.

John P. Kotter, What Leaders Really Do (Cambridge, MA: Harvard Business School Press,
1999).

Giorgio Merli, Co-makership: The New Supply Strategy for Manufacturers (Cambridge,
MA: Productivity Press)
Out of print, but worth searching for. Includes a six-level Likert-scale system for
diagnosing suppliers (over multiple criteria) as partners in a lean supply chain.

Articles

R. Eugene Goodson, “Read a Plant—Fast,” Harvard Business Review, May 2002. Useful
in getting to the bottom line—including estimating cost of sales—on lean implementation
pronto. No treatment of cultural issues related to institutionalization of lean norms.

Spear and Bowen, “Decoding the DNA of the Toyota Production System,” Harvard
Business Review, September-October 1999. Shingo Prize-winning description of what
makes the Toyota Production System tick. Highly regarded by experts in the field.

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 About the author

Tom Jackson is a principal of the Caledonia Group, a lean transformation consultancy

serving equity buyout funds and their portfolio companies. Tom has been a member of the
Ford Lean Resource Center’s Lean Advisory Group since1998. He is a published author
and recognized expert in the fields of strategic planning and curriculum design for lean
manufacturing transformation. He is also handy on the shop floor with cell design, quick
changeover, and a variety of other lean techniques.

Tom lives with his wife Daksha and daughter Aditi in Portland, Oregon.

*****

LeanPress, headquartered in Portland, Oregon, pursues, develops, and distributes the best
in contemporary thought and systems in the field of business improvement. Soon to be
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