Resolving Conflicting Pressures between Budget and Lean

Q. How do we resolve the conflicting pressures of budgets and Lean? Plus, how do we ensure that the pressures of cost savings don’t drive the wrong behaviors?

Here are some of the consolidated thoughts and ideas that were shared by the participants of the Lean Executive Day workshop on Resolving Conflicting Pressures.

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Use communication and change management to counter the incorrect impression that lean and budgets appose each other.

- As lean eliminates waste, costs are dramatically reduced

- As lean standardizes processes, managers have freed time to examine other issues and focus on improvement

Ensure that headcount reductions due to loss of business, poor growth, budget cuts, etc. are not equated to process improvement due to lean.

- People will not participate in lean improvements if they fear their jobs will be eliminated.

Educate everyone on the relationships that drive budget success.

- Lean reduces inventories and tied-up capital

- Lean improves quality and reduces rework

- Lean reduces the effort to do the same amount of work – freeing time and capacity.

Ensure that there is a balance of metrics used to measure the organization’s success – not just financial.

- Cost, Quality (including safety), and Time.

- Do not let capital investment in point improvements (for example faster machines or huge IT solutions) take focus over the success of the end-to-end value stream. Use value stream mapping and customer demand to understand success.

Ensure that trends are used to review key metrics rather than month-to-month or point-to-point comparisons.

- Statistical process control charts and histograms are useful in understanding process behavior. A good consulting company can train you on them.

- Remember that value stream improvements require changes – which often need stabilization before full performance is realized. Don’t be too quick to judge!

Involve finance people or accountants in improvements early. If they understand the nature of the changes made, they will be better equipped to understand the success of lean.