Lean Accounting & Traditional Accounting Compared Part 5 – Process Organization

    Many of you will have discovered that lean companies think differently.

    In my last blog about Lean Culture, I asked how accountants and financial people in a Lean company can best participate in Lean and help sustain it.

    I recounted that, in my work with BMA customers, I have seen many cultural issues that are made difficult simply because the traditional information used for making decisions, managing, and measuring are in fact motivating people towards non-lean behaviors.

    The same can be said for why lean companies need to organize around their value streams.

    Art Byrne, the CEO of the famous lean company Wiremold, stated in his new book[i]You cannot just drop Lean on a traditional structure and hope to be successful. You will need to … change to a value stream structure.” He went on to add, “The biggest and most common mistake that I see companies make is thinking they can somehow move to a Lean strategy while preserving their traditional organization structure.

    When we make the value streams the primary organization for the company, then people begin to think and work differently.

    I am currently working with a start-up company that has recently realized that need to build their new plant around value streams. The CEO and I are meeting this morning (February 5) with a recruitment company to discuss the implications of this to the company’s leadership team.

    When a company is organized by value stream, the roles and responsibilities change. The background and experience of the people will be different. The approach to change, improvement, and team-work will be different. A value stream structure focuses everybody around lean principles, and away from the top-down command and control management that is so much beloved by the MBA schools.

    My first picture tells the tale.

    The guy at the top makes the big bucks; all the other people are trying to figure out how to get up there with him. They may work together, or not. The company may benefit, or not. Nowhere in this picture do we see a customer! Nor do we see anything about the process we go through as a business to provide the products or services the customer buys.

    Lean requires us to rethink how we organize the company so we focus on understanding and creating customer value. Focuses on the whole process we use to create that value. Focuses on making that process flow without stopping, removing the waste that impedes the flow, and (most importantly) creating a value stream team that works together to serve the customer, and constantly improves and innovates the process.

    Why do we do this?

    Because the value stream is where customer value is created. It consists of all the processes required to create our products and services; it is organized as a team; it is solely accountable for increasing value and profitability through continuous improvement.

    The next picture illustrates this concept. This team of people moves along aligned with the value stream. The difference is clear.

    We can imagine these people working as a team. We want everybody to have “line of sight” to the customer. We want the people to become cross-trained so as to provide flexibility and fast response. We will have performance measurements, financial information, and capacity calculated for the value stream as a whole.

    The team will work together to improve the flow, eliminate waste, and maximize the profitability of the value stream as a whole.

    Am I making this sound too easy? Of course, nothing is easy. But the value stream manager has clear accountability for improving value stream performance and cash flow. He/she has a team that is working together on improving and perfecting the process. The sales or customer service people on the team are helping to balance the demand with the capacity. The process quality is improving over time because each step is monitored hourly, problems identified quickly and solved permanently.

    This is how a lean value stream is designed to work.

    One last quote: This time from Jim Womack and Daniel Jones in their ground breaking book Lean Thinking

    As you get the kinks out of your physical production, order-taking, and product development, it will become obvious that reorganizing by value stream is the best way to sustain your achievement.” [ii]

    The following table recaps the stark contrast between the two ways of organizing your company.

     

    To see more about value stream organizations, please look at my previous blog series on value streams.

    Also take a look at the responsibilities of a value stream manager which we just added to our “Mind Maps” page at this link: Value Stream Manager Mind Map. While you are there, you can review a mind map that explains “Why Value Streams?” also on our web site at this link: Why Have Value Streams

    Next time, we’ll delve into the next subject on our tour around the mind map: Financial Reporting.

    We are, after all, Lean Accountants ;-)


    [i] Byrne, Art, The Lean Turnaround: How Business Leaders Use Lean Principles to Create Value and Transform Their Company(New York, McGraw-Hill, 2012), p 61.

    [ii] Womack, James P. and Jones, Daniel T., Lean Thinking: Banish Waste and Create Wealth in Your Corporation, Revised and Updated, (New York, Free Press, 2012.)

     

    Original at http://blog.maskell.com/?p=599

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