The Ten Wastes
The Following is Part 14 from My Forthcoming Book (Name and Release Date TBD)
As we’ve discussed previously, I find it useful to dramatically simplify the concepts of continuous improvement (a.k.a., Lean) into three primary tenets: (1) respect for people, (2) identify and minimize waste, and (3) adopt a laser focus on the customer. It really is that simple.
In Parts 11-13 we explored the concept of “respect for people” through the lens of goal setting and standard work. Trust, accountability, and flow are maximized when roles and responsibilities are well defined and communicated consistently and effectively. Now we’ll turn our attention to the second tenet of continuous improvement: identifying and minimizing waste.
However, before we get started, it’s important to note that most discussions of waste focus on manufacturing and physical production environments. This is natural as “Lean” had its beginnings in Toyota manufacturing facilities during the 1930s and 1940s as Kiichiro Toyoda, Taiichi Ohno, and others in the company sought to refine the pioneering innovation of the assembly line that Henry Ford had established earlier in the 20th Century.
In 1990, Womack, Roos, and Jones codified the Toyota Lean process in their seminal book, The Machine that Changed the World, and refined those concepts in the 1996 follow-on work by Womack and Jones entitled Lean Thinking. I recommend that readers who want to delve into hardcore Lean principles start with these two books. In addition, organizations like the Lean Enterprise Institute (Lean.org) are excellent resources for all things Lean / continuous improvement and cater to everyone from novices to experts.
My favorite book on Lean, entitled The People Side of Lean Thinking by Robert Brown (2013), was handed to me by a colleague in the mid-2010s. Brown’s book piqued my interest because it looked at continuous improvement through a different perspective, and led me to connect the dots between the practices of organizational health and continuous improvement. I’ll be forever grateful for the courage and tenacity of that former colleague.
The book you’re reading right now does not contain an in-depth analysis of traditional Lean practice models for two reasons:
Language: The full-on adoption of Lean within a business requires that everyone in the company learns the language of Lean–which can be unapproachable and foreign, especially if the concepts are not used each day. I stress “everyone” because in my experience, for Lean to be effective in a business, it has to be adopted by all departments and be embraced by individual contributors, senior executives, and everyone in between.
Simplicity: As I described at the top of Part 11, my goal in this book is to provide a guide to the essential components of a successful business. I’m saying that a business must build effective and impactful strategy statements; have a plan for managing change; define their “It” and how to drive consumer indispensability; create clarity through long-term and short-term goal setting; weave learning and coaching into the fabric of the organization’s culture; and adopt a core set of management tools/practices. If going all the way with Lean fits into a business model and culture, then great! I’m only introducing the continuous improvement tools that I believe are necessary conditions for business success.
A Primer on Value Streams
In Part 15, we’ll get into the nitty gritty of several continuous improvement tools that meet the definition of necessary tools for business success and you’ll see what I mean when I say that the language of Lean is unapproachable. However, before we tackle those concepts and talk about identifying and minimizing waste, we must introduce the concept of a value stream.
Put simply, a value stream is a set of activities that add incremental value to a product or service from its inception to its delivery to the customer. It is that river of value that builds its strength through inputs and deposits along the water’s journey.
To illustrate a simple value stream, close your eyes and think about your favorite sandwich shop. From the moment you walk in the door, the value stream to get you an awesome sandwich kicks into high gear.
Step one is likely the branding and environment. Is it inviting? Do you feel welcome? Is the end of the line clearly marked?
Step two is the menu board. Is the language clear? Options laid out efficiently?
Step three is the ordering process. Bread, condiments, meat choices, cheeses, and toppings–are they all displayed in an appealing and logical manner?
Step four runs concurrently with Step 3 and is the production process. Are sandwich inputs in the right order? Are they fresh? Who’s responsible for restocking? Does work-in-progress flow smoothly down the line?
Step five is packaging and payment. Are payment options clear? Is packaging easy to work with for both sides of the transaction?
Step six is exit from the establishment or in-store consumption. Are tables clean? Seating comfortable? Exits clearly marked? Staff knowledgeable, well-trained, and engaged?
Yes, this is a very simple example and I’m sure I’ve missed some steps in the process (we’d need a value stream mapping event for that), but it clearly illustrates the concept of value-addition. When the customer walks in, there is only an idea of a sandwich in the potential consumer’s mind. At the end of the value stream is a (hopefully) satisfied customer with a full tummy.
A great exercise to solidify the concept of a value stream is to think about the products and services that you buy–everything from airline tickets to a trip to the grocery store. There are myriad value streams all around you. Next time you go to an event, interact with your smartphone, walk around the office, or drive down the road; look for value streams.
The Eight Wastes
It is common for practitioners to lay out the eight wastes of Lean as a guide to the identification of waste in business. You may have noticed that this part is about ten wastes, and we’ll get into those two additional sources of waste a little later on. What follows is a brief discussion of each of the eight most widely cited sources of waste. Note that the eight wastes can be applied to any industry or business model–not just manufacturing or production environments:
Defects: This can be either a product or service failure along a value stream. It’s important to note that defects can take many forms. As an author and educator, the most egregious defects are typos and errata that lead students to question themselves first and then question my capability level as a teacher second. Even seemingly inconsequential details can be huge dissatisfiers. Does the binding of my book crack too easily? Are the pages too shiny and slippery to accept ink when a student tries to take notes? Defects are a leading cause of unnecessary customer dissatisfaction.
Overproduction: If supply exceeds demand, waste is created. Bear in mind that there are supply and demand equations at nearly every point along a value stream. Hence, overproduction doesn’t apply solely to the finished good or service. For each input or interaction point along a value stream, supply of inputs can exceed demand.
Waiting: The handoffs that occur along a value stream should be smooth and timely. To illustrate this, think about your own work. How many times have you been waiting for an input to your part of the value stream only to find out it’s been stuck in a queue or, worse yet, in the middle of a disorganized pile on a co-worker’s desk? In all the value stream mapping events I’ve been privy to, the waste of waiting has been the #1 driver of employee dissatisfaction. “What do you mean you’ve been sitting on my value stream input for three weeks waiting for a signature from your boss. The customer is furious over the delays in final delivery. What the Fork?!”
Underutilized Talent: People are a business’s most valuable asset. Period. Having people in the wrong place with the wrong skills along a value stream can create unnecessary challenges. This is the primary reason why I placed learning and coaching in the list of non-negotiable strategic underpinnings of any successful business (see Part 9). With the advent of computers that can “think” at low, but ever-increasing levels, it’s critical to have a plan for keeping current employees’ skills fresh. The old mindset of imagining that employees are expendable when their skills become obsolete is dead. The costs of hiring and training new team members far exceeds the cost of upskilling/reskilling existing colleagues whose skills aren’t up to date.
Transportation: Are warehouses located near the source of demand, or are products being moved unnecessarily prior to sale to the end user? While the waste of transportation primarily applies to a physical goods environment, take a moment to think about the cost and disruption associated with large team meetings and corporate events. Hopefully the SARS CoV-2 pandemic has taught us to carefully balance the benefits of such events with their hard and soft costs. “Soft” or non-monetary costs can be the bigger of the two!
Inventory: Holding too much inventory drives up warehousing and spoilage costs, but the opposite–too little inventory–can be even more costly. This is another important lesson from the SARS CoV-2 pandemic. In the two decades prior to the pandemic, many businesses had adopted “just-in-time” (JIT) inventory management methodologies as a way to squeeze profitability out of the middle of the profit and loss statement (P&L). JIT works great when (a) everything that is within the control of management is flowing smoothly, and (b) when externalities (those things that are beyond the control of management) are minimal. JIT breaks down when these conditions are violated. The lesson is to strike a more appropriate inventory balance and develop more robust contingency plans–the world around us is more fragile than we imagine.
Motion: Does it take 10 steps to move from point A to point B, or can a service or production environment be reconfigured so that it only takes 5 steps? Reducing both waiting and motion can do wonders for morale and productivity. The primary tool used to reduce both is to engage in value stream mapping to pinpoint excess motion and waiting. Beware! Some colleagues may be using excess waiting and motion as job security blankets. Be sure to ask as many “whys” as necessary when mapping a value stream and show your teams that the resources freed up through reductions in motion and waiting can be put to higher and better uses (e.g., more fulfilling and value-adding work) versus staffing cuts. We’ll talk more about this later.
Excess Processing: Is the quality standard for a product or service out of alignment with customer expectations? Does the product really need that extra bell or whistle? To some this may seem counterintuitive, but the job of product management is to ensure there’s alignment between consumer expectations and service levels or product quality. I speak from experience when I say that jamming more features into a product offering can backfire on both customer satisfaction and the P&L.
We’re not going to get into the details of how to minimize each of the eight wastes, as those details are heavily dependent on the specific circumstances of your business and the value stream in question. What’s important for you to take away is that, as discussed in part 13, communication and transparency are essential ingredients for the minimization of waste in your business. Obfuscation and hiding–whether intentional or not–are surefire ways to create waste. In Part 15, you’ll note that the majority of the continuous improvement tools we introduce are designed to improve communication and increase organizational transparency.
The Ninth Waste - Emotion
Now that we’re grounded in the eight wastes of Lean, I’d like to introduce another form of waste - a waste that is more insidious and costly than the primarily physical wastes noted above.
Emotional waste is like dark matter and dark energy in physics–we know it’s there, but it’s difficult to see and difficult to measure.
Emotional waste in the workplace can take many forms. Just a few examples include:
Misalignment of purpose: Showing up every day to a job that doesn’t align with your personal purpose is exhausting. Apathy quickly sets in and the work suffers.
Unproductive team dynamics: We’ve all been part of a team that doesn’t “click.” Leaders that don’t make the time to help team members understand one another are setting the team up for failure.
Bad managers: Working for a domineering, overly directive, or oppressive boss can be soul crushing. If you walk up the stairs to the office every day with a sense of dread hanging over your head, how productive can you be?
FOMO and/or Control: Fear-of-missing-out (FOMO) and control are highly interrelated. We seek to control what we can’t and have our fingers in as many pots as possible. FOMO is typically found in personal friend circles, but creates tremendous waste at the office as well.
Active disengagement: Leaders who allow the actively disengaged to continue to roam the halls of the business are sending clear signals to the rest of the team that a healthy, engaged workforce isn’t valued. Remember, you are what you allow.
Poorly defined goals and North Star: If team members are working at cross-purposes or don’t understand where the company is going, they will constantly question the value of their work.
Misaligned incentives: Humans want to be treated fairly. Individuals who believe they’re being treated unfairly will put in the minimum amount of effort to just get by. Incentives are devilishly difficult to get right, but the reward to getting incentives right can be invaluable.
The amount of emotional waste in your business is a direct reflection of the culture. Much of this book is devoted to the installation of a management operating system that’s designed to promote flow and build organizational trust and accountability. We won’t spend too much time here reiterating our thesis, but we can reduce emotional waste by:
Making learning and development a priority: Nothing shows you care more than continually investing in your team’s skill profile. I’m not suggesting an open checkbook for learning, but instead aligning the learning agenda with the goals of the business. To do so, skills inventories must be established at the corporate level and individual skill portfolio evaluations should routinely occur with team members. This allows individuals to clearly see how the new skills they’re acquiring will have a positive impact on the company and how they will personally benefit from learning new skills. Learning must be a two-way street and learning agendas must be implemented with equity.
Improving clarity: Engaged employees know where the business is heading and how their daily contributions will have a positive impact on customers, culture, and the top/bottom lines. Clarity is established by continually refining and communicating the company’s North Star, long range plan, and annual goals. Individual and team goals must then map directly to master company goals and conflicting goals between teams and individual team members must be minimized. There’s nothing more frustrating than showing up every day with the mindset that what you do doesn’t matter.
Building transparency of metrics and key performance indicators (KPIs): Not only does everyone need to know what everyone else is doing to keep the oars moving in unison, it’s also critically important to let everyone know how the business is doing. To move from emotion to rationality and objectivity, put the good, bad, and ugly on display so teams and team members know where to pitch in to help solve challenges and support their colleagues. Transparency is the elixir that helps shift the culture from blame, to joint responsibility for both successes and failures. It’s also easier to learn from failures if everyone knows what’s being measured and what constitutes a poor result.
Emotion is not necessarily a bad thing in a business environment. As a leader, you want to see passion on display in the form of a keen desire to beat the competition and create exceptional value for customers.
I’ve stood many times in front of teams and reminded them that the enemy is outside the four walls of the business in the form of competitors who want nothing more than to eat our lunch. When the enemy is within, watch out. That enemy within usually takes the form of emotional waste that’s draining the life from your company.
Dare I Say the Tenth Waste? Meetings
If I had a nickel for every time I’ve heard someone grouse about how many meetings they have to attend, I’d be able to fund a really cool charitable foundation. That foundation would be called “Meetings Anonymous” (tongue firmly in cheek).
All kidding aside, the crush of meetings on our calendars is overwhelming and a consistent contributor to employee dissatisfaction and disengagement. Meetings can also represent a significant source of waste in your business.
Next time you’re going to schedule a meeting, do some simple math. Start with the number of attendees, multiply by the average wage with benefits, add on a facilities/technology support fee, tack on any transportation costs, and then add an opportunity cost factor. Some of the inputs to the calculation will be educated guesses, but the exercise is useful nonetheless.
For example, let’s suppose you’re hosting a blended, internal technology update meeting with 20 attendees and the average wage is $40/hr. Your company’s all-in benefits rate likely runs between 15-25% to cover the company’s direct payments (on your behalf) for things like health insurance, retirement plan contributions, federal and state mandatory withholding, and that gym membership that only gets used in January of every year (snark). We’ll use 20% as our estimate.
In a flexible working environment, some individuals will gather in a company conference room and some will be online. Enterprise Zoom licenses are not free and neither is the conference room everyone is sitting in. Conference room costs include per square foot lease rates, utilities, technology support, custodial maintenance, and amortization of fixtures and equipment. To hold a meeting with 20 attendees in a blend of online and live, the facilities cost is low, but not zero. We’ll use an estimate of $50 per hour for an internal company conference room. If the meeting is offsite, then you’ll be paying a hotel or conference facility 2-5x that number and face the costs of transportation and meals.
The opportunity cost is where the educated guess comes in. For those not familiar with the concept, opportunity cost is the forfeiture of a potential gain from engaging in an alternative activity. If your meeting is the highest and best use of all its inputs (e.g., people, facilities, time) then its opportunity cost is zero. However, it’s highly likely that the alternative use of one or more meeting inputs will add more value to the company (e.g., serving customers, developing a new product, getting an existing product to market more quickly).
Unfortunately, ego and hubris typically blind us from thinking about opportunity cost. “Of course my meeting is the most important thing my colleagues have to do!” Don’t get caught in this trap. In fact, thinking of a meeting as the least value-adding activity you and your colleagues can engage in will force a conscious computation of how your meeting will add value and not detract from it.
So, how much does our hypothetical meeting cost?
(20x$40)1.2 + $50 + unknown opportunity cost = at least $1,010
If your meeting will create more value than $1,010, then go for it! If bearing a cost of $1,010 to provide a technology update gives you pause, then consider other communication methodologies.
Tips to reduce the waste of meetings from the perspective of the individual:
Work on yourself first. Some folks I hear complaining about how many meetings they have to attend will also complain about feeling left out (a form of FOMO, or ‘fear of missing out’) and actively work to muscle in on meetings they really don’t need to attend. Trust is usually a root cause of this intrapersonal conflict. To expose potential FOMO or trust issues, ask yourself “Why do I feel the need to attend this meeting?” A culture of transparency and trust is the most powerful antidote to FOMO-driven meeting attendance.
Don’t become a meeting spectator. Ask yourself the following question after each meeting: “Was I a spectator in the last meeting I attended?” If you were watching from the sidelines and not meaningfully contributing to the conversation, you were likely a spectator that didn’t need to be on the field of play. Shifting analogies, nobody likes to see “tourists” in their meetings unless they’re specifically invited with that intent.
Tips to reduce the waste of meetings from the perspective of the team:
Assign delegates. In many cases, assigning a delegate from your department to attend a meeting and report its outcomes back to the broader team can be an effective way to reduce waste and free up time for more value-adding work. Assigning a delegate will also have the positive knock-on effect of forcing the delegate to hone critical thinking, presentation, and communication skills through a crisp readout of the meeting’s key outcomes in a regularly scheduled team gathering.
Establish a team charter and a simple RACI diagram (Responsible, Accountable, Consulted, Informed). With the charter and RACI, it becomes clear(er) who must be in team meetings and who’s optional or can be updated via email or other team collaboration tools (e.g., Slack). Remember that charters and RACIs are not set in stone and should be revisited and adjusted periodically. We’ll discuss both of these concepts in greater detail in Part 15.
Require an agenda. Ensure the meeting agenda and assignments are created well in advance. If there’s no agenda or you and your team are constantly scrambling to put agendas together at the last minute, take a step back and ask “why?” as many times as necessary to get to root cause.
Talk as a team about the number of meetings that are on the books. Meetings are typically set in isolation and we seldom look at the meeting cadence of our functional area (or our business) holistically. Your manager or functional area leader is likely unaware of all the meetings that are occurring under their watch and is also likely unaware of the meeting requests that are coming from other functional areas of the business.
Tips to reduce the waste of meetings from the perspective of the company:
Make the costs of meetings known. The CFO or head of facilities should periodically remind team leaders about the hard and soft costs of meetings within the context of the business. Be sure to work the benefits of camaraderie and team building into the opportunity cost calculation. If done well, meetings can be a net positive for the organization by promoting relationship building and encouraging cross-departmental communication and collaboration.
Avoid quick fixes to the meeting problem (e.g., “meeting free Fridays”). These blanket policies are just bandaids and do not get at the root cause. Search for root cause first and address the issue from there.
Create a master meeting calendar. This high-level calendar should contain all known meetings that senior management is committed to–board meetings, major conferences, quarterly updates, financial readouts, town halls, budget defense sessions, etc. Publish this calendar as early as possible and to as broad an audience as possible. This will give middle management plenty of time to build their calendars around the master calendar, and will help avoid last minute jockeying and rescheduling, which is itself a huge waste generator.
Adopt an organizational strategy for meetings. The popular business literature is filled with advice on how to run an effective meeting and how to establish a cadence for meetings that is value-adding. My advice is to choose a strategy for meetings and propagate that strategy throughout the organization. Allowing each leader or manager to adopt their own strategies just leads to chaos. Start with Patrick Lencioni’s The Advantage (Jossey-Bass, 2012) and go from there.
A Note on “Digital Transformations”
Both McKinsey and Boston Consulting Group (BGC) estimate that a whopping 70% of digital transformations fail to achieve their stated objectives. Digital transformations are large technical and business process change projects that span most, if not all, of a company’s existing operations. They can take many forms, but often include a fundamental shift in the business model from physical to digital delivery. Post-transformation, the company will interact with its customers in new ways and employees will need to adopt entirely new ways of working both internally and externally.
Even if these studies overestimate the failure rate by, let's say 50%, digital transformations rank amongst the top waste generators in the business landscape. The underlying reasons for these excessively high failure rates are the usual suspects of talent misalignment, lack of strategic clarity, pushback from the clay layer, leadership overconfidence, and no/little focus on change management.
Flow mechanics and handoffs that were established prior to the digital transformation must be fundamentally reengineered. Digital transformations that are poorly executed leave the business in a kind of “twilight zone” for extended periods in which teams and individuals are required to work using both old and new world tools and processes. Morale and engagement suffer as digital transformations drag on–everyone ends up feeling like they’re working in mud.
Conclusion
I want to be careful here. My goal in introducing the eight wastes of Lean and the two additional wastes of emotion and meetings is more about developing the ability to see wastes clearly than it is about properly classifying them. Getting into a drawn out debate as to whether a waste in your business is excess processing or motion is itself waste.
As the saying goes, “What gets measured gets managed.” This ability to see waste is key to the adoption of a continuous improvement mindset. After all, if we can’t see waste and inefficiency, how can we continually improve our standard work?
