Lean manufacturing principles have contributed to record success for hundreds of global companies since Toyota started implementing lean principles in the 1980s. Lean principles focus on eliminating waste and leveling work to optimize productivity and profits. Innovative organizations have applied the lean principle beyond the shop floor and into back office organizations. Finance organizations have achieved incredible efficiency gains in accounting, procurement, payables, and order processing (to name a few). IT has used these principles to migrate to the cloud.
Unfortunately, some back office finance and IT organizations have not found success when implementing lean principles. The less successful organizations have over-engineered or misapplied lean principles.
One principle of lean is seeking perfection. Unfortunately, the pursuit of perfection can slow an entire process. A department will strive to get everything as perfect as possible while their perfection creates issues downstream. For example, a chemical manufacturing company wanted to cut their close process in half. A critical path in the close process included accruing raw material purchases. Several years ago, the payables team was given the ultimatum to ensure the accrual for raw materials purchases was perfect. The raw materials accrual became a critical path item for the close, extending the close calendar by two days. Introducing the concept of “done is better than perfect” is not a lean principle. However, further analysis concluded the payable group could create an accrual within a few hours (well within materiality thresholds) and allowed the organization to cut the close by two days.
Tools created for lean programs are excellent guides for problem solving, but many finance organizations force fit the use of these tools into every decision-making process. A large field services company was experiencing a 5% customer invoice rejection rate. The finance organization conducted a series of in-depth root cause fishbone documentation and bottleneck analysis over several months with no avail. They were using the wrong tools and wasted time. A simple Gemba (visit to field) found the field service reps were using an outdated listing of field service codes. After the reps were given the proper service codes, 90% of pricing and invoice errors disappeared. Extensive analysis using the lean tools is not always necessary to solve a problem.
Part and parcel to a lean program is quantifying results through measurement. While measuring what matters is important, not everything is worth measuring. Sometimes it can take longer to measure something than complete the task being measured. Finance and IT organizations can spend an inordinate amount of time measuring and displaying the intricate results of every possible activity. An auto parts manufacturing company created a vast array of IT measurements, visual displays, and report out meetings occupying at least 20% of management’s time. For example, IT was measuring, reporting, and displaying in the hallways the number of service calls closed each week by person, type, and department. Nice measurement, but they were not acting on the information. Bottom line, organizations should eliminate measures not influencing future actions or decisions.
Applying lean principles can be very useful for back office finance and IT organizations, but the principles need to be applied in a fit-for-purpose manner. As soon as finance or IT leadership sees the lean programs slowing decision making or occupying too much time, it's time to make the lean program lean again.
