Does This Org Chart Make My Department Look Fat?
On the evening of April 14, 2010 I boarded a plane to London, England where I was scheduled to teach a series of continuous process improvement classes. The following morning, as my flight neared the UK, the pilot announced that our flight was being diverted to Brussels due to a cloud of volcanic ash blowing in from Iceland. Thus began my unplanned four day stay in Belgium.
Don’t get me wrong, I greatly prefer landing safely anywhere to crashing at my intended destination. However, my four day experience in overcrowded Belgian airports, hotels and train stations made me start thinking about the tradeoff between the efficiency benefits of being lean versus the risk of not having enough reserve capacity to handle unplanned events. Granted, this was an extreme example. I really wouldn’t expect the European rail system to have the capacity to handle its normal load plus the load of the entire air transportation system, which was shut down for nearly a week. However, this experience highlighted the fact that having some reserve capacity comes in handy during a disruption of the status quo.
Lean practitioners know that excess inventory and excess capacity are forms of waste, but it’s difficult to define exactly what "excess" means. The more I thought about the concept of being "too lean," I started wondering where is the line between being lean and being anorexic?
While this question may sound blasphemous to some, I am not a Lean Six Sigma heretic; I am a true believer. I have witnessed the advantages these tools, when properly applied, can bring to any business, government agency or not-for-profit organization. Over the past nine years I have seen millions of dollars in savings through quality and productivity improvements achieved by me and the students I have mentored. Lean is a good thing, but contrary to the popular country song, "too much of a good thing" isn’t always a good thing.
The Center for Disease Control tells us that one key to maintaining optimal health lies in keeping our body mass index (BMI) in a range between 18 and 25. A person with too little body fat is at just as much risk of serious, possibly even life threatening, medical conditions as a person with too much body fat. People with too little body fat are at higher risk of infertility, osteoporosis, anemia, fatigue, irregular hormone regulation, and a compromised immune system. In other words, the human body requires a certain level of body fat just to survive and even a little more to thrive.
I believe the same is true for organizations. There is an optimal range on the lean continuum below which "getting leaner" is counterproductive to the long term health of the organization. In this regard, there are a number of legitimate analogies to be drawn between anorexia and companies which implement lean concepts to irrational and unhealthy extremes. For instance, a manufacturing company I once worked for took single piece flow to the extreme of asking a supplier to individually package and sell 5 amp fuses to them. This change didn’t improve anything since the company was using about 50 fuses per day and the supplier nearly quadrupled the piece price of the fuses due to the extra work and packaging required on their end.
Another analogy between anorexia and "too lean" is their root cause. While it has many physical effects, anorexia is considered a mental disorder and is co-morbid (clinically correlated) with obsessive compulsive disorder (OCD). Anorexia frequently manifests itself in individuals who are obsessed with their appearance and how others perceive them. This could be due to a sense of insecurity (I’ll never find a spouse if I don’t lose another 10 pounds), peer pressure (all my friends are thinner than I am), a distorted view of reality, or a drive to meet some arbitrary goal (I’ll be happy if I can just drop another 6 pounds).
I believe all of these conditions have parallels in organizations. Insecure directors may worry a new CEO will think their department is fat (I’ll never make Vice President if I don’t lose another 10 headcount). Likewise, leaders of profitable companies may obsess over how their organizations compare to others in their industry, or they may read the latest, best selling management book and get a distorted view of reality. They may even set an arbitrary goal of achieving "the leanest" company in their industry, which is a great way to boost the bottom line…for a while.
The problem is that trying to get and stay too lean comes at a steep price. Professional body builders, who may drop to 4 percent body fat prior to a contest, have to take special supplements to prevent their bodies from literally cannibalizing their existing muscle mass. They also only maintain those low body fat percentages during the relatively short competition season. During the off season, they consume many more calories to intentionally "bulk up" because it is impossible to add or even keep their hard earned muscle mass while living on a 1,200 calorie per day diet as they do during the competition season.
The dangers of organizations being too lean are just as real and include:
- Lack of focus in the workforce due to employees’ fear of losing their jobs (ironically, I have even heard an HR manager in one company use the term "purge" when referring to a recent downsizing). The eighth of Deming’s 14 Points of Quality is to drive fear out of the organization, but sadly some companies today seem to view fear as a motivational tool.
- Burnout. The phrase "You’re lucky to have a job" is thrown around all too often today by business leaders trying to squeeze more productivity (usually longer hours) out of fewer employees. In many cases, management’s attitudes are planting seeds of resentment that may yield a record harvest of voluntary turnover when the economy recovers and the company’s best employees suddenly have more attractive career options.
- No time for training or making improvements. When you downsize 25 percent of a department without removing any of the work, the rest of the department’s workload goes up by 33 percent, which in turn deprives them of the time needed to participate in training or work on improvement activities in their area.
- Lack of reserve capacity. Unplanned work and disruptions are known killers of productivity, and their sources need to be tracked down and eliminated wherever practical. However, relatively few companies have been successful in doing this. In the companies I have worked for, it is still a common practice for employees to spend a substantial amount of their week performing "drop in" work. When a person’s time is loaded to 100 percent (or more), there is no way he or she can get everything done that needs to be done and assist with the unplanned things that also have to get done.
We should never let the risk of abusing a tool prevent us from using it properly. Many, if not most, companies in the U.S. still have a long way to go before they have to worry about getting too lean. However, in any company it is likely that some departments are already leaner than others. Companies in this situation need to be especially careful of "10 percent across the board headcount reductions" because that may be overly aggressive in some areas and possibly not aggressive enough in others.