Lean Success in Public vs. Private Companies

There are many reasons that Lean can fail to take hold in an organization. One complaint that I hear commonly is about the short term financial pressure on publicly traded companies. Lean requires a long term investment in people and processes.

When a company is first trying to weave a continuous improvement culture into its DNA, there can be large expenses. Whether these are related to the time spent training a team, hiring new team members with Lean experience, or investing in new tools and equipment, there is often a lag between the outlay of cash and recouping the investment.

When a company is further along its Lean journey, it will likely have periods of overcapacity. When the improvement in productivity outpaces rising demand, individual workload can drop.

So a common belief—one shared by me—is that quarterly earnings reports creates pressure that compounds both of those situations mentioned above.

In the first case, when profits are lower than expected, it can be easy to slash into the investment that is required to get teams up to speed. Fewer consulting weeks to get people educated in Lean. Fewer new hires with continuous improvement experience. Hiring less qualified (i.e. cheaper) people without sufficient Lean experience in key roles. And, of course, layoffs which negate all the time and energy spent developing a strong team.

In the second case, the pressure is to harvest gains too early. The improvements that people make are a lot like interest. When the interest is left in an account to grow, the dollars pile up quickly. When the earnings are pulled out, there is less left to build up a larger balance. The pace slows. The same thing happens with staffing. While it is uncommon to see a company lay people off after improvement projects, what does happen is that people are not replaced, or temporary employees are released. While improving productivity by removing waste is one of the goals of Lean, it is hard to do when a team is chronically understaffed. Most people don’t expect their jobs to be cushy, but they don’t want it to be draining either. Executives often see the time earmarked for improvements as expendable. An improvement culture won’t develop when there is no commitment to it.

If this belief about quarterly earnings is true, though, Lean would be more successful in private companies that don’t have to report numbers as frequently. So, in the spirit of continuous improvement, I am not going to let beliefs rule my actions. I am going to collect facts and data.To confirm whether or not this theory has legs, please answer the question below. I’ll be interested in seeing if there is any significant difference in the success you have seen based on the ownership structure of your company.

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