Saturday, 21 November 2009

Squeezing budgets - a Leanomics (and Economystic) view

On Stephanie Flanders recent blog I was asked a question about the squeezing of budgets, and some of the challenges ahead, and in response I wrote:

'IMHO your questions/insights are good. The government (and politicians of all colours) are void of ideas and/or unprepared to take on the challenges ahead in any robust way (nb the main things in Gordon’s toolbox seem to be QE, inflation and spin). IMHO the fundamental problem we actually face is one of outdated leadership & management practices (e.g. in terms of politics, economics, service and enterprise).

There are lots of ways companies & nations will ‘grow’ in the future, but outdated leadership / management practices mean most ‘leaders’ haven’t got a clue how to do it, and the majority of ‘leaders/managers’ will have to ‘unlearn what they have learnt’ in order to access the ‘world of opportunity’ of opportunity that actually exists. The idea of somehow hoping/relying upon a immediate/massive resurgence in manufacturing is also flawed, as is the concept of considering products and services in isolation of each other.

In terms of public sector cuts, IMHO given the level of crisis now faced the only robust solution (both in the short term and the long term) is to rapidly introduce 21st century lean management practice … to continuously, and systematically, remove all non-value adding activities and divert all of our taxes/resources to value adding activities. When enterprises start to do this, most initially find between 40-90% of all time / resources are actually being wasted (and as you can probably imagine with public sector services this tends to be at the higher end of the scale!).

Leaders/managers need to learn how to support front line staff to continuously improve the way the work works (and how to systematically challenge/remove all the barriers to providing value in more effective ways). This process invariably releases resources (a lot of resources!), but the ‘key’ thing is what you do with the resources released. Front line resources released need to be re-invested into improving / increasing the services provided. Managers supporting front line staff to continuously improve how value can be provided are also kept, but the remaining ‘leadership’ and ‘management’ (i.e. who don’t understand the work, create barriers instead of removing them, frustrate front line staff and prefer to ‘manage’ targets / league tables / people rather help/support people) need to find something else to do (e.g. work out how to add value!)

Resources released from front-line services are used to continuously improving the level of value provided and to identify/provide more effective services too (yes – more services – hence the term ‘more for less’). Meanwhile management has to change fundamentally (i.e. to lean management), with far fewer managers carrying out very different work – e.g. supporting front line staff continuously improving the work and systemically removing every barrier in their way of doing this (e.g. the plethora of bureaucracy and flawed policies – nb top line figures for the number of pen-pushers/bureaucrats is just the tip of the iceberg and most current policies are designed to generate waste, not remove it). You can think of this as a systematic ‘bureaucracy stripper’.

Lean management also needs to be applied to Government policies too (nb the bottom up continuous improvement described above would drive this anyway) … for instance changing the vast array of complex tax structures/credits which has resulted in a culture of dependency and armies of paper pushers to ‘check/process’ them all. It would also introduce robust, fairer, and much simpler taxes such as a Land Value Tax (referred to earlier). It was also remove the flawed and outdated targets/league table culture introduced by this Government … for instance take a look at my recent post here.

Lean management is already starting to be applied by forward thinking police forces/hospitals (with dramatic and positive outcomes – 30/40% improved outcomes in terms of time, resources, service quality, staff moral…). Change is coming, but it has been held back/stifled by all the policies/barriers put in place by this Government (e.g. league table/target culture).

Millions of jobs are going to be lost in the short term whether we like it or not … given this we need to make sure we lose the non-value adding ones and reinvest time/resources released from front line services to provide more and better services, so we can start to get back on track and avoid ‘cutting/slashing’ the actual services provided (like countries such as Singapore have done) … we also need to offer the majority of ‘managers’ released training in 21st century leadership and management practice! IMHO the youth of today should also be given the opportunity to separately learn about 21st century leadership & management practice too (e.g. within school), as it would expose them to the actual world of opportunity still out there, and expand their leadership and entrepreneurial qualities too.

Based on Deming’s work, I successfully decoded 21st century leadership and management two years ago, as well as the system diagrams describing the above (P219-223) … for those interested in learning more about this you can always read my book online (via Google books) here

NB the ‘losers’ – the leeches/managers who add no value, fail to listen/learn, have no interest in helping/supporting anyone (eg like to please their boss, rather than customers / front line staff) and have no interest in learning/applying 21st century leadership & management. The other losers will be those who like to ‘obtain lots more wealth’ but by ‘adding no value’ ...'