Lean Leadership: Part 2 of 3

Lean Management Components Core Values / Principles / Philosophy • Analytical tools • Value stream analysis & mapping • Metrics-based process mapping • Root cause analysis: Five Why’s, Fishbone, Pareto, Problem tree, FMEA • Waste Countermeasures • Standard work • Quality at the Source / Error proofing • 5S / Visuals • Pull systems: One-piece flow, FIFO lanes, Kanban • Cells / co-location • Level loading • Work balancing • Batch size reduction • Setup & changeover reduction • Work segmentation • Autonomation • Cross-training / multi-functional workers • Strategy deployment (hoshin planning) • Value stream management • Key performance indicators (three levels, including customer & operational metrics) • Disciplined process management via clear owners & KPIs • Daily kaizen • PDSA Problem Solving (& A3 management) • Performance dialogues / huddles / standups • Go & see (gemba) management • Humble inquiry • Continuously seeking voice of the customer • Purposeful meetings & reporting • Lean accounting • Consensus management • Humility • Respect • Curiosity • Transparency • Relentless pursuit for perfection • Customer value • Flow / waste elimination • Just in time • Visual management • Work standardization Lean Management © 2016 The Karen Martin Group, Inc. 2

Lean Leadership Webinar – Part 1 Core Values / Principles / Philosophy • Analytical tools • Value stream mapping • Metrics-based process mapping • Root cause analysis: Five Why’s, Fishbone, Pareto, Problem tree, FMEA • Waste Countermeasures • Standard work • Quality at the Source / Error proofing • 5S / Visuals • Pull systems: One-piece flow, FIFO lanes, Kanban • Cells / co-location • Level loading • Work balancing • Batch size reduction • Setup & changeover reduction • Work segmentation • Autonomation • Cross-training / multi-functional workers • Strategy deployment (hoshin planning) • Value stream management • Key performance indicators (three levels, including customer & operational metrics) • Disciplined process management via clear owners & KPIs • Daily kaizen • PDSA Problem Solving (& A3 management) • Performance dialogues / huddles / standups • Go & see (gemba) management • Humble inquiry • Continuously seeking voice of the customer • Purposeful meetings & reporting • Lean accounting • Consensus management • Humility • Respect • Curiosity • Transparency • Relentless pursuit for perfection • Customer value • Flow / waste elimination • Just in time • Visual management • Work standardization Lean Management © 2016 The Karen Martin Group, Inc. 3

Lean Leadership Webinar – Part 2 Core Values / Principles / Philosophy • Analytical tools • Value stream mapping • Metrics-based process mapping • Root cause analysis: Five Why’s, Fishbone, Pareto, Problem tree, FMEA • Waste Countermeasures • Standard work • Quality at the Source / Error proofing • 5S / Visuals • Pull systems: One-piece flow, FIFO lanes, Kanban • Cells / co-location • Level loading • Work balancing • Batch size reduction • Setup & changeover reduction • Work segmentation • Autonomation • Cross-training / multi-functional workers • Strategy deployment (hoshin planning) • Value stream management • Key performance indicators (three levels, including customer & operational metrics) • Disciplined process management via clear owners & KPIs • Daily kaizen • PDSA Problem Solving (& A3 management) • Performance dialogues / huddles / standups • Go & see (gemba) management • Humble inquiry • Continuously seeking voice of the customer • Purposeful meetings & reporting • Lean accounting • Consensus management • Humility • Respect • Curiosity • Transparency • Relentless pursuit for perfection • Customer value • Flow / waste elimination • Just in time • Visual management • Work standardization Lean Management © 2016 The Karen Martin Group, Inc. 4

Lean Leadership Webinar – Part 3 Thursday, October 27 – https://attendee.gotowebinar.com/register/2039217314521750529 Core Values / Principles / Philosophy • Analytical tools • Value stream mapping • Metrics-based process mapping • Root cause analysis: Five Why’s, Fishbone, Pareto, Problem tree, FMEA • Waste Countermeasures • Standard work • Quality at the Source / Error proofing • 5S / Visuals • Pull systems: One-piece flow, FIFO lanes, Kanban • Cells / co-location • Level loading • Work balancing • Batch size reduction • Setup & changeover reduction • Work segmentation • Autonomation • Cross-training / multi-functional workers • Strategy deployment (hoshin planning) • Value stream management • Key performance indicators (three levels, including customer & operational metrics) • Disciplined process management via clear owners & KPIs • Daily kaizen • PDSA Problem Solving (& A3 management) • Performance dialogues / huddles / standups • Go & see (gemba) management • Humble inquiry • Continuously seeking voice of the customer • Purposeful meetings & reporting • Lean accounting • Consensus management • Humility • Respect • Curiosity • Transparency • Relentless pursuit for perfection • Customer value • Flow / waste elimination • Just in time • Visual management • Work standardization Lean Management © 2016 The Karen Martin Group, Inc. 5

Distraction Kills

The Power of Focus: Organization A – Projects Completed 12 20 12 3 12 Pre-Focus Post-Focus Projects Started Projects Completed

Organization B: Completed Projects Per Year 13 24 73 Pre-Focus Post-Focus • No additional resources • Higher quality products launched

A Key to Apple’s Success? 14 “…saying no to 1,000 things to make sure we don’t get on the wrong track or try to do too much. …it’s only by saying no (or not now) that you can concentrate on the things that are really important.” — Steve Jobs

Task #1: Focus Reduces Chaos. Task #2: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Round 1 – Alternate between tasks : letter, number, letter, number, etc. Sentence: Numbers: The Cost of Switch Tasking Round 2 – No switch tasking. Write the full sentence and then the numbers 1-17. Sentence: Numbers:

Annual Hoshin Planning (Strategy Deployment) • Builds consensus around TRUE NORTH • Creates organizational focus on solving what matters most

Strategy Deployment Key Feature: Catchball 18 Executive Team What? Who? When? Senior Mgmt What? Who? When? Middle Mgmt What? Who? When? Frontline What? Who? When? Year 1 Year 2 Year 3

Strategy Deployment Plan Development Pre-work 19 Gather lists of: • All active projects and initiatives • All stalled projects and initiatives • All planned projects and initiatives • All desired projects and initiatives • All “stealth/rogue” projects and initiatives

20 Must do Eliminate Maybe Delay 1. List what you could do on 3x6” post-its (active or planned initiatives, projects & improvement activities). Gain consensus. 2. Categorize them (place post-it on appropriate page. Gain consensus. 3. Decide what you will do. (Move “maybe’s” onto one of the other three pages.) Gain consensus. Label Four Flip Chart Pages & Hang on Wall

Step 4 Create Action Plan for What You Will Do 21 Must do Eliminate Maybe Delay

The Overly Complicated X-Matrix 22

23 1. Increase sales 5%. 3. Achieve 10% profit. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec IT Mktg Ops HR Bob Fin PE Pario COM Direct CDs / AMs PD Rec PD Mgmt BMD SWS 2 3,500 units sold by 12/31/2013 through all channels (approx. $700K) X X X X X X X X X X X X Bob Dana 2 3 3 3 2 3 3 1 1 3 3 1 3 11 Develop & deliver training to top 50 Dealers X X X X X X Bob Rex/Tim 3 3 3 21 Revised course materials by 6/30/2013 X X X Bob Josh R? 2 3 3 2 2 5 Education: 1 school district spec'd/underperforming COM distributor (25) by 12/31 valued at min $35K each X X X X X X X X X X X X Howard Michael S 1 3 2 3 3 8 10 new dealers on board (net) ($500K per dealer this year) X X X X X X X X X X X X Howard Mike B 2 3 9 5 new distributors bringing $200K annual rev (& 5 terminated) X X X X X X X X X X X X Howard Howard 1 1 1 2 3 17 10 projects spec'd by 12/31; $300K rev by 12/31 X X X X X X X X X X Howard Dana 1 3 3 3 29 20 by year-end X X X X X X X X X X X X Howard Mark H 2 3 3 3 32 TBD X X X Howard Howard 33 TBD X X X X X X X X X Howard Howard 10 Useful reporting and metrics are established and in place X X Jim Randall 3 1 1 1 1 1 1 30 TBD X X X X X Jim Josh 3 31 TBD X X X X X X Jim Josh 1 1 1 3 1 1 1 1 1 1 1 1 1 1 25 TBD Jim Shannon 3 3 1 1 1 1 1 26 System 7.0's in place X X X Jim Randall 3 2 1 2 1 15 100% accurate payroll; 100% management satisfaction at April mgmt. meeting X X X Josh Phyllis 1 3 20 Internet task list is simplified and streamlined for PDs then plan is rolled out to PDs X X X X Michael M Michael M 2 3 2 3 22 Design Calculator is updated successfully and rolled out X X X Neall Matt D 3 1 1 3 2 2 3 24 Competitive Analysis complete and distributed for use X X X Neall Dana 2 3 3 3 3 3 3 1 Design changed to solve delam issue long-term X X X X X Susan David R 3 2 3 12 30 parts sourced in U.S.; completed plan for managing China-sourced parts X X X X X X Susan Shannon 3 3 2 2 13 Warehouse laid out; kanban revised; Syspro implemented X X X Susan Shannon 3 14 Lay out complete; equipment installed X X X Susan David R 3 3 X = Planned 2013 Priorities 2013 Goals & Objectives 4. Improve morale (metric TBD). 2. Achieve 50% gross margin. Created: 01-14-13 Revised: Level of Effort/Involvement Required Priority Goal or Measurable Objective Exec Owner Plan review dates: Tactical Owner ● = Actual < Company Name > Contentremovedforconfidentiality Modified Strategy Deployment Annual Plan

POST: Plan Management 24 • Weekly status meetings to start, then 2x a month, then monthly (required attendance). • Focus: how to turn red items into green • Expectation: Full team helps remove obstacles • Tone: supportive but tough • Visibility matters: post progress physically! • Modify plan for changing conditions, but avoid Organizational ADD

28 Scientific Problem Solving

30 Detailed Steps 1. Define and break down the problem. 2. Grasp the current condition. 3. Set a target condition. 4. Conduct root cause & gap analysis. 5. Identify potential countermeasures. 6. Develop & test countermeasure(s) 7. Refine and finalize countermeasure(s). 8. Implement countermeasure(s). Study Evaluate Results 9. Measure process performance. 10. Refine, standardize, & stabilize the process. 11. Monitor process performance. 12. Reflect & share learning. Adjust Do Clarifying the PDSA Cycle Plan Develop Hypothesis Conduct Experiment Refine Standardize Stabilize Phase Nailing the Plan stage of PDSA is the most important element in the entire cycle.

Truth Truth Truth Truth Truth Truth Truth CLARITY 31

Investigation Takes Many Forms 32 P/U AFrame Power Pole o st g Up Spag ett ag a e o e a e t p o e e ts st ated d sta ce a ed du g g Up 3095 t ag a o o s t e oo a d a d does ot c ude o g t e a e g Up e 90 utes Water

33 Detailed Steps 1. Define and break down the problem. 2. Grasp the current condition. 3. Set a target condition. 4. Conduct root cause & gap analysis. 5. Identify potential countermeasures. 6. Develop & test countermeasure(s) 7. Refine and finalize countermeasure(s). 8. Implement countermeasure(s). Study Evaluate Results 9. Measure process performance. 10. Refine, standardize, & stabilize the process. 11. Monitor process performance. 12. Reflect & share learning. Adjust Do Clarifying the PDSA Cycle Plan Develop Hypothesis Conduct Experiment Refine Standardize Stabilize Phase Iterative Problem Definition & Scoping

Example: “Data integrity problem” Says who? What are they saying SPECIFICALLY? Go interview! Are we talking about inaccurate data, missing data, incomplete data, data in wrong location, similar but slightly different data stored in different locations, incorrect conclusions about accurate data, or…? Example: “No control of refrigerant inventory (controlled substance)” Is this true in all locations? All types of refrigerant? Is physical inventory quantity higher, lower, or both when compared to computer numbers? © 2015 The 34 1. Define and Breakdown the Problem

© 2015 The 35 Problem Definition: Clarify, Qualify, Justify, Quantify 1. Is the problem clear and focused or vague and diffuse? 2. Why is this a problem? 3. How do we know it’s a problem? What evidence or proof exists? 4. How big is the problem? 5. Which aspect of the problem are we going to address?

36 2. Grasp the Current Condition • Understand the details behind the problem. • Options – OBSERVATION – Interview – Data analysis – Video analysis – Document review – Value stream or process mapping, – Etc.

Describe the future. How does “better” look and feel? From/to: “If not this, then what?” Must be measurable Surveys enable you to convert anecdotal feedback into quantifiable data Should stretch the organization/team/problem owner (improvement is largely a mind game) Level of aggressiveness depends on : Urgency Timeframe Available resources Consensus around the problem Degree of focus © 2015 The 37 3. Set a Target Condition

What’s stopping you from performing at the target condition NOW? Consider all obstacles: Physical / Environmental Mechanical Process-related Psychological / cultural Resource-related © 2015 The Karen Martin Group, Inc. 38 4. Conduct Root Cause & Gap Analysis CauseCause--andand--Effect DiagramEffect Diagram Machine Measurement Environment People Material / Info Method Budgets Submitted Late Lack of experience Time availability No sense of import No stnd spread sheet Email vs. FedEx No standard work Input rec’d late Forecast in other system Manual vs. PC System avail. No milestones $ vs. units Weather delays Dispersed sales force Changing schedule Machine Measurement Environment People Material / Info Method Budgets Submitted Late Lack of experience Time availability No sense of import No stnd spread sheet Email vs. FedEx No standard work Input rec’d late Forecast in other system Manual vs. PC System avail. No milestones $ vs. units Weather delays Dispersed sales force Changing schedule 5 Why’s Why? Why? Why? Why? Why?

• Standard work • Quality at the Source / Error proofing • 5S / Visuals • Pull systems •One-piece flow •FIFO lanes •Kanban • Cells / co-location © 2015 The Karen Martin Group, Inc. 39 5. Identify Potential Countermeasures • Level loading • Work/line balancing • Batch size reduction • Setup reduction / changeover • Work segmentation • Autonomation • Cross-training / multi- functional workers

A3 Reports are used as: Coaching aid Consensus-building tool Communication tool Organizational learning device Problem Countermeasures / Implementation Plan - 32% of customers dissatisfied with office space cleanlines- 80% of emergency service requests are to wrong contact - Standard work for restroom cleaning - Standard work checklist for non-routine items - Service levels vary by building - Standard process for measuring & mixing chemicals - 10% of daily staffing available is allocated to travel/check in time - Restroom cleaning log - Standard facility service plan (Plan A & Plan B) Current Condition - Modify & standardize process for unplanned absences - 31 Facility areas require custodial services - Modify starting points and schedules to reduce transportation waste - Evaluate fleet availability to reduce waiting waste Effect Confirmation Target Conditions/Measurable Objectives - 80% Daily staffing availability - 50% Improvement - customer satisfaction with restroom cleanliness - Defined standard work (for custodial staff and customers) Follow Up Actions Root Cause & Gap Analysis - Undefined level of service (office parties, special events) - No defined process for unplanned absences (calling in, redistribute work, etc.) - Inconsistent availability of communication tools (vary by building) - No defined process for requesting/responding to emergencies - Variation in cleaning schedules versus facility operating schedules - Unpredictable daily staffing - Travel time + Check in Time = 16.00 hrs/day = 2 FTE - Customer requested personalized service (newspaper delivery, parties, trash) CUSTODIAL SERVICES A3 Plan Do, Check, Act - 22% of customers dissatisfied with restroom cleanliness 8% 20% 8% 14% 17% 33% 0% 5% 10% 15% 20% 25% 30% 35% Phone Call to Custodian Phone Call to Custodial Supervisor Phone Call to Custodial Manager Phone Call to Public Works Dispatch (x6000) Email Notify Custodial Staff On Site Survey: When you require emergency services, how do you request them? 32% 22% 19% 18% 6% 0% 10% 20% 30% 40% Office Spaces Restrooms Common Areas Overall Conference Rooms Survey: Custodial Services - Areas of Dissatisfaction Travel/ Check In Time 16.00 10% Absent Staff 24.00 15% Vacancies 24.00 15% Special Events 2.00 1% Staff Available 94.00 59% Daily Staffing Availability (Hours) 41% ofdaily staffing is unavailable for custodial tasks Title # Staff Hrs/Wk Hrs/Day Lead Custodian 4 160 32 FT Custodian 8 520 64 FT Custodian (Vacant) 2 80 16 PT/Perm (avg 30 hrs each) 3 90 24 PT/Temp (avg 20 hrs each) 3 60 24 Total 20 910 160 Current Actual Result State (+ 60 days) Customers dissatisfied with restroom cleanliness 22% <10% Avg minutes per restroom cleaning 35 30 Avg hours per day cleaning restrooms (184 restrooms) 107 92 Daily staffing availability 59% 80% Daily travel/check in time (hours/day) 16 8 Travel miles per day 139 <70 Metric Projected Remaining Actions Owner 1 2 3 4 5 6 7 8 9 10 11 12 Explore options to improve cell phone availability Mark R. Define process for requesting and responding to emergencies Custodial Supvs Equip carts for recycling Mark R. Process mapping for specialized facilities Mark R. Standardize Cart Equipment & Supplies Custodial Supvs Process improvement for other facility types, e.g. offices, common areas, etc. Mark R. Consider alternative staffing models (floaters, modified shifts) Mark R. Actively manage vacancies Mark R. Implementation Schedule (Months) 42

Alignment of A3s Senior Leadership Middle Management Front Lines Focus A3s How are we going to grow the business? Micro A3s How do we reduce setup time at workstation XYZ? Problem A3s How are we going to reduce lead time to better meet customer demand? 43

GROWTH (TOP LINE) CUSTOMER EXPERIENCE PEOPLE EXPENSE MGMT PERFORMANCE CATEGORIES FOCUS A3 FOCUS A3 FOCUS A3 FOCUS A3 MEASURE 1 MEASURE 2 MEASURE 3 MEASURE 1 MEASURE 2 MEASURE 1 MEASURE 1 MEASURE 2 MEASURE 3 FOCUS A3 MEASURE 1 MEASURE 2 Visual Management via “True North Wall” FOCUS A3 MEASURE 1 MEASURE 2 44

QUALITY IMPROVEMENT DELIVERY IMPROVEMENT COST IMPROVEMENT HUMAN DEVELOPMENT PERFORMANCE CATEGORIES FOCUS A3 FOCUS A3 FOCUS A3 FOCUS A3 MEASURE 1 MEASURE 2 MEASURE 3 MEASURE 1 MEASURE 2 MEASURE 1 MEASURE 1 MEASURE 2 MEASURE 3 FOCUS A3 MEASURE 1 MEASURE 2 Visual Management via “True North Wall” Example 2 (Different Categories) FOCUS A3 MEASURE 1 MEASURE 2 45

PROBLEM A3 #1 PROBLEM A3 #2 PROBLEM A3 #3 PROBLEM A3 #4 PROBLEM A3 #5 FY17 PRIORITIES PROBLEM A3 #6 PROBLEM A3 #7 PROBLEM A3 #8 PROBLEM A3 #9 PROBLEM A3 #10 PROBLEM A3 #11 PROBLEM A3 #12 PROBLEM A3 #13 PROBLEM A3 #14 PROBLEM A3 #15 PROBLEM A3 #16 PROBLEM A3 #17 PROBLEM A3 #18 PROBLEM A3 #19 PROBLEM A3 #20 Visual Management of Key Priorities 46

© 2016 The Karen Martin Group, Inc. 47 To Learn More… • Books • Getting the Right Things Done (Dennis) • Hoshin Kanri for the Lean Enterprise (Jackson) • The Outstanding Organization (Martin) • Managing to Learn (Shook) • Understanding A3 Thinking (Sobek & Smalley) • Public Workshops & Conferences • Association for Manufacturing Excellence • Lean Enterprise Institute • Shingo Institute • Tours – especially outside your industry • Practice, practice, and more practice!

Questions or comments? 48

Karen Martin, President ksm@ksmartin.com @karenmartinopex Blog & newsletter: www.ksmartin.com/subscribe 49