What organizational structures are most conducive to Lean implementation? Which ones are not? If the existing organization is not conducive to Lean, how can one structure the Lean deployment to maximize the likelihood of success?

1. Organizing for Lean
Autonomy, Recursion and Cohesion
Insights from the Viable System model
by Ben Sagalovsky 2015
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2. Organizing for Lean
Autonomy, Recursion and Cohesion
Insights from the Viable System model
Version 2.1 November 2015
Benjamin Sagalovsky
This publication may be reproduced, as a whole or in part, remixed or
transformed, provided that acknowledgement of the source is made.
Notification of such would be appreciated.
by Ben Sagalovsky 2015

3. The Viable System model
Why a model:
• Lean often turns out to be much harder to establish and sustain than expected.
• Part of the difficulty arises from discounting its organizational aspects – what is
needed organizationally so that Lean can succeed and take root.
• A good (mental) model of organizational issues can shed light on the areas to focus
in order to ensure the success of a Lean initiative. Value Stream Mapping, for
instance, contributes such an insight at the production line level.
The Viable System model (VSm)
• Written here with a lowercase “m” to differentiate it from Value Stream Mapping.
• Developed and presented in several books in the 1970s and ‘80s by Stafford Beer
(former Production Controller and Operations Research manager at United Steel).
Beer challenges some key ideas on what constitutes an organization and thus the
VSm approach, not unlike many Lean concepts, takes a while to fully grasp.
• These slides present a very partial view of the VSm, focusing on its application in
support of Lean deployments. The discussion follows the terminology and approach
of Raul Espejo, who has advanced the development and application of the VSm and
elaborated on the key deployment tools to be discussed below, the unfolding of
complexity and the primary activity-function table.
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4. The VSm’s Perspective on Organizations
The VSm models the viable enterprise as a Recursive organization
of Autonomous Units within Autonomous Units.
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ENVIRONMENT
The overall organization…
…whose main value-adding activities…
…an autonomous unit…
… in interaction with its environment…
…are each carried out by its own autonomous unit…
…and so on…
A Unit is Autonomous if it is able to conceive,
implement, execute and evolve its own processes,
products and services in continuous interaction with
its environment, and in alignment with the goals and
policies agreed with its embedding organization.
Supporting and
orienting functions

5. Autonomy, Recursion, and Lean
5by Ben Sagalovsky 2015. Toyota Kata diagram by Mike Rother
Lean assumes and requires
Autonomy at all levels, and by
exercising it regularly it also
promotes its further development.
Value Stream
Level
Value Stream
Loop Level
Process
Level
Organization
Level
Many Lean tools
take team autonomy
as a given…
Workers and teams
can decide tools and
materials location Workers can ‘stop the
line’, and with their
supervisor, find and
address root causes.
Teams can negotiate and pursue goals,
identify and remove roadblocks, etc.
Sort
Set in
Order
Shine
Standar-
dize
Sustain
Jidoka
Hoshin
Kanri
Toyota
Kata
… and some even
assume a recursive
organization of
autonomous units
within autonomous
units.
The Viable System model concepts of Autonomy and Recursion
are also deeply embedded in Lean:
A P
S D

6. An Example: Levels of Autonomy
in a Value Stream - Based Organization
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Consider an organization
that, after much effort,
has organized itself along
value streams, in the
spirit of Learning to See.
Loop 1a Loop 1b Loop 1c Loop 1d
Value Stream 1
Loop 2a Loop 2b Loop 2c
Value Stream 2
Loop 3a Loop 3b Loop 3c Loop 3d
Value Stream 3
For simplicity’s sake some
items are not shown:
information flows,
customer pull, shared
processes, suppliers, etc.
on the organizational decisions
taken when the value streams
were established!
Value
Stream 1
Value
Stream 2
Value
Stream 3
Loop
Loop
Loop
Loop
Loop
Loop
Loop
Would this constitute a
Recursive organization of
Autonomous Units within
Autonomous Units?
It depends…
The following slides present three possible scenarios . . .

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Organizational Scenario 1:
Top-down Lean
The value stream structure is conceived,
implemented and updated by a Lean
specialist team.
Product changes, decided elsewhere, are
implemented by Production Engineering
and the Lean specialist team.
Production Control does not have to call
all the shots, thanks to Lean tools and
practices:
• Loops self-schedule based on clear
Pull signals
• Value Streams decide on Kanban and
supermarket sizes, heijunka job
sequencing, etc.
A unit is autonomous if it is able to conceive, implement, execute and evolve
its own processes, products and services in continuous interaction with its environment,
and in alignment with the goals and policies agreed with its embedding organization.
“Operational Discretion”
Operational complexity is addressed
right where it arises, at the loops and
value streams.
Production Control can now focus on
interfacing with marketing, sales,
planning, etc. – addressing the residual
complexity that in this Scenario cannot
be locally dealt with.
Production Engineering and the Lean team
overwhelmed by the complexity of
addressing all the details, breakdowns and
evolution of the production processes.
This results in queues for their time and
attention, problems getting out of control
for lack of timely and appropriate care, long
stabilization times at product startup, etc.

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Organizational Scenario 2:
Engaged, Evolving Lean
The structure is the outcome of Value
Stream Mapping efforts where all levels
participate.
Future State Maps are periodically updated,
and seen as Challenges to strive for as part
of an ongoing Toyota Kata process.
A unit is autonomous if it is able to conceive, implement, execute and evolve
its own processes, products and services in continuous interaction with its environment,
and in alignment with the goals and policies agreed with its embedding organization.
“Internal Process Discretion”
Internal process complexity is addressed at
the level it arises, at the time it arises, by the
people directly involved in each process.
Production Engineering and the Lean team
provide support and training and work on
planning ahead and on the residual process
complexity that cannot be locally addressed.
Production Control deals with the
residual complexity of interfacing
with marketing, sales, planning, etc.
Involvement of high level personnel
(above the value streams) is often
required to address trade-offs and
reach agreement with those groups.
Production Engineering and the
Lean team do not need to focus on
process details:
• VSM exercises lead to new
visions of how work is to be
conducted.
• The Toyota Kata process brings
those visions to life.

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Organizational Scenario 3: Integrated Units
Similar to Scenario 2, with the following changes:
• The product development, marketing and sales groups for
each of the product families have been integrated with the
corresponding value stream.
• A Hoshin Kanri process aligns efforts across all levels of the
organization.
• The Value Stream and loop teams maintain ongoing
conversations with suppliers and equipment manufacturers
in order to identify opportunities and trends.
Production Control
role absorbed into
the integrated units.
Higher level
involvement only
required for setting
direction, goals and
boundary conditions.
A unit is autonomous if it is able to conceive, implement, execute and evolve
its own processes, products and services in continuous interaction with its environment,
and in alignment with the goals and policies agreed with its embedding organization.
“Autonomy”
Overall complexity
is addressed right
where it arises, by
those most
affected and vested
in the viability and
success of each
product family
The more self-contained organizational units allow for all the
complexity of the interactions among production, sales,
product development and marketing to be addressed directly.
This results in a more agile and flexible response to
requirements and a faster integration of changes in business
conditions and market trends.

10. Autonomy and Lean Deployment
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and decisions
only possible
here
Even when the structure is not conducive, it
is still tempting to deploy Lean along the
existing organization. But a lack of
autonomy and the resulting organizational
struggle could sabotage the process.
Deploying for instance Hoshin Kanri objectives along an
unfavorable pre-existing structure may end up in failure
if a lack of autonomy makes it difficult to achieve any
significant, ambitious goals.
Same with TPM, cells, Lean materials supply, and so on.
But, how could an
organizational structure be
defined than can actually
promote autonomy and
thus facilitate Lean
implementation?
In some cases (a crisis?), a complete
reorganization may be considered.
If this is not warranted, a temporary
Deployment Structure can be set up to
ease the Lean implementation and to pull
the existing structure in its direction.
These scenarios illustrate how organizational decisions impact autonomy and, along with
it, the reach and the depth of Lean implementations. Not all organizations are able to
sustain autonomy, and this can create significant barriers to Lean deployment.

11. Organizing for Autonomy
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Products
and Services
Variety
Market
Segments
Variety
Process
and Technology
Variety
Geographical
Variety
Organization
Organizations are complex
because they need to be
able to cope with all the
complexity inherent in
the business.
The development of a
structure based on
Autonomous Units needs
to start by splitting that
complexity into pieces that
can each be addressed
autonomously.
SOME Products
and Services
Variety
SOME
Market
Segments
Variety
SOME Process
and Technology
Variety
SOME
Geographical
Variety
Unit 1
SOME Products
and Services
Variety
SOME
Market
Segments
Variety
SOME Process
and Technology
Variety
SOME
Geographical
Variety
Unit 2
SOME Products
and Services
Variety
SOME
Market
Segments
Variety
SOME Process
and Technology
Variety
SOME
Geographical
Variety
Unit 3
By successively splitting the complexity along its different dimensions we can identify
possible ways to create a whole structure of autonomous units within autonomous units.


12. The unfolding
proceeds down to
the lowest levels,
reaching down to
Value Streams and
Loops.
A Value-Creation Centered Structure
12by Ben Sagalovsky 2015. Diagram from “Organizing for Lean” (Sagalovsky, 2015)
The successive “unfolding” of the complexity that has to be managed can help define a
structure for the primary (value-adding) activities, those that generate the products and
services that the clients value.
Note that an alternative
unfolding could have split
Markets at the highest
level, thus suggesting a
different structure based
on top-level Industrial and
Consumer divisions.
The decision on the order
in which to unfold the
complexity is strategic,
based on expected market
trends, on synergies to
leverage and promote,
etc. Whatever the order,
the unfolding should
ensure that each “chunk”,
at each level, can be
autonomously managed.
This example
unfolds the
complexity of a
hypothetical
company along
its Geography,
Market and
Process
dimensions.

13. Allocating the Functional Support Roles
13
A support task would best be de-centralized
to a specific unit if it is a critical success
factor for the unit, if it needs to be
performed in a specific way for that unit, and
if the demand and resources at the unit
make such a de-centralization possible.
by Ben Sagalovsky 2015. Diagram from “Organizing for Lean” (Sagalovsky, 2015)
On their part, the support functions
(internal HR, finance, sales, supply
chain, etc.), need to be deployed so
as to optimally support the work
and the autonomy of the primary
activity units.
The Primary Activity-
Function table can be
used to display the
allocation of that support.
Purchasing
Contracts
Marketing
ProductDevelopment
Sales
Maintenance
Planning
InternalControl
BudgetandFinance
Safety
FormalTraining
Hiring/Firing
Metallic, Inc.          
Americas      
North America          
Consumer Products        
Manufacturing        
Distribution       
Distribution Centers      
Industrial Products       
Manufacturing       
Plants       
Installation       
Northeast     
Prefab Shops       
Onsite Crews       
Primary Activities
Support Functions
At the level of the
Americas unit
there is no
involvement on
Purchasing and
Marketing, but
there is in
Contracts,
Planning, and
Formal Training.
Onsite Crews are
involved in
Purchasing and
Hiring/Firing, but
not on Contracts
or Marketing.
A dot in the table
indicates that some
tasks of that function
are delegated to the
Unit engaged in that
primary activity; the
specific tasks need to be
clearly documented.

14. A Structure for Lean Deployment
14by Ben Sagalovsky 2015
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At the start of a Lean deployment,
the organization will likely not be
structured as “autonomous units
within autonomous units” (just like
value streams will not be neatly
made up of autonomous loops)
These are
target states, to
be pursued as
part of the Lean
deployment
itself.
Purchasing
Contracts
Marketing
ProductDevelopment
Sales
Maintenance
Planning
InternalControl
BudgetandFinance
Safety
FormalTraining
Hiring/Firing
Metallic, Inc.          
Americas      
North America          
Consumer Products        
Manufacturing        
Distribution       
Distribution Centers      
Industrial Products       
Manufacturing       
Plants       
Installation       
Northeast     
Prefab Shops       
Onsite Crews       
Primary Activities
Support Functions

Initial cascading of value-
added activities groupings.
Support activities to be
integrated at each grouping.
Makeup of leadership teams
to hold accountable for the
goals of each grouping.
Hoshin objectives, and
other Lean tools, can now
be effectively deployed
along this structure.
It is in fact the pursuit of
business objectives that
provides direction, energy
and motivation for setting
up a Deployment Structure!
If a complete reorganization is not warranted, the VSm concepts and tools
can still serve as a guide for setting up a temporary Deployment Structure:
The details of the deployment structure will need to be developed recursively, figuring
out what splitting of complexity at the next level can best help achieve the goals of each
grouping. At some point this will demand a complete value stream mapping effort!

15. Building Up the Units’
Capacity for Autonomy
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It is not enough for
the structure to
“allow” Autonomy;
each unit has to be
able to effectively
exercise it.
The VSm identifies three systemic functions that need to be active
in units at all levels for them to be able to exercise Autonomy.
Setting direction
and goals,
or localizing,
negotiating and
incorporating
goals from
higher-up in the
organization.
Policy
Ensuring that the
unit’s producing
activities
(autonomous
units themselves)
effectively
contribute to the
overall unit’s
goals.
Cohesion
Identifying and
assessing trends,
opportunities and
threats in the
environment, arising
from client needs,
suppliers, competitors,
and the rest of the
internal organization.
Intelligence
Even in the case of front-line teams, Lean emphasizes the importance of
Cohesion (flow, pull, shared understanding via tracking boards, etc.),
Intelligence (clear client and ‘next process’ requirements), and
Policy (negotiating and setting goals, as with A3 or Toyota Kata).
These functions do not demand dedicated resources,
but dedicated attention and effective processes

16. Securing Organizational Cohesion
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Cohesion is a necessary counterpart to Autonomy – the “glue” that binds autonomous
units together and ensures that they all share a common purpose and that their work is
harmonized in the direction of that purpose
Lean developed naturally to attend to this complementarity: while it furthers the
autonomy of teams at all levels, it also ensures cohesion through practices and tools that
enhance Alignment, Monitoring and Coordination (see Table on the following slide).
The VSm seeks to
recursively secure
the organization’s
Cohesion through
mechanisms that,
implemented at
each unit, ensure
its cohesion with its
own embedded
primary activity
units, and so on.
Alignment: by Negotiating the goals and programs to pursue at
each embedded unit and the necessary resources,
Defining non-negotiable items (safety, compliance, etc.), and
Intervening directly (only when absolutely necessary).
Coordination amongst the embedded units to ensure synergy, to
avoid inconsistency and conflicts, and to reduce the residual
complexity that has to be brought up to higher levels.
Monitoring (sporadically) the activities at the embedded units,
so as to better understand their capabilities and constraints.
The columns of this table can help
identify tools to use for reinforcing
a particular dimension of Cohesion.
Rows can help assess if full advantage is being
taken of a tool (e.g., is Standard Work used
only for Alignment, and not for Monitoring?)

17. Lean Practices as Cohesion Enablers
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Alignment Monitoring Coordination
Hoshin Kanri Negotiated goals and resour-
ces. Tracking and reporting.
Deep understanding gained
through PDSA review cycles.
Improvement and Coaching
Kata, A3
Negotiated goals and
resources.
Supervisor in a coaching role,
learning of issues and
difficulties. Can be used to improve upon
coordination issues.
PDSA, Kaizen events Addressing stated goals.
Deep understanding of issues
and blockages.
Going to Gemba ,
Standing in the circle
First-hand witnessing of work
processes.
Pull: Supermarkets, Kanban,
etc.
Supermarket and Kanban
status provide quick high-level
view of process and issues.
Enables direct coordination
of production between
processes.
Value Stream Mapping
Agreements and
expectations clearly stated
through Future State VSMs.
Direct witnessing of work
processes.
One key focus is improving
coordination among the
value stream processes.
Standard Work, Production
Boards, Visual Controls, 5S
Clear expectations, and
negotiated evolution of
standards. Easy and prompt
identification of issues
and workarounds.
Stability and consistency
simplify coordination among
processes.
Cycle Time specification and
tracking
Clarity of goals, ease of
tracking. Basis for assigning
resources.
Mistake-proofing, Jidoka,
TPM
Lean Culture: Continuous
Improvement, 7 Wastes, etc.
Provides common grounding
for collective action.

18. Incorporating the Organizational Dimension
into Lean Deployment Efforts
The prior discussion suggests some actions that can help establish a conducive
organizational infrastructure when initiating (or re-energizing) a Lean Deployment:
Identify the organizational scope of the effort, and the goals to be pursued.
• If the scope is not the whole organization, but a “slice”, or “pilot area”, make sure it
represents indeed an Autonomous unit – this may require enlarging it by securing the
participation of some support functions and complementary value-added activities.
Agree on the outlines of a possible Deployment Structure.
• If the target organization is not itself structured as “autonomous units within
autonomous units” then come to agreement on an initial Unfolding of Complexity and
an associated Primary Activity – Function table.
Unfold, recursively, both the goals and the Deployment Structure.
• Starting with the top level, identify a high-level lead team and validate the initially
stated goals with them.
• Recursively, with the help of the unfolding of complexity and the primary activity -
function table, identify lead teams to hold accountable for each area at the next level
down, and unfold the established goals to them, in the spirit of Hoshin Kanri.
• Support each team in establishing processes to attend to the Policy, Intelligence and
Cohesion functions, making use of Lean tools to support Cohesion as appropriate.
• As the structure takes shape, leverage Lean processes such as Toyota Kata or A3 to
advance towards the stated goals.
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19. • This discussion has hopefully illustrated how the Viable System model can provide a
much-needed perspective on what is needed organizationally so that Lean initiatives
can succeed and take root and, more generally, on what it means organizationally to
“go Lean”. This can also serve to orient and focus efforts aimed at setting up a Lean
culture and organization.
• These slides represent an adaptation, with minor updates, of the paper "Organizing for
Lean: autonomy, recursion and cohesion“, B. Sagalovsky (2015), Kybernetes, Vol. 44,
iss: 6/7, pp.970 – 983
• For a comprehensive overview of the VSm and of Espejo’s work on this area, please
refer to Organizational Systems: Managing Complexity with the Viable System Model,
by Espejo, R. and Reyes, A., Springer-Verlag, Berlin-Heidelberg (2011),.
I would greatly appreciate learning about the thoughts that may have come up for you as
you went through the presentation. Please share those thoughts, along with comments,
questions and experience, in the Comments section below or directly via email at
Thanks!
Organizing for Lean
Insights from the Viable System model
19by Ben Sagalovsky 2015