Can public US companies really embrace lean? Well sure, they can deploy lean tools here and there, but the whole socio-technical system that comprises lean? I don’t think so.
Wall Street pressure for quarterly profits competes fiercely with lean principles, both inside and outside the company. Executives who take the long-term view and view employees as appreciating assets worthy of investment, rather than variable costs to be minimized, put their companies at risk of attack from outside “activist shareholders” who demand higher returns. And given how tightly senior executive compensation is tied to the company’s share prices, there’s internal pressure not to put their own wealth at risk by not pumping up the stock price. (Tom Johnson, Doc Hall, and Bob Emiliani have written extensively about this problem.)
The vast majority of shining lean exemplars in the US that I know of have been private companies that don’t need to answer to a bunch of 27-year old Wall Street analysts every three months. How many public companies match up with US Synthetics, Fastcap, Zingerman’s, Menlo Innovations, Lantech, JD Machine, and others? The few firms like Danaher and Barry-Wehmiller that have thoroughly embraced and sustained lean over many years are few and far between. Even when you do hear about public companies having success with lean, it tends to be with one facility, or a specific function, or possibly a division, but not a total corporate commitment.
As a result, lean (or lean-ish) leaders in public companies have about as much luck sustaining lean as an Avenger does in picking up Thor’s hammer. Howard Schultz did remarkable work driving lean at Starbucks, but as Karen Gaudet indicates in her book Steady Work, it didn’t stick. What about Alan Mulally at Ford, or Paul O’Neil at Alcoa? As near as I can tell, the commitment to the totality of lean—what John Shook calls the “socio-technical” system—didn’t survive past their tenures. Of course, that’s not just a problem for public companies, as proved by the sad story of Wiremold after the Legrand acquisition. But it’s an even thornier challenge for public firms.
As always, Toyota is an outlier. But comparisons with Toyota are pointless. Leaving aside the obvious difference that Toyota is the birthplace of lean, it’s playing in a different game than US firms. Stockholder expectations are much lower in Japan. Additionally, industrial cross-holding of stock and societal expectations for responsibility to all stakeholders buffer public Japanese companies from the need to maximize shareholder returns in the short term. That makes it much easier for Toyota (and other Japanese firms) to commit to TPS.
I’m leaving family-owned companies, private equity firms, and any kind of not-for-profit or public service entities out of this discussion. The family in family businesses, the investors in private equity firms, and the Board of Trustees in non-profit (or governmental) organizations certainly play an important role in determining the appetite for the more difficult aspects of lean management. But it’s the drive for short-term profits in public companies that poses the highest hurdle to the wholesale commitment to lean.
Driving lean through a public organization isn’t like trickle-down economics: you can’t just put the leadership team through the paper airplane simulation and expect that TPS will percolate through the entire organization and bring it to the broad sunlit uplands of lean. No matter how impactful the simulation is, we need larger, more systemic changes to our economic system and mental models to make that happen.