Why Measuring Efficiency is Anti-Lean

The measurement of people’s efficiency has a long history in manufacturing industries. The design and production engineers calculate the time required to manufacture a product or batch of products. Each time the product is made, the “actual time” is measured and recorded. The efficiency of the production people (or the process) is calculated by dividing the standard time by the actual time.

If the actual time is faster than standard, the efficiency will be greater than 100%. When the actual time is longer than standard, the efficiency is less than 100%.


The purpose of measuring efficiency is to monitor if the people and the process are running at the right speed so that the right number of units are made according to the production schedule, and the need’s of the customers. When the efficiency measurement is significantly less than 100% an investigation is made so that the shortfall can be caught up, and the reasons for the problem identified.

Traditional approaches to manufacturing finds these measurements very helpful. The measurements were designed to support the “scientific management” developed by Frederick Taylor (and others) in the 1920’s when modern industrial methods were first standardized. These clever and innovative engineers and entrepreneurs based their methods on a few key paradigms.

  • One was that the operations people in a manufacturing plant have “separation of duties”. The people should not make the whole product but each have specialized skills. The products pass through several work stations from fabrication to finished products.
  • A second paradigm is that the plant must maximize the use of the operators time. Operators are an expensive resource and we need to make sure that every minute is used productively.
  • A third is that making large batches of products optimizes the production time and productivity.

The outcome of these assumptions is that the factory makes products all the time, builds finished goods inventory, serves the customers effectively by having available product, and minimizing the product costs. The underlying philosophy of manufacturing management is that we need maximize the “economies of scale” and produce as many products as possible, and to harness the production operators 100% of the time.

None of this thinking works in a lean organization. “Overproduction” is one of the famous Seven Wastes articulated by Shigeo Shingo.

  1. Lean companies do not want their people working all the time making the products. The people need time to work on improvements in their work areas. These improvements are not the large “kaizen events”; they are “continuous improvements”. Hundreds of small improvements initiated by the people in the cells or other work areas. These many small improvements lead to huge benefit as the small improvements add up to significant change, and the people making the changes are the people with the most knowledge.
  2. If the company emphasizes production efficiency, then the people will work to create maximum efficiency. One way to achieve this is to shortcut the standardized work required to make the product, or other tasks the people are doing. This may lead to short-term “efficiency” but violating standard work compromises quality and consistency.
  3. Making larger batches increases the efficiency measurement of production but violates single-piece-flow which is fundamental to lean manufacturing.
  4. Another way to increase efficiency is to change the sequence of products being made so as to minimize such things as change-over or materials handling. In many cases the production sequence is important to providing the right products to the customers, and leads to shortages or delayed delivery of all the products the customer needs today.
  5. A more important issue is that process problems are overlooked and hidden when the people are driven by efficiency. Lean companies identify problems immediately by stopping the process and solving (or at least fixing) the problem so that it will not happen again. This is an important aspect of continuous improvement.

If Efficiency is Anti-Lean then What Do We Measure?

A common way to measure the production process in a lean organization is to use the Day-By-The-Hour chart.


The production quantities for each hour are shown in the Schedule column. The quantities completed are shown in the Actual column and the problems are recorded in the right hand column. This visual board is posted in the work area and kept up-to-date each hour. The board controls the production quantities, initiates problem solving, and ensures that the right products are made at the right time and in the right sequence.

Different versions of the Day-By-The-Hour chart are used in office, warehouse, design, and other processes to create control of the work processes.


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Work by Seeing It. Make it Visual.

unnamedLean organizations of all kinds make strong use of visual management. Visual management means that – as far as possible – people’s work is scheduled, organized, and controlled by themselves, and the information they need can be easily seen on schedule boards, visual work instructions, and simple progress boards.. Their work is not “hidden” inside computer systems or desk drawers.
There is a simple reason why lean companies focus on visual work methods. Humans are visual creatures, and we work much more successfully when the work is visually controlled. The other great advantage of visual management is that it saves a great deal of time. When work schedules and organizations are visually controlled, there is no need for supervisors and managers to spend time assigning work and scheduling on-the-fly.

This is the 8th article of our series showing how to develop a truly Lean Management System. Control your processes using VISUAL MANAGEMENT.unnamed-1 









What Does Visual Management Look Like?

The most obvious aspect of visual management is the widespread use of operations boards. In many lean companies there are operations boards at each cell and work station, and there is a visual board for each value stream. Similar boards are used in new product development, sales and marketing, the office processes, and executive meetings.
VS Board for BlodThe boards are used to show what work needs to be done today or this hour. They are used to report the status of the work, who does the work, the issues and problems that arise, the action needed to ensure the quantity and quality, and to report completion of the work. Visual management is best when the work-teams control and schedule their own activities, based on the current needs of the customers and the company.

Visual work boards are often placed immediately where the work is done. Employees and managers can immediately see the schedule and the progress. This eliminates a lot of wasted time asking what to do next, how to resolve a problem, searching for information. Well organized, visual processes improve productivity, costs, quality, on-time completion, customer service, inventory levels, and machine reliability.

Visual Control of Materials. (What, Where, When, How Many)
This goes back to the adage of “a place for everything, and everything in it’s place”. Lean companies have carefully organized production areas that clearly show where the materials should be, how many items, and the sequence of use. Many simple methods are used to achieve this. Squares drawn on the floor show how many are needed and when the items need replenishment. Colored lines painted on racking show the maximum and minimum number of boxes required. Liquids or powders stored on weighing scales so the amount available and amount needed can be controlled.

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This kind of visual management makes it is easy to replenish materials, to identify shortages, and ensure everything is available before starting a production job. Replenishment is often done using visual kanbans. If, for example, we need 5 pallets of an item in stock, then each pallet has a kanban card attached. When a pallet is used, the kanban card replenishes it from the supplier.

These method largely eliminate the traditional stock counting at year-end or quarter. The materials are under control constantly, and we are not required to “stock count”.

Making this Right
Clear and visually available standard work diagrams enable everybody to know how to make the products, or other tasks, and do it right every time. Similarly, specifications, diagrams, drawings, photographs, and videos are used to visually show the correct process. There are often comparison diagrams showing common errors and mistake-proofing (poke yoke). Clear and standardized inspection and verification processes are also shown visually in the work centers.

Who Does It and When Is It Done

Visual management is used to ensure that the right people with the right skills are assigned to appropriate tasks. It is common to have assignment boards that show who isimagesworking on which tasks or projects, and when they will be available. This is complemented with visual boards showing each persons’ certification for the company’s tasks with various levels of complexity, and where they are currently working so they can be easily found. This visual information makes it easy to assign people to new tasks. This is particularly important for companies that work as “job shops” and have a wide variety of products and processes, and widely different products and services.

Visual Management for Senior Leaders
One of the most successful visual management methods adopted by lean organizations is the “Obeya room”. The Japanese word just means “a large room” but it has been adopted by many companies. The purpose of the Obeya room is to visually organize and monitor the company’s strategic plans.

Visual Management in the Offices, Design Departments, Sales/Marketing, and Administration
As with all aspects of lean management, these visual methods work in the same way throughout the company. Visual methods to control, report, and expedite product designs imagesare achieved in similar ways to production processes, although the work often takes longer, is more diverse, and people work in parallel across multiple projects. This kind of work lends itself to visual management. I cringe every time I see people pulling up Microsoft Project software and thinking they have visual management. Apart from the fact that anyone over 40 years of age can not read the tiny type, these project management apps should be replaced with clear, hand-written (or post-it’s) in visual control boards.

Sales and Marketing has similar issues to that of product development because they often they need to communicate across the long distances. This makes a computer based planning and control system a necessity. But it is again important to create a system that is simple and visual so that people can effectively use the information.

Administrative tasks are a given for visual management. Much of the administrative processes are highly standardized but irregularly used. These include recruitment, month-end financial close, customer relations, etc.. In these situations standardized visual management is a must to ensure the quality and consistency of the process.

Homo Sapiens are visual creatures. To achieve fast, effective, and consistent results we must use visual thinking and methods. Simplistically said, the fewer computer transactions, the lower the waste, the better the process, and more engaged the people. This is a recipe for success and improvement.

VIDEO: Visual Management at Steffes Corporation. 

Why Visual Management


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You Get What You Measure. Measure Right


There is a lot of truth in the old adage “what you measure is what you get”. This is certainly true for industrial companies and most other organizations. As you progress with your lean journey you will soon find that the measures you have been using for years are not only unhelpful, but actively harmful to what you are trying to achieve through lean thinking and methods. Shown below there are five keys to the design of a great lean performance measurements in your company.

This is the 7th article of our series showing how to develop a truly Lean Management System.

unnamed-1Key #1. Our measurements must be developed to support your company’s unique strategies.

There is no one-size-fits-all set of lean performance measurements. Each company must develop their own measurements to support their strategy, their market, their products, and their customer needs.

If you develop the measurements yourselves the measurement system will work better in your company. If you have the teams develop their own measurements then your people will understand them and know how to use them for improving their results.

Key #2. Our measurements be must designed for your company’s specific operations.

The starting point for designing lean performance measurements across your company is to clearly define your company’s strategy. This strategy may be a formal strategic plan, or it might be a less formal explanation of what the leaders of the company value in order to achieve success in their business.

The best way to develop measurements is to use a “lean performance measurements linkage chart”. Starting with the company strategy, we develop measurements that show the achievement of the company’s strategic goals. These measurements are usually easy to define if the company’s strategic objectives are clear and concise.

03 PerfMeasures LinkChart WBLg

Example of a Lean Performance Measurement Linkage Chart

The next step is to link these strategic measurements with measurements at (for example) a plant level. Within the plant we link measures to value stream performance, and finally to measurements in production cells, other operational processes, and administrative processes.

As you can see in the picture (above) the linkages look at the goals at each level and the critical success factors at the lowest level. This enables the company leaders and their value stream teams to think through what is critically important and should be measured. It is this process that enables us to bring the number of measurements down to “the vital few”.

Key #3. We must work hard to use the smallest number of measurements.

The fewer measurements the better, providing you have selected the right ones based on strategy, markets, products, and customer needs. Companies that have “dashboards” containing many complex measurements created by computer system each month have a poor understanding of the business. Companies with five or six well chossen value stream measurements, for example, have their business under control because the local people in each value stream, process, and support department can understand and use these measurements.


One Example of the Development of Lean Performance Measurements Across the Company

If your people clearly understand the handful of measurements they can take responsibility to use the measurements to control their own processes, improve the processes, and increase customer value.

Lean measurements are designed to foster continuous lean improvement, not to monitor past performance. They must NOT be used – in the traditional way – to punish those who fall short. Rather they are used to motivate and empower people.

Key #4. We need different measurements at different levels of the organization.

Most companies need at least three levels of measurements; strategic, value streams, and cells/processes. You can see this on the Performance Measurements Linkage Chart example above.

The strategic level shows the company leaders the overall performance of the business each month, typically. The purpose of the strategic measurements is for the senior managers to see if they are achieving their strategic goals; operationally and financially. (See Lean Accounting in a Nutshell for more information of financial reports.)

The value stream managers and their team need to know the performance of the value stream each week so that they can use this information for the continuous improvement of the value streams. The results show the problems, the problems can be immediately investigated, the root causes understood, and changes made to create improvement.

The people working in the cells, processes, and support areas need 2 or 3 much more frequent measurements that enable them to constantly monitor and control their work so as to serve the customers well and consistently conform to standardize work.

Key #5. Our measurements must be visual and (ideally) updated by hand.

This bring us to the human side of the measurements. If you want your people to use the measurement and take appropriate action at all levels, the measurements must be displayed visually. People better understand visual measurements. Visual measurements enable groups of people to discuss issues and improvements. Visual measurements enable the teams to see the “big picture”. Visual measurements are combined with visual explanations of causes and the impact of improvements. Companies with fat reports coming from the computer system – usually monthly or later – are missing the point and purpose of the measurements. It all about the people; not the numbers.

Many companies find that they get better understanding, commitment, and results if the people using the measurements also have the task of gathering the data and updating the visual measurement boards. This is NOT a requirement, and if the work of data gathering is burdensome, then it is good to have the computers create the reports. But the more the people at all levels are actively involved in the creating their own measurements, the more likely they are to take responsibility and create improvement.


For lean companies, operational performance measurements are just as important as the financial results. Financial results do not happen on their own. They are the results of continuous improvement of the company’s primary operational processes; sales & marketing, product design & development, operational processes, purchasing, improved quality and capacity usage, etc..

Truly lean companies integrate their operational and financial control systems so that the value stream managers have a full picture of what is needed to create customer value, grow the business, and make tons of money. The ideal measurements and financial reports are on single pages, focused, and meaningful. That is the way to create empowerment, control, and improvement. (see information about the “Box Score”)

You can not run a lean company with the traditional measurements – operational and financial. If you do, you will not be able to sustain lean manufacturing, lean product development, lean sales and marketing, etc. because your traditional measurements will “push back” against your lean hard work. Moreover, you can not have two sets of measurements; one for financial control and another for operational control.


  1. Replace the traditional measurements with performance measurements that are designed to motivate and monitor lean behaviors and improvement.
  2. Develop a set of measurements throughout the organization that thoroughly reflect the company’s strategy and goals.
  3. Post the measurements (at all levels) visually so everybody can easily see and understand the results and the causes of the results.
  4. Make sure that as the people work to improve their measurement results they will be actively working to achieve the company’s strategic goals.
  5. Make this an integral part of the lean culture you are developing within your value stream and indeed the whole enterprise.


For more information about Lean Performance Measurements:

Why Lean Performance Measurements? – Think Radical

Why Lean Performance Measurements? Keep the Faith


Best Performance Measure for the Manufacturing CEO

Wrong Measures Send Wrong Signals

Performance Measurements #1

Performance Measurements #2

Posted in Industry, Lean Accounting, Lean Management System, Lean Management System Series, Performance Measures, Strategy, Uncategorized | Tagged | Leave a comment