For many people the role of a value stream manager isn’t clearly understood. Others incorrectly use the term “value stream manager” as a substitute for production manager or supervisor in the factory. However, a value stream manager has full responsibility for the revenues, costs, and profitability of a major part of the company’s business.
This is the fifth post in a series that shows how to develop a truly lean management system. Here we’re primarily addressing order-fulfillment value streams. These are value streams that get orders from customers and fulfill those orders by shipping the products, thereby achieving profitably and continuous improvement.
Here’s the big-picture diagram:
As this graphic shows, there are other kinds of value streams. For example, most companies have value streams to develop new products and services. There are also departments that support the value streams. These include human resources, IT, and financial accounting. (Click here for a two-minute video on lean management system information.)
Our focus is on value streams in manufacturing companies, but similar methods apply to healthcare service lines. Lean banking operations use value streams that are largely based around information flow. The same principles and methods apply to all of these.
The role of the value stream manager
Ideally, the value stream manager has full authority and accountability for the revenues, costs, and profits of his product families. The value stream manager must be very close the customers, very close to the operations that create customer value, and very close to the suppliers. In other words, the entire flow of value creation.
There are eight aspects of the value stream manager’s work that we will address in this post.
The overall job description for a value stream manager is:
1. Create more customer value
2. Grow the business
3. Eliminate waste from every process
4. Make tons of money
Although this description is a little tongue in cheek, you can see that the job of the value stream manager is a business and executive role. Many companies think that the value stream manager should have a production background. It doesn’t matter what background the value stream manager has, provided she can run a miniature entrepreneurial business within the business.
1. Clearly distinguish the value stream team
The value stream manager’s role starts, of course, with people. The value stream manager must have a team that can support and improve the operation. Increase sales to grow the revenues. Improve the processes to free up capacity and grow the business without growing costs. Improve the relationships and performance of the suppliers to achieve high quality, frequent (often daily) deliveries of small quantities. Simplify the processes using lean methods so the business can run largely visually.
There needs to be a balance of skills and experience. The value stream manager can’t be an expert in every aspect of the process. For instance, if he has a marketing background, then it’s important to have strong operations leaders in the value stream. If she has an engineering background, then the value stream will need strong sales and marketing leaders.
2. Build your team
Value stream managers take the lean principle of empowerment and respect for people very seriously. The culture of continuous improvement and the pursuit of perfection is developed by the value stream manager, and supported by company executives.
The value stream manager must challenge the entire team not only to serve the customers and create value, but also to make improvements every day, every week, and every month. The value stream manager must also “hold an umbrella” over his employees so they aren’t distracted by corporate and other issues going on in the business. The value stream manager addresses these issues and keeps the team focused on customer value and continuous improvement.
3. Build knowledge within the team
The value stream manager is responsible for the skills and knowledge of the value stream team. This includes formal training sessions and the follow-up and certification of employees. This is often done by human resources, and some companies include an HR person in the value stream team if the company and the value stream is large enough to warrant this.
The value stream manager is also responsible for cross-training employees. The purpose is to provide flexibility within the value stream, and cross-training is often a value stream measurement that helps focus the value stream team on achieving this flexibility.
The value stream manager’s primary role in building knowledge is through active mentoring of people. There are many opportunities to do this:
• Mentoring people during the daily gemba walks through the value stream processes. (Gemba means “the place where the work is done.” Lean leaders have few meetings in conference rooms. Most routine meetings and discussions occur at the gemba, and lean leaders are there for a considerable portion of every day.)
• Mentoring the leaders and team members working on lean improvement projects
• Reviewing the A3 documents are an excellent time for mentoring
• Regular review of the leader’s standard work outcomes with the people directly reporting to the value stream manager
• Mentoring during the sales, operations, and financial planning (SOFP) executive meeting and the strategy-deployment “catch all” process
This mentoring isn’t done by telling people how to do things differently. It’s done by asking appropriate questions and drawing out the people’s own experience and difficulties. It’s better to have people work out changes or problem solutions themselves than to have the value stream manager give them the answers—even if the value stream manager’s solution is a better method.
4. Build customer value
It’s essential for the value stream manager to have a detailed and deep understanding of how customers value the value-stream products and services. Much of the legwork for this is done by marketing, sales, and product development, but the value stream manager must be on top of these issues. Customer value changes over time, and new products change the value propositions. Additionally, the value stream manager needs to work to create cooperative and partnership relationships with the customers.
5. Strategy deployment
Companies using a lean strategy-deployment method develop the companywide strategy and then break that down to the strategic contributions of each value stream. There’s a “catch ball” process where the value stream manager (and her team) review the requirements and critique the plan. During this process the “ball” is thrown backward and forward until there’s full consensus across the entire company. This isn’t the normal management-by-objectives used by most companies. Consensus means that everyone has genuinely bought into the plan and have developed practical methods within their value stream to achieve it.
6. Daily, weekly, monthly leadership
Unlike senior managers in traditional companies, lean leaders are frequently at the gemba. The daily and weekly routine meetings are led by local managers and supervisors, but the value stream manager has a standard schedule (leader’s standard work) to regularly participate in these meetings. The value stream manager can’t attend each one every time, but over time he’ll attend them all. The purpose is for the value stream manager to be highly knowledgeable about what’s really happening on the shop floor, the sales office, the quality workstations, purchasing, etc.
The weekly value stream meeting around the visual performance board will always be attended (but not usually led) by the value stream manager. This is also the case for the weekly income statement review and customer service meeting. The value stream manager is actively involved in monthly meetings, including the SOFP executive meeting, capital review, and strategy reviews.
7. Value stream measurements
The operational and financial measurements of the value stream are, of course, key knowledge for the value stream manager. The weekly value stream performance measurements are posted on a visual board that shows the results, the reasons for shortfalls, and the continuous improvement projects to solve problems and improve the flow. The weekly income statements show simple revenue, costs, and profits for the week. The value stream manager and the value stream team uses these to understand the financial impact of their work, bring the value stream under control, and improve the financial results.
The daily or hourly measurements posted in each work center, office, or other processes are similarly reported visually. The value stream manager reviews these as a part of the daily or weekly gemba walks. The “box score” shows a summary of the value stream performance each week. It shows the operational measurements from the visual board, the financial results from the income statement, and the capacity within the value stream.
8. Driving lean continuous improvement
The value stream manager must understand the customer value created by the company, eliminate waste throughout the value stream, free up capacity (e.g., people, machines, cash), and use this additional capacity to grow the sales and the bottom line without increasing costs (other than materials). The value stream manager will instigate, through the value-stream continuous improvement team, the development of current and future state maps, and to identify what changes must be made to create the growth and profitability.
Broadly speaking, there are four different kinds of continuous improvement processes:
• Breakthrough improvements achieved through large significant projects
• Continuous improvement (often called kaizen) events that are derived from the value stream maps and performance measurement boards
• Just-do-it improvements, which are the hundreds or thousands of small improvements done every day by people working in the value stream processes from sales, to operations, purchasing, accounting, etc.
• Target costing, where improvement methods are used to increase value to the customer and reduce the costs of products.
First published July 3, 2015, on the BMA blog.
Comments
Is there anything he doesn't do? ;)
Dear Brian,
Thank you for interesting article, I have never encountered attitude you decribed. For me Value Stream Manager was always a guy who leads value stream mapping analysis. I have some doubts though, so I let myself to ask you some questions which will help me to understand better. Is VS manager the same guy who in other companies would be called Lean Manager, Continous Improvement Leader etc.? If not, what is the difference? Also, does he have any other role in the company (e.g. Quality Manager who is VS manager at the same time) or this is full-time job reporting to management board?
Many thanks for your answers in advance!
Broken link
Some links (in the body of the article and at the bottom) are broken. It is pity that the files were not published.
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