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Mike Micklewright

Six Sigma

Is Centralization Anti-Lean?

The disperse facets of lean

Published: Wednesday, August 25, 2010 - 05:30

“To effect the economies, to bring in the power, to cut out the waste, and thus to fully realize the wage motive, we must have big business – which does not, however, necessarily mean centralized business. We are decentralizing.”

--Henry Ford “Today and Tomorrow”, 1926

 

Is your organization truly trying to get lean? If it is, then it must be struggling with the concept of centralization. It has to. The mere concept of centralization means there will be increased travel or transportation, which is one of the seven deadly sins… oops… I mean one of the seven process wastes. 

Centralization also implies big and powerful, at a central location. If one must go to a central location for stuff (e.g., paper, information, processing, materials, parts, prints, meetings, policies, permission, approvals), doesn’t this mean the stuff is not at “point of use?” Point of use storage (POUS) is a common lean practice. If stuff is not at the point of use, it means there will be wasted effort in getting the stuff.

How about an example—at home?

Many of us relied on central air this summer. Because air conditioning is centralized, it means that the cool air must travel great distances to the various locations through a patchwork of extensive ductwork. One would think there is a tremendous amount of waste in this process, and one would be right. In our home basement offices, even though we tried to close the vents, the basement was freezing cold this summer because the conditioned air was centralized, and we overproduced (another deadly sin, by the way) cold air that was not needed. Yet upstairs, in the bedrooms of our two-level house, the rooms were still warm, so we cranked up the A/C to an even higher level, wasting even more energy, because we, as Americans, can afford to overproduce and waste cool air. 

One might argue that central air is less expensive overall than having window air conditioners in every room. I would counter with we wouldn’t be turning any air on in the basement, we wouldn’t have air turned on in the rooms no longer occupied by college kids, and we would only turn air on in the rooms when we need it, not all the time, just like you do with POUS.

So what about your business operations?  Should your organization have “central air,” or should it have decentralized “window units”—for quality control, quality management systems, safety, human resources, accounts payable and receivable, purchasing, and even for management?

These are tough questions for those companies that have a strong corporate culture and yet are trying to practice lean. Isn’t centralization (or corporate control) and lean oxymoronic? I challenge you to debate this question within your organization. I can guarantee that the POUS people working on-site at different locations would reply with a resounding, “Yes, they are oxymoronic (you moron).”  How can your company claim to be lean when all decisions are made from Mt. Olympus?

Eight process wastes in a centralized corporate world

Do these occur more readily in a centralized environment?

Defects. Of course. We’re talking about defective paperwork and decisions.

Overproduction. Producing too many things before they are really needed. You need to judge that for your specific cases.

Waiting: Absolutely. You’d have to be smoking that medical marijuana not to agree with this, but that would only be because you would enjoy the wait in your state.

Not using employees’ minds and/or skills. Who would want those simpletons at the local sites making decisions anyway, when we are much smarter here on Mt. Olympus? Of course, this would happen more.

Transportation. Without a doubt. Even electronic transportation slows things down because it is another hand-off that sits in someone’s in-box (How many messages do you have in yours right now?) while another 67 people are copied to cover someone’s behind so they don’t get blamed when corporate doesn’t respond in a timely fashion.

Inventory. Mostly in the form of forms, documents, procedures, e-mail, and, oh yeah, people. Do you have too many (dare I say “redundant”) people overseeing what others do at local sites, making sure they do it all right? Excessive inventory due to a centralized corporate control system quite likely means a yes answer.

Motion: You’re darn tootin’. There’s a lot of extra motion when dealing with a centralized system, mostly in the form of keystrokes and eye movement as people try to search for the correct complex processes they are supposed to use.

Excess processing. Need I even address this topic? It’s called red tape.

 

When pondering the question whether centralization is antilean, think of specific examples within your own workplace, such as:

• Am I wasteful due to the fact we all have to use the giant, rapidly efficient, masterfully powerful, all-in-one copier/fax/scanner/printer machine that is in a centralized location where we all congregate, waiting for our batches of stuff while someone in IT changes the toner?

• Am I wasteful when I search through thousands of electronic files and folders for our centralized documents in our centralized document control system that’s part of our centralized quality management system?

• Why don’t our lean people want to control their documents in this totally awesome system? Who cares if it takes eight weeks to approve a modified document through our corporate controlled system?

 

By definition, decentralization is the process of dispersing decision-making governance closer to the people or citizen. Doesn’t this sound like what lean is really all about? Isn’t this being process-focused? How can an organization say it’s “doing lean” while at the same time it centralizes more and more of its functions and processes?

Centralization vs. standardization

Perhaps the problem lies in the confusion between centralization and standardization. It is well-known within lean circles that standardization is the key to continuous improvement. To improve, we must standardize the current state of a process, understand it, see the waste, and develop processes that eliminate the waste and improve the quality. But “standardize” does not mean “centralize.”

Standardization is the process of establishing a technical standard, which could be a standard specification, test method, definition, or procedure (or practice). It is standard for that procedure, process, or practice and not necessarily for all similar procedures, processes, or practices in other facilities. And even if a practice is standardized in different facilities, it does not mean relinquishing control of the process to a corporate governing body rather than maintaining control and improvement at the local level, consistent with the definition of decentralization above and lean principles.

Standardization is not centralization, and the two should not be used interchangeably.

In summary

Regardless of whether one agrees with the assertion that centralization is antilean, this topic must be discussed within any organization claiming to pursue “lean” every time there is an attempt to move toward standardization for any process or activity. Corporate leaders in a corporate environment tend not to trust the knowledge and practices of localized facilities and think that, with more control, consistency will increase. In some cases this may be true. But at what cost, and is centralization only a Band-aid for deeper problems?

It is top management’s responsibility to understand the effects and interactions among policies, practices, systems, organizational structure, and its people. This includes understanding not only the perceived positive results of centralization, but also the added waste and other negative consequences, such as a deterioration of employee morale, when the decision to centralize is made.

Discuss

About The Author

Mike Micklewright’s picture

Mike Micklewright

Mike Micklewright has been teaching and facilitating quality and lean principles worldwide for more than 25 years. He specializes in creating lean and continuous improvement cultures, and has implemented continuous improvement systems and facilitated kaizen/Six Sigma events in hundreds of organizations in the aerospace, automotive, entertainment, manufacturing, food, healthcare, and warehousing industries. Micklewright is the U.S. director and senior consultant for Kaizen Institute. He has an engineering degree from the University of Illinois, and he is ASQ-certified as a Six Sigma Black Belt, quality auditor, quality engineer, manager of quality/operational excellence, and supply chain analyst.

Micklewright hosts a video training series by Kaizen Institute on integrating lean and quality management systems in order to reduce waste.

Comments

Maybe, Maybe not

Hi Mike-

I too have the heating and air-conditioning problem you speak of always hot upstairs and cold in the basement during the summer and opposite the winter. I had a counter-intuitive moment working with some HVAC companies. Two assumptions I had were dispelled. One, that those micro-filters that keep the dirt out of the air actually inhibit airflow and make your furnace dirtier. The second that the duct system can be so poorly designed in homes that airflow is restricted. I was engaged in both untl I saw the evidence.

Many duct systems follow a standard design so we have many homes with the same problem. They have standardized to a poor design and replicated it over and over. It is the danger of standardization when we don't have purpose defined.

Centralization doesn't always have to end in waste, but the functional thinking makes it so.

Centralization vs. Standardization

Hi Mike,

I think you hit the nail on the head in terms of needing to standardize vs centralize.

What companies need is a QMS software system that the "Main Office" can set up the way they want in terms of standardization, companywide procedures, terms, etc that can then be duplicated to lower levels so that they get both the control and efficiency of standardization, the speed of electronic approvals, but individual business units can then run with the system in terms of the continuous improvement process that needs to be driven and managed as close to the process as possible. At least that's how Toyota came up with all those great lean techniques, rigtht? Getting managers to "go see" the process and drive change by tapping into the ideas of the people close to the process?

Ideally the Quality Manager at the corporate level could easily log in and run reports on individual subsidiary systems over the Internet, and work with the software vendor to add reports and features as improvement opportunities are uncovered since local managers will be contributing to the continuous improvement process now that they have their own system to work with, and the main office has a consistent tool and methodology to teach to everyone.

Of course make the system affordable and you've got a real dream scenario that makes everybody happy.

Now if only someone would build a system like that.....:-)

David Smithstein, Founder and CEO