The Value Stream Manager - Lean Enterprise Institute

Objectives of This Paper:
The Lean Enterprise Institute receives many questions about how to select the right person to be the value-stream manager. In some cases we are getting calls from newly appointed value- stream managers that have been given the job, but are unsure as to what they are supposed to do. These issues can be resolved by understanding ahead of time what makes a good value-stream manager, and what they are expected to achieve. This paper

Identifies what a value-stream manager is.
Identifies what a value-stream manager does.
Discusses how to select a value-stream manager.
Discusses how to evaluate a value-stream manager’s performance.

The objective of this paper is not to provide a checklist for an executive conducting a staffing exercise; rather it is to highlight some of the key issues to address when considering the right person for the job. The paper considers a value-stream manager’s role within an organization. It does not deal with lean enterprise issues where a value-stream manager would have to manage a value stream across several firms or organizations.

Introduction:

The following is a quote from the book “Learning to See“ by Mike Rother and John Shook …

“You may have already noticed that tracing the value stream for a product family will take you across organizational boundaries in your company. Because companies tend to be organized by departments and functions, instead of by the flow of value-creating steps for product families, you often find that surprise no one is responsible for the value stream perspective. (It’s no wonder we have focused too heavily on process-level kaizen!)¹ It is astoundingly rare to visit a facility and find one person who knows the entire material and information flow for a product (all processes and how each is scheduled). Yet without this, parts of the flow will be left to chance – meaning that individual processing areas will operate in a way that is optimum from their perspective, not the value stream’s perspective.

To get away from the isolated islands of functionality you need one person with lead responsibility for understanding a product family’s value stream and improving it. We call this person a value-stream manager, and suggest that in this capacity they report to the top person at your site. This way they will have the power necessary to help change happen.”

Definition:

A value-stream manager is a person that is responsible for increasing the ratio of value² to non-value, and eliminating waste in the overall supply chain from start to finish, for a defined product family; and for ensuring that the value stream meets or exceeds customer requirements.

Primary Responsibilities:

When we consider the scope of responsibility for a value-stream manager, at least two levels come to mind. First is there is the plant-level value-stream manager that looks basically after the value stream between the four walls of the plant; and perhaps takes into consideration the inbound and outbound logistics to/from that plant. But there is a second level that considers the value stream at the enterprise-level. Not much has been written on this to date. At the enterprise-level, the value-stream manager is responsible for eliminating waste throughout the whole value stream, often spanning several independent organizations. This can be very difficult as there are huge issues regarding trust, privacy, transparency, etc. in each organization involved.³

The value-stream manager is responsible for the following activities:

Defining the product family by conducting product routing analysis⁴ and appropriate groupings.
Ensuring that a current state value stream map is created of the end-to-end value stream(s).
Conducting fact-based analysis of the current state map(s).
Preparing an ideal state map showing what the value stream could look like in the long term.
Preparing a future state map that uses lean techniques to eliminate waste and improve process value in the short to mid-term.
Creating a plan to achieve the future state.
Leading the implementation of the plan.
Leading and mobilizing the people inside and outside of the value stream to enable the required changes. (Including customers and suppliers)
Leading the day-to-day activities within the value stream to ensure that current commitments are achieved while improvements are being made.

Personal Attributes:

The value-stream manager must be able to step back and view the value stream from a broad perspective. Are they able to understand the key system constraints, and be able to quickly spot critical process issues? They should have a good level of knowledge about lean thinking, or alternatively be willing to work closely with a sensei ⁵ to get this knowledge. The value-stream manager must not focus on sub-optimizing the parts of the supply chain, but must concentrate on improving the value created by the whole system.

This person should have exemplary leadership abilities, and be able to motivate individuals in the value stream to change – even if their individual areas do not personally receive the benefits. Does she/he make decisions based on data, not opinion? They must be open to ideas from employees for improvement and understand the working culture within the value stream. They should be able to create and manage a value stream plan. It is also important to be able to communicate with senior executives to achieve buy-on to major changes. Can they highlight or create the right levers (or crisis) to show why urgent change is required? They must have the ability to interact with customers and suppliers to ensure that win-win changes are made, while increasing value.

Selecting a Value-Stream Manager:

Do I select the current manufacturing manager? The logistics manager? The human resources manager? How do I select the right person?

First and foremost in the decision are the personality aspects of the individual. The technical parts can be learned later if the right attitude and personality are there already. The person involved must be the type that sees the big picture. The value-stream manager must have an extreme desire to improve - what was done before is never good enough for the future. Do they have the ability to convince and motivate other individuals to make change for the better of the company – even perhaps to the detriment of their own sub-processes? The individual must understand that the core value on the work floor is not the technology it’s the people. Therefore the value-stream manager is the type that goes out of their way to enable change, and treat people as valued assets. They should be good communicators, and be able to communicate the improvement process; and then gain personal credibility by sticking to the process. They must build and maintain the trust of the employees and executives. Are they the type of person who will be tolerant of calculated risk taking and the mistakes that sometimes occur as a result?

Next in importance is knowledge of lean techniques. Preferably this knowledge is grounded in actual experience in another company or in a sister value stream⁶ within the same company. Without this knowledge and experience, the value-stream manager must be able to work closely with and learn from an advisor with the required knowledge, background, and experience. Without detailed knowledge, a greater frequency of mistakes and errors will be made. Progress will be slower.

Lastly, the person should be very knowledgeable regarding the material and information flows in the value stream that they will be responsible for. Also, they must have access to the people who are experts in these flows. And this is not just knowledge of the manufacturing processes and techniques. They have to be aware of the logistics processes, including both inbound and outbound materials. Real estate issues often enter the picture.⁷ They need to be in regular touch with marketing and sales so that they know what the sales plans and future demand requirements are. Do they know what satisfies their customers? This industry knowledge should be recognized to be both a good and a bad thing. A detailed knowledge of the processes involved is very beneficial but beware of the person who says that “we’ve already tried that before, and it won’t work”.

The Role of the Executive:

Once a value-stream manager has been selected, the executive should realize that in the beginning this person will need a high level of senior support to be successful. Individual process managers within the value stream need to know that the value-stream manager has the authority and responsibility to make changes within the value stream. These individual process managers have to participate for the whole thing to work. The senior executive can help in this regard by visibly supporting the direction, and providing the tools that will be needed to ensure success. They can also help in the conversion or removal of anchor-draggers at the process level.

A second role of the executive is to provide air cover during major changes. The value-stream manager has enough “on the go” without having to worry about where they are going to get broad-sided from next. Old-style measures may slip, or be ineffective while change is underway. For example, what would happen in your organization if point velocity⁸ was suddenly reduced due to a kaizen in the area (even though system lead-time was improved)? The executive must run interference with the CEO, Board of Directors, or any higher level that can interfere with progress. Once this is underway, the value-stream manager must stay in close touch with the executives, and take frequent pulse readings. Then she/he can take on the role of providing air cover to associates on the work floor.

This is not to say that the executive should sit back and not expect results. The executive should be impatient for bottom line results, while understanding that change sometimes means one step back for two steps forward. The executive should not dissuade the value-stream manager from taking calculated risks. Remember that perfection is not achieved on the first try!

Evaluating Performance:

The value-stream manager should be evaluated on the achievement of their plan. Right at the start of the year, and periodically throughout the year, the senior executive should review the value stream plan with the manager to assess progress. Of course this can’t be accomplished if the current state, future state and implementation loops⁹ haven’t been properly documented. The senior executive should recognize that all plans are fluid, and can change over time as better ways are found. Therefore, there should be some flexibility shown. The value-stream manager should also be evaluated on softer issues, such as their leadership style, their support of employee’s suggestions, their plans for dealing with excess labor, etc. They also need to develop succession plans and developmental assignments for their subordinates in today’s flatter organizations.

One of the key questions facing companies that are appointing value-stream managers is how to take a value stream organizational approach, while still building functional expertise. Moving people back and forth between functional careers and value stream management every few years sometimes solves this issue. For example, a person from engineering might be selected to become a value-stream manager, and then three years later move back into the engineering department in a more senior position to upgrade their engineering skills. This should be a definite item of concern in performance and development planning.

New measurements may be required to ensure that progress is made in areas that support the strategy. Old measures should be scrutinized closely to ensure that they don’t reinforce behavior that is contrary to the goals of the organization. (E.g., is point velocity the key target for individual departments?)

At the start of their assignment, the value-stream manager might use a great deal of time to firefight and deal with daily production issues. The percentage of time used on daily issues should drop, and the focus must definitely shift to longer-term value stream improvement as processes are improved and become more reliable. The executive should expect to see a declining daily firefighting trend in the value-stream manager’s routine. This should be a consideration in the staffing process. Sometimes the best firefighters enjoy what they do and get a great deal of satisfaction from solving daily problems. They can sometimes also be the arsonists! This trait will not make a good value-stream manager.

Conclusion:

Staffing a good value-stream manager is not an easy thing to do. There are many things to consider. If you can find a person with a great personality and leadership style, plus the knowledge of lean techniques and work floor processes, then you have a good chance of success. It is the right thing to do. Without someone responsible for the end-to-end value stream, you can expect to see isolated pockets of improvement. System-wide value improvement will be elusive indeed! In this paper, we have discussed the issues around staffing a value-stream manager position within an organization. The next challenge is for us to consider how we would appoint a value-stream manager in a lean enterprise that spans several firms or organizations. The enterprise value-stream manager will require an additional set of skills including global expertise, and cross-firm negotiations experience.

Further Reading:

Learning to See by Mike Rother and John Shook.
Lean Thinking by James Womack and Daniel Jones.

Notes:

^1. There are traditionally two types of kaizen, first is individual process kaizen where the team in the work unit improves individual processes within the unit, and the second is flow kaizen where strategic processes are improved in the value stream to give an overall system improvement. (back to text)

^2. Value in lean thinking refers to a transformation of the product or service in a way in which the customer would be willing to pay for. (back to text)

^3. Please see Lean Thinking by James Womack and Daniel Jones, page 277 for a discussion on the principles of a lean enterprise. (back to text)

^4. Product routing analysis is sometimes completed using a product family matrix. See Learning to See page 6 version 1.2. (back to text)

^5. A sensei is a teacher in Japan. In this case a sensei is an expert in the application of lean techniques. A learning instructor is called a sempai a term traditionally used in karate for students that have nearly achieved their black belt status. (back to text)

^6. Many companies implement lean techniques on one model line first then move to the next product family. (back to text)

^7. One of the benefits is usually a reduced requirement for floor space. What will we do with the freed-up space to reduce our operating costs? (back to text)

^8. Point velocity is the speed through one process or machine. Often the achievement of a target point velocity is rewarded, while inventory is built up in front of the next downstream process. What we really want to achieve is overall system velocity. (back to text)

^9. For a detailed description of value-stream loops please refer to Learning to See version 1.2 page 86. (back to text)