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52 The work of leaders in a lean management enterprise

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Over the past 20 years of evaluating and diagnosing
lean transformations, our research keeps con-
firming the familiar statistic: fewer than 30 percent
of organizations succeed in improving both their
performance and their long-term health.1

Much of our work has therefore focused on what
makes those 30 percent different. Certainly, their
paths aren’t easy. The enduring transformations,
like their less-successful counterparts, encounter
barriers where performance plateaus or even
slips. But what’s unusual among the successful orga-
nizations is that the barriers aren’t the end of
the story. Instead, they become new beginnings.

One difference, we find, is how the 30 percent
learn: they undergo repeated problem-
solving cycles—identifying issues, finding root
causes, implementing countermeasures,
and taking the time for ref lection. These cycles
reexamine not just how the companies
operate but also how they think about their
operations. Their rigorous use of this basic
structure expands their capacity for change and
strengthens the interrelated disciplines of
the lean management system: delivering value,
developing people, discovering new ways of
working, and connecting broad strategy to goals
and a meaningful purpose.

Holding a mirror to
the management system:
How mature is it?

To keep its performance improving, an enterprise must keep its management system improving, too.
A regular, rigorous cycle of assessing itself reveals actions that help make the system more mature.

Randy Cook, Stefan de Raedemaecker, Jacek Fabianowicz, and Alessandra Fantoni

53

The entire cycle is based on an even more critical
difference. A successful organization understands
itself—its strengths and, most especially, its
weaknesses—to a depth that keeps its people from
ever being entirely satisfied with its performance.
From the front line to the C-suite, all of them know
that there’s always something important they can
help to improve. And the scope of what might need
improvement includes how the organization
goes about improving itself.

The resulting clarity keeps it from becoming
overconfident about its success, so it can
understand the terrain ahead, deal with the perils
of the journey, and set off in a new direction as
conditions dictate. With these insights, one basic-
materials company, for example, has increased
its agility in a challenging market, recommitting
itself to develop its people and to change con-
stantly by rating their ability to use its management
systems in all performance reviews and by
enhancing cross-functional training. A leading
insurer is developing a new generation of
leaders to handle digital disruption. And a financial
institution is reinforcing its senior manage-
ment’s capabilities to prepare for a major expansion
of its business.

How success can lead to failure
Fundamentally, the problem many organizations
face with lean management is how to respond to the
performance advances the initial effort often
produces. Ideally, organizations would continue to
pursue improvement, compounding the
early impact. But, paradoxically, early success may
instead play out negatively in several ways.

Losing business purpose. The experience of the
basic-materials company illustrates how an
organization can get sidetracked by (and ultimately
recover from) one of the most common dangers
of lean transformations: a loss of focus on business
objectives, so that transformation increasingly

occurs for transformation’s sake. Certain diag-
nostic tools helped the company to identify waste so
effectively that people started thinking about
where the tools could be applied next rather than
which challenges were truly most important.
Over time, the company recognized that simply doing
more lean things wasn’t enough to ensure it was
changing in the way its business required.

Focusing on tools, not ideas. Typically, focusing too
intently on particular tools points to a deeper issue:
people haven’t fully assimilated the ideas
underlying the tools, whose point is to reinforce
a continuous-improvement culture, not to
create experts in the tools.

Performance boards, for example, are often the
single most visible evidence of a lean transformation.
The data they display is essential to how a
transformed organization works. Yet it isn’t the
boards that are truly important, or even
the data. It’s the ideas they represent: that people
measure what truly matters to customers (and
the company’s strategy), that those measurements
define good performance, and that people
use them to talk openly about ways to improve.
The boards can disappear at any time if
whatever replaces them is at least as effective
in reinforcing the same ideas.

Changing behavior but not mind-sets. The change-
management literature2 has long focused on
the need to overcome resistance. But resistance can
imply intent, when in reality people often revert
to old behavior out of habit or instinct, ref lecting
old mind-sets that may persist even after
an apparently successful initial transformation.

One financial institution, for example, adopted lean
management enthusiastically after an early round
of changes cut project-time requirements almost in
half and helped the company to weather a crisis.
But over the following years, the gains started to

Holding a mirror to the management system: How mature is it?

54 The work of leaders in a lean management enterprise

erode. Managers reported that they felt they were
spending more time enforcing standards than
questioning whether the old ones still made sense.

The continuous-improvement culture the
institution thought it had created hadn’t fully taken
hold. Consequently, under stress, many leaders
reverted to command-and-control behavior,
making decisions and solving problems for their
teams or managing solely by outcomes rather
than developing the skills of those teams. Some
leaders paid only lip service to the new ways
of working: they remained spectators rather than
coaches and failed to shape expectations by
modeling the desired behavior.

Building without balance. In the deepest sense,
this problem’s root cause is an incomplete or
unbalanced approach to lean management. Our
analysis of survey data on organizational
transformations3 underscored the point that lean
management works when its four disciplines
reinforce one another (Exhibit 1). To deliver more
value, a company must find new ways of work-
ing, so its people must develop new capabilities
consistent with its strategy and purpose.
Accordingly, no single discipline will remain stronger
for long unless the rest get stronger as well. Of
course, at any given time, an organization may have
to emphasize some aspects of lean management
more than others, but ultimately all of the disciplines
must work in unison. That means finding out how
good the organization is at each of them.

The value of management-system maturity
To find out exactly why a transformation is no
longer producing the expected results, an
organization must look in the mirror and truly see
itself. Because a few organizations have built
such an advanced self-awareness into their
management systems, they have little need to ask
how mature those systems are or which
components may need further work. They know

that improvement tends to happen in cycles and are
probably already at work on the next one’s most
important opportunities.

But such organizations are rare, particularly among
large enterprises where informal practices and tacit
knowledge don’t scale very well.

How can you assess a management
system’s maturity?
Most enterprises instead need a more explicit
approach to assessing themselves—one that allows
leaders to pinpoint exactly where (and how)
to intervene so that improvement remains truly
continuous.4 In our review of several organi-
zations that successfully strengthened their
management systems, a few characteristics came
to the fore:

� Comprehensive coverage of the system. For
anything as comprehensive and interdependent
as lean management, an assessment must be
just as comprehensive, covering all disciplines
in equal depth. Assessing only parts of the
system may be tempting, especially when leaders
have a strong hypothesis about which disciplines
seem weakest. But that shortcut risks
missing critical issues and leads to ineffective
half measures as a result.

� Detailed standards. Lean management
systems require new behaviors such as root-cause
problem solving, systematic coaching and
mentoring, and in-person confirmation that
processes actually work as planned. These
are so different from long-standing norms that
the assessment must set clear expectations.
For each behavior, it should provide examples of
different levels of performance. Consider
root-cause problem solving. Companies might
decide that basic performance is characterized by
problem-solving sessions that are frequently
preempted by other priorities. By contrast, the

55

proficient standard might require the sessions
to be held on a consistent schedule, with
regular follow-up by senior leaders and only
rare preemption.

� Aspirational top-level descriptions. Descriptions
of the top level require particular care

because they serve as a motivator to keep people
reexamining how well they are doing—a true
north that represents a perfect (and unattainable)
score. To return to problem solving, the top-
level standard might require that leaders always
allocate sufficient time and resources to this
discipline, so that preemption never occurs.

Exhibit 1

Lean Compendium 2017
The value of a good mirror: Assessment for continuous improvement
Exhibit 1 of 2

Implementing the four disciplines of lean management dramatically increases the chance
of sustaining improvements over time.

Source: McKinsey Quarterly transformational change survey, November 2014 (correlation analysis and factor analysis)

Each of lean management’s four disciplines
comprises two elements

Success rate by number of elements
implemented (n = 1,624)

• All employees adapt
their day-to-day capacity to
changes in demand

• Everyone starts the day
with a formal team discussion
about the previous day’s
results and the current
day’s work

• All employees understand
how their work relates to
the organization’s vision

• Everyone is fully engaged
in meeting individual goals
and targets

Connect

• The organization develops
its people so that they
can surpass expectations
for performance

• Managers understand that
their primary role is to lead
and develop their teams

Enable

Deliver

• Best practices are
systematically identified,
shared, and improved

• Everyone is actively
engaged in identifying errors
and defects before they
reach customers

Discover

% of transformations that sustained
improvement over time

Number of elements of the four
disciplines that were implemented

80

70

60

50

40

30

20

10

0
1 2 3 4 5 6 7 8

Sustainability

Holding a mirror to the management system: How mature is it?

56 The work of leaders in a lean management enterprise

� Expert assessors. The people who perform the
assessment must not only understand the
standards well enough to grade particular kinds
of behavior consistently but also provide practical
suggestions about what to change. Internal
assessors, such as core people from the team that
led the transformation or from other parts of
the organization, are therefore especially valuable
because their suggestions will be grounded in
its culture and operating environment. Training
internal assessors takes time and work, but
the effort can pay off. If, say, the follow-up for
root-cause problem solving is inconsistent,
the assessor should be able to suggest realistic
ways to determine which current activities
could be eliminated to free up time. And as a
European conglomerate has discovered,
internal assessors help accelerate the cross-
pollination of the best ideas.

Enabling a practical follow-up
For the assessment to have a lasting impact,
the reports it generates must lead to thoughtful,
pragmatic action. Leaders should be able
to understand what they must do to advance the
company from one level of maturity to the
next—for example, creating clear implementation
mechanisms so that new solutions are fully
disseminated, or incorporating problem-solving
expectations into all role descriptions.

Well-designed digital innovations provide further
advantages in converting assessment data into
results. First, they help the expert assessors to
evaluate behavior and calibrate the findings more
quickly. Second, and more important, they make
the results more accessible—not only physically, by
putting them in the hands of anyone with the
right screen access, but also psychologically, by
improving the way companies visualize data.

Consequently, managers can see, for example,
exactly how many problems teams are resolving
and how many other problems haven’t been
addressed. That creates a new sense of urgency,
which makes it easier to undertake moves such as
protecting time for problem solving in team
schedules or prioritizing implementation when
solutions are ready. The result is a dramatic
increase in the number of problems resolved.

Assess, improve, repeat: Keeping the value-
creation cycle humming
The value an organization gets from assessing
itself keeps increasing as the process is repeated
across the organization over time.

Assessment as teaching tool
Continual exposure to the assessment process
teaches leaders at every level to view the
organization and themselves more objectively,

The value an organization gets from assessing itself keeps
increasing as the process is repeated across the organization
over time.

57

particularly if the assessment provides comparisons
against benchmarks from mature organizations.
Even internal comparisons of units with one another
can highlight patterns and best practices that
create significant value—initially, just by providing
hard evidence of performance that’s regarded as
really good. Over time, the structured assessments
encourage organizations to pursue balance
across the detailed leadership behavior in all four
lean-management disciplines.

This knowledge often reveals that organizations
have a significant new improvement potential—an
almost inexhaustible supply of targets, setting
up a continuous-cycle journey of improvement
and learning. That in turn leads to better
business results.

Accelerating continuous improvement
Organizations that stick to an assessment timetable
are seeing a wide range of improvements.

� Breaking through plateaus. The basic-materials
company detailed earlier has used its assessment
to achieve new levels of performance. Its leaders
focused the assessment on a small number of top-
performing sites—an approach that not only
exposed opportunities unique to each of them but
also helped the leadership as a whole to see
common themes. That led to a reexamination of
company-wide practices and behavior.

� Jump-starting a deeper transformation. At
companies in sectors from mining and metals to
industrial equipment, an in-depth assessment

Exhibit 2

Lean Compendium 2017
The value of a good mirror: Assessment for continuous improvement
Exhibit 2 of 2

A European conglomerate’s assessment cycle helps build
the continuous-improvement system.

PreparationAutomated KPI1 monitor

Walkthrough by team
Yearly
scanning

Feedback sessionImprovement plan

Development

1 Key performance indicator.

Holding a mirror to the management system: How mature is it?

58 The work of leaders in a lean management enterprise

has identified core strengths for improvement by
targeting a few critical opportunities. The
transformation initiatives of these organizations
hit the ground running, and the leaders were
better able to describe their future ambitions and
to tell their people what the journey would
look like. Moreover, these leaders report a greater
understanding of how their own behavior
had to change to sustain performance improve-
ments. More broadly, the preparation
kept people committed and engaged through
temporary setbacks.

� Reinforcing an annual improvement cycle.
The European conglomerate mentioned earlier
now undertakes yearly assessments for each of its
units as part of an annual improvement cycle
(Exhibit 2). Since managers report over time that
they have a better understanding of what they
are expected to do, they can improve their skills
substantially and find new S-curves of better
performance for their teams.

Recommitting to culture change
One of North America’s largest asset managers has
been building its lean management systems for
more than five years. It has recorded major improve-
ments in critical metrics, such as customer
satisfaction and average account-funding levels.
But as new pressures on the industry grew,
particularly from digitization, the company’s
leaders realized that they needed a broader
understanding of how these systems would have
to evolve. The company therefore launched
its first assessment of its systems.

The basic findings seemed clear: in the four years
after the initial transformation, 80 percent
of the assessed sites showed continuing progress,
while 20 percent had stagnated. But a deeper
examination of the results showed that some of the
reported progress was more apparent than real,
especially from a sustainability perspective. Some
sites showed worrying lapses in essential forms
of behavior—lapses that, if allowed to persist, would

59

Randy Cook is a senior expert in McKinsey’s Detroit
office, Stefan de Raedemaecker is a partner
in the Antwerp office, Jacek Fabianowicz is a senior
research analyst in the Wrocław Knowledge
Center, and Alessandra Fantoni is a solution delivery
manager in the Southern California office.

The authors wish to thank Tom Ehrenfeld and Erin
Ghelber for their contributions to this article.

Copyright © 2017 McKinsey & Company.
All rights reserved.

1 “How to beat the transformation odds,” April 2015,
McKinsey.com.

2 For example, see John P. Kotter, “Leading change: Why
transformation efforts fail,” Harvard Review,
March–April 1995.

3 “How to beat the transformation odds,” April 2015,
McKinsey.com.

4 The examples discussed in this article are based on
a McKinsey capability: the Operational Excellence Index and
its predecessors.

probably lead to declining performance. In short,
parts of the organization had reverted to boosting
their results in the wrong way.

The company then recommitted itself to cultural
change, particularly emphasizing its line leaders’
responsibility to encourage problem solving. Since
then, the number of problems identified and
solved has more than doubled, to upward of 50,000
a year. Most important, an assessment conducted
two years later shows clear business results:
customer satisfaction, employee engagement, quality,
and productivity have all increased.

The experiences of these companies show how
the perils of the continuous-improvement journey
are in fact essential to learning—so long as
organizations have the self-awareness to understand
that the most important perils lie within. A
cycle of well-structured assessments builds that
self-awareness, so the management systems
enabling continuous improvement can themselves
continue to improve.

Holding a mirror to the management system: How mature is it?