Considerations on Maintaining the Fairness of Kaizen Ideas Reward Systems

Would you rather have 10 people each solving one $250,000 problem per year? Or would your rather have 100 people each solving ten $2,500 problems per year? This may be one of the key ways to distinguish continuous improvement via lean and continuous improvement via six sigma. Both approaches are necessary and complementary to each other. Yet the lean philosophy argues for total involvement and kazen through practical problem solving at the small scale, while six sigma is heavier initially on training upfront for a select few experts. Your chances of finding and fixing problems is far greater when everyone is involved rather than just a few experts. Ideally the experts that you have should teach and enable all others to solve problems, rather than be direct problem solvers. This is true of both lean and six sigma.
There is a need for both styles of training, engagement and problem solving, but suggestion systems have been neglected in comparison with six sigma programs. One of the challenges within lean when implementing a suggestion system or any all-hands kaizen with a reward system is how to manage fairness in giving financial rewards. There are three main factors contributing to this issue and these are 1) people’s relative problem solving ability, 2) visibility of and access to problems and 3) the condition of badness at the organization when initiating the suggestion system.
People’s relative problem solving ability refers to the topic in the first paragraph, in that some people may bring more training, experience and a higher level of skill in problem solving to their work. There are two ways to keep the experts from finding and tagging the best kaizen ideas as theirs, thereby denying others the chance to learn to see and fix problems. The first is to strictly maintain that kaizen idea generation must apply to one’s job or direct area of influence. At the least this will limit the scope of opportunity so that a senior lean six sigma expert is not able to walk out to the welding line or into the marketing department to cherry pick a dozen kaizen suggestions.
The second is to give these experts a higher challenge. While it may not seem like the American way to not reward the heroes, in the interest of bringing up the majority of the organization these few exceptional people should be given the task of trainers, enablers and helpers in the suggestion system. It may be perfectly appropriate to challenge them with identifying several $250,000+ cost savings ideas per year, or in assigning them to coach groups or teams of individuals in idea generation and implementation. The main point is that the competition to find improvements within an organization remains fair and healthy.
In theory, managers and leaders have greater visibility and access to problems, and if abused they would be able to find and fix problems of their choice, robbing others on the front line of their opportunities to learn via suggesting and implementing kaizen ideas. In practice, the vast majority of management do not get out to the gemba nearly often enough to see the actual problems in their reality, a practice sometimes called genchi genbutsu. This sad tendency notwithstanding, it is advisable to apply the same rules to managers (who may in fact have a relatively low problem solving ability!) as stated in the previous two paragraphs. In the early stages of implementing a suggestion system at Toyota 57 year ago the management was excluded from the suggestion program, and it may have been for these reasons.
Certain areas may be in worse shape than others, benefiting the people working there by giving them more ideas and therefore greater access to reward money. In the absence of a system of regular job rotation within the day, there is not a whole lot that one can do except to make kaizen idea suggestions a cross-functional team-based activity rather than an effort driven by individuals within the work area. This is partly related to the third factor.
The third factor refers to how “target rich” is the environment when the suggestion system is launched. Different strategies are needed depending on the organization’s maturity or progress on the lean journey. When a suggestion system is first launched within a workplace that is relatively new to lean and the condition of badness is high, there are diamonds on the desert floor, so to speak. It can be easy for people who are quick to make a buck on reward money in this early stage. When planning a suggestion system it is important to consider the three phases relative to the starting point and change in the organization’s warusa kagen condition of badness.
In phase 1 you should emphasize volume of ideas over quality of ideas. The aim is to get total participation as soon as possible and in order to do that you may accept ideas which may not have clear financial impact. The more people hear “yes” to their ideas the more you will reinforce the behavior of idea generation. When it is clear that there are too many big and easy savings for some individuals who live near the desert with diamonds, it helps to organize team activities such as 5S sweeps, value stream transformations, model lines, or kaizen events so that the group receives the benefit of the learning and the financial reward. Some may see this as being “cheated” out of their opportunity to gain the reward money personally, and for this reason it is best to be mindful in terms of how and when a suggestion system is launched.
In the second phase many of the big, obvious areas of improvement have already been addressed and it has become more challenging to find ideas. If you have done a good job of training people to observe carefully and think in terms of eliminating the 7 wastes, they may continue to find improvement opportunities in their area. Likewise in the cases where an organization is implementing a suggestion system after having done some good work in implementing lean principles (based on the advice in the paragraph above) the emphasize should shift to the quality of ideas over the volume of ideas. Competitive people will naturally strive for a bigger, better kaizen idea and to outdo each other. This can result in finding only problems that are harder to implement, or requiring greater expertise and cost rather than noticing the smaller gems or flecks of gold in the sand. The main ways to maintain momentum and fairness through this phase are to pay the token reward for every idea, and through a dialog of learning and coaching between the idea generator and their coach so that people continue to learn and be given the opportunity to develop their ideas into ones that can be rewarded.
In the third phase it has become really hard to find even the smallest ideas, as the process has been refined through years of kaizen. People may feel burdened by the requirement to come up with kaizen suggestions, or that only people with more years of experience and practice can find and propose solutions to problems. In general the strategy at this point is to maintain the quality of the ideas but increase the variety of ideas. In a mature stage of lean as waste is squeezed out of processes it will become more difficult to find good kaizen ideas for workers so the scope of suggestion ideas should be broadened into environmental, health, safety, morale, communication, fun and other topics that may be more difficult to pin down but will keep people looking at their work from a critical perspective. Taking people from the factory to the office or vice versa in an effort to stretch their problem identification and problem solving muscles is also a good way to refresh the suggestion program in this third phase.
Implemented correctly, the financial reward should be a lesser part of the motivation by the time the organization reaches the third phase. When an organization finds itself already in the third phase, or more mature state of lean when starting out with the suggestion system it is advisable to tailor the program towards skills and leadership development rather than cost savings, and reduce emphasis on financial rewards accordingly. While taking nothing away from the power of six sigma, the impact of educating 100 people to become practical problem solvers is arguably a greater legacy for a leader than having certified 10 black belts.

4 Comments

  1. Anna

    March 6, 2008 - 7:31 pm

    “strictly maintain that kaizen idea generation must apply to one’s job or direct area of influence” -JM
    But isn’t it much faster to not pose limitations? First come, first serve? If workers realized this being the operating principle, wouldn’t it encourage a certain competitiveness?
    “management was excluded from the suggestion program” -JM
    When I think of “management”, I envision a remote employee organizing important papers at his/her desk. They execute/command, but I think it’s the grunt-workers that actually see what is really going on. They are the specialists because they are intimately familiar with their immediate surroundings/environment. They work with their tools (or “tools”) on a daily basis and should know each benefit and subsequently, each defect.
    “in the interest of bringing up the majority of the organization these few exceptional people should be given the task of trainers, enablers and helpers in the suggestion system” -JM
    What if a business cannot afford (time, $) to create a team for this specific purpose? I know it is vital, but it’s almost a luxury for a company that lacks resources; maybe one that can barely execute daily operations as it is. I think I know where this will go. Which is why I am here in the first place.
    This entry is quite meaty and I had to came back to it a few times. Thank you, Mr. Miller. I hope that you will not ever run out of thoughts and things to say.

  2. Jon Miller

    March 7, 2008 - 8:21 am

    Hi Anna,
    It’s actually faster with these limitations because the ideas are more practical when they pertain to your own situation and when the idea generator has responsibility in implementing these ideas. A flood of ideas without ownership for implementing them is just a waste of time unless you have an vast pool of resources to take action.
    If a business can barely execute daily operations, then maybe they should stabilize things first. Getting improvement ideas from people may help with this but hte leadership should grasp the situation first as more drastic measures may be needed initially.
    A business will solve problems the expensive way – after they have gotten out of control or in front of the customer – or they will solve them when they are first noticed, small and manageable. One way or another, resources will flow towards problem solving. The suggestion system gives you more eyes, hands and brains to get at the problems while they are small.

  3. Jan

    August 11, 2008 - 10:58 am

    Jon,
    What about quite an opposite situation? Imagine starting idea management system, with an immediate response of people. They give 10-15 ideas/month that can bring great gains for the whole company. However they require lots of time, management effort, investment, technology changes etc. Do you think these ideas should be rewarded or should be rejected as not really being part of KAIZEN philosophy?
    I’m asking because I am struggling with a CI system design. On one hand I want to change culture and make people think about improving their own backyard FIRST. On the other hand I wouldn’t like to block any BIG ideas, because they may be brilliant as well! And how to reward people for both breakthrough and kaizen ideas having a single rewarding system?

  4. Jon Miller

    August 11, 2008 - 11:20 am

    Hi Jan,
    I think ideas should never be rejected, but that does not mean that all ideas should be accepted either. It is the job of the idea generator’s immediate team leader or supervisor to coach that individual on how to define the problem properly and find solutions that are practical and can be implemented locally as much as possible.
    If there are so many potential improvements that everybody can find 10-15 huge improvements, the organization is probably not ready for a suggestion system. First they need to stabilize and transform their operation so that the big and obvious improvements are handled as projects in a prioritized basis. The suggestion system seems to be most successful as a vehicle for gradual, incremental improvement to keep kaizen going in something closer to a steady-state environment. There will always be change within organizations, but for most people, their “own back yard” is narrow enough in scope that is is fairly steady state.
    The problem with big ideas is that while the big idea may make great sense, there may be another person working two bays down with another great big idea, and yet these ideas taken together cancel each other out. So the big ideas, unless they are technology or process focused (more innovation than improvement) should be studied from a end-to-end or value stream point of view. This takes quite a lot of coordination, so the small, local ideas are best. If some of these ideas happen to be local and big, all the better.
    In terms of a reward system, every idea should be rewarded equally at either the team or individual level. This can be a token reward. In addition, rewards can be given through contests by category, impact or number of ideas implemented.