At DTE Energy, executives are becoming leaders and teachers, and unleashing employees to solve problems whenever they appear. The company is depending on these capabilities to save $130 million this year.
Getting buy-in from management is the barrier most often encountered in lean transformations but that’s not the case at DTE Energy. There, executives are going to worksites to teach and coach, proving they are committed to change.
DTE Energy is a $9-billion Detroit-based company involved in energy-related businesses and services nationwide. Its largest subsidiaries are Detroit Edison, an electric utility serving 2.2 million customers in Southeastern Michigan, and Michigan Consolidated Gas Co. (MichCon), a natural gas utility serving 1.2 million Michigan customers.
The company has invested 10 years in making lean and six sigma part of its culture, but only recently has it found a way to truly engage top-level executives in demonstrating what the principles mean.
“It was eye-opening,” said Steve Kurmas, Detroit Edison president, in describing a weeklong Continuous Improvement (CI) Leadership Workshop. “Seeing what Autoliv is doing with continuous improvement compared to what we’re doing–it fundamentally changed my perspective.”
Kurmas and other DTE Energy executives have participated in CI Leadership Workshops, initiated in 2007, at the Autoliv facility in Utah and other locations. The workshops, developed in cooperation with the Toyota Supplier Support Center, were designed to help executives understand their role as leaders in driving the culture changes that will take the company’s lean transformation to the next level.
Focused on principles, not tools, the CI Leadership Workshop balanced classroom instruction with hands-on practice. The executives worked on real problems on the factory floor, which, at Autoliv, immersed them in a shared culture of improvement. Working on the factory floor also gave the executives a taste of the enthusiasm and satisfaction shared by people solving problems that make a difference.
“We came back and wanted to instill that mindset and culture in our employees,” Kurmas said. “We began to implement what we learned and to engage people at the front line.”
After the leaders’ introduction to this new approach, Kurmas said, “we could see that continuous improvement is not a project or a process, it’s a culture. It’s about looking for smaller incremental changes in every element of every process and getting the employees involved in that.”
In the past, Kurmas, like most executives, thought continuous improvement was something that somebody else was supposed to do. “When it was done successfully, it was our job to congratulate and reward them,” he said. “The mindset we have now is that it’s our responsibility to lead that effort by hands-on demonstration.”
When first asked, DTE Energy’s executives couldn’t see how they could spare a week for the CI training, not to mention more weeks teaching it afterwards. To their surprise, they have spent many weeks in the field to show that the continuous improvement effort is important. They are learning how processes work and helping frontline employees find and eliminate problems and workarounds.
Supporting the leaders in their new roles is a team of more than 90 people–including three union members–led by Jason Schulist, director of continuous improvement. Where once the group was considered to be directly responsible for CI training and projects, the CI experts are now co-teaching the CI Leadership Workshop with leaders and becoming a resource to help them with their CI strategies and execution.
The principles introduced in the CI Leadership Workshop reflect the nature of complex systems and processes.
“The work done at DTE Energy — whether it’s power generation at the plants, support of the generation effort, distribution or support of customers — is incredibly complex,” said Steven Spear, one of the architects of the course. “It is complexity itself that’s a real challenge for companies. You design processes and systems to get work done and it’s unavoidable that you get it wrong. Just by the number of pieces that have to come together, you’re going to miss something. You’re not going to understand how things interact. The structure will be wrong. You won’t understand the behavior of the system.”
In most organizations, when a system is flawed, the next step is to expect employees to somehow deal with it, sentencing them to firefighting and finding workarounds.
What makes a system even more difficult to comprehend and repair is that while traditional organizations are divided functionally, processes don’t respect those boundaries. When people in one silo don’t know much about what happens in another, their actions may create problems elsewhere. Spear said that senior leaders in these silos don’t usually view themselves as being responsible for what happens on the other side of the boundary. They don’t see their roles as ensuring that pieces come together harmoniously in order to get work done.
Spear said the barrier to getting through to executives about the nature of lean and continuous improvement is their hesitation to admit that they don’t know.
When you get executives to participate in a workshop like the one at Autoliv, they engage in a problem discovery and solving activity, and see firsthand how the principles they learned in the classroom result in incremental improvements in real processes. They also learn from their hosts how those small improvements add up. And because they are not expected to know how airbags, for example, are manufactured, they can say they don’t know and learn how to learn.
The CI Leadership Workshops, Schulist said, also focus on four capabilities built into the culture of operationally outstanding companies. In DTE Energy’s parlance, they are the Four Cs:
C1-Design work to see problems as they occur.
C2-Countermeasure problems rapidly at the point of activity.
C3-Share new local knowledge across the enterprise.
C4-Leaders develop engaged employees through teaching, coaching and mentoring.
The executives-turned-teachers at DTE Energy have eagerly gone to where the work is done, where service vehicles are dispatched in the morning, where representatives talk to customers and where power generation facilities are maintained.
At the work sites, with experienced continuous improvement facilitators, leaders co-teach the new course and coach people through improvement events. By teaching, they show they are leaders of the effort, which creates buy-in and shows how serious management is about continuous improvement.
DTE Energy’s goal is to help people identify small problems, develop countermeasures and make those process improvements quickly. People are not used to having action follow their ideas.
“What I hear most often is that everybody knows what needs to be done to improve their process, and has suggested it in the past to management or through suggestion programs, only to see their idea get lost in the bureaucracy,” Kurmas said. “We gave them the opportunity to suggest something, then to try it, test it and implement it almost in real time, assuring that the changes were moving us in the right direction.”
When a new initiative is implemented, typically after others have stalled, there is a chance for resistance and disbelief in the sincerity of management.
Kurmas pointed to a situation at one of Detroit Edison’s coal-fired power generation plants. After the classroom phase of a workshop, participants went into the plant to try to engage the people who do the work every day.
One task targeted for improvement was the collection and removal of pyrite, a waste left after coal is burned. The team wanted to reduce the time the non-value-added job required. Several people thought the process would be improved if they only had the same equipment as a nearby plant. As it happened, the manager of that plant was on the team. Within hours, that very piece of equipment rolled in.
“In the team, you could see the light come on–we’re sincere about this effort,” Kurmas said.
Though the equipment failed to solve the problem, from then on, that whole team was energized by seeing that leaders were sincere about minimizing this wasted work. The team came up with more than 100 other ways to improve the process, for a 20 percent reduction in the amount of labor dedicated to the task.
It’s important to show employees that these events are not one-shot deals. Kurmas has been back to the plant for additional activities. Teams there are continuing to apply what they learned from that first session.
Vince Dow, Detroit Edison vice president, Distribution Operations, worked with another team to tackle a service center truck flow problem. An employee pointed to a big metal stanchion that was blocking part of an aisle.
Employees said they wanted the stanchion taken down, but perceived a lengthy paperwork trail to do it. By the end of the fourth day, the stanchion was gone, a traffic flow pattern was created and the next day, all the congestion disappeared.
“Everyone said it was symbolic,” Dow said. “It not only freed the trucks up, it freed their minds and their hearts. Everybody became engaged after that thing was moved. They were saying, “˜You guys actually moved something that we all knew was in the way, but we never thought we could do anything about it, and now we know we can.'”
Kurmas recalled an event in the call center, where the team identified a process that routinely caused representatives and customers frustration. A commercial customer would call in to pay a bill for multiple addresses on one credit card.
DTE Energy’s credit card system, for security reasons, was designed so that once a customer service representative typed in the pertinent information, it was recorded and erased. A customer who had six accounts would have to provide that information six times, which did not sit well with the customer”or the employee.
“Before we did that effort,” Kurmas said, “the customer service reps were dealing with this on a daily basis and that problem was never really percolating through the organization so that we could devote the IT resources necessary to correct it. When we were able to implement a change our customers saw an immediate benefit.”
Large organizations usually have many layers of management between the executives and the people who do the work.
The test is whether DTE Energy’s leaders will stick with the plan. Spear said that leaders need to look out for a few things.
“It’s intoxicating at first because in organizations that haven’t been process oriented, it’s not even low-hanging fruit,” he said. “The fruit is on the ground, it’s clean, it’s packaged, and it’s ready to eat. It’s so easy. But once you start getting rid of the low-hanging fruit, you’ve got to look a little harder for it. In order to solve the problems, you’ve got to start managing across boundaries and borders, and you’ve got to step up and say, “˜I don’t really understand what people do. I now have to make an investment in understanding that.'”
Leaders must also be careful not to view one approach as a panacea. One continuous improvement methodology does not fit every problem or situation. Events are one approach, a learning experience, but developing the everyday capability to see and solve problems in the moment is more like DNA building. Meanwhile, other situations require a project approach, with more formal stages like fully describing and understanding the problem, identifying countermeasures, executing them and then sustaining them.
2009 Challenge: Save $130 Million with no Layoffs
DTE Energy has not been exempt from the effects of the sudden downturn in the economy; it has hit Michigan especially hard. Foreclosed houses, closed offices and idle factories reduce demand for gas and electricity. The need for DTE Energy to cut costs has suddenly escalated.
“We’re approaching this challenge a lot differently,” he explained. “In October 2008 we realized the need to take out an additional $130 million and we’re committed to the employment security of DTE Energy employees as well. We’re trying to hold the jobs of every full-time employee sacred. When you consider that, excluding labor and fuel costs, the total piece of the pie that can be examined for reduction is $800 million, finding $130 million in savings is a huge task.”
“80 percent sustainable means minimal scope cutting or retrenching,” Schulist said. “DTE Energy wants to do this as a way to become a company of strength, a company thinking about the future. We’re going to do this the right way so that two years from now we will have engaged employees with extremely strong problem-solving skills. This approach seems unique relative to other utilities’ responses to the current economic crisis and to our typical response in the past.”
“That’s a major switch in the mental model of how we approach continuous improvement, and that’s why we’re achieving such positive results,” Schulist said. “I expect that we will prevail in our efforts and we’re doing it the right way by developing people and engaging people in the process. This means it’s not going to be a leader deciding what’s going to happen.
As an example of the difference in how decisions are made, many companies affected by the downturn have issued a ban on travel. At DTE Energy, however, people are asked to determine whether or not travel is appropriate, and decide what to do. That creates the decision-making at the right point of activity.