Human Machines in the Lean Enterprise

Direct labor is a variable expense on the income statement. In the lean enterprise, direct labor should really be considered amortization on capital equipment — like lease payments on a human machine.

KEN ROHLEDER

Over the course of a 20-year career, the fully burdened cost of a human machine earning $40,000 a year is $1 million. The financing is a bargain — the human machine can be purchased with nothing down, zero interest and monthly payments indexed to inflation over its productive life.

Human machinery is the most flexible and capable technology ever conceived. But every human machine has unique limitations — some that can be overcome with training and mentoring, some that cannot. Understanding the unique capabilities and limitations of each human machine requires rigorous processes.

The process for buying a human machine should include a deep analysis of how the needs of the human fit the needs of the enterprise. If the fit is not superb, the performance of the machine will fail to meet expectations, and the value it creates for the enterprise will be suboptimal.

Buying a human machine is a courtship. The highest-value human machines come to your organization after months or sometimes years of discussion and information exchange. Before the million-dollar investment is made, there should be a deep understanding of the machines' values. The human machine must also understand the values of the enterprise and clearly know the roles and expectations the machine will be expected to meet.

Research shows that human machines are most productive when they work 40 hours per week. More hours and their need for work/life balance is not met. Fewer hours and their financial and ego needs are not met. Sporadic changes in working hours that meet the temporary needs of the enterprise can damage the productivity of a human machine well into the future and should be avoided.

Senior managements' first priority is preventative maintenance and sourcing of human machines. Managers must create an environment that keeps the human machines under their care in top value-creating condition and they must vigilantly source and court additional human machines to meet the future needs of the enterprise.

Fear creates a negative feedback loop in human machines that is impossible to correct. Human machines fearing layoff during economic downturns will permanently reset their output rate to a lower level. Therefore it is critical to only invest in human machines that can be retained through the normal dips in the business cycle.

In the current economic reality, market size has been decreased permanently. Growth will occur again from a diminished baseline, but business will not rebound as it has in the past. Resizing the fleet of human machines should be done methodically based on the optimal value creation of the fleet. Downsizing the fleet should be done in a single action that resets the size of the enterprise so that it is appropriate to the new economic reality.

Reducing the hours of the entire fleet violates the human machines' need for a 40-hour work week and introduces a negative feedback loop of fear that is irreversible. Temporary layoffs in the fleet have the same effect — the value creating capacity of the entire fleet will be permanently reduced. Resizing the fleet, therefore, is necessary.

The personal toll of this economy is real and equating gut-wrenching human resource decisions to investments in machinery might even be offensive I suppose. But the lean enterprise operates with a clear understanding of what each stakeholder values. What human machines — human beings — really value is a secure 40-hour job, free from fear with an enterprise that believes they are worth the million dollar investment.

Ken Rohleder is president of the consulting firm Rohleder Group, Louisville, Ky. He is also executive vice president for Packsize LLC, the global leader in on-demand packaging systems. He can be reached at ken@rohledergroup.com.