By November 1, 2007 0 Comments Read More →

Maybe a little hansei would be in order.

by Dan Markovitz

Without realizing it, James B. Stewart, the SmartMoney columnist for the Wall Street Journal, touched on the value and power of hansei (reflection) in yesterday’s piece (available for free here). Commenting on the recent ouster of Merrill Lynch CEO Stan O’Neal, he writes that

Mr. O’Neal and his board may have failed to engage in the kind of debate that would have prevented this tragedy [the $8.4 billion write-down of assets]. To be specific, what was Merrill’s board asking O’Neal when Merrill was earning record profits on the outsize success of its huge investment in subprime mortgages and related collateralized debt and loan obligations?. . . I know it’s hard to ask tough questions in the face of success. It’s not a strategy for winning popularity contests. But it’s essential in the worlds of business and investing.

We often think of hansei as something that’s done after project completion to determine what went wrong. But in fact, hansei is just as valuable — and perhaps even more so — when things go well. Matt May addressed this very idea in a recent blog post about Toyota exceeding their global sales goal, and doing it three years early:

Hansei is not about confirmation. It’s not about celebrating success. It’s a sobering reality check, even when a project has been wildly successful. Were you to attend a hansei meeting following a resounding success at Toyota, you would be shocked at the tone of the meeting. It’s stern and serious. Yes, the team greatly exceeded expectations, but exceeding expectations also means project members didn’t fully understand the process, or else misjudged the impact of factors beyond their control. Their objectives should have been met. And even if they reached their exact target, the team must still examine their course of action and the interim measures, not just the final results.

Matt goes on to explain that

the fruit of all hansei is new policy and the road to new policy is lined with sharp questions.

These are precisely the questions that the Merrill board wasn’t asking. They accepted the fantastic returns O’Neal delivered without questioning whether those returns could be generated without a commensurate increase in risk.

Stewart’s column focuses on your responsibility as an individual investor to examine the top performing positions in your portfolio so that you can understand why you’re doing so well — and what risk you might be taking on. But his point is equally valid for your personal lean efforts at work: do you really understand why some of your efforts go smoothly?

Don’t just congratulate yourself on your brilliance. Do some hansei and figure out why you succeeded. You’re guaranteed to learn something important.

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Dan Markovitz

Dan Markovitz is president of Markovitz Consulting, a firm that radically improves operational speed and efficiency by applying lean concepts to knowledge work. He is a faculty member at the Lean Enterprise Institute and teaches at the Stanford University Continuing Studies Program. He also lectures on A3 thinking at the Ohio State University’s Fisher School of Business. Dan is a frequent speaker and presenter at conferences, and has consulted to organizations as diverse as Camelbak, Clif Bar, Abbott Vascular, WL Gore & Associates, Intel, the City of Menlo Park, and Memorial Sloan-Kettering Cancer Center. His book, A Factory of One, was honored with a Shingo Research Award in 2013. Dan has also published articles in the Harvard Business Review blog, Quality Progress, Industry Week magazine, Reliable Plant magazine, and Management Services Journal, among other magazines. All of these articles are available for download on the Resources page. Earlier in his career, he held management positions in product marketing at Sierra Designs, Adidas, CNET and Asics Tiger, where he worked in sales, product marketing, and product development. He also has experience as an entrepreneur, having founded his own skateboarding footwear company. Dan lived in Japan for four years and is fluent in Japanese. He holds a BA from Wesleyan University and an MBA from the Stanford University Graduate School of Business.

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