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.

About LeanBlog.org: Mark Graban is a consultant, author, and speaker in the “lean healthcare” methodology, focused on improving quality and patient safety, improving access, reducing costs, and fully engaging healthcare professionals. He is also the Chief Improvement Officer for KaiNexus.

Tagged as: Hansei, Markovitz, Toyota, WSJ