Quality and Cost Always Go Together with Lean Thinking


This is an old story, from May, that I've meant to write about for a while. Peter Orszag, the Director of the Office of Management Budget wrote a piece in the WSJ about healthcare.

He wrote:

The good news is that there appear to be significant opportunities to reduce health-care costs over time without impairing the quality of care or outcomes. In health care, unlike in other sectors, higher quality currently seems to be associated with lower cost — not the opposite.

Well at least he is right that you CAN improve quality while reducing costs. ThedaCare is just one of many hospitals that are using the lean methodology to do just that. As CEO Emeritus John Toussaint said on Fox News, their hospitals are delivering 25% lower cost, shorter length of stay, and better quality through the use of lean methods and lean thinking (the culture and management system).

Where Orszag misses the boat is the “unlike in other sectors” part. He is showing his economist roots. My MIT Leaders for Manufacturing program classmates got into a huge fight with our economics professor who was teaching the outdated “economic quality level” concepts, which assumed that better quality cost MORE and there was, therefore, a tradeoff where better quality wasn't worth the better cost. He couldn't understand our lean thinking and we gave up the fight before he flunked us.

This ignores the basics of Lean thinking that trace back to the book The Machine That Changed the World. In the traditional automotive “mass production” mindset better quality DID cost more because better quality came through costly measures such as:

  • Better quality materials
  • More expensive equipment
  • More inspection steps

Toyota, through lean production, proved that better quality could indeed cost less if you prevented defects from occurring, partnered with suppliers and employees, and built quality into the product the first time (using methods Dr. Deming taught them).

Lean is lean — the mindset. Better quality costs less in any lean environment. And this is true in healthcare. Better quality, the old fashioned way, in healthcare relies on similar failed strategies:

  • Hiring the “best and brightest”
  • Newer, better equipment
  • More inspection steps

At least Orszag understands what's possible – and what's happening – in healthcare. Now he needs to understand the other 83% of the economy, eh?

Regardless of your industry, do you have examples of how better quality costs less through Lean?

p.s. Wanted to give a mention to this year's Deming Conference at Purdue University.

Subscribe via RSS | Lean Blog Main Page | Podcast | Twitter @markgraban

Please check out my main blog page at www.leanblog.org

The RSS feed content you are reading is copyrighted by the author, Mark Graban.

, , , on the author's copyright.

What do you think? Please scroll down (or click) to post a comment. Or please share the post with your thoughts on LinkedIn – and follow me or connect with me there.

Did you like this post? Make sure you don't miss a post or podcast — Subscribe to get notified about posts via email daily or weekly.

Check out my latest book, The Mistakes That Make Us: Cultivating a Culture of Learning and Innovation:

Get New Posts Sent To You

Select list(s):
Previous articleNew Blog: "Grand Rounds"
Next articleConfirmed: Toyota to Shut Down NUMMI Production
Mark Graban
Mark Graban is an internationally-recognized consultant, author, and professional speaker, and podcaster with experience in healthcare, manufacturing, and startups. Mark's new book is The Mistakes That Make Us: Cultivating a Culture of Learning and Innovation. He is also the author of Measures of Success: React Less, Lead Better, Improve More, the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, and the anthology Practicing Lean. Mark is also a Senior Advisor to the technology company KaiNexus.


  1. Point in case, in plastic injection, a midsize plant (18 presses from 300 tons to 900 tons) in a 40 week period, managed to reduce its rejects from 2.7 % down to 0,5%, which, in terms of Cost Of Non Quality, is a reduction from 2.2 percent of sales down to 0.4 percent – from doing very, very basic Jidoka.

  2. In distribution centers the typical method for increasing customer order accuracy is to hire more "auditors" to check orders before they're loaded onto the truck. Through lean methods (standardized work, poka-yoke) we can increase order accuracy the first time (i.e., when the employee picks the order), thus eliminating the cost of auditors as well as monetary penalities we may incur from the customers for shipping inaccurate orders.


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.