When I worked with Johnson & Johnson's ValuMetrix Services consulting group (from 2005 to 2009), we had a simple but firm rule before engaging with any healthcare client: executives had to commit to a “no layoffs due to Lean” policy.
If leaders couldn't or wouldn't make that pledge, we politely declined the engagement. That stance wasn't just ethical–it was practical. Lean cannot thrive in a culture of fear. Our projects wouldn't succeed… or if they did, they wouldn't sustain.
As I wrote in Lean Hospitals:
“Rest assured, the approach presented here is not about mass layoffs.”
That single sentence often opens the door to a larger conversation about respect for people, the first pillar of the Toyota Production System and the moral heart of Lean.
Why “No Layoffs” Matters
A Lean health system respects and supports staff. It:
- Doesn't drive cost-cutting through layoffs.
- Improves productivity and reduces cost without reducing headcount.
- Protects employees' livelihoods even as their work evolves.
As I wrote in Lean Hospitals:
“Productivity improvements and cost savings can be accomplished in ways other than layoffs or head count reductions. Using Lean to make quality and productivity improvements that result in layoffs would be an example of not maintaining this balance.”
Leaders at pioneering health systems understood this early on. A growing number have publicly stated policies against using Lean to justify layoffs. That public commitment builds trust–and trust accelerates improvement.
Lessons from ThedaCare, Silver Cross, and Avera McKennan
At ThedaCare, a rural hospital CEO Bill Schmidt and his team demonstrated how a “no layoffs” philosophy can create a sense of safety even when roles change:
“There was not a great fear of layoffs, given the system's ‘no layoffs philosophy'; the bigger fear among staff was how their own role would change in a Lean system. They might not have been thrilled to be doing something different, but at least they were doing something.”
That distinction–protecting careers, not necessarily specific jobs–is key. It's about adaptability, not stagnation.
Silver Cross Hospital's leadership took a bold, visible stance. As David Schlappy said:
“We're not going to lay off anybody, nobody loses their job because of process improvement initiatives. I am committed to that personally, that if we were going to go forward with Lean, I would put my personal reputation on the line that we weren't going to do that.”
He understood that without visible, vocal commitment from executives, fear would spread faster than Lean itself.
Avera McKennan took a similar approach. Former president Fred Slunecka shared:
“We basically promised employees we would do everything we can to protect their careers, but not their specific jobs, if they in turn do everything possible to keep the organization economically secure.”
That reciprocity–mutual commitment between leadership and staff–anchors a true culture of continuous improvement.
The Business Case for Respect
Skeptics often ask: “If Lean improves productivity, how do we afford to keep everyone?” One answer is simple: use the freed-up capacity to do more and do better. Improve access, expand services, enhance quality. Lean isn't about cutting people–it's about cutting waste.
At NorthBay Healthcare, CEO Gary Passama reflected:
“While cost savings are nice, we did not set out in our Lean activities with that as a primary goal. Our staff understands this and therefore does not fear Lean. We have had no significant layoffs since embarking on our Lean journey. It may be a coincidence, but since we started using Lean principles we have had our best years in terms of financial results and employee satisfaction scores.”
That's not a coincidence–it's cause and effect.
Why This Still Matters–In Every Industry
The principle of “no layoffs due to Lean” isn't unique to healthcare. It's a universal truth about improvement and trust. Whether you work in manufacturing, tech, logistics, or public service, the same dynamic holds: fear kills improvement.
If people believe that working themselves out of a job is the reward for improving processes, they'll stop improving. If they believe that efficiency leads to opportunity–not unemployment–they'll bring forward ideas you could never buy with incentives alone.
Respect for people isn't a slogan–it's a system design choice. When leaders commit to protecting people, those people respond with creativity, ownership, and loyalty. That's how organizations build a sustainable culture of learning, whether you're making microchips, airplanes, or delivering patient care.
So, as you reflect on your own organization:
Have you seen a “no layoffs due to Lean” commitment in action? What difference did it make–or what happened when it wasn't there?
Let's keep this conversation alive. Share your experiences and lessons learned–because the way we treat people when we improve says everything about the kind of organization we want to be.
Related Blog Post and Article:
How lean management helped hospitals avoid layoffs
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Let’s build a culture of continuous improvement and psychological safety—together. If you're a leader aiming for lasting change (not just more projects), I help organizations:
- Engage people at all levels in sustainable improvement
- Shift from fear of mistakes to learning from them
- Apply Lean thinking in practical, people-centered ways
Interested in coaching or a keynote talk? Let’s talk.
Good points Mark,
Really relevant. There are many areas where any extra folks can be applied when improvements are made as you have suggested.
I once worked on an improvement initiative that involved a service desk of about 150 folks.
The GM of the area would not commit to no layoffs, and rumours abounded that half a dozen or so people would lose their jobs due to the process improvements that were being implemented.
This affected morale. Quite a few people resigned to go to places where layoffs were not in the wind. The service desk ended up having to hire new folks as so many good, experienced people had resigned.
duoh!