Patrick Adams:  Hello everybody and Welcome to the Lean Solutions podcast. My name is Patrick Adams and my guest today is Mark Deluzio. Mark is the founder and chief executive officer of Lean Horizons Consulting. He is also a former corporate officer and vice president of Danaher business system for Dan and her corporation. Mark is also credited with developing. The first lean accounting process in the United States for Danaher’s Jake Brake Division where he served as their chief financial officer. Mark is the author of Turn Waste into Wealth as well as flatlined. Why Lean Transformations Fail and What To Do About It? Welcome to the show Mark.

Mark DeLuzio: Patrick, thank you. Nice to see you.

Patrick Adams:  Nice to see you, too. We had some great conversations before we hit record and I wish we would have recorded a little bit earlier, but hopefully we can die.

Mark DeLuzio:  Yeah, I think that conversation was a podcast all by itself.

Patrick Adams: I think so too. I yeah, we may maybe we should start recording the pre conversation to these.

Mark DeLuzio: There you go.

Patrick Adams: But anyways,…

Patrick Adams: I really, I love your book flatlined. Why transformations fail and what to do about it and…

Mark DeLuzio:  Thank you.

Patrick Adams: It is an age-old question. You know, why do transformations fail? And I really like to just kind of dive in right there with, you know, the toughest question that I think has been posed out there because, you know, we can learn a lot from successes, right. But, you know, we can learn so much more from failures and so I just want to ask you, you know, what are your thoughts? What have you learned? Can you just fill our listeners in a little bit on what you think, you know, is going on with, with lean transformation?

Mark DeLuzio: Well, I just want to make it clear up front. I’ve never had a failure, I’ve never made a mistake. Okay. So I just want to let you know that.

Patrick Adams: All…

Mark DeLuzio: Okay. No,…

Patrick Adams: All right.

Mark DeLuzio: You know, it’s funny I was at a conference a while back and the conference founder You know, I said to him, You know I’m I’ve been going to this conference every year or so and it’s like everybody gets up and talks about their successes. I said, “Would you mind if next year I can come back as a keynote speaker and just talk about how I screwed up?”

Patrick Adams:  There you go.

Mark DeLuzio: While you’d be willing to do that. Yeah, I think people learn more from that than not right. So I have a whole presentation called humble errors, the mistakes we made in developing the Danaher business system, Okay. We made a lot of mistakes but,…

Patrick Adams: A lot of that.

Mark DeLuzio: You know, back then there weren’t a lot of consultants. Maybe that’s a good thing, but they want a lot of consultants to go after and misdirect you in turn. That’s what’s going on today. I think in a lot of ways. So, flatline really, Patrick is, is about a book. Why did I pick that name? I would get calls from CEOs.

Patrick Adams:  Yeah.

Mark DeLuzio: You know, they teach the Dan, her business system at Harvard, and I spoke to MIT, and all these schools, and, and Harvard, and at Kellogg, and they go to the schools, and they teach the Dan and her business system and the seat. Yeah, we’ll call me back and say, Hey, by the way, I just got my OPM certificate at Harvard and they talked about DBS. Those were the most interesting parts of the whole course, and we found that you’re the principal architect and we want to do DBS.

Mark DeLuzio: Because we’ve been doing lean for 10 years our business has flatlined. They use that word,…

Patrick Adams: You. Yeah.

Mark DeLuzio: right? So after a while, I kind of thought that was a good, a good name, other people sometimes think the book is about. You know, medical heart cardiology or whatever. And so what I, what I, what they would say we want to do is Dan and her business system. I think that if I told you earlier, I would say, Well, if you want to do the dance or business system, go work for dinner, okay? Because you can’t do it,…

Patrick Adams:  Right.

Mark DeLuzio: you gotta do it, your own, create your own system with your own culture, your own people, you know, industry and and all that. You can’t just copy people, you can’t copy Toyota,…

Patrick Adams: I mean, yeah. It’s not like I’m taking steps to become Toyota or…

Mark DeLuzio: You know, Parker ahead of it.

Patrick Adams: Five Steps to become Danaher. Can’t there’s you can’t give us the roadmap.

Mark DeLuzio: No, no, no. No. No. You know I tell people once you become Toyota like but you can’t become like Toyota okay it’s a little different right? And so so…

Patrick Adams:  Well.

Mark DeLuzio: what I’ve observed doing this for quite a few years I mean well going on four decades now. And I’ve been in all kinds of industries. I’ve been into even things like fracking and oil, and gas, and insurance, and logging. And, the one thing I will tell you Patrick is that the principles of lean apply, I don’t care what business you have. They apply. Now how you do it and…

Patrick Adams: That’s right.

Mark DeLuzio: how it tools you pick and how you approach that everybody gets really hung up on the tools.

Patrick Adams:  Mm-hmm.

Mark DeLuzio: And by the way, you’ve got to be really good at the tools, don’t get me wrong about that, but it’s not enough. The argument I always make is I have it in my garage right now. I know how to use almost every tool that’s out there, but I don’t know how to build a house and the bottom line is a lean transformation like building the house. All…

00:05:00

Patrick Adams:  Yeah, that’s right.

Mark DeLuzio: There’s a lot that goes into that, right? so, What I look at is what I’ve observed of the failures over the years of companies who tried to transform and failed. When I say I feel That’s a harsh word but let’s say they didn’t realize what they really should have realized had they thought about it differently. So the thing I look at is this number one: A lot of CEOs, a lot of leaders want to learn because they’ll get a short-term cost reduction tool and they’re going to try to drive their performance or, you know, their profits or stock price whatever.

Mark DeLuzio:  And I try to get to the point where it costs. Is a result of doing everything else writing. In other words, you know, you’ve got your safety which is the first priority and then your quality is your next and you’re delivering service to your customers, third, in that order. Then the last is cost and it seems as if Many companies and that will be a result of the cost if you do this first thing right, cost will take care of itself, productivity.

Mark DeLuzio: And growth by the way. And that’s the best thing you could do.

Patrick Adams: Right.

Mark DeLuzio: Because anybody can lay people off, that’s easy. You don’t need a, you know, a PhD in business, to lay people off. Matter of fact, it’s almost a correlating thing to do, but if you can’t, as a leader, say to your people. Hey look, we’re gonna have a no layoff policy as a result of improvements in Lean, then you’re not going to get the buy and, and it’s gonna be a joke, okay? So safety quality delivery cost in that order. And so they usually just look at it instead of Sqdc, they look at it as cc cc. Okay, everything’s cost everything,…

Patrick Adams: You.

Mark DeLuzio: I’d be cost justified and it drives and it won’t work. Okay, never once, by the way, in the decade, I worked for George Sherman. When I develop, you know, part of, you know, Leading the team that develops Dana, her business system, did George ever ask me? How much money did the DBS office save Mark?

Mark DeLuzio: What do you guys do? What kind of numbers did you put up this year? Never had that question. I was challenged on a lot of other things that didn’t get me…

Patrick Adams:  Sure.

Mark DeLuzio: But, but not that, not that because he understood that, the people owning the businesses needed to be responsible and accountable, right? And so and…

Patrick Adams:  Right.

Mark DeLuzio: I tell people that they don’t believe me. So number one, they look at it as a cost reduction tool. And only focus on cost. Secondly, they don’t tie their lean initiatives to strategy.

Mark DeLuzio: So what they do is they’re all over the place in terms of, you know, let’s fly Vesta. Mail room. Okay, that’s great. Grab some pizza and we’ll have a party on Friday afternoon and I’m not saying you shouldn’t buy the best a male room, okay. But what I am saying is You need to focus your resources and as you know coming out of your background in your career you can’t be everything to everybody. So you actually have to decide what not to do. So we put in the policy deployment process in the early 90s and you’re still using it today. It’s a big part of the dinner business system and That was a game changer for the Danaher business system that took us out of the, you know, process improvement, although that didn’t go away to a more strategic approach. Look at what we were doing, right? So strategy deployment.

Patrick Adams: Right. Right.

Mark DeLuzio: What? I call strategy deployment, Dan and her still call it policy deployment because that’s how I learned it from the Japanese. so time to strategy,

Patrick Adams:  Sure.

Mark DeLuzio: When we initially started we called it the Dana her production system and it is, we changed the name to the Danaher business system because we knew it had to apply to the whole business not just to manufacturing, right? But I only changed the name…

Patrick Adams:  Mmm. Yeah.

Mark DeLuzio: We didn’t really know what that meant. We thought at that time we thought I was just about functions. We had to have a good HR department, a great IT department, great engineering, great accounting, you know, great finance, great whatever, good on the list of functions. But as we’ve got going more and especially with strategy deployment when you have to enlist mostly functional teams. to work together for a common breakthrough because no breakthrough that I’ve met yet, is a single function,

Mark DeLuzio: We found out that it was an enterprise play. Not a functional play. So, the enterprise has to work or the functions have to work together. As one cohesive enterprise. Not. And I will say this to you Patrick. If anyone tries to optimize themselves, They will suboptimize the enterprise. Okay. And I’ve seen that happen time and…

Patrick Adams: You.

Mark DeLuzio: time again. All right? Thirdly That’s third. I’m sorry, fourth, it’s all about leadership. So it’s really four things. It’s a function that focuses on tools and driving for costs, only the right to strategy. The enterprise focus versus just functional approach and then the leadership engagement. And here’s the real key here, how do you get a senior leader, who’s made it to these lofty positions?

00:10:00

Mark DeLuzio: And tell them what got you here. No longer is going to apply and you have to think differently. So, when you get into the leadership realm, you start talking about, What’s this whole business about respect for people, which is a really key thing. Because I learn about people, not about machines, not about products and engineering, not about standard work. Well yeah, all these things are part of that, but it’s if you don’t focus on the people,…

Patrick Adams: Mean.

Mark DeLuzio: you’re gonna lose. And then the other thing is, How are leaders going to be engaged in? Are they willing to change? I was saying that Kaizen, you’re so first before you start kaising, the rest of the organization because a lot of leaders will tell me. Well, I got to get my people to change. Really maybe you should start with you. Because if you don’t fall,…

Patrick Adams: Mmm. Yeah. So personal

Mark DeLuzio: You know, so that whole leadership side of this thing and then in that category is the returning back to basics. Because as you probably know, as well as I do, Patrick, there are so many

Mark DeLuzio: I actually own wannabes out there today that want to put a name out there and…

Patrick Adams:  Sure.

Mark DeLuzio: write a new book and just repackage things and you know Work on the basics and…

Patrick Adams:  Right.

Mark DeLuzio: I tell CEOs all the time. If you’re a football fan been somebody took his future Hall of Famers who were lousy lousy team, I should say in his first practice was he held up a football and he said Gentlemen, this is a football Then he he focused on the, the basics of tackling of passing a blocking. He was a basic guy, he probably puked on the West Coast offense today or the shotgun,…

Patrick Adams:  Right.

Mark DeLuzio: right? Okay. He was a basic guy and looked at the results. He got it. Go back to basics. There’s no silver bullet. and, you know, just do the basics and you won’t believe

Mark DeLuzio: How good that will get you. So anyway that’s really the long answer to your question about why lean transformations are real, but these are patterns I have seen over the years Okay,…

Patrick Adams: Yeah. Yeah. Right? Well that I mean super powerful,…

Mark DeLuzio: and that they’re not just like one off type things.

Patrick Adams: every one of those is probably worth an entire episode on Excuse me. But let’s try to break these down a little bit. One of the first ones that you mentioned was business strategy. So let’s break. Let’s dive into that one just a little bit. Can you explain the importance of having a business strategy and the ability to deploy and execute that strategy properly? And how did you guys do it at Dan, or what was the success that came out of that?

Mark DeLuzio:  Oh sure.

Mark DeLuzio:  Right.

Mark DeLuzio: Yeah, we’re always successful at it by the way, so we had a chance, okay? And this is where the Danaher business system became an all-encompassing type of approach.

Patrick Adams:  Here.

Patrick Adams:  Okay.

Mark DeLuzio: First, let’s talk about what strategy is, how we define a danaher, very simply, what game are you playing and how are you gonna win? That’s it. Forget about all that. Textbooks and everything else that’s it. If you can’t define it. Clearly what game you’re playing in Larry called, Who’s Now Running GE? And I actually sat down and put the strategy. Development process Together, huh? We want standard work as to how we do a strategy. Okay, so many of our businesses all thought they knew strategy and they were missing some fundamentals, including things like SWAT, analysis and simple things like that.

Patrick Adams: You.

Mark DeLuzio: But anyway, And he had a saying, he said, the quality of the strategy is inversely related to the thickness of the presentation.

Mark DeLuzio: Okay, you know, the thicker the presentation, the more convoluted the story was. You should be able to articulate, you Georgie and elevator in 20 seconds, you know what,…

Patrick Adams:  Yes.

Mark DeLuzio: What’s your strategy, your company? It’s just this, and this, right? So anyway the strategy, let me just go back and differentiate a little bit on strategy here because a lot of people say Hey we’re leaning gonna be our strategy. Well, how did that work out for Delphi? There were some of the best lien companies in Delphi. They want all kinds of shingle awards but they’re no longer a company, are they okay?

Patrick Adams: Right.

Mark DeLuzio: So so

Mark DeLuzio:  You could be making buggy whips and cement life preservers. You’ve got a bad strategy, Okay? You’ve got a bad product approach and all that. So you have to have a winning business strategy and use Lean to be able accelerate and drive that strategy. Okay. So, if you and, and I will hold this, too, if you’re a commodity business, and the only thing you compete on right now is price, you could take yourself out of the commodity category, by simply being the best in quality and the best in on time delivery in lead time. All of a sudden no matter what, one of the white papers I’m going to be writing very soon is going to be, there’s no such thing as a commodity, all right? And we had a new acquisition, that was a commodity and we took, you know, I went in and talked to the managing director, it was over in England and I said He’s 28 days. Lead time is a competition. 35 I said Well you don’t have a real

00:15:00

Mark DeLuzio: Advantage. He thought he did cuz I can get you down to three days and we did and like nine months. We got him down in three days,…

Patrick Adams: If? That’s right.

Mark DeLuzio: he more than tripled the business. Because here’s the best guy out there, and he got the price on a commodity product from 30,000 years to 110,000 units. So you can grow the business and that’s what it’s all about and, and it and, and grow profitably, providing employee security numbers. Number first, and from foremost, but, the strategy has to be addressing your three, major constituents, which are your employees, your customers, and your shareholders. And I know there’s others. But in the book, I talk about the lean trilogy of those three cats, those three stakeholders.

Mark DeLuzio: And if you don’t meet the objectives of all three and some, by the way, may be in conflict with each other, you’re not going to have a sustainable long-term win. And a lot of people think about the shareholder in the bottom line and earnings for sharing things like that and they probably think about the customer that really understands what the customer wants and employees. That’s all lift, service hardly we ever asked them. So all three of these have to be subjected to the plan. Do check the act process. Am I hitting their objectives?

Patrick Adams: He?

Mark DeLuzio: And if not Why and what’s my kind of measures, and what’s my A3 look like? And after all that, we don’t think about strategy that way, right? We just think about how I can sell more and make more money, right and…

Patrick Adams:  Right.

Mark DeLuzio: grab market share. And I’m not downplaying that. But there’s more to it than that because if you don’t address the the engine

Mark DeLuzio: That drives in, by the way, suppliers are included in strategy and as a stakeholder, your community, the environment, all those kinds of things, right? So,…

Patrick Adams: Absolutely.

Mark DeLuzio: Anyway, so that’s strategy. Lean by itself is not a strategy. You have to have a business strategy that Lean will enable you to accelerate that and beat your competition in that regard. So,

Patrick Adams: What, what is Dan, or her? How did you connect? Maybe the long-term strategy, the business strategy. How did that get connected all the way down to the front line workers and everything in between, what, what did you use, are there any Specific tools or…

Mark DeLuzio:  yep.

Patrick Adams: techniques that you use to make the connection.

Mark DeLuzio: Well, we were very clear on breakthroughs. Strategy, what strategy deployment or policy deployment as we called it and daily management. Okay, in a way I like to explain this to people this way, think about your business and think about all the processes that run your business. I don’t care if it’s, how do you open up an envelope? When it comes in, on the mail to how you pay a bill to how you do payroll to how you design a product, how you think about thousands of these processes, right? And by the way, I have a thing called my 10 rules of a process. If it’s not documented, you can’t call it a process. Okay. Okay. That’s the first rule of the 10. But anyway, yeah. All these processes are in the game. Which are the four, three or four of those processes are game changes for you.

Mark DeLuzio:  That is going to really drive your business. Then all the other processes are more functional and they just have to be done really, darn well. Okay, so if I’m gonna be, you know, paying invoices in the accounts, payable being the best accounts, Payable Department is not going to be strategic for me, but I’ve got to do that because breakthrough strategy depends on good sound, fundamental daily management systems. Okay so I’ve got to do all those things really really well and I’ve got to be looking at my KPIs for each. One of those all houses in my daily management and safety quality delivery cost.

Mark DeLuzio: And keep driving performance in that regard. But the four or five things that are really key for my business, sometimes it’s only one, I’ll give you. One example, we wanted to break into the Japanese Asian market to be kind of cyclical at Jake Break. Our new product development cycle was 72 months. He had no motors, which was part of Toyota. One of my customers was 18 months old, developing a whole engine that our product went on. We’re not gonna play in Japan, if we’re 72 months old. So our breakthrough for that for our purposes,…

Patrick Adams: Right.

Mark DeLuzio: was to drive our new product development cycle from 72 to 18 months, it wasn’t about improving productivity in the shop. Okay, that wasn’t a breakthrough. We went from four kids for 100 man hours to 45 so it wasn’t a breakthrough.

Patrick Adams:  Right.

Mark DeLuzio: That was relegated to daily management. So once you achieve a breakthrough and the processes to sustain at that level, it gets relegated back to your daily manager, because that’s just how you do business now and then the next break that comes along, right? But that one, there we

Mark DeLuzio: To work on getting 72 months to 18 and the funny thing was, when we got there, you know, was that 16? You know, they don’t, they don’t, that’s what people don’t understand. They don’t they don’t stop right? And stand still.

00:20:00

Patrick Adams:  Right.

Mark DeLuzio: So there’s an example there that there are things within Jake brake that were Warren breakthroughs for us and we were gonna really focus a majority, I’d say 60, 70 percent of our lean resources on the fundamental breakthroughs for a particular business. Now some companies their safety quality delivery and costs are such a mess or fundamental operating performance, a mess that is to break through for them. And we had a saying that I developed called,…

Patrick Adams: Hmm.

Mark DeLuzio: you have to earn the right to grow. So if you know, if you don’t , if your fundamentals are just broken and really bad and you get customers complaints and bad quality and all kinds of issues with safety.

Mark DeLuzio: That’s your breakthrough. Then you can’t grow in that kind of environment. You’ve got to fix the fundamentals. All right, first. So that’s how we treat acquisitions when we get new acquisitions. So from a strategic perspective, What are the things that we have to do? We don’t know what to do. Now that’s a definition of breakthrough that is going to be real game changers out there today and strategy is a process. That’s not a one-time a year deal. So we took that long-term. We went out for three years,…

Patrick Adams: Right.

Mark DeLuzio: some go out five, but we were not three years for a strategy, but through the strategy deployment or policy deployment process. We distilled down The things we had to do in the year itself and…

Patrick Adams:  Right.

Mark DeLuzio: got it down to the month and got it down to the week and we looked at the things that we had had to accomplish in order to support that three year.

Mark DeLuzio: Breakthrough. Okay.

Patrick Adams:  You.

Mark DeLuzio: And that’s where the deployment of your strategy. Strategy deployment ocean planning. Some people call it Ocean Connery but it’s not one of those deals where everybody gets involved. Everybody says, Well, we gotta have the janitor involved in our strategy. No, you no, no. You don’t want the janitor and I love the gender. Okay. And I treat the janitor. No different than the CEO, but you want to know something? No, the general doesn’t get involved in the strategy. Sorry. There’s certain people that have to run the business. Okay, you have to come in every day and put out a product, pay the bills, develop design, the product and, and work on those processes that are maybe relegated to daily management and improve those through kaizen. Okay, great. But not everybody can be involved in breakthroughs.

Mark DeLuzio: Because you got to run the business. So that’s a big mess. I think in ocean planning where everybody gets deployed, the same goals and everybody’s involved and all disseminates down to, you know, the janitor, right? And no, that’s not how we did it at dinner. And I don’t think that works long-term. Because I think all that is a lot of good stuff going on. And it’s a lot of busy work and, you know, no, that’s not to say that every department. Every function doesn’t have their daily management goals to say,…

Patrick Adams: Sure.

Mark DeLuzio: Hey, we got to improve quality, productivity, whatever it is, right? Okay fine. But to put that into strategy deployment, we thought about it differently than even maybe Toyota does right?

Patrick Adams: Sure that makes sense. Now that’s very valuable good information. You talked a lot about the difference between companies looking at growth versus cost cutting. And I have to imagine that there’s gonna have to be some changes made to the accounting systems. So you know as the father of lean accounting, how important it is to change the accounting systems when embarking on a lean transformation. What’s been? Your experience there? And can you talk to us? Because this is an area. I think that you shouldn’t talk about people, just move ahead and don’t make changes to their cost accounting or…

Mark DeLuzio: Here.

Patrick Adams: to their accounting systems. So what would you say to that question?

Mark DeLuzio: Well, Patrick, I would, you know, I would say to you that probably the most You know, fundamental problems with a transformation is that it comes out of the financial world, okay? and,…

Patrick Adams: Yeah.

Mark DeLuzio: and financial accountants who Are sitting there with their clipboards. Looking at the results, evaluating the lean process. So here’s how I look at it. You could when you’re doing a lean transformation, you could either be in the arena with the lions or you can be in the stands watching everybody. And those financial CFOs that sit in the stands to watch, not realizing that their participation is critical to the success. But they refuse to get into the lines.

Patrick Adams: Yes.

Mark DeLuzio: But then they’re standing there with the clipboard and then they finally say Well you know this isn’t working what’s been we’re gonna lay off the lean department.

Mark DeLuzio: We’re gonna, you know, it’s not working and…

Patrick Adams:  Right.

Mark DeLuzio: they’ll get they don’t get any thing that’s going on in that regard and they treat it like a program as opposed to a transformational cultural change, right? And and…

Patrick Adams:  Right.

Mark DeLuzio: So that, if you go back to the traditional, Financial measures that I got taught and costly. I grew up as a cost accountant. First, and foremost, before I went to operations and into general management. And I had, I’ve worked, I worked at LEGO. I worked at some unbelievable companies with some of the best, I believe cost accountants in the world and…

00:25:00

Patrick Adams: You.

Mark DeLuzio: I was trained like you wouldn’t believe and I was a very good cost. Accountant, traditional 101 type stuff. I didn’t do all that once I started learning lean. I’m saying you know, these measures are causing us to do bad things on lean things like absorption accounting. No, I don’t want to build more inventory so I can

Mark DeLuzio: I can capitalize my labor and overhead cost into inventory into the balance sheet. Now I want to do that. Because it’s gonna have to come out sooner or later okay and…

Patrick Adams: That’s right.

Mark DeLuzio: It’s a cash flow issue right? I don’t want to go back to the principles that I violated just in time. Yes, absorption accounting violates just in time. I don’t want a purchase price because I don’t want my purchasing guys to buy more because they’re saving and getting a favorable purchase price for it because some Nebulous standard cost stand across is an enemy to learn. And then And every every single I would say ninety and then 90 maybe 75% of the discussions on variance analysis to a standard all had to do with why the standard was wrong. That was the debate. It wasn’t a performance. It was a big joke.

Mark DeLuzio: Standard question is a lot of time involving put in stand across together. I’ve done so many conversions. All the years and thought I was doing a really good job. I look back now boy what a disaster that was, so purchase price, varians variance analysis. The whole concept, for example, of indirect and direct labor ratio, we got taught in school that direct labor is value added in indirect is not well, you tell that to a NASCAR driver, Okay. His picture is of indirect labor.

Patrick Adams: Mmm.

Mark DeLuzio: Let’s get some cost reduction,…

Patrick Adams:  Right.

Mark DeLuzio: get rid of that or you know maybe he could change his own tires, which all go into water spiders. And how do you think about teams on a single minute exchange to die?

Patrick Adams:  Sure.

Mark DeLuzio: So we got rid of that notion. Now, I’m not saying we should be foolish with indirect, if you want to call indirect labor, we should be foolish in that regard. But what I am saying is that

Mark DeLuzio: No, those guys are necessary because what we’ve learned is operators should operate. I want my operator on their standard work sequence as long as possible. Without any interrupt, I don’t want them looking for two weeks, I don’t want them looking for materials. I want them to operate in their work sequence. No different than I want that driver to be on that racetrack as much as possible. That’s his work sequence,…

Patrick Adams: That’s right.

Mark DeLuzio: okay? So, I use these analogies right? And so all the things that we learned as others, by the way other than we, how we measure ourselves, and how we look at ourselves is just bad and it causes the wrong decisions, but you can invent the right decisions. If you have the right managerial accounting system. Now, one of the things a lot of see I’m a CMA but a lot of sea CPAs don’t understand is you don’t have to be gap compliant. Socks compliant internal management accounting. You could do it any way you want.

Mark DeLuzio: Yeah, your external reporting has to be such to whatever standards are out there, but You don’t have to do that internally. So for example, when one of my guys at Jake Brake bought six months worth of tooling, his tooling cost per unit went through the roof and…

Patrick Adams: Okay.

Mark DeLuzio: he complained to me about it. I said, I don’t care. You know, but I’m not using all that tone. Don’t you guys advertise it? No, not my system. I don’t want to know why you bought too much but Mark, you don’t believe the savings I got on it. Yeah, Bill well, what happens if the design changes and…

Patrick Adams:  Right.

Mark DeLuzio: that cooling is no longer good, you just and what about the cash flow? You know, go back to your daily life. Would you buy six months worth of motor oil for your car, or six months worth of groceries? Right? For all the obvious reasons you wouldn’t do it.

Patrick Adams: Right.

Mark DeLuzio:  But in business we do different things. We don’t treat, we don’t talk about this in a book. We don’t work our lives, run our lives the same way we run our business, okay? Why did you get a discount? He thought he was gonna get a pat on the back. We didn’t get one from me. Okay. Because he used our cash. Okay. So he returned for a month and he got a credit. Okay, so I said, No, I’m not gonna amortize it but Connie says, You should do it. Yeah. Well, guess what, we’re not doing that, we’re not doing that. Another one was machine depreciation and, and he can’t, the same guy came to me once and he said, But what’s this machine depreciation charge? So I explained it. And he said, Well, she’s Mark. I’ve got eight machines and myself. I only need six. But I got rid of the tool. Am I going to save? Yeah, there are 250,000 machines, okay, two of them. The next month, I said, Put them in the graveyard. I’ll make the adjustment. Right? So we made the adjustment, his cost went down.

Mark DeLuzio: He’s next month, I got a capital appropriation request from another guy named Marshall. And I took, and I ripped it up right in front of them, it was for two CNC machines. 500,000. Okay,…

00:30:00

Patrick Adams: He?

Mark DeLuzio: So it’s things like that, right? And so you could drive the right behaviors but you can kill a lean. A lean. And by the way, this all goes back to the value stream. Costing getting rid of overhead overhead percentages are, which are arbitrary and go to direct cost changes, a whole science behind it that we put together. But at the end of the day, if you know, real traditional cost accounting and compared to what I did at Alina County it, it’s embarrassingly simple, everything’s complex. It’s even simpler than what you learned in school. So

Mark DeLuzio: Be happy to do so, yeah.

Patrick Adams: So far is this the concept of respect for people and you know, I’d be really interested to hear about your experience at DANAHER and some of the other companies that you’ve worked for around respect for people in the role that that plays in the success of a lean transformation.

Mark DeLuzio: Well, you know, at the end of the day nobody’s perfect at it even Toyota. And by the way, respect sometimes is in the iron beholder. One of the things I think is a big misnomer today because on LinkedIn, you’d see all kinds of people complaining about their boss, right? You never hardly see people complaining about their employees. If you think about a leader, they have 10 of these little darlings complaining about them because they all think they could do the guys job or the gals job better, right? and by the way, sometimes warranted, I’m not saying that but, but the respect thing, first thing, I’ll say about respect is that You have no right to demand my respect. You have to earn it and people don’t get that today. People just think employees, in particular subordinates, in particular think that you have to respect me.

Mark DeLuzio: Okay. You don’t, you don’t you don’t you you can’t ask me of that. You have to earn my respect. At least that’s why I think about it. However, it doesn’t mean you.

Patrick Adams: Yeah.

Mark DeLuzio: You need to be disrespectful to people who don’t have your respect. Okay, there’s a difference. So, as you look at respect for people. And if you go back to how Toyota thinks about it, They don’t only think about it from our people’s perspective and it’s probably a misnomer because it’s respect for you, your customers. It’s respect for your shareholders, your, your suppliers, your environment, your community. Oh yeah. By the way, even their competition puts them in that category. Respect for their competition which is I never heard any company to do that by the way. And so, the whole respect thing is getting a lot of press and all that. and,

Mark DeLuzio:  But you know, one of the things I always said was, if you just treat somebody the way you want to be treated, you’ll be fine. You know, and I’ll tell you a quick story, I’m not gonna get into names or anything like this, or even the company, but I was running operations, like I was called in by the president. And we were UAW shops. and he said to me, Mark, I can close the door, I have a problem. I just had a meet and greet with your people. This afternoon and Well, I’m a little concerned. I go, what’s wrong? He says they absolutely love working for you.

Mark DeLuzio: Oh okay, yeah, well great. Yeah, I kind of do that. But yeah, we have a good relationship, Mark. You understand their union? The Union shop, you’re not supposed to have that kind of relationship with the Union people. Were you…

Patrick Adams: If?

Mark DeLuzio: UAW and I negotiate a couple of contracts. and, I go. I’m not, I’m not getting what you’re saying. What are you just can’t have that kind of the ladies love working for you. Oh yeah. They’re kind of like they think I’m their son. You know, they’re older ladies and they took me under their wing like they’re watching out for me, you know, I said. But we have a lot of fun. Great. Yeah. We have a lot of fun. I said, You know, we asked for their ideas. We make, we actually in a fun way, make fun of each other, they make fun of me. We just have a lot of fun, you know, we are both on each other and…

Patrick Adams: What?

Mark DeLuzio: They love coming to work, you know, and I said, By the way, I said, the performance in these areas has never been met before in this company.

Mark DeLuzio: Is that a problem? Well, no Mark, but I don’t think you get what I’m saying. I tell you what, let me go out and I’m gonna go piss him off. I could do that really easily. I’m good at it. Okay. Just like you’re doing to me right now. Okay. No,…

Patrick Adams: Yeah, right.

Mark DeLuzio: no, that’s not what I’m saying. Okay so you see you know so what I’m trying to say here, is that how we think about people as it and I said to this president, Look, my father was 44 years at New Britain machine as a total diemaker. Never missed a day of work in his life except when he went to fight in World War Two and he was at the Battle of Geneva, okay? so, I said, when I see those people out there, I see my father, Right.

00:35:00

Mark DeLuzio: Sorry, if you want somebody to piss him off, you have to find somebody else. All…

Patrick Adams: Mmm. Right.

Mark DeLuzio: And I left and I left his office. And that was the last it was ever said. So I’m telling you that story because You know.

Mark DeLuzio: People have different notions about classes of people and they won’t treat the janitor the same as they do some examples, you know.

Patrick Adams: Right.

Mark DeLuzio: And, you know, and and and and I just nobody intimidates me from that regard and and I just, you know, I’m gonna treat you. And anybody and them that we position is I look at your character, your values and all that. And but, you know, I guess, I guess everybody. There’s a lot of talk about this but we don’t. So I think the thing about respect for people is all these things that we say I want to solve problems at the lowest possible. Level teamwork is important and blah, blah, blah blah. You go on and on, they’re all slogans, if they’re not backed up by our process.

Mark DeLuzio:  Okay, you put them on a poster and it looks really good to the outside world, but the people inside? No, it’s not true. If you don’t do it. Okay, I was with a group, a CEO and his multibillion dollar company. And I said, How many people here think that it is a creative realm? It’s a really key part of leadership. Oh yeah, we’re really big on that. Okay, Well I said, What’s your career development process? Didn’t have one. Anybody here ever Career Development Plan? No. Oh, okay. What about solving problems at the lowest possible level? Highest necessary level? Yeah, we’re all into that. Yeah, well, it’s not happening, right? Right. Do you have a process? No. Okay, then, how’s it going to happen? You know. So I came up with this slogan for a slogan. It says, You know, principles and values without an underlying process, Are merely slogans.

Mark DeLuzio: they are you’ve got to know, do you really know the goals of your people and what they’re what’s important to them or…

Patrick Adams: Hmm. Right.

Mark DeLuzio: Do you think, you know, I thought I knew what Hino Motors wanted until I found out. It was 106 out of 110 with 100%. Quality 100%, zero warranty 100% on time delivery from Connecticut to their request day. You know, City, Japan, 100%. I was 106 out of 110 on diesel engines. Wanna know why? Because my labels weren’t always exactly in the same part on the box.

Mark DeLuzio: I mean different game over there with Toyota, right? Different game. I mean quality and delivery. We’re just given that’s an entree. That’s a being to dance. That was just an entree. Okay. And,…

Patrick Adams: Hmm.

Mark DeLuzio: And I didn’t realize what they said and I and I argued and they said Deluzio’s son. You know, it doesn’t affect form. Bit of function. Come on. What’s going on here, guys? So that’s your son. You don’t understand if you cannot guarantee the quality outside the box, how can you guarantee the quality inside the box? Okay, so anyway,…

Patrick Adams:  Mmm.

Mark DeLuzio: understanding the goals and how do you do that? It’s a whole process in and of itself.

Patrick Adams:  Yeah.

Mark DeLuzio: Everybody’s going to tell you. But anyway, this whole respect for people is a very important part and it’s the biggest reason why I think these things fail on the lean transformations. And if you can’t guarantee no layoffs, do learn improvements. You can’t lay off tens of thousands of people like some companies have done and quality. Sorry,…

Patrick Adams:  Yeah.

Mark DeLuzio: Any idiot can lay people off. Anybody can lay somebody off. Okay, you can’t call that lean. All…

Patrick Adams: Right. Right,…

Mark DeLuzio: I don’t know what you would call it but it’s not lean. so,

Patrick Adams: I agree. 100%. So, Mark, amazing, love, love everything you’ve talked about and you’ve hit on a lot of different points. One of the questions that I did have to kind of wrap things up here is just specific to the danaher business system.

Mark DeLuzio:  Sure.

Patrick Adams: If you could pick one thing and maybe you can’t I don’t know. But what would you say made Dan or her business system? So successful out of everything we’ve talked about, Is there anything you could pinpoint or say This is it you know or No is there multiple things?

00:40:00

Mark DeLuzio: I would have to say consistency of leadership in the belief. That. What the Denver Business system can mean for all stakeholders?

Mark DeLuzio: Was never wavered from CEO to CEO, no matter who it was on George was the first, but it started with our burn.

Patrick Adams: You know.

Mark DeLuzio: And George Conan Saker who hired me and Jake break. And if Jake Break didn’t have the crisis that it did, There’d be no dinner business system today. And it was George and…

Patrick Adams:  Right.

Mark DeLuzio: Art that basically were the ones that said, Okay, well we got to do something totally different and that’s when we brought we, the first ones in the United States to bring in shingijutsu with the Lieutenant Satoshiono. Okay, we’re the first ones in 1987, and I happen to be working there. I got hired when George hired me, at 1987 Georgian art. So, once we saw the magic there and by the way, we made so many great improvements but we didn’t know what we were doing. We think we did, okay? And now I look back and I kind of laugh about how good we thought we were. Okay.

Patrick Adams: Here.

Mark DeLuzio: But we made such drastic improvements when George Sherman came in as new CEO, and he sort of somehow, like, asked me what I want to do in my career. I was already the CFO at an earlier age and I said, I want to get into operations. Like they said, I went to Japan. George and Art sent me to Japan for the first of several study missions that I’ve done. And I said, I love this stuff. I want to do more of it. So before I knew it, I was one of the Asian businesses. And operations and the whole business itself. And then George came to me and said, Mark, I want you to do for dinner or what you guys did for Jake brake, and that was my marching orders for the dinner business system. So it was that belief that If we do this thing right and…

Patrick Adams: Mean.

Mark DeLuzio: And I think we were pretty good people but you know what we were perfect. We had a lot of idiots that run some of these businesses and some of the guys out there that want to do top grading.

Mark DeLuzio: I said, Well, why don’t you top grade yourself? You’re the one who hired him, You know?

Patrick Adams:  Right.

Mark DeLuzio: I mean, no. You know, and I and I really do believe that. I mean, philosophy of 94% of problems are process problems. Not people’s problems. Okay but we had those idiots that want to do that kind of stuff,…

Patrick Adams:  Right.

Mark DeLuzio: We had some really bad leaders too. We have the bell curve but I’d say our bell. Curve was more shifted to the good leaders than the bed. Okay? And that was good because we weeded them out after a while. You know, some states are phenomenal. Politicians. Let me tell you. I think every company’s got that. So you know at the end of the day, I think it was probably the end of one word. Answer to your question is that belief? In, in the process. Not always having the answers in, in learning as leaders, how to ask the right questions, instead of giving answers. You…

Patrick Adams: Yeah.

Mark DeLuzio: and I’m sitting here saying this, what knowing that

Mark DeLuzio: We were nowhere near anywhere near perfect. I mean it was anything.

Patrick Adams:  Sure.

Mark DeLuzio: I may be talking about. This is like the Holy Mecca here. It wasn’t at all. Okay. It wasn’t at all those and a lot of cases. You know what show? Okay, so it wasn’t smooth, it wasn’t smooth. And when you do something like we did, we didn’t know we were creating a sort of history with this, but when you do this kind of stuff, when you’re dealing with all the issues that anybody would deal with, Everybody thinks you don’t know. Had it smooth. I got his Bible, I can send it to you. People push back from all levels in the organization. Okay. It wasn’t smooth for passion. Ibis is something the Japanese are just gonna do. They’re told No, no. It wasn’t like that at all. So

Mark DeLuzio: It wasn’t a smooth deal and everyone looked at the beautiful iceberg with the sun glistening on it. But underneath the iceberg, if you’re not careful, that’s not the Titanic, okay? And, and so, I don’t want to give this holier than thou view of Dan here and the Danaher business system to show how excellent it was. And, and all that because I want to talk, I think you can learn more about the screw ups. And we had a lot of them,…

Patrick Adams: That’s right. Yeah. Now,…

Mark DeLuzio: We had a lot of them. Okay. so,

Patrick Adams: That’s great, so such good points. Amazing, share stories’ value. Everything that you’ve talked about is just spot on Mark and I so much appreciate you being open to share about some of those failures because sometimes that’s not easy. But obviously, you know, coming out on the other end, reflecting and learning and being able to help others, you know, through some of those same challenges as massive, so thank you for that. I know our listeners are appreciative of that and before we go to you you do a lot of work for veterans, can you just real quick? Can you give our listeners a view on the nonprofit organization that you run and maybe some of the work that you guys do for veterans?

Mark DeLuzio: You know, it’s not even a nonprofit. It’s not a 501c3 at all. I don’t take any money for it. It’s just I’ve got some people that work with me on this but it’s a when I when my son got killed in Afghanistan and I saw the pain in my son went through, I got to see what veterans, you know, I got to see in your veteran a Marine as well, but I got to see the pain. They went through after they left the battlefield and the war didn’t end right for them and…

00:45:00

Patrick Adams: That’s right.

Mark DeLuzio: Some guys don’t make it. My son, just my my son Scott, just lost his third guy in his platoon to suicide right? That two kids wife so

Mark DeLuzio: I didn’t serve, I miss being on my body here. That’s not an excuse, but I didn’t serve. But I said, Well, what can I do? I have a lot of gifts that God’s given me to be able to help veterans,…

Patrick Adams: Yeah.

Mark DeLuzio: right? So I started an organization to help them start businesses and also help them with their business, or help them with their careers, you know? And, I’ve helped quite a few veterans in that regard. It’s called Brave B R, A V E, it’s business reviews, and advisors for veteran entrepreneurs, not just entrepreneurs though, you know, people seeking, you know, positions and all that.

Patrick Adams: Sure.

Mark DeLuzio: Um and it’s the website for brave.org. The number four, brave.org and I just do it. We do it. I do strategic plans. I help them with their business. Advice whatever they need, you know, or connect them with the right people to be able to do that. So that’s something I’ve been doing now for quite some time. Oh, she’s I don’t know how long it’s been Bobby. Eight years seven, eight years, and yeah.

Patrick Adams: What ultimate?

Mark DeLuzio: So that’s what it is. And it’s all volunteer work. No money. People want to give me money for I don’t want money, so

Patrick Adams:  Yeah, that’s such a huge need and so, I appreciate that. I want to thank you, and, and we’ll make sure that we take that link and put it in the show notes too. So, if anyone’s interested to go and check out the website, we’ll put that right in the show notes. Along with your contact info, too. So if someone is interested to grab a flatline or turn waste into wealth or connect with you, where’s the best place to do that? Amazon.

Mark DeLuzio: Well, the books, you could have gotten on Amazon and my website is Lean horizons.com. That’s our consulting address. I’m also doing a podcast which I would like to invite you on. It’s called Lean 911.com lead 911,…

Patrick Adams: You. Yes.

Mark DeLuzio: where we take a lot of questions from people in terms of the tough stuff that the books don’t give you in most consultants, don’t either, but we’d love to interview you on that podcast as well. I don’t usually interview people as well. Moreover, I am kind of answering questions but I’m gonna change.

Patrick Adams:  Sure.

Mark DeLuzio: I’m gonna change the format to get the right people on there that can help people up. Oh, what I do at that podcast is just to kind of help people through some of the tough spots of lean, you know, and that if you don’t you don’t you will not get in a book.

Patrick Adams: Yes.

Patrick Adams: Right. Much needed for sure.

Mark DeLuzio: Usually, so yeah.

Patrick Adams: I would be honored and I look forward to that. And again, we’ll put all of those links in the show notes. So if anyone’s interested go there and…

Mark DeLuzio:  Awesome.

Patrick Adams: grab Mark’s book, or find his website there, and connect with him Mark, it’s been great to have you on again we we got to get to do this again. Dive into lean accounting or some of the other areas of that strategy.

Mark DeLuzio: So many things to talk about.

Mark DeLuzio: Patrick my God,…

Patrick Adams: So many things. Yes. All…

Mark DeLuzio: Let’s just do it.

Patrick Adams: Well, thank you, Mark. I appreciate it. Have an amazing week.

Mark DeLuzio:  You too, thank you for having me. I do appreciate it.