Following a self-described “tour of duty in public accounting,” Lexington-based author Nick Katko began a new career — as CFO of a company implementing the management system known as “Lean.”
Moving from financial analyses that were standard and established to a new system quickly pushed him out of his comfort zone. Traditionally, a CFO is responsible for external and internal accounting systems, based on generally accepted accounting principles. Such systems culminate in financial statements used to assess the company’s condition.
Lean, Katko quickly learned, can be completely the opposite. For example, Lean companies control production by producing to demand and creating flow as compared to traditional manufacturing.
When a company switches to Lean, the CFO is challenged with replacing the entire accounting system. The CFO must design the system and then move the company into it while simultaneously demolishing the old one.
Katko quickly became a fan of the Lean system when he realized that is every CFO’s dream.
“I figured out how Lean could make us a lot of money,” he said. “Then I was all in on Lean.”
As he began to think of himself as a Lean CFO, he became acutely aware of the importance of that position in leading a company through its “Lean Journey.” He has now put his experience to pen with his book “The Lean CFO: Architect of the Lean Management System.”
While admitting the book is targeted to financial people, Katko intends his book for anyone involved in the Lean process. Particularly helpful for those starting the management system, it can also be used by those deeply involved in the Lean process.
Still, the focus here is on the unique role the CFO has in leading a company through the Lean process. This can only begin when there has been a mental transformation — from CFO to Lean CFO.
Leadership is paramount because the principles, practices and tools of the Lean process can be confusing to people unaccustomed to it. The CFO’s role is vital, demanding a good understanding of Lean measurements and financials. The CFO often needs to make changes in financial and reporting systems to fulfill the Lean business strategy. Otherwise, the company may fail to realize the financial potential of the process.
“Lean is a business strategy that impacts every part of the company,” Katko says. “Every person, from the CEO to the shop floor operator, will have to change the way he or she thinks about and does his or her work.”
Lean business success is based on three things: 1) delivering value to customers, 2) flowing business processes, and 3) eliminating waste. Lean, according to Katko must take priority over any other management initiative in order to achieve financial success.
Providing value to customers ranks as the No. 1 principle of a Lean business strategy. It incorporates both the company’s clear understanding of value from the customer’s perspective and the actual delivery of that exact value. A company will change its relationships with both its customers and competition by adhering to this single objective.
Flow, the second principle of Lean, is the most difficult, Katko says. Flow requires system thinking and working in a coordinated manner to meet customer needs, as well as maintaining productivity. Flow usually requires redesigning processes that in turn need constant measuring.
Lean is often thought of as a process that eliminates waste. This creates a necessity for continuous improvement systems. Waste is classified in one of seven categories ranging from transportation to inventory.
Katko details the Lean business strategies in a variety of areas ranging from the Lean office to manufacturing operations. The role of the CFO is crucial in all areas, leading the company to define and implement the Lean process broadly. In the past, companies have often taken what Katko calls the “easy approach” to Lean, using it only on manufacturing processes.
Katko successfully writes with clarity and insight on a topic that can be dense with detail. The introduction as well as the “Wrap Up” to each chapter, gives the reader a focused structure for understanding how to be successful with Lean practices.
Every CFO whose company is using the Lean Management System should make reading this book a primary part of their Lean process. The author’s 20-year experience in implementing Lean Management Systems and his clear and defined explanation of the process in this book could help ensure any organization’s Lean success.