3 Three Essential Systems
DOI: 10.4324/9781003267768-3
YSTEMS DESIGN
What does it mean to design a system? Systems design
is the action of defining the components of existing
and new systems and implementing the five tools for
each system. Once components are identified and tools
are implemented, the system is formalized. In design-
ing each system, you will identify all of the vital parts
and organize them into the system. Designing a system
can be a bit like cooking; not only do you need the
right ingredients; you also need to use the ingredients
in the right proportion at the right time.
Previously, many people who followed the Shingo
Institute’s recipe for excellence found it difficult to dis-
tinguish between tools and systems. Making a clear dis-
tinction between the two is very helpful. Think of the
system as the recipe and the tools as the ingredients.
Companies have many tools. Considering ingredients
in the pantry is like looking at all the different tools.
When the tools are combined together in the right way
—as a system—you will get the dish that you want.
Implementing carefully considered, well-designed sys-
tems create and drive improvement throughout an or-
ganization by ensuring that each team member under-
stands the work and is granted permission to do that
work. Despite wanting to do their best, people can only
do what they understand, and they will only do what
they have permission to do. A formalized system gives
workers the permission and the knowledge to make
correct decisions about their work. The more closely
the system functions to identify, support, and encour-
age the ideal behavior, the more sustainable the sys-
tem becomes. The goal of any system should be to
make it easy for people to do the right thing (the ideal
behavior) and hard for people to do the wrong thing
(the less-than-ideal behavior). Formalized systems cre-
ate culture and drive behaviors.
HREE TYPES OF SYSTEMS
Many organizations struggle with what happens when
a supervisor is not available to solve a problem.
Oftentimes the work stops until the supervisor arrives,
or each team member improvises a solution that cre-
ates as many unique workarounds as there are work-
ers. Both responses are problematic. A well-designed
system empowers each team member to make and re-
spond correctly to problems as they arise. Because dif-
ferent team members are faced with different types of
problems, they require different institutional support.
The kind of system required to support each team
member can be classified into the three types of sys-
tems identified by the Shingo Institute: management
systems, work systems, and the improvement system.
While the exact dynamics of these types of systems will
be unique to each organization, understanding the
types of systems and how they relate to each other will
help you to strengthen connections and empower peo-
ple throughout your organization. Because the formal-
ized systems provide the required information, team
members are empowered to make decisions, find im-
provements, conduct audits, hold training, and report
problems. A well-designed system also aligns all team
members with the organization’s purpose.
In Figure 3.1, notice that the management and im-
provement systems both point to the work system. This
is because both systems support the work of the orga-
nization. Of the three types of systems, the work sys-
tem is the most fundamental. A work system has an in-
ternal focus, meaning that it focuses on everything that
is needed for an output, i.e., the work being done to
provide value to the customer.
FIGURE 3.1 In an organization, the work systems are
central. The improvement system and management
systems contribute to the success of the work systems.
The improvement system focuses across the entire or-
ganization and through all the departments within the
organization. In this way, the systems support building
an improvement culture that involves everyone in the
organization, everywhere in the organization, all the
time.
The focus of the management system is leading the or-
ganization by developing system leaders. The purpose
of management systems should be to build alignment
in the organization around the common purpose and
to create value for the customers. However, these pur-
poses are accomplished by the work systems, as sup-
ported by the improvement system. Through develop-
ing system leaders, the management system assures
the work is done, and that continuous improvement is
happening throughout the entire organization (Figure
3.2).
FIGURE 3.2 When formalized, all three types of
systems work together to improve the organization.
The three types of systems are tightly connected and
interdependent. Each type of system is dependent on
the others. When the systems work together, the whole
organization aims at excellence together.
ORK SYSTEMS
The work system is the basic organizational unit in the
company and is usually the easiest of the three types to
recognize (Figure 3.3). A work system consists of work-
flows or jobs. In an accounting work system, the peo-
ple who are doing the same job would make up a
workflow. For example, accounts receivable would be
one workflow and accounts payable would be another.
In manufacturing, a work system is often defined by
product line. The process to manufacture the product
is often arranged into cells and a work system could
encompass multiple cells.
FIGURE 3.3 The work systems are central to the basic
structure of the organization.
Because work systems are so fundamental, in most or-
ganizations they are functional units that can be found
on an organizational chart. The leaders of work sys-
tems are generally supervisors or managers, easily
identified on an existing organizational chart. While it
is likely that you can identify some work systems in
your company, they are most likely informal or lack
some components of a formal system. A medium-size
organization of a thousand people could have 20–40
work systems.
READER CHALLENGE
Identify a few of the work systems in your
organization:
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e Real World: O.C. Tanner
O.C. Tanner is a global company that develops strategic
employee recognition and reward solutions that help
people accomplish and appreciate great work. They
manufacture custom awards for recognizing the work
people do from trophies to pins as well as apps to con-
nect people to purpose, accomplishment, and to one
another. O.C. Tanner received the Shingo Prize in 1999
and has continued to work closely with the Shingo
Institute. They create “custom, one-of-a-kind products
produced with the same efficiency as mass
production.”*
* Business Wire, “O.C. Tanner Executive Inducted into AME Hall of Fame,”
November 16, 2015,
https://www.businesswire.com/news/home/20151116006236/en/O.C.-Tanner-
Executive-Inducted-AME-Hall-Fame.
O.C. Tanner formalized these ten work systems:
Distribution
Purchasing
International purchasing
Logistics
Maintenance
Research and development
Pressed product
Custom product
Build engineering
Production scheduling/systems
e Real World: Toyota
Toyota gives us a great example of the importance of
clearly defining the work processes in a system.†
Although many companies have tried to imitate
Toyota, most of them fail. Unsuccessful adoptions fre-
quently focus on the obvious practices without apply-
ing the four unwritten rules:
† Steve Spear and H. Kent Bowen, “Decoding the DNA of the Toyota Production
System,” Harvard Business Review, Sept–Oct (1999): 98.
1. All work is highly specified in its content, sequence,
timing, and outcome.
2. Each team member knows who provides what and
when.
3. Every product and service flows along a simple
specified path.
4. Any improvement to process, worker/machine con-
nections, or flow path must be made through the
scientific method, under a teacher’s guidance, at the
lowest possible organizational level.
Like strands of DNA, these rules govern how people
carry out their jobs, how they interact with each other,
how products and services flow, and how people iden-
tify and process problems.
Following the Toyota example of improving processes,
system design takes a similar deliberate scientific ap-
proach to improving systems.
MPROVEMENT SYSTEMS
The improvement system consists of several sub-sys-
tems that impact all of the other systems in an organi-
zation (Figure 3.4). Each sub-system can be considered
a separate system and should be comprised of all the
essential tools and components of a full system. When
working together, these sub-systems support improv-
ing the whole organization. Therefore, we teach a sin-
gular improvement system.
FIGURE 3.4 The improvement system impacts the
whole organization.
The human body is a good analogy. The body itself is a
system with essential sub-systems, such as cardiovas-
cular, digestive, lymphatic, etc. The improvement sys-
tem or an organization likewise contains many sub-
systems.
The focus of the improvement system is on making the
organization better by driving improvement across all
systems. As the sub-systems advance in development,
the common focus of the different sub-systems will
merge into the overarching improvement system.
Common improvement sub-systems include problem-
solving, 5S, SMED, visual management, and idea gener-
ation and tracking. The leaders of the improvement
system and the various sub-systems are generally in
the middle management tier of an organization. They
are able to influence other leaders. A medium-size or-
ganization of a thousand people could have between 8
and 12 sub-systems to formalize within the improve-
ment system.
READER CHALLENGE
What are the important improvement sub-
systems at your organization?
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e Real World: O.C. Tanner
O.C. Tanner has formalized these improvement sub-
systems* :
* To listen to Gary Peterson of O.C. Tanner talk about these functions, use the
YouTube link: https://youtu.be/uzkFH5ISLKY. The video, “O.C. Tanner Lean
Manufacturing Principles,” was published by O.C. Tanner in 2014.
Coaching and training
Visual management
Go and observe
Problem-solving
Leader daily work
ANAGEMENT SYSTEMS
Management systems consist of work systems and the
improvement system (Figure 3.5). As explained above,
its focus is the development of system leaders. A man-
agement system provides direction to the leaders of
work systems and the improvement system. The man-
agement system would be led by an executive or top
manager of the organization. The management system
leaders ensure that the interrelationships between the
work systems are properly developed and that the im-
provement system functions are adopted throughout
the organization. Examples of management systems in
a traditional organization might be operations, fi-
nance, HR, supply, strategy deployment, business de-
velopment, customer relations, and R&D. Some organi-
zations have moved all of these functions into a value
stream organizational structure. Management systems
may also have work systems that are the responsibility
of the management system leader, such as business de-
velopment. A medium-size organization of a thousand
people could have between six and ten management
systems.
FIGURE 3.5 The management system develops leaders
for all types of systems.
READER CHALLENGE
What management systems can you list for
your organization?
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e Real World: Lifetime Products
As a pioneer of the System Design approach, Lifetime
Products has been identifying and working with sys-
tems for nearly ten years. They have 16 functioning
management systems:
Manufacturing process
Metals
Plastics
Manufacturing engineering
Maintenance
Product development
Information technology
Legal
Planning/control
Purchasing
Quality
Logistics
Sales
Marketing
Human resources
Accounting
As we have narrowed our focus to the three essential
types of systems that will support striving for excel-
lence, the hundreds of potential systems become more
manageable. How many systems are we talking about?
For most mature, medium-size organizations, we
would expect about 50 systems (e.g., 32 work systems,
10 improvement sub-systems, and 8 management sys-
tems). Fifty well-defined, carefully thought out, formal-
ized systems will be more helpful in aiming for excel-
lence than hundreds of undefined, informal systems.
Your work as a systems designer will be to identify the
specific systems in your organization and to formalize
them by implementing the five required communica-
tion tools: standard work, reports, feedback, schedules,
and improvement log, as well as other essential com-
ponents such as a specified leader, and a clear aim.
While the systems in your organization may not add
up perfectly to 50, you will be able to count and chart
each system.
KEY BEHAVIORAL INDICATOR: DOCUMENT
YOUR SYSTEMS
Identify each system
Chart each system
READER CHALLENGE
What is the first management system you
would want to formalize in your
organization?
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What are the two improvement sub-systems
that you would want to formalize first?
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What are the three or four work systems you
would want to formalize first?
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