Evolving Excellence

Is Business Learning the Value of Experience?

By Kevin Meyer

I subscribe to three of the Kiplinger Letter publications - the original Kiplinger Letter, the Kiplinger Tax Letter, and the Kiplinger California Letter.  Each weekly edition is a concise 2-3 page summary of economic, political, policy, and business data, news, events, and forecasts and generally right on target.

The economics section of the July 2nd edition of the Kiplinger Letter discussed the current employment situation, and had the following interesting comment:

Who’s more likely to be laid off these days, a younger worker or an older one? A younger one. The pattern of past recessions is being turned upside down in this downturn. More employers are deciding that they get more bang for their buck with experienced workers, even though their pay may be higher. One reason: Their institutional memory. Another: Their work ethic. Employers say they don’t need to tell oldsters to turn off their iPods, remind them how to dress or to come in on time.

Bang for the buck?  Could that mean... value?  An older pair of hands has more value than a younger pair?  Well, ok, I thought that was what they meant before the "turn off their iPods" comment. 

On that final note, perhaps we're experiencing what every generation has to experience at least once: a downturn creating a recognition that there's also value in working hard... and taking work seriously.  Prosperity isn't handed to you on a silver platter or in a success redistribution check from the government.

Although these days I've started to wonder.

The Preventive Performance Review

One of the most loathed supervisory activities in a traditional organization is the performance review.  In the worst case the reviews aren't conducted at all; or perhaps the worst case is actually a review that is performed on a superficial and one-sided level thereby giving completely wrong and ineffective feedback.  On the other extreme are organizations that recognize the value of continual feedback and development, sometimes to the point where a formal review is no longer necessary.

In a traditional organization the review, if conducted at all, looks backwards, evaluates, and attempts to take sometimes punitive post-even corrective action.  More innovative organizations use the "review" to focus forward, identify warning signs and developmental needs, and correct issues before they happen.

That's what's also happening in some cities as they take a more pro-active and innovative approach to reducing crime.

At least 30 cities are expected to announce Monday that they are joining an unorthodox crime-fighting program that relies on persuasion, rather than arrests, to cut down on criminal behavior.  Under the project, law-enforcement officials and prosecutors in the cities identify individuals operating in violent-crime areas who haven't yet committed serious violent crimes, and build cases against them, including undercover operations and surveillance.

In effect potential future problems are being identified before they actually become a problem.  Then a style of performance review happens.  A peer-based, or perhaps "360 degree review" to use the parlance of some organizations.

The culmination is a "call in" when the case is presented to the would-be suspect in front of law enforcement, community leaders, ex-offenders and friends and family.  "The prosecutor talks to them and lets them know: 'we could arrest you now but we won't because the drug dealing stops today, the violence stops today,'" said Jeremy Travis, president of John Jay. "If you continue, you now know the consequences and you've seen the case against you but we don't want to send you to prison."

A different path forward is presented and alternatives and support systems created.

A deeper root cause analysis would go even further, focusing on why an environment exists that creates a propensity for offenders in the first place.  Just as more innovative organizations attempt to understand why poor performers were hired or transitioned to that level of performance.  A large majority of performance problems are not the result of the people, but of the systems and processes and methods that surround and support those people.

Laffer and the Portability of Knowledge

By Kevin Meyer

The Laffer Curve has received a lot of press over the past couple weeks as federal, state, and even local governments try to close huge budget imbalances by increasing taxes predominantly on the "rich."  It never works, as Arthur Laffer himself pointed out in the WSJ a few days ago.

Lawmakers in California, Connecticut, Delaware, Illinois, Minnesota, New Jersey, New York and Oregon want to raise income tax rates on the top 1% or 2% or 5% of their citizens.

Why doesn't it work?

We found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York [Maryland], and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.

The concept that politicians don't seem to understand is that capital, wealth, and therefore investment creating jobs and more wealth, are portable.  It can move across state lines, and even from country to country as we see some large corporations relocate and take their taxable revenue with them.  People and organizations expect to pay some amount to obtain access to infrastructure and services, but at some point the amount is no longer worth the value provided.  Like it or not, states and nations also operate in a form of free market competition with each other.

But you'll be happy to know that tax policy is not the point of my rant.  Money is portable... and so is knowledge.  And knowledge as we know can be far more valuable than the money often attached to it.

Let's take another look at the classic Laffer Curve profile from the perspective of knowledge and knowledge workers.  Perhaps put "knowledge retention" or "knowledge attraction" along the bottom x axis.  What could go on the y?

Keep in mind when I say "knowledge" I mean "quality knowledge"... any organization can hire a lot of brains, but you really want quality brains, or brains that can be developed into quality brains.  People that drive an organization to new heights.

So I bet one attribute on the y axis that would create a very similar curve would be policies and procedures.  Most people, and organizations, want some level of structure and common policy.  True chaos is seen as beneficial to only a small number of people.  But in many organizations the need to detail policy and procedure begins to grow out of control and eventually you have 26-page travel policies that detail every nuance except the one you need.  What happens then?  I mean besides the exponential cost to administer and manage such programs.

The smart guys, the ones who can easily find new jobs in even today's economy, the ones that fuel innovation and growth... they say "screw this" and move on.  You reach a tipping point similar to the Laffer curve, and knowledge flight takes off.

I know of another company, a very large industrial equipment manufacturer that is often considered to be on the forefront of lean thinking, that is attempting to deal with the dramatic and long-term slowdown in orders by slashing hours, wages, and even benefits... instead of laying off.  A laudable policy or foolish move?  I explored this conundrum a few months ago and concluded, much to the derision of some lean purists, that it could be foolish.

Saving jobs, and the knowledge and creativity that if lead right those jobs represent, is a good thing.  Mutual sacrifice can be a good thing... to a point.  A good friend of mine at the company I referred to above recently told me how, after over six months, the morale has gone from one of "we're in this together" to "why am I subsidizing lesser performers?"  Pretty toxic, and I bet you can guess what is happening.  The best and brightest are moving on, and there's real concern for what will remain when the industry recovers.  So on the y axis we now have "depth of personal sacrifice"... it eventually reaches a point where it is no longer worth it, and knowledge flees.

Take another look at the Laffer Curve, ignoring the original tax policy implications.  Where is your organization reaching a tipping point in terms of knowledge retention and growth?  What can you plot on the y axis?

Taking the "Gen" out of "Genchi Genbutsu"

Well, GM is in the news again, this time for refusing to cancel its program that gives a company car and company-paid gas for about 8,000 white-collar employees. It's almost too easy to work myself into a righteous wrath over a perk that costs the company $12 million a year, at a time when GM has already received $13 billion from taxpayers and is looking for $16 billion more. But in the grand economic scheme of things these days, it's pretty much a rounding error.

GM claims that the perk, which is formally called the "Product Evaluation Program," is an important tool to improve vehicle quality, because employees can immediately report problems. But Walter McManus, a former GM economist during most of the 1990s, questioned the program's value:

I'm not aware — when I was in market research or in product planning — of anyone at GM ever using the information for any sort of analysis or any product development decisions. No one that I knew took it seriously.

Okay, so we've got some waste here: a program that certainly costs money to administer but doesn't do a damn thing to benefit customers. But to me, the real problem with this program is the way it isolates GM executives from the reality faced by its customers. The principle of genchi genbutsu ("actual place, actual thing," where "gen" means "actual") is designed to ensure that workers (and especially) managers get out their bubbles and see the reality of a situation. Yuji Yokoya, the Toyota chief engineer for the 2004 Sienna minivan is legendary for driving 53,000 miles around North America while developing the minivan, all in an effort to experience the reality of the US market.

You'd think that it would be easy -- even unavoidable -- for GM execs to experience the "actual thing" faced by their customers. All they need to do is simply drive their cars -- you know, to the store, to work, back home -- just like their customers. But leave it to GM to keep their execs in the bubble. What's the long term effect of these twice-yearly free cars twice and free gas? After all, if you're getting it for free, can you really understand what it's like for a consumer to own an SUV that gets 9 mpg when gas costs $4 a gallon?

GM insists its employees appreciate the impact of high fuel prices, but one current GM staffer interviewed for this story said the perk does blind some people. He recalled that when gas spiked last summer, a colleague complained. It wasn't because of the cost. It was because he had to swipe his credit card twice to fill up the tank of his big SUV.

Somehow, I don't think that the inability of gas pumps to register over $100, and the extra effort of the double swipe was the biggest problem facing consumers last year. When you're getting the car and the gas for free, you're not really experiencing the "actual" anything.

So, given the cost and questionably utility of this program why not end it?

GM has talked about ending the program, but a spokesman said employees have built their lives around it. It allows many to live far from their offices and commute at little expense. The spokesman said killing the program now would be "extremely" disruptive.

Ah, now I understand: 8,000 execs who are high enough up the corporate food chain to warrant (and I intentionally don't use the word "merit") free cars and gas can't afford to drive to work? Do they really make so little money that they can't afford to pay for the commute out of their own pockets? Did they really "build their lives" and choose where to live based on the assumption that they'd have free cars and gas in perpetuity? Are they really that asinine? If so, that explains an awful lot about how they can so seriously, and so regularly, misunderstand the customer.

Leave it to GM to take the "gen" out of genchi genbutsu.

Do You Truly Know Your Culture?

One of my real jobs is running a medical device component manufacturer with a few hundred employees.  A fun job in a thankfully still-growing industry.  When I started a few years ago the culture was one of top-down decision-making... really top down.  In fact, pretty much every decision was made at the very top, and no one else, even senior managers, decided anything.

That had to change in order for lean manufacturing have the slightest prayer, so I slowly began to expect people at all levels to stand on their own two feet.  I knew that we had a group of very talented people who were fully capable of making decisions, and I also knew that there were very few decisions of such significance that we couldn't recover from one that was poorly made.

It worked.  With rare exception the group stepped up to the plate, and along the way the overall leadership competence of both managers and individuals increased dramatically.  Quite honestly I feel like a proud papa.  We've made some incredible changes, created excellence in many areas, and mutually raised the bar.  The exciting part is that it continues to accelerate, and part of my job has become the "throttle" so we don't get ahead of ourselves.  I have become aware that there is an optimum rate of change, not too fast that it collapses like a house of cards and not too slow that it withers.  Building a solid solid foundation is critical.

One side effect of our invigorated leadership is that we have become very good at discussing issues.  Perhaps too good.  We passionately point out problems, opportunities, and new ways of doing things.  We debate long and hard.  We're master debaters.  Well, maybe I should rephrase that.  The debate sometimes slows down decisions, and we need to work on that.

I didn't realize how much this passioned debating had become part of our culture until the other week.  We recently hired a top notch manager who is creating dramatic change in his organization and really taking the overall company to a whole new level.  We're all thrilled with what he's doing.  Then I receive an email from him worried about all the "ruffled feathers" he's creating and wondering if he truly fits in.  I was completely blind-sided.  Where the heck did this come from?

Then it hit me.  He would suggest some improvement, and immediately a whole bunch of people would reply with "how about this other way" or even more directly, "I don't like that, but this other way might work."  That's how we operate.  It can require a thick skin, and I consider it a positive when difficult conversations are out in the open instead of fermenting in a hidden cranny.  In our environment we would eventually sort out the various ideas through vigorous debate, and in the end we'd implement an improvement.

But think about it from an outsider's perspective, even one with thick skin and years of leadership experience creating obvious competency.  A bunch of people always second-guessing ideas?  I can completely understand why it would appear to be "ruffled feathers."  After a bunch of explaining, the situation has calmed down and I hope he engages us as much as we perhaps overly-engaged him.  We need to be challenged in order to improve, and outsiders bring a fresh perspective that can add fresh challenge.

It can be tough, especially if you've been entrenched in it a while, but be aware of the culture you've created or that has evolved.  Even if it is positive, how is it perceived by a newcomer?

Preserving Talent

Layoffs are rampant these days, but even so the negative consequences of this recession are taking shape differently than in the past.  So far.

There are no comparable data from earlier recessions. But Laura Sejen, director of the strategic-rewards practice at consultant Watson Wyatt Worldwide Inc., says companies are trimming costs in more ways than in previous downturns, when they relied more heavily on layoffs.

What other ways?

Prompted by slackening demand for consumer electronics and automobiles, chip maker ON Semiconductor Corp. will cut 1,850 jobs -- nearly 13% of its work force -- and close four fabrication plants by early next year. But that's not all. ON is also suspending bonuses and raises, cutting discretionary spending, idling factories for as many as 12 weeks and requiring managers to take as much as six weeks off without pay.

Employees at ON and elsewhere are learning that in this recession layoffs are only part of the pain. Many companies are also cutting the pay, hours and benefits of those who survive.

What is driving the change from the pure layoff strategies of the past?

She [Laura Sejen] and other experts cite two principal reasons for the shift: The speed and depth of this recession is forcing employers to cut costs steeply, and many also worry about retaining enough talented workers. When the economy recovers, "those may be heads you wish you hadn't cut," Ms. Sejen says.

A recognition that talent means something, and attempts should be made to preserve it.  What a revelation!

Broad-based trimming allows executives to "keep your options open" amid uncertain business conditions, Mr. Colvin says. "If you want to do it all through layoffs, than you have to decide ahead of the game what your future business is going to be," he says. Right now, that's "a difficult call to make."

Some companies have a very defined strategy for holding onto key knowledge workers as long as possible.

At Corning Inc., that means deploying "rings of defense" to cut costs as sales dip, says James Flaws, vice chairman and chief financial officer. Last summer, the Corning, N.Y., maker of glass for flat-panel screens froze hiring and cut discretionary spending. In the fall, it shifted many employees to four-day workweeks and began eliminating 1,400 temporary and contract workers.

In January, Corning implemented its third ring, cutting 3,500 jobs -- about 13% of the work force -- consolidating factories and freezing salaries, Mr. Flaws says. If sales continue to fall, he adds, "we might have to do more," including selling assets or cutting pay, benefits and research-and-development spending.

Unfortunately the problem is that many companies have already effectively hit that "third ring"... if not the fourth.  This is going to be a painful year in many industries.

Hsieh on People

Peter Abilla over at shmula  as been running a Q&A series with Tony Hsieh, CEO of Zappos.  I've been a fan of Zappos for several years as I try to avoid wasting time in stores.  I also like that prices are low, and even lower when you consider that shipping is free, and return shipping for no-questions-asked returns is also free.

The entire Q&A is interesting and I encourage you to read it, but one section stuck out:

What leadership lessons have you learned in your time as CEO? Also, what mistakes have you made and how did those mistakes change you and change the company?

I think the biggest lesson I’ve learned is that there is a lot more hidden talent and potential in your employees than you think. It’s just about building the right culture and figuring out how to unlock all of that talent, which isn’t always an easy thing to figure out.

We’ve made a lot of mistakes at Zappos, but in general I think we do a pretty good job of learning from those mistakes. If we weren’t making mistakes, then I would say we weren’t taking enough risks.

Our biggest mistakes in the past have probably been related to hiring the wrong people, especially those that were bad for the company culture. It’s actually made our culture stronger today because we want to try to avoid making the same mistakes.

There we have it again: the value, not cost, of people.

Pella Prefers People

Times are tough, and organizations are having to cut back.  Some are taking the traditional approach of whacking heads without realizing the full value of the brain in those heads.  Some, like Toyota, are spending vast sums of cash to stash even more knowledge into those brains.  However even Toyota may have to come to grips with fundamental cash flow realities if this downturn remains as severe as it is now.  That will be, sad pun not intended, a head-turner.

Some organizations are taking a different tact.  One of them is Pella, one of our favorite lean companies.

Like many companies, Pella is looking to cut expenses because of the economic downturn. But instead of laying off more workers, the Iowa manufacturer of windows and doors is instituting a four-day workweek for about a third of its 3,900 employees. Chris Simpson, a senior vice-president at the company, acknowledges it's an unconventional move. But Pella believes the economy could turn around faster than most people expect, and it doesn't want to be caught short of experienced workers.

Even government is getting in the act.

In Atlanta, Mayor Shirley Franklin is cutting the hours and pay of 4,600 employees by 10% because the city is facing a $50 million budget shortfall. Franklin says that if she were to lay off more workers instead of slashing hours, "you'd have to eliminate major functions of the government. It's not just jobs we've saved, it's services."

California is trying the same thing by requiring workers to take two days off per month, but of course unions are now suing Schwarzenegger over that executive mandate.  With only 70 days of cash left in the bank, I guess we can let them work those two days.  We'll just mothball some firetrucks and classrooms instead... geesh stop being so self-centered already.

Other organizations are letting people take more vacation over the holidays, chewing up that accrual that finds its way onto the books.

Many American tech companies are shutting down for a few extra days over the holidays. For the first time, PC maker Dell is allowing employees to take up to five days without pay during the quarter ending in January.

Earlier this year many organizations went to four day work weeks in order to conserve fuel by eliminating one day of commute.  Originally it was a shift from 8 to 10 hour days to maintain a 40 hour week.  Now that's being cut to four days of 8 hours.  With both forces pushing toward a four day work week, that may soon become the norm. 

But is a reduction in hours really a good thing?  Perhaps initially.

Most employees prefer a reduction in hours to being laid off. But workers say there are costs either way. Pella employee Connie Davis says she plans to cut back on certain groceries when the four-day workweek takes effect in January. "Like anyone who's counting the pennies, I will tighten my belt a little bit," she says.

And that's the problem.  Shorter weeks with fewer hours still hurt financially.  It may be a short-term strategy to hold onto valuable knowledge, but maintaining it for more than a month or two may not be the best policy.   Most people are willing to chip in for a while, but at some point the pain of the masses may outweigh the pain of the few, and tough decisions should be made. 

A couple weeks ago we asked if a no layoff policy was really wise.  The conclusion seemed to be that a "no layoff due to lean", perhaps coupled with a "no layoff if the next quarter looks profitable", is good policy.  Sometimes, as an absolute last resort, tough decisions need to be made to preserve the business that supports the rest of the people. 

But let's still applaud the organization, like Pella, that realize that it's an absolute last resort and also involves the shedding of valuable brains and knowledge.  Not a knee-jerk reaction to reduce the cost of just a pair of hands.

Doonesbury on the Value of People

A regular reader and loyal subservient leader of one of my best factories pointed me to a Doonesbury comic from earlier this week that captured the value of people during this period of lemming-esque layoffs.  In an attempt to avoid the copyright cops but still provide a nice colorful graphic to augment the visual value of this post, here's just one frame of the strip from December 28th. The rest can be found here, on their fully-authorized website.

While several frames do talk about the value of people from a knowledge and creativity standpoint, I still have some issues.  First off, albeit minor, is the reference to people as "hands."  That unfortunately perpetuates the concept of workers being assemblers and not thinking, creative, key members of an evolving organization. 

How about "brains"?  Would we think differently if we had to say "let's lay off about 95 brains today"?  It's at least better than the usual term of "heads" or "headcount".  Even better, try this: change your HR reports to say you have "103 full-time brains and 32 temporary brains."  Hmmm... I know what's going to happen now.  That same loyal subservient leader I referenced above will probably do this, as he also recently tried to slide through a bunch of personnel action forms (perhaps we should rename them "brain action forms"?) to remove the job titles from almost everyone at his plant, claiming he had cross-trained them to equality.  I appreciate his thinking, although we're not quite ready, and perhaps I should start calling his plant a "commune." 

But back to the strip.  There are also several frames that imply that age equals experience equals value.  That's the same trap that unions, government workers, and the like fall into.  Basically anyone that gets an automatic increase due to time of service.  Knowledge and creativity are not age dependent, in either direction.  Old teachers may be the worst teachers, young autoworkers may be the most creative.  This concept relating age and knowledge driving the incorrect relationship of age and value and correspondingly age and income then has the perverse side effect of creating the exact situation the Doonesbury strip deplores: laying off older workers to be able to hire younger, cheaper workers (brains...).  Once again, unintended consequences, this time in a self-fulfilling kind of way.

I was also going to take issue with the frame above, and the limitation of "businesses" instead of including government and other organizations.  Then I remembered that government is a bit unique in that they don't have to follow normal financial rules, compete for customers, and therefore rarely have to lay off or even fire either valuable or incompetent brains.  Hmmm...

Is a No Layoff Policy Really Wise?

Conventional lean wisdom dictates that in order to obtain employee commitment for lean improvements, improvements that by their nature create efficiencies that could threaten jobs, a "no layoff from lean improvement" policy is necessary.  Otherwise the employees, the creators of ideas and suggestions, cannot be expected to fully buy in.

Mark over at the Lean Blog has been debating this in a couple of recent posts.  Definitely worth the read, especially the comments.

In many Lean implementations (including mine in hospitals), we insist on "no layoffs due to Lean" and management makes that pledge. If employee input is critical to Lean improvements, layoffs will understandably kill most of the enthusiasm for Lean. We try to think of employees as partners in providing value and improving quality, not "heads" to be cut (I hate it when employees are referred to as "heads" or "bodies").

There was a lot of good discussion and I'll amplify my point that it's got to be part of your corporate DNA to manage in a way that allows you to avoid layoffs. If you haven't built your company around that philosophy, it's probably impossible to avoid the need to "cut heads" by suddenly deciding at some point "we want a no-layoff philosophy."

He references a recent WSJ article and another from CNN Money.  Both articles describe several companies that have made, and kept, a no layoff pledge or policy, even in these hard times.  From small private companies to large public companies, in a variety of industries... including some hard hit by the recession.

In the midst of a recession, job cut announcements have become a daily occurrence. But some employers have promised no pink slips, and are sticking to it.

Both private companies - like equipment maker Hypertherm - and public companies like Lincoln Electric had no-layoff policies in place long before the economic fallout this year, and have no plans to lift them now. and steelmaker Nucor

"We have a no-layoff practice that we have been able to follow going back to 1966," said Gregg Lucas, a spokesman for Nucor. "That no-layoff practice continues even today in the current challenging economic environment."

Others, like Southwest, FedEx, Aflac, Toyota Motor North America and Erie Insurance may not have a formal policy ruling out layoffs, but say that there is no history of layoffs and no plans to lay off workers going forward.

That is definitely laudable.  It takes some serious leadership guts to make that pledge, especially in industries like steel, cars, and airlines.  And keep in mind that's a full no layoff pledge, not a "no layoff due to lean improvements."  A much higher bar.

Each company has a variety of tools to help manage the workforce to avoid layoffs.

Some companies like Toyota keep workers busy during downturns with training sessions or classes. Hypertherm reallocates employees to departments where there is a greater demand for labor. Others choose alternative cost-cutting methods like hiring freezes or shorter work weeks.

Dean Gruner, CEO of ThedaCare, a Wisconsin-based health care system provider, instituted a no-layoff policy 18 years ago. To slash expenses in lean years, the company slows the hiring process and redeploys workers to other areas. "We can manage our staffing levels by being thoughtful about our turnover rate and redesigning the work that we do," Gruner said.

But here's my problem, coincidentally spelled out by a guy at one of the big name lean consultancies.

One of the major drawbacks to such a policy is the risk of failing, according Michael Chamberlain, senior vice president of Simpler Consulting. If companies instill such a policy but can't stick to it, that will deal a serious blow to their credibility. And, there will always be certain business conditions that the organization can't anticipate in the future, he said.

In addition, if the company has to go back on it's word, anything it says after that, "could be perceived as one more promise that will be broken," according Michael Maslansky, CEO of Luntz Maslansky Research, a market research firm.

In my mind employee trust is king, and this kind of danger is very real.  Toyota has made the news over the last few months with how, even though they are not unionized, they are paying their workforce to come in and get trained.  It costs Toyota $35 million a month, and they have tied up hundreds of corporate trainers.  The UAW Detroit Three "Jobs Bank" by comparison basically pays the workforce to stay home and get trained by Oprah and Montel. 

When I visited one of Toyota's most profitable factories in Japan last month, we were told that they had just cut back almost all of their contract and temporary workers.  Several factories in the U.S. are idle.  The auto demand downturn is severe.  So how long can Toyota hold out?  How long should it hold out?  At what point does the cash burn from its impressive "training but no production" program begin to offset the true value in the knowledge, creativity, and experience of their employees?  It's an ugly thought.

What happens if and when Toyota has to lay off?  What will we say?  Will we still hold them on a pedestal?  What will Toyota's "life time employment" employees say?  What will happen to their lean prowess, their force of employee-driven productivity improvements?

One of the commenters to Mark's post asked if he had "ever been responsible for a P&L"?  I have had P&L responsibility for almost two decades, and have had the ultimate P&L responsibility in that I used to own a fledgling company.  It does change you.  You want to focus on the people, but at some point you are also forced to make some tough calls between people and the fundamental survival of the enterprise even after all the tools of pay/hour cutbacks and such are implemented.  Failure could affect even more people.  It's tough.

I think a "no layoff from lean improvements" policy is acceptable and necessary, but a fundamental "no layoff for any reason" policy is a bit disingenuous and downright dangerous.  I will say that most companies jump to layoffs far, far too rapidly as they don't perform an accurate business analysis based on the true value of the employee, a value that includes knowledge and creativity in addition to the cost of the pair of hands.  But the time may come when difficult choices need to be made, even with employee value in mind, in order to fundamentally keep an organization viable.

Leaders must recognize that value, be willing to make the tough calls with that value in mind, but of paramount importance is to be open and honest with the employees.  A demonstrated acknowledgment of employee value coupled with an atmosphere of trust, openness, and mutual sacrifice will allow a lean culture to thrive in even the most difficult of times.

Unfortunately I see some top notch true lean companies like Toyota having to make those tough choices in the next few months.  It will be interesting to see how they fare.