The No Tool Zone

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I am reading two books right now.  One by Governor Daniels of Indiana and another by former Governor Jennifer Granholm of Michigan.  Governor Granholm talks quite a bit about the loss of jobs in manufacturing in her State to outsourcing.  In fact, her last election against Dick DeVos – the former Amway CEO – she let him have it during her campaign for outsourcing jobs to China.  Certainly, the subject for a future blog post.

However, something else caught my eye . . . Governor Granholm’s love for MBO.

“As a big believer in management by objectives, I loved using  the State of the State speech as a blueprint for the year.”

- from A Governor’s Story – Governor Granholm

There is a correlation between the loss of jobs to outsourcing and MBO, but I won’t make it in this post.  They are both wrong behaviors and outsourcing you can find plenty of posts why it isn’t typically saving money.

Organizations and governments are still using MBO – shocking?  Not really.  I still see it in many organizations, once a bad idea . . . always a bad idea.

Peter Drucker invented this thinking in 1954, W. Edwards Deming rocked the world when he spoke about MBO as one of the evils of management (as practiced).  Closely related to MBO is SMART (Specific, Measurable, Agreed, Realistic and Time-related) and a Balanced Scorecard.  Targets come along with these thinking methods.

First of all, Dr. Deming understood that when you provide objectives and targets by function you get sub-optimization.  Meaning if you optimize each functional piece you miss the inter-dependencies and create a system works against itself.  This creates waste.  For example, you often see departments vying for resources focused on what they can get in resources for themselves. Artificial competition is produced and the loss to the system is great because we do what is right for the department, but not right for the system.

Information technology seems to get much of the money in organizations.  Yet IT cannot create value, it can only add value to the relationship between customer demands and work.  Unfortunately, too many organizations don’t get that IT, HR, Finance and other supporting areas aren’t meant to create a profit for their department – they are there to enable the value creating relationships.

With MBO, we get management and worker focused on the wrong things.  Hitting the target laid out in the objective (remember SMART).  The flow is interrupted by the functional separation of work as each piece tries to optimize itself.

“(MBO) nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, nourishes rivalry and politics.”

- W. Edwards Deming (from Out of the Crisis)

“Management by Fear” was the Deming phrase that replaced MBO.

Governor Granholm is a Harvard graduate.  Peter Drucker taught there.  Harvard, with all its money has become the poster child for bad theory.  Smart people, wrong method.

As voters, we need to ask candidate, “By what method?”  As managers, we need better thinking about the design and management of work – devoid of MBO and targets.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com.  Learn more about the Vanguard Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

First of all, I am not a statistician, but have learned from what I consider to be the best people in the statistical realm.  Dr. Don Wheeler, Dr. “Frony” Ward and a gentleman named Tim Baer.  These folks understand in statistical terms how control charts work and also understand the message of W. Edwards Deming and Walter Shewhart.  If you want to understand Dr. Deming’s System of Profound Knowledge. you have to understand variation.  David S. Chambers and Dr. Wheeler’s book Understanding Statistical Process Control is a must read.

The question came to me recently about why three standard deviations (3-sigma) and not two to discern data.  I reacted rather badly as it had been awhile since 3-sigma limits had been challenged.

Wheeler and Chambers (in the fore-mentioned book) point out that 3-sigma limits are “not solely based upon probability theory.  Further . . . “this point has been repeatedly misunderstood by those who would use  probability theory to “adjust” control chart  limits.

Shewhart identified his reasoning in the Economic Control of Quality of Manufactured Product:

” . . . we must use limits such that through their use we will not waste too much time looking unnecessarily for trouble.”

“The method of attack is to establish limits of variability . . . such that, when an observation is found outside these limits, looking for an assignable (special) cause is worthwhile.”

” . . . we usually choose a symmetrical range characterized by limits

Ø ± t σ_Ө

Experience indicates t=3 seems to be an acceptable economic value”

“Three-sigma limits are not probability limits.  The strongest justification of three-sigma limits is the empirical evidence that three-sigma limits work well in practice – that they provide effective action limits when applied to real world data.  Thus, the  . . . arguments cannot further justify the use of three-sigma limits, but they can reveal one of the reasons why they work so well.” -  Wheeler and Chambers

So, there you have it.  Empirical evidence by their use is the reason that we have 3-sigma limits.  This fits with overwhelming evidence for when to look at special causes.  Occasionally, I find that I get a false signal in practice wither a special cause within the limits or a false signal outside the limits.  However, I have found that they serve me well in practice.

Further, I have found that in service that limits are much more robust in as systems display great variation.  Many times this has played itself out as I understand customer demand – meaning that homogeneity of the data is the issue, not the limits.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at info@newsystemsthinking.com.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

I read an article today in Quality Digest about Dr. Don Wheeler (An Interview with Donald J. Wheeler).  I had the pleasure of getting a solid back ground in SPC from Dr. Wheeler and from a local (Indianapolis) statistician named Tim Baer.  I won’t pretend to have their knowledge, but through application of statistical theory I have learned that there is no other way to know whether improvement efforts or experimentation are making things better.

W. Edwards Deming challenged us in many ways.  He warned us not to copy the Japanese (because we could never catch up).  The perpetuation of Dr. Deming’s ideas requires a solid understanding of statistical methods.  Rarely, do I walk into a service organization and see the use of control charts (or process behavior charts as Dr. Wheeler references them).

The truth is there is no way to know whether things are getting better without the use of SPC.

That is correct – there is no other way!  So this begs the question of why their use is so uncommon amongst those that mine, analyze and use data.  If they did they would understand why targets are so damaging.  Or why the system governs performance and not the individual.  These are things you come to understand when you understand variation through the use of SPC.  My Myth Buster series at IQPC explains why – click here.

To me, operating without solid knowledge of SPC is a mistake that is very costly.  An organization trying to achieve business improvement must know when things are betting better or falling apart.  Sometimes you find out that things are worse when it is too late.  This requires an early warning system for a business tsunami that can wipe you out.

Using data in appropriate manner is hard to find these days in service organizations.  SPC is the only tool worth learning.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at info@newsystemsthinking.com.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Over the weekend, I was preparing my paper for the International Deming Conference in March.  I decided to look at some videos of W. Edwards Deming on YouTube and other assorted mediums. Having attended Dr. Deming’s 4-day seminar I felt the familiar pull of a lost message about American management and that the Western style of management needs to change.  That was in 1984 . . . and not much has changed.

Dr. Deming in one video outlined the 5 Deadly Diseases of Management.  They are:

1. Constancy of Purpose
2. Emphasis on Short-Term Profits and Thinking
3. Annual Rating of Performance/ Merit Pay
4. Mobility of Management
5. Use of Visible Figures Alone

All of these things Dr. Deming warned us about in 1984 are present in almost all American businesses and government today.  The banking crisis we are finally emerging from in the emphasis of banks to seek larger and larger profits to achieve targets.  Short-term thinking isn’t just accepted, it is encouraged.

The problems with mobility of management are rooted in the lack of knowledge that management has about the systems in which they manage.  Many lack the basic knowledge of their systems and manage based on common sense.  But common sense can only be achieved by having knowledge from being in the work understanding it – outside-in as a system from a customers point of view.  Anything less is leads to waste and sub-optimization.

The financial targets in American business are highly visible to anyone who manages and in government the focus on visible costs.  A shame that very few can answer a simple question like, “what measures matter to customers?”  Most will say, “oh yeah, that too”, but have no idea from their functional perch.

And so we live with high unemployment that is firmly rooted in bad management.  Education is a top priority in the US and many states to help America become more competitive.  A noble aim, but our problem is not just education . . . it is the wrong management theories being taught that deepen our plight.

Join me for the International Deming Conference in New York City on March 21 – 22.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at info@newsystemsthinking.com.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

To take a look at business we have to go back in time to a Post WW II world.  Manufacturing was decimated by the war, except in one country . . . the United States. The world turned to the US for products.

Because of world demand, the US focused its manufacturing on mass production and the thinking from Frederick Taylor and Henry Ford.  How many can we produce and how fast?   . . . Were the questions that US manufacturing was trying to solve.  No competition and no focus on quality.

This worked well until a meeting in Japan on July 13^th, 1950.  Where W. Edwards Deming met with 21 presidents of industry that represented about 80% of the capital of Japan.  Dr. Deming promised that if they followed better thinking that the US would be screaming for protection from Japanese goods in 5 years, they did it in 3.

In the greatest upset in economic history, US manufacturing faltered . . . culminating in the 1970’s with the bankruptcy of auto industry giants – Chrysler and Ford.  This lead to some self-reflection in the US about how a small country like Japan with few natural resources could put the US on its heels.

In 2011, the design of American manufacturing and service still has that mass-production flavor.  Some have managed to change to just survive (always good motivation to do so), but service still lags in thinking.  Many technology organizations think of their software development process as a production line.  A wholly wrong approach if you hope to make good software.

I have talked about economies of flow before, but it is scale thinking that still wins the day.  Reducing costs through outsourcing, shared services leads to service designs that have the opposite outcome of what is desired . . . or unintended consequences.  In this case, the unintended consequences are increased costs, worse service and reduced morale.

Economies of flow thinking helps lead us to better design as what is good for the customer always is good for the bottom-line.  To many, this is counter-intuitive.  The prevailing thinking is that better service costs money and it is with the industrialized thinking of yesteryear.

And so as we enter 2011, we still have the fundamental thinking problems about the design and management of work.  Will this be the year that you do something about it?

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at info@newsystemsthinking.com.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

I see this quite often in both business and government . . . a change to the operational definition in a number.  The change in operational definition is often used to show improvement or to advance some political thinking.  This is more manipulation than improvement or real change.

The Bureau of Labor Statistics has change the operational definition of the US Unemployment statistic.  The change is including the unemployed for 5 years rather than two years.  This means after five years the unemployed don’t get counted.  This will increase the unemployment number as more will be included.

This does not mean the new five year measure is better or worse, but just different.  Comparison purposes will not be relevant following this change to the operational definition.  The government may believe that the new number is more representative than old . . . and may be right.  But we now have lost a consistent measure to know whether the economy is getting better or not.

Manipulation of business or government measures are used to achieve bonuses, describe things as better or worse than they are, and a number of other reasons.  One doesn’t have to look far to see how measures get exploited for causes.  Even the Dow Jones adds and deletes companies that changes the measure of the financial markets.

Consistency in measuring is important so there is knowledge on the true status of an organization.  Otherwise, we are only fooling ourselves about whether things are improving or not.

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at info@newsystemsthinking.com.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

All systems are different.  Like snowflakes, which I have seen a lot of lately, no two are the same.  They are different by structure, thinking, work design, measures, customer demands, and much more.  The cracking of your system’s code requires study.

The act of understanding performance will lead you to your own unique conclusions on what is best for your system.  Copying other systems for best practices leaves service organizations under-performing.  Too many improvement efforts are lost by trying to avoid “reinventing the wheel” when the wheel never fit the purpose in the first place.

Management has a head full of ideas that they believe will improve their system.  But not until they challenge and discern the current list of assumptions and the real result of current thinking can they move on.  The question of current  performance should be  . . . “do my current list of assumptions and theories about the design and management of work provide me knowledge in the form of evidence that it is or isn’t working?”

An inability to ponder how knowledge is gained is just shooting in the dark when new assumptions and theories are added.  As Dr. Deming would say off to the Milky Way we go!  It becomes a crap shot.

Too few service organizations have the correct measures to judge their performance.  They focus on financial metrics or functional metrics that drive both waste and sub-optimization.  But don’t begin with measures.

Measures need to be derived from purpose and without establishing the purpose of your system any direction you go will lead you nowhere.  Service systems need to understand why they exist . . . and the reason is related to customer demands.  Studying customer demands will allow you to define and refine the purpose of your system.

The relationship between all elements of your system and performance is inextricable.  What you will discover if you are honest with yourself is that the thinking that has driven your current performance needs an overhaul and to test new ideas related to customer measures and purpose.

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at info@newsystemsthinking.com.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

No, this is not about the movie Animal House, Flounder, pledge pins or John Belushi.  Instead this is a pledge I took years ago while attending a Deming User Group seminar done by John McConnell:

“I swear, that I will never, under any circumstances what so ever, draw specifications, tolerances or any other arbitrary limits on a control chart.

On such charts I will draw only control limits calculated from the data drawing only from the Shewhart model.”

And so it was that I learned that the system governs performance and not arbitrarily set targets or numerical goals.  A system operating between the limits(UCL and LCL in the above diagram) set by the data would continue to operate there until entropy would take over and deteriorate the system or method would come along and improve the measures.

A waste of time and money to send management and worker out on a mission to hit an arbitrary target without understanding that the system dictates performance that is predictably between the limits.  Also, management has to understand that a predictable system means that the problem is not that of the worker and that management must solve the problem of improvement.  As the system dictates performance, so does management thinking about the design and management of work.

A poorly designed system will certainly have a greater impact on an worker’s performance than anything a worker can do.  Setting “stretch goals” and performance targets will either frustrate an individual or cause them to manipulate (a nice term for cheat) the system, especially if carrots and sticks are involved.

So, take the pledge by first understanding variation or start by reading Service Metrics: What You Need to Understand.

Leave me a comment. . . share your opinion!  Click on comments below.

Make the new decade a profitable and rewarding one, start a new path here.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about how to get started at tripp@newsystemsthinking.com.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Tripp Babbitt is a columnist (Quality Digest, PSNews and IQPC), speaker, and consultant to private and public service industry.

The answer many organizations have come up with for problems of efficiency is to seek standardization in their processes.  But they don’t understand the problem and the potential damage of not understanding the problem ends in increased costs and worse performance.

Manufacturing has taught us that a standardized process is helpful in making products.  We get predictable outputs and quality in making products.  Much that has happened in service industry in recent years has been an attempt to copy this thinking.

People wrongly think that the ability to standardize work in service will help improvement like in manufacturing.  Here, we get a starting point to reduce the variation and get better quality.  The result is the search for “one best way,” scripts for contact centers, written procedures in operational areas, etc.  in service.  All of these efforts to standardize work are locked-in with entrapping technology.

These efforts seem practical until we look at the evidence.

The missing element that creates a management paradox is the variety of demand that customers place on service systems.  And the evidence that this exists comes in the form of failure demand (demand caused by a failure to do something or do something right for a customer).

When our service systems are full of standardization they lack the ability to absorb the variety customers bring to service.  A direct measure of this comes in the form of failure demand which we find runs between 25-75% of all demands customer.  This is some of the evidence that a service organization needs to know how well or poorly a system performs in absorbing variety from customers.

This does not mean that all standardization is bad.  What it does mean that it dispels the notion that all standardization is good.  More importantly, it means to make an assumption that to standardize and reduce variation is good for service is a wholly wrong place to begin.

Our first task needs to be to get knowledge by understanding the what and why of current performance.  Purpose of the service system, type and frequencies of demand (plus value and failure demand), how the system responds to demand, studying flow, system conditions and management thinking are part of this process.

From understanding purpose, new measures and methods present new perspective and insight.  Whole new and different problems emerge when we study our organizations as systems.  The result is improve service, reduced costs and better performance.

Leave me a comment. . . share your opinion!  Click on comments below.

Make the new decade a profitable and rewarding one, start a new path here.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about how to get started at tripp@newsystemsthinking.com.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Tripp Babbitt is a columnist (Quality Digest, PSNews and IQPC), speaker, and consultant to private and public service industry.

The difference between lean and systems thinking from the Vanguard Newsletter by John Seddon

I was asked by someone from a local authority: what is the difference between ‘lean’ and ‘systems thinking?  Having been on about it for years I was a bit surprised, but then I thought why should I be? Why should everyone know? So here, for others who have not read all the stuff on lean versus systems thinking, is what I wrote, maybe the simplest explanation:

“‘Lean’ was the word coined by Womack, Roos and Jones (in The Machine that Changed the World, 1990) to describe the Toyota Production System (TPS). The book brought the extraordinary achievements of the TPS to prominence. This led to the general assumption that if we apply the tools created in the TPS we will improve as it did. So the market for ‘lean’ grew.

But are you in the business of making cars at the rate of customer demand? Why should these tools be universal?

The TPS tools were developed to solve the problems they faced in developing a system to produce cars at the rate of demand. Do you have the same problems?

How did Taiichi Ohno (the man who created the TPS) teach people? Did he give them tools to solve problems they thought they had (as the lean tool-heads do?). No, he taught managers to study their work as a system, his favourite work was ‘understanding’. That’s what Systems Thinking does, it starts with studying. It leads to astonishing improvement. My current favourite: Portsmouth and their suppliers deliver repairs on the day and the time tenants want them, and they do so at half the repair cost. Just like the TPS, an economic benchmark.

Now for the tricky bit. ‘Lean as tools and projects’ appeals to managers. Managers think they know what their problems are and they think tools training and projects will be useful. Managers like the idea (promoted by the lean tool-heads) that services should be standardised (big mistake). If they do get improvement it is marginal, often they end up worse but they don’t know because they are still measuring the wrong things (lean tool-heads don’t question targets or activity measures for example, indeed they don’t question management philosophy).

My work has been the development of the Vanguard Method. It is a method that helps managers study service organisations as systems. On the basis of the knowledge gained, the system is re-designed; changing everything, roles, measures, procedures etc. The first step is leaders becoming curious about changing the way they think about the design and management of their services, for applying the method will change their thinking and hence the way everything is done.”

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The tool-head collection

I have written a number of articles on the lean tool-head problem. Last month we put them all in one place, so if you want longer explanations you can find them in the articles section of the web site

Lean Articles