Category Archives: Systems Thinking and Measures

Beliefs and Assumptions – How Damaging?

 

All too often, I hear the use of statistics like the clip from Anchorman (above).  People don’t quote percentages too often, but they do say things similar to, “most of our customers like . . .” or “that happens . . . all the time.”  The problem is what follows.  I have witnessed multi-million dollar IT and management decisions based on nothing more than a claim.  I am often assured that the claim came from a “good source.”

I do not believe that organizations do enough to challenge the beliefs and assumptions where decisions are made.  The skeptics often succumb to the hierarchy – meaning if the source of the belief or assumption is up the chain of command it can’t be questioned.

It’s funny to me that people get challenged on things like their expenses, but not on operational decisions of much greater magnitude.  Some degree of due diligence would seem to be appropriate.

Conversely, it seems silly to me that those conducting a due diligence will quote ROI numbers for new lines or IT.  Then, proceed to roll-out a large project without even a small scale pilot.

You see all projects and decisions are based in assumptions and beliefs.  Some we pick up from other people, companies, articles, etc. and others from internal sources of “authority.”  Assumptions and beliefs make up our world as we know it.  We just need to be aware of what they are and test them against reality.  You never get a full answer, but you do gain knowledge when you test things first.

The question is, “What are the beliefs and assumptions that went into your last strategic plan, project plan or decision?”  You should have a list of what they were when you made the decision or even better make the list AS you deliberate the next plan or project.  Test it on a small scale and then make a decision.  This is scientific method.

Take a look at your organization as your customers see it –  our 4-day workshop has been called “an awakening experience.”  You will understand the customer view of your organization and take inventory of the assumptions, beliefs and perspectives that drive performance.  Tripp Babbitt is a service design architect and organizational futurist.  His company helps service organizations understand future trends, culture and customer.  The 95 Method designs organizations to improve the comprehensive customer experience while improving culture and management effectiveness.  Read his column at Quality Digest and his articles for CustomermanagementIQ.comReach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

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“Opinion Data” Still Prevails in the US

When power and hierarchy run an organization ideology, opinion and assumption become the staples of decision-making.  The loud mouth with position becomes the voice of direction . . . but hardly reason, logic or truth.  I have long used the phrase “opinion data” to describe the phenomenon used in executive and other management meetings.  This, of course, is an oxymoron as no data exists.

“In God we trust, all others use data” – W. Edwards Deming

The lack of relevant data I find in organizations is astounding.  Unless you want budget/financial data or other useless data in lagging measures that can’t tell us how to improve only how to keep score.  The result is opinion data prevails in corporate America and no where is it more prevalent then in the executive ranks far away from the work and measures that matter.

Too many IT organizations are selling Business Intelligence (BI) systems that lack one important ingredient – intelligence.  More of the wrong data that doesn’t matter to customers or to what actually makes profit. Data should help lead to better decisions, work designs and profit.  Data can help uncover facts, but here in the US . . . they do not.

Data needs context and only those that interact with customers in service industry can give us context.  No knowledge of the work, will give you no useful data.  How often might you find management in the work? Never mind an executive.  No knowledge of the work leads to bad decisions, poor work designs and lower (if any) profit.  Management reports are a poor substitute for knowledge.

Conversely, I have seen multiple front-line workers find a problem or set of problems that require management intervention and the need for data to get what they need to do their job requires reems of data for justification.  Lower in the hierarchy, workers fill out forms and are scrutinized by management lackeys.  It is what Ross Perot might describe as “forming a committee on snakes, rather than killing the snake.”

Opinion data will some day be viewed as an archaic management practice.  However, where power and hierarchy rule the day . . . facts become an obstacle.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to link perspective to performance.  Read his column at Quality Digest and his articles for CustomermanagementIQ.com. Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

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Increasing Sales is About Changing Thinking

Whether you live in the US or not, the thinking about how to increase sales seems universal.  Hiring sales type personalities that can overcome objections and hit targets.  This thinking has been repeated so often that organizations have come to believe it . . . if it were only true.

The service that most organizations achieve for their customers is horrendous and poor service leads organizations filled with revenue targets to “hit the number.”  Incentives and training to overcome objections is the recourse.  No one addresses the main thing that prevents sales, namely, bad service.

This bad service can be measured in organizations by understanding what percentage of customer demands are in the form of failure demand (the failure to do something or do something right for a customer).  The percentage in most organizations is between 25 and 75% of all customer demands.  It is difficult to sell to someone with this much failure.

High failure demand means we have to compensate for our bad service by selling.  After all, it takes a lot of extra sugar coating to sell to someone that gets horrible service.

Service can only be improved by changing the system and the system requires new thinking about the design and management of work.

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 The 95 Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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American Toast: The Revenue – Expense Debate

A classic quote from Dr. Deming was “let’s make toast the American way . . . you burn, I’ll scrape.”  This quote has so many references that you can see in manufacturing, but the same applies to management.  I see more burning and scraping in service organizations with management than I care to mention.

The most obvious is when we take the income statement and functionally separate it into revenue and expense by having sales be responsible for revenue and operations responsible for expense.  CEOs claim that we must grow the top-line and reduce the burden of expense – nothing wrong with that, except asking the question “by what method?”

Getting the sales dogs to hunt and the operations to cut is the formula most management embrace for organizations.  The problem is that revenue and costs are the two sides of the same coin.  The two are inextricably tied together.  The optimization of each as independents leads to sub-optimization and waste.    The burning of toast and scraping becomes a way of “doing business.”

We have functionally separated organizations and rely on specialists to optimize the functions.  This erases the real aim of business . . . profit!  The reward and incentive systems lock in the waste.  Too many times have I seen management make their functional targets and rewards while the organization goes down the tubes.

Profit comes from the combination of revenue and expenses together.  The next step is to manage that way.

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 95 Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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Revisiting MBO (Management by Objectives)

The Honorable Jennifer Granholm, Governor of t...

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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 95 Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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Control Charts – Why 3-Sigma Limits?

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 σӨ

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.

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SPC – There is NO Other Way!

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.

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W. Edwards Deming “Unemployment is Not Inevitable . . . It is a Sign of Bad Management”

W. Edwards Deming
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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.

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Industrialized and Mass-Production Thinking is Still the Enemy

W. Edwards Deming in Tokyo
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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 13th, 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.

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Learning from the Changing US Unemployment Measure

Bureau of Labor Statistics
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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.

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