The 95/5 Rule
- April 1st, 2009
- Posted in Systems Thinking Concepts
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As I have entered discussions on Linkedin and other business network sites, I am alarmed by the number of people that are focusing their energies on things like how to find employees that are nice vs. kind and whether a person’s past performance is a good predictor of future performance. It gets to some of the fundamental problems in our thinking believing that our emphasis on the individual will make an organization better.
Dr. Deming taught me that 95% of the performance of an organization is attributable to the system (processes, technology, work design, regulations, etc.) and 5% are attributable to the individual. During his 4-day seminars he would use the analogy of an business needing to be run like an orchestra. Where we can’t have a 200-piece group of prima donnas trying to play a solo. To achieve great sound pleasing to the ear, each needs to understand the broader aim and system. As opposed to a bowler that only needs to be concerned with himself or herself.
This fundamental change in thinking is crucial to be a systems thinking organization. Organizational change management means moving to this type of system. The management paradox here is that this not the way command and control thinkers think. They spend an inordinate amount of time coming up with performance appraisals, incentive schemes, performance targets and the like that wind up making the system performance worse.
A change of thinking is in order, the US needs to become a nation of systems thinkers. You can start by downloading (free) “Understanding Your Organization as a System.” There is a better way.
Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public). He is focused on exposing the problems of command and control management and the termination of bad service through application of new thinking . . . systems thinking. Download free 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/TriBabbitt.
I don’t believe that kind vs nice is the issue nor do I agree that 95% of performance is attributalbel to systems processes as I understand you have defined them. When I think of organizational systems, I see four sub-systems, plus outside influences. The four sub-systems I define as: 1)organizaitonal systems: the formal structures and processes; 2) technical systems: those systems that support the day-in/day-out operation of the organization (HR systems, technical systems, physical asset systems), 3) People systems (leadership, human capapcity development and the systems that support it, 4)Culture (the integration of the first three, in other words, how work really gets done. Outside influences are those systems outside the organizational systems boundary that can impact organizational systems. My guess is our perspectives are closer together, but I don’t know that the 95/5% rule actually applies as systems are dynamic and Demming was not accounting for complexity and hyper-complexity.
Good call on the operational definitions. I see all those (4) elements as the system. Although those outside elements would require further deifnition to determine what is in or outside the system. I suspect Dr. Deming had some idea of complexity to what extent I am not sure as we never discussed this. His point I don’t want to lose track of and that is we spend way to much time worrying about the performance of the individual and not enough time on the elements that will have a greater impact. The broader point is that performance of the system isn’t 95% the individual (our current view) and 5% the system. Whether that is 99% or 80% the system and 1% or 20% individual matters little as long as the fundamental understanding is the system has a greater impact than the individual. In practice with performance appraisals and individual performance targets we are not helping ourselves by focusing on the wrong thing.
Dr. Gearry Rummler has an interesting observation to add to the discussion: “If you pit a good performer against a bad system, the system will win almost every time.” Source: “Improving Performance: How to Manage the White Space in the Organization Chart.”
When the individual falls within existing parameters of culture, the individual may make the organization better in its pursuit of things it was design for. The answers to the performance problems are in part systems things, but a larger extent in Social Psychology (SP) of organizations. Our method provides the direct link between politics, behaviors, culture and cognition on one hand, and business models, technologies, org. designs. and strategies on the other hand. Now we are able to attach “wicked” business challenges of performance. P.S. We use 97/3 Rule as it is closer to out typical exponential distributions.
Sergei: Thanks for the comment. Interesting view. I see you work at 3M. My observation of data and other system factors (structure, work design, management, measurements, etc.) leads me to the some conclusion as W. Edwards Deming. The individual has little effect on the broader system in which they work. The biggest levers for change and large impact on the system are customer demand, workdesign (against customer demand), and measures (because of how they are misused in targets and incentives creating a defacto purpose). We have found that changing these things create huge culture improvement along with improvement in customer service/experience and reducing costs in service. I am not discounting the things that you are saying in as much we have seen in service the what the levers for huge improvement are in service and it is tied to the design and management of work, not the individual.
Interesting discussion. New to Systems Thinking, but I like what I’m reading. Systems Thinking seems to offer answers to questions about organizations and operations that the traditional command and control approach does not, at least not very well. I’ve tossed this around in my head now for about 30 minutes and I think I see what it is that I have trouble with…its this statement – “..individual matters little as long as the fundamental understanding is the system has a greater impact than the individual” If this is to say that the whole is greater than the sum of its parts, I get it. I would also suggest though, that the whole is made up of its parts and would not be a whole without the parts. The parts matter and as they work together to create the whole, the whole has greater impact than a single part. To put a percentage on the parts seems akin to suggesting one put a value on say, their big toe. By comparison, not a large appendage, but try running without one.