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Comment on: Fun With Statistics, CEO Life Edition
Another useful comparison would be with Japan where top decisions tend to be much more based upon consensus and not as dependent on the American Superstar model.
Wouldn’t being “less and less critical to the long-term success of the organization” make it more and more difficult to justify salaries that would make a King jealous? If the USA CEO’s are less critical why are the USA CEO’s paid the highest (and most unbelievable crazy) amounts? I have thought for years CEO pay in the USA has nothing to do with their “worth,” this seems one more piece of evidence for that belief.
Today, in the USA, CEOs are basically win the lottery when they start and then either win some more and stay or don’t win and are let go. The lottery performance appraisal aspect Deming talked about (rewarding whoever random variation or macro economic and micro economic trends smiled upon during the period). So if a market (housing, oil, steel, investment banking, microchip, hotel…) is booming why give all the CEO’s in that market huge payoffs? What do they have to do with the economic boom in the entire market? Why pay them a lottery sized payout when a boom occurs? Occasionally a CEO may help make decisions that position the company to take advantage of a predicted boom particularly well (such a case could at least trigger a discussion on the worth of that action).
We also have to recalibrate Deming’s comments to say regular performance appraisal raffle winners. CEO’s are now actually getting $40,000,000 - lottery sized - annual pay so using the term lottery is a bit misleading for everyone else. The same issue hold though rewarding people for what is often just micro factors similar to the macro factors listed above for CEOs.
Warren Buffett on overpaid CEO’s:
Related: Deming on performance appraisal - Excessive Executive Pay - Obscene CEO Pay - No Excessive Senior Executive Pay at Toyota
The Seven Fatal Flaws of Performance Measurement by Joseph F. Castellano, Saul Young, and Harper A. Roehm
Once the targets are established, most organizations measure the performance of component units by comparing targets to actual performance for certain time periods. Variances from expected results are noted and explanations are required. The popular business press trumpets the efficacy of the above approach, but this methodology has serious flaws. In fact, the design and use of performance measurement systems in most organizations suffer from a number of fatal flaws that can undermine an organization’s ability to use its measurement system to improve processes and make better decisions.
…
The proper role of measurements should be seen in the context of helping employees connect with the overall aim of the organization. Management must gather and analyze information that will help employees become better contributors to the firm’s purpose.
The articles does an excellent job of explaining the flaws in how performance measurement is applied (both in Management by Objective (MBO) and performance appraisals).
Related: Performance Without Appraisal - Jeffrey Pfeffer on Evidence-Based Practices - Problems Caused by Performance Appraisal - The Danger of Forgetting the Proxy Nature of Data
Sybron has adopted principles known as Danaher Business Systems, which he called a “playbook” to make the company run as a more efficient team. It’s centered on “kaizen,” a quality improvement process that grew out of the teaching of W. Edwards Deming. The focus on manufacturing and operations, combined “with our sales and marketing expertise (has) made us a much stronger company,” Tuttle said.
Danaher continues to do a good job improving management practices one purchase at a time. I continue to eye Danaher as a stock to buy but have not bought yet.
Related: Danaher Practicing Lean Thinking - Lean Thinking at Danaher - Tilting at Ludicrous CEO Pay - lean manufacturing directory
This Too is a Kanban by Jon Miller:
Carts can be kanban. When a set number of carts containing a set quantity of parts of a set item is moved between set locations based on set rules, this can be kanban. Simply, when there are a certain number of empty kanban carts, the upstream process takes these and brings them back full…
Very nice. It is important not to fall into habits that confuse the concept with the method. Kanban is a visual display to signal a process (which helps manage the process). A common method is a signal card but kanban is not a signal card. A signal card is the most common implementation of kanban.
Related: Kanban resources - Kanban In Software Engineering - What Is Muda? - One piece flow (continuous flow) - Eliminating Complexity from Work
Last month, in a long post criticizing the ACSI I took issue with, among other things, the implications being drawn from an ACSI rating. The ACSI rating of Yahoo was higher than that of Google (though statistically insignificantly so). Anyway, here is some new data on search volumes of the leading providers:
Top 5 Search Providers for August 2007, Ranked by Searches (U.S.)
| Provider | Searches (000) | Year over Year Growth | Share of Searches |
|---|---|---|---|
| 1. Google Search | 4,199,495 | 39.8% | 53.6% |
| 2. Yahoo! Search | 1,561,903 | 8.9% | 19.9% |
| 3. MSN/Windows Live Search | 1,011,398 | 69.8% | 12.9% |
| 4. AOL Search | 435,088 | 32.4% | 5.6% |
| 5. Ask.com Search | 136,853 | 0.0% | 1.7% |
Source: Nielsen//NetRatings MegaView Search
So Google grew 39.8% year over year and Yahoo grew 8.9% year over year. Google now has 53.6% of the total searches. Granted this is limited data but it seems to confirm that Google is in fact continuing to increase their lead in search volume. Practically all evidence seems to support this belief - the ACSI seems to be the exception. Which might indicate great insight provided by the ACSI that everyone else is missing. Or it might show ACSI results are doing a poor job of providing a useful measure of customer satisfaction with search engines. I go with the second.
Related: posts on using data effectively - Website Data - Understanding Data - posts on Google management - Curious Cat Management Improvement Search
Yahoo Mail Innovates, Gmail Stagnates
To me Yahoo is really continually improving the service, not innovating. Still an interesting exploration of visible improvement.
Related: Kaizen Online - Kaizen definition -Innovation Examples - Google Innovation webcast -
In Loyal Employees Stay Home, quotes from the Wall Street Journal (behind a iron curtain still in this day and age - oh well):
I agree with the sentiment expressed here. And I speak from personal experience that it does make a big difference to me. I have trouble getting some of my work done in the interruption prone office. Working at home allows me some time to concentrate and focus with fewer interruptions (and ones easier to ignore if I really need to focus). If you wanted to hire me (given what I would be doing) and didn’t offer telecommuting options the odds of hiring me are not good.
Related: Five Pragmatic Practices - The Siren Song of Multitasking - Curious Cat Management Improvement Jobs - performance appraisal posts
We’re Not Finnished With You Yet
This is becoming the reality nearly everywhere. The best hope is that companies learn respect for employees and want to keep employees because they truly value them. But failing that watch what happens over the next couple of decades as demographic trends mean that companies have little choice but listen to the desires of older workers.
Finland, Japan and a few others may lead the way but the western industrialized world is quickly aging. It seems pretty straight forward that the aging workforce is going to be needed. And companies are going to have to adapt (that is my prediction anyway). I have always thought it is crazy that we work full time and then stop all together. It makes much more sense to me for there to be a gradual easing of the workload. The biggest complication I think is companies that don’t want to be flexible. I think that desire to be inflexible will be overwhelmed by the demographics. There is also an issue of psychology - people don’t like to earn less.
I have a feeling that it may well be necessary for most to earn less at 70 than at 40 (many just can’t produce the same value they once could). There are some additional benefits that experience will bring but how everything balances out will decide what is justified. This will play out in the marketplace, but I think in addition to companies not comprising to make part time jobs work many employees insist on maintaining salaries - which might not be reasonable. I am happy to have the marketplace make the decision on salaries.
Another part of the reason this seems likely to me is people just don’t save what they need to in order to retire - so many need to keep working (as companies will need experienced workers).
Related: Saving for Retirement - Working Longer - Our Only Hope: Retiring Later
Please submit your favorite management posts to the carnival. Read the previous management carnivals.
Out of the Crisis by W. Edwards Deming, page 19
I am reminded of a quote I heard from Dr. Deming (though it may well precede him): “Don’t just do something, stand there.” First think, then act. His quote also relates to the tendency we have to tamper - institute “solutions” without understanding what is going on (often due to a lack of understanding variation). Many managers have learned their job is to act, even if they don’t have the knowledge needed to make a rational decision: they don’t just stand there, they do something. Learning to say, I don’t know, and then spend time learning instead of acting is a valuable skill to develop.
As regular readers of this blog know I think Ackoff is great. Dr. Ackoff’s ideas on this topic are wise (as usual): articles by Russ Ackoff - Doing the wrong things right podcast by Ackoff.
Related: Deming on Management - best efforts - Doing the Wrong Things Righter - theory of knowledge
The USA health care system is well known as by the most costly in the world. Most also agree the system provides far from the best results - perhaps great results could justify such high prices but that is not the case (though some still argue this point). Decades ago W. Edwards Deming targeted high health care costs as a deadly disease of the US economy decades ago and the problem has just gotten worse almost every single year since. In the last few year the “good news” is that while health care costs are still rising above the rate of inflation above the growth in the economy the rate of the increases were declining. From the Kaiser Foundation news release:
Luckily some good work is being done but so much more is needed. Seeing figures like these should make people understand this system is broken and needs to be fixed. This has been a known seriously problem for quite a long time. It is very difficult for an economy to sustain such large negative factor in economic performance. Luckily the USA has a strong enough economy to sustain a large negative impact from the health care system (it is also able to overcome: a huge amount of government and consumer borrowing - ludicrasly overpaid senior executives). (more…)
The Deming Electronic Network email list 2.0 is now live.
The email list provides some wonderful thoughts on applying Deming’s ideas. It is focused on Deming, and some might find it a bit too focused on Deming’s idea but I think it is a great resource. Jim Clauson acts as a moderator to keep the list focused (in this age of blogs many may forget, but email lists often deteriorate into fairly uninteresting person debates).
Steve Prevette’s message is a nice example of what you can read:
On a related topic Peter Scholtes was awarded the latest Deming Medal by ASQ. Related posts: Curious Cat Deming Management Thoughts - Blog posts on Deming’s management system - lean management portal - articles by Steve Prevette
Jim Press leaves Toyota to join Chrysler. I am surprised. I would imagine he is getting a huge amount of money. And I would guess it will encourage those that think you have to massively overpay executives or lose them to that that will overpay them. I don’t think it is wise to pay huge sums to executives. If that means you lose some, fine, continue to manage your system well and things will still work out fine for you. And maybe pay has nothing to do with the move.
Press will team with current Vice Chairman and President Tom LaSorda as Chrysler’s executive team makes a push to wring out landmark health-care and pension concessions from the United Auto Workers.
I agree getting Press could help Chrysler a great deal. If they will actually let him change the system. If they just want to hire a couple of executives and basically keep the same mentality in place it won’t work. For those convinced it must be Chrysler sees the errors of its past management I would caution you. Typical management practice is to hire people from companies that have been winning. So hiring Toyota people is no real indication that Chrysler is thinking any differently than they have before - it might or it might not.
Related: No Excessive Senior Executive Pay at Toyota - Toyota management posts - lean manufacturing articles
Another essay by Paul Graham packed with great thoughts - this one on hiring, colleges, measuring performance of people, etc..
Related: Hiring the Right Workers - Malcolm Gladwell, Synchronicity, College Admissions… - Google and Paul Graham’s Latest Essay - Interviewing and Hiring Programmers - What Business Can Learn from Open Source - Google’s Answer to Filling Jobs Is an Algorithm - Hiring: Silicon Valley Style - Curious Cat Management Improvement Career Connections
The Siren Song of Multitasking
Writes Mark, “This suggests a fairly high cognitive cost to resume work, as people are distracted by multiple other topics, and sometimes even nested interruptions. Our informants report that this can result in redundant work as they reorient.” Mark acknowledges that interruptions are often relevant to the work at hand, but notes that “reorientation” to the task comes at a cognitive cost. A report from Basex quantified the cost of interruptions. It found that the average knowledge worker loses 2.1 hours per day to “unimportant interruptions or distractions.”
Quite simply, people need the mental and physical space to think. In fact, the number-one predictor of job performance and satisfaction is the ability to concentrate in one’s own workplace. While work environments that include places for quiet, uninterrupted work as well as collaborative work can help a worker fight the urge to multitask, a worker’s ability to concentrate comes in part from being determined to concentrate.
via: The “multitasking” delusion
Related: Five Pragmatic Practices - Curious Cat management articles - Why Projects Take so Long - psychology related management posts
Once again Seth Godin does a great job of explaining the dynamics of marketing on the web: Seth Godin Video on Web Marketing. In this 6 1/2 minute video he touches on various topics including:
Seth is asked if there is a social network that is good for marketers to help them do their jobs. He says: “Far and away it is having a blog. It’s tempting, if you’re a salesperson to go to Linked In…” I think he is exactly right: Your online brand - Blogging is Good for You. For many a “regular” web site is fine too - post some articles to give a real view of what you offer that is different from everyone else (blogs are fine but they are not the only way).
Related: Better and Different - Why are you afraid of process? - Seth Godin speaking at Google
Management Improvement Carnival #18 is hosted by Ron Pereira at the Lean Six Sigma Academy. Some highlights include:
Please submit your favorite management posts to the carnival. Read the previous management carnivals.
Peter Pande adds his thoughts on how six sigma and innovation can work together. In his podcast, Innovation vs. Efficiency, he makes the argument that innovation and efficiency can work together. As I have stated many times, while bad six sigma efforts may harm innovation but there is no reason good six sigma efforts would. In fact good six sigma efforts help innovation.
Related: Six Sigma Outdated? No. - Fast Company Interview: Jeff Immelt - Better and Different - New Rules for Management? No! - Six Sigma Success
via: Peter Pande’s Take on Six Sigma and Innovation
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