Why Congress Won’t Investigate Wall Street

Posted on April 30, 2009  Comments (2)

Why Congress Won’t Investigate Wall Street

The famous Pecora Commission of 1933 and 1934 was one of the most successful congressional investigations of all time, an instance when oversight worked exactly as it should. The subject was the massively corrupt investment practices of the 1920s. In the course of its investigation, the Senate Banking Committee, which brought on as its counsel a former New York assistant district attorney named Ferdinand Pecora, heard testimony from the lords of finance that cemented public suspicion of Wall Street. Along the way, the investigations formed the rationale for the Glass-Steagall Act, the Securities Exchange Act, and other financial regulations of the Roosevelt era.
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Over the years, federal agencies have been defunded, their workers have grown dispirited, their managers, drawn in many cases from antiregulatory organizations, have seemed to care far more about industry than the public.
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And while today’s chastened Democrats might be ready to reregulate the banks, they are no more willing to scrutinize the bad ideas of the Clinton years than Republicans are the bad ideas of the Bush years.

“We may now need to be reminded what Wall Street was like before Uncle Sam stationed a policeman at its corner,” Pecora wrote in 1939, “lest, in time to come, some attempt be made to abolish that post.” Well, the time did come. The attempt was made. And we could use that reminder today.

Well said. The incredibly dire current economic results should encourage some thought about choices we have made. The failures of the political leaders (putting their donors interests above the public interest) is something that should be investigated seriously. The economy declined 6.3% in the fourth quarter of last year and 6.1% in the first quarter of 2009. And we have paid several hundred billion to bail out bankers; the same bankers that had congress repeal the regulation that prevented such enormous failures in the past.

It would be nice if we at least learned our lesson, but I don’t think we are remotely close to learning our lesson. There seems to be some tilt away from the most egregious excesses of the last 25 years of financial deregulation. But only minor adjustments around the edges seem to be under consideration at this time.

Related: Failing to Understand the Capitalist Economic Model – Looting: Bankruptcy for Profit – Leverage, Complex Deals and Mania – Lobbyists Keep Tax Break for Billion Dollar Private Equities Deals (2007) – Congress Eases Bank Laws (1999) – Why Pay Taxes or be Honest – Failure to Regulate Financial Markets Leads to Predictable Consequences – Losses Covered Up to Protect Bonuses – Bankers Bet Billions and Lose (guess who pays? Not them) – Uncertain Economic Times

Carve Out Time to Think

Posted on April 29, 2009  Comments (1)

Dan Markovitz recently discussed the practice of the CEO of eBay to take thinking days, Why isn’t “thinking time” part of your standard work?,

Some people think that it’s all well and good for a CEO to unplug himself — when you’re the big cheese, you make the rules — that’s just not possible for the folks in the trenches. But I think that’s a lie. Unless you’re in a sadly dysfunctional organization (and if you are, feel free to stop reading now and go to ESPN.com for the latest baseball scores), you’re being paid to create value for customers (internal or external). You’re not being paid to respond to every random thought or idle question in 8 nanoseconds. And to create value, sometimes you have to actually stop and think.

And a recent Business Week article quotes Turner Broadcasting CEO, Phil Kent: “carve out time to think, not just to react.”

I agree. We need to take more time to think and reflect on how to improve the system to produce better results. We too often find ourselves trapped by spending so much time reacting to seemingly urgent but less important matters. We need to make time to focus on important but perhaps less urgent matters. And taking time to think is part of doing so.

Related: Think Long Term Act Daily – How to Improve – Most Meetings are Muda – Managing Innovation

Why Setting Goals can Backfire

Posted on April 27, 2009  Comments (2)

Dr. Deming long ago stated in his 14 obligations of management: “Eliminate numerical goals, numerical quotas and management by objectives.” I think he was right then, and is right now. A goal can help set the scope of the effort. If you are aiming for 2% improvement different strategies may make sense than if you are aiming at 50% improvement. But that type of use is rare. The problem with goals is what actually happens in organizations. They create serious systemic problems and should be avoided (other than in setting the scope). They are deeply ingrained in the way many people think, but we would be better if we could eliminate the use of goals, as they are used now (mainly as arbitrary numerical goals).

Ready, Aim … Fail, Why setting goals can backfire

In clawing toward its number, GM offered deep discounts and no-interest car loans. The energy and time that might have been applied to the longer-term problem of designing better cars went instead toward selling more of its generally unloved vehicles. As a result, GM was less prepared for the future, and made less money on the cars it did sell. In other words, the world’s largest car company – a title it lost to Toyota last year – fell victim to a goal.
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Rather than reflexively relying on goals, argues Max Bazerman, a Harvard Business School professor and the fourth coauthor of “Goals Gone Wild,” we might also be better off creating workplaces and schools that foster our own inherent interest in the work. “There are lots of organizations where people want to do well, and they don’t need those goals,” he says. Bazerman and others hold up Google as an example of a company that manages to do this, in part by explicitly setting aside time for employees to pursue their own projects and interests.

Today, as the economic situation upends millions of lives, it is also forcing the reexamination of millions of goals – not only the revenue targets of battered firms, but the career aims of workers and students, and even the ambitions of the newly installed administration. And while it never feels good to give up on a goal, it may be a good time to ask which of the goals we had set for ourselves were things we really needed to achieve, and which were things we only thought we should – and what the difference has been costing us.

Related: Measuring and Managing Performance in Organizations – Arbitrary Rules Don’t Work – The Defect Black Market – Goals can Distract from Improvement – Be Careful What You Measure

More Management Blog Posts From January 2006

Posted on April 25, 2009  Comments (1)

energy chart

  • Great Charts – The lack of such effective visual display of information is another example of how much improvement could be made just by applying ideas that are already published.
  • Change is not Improvement – if you have to document how you will know the change is successful it makes it more difficult to change for just the appearance of improvement.
  • Management Excellence – Most management practices cannot be plugged into any organization and work well. That practice must be applied in a sensible way given the organizational system.
  • China now the 5th Largest Economy – China’s economy grew 9.9 percent in 2005, overtaking France as the world’s fifth largest, powered by exports and investment in factories, roads and power plants.
  • Zero Defects – eliminating defects that get to customers (and even those that don’t) is wise. But doing should be as the result of continually improving your processes. I do not believe you succeed by declaring your goal to be zero defects. You succeed by creating a culture of never ending improvement, of customer focus, of fact based decision making, of learning…

Red Bead Experiment Webcast

Posted on April 22, 2009  Comments (3)

Dr. Deming used the red bead experiment to present a view into management practices and his management philosophy. The experiment provides insight into all four aspects of Dr. Deming’s management system: understanding variation, understanding psychology, systems thinking and the theory of knowledge.

Red Bead Experiment by Steve Prevette

Various techniques are used to ensure a quality (no red bead) product. There are quality control inspectors, feedback to the workers, merit pay for superior performance, performance appraisals, procedure compliance, posters and quality programs. The foreman, quality control, and the workers all put forth their best efforts to produce a quality product. The experiment allows the demonstration of the effectiveness (or ineffectiveness) of the various methods.

Related: Fooled by Randomness – Performance Measures and Statistics Course – Performance without Appraisal – Exploring Deming’s Management Ideas – Eliminate Slogans

Management Improvement Carnival #61

Posted on April 20, 2009  Comments (0)

Submit suggestions for the management improvement carnival.

  • Unplanned items and legacy issues by Xavier Quesada Allue – “A small change request if you want. How are you going to manage this work? Are you going to create a new story for this? Too much overhead… just put up a task (a post-it) in Legacy Issues, get it done with and forget about it.”
  • Ask Gemba: Nuts and Bolts of the Andon System by Jon Miller – “Each person should have specific and personal responsibility for responding to problems raised within a particular zone. Each person should have a clear person that they can go to when unable to resolve the issue, all the way up the chain to the head of site at a minimum”
  • How to Manage a Remote Employee – “My belief is that without deliberate attention, the remote employee slowly becomes irrelevant to the organization.”
  • What’s So Special about 3-Sigma? by Marc Hersch – “So where did Shewhart get the 3-sigma limit from? He got it from lots and lots of empirical observation. He says it has no “truth” to it. It is just a value that works to minimize the consequences of the mistakes our minds trick us into making. 3-sigma is a tipping point that minimizes the two mistakes we can make—confusing common cause with assignable cause OR confusing assignable cause with common cause. In his own words”
  • Are Business Schools to Blame? by Joel M. Podolny – “There has been little contrition on the part of those involved in MBA education after the crisis… Until business schools make such public gestures of disapproval, society will never fully trust the MBA again. “
  • Why requirements stink by Scott Berkun – “Getting Real, by the folks at 37 signals, is a book that puts simplicity first, advocating almost no formal documents, requirements lists or specs at all.”
  • Management Poka-Yoke by Dan Markovitz – “But why not institute poka-yoke for management? Why not create systems that prevent bad management practices from taking hold?”

    • Read more

Leadership

Posted on April 17, 2009  Comments (2)

Leadership is the act of making others effective in achieving an aim.

Leadership is not about being great yourself.

Leadership does involve more than making others effective. Leaders need to know what needs to be done, and then make others effective, based on that knowledge. As Dr. Deming said about any situation:

It is not enough to do your best; you must know what to do, and then do your best.

Leadership is not about getting a good performance appraisal. Leadership is not about making your numbers. Leadership is not about following the latest fad. Unfortunately, in my view, far too many managers fail to focus on making others better. Instead, probably largely influenced by performance appraisal mentality, they focus on making the case for why they, personally, are valuable.

Related: Deming on being destroyed by best efforts – 6 Leadership Competencies – The Leader’s Handbook – Seven Leadership Leverage Points – How to Improve – People are Our Most Important Asset – Bring Me Problems – Dr. W. Edwards Deming quotes

Management Blog Posts From January 2006

Posted on April 15, 2009  Comments (0)

photo of John Hunter John Hunter on the top of the Bear’s Hump trail in the park, Waterton, Canada. A great, very steep trail.
  • Agility vs. Six Sigma – “Process improvement should be part of a well run system, as should innovation. Deming, who many believe focused only process improvement, knew the importance of both. See several of Deming’s ideas on innovation.”
  • The Public Sector and Deming – Madison’s quality improvement efforts began after then-Mayor James F. Sensenbrenner and his staff were exposed to the teaching of W. Edwards Deming in 1983. and a follow up Public Management II: Actually Deming did acknowledge that the United States government was not designed to be as efficient as possible. From page 198 of Out of the Crisis “Government service is to be judged on equity as well as on efficiency.” He then quotes Oscar Ornati “We have forgotten that the function of government is more equity oriented than efficiency oriented.”
  • How Not to Convert Equity – “In no way does increasing their leverage convert equity that might melt away… If the value of their house fell $300,000 before or after this supposed ‘conversion’ they would ‘lose’ (on paper) the same amount: $300,000.”
  • Management Improvement Leaders – Russell Ackoff – frankly I find it difficult to imagine a list management thought leader list, not including his name. Organizational development, systems thinking, management improvement, planning, policy deployment, learning. George Box: statistics, design of experiments, finding solutions (problem solving, process improvement), learning, management improvement…
  • The photo shows me from one of my most enjoyable days from 2005 hiking in Glacier Waterton International Peace Park

Building a Great Workforce

Posted on April 13, 2009  Comments (0)

How P&G Finds and Keeps a Prized Workforce by Roger O. Crockett

“We actually recruit for values,” says Chief Operating Officer Robert McDonald. “If you are not inspired to improve lives, this isn’t the company you want to work for.”
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The P&G strategy starts on college campuses. The Cincinnati company dispatches line managers rather than human resource staffers to do much of its recruiting.
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For the few who get hired, their work life becomes a career-long development process. At every level, P&G has a different “college” to train individuals, and every department has its own “university.” The general manager’s college, which McDonald leads, holds a week-long school term once a year when there are a handful of newly promoted managers. Further training—there are nearly 50 courses—helps managers with technical writing or financial analysis.

Career education takes place outside the classroom, too. P&G pushes every general manager to log at least one foreign assignment of three to five years. Even high-ranking employees visit the homes of consumers to watch how they cook, clean, and generally live, in a practice dubbed “live it, work it.” Managers also visit retail stores, occasionally even scanning and bagging items at checkout lanes, to learn more about customers.

Going to visit the gemba, the actual place is incredibly important, and far too often ignored by managers today.

The emphasis on life long learning (in practice, not just words) is also very wise. In my experience far to little emphasis is placed on continual improvement of what many companies will say is their most important asset: their people. If you don’t invest in education of your staff that is going to harm your long term success. The investment P&G makes shows a respect for people.

Related: Jeff Bezos Spends a Week Working in Amazon’s Kentucky Distribution Center – Workplace Management by Taiichi Ohno – Respect for People, Understanding Psychology – Ohno Circle
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Build Your Business Slowly and Without Huge Cash Requirements

Posted on April 12, 2009  Comments (0)

Get Rich Slow by Josh Quittner

At no other time in recent history has it been easier or cheaper to start a new kind of company… These are Web-based businesses that cost almost nothing to get off the ground
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The term ramen profitable was coined by Paul Graham, a Silicon Valley start-up investor, essayist and muse to LILO entrepreneurs. It means that your start-up is self-sustaining and can eke out enough profit to keep you alive on instant noodles while your business gains traction.

“At this point, it would be hard for companies to get any cheaper,” Graham said. Since everyone already has an Internet-connected computer, “it’s gotten to the point that you can’t detect the cost of a company when added to a person’s living expenses. A company is no more expensive than a hobby these days.”

I see a great deal of truth to this and it provides interesting opportunities. Including being able to build a business slowly while still working full time. I have written about Y-combinator previously they have helped make this model popular. And the services these companies make seem to me to often be much more refreshing than ideas so watered down they lose much passion (so common from so many companies). Though some large companies provide great web sites.

Related: Some Good IT Business Ideas – Find Joy and Success in Business – Our Policy is to Stick Our Heads in the Sand – Small Business Profit and Cash Flow

Management Improvement Carnival #60

Posted on April 10, 2009  Comments (0)

Kevin Meyer is hosting the Management Improvement Carnival #60 on the Evolving Excellence blog, highlights include:

  • TimeBack asks why “thinking time” isn’t part of our standard work.
  • Unfolding Leadership gives us some practical words of wisdom in dealing with layoffs.
  • Shmula describes his experience and observations while sitting in a Jiffy Lube waiting room.
  • Gemba Panta Rei suggests twelve leader standard work questions to ask while at the gemba.
  • Evolving Excellence warns us about the perils of going to China in today’s economy.

Please submit suggestions for post to include in future editions of the management improvement carnival.

How We Know What We Know

Posted on April 9, 2009  Comments (6)

Dr. W. Edwards Deming’s management philosophy is a system of management composed of four interdependent areas: knowledge about variation, understanding psychology, systems thinking and the theory of knowledge. The theory of knowledge is the least understood, and the least adopted in the various other management improvement theories (lean manufacturing, six sigma, theory of constraints…). A recent op-ed in the New York Times touches on the ideas behind how we learn: Learning How to Think

The actor was introduced as “Dr. Myron L. Fox” (no such real person existed) and was described as an eminent authority on the application of mathematics to human behavior. He then delivered a lecture on “mathematical game theory as applied to physician education” — except that by design it had no point and was completely devoid of substance. However, it was warmly delivered and full of jokes and interesting neologisms.

Afterward, those in attendance were given questionnaires and asked to rate “Dr. Fox.” They were mostly impressed. “Excellent presentation, enjoyed listening,” wrote one. Another protested: “Too intellectual a presentation.”

So if you want to rate know if your consultants or trainers were entertaining maybe a survey is a good idea. Of course, if you want to know if people learned something useful that they can apply and make your business more effective a survey may not work so well.

The marketplace of ideas for now doesn’t clear out bad pundits and bad ideas partly because there’s no accountability. We trumpet our successes and ignore failures – or else attempt to explain that the failure doesn’t count because the situation changed or that we were basically right but the timing was off.

I think this sounds good, but wouldn’t work. In general, the way people build up beliefs, is full of all sorts of systemic problems. Like above, they tend to think someone entertaining is more educational than someone not entertaining. They may be more entertaining, but taking the ideas of those who are entertaining and rejecting the ideas of people who are not is not a great strategy to build up a great system of knowledge. To more effectively adopt good ideas and reject bad ideas, understanding the theory of knowledge (how we know what we know) and then apply that knowledge to how you learn is a better strategy. Learning to recognize confirmation bias and take steps to avoid it is one positive step. Learning to recognize when you accept ideas from those you like without critical judgment and reject ideas from those you find annoying and then learning to evaluate the ideas on the merits is another positive step you can take.
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Checklists in Software Development

Posted on April 7, 2009  Comments (2)

Verify your work with checklists

WHO has recently shown that surgical deaths can be reduced by a third when hospitals follow their Surgical Safety Checklist. The checklist is very low tech. It includes questions like whether the patient has been properly identified, whether the proper tools are available, and whether everyone knows what kind of procedure is about to be done.

If a checklist so simple can save so many lives, I thought the technique could surely help us do better as well. So after reading about this study and their checklist, I’ve been pushing us to create checklists for all the common procedures at 37signals.

We now have checklists in Backpack for confirming that a feature is complete, we have a checklist for preparing the feature for deployment and for executing the deployment, and finally for verifying that the feature is working as expected in the wild.
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It’s the kind of stuff that we all know, but that we’ll often forget if we’re not being reminded about it in the moment. Thinking back to the mistakes we’ve made in the past, there are plenty of those that could have been avoided or caught much earlier if we had been using checklists.

This is a great reminder of two things: using checklists and adopting good ideas. Checklists are a simple and effective quality management tool. We use them for our software development (I have been a bit slow at getting them in place but we have been making progress recently). Also this shows how management improvement should work. You get good ideas from others and adapt them for use in your systems. Copying what others do, doesn’t work well. But understanding the concepts they use to improve performance and then adapting those concepts to your organization is the path to improved performance.

Related: Checklists Save Lives – Find Joy and Success in Business – Lean, Toyota and Deming for Software Development – The Power of a Checklist – Most Meetings are Muda

Another Year of CEO’s Taking Hugely Excessive Pay

Posted on April 6, 2009  Comments (5)

I continue to do my part to publicize the abusive CEO pay packages that the current crop of unethical CEO’s, and those sitting on corporate boards have supported (Tilting at Ludicrous CEO Pay 2008 – 2007 post on CEO pay abuses). It does seem there is more anger now at the looting these corrupt CEOs have engaged in; though far too many people seem to think the corruption is some isolated few CEO’s. The widespread failure of ethical standards by an enormous number CEO’s (those taking from corporate treasuries as though it was their own personal bank account) is the problem (not a few individuals). The looters certainly have littered their “courts” with apologists for their egregious behavior. Even with the large amounts they pay such lackeys I am surprised they find such willing apologists, in such large numbers.

2007 pay
rank		 Company CEO 2008 Pay 2007 Pay CEO % of 2008 Earnings total employees
1 Motorola Sanjay Jha $104,400,000 company lost $4.2 billion 64,000
2 Oracle Lawrence Ellison $84,600,000 $61,200,000 1.5% 86,600
3 Walt Disney Robert Iger $51,100,000 $27,700,000 1.2% 150,000
4 American Express Kenneth Chenault $42,800,000 $50,100,000 1.6% 66,000
5 Citigroup Vikram Pandit $38,200,000 company lost $27.7 billion 322,800
6 Hewlett-Packard Mark Hurd $34,000,000 $26,000,000 7.4% 6,200
7 Calpine Jack A. Fusco $32,700,000 327% 2,000

This executive pay data is for 2008, from the New York Times article, Pay at the Top. Earnings and employee data for 2008 from Google Finance. I would not pay any of these guys 1% of what they were paid if I owned the company, myself.

These guys and their friends have created a culture where their looting is as accepted as the clothes the emperor is not wearing. We need to wake up and stop letting these people steal the bounty created by the employees, customers, community, suppliers, investors… They want a world where they can behave like nobility – taking whatever they want from the value created by others. And lately they have succeeded in creating such a world. They leave in their wake very weakened companies and societies.
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The Importance of Making Problems Visible

Posted on April 2, 2009  Comments (1)

Great, short, presentation webcast by Jason Yip showing the importance of making problems visible. Anyone interested in software development should watch this, and it is valuable for everyone else, also. Great visuals.

Related: Future Directions for Agile Management – Agile Software Development Slideshow – Leading Lean: Missed Opportunity – Information Technology and Management – Curious Cat Micro-financiers – posts on project management – Toyota Institute for Managers

Management Improvement Carnival #59

Posted on April 1, 2009  Comments (0)

Nicole Radziwill is hosting the Management Improvement Carnival #59 on the Quality and Innovation blog, highlights include:

  • June Holley, talking about self-organizing to achieve systems-level innovation. She notes that because theory is lacking, this process might be protracted, but to get to the point of understanding theory we need some more “real life” examples and case studies of how we self-organize in our organizations well – and not so well.
  • Small is the new big. Sustainable is the new growth. Trust is the new competitive advantage. All of the rules of business have changed, and the seismic shift is both electrifying and frightening. But there are opportunities to be embraced, and many of them are summed up in this HBS blog article entitled, Why Small Companies Will Win in This Economy
  • And did you know that neuroscience may provide some insights into how to stage your process improvement efforts and your initiatives that focus on innovation?

Submit suggestions for the management improvement carnival.

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