Monthly Archives: March 2012

Continual Feeding

I like growing things. I think it is part the connection to system thinking I have had since I was a kid. I like finding ways to leverage my effort so that I put in a bit of thought and effort and then get to enjoy the fruits of that effort for a long time. This idea also guides my investing approach.

I planted a vegetable garden in my yard a few years ago. My strategy was to find methods that gained me what I wanted (yummy food) without much effort required from me. I don’t want to deal with persnickety plants. Basically I composted leaves, grass and yard waste. I put that into the garden spot and put in some seeds and small plants to see what would happen. I watered things a bit early on and if we had very little rain for a long time. But in general my attitude was, if I could get success with some plants with this level of effort that was good. Only if nothing would grow would I bother with more involvement from me.

photo of wineberries

Wineberries in my backyard.

Luckily it turned out great. Lots of great tomatoes and peppers and peas and beans and cucumbers and more, and very little effort from me.

I actually even had more success with wineberries. I didn’t even have to plant them (some bird probably seeded them for me and I just let them grow). It was wonderful for several years. Then I had a huge area with huge amounts of tasty berries: it was wonderful. Sadly then birds started to eat them before I go them and I got far fewer good berries than before. The berries were so good I went to effort to keep the birds from devastating my reward (to some success but with much effort). Oh well, I didn’t really mean to get onto that – those berries were just so great.

Now I am living in Malaysia and growing plants on my balcony. It is wonderful in many ways but one of the issues is I have to continually water the plants. Even though we get a great deal of rain, not nearly enough reaches the plants (and also the dirt doesn’t retain the water well – especially given the small volume of the containers). So if I want the fresh vegetables I have to continually water the plants. This goes against my desire to plant seeds and let me sit back and enjoy the bounty of my limited efforts (ok it is still pretty limited).

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How Could They Know?

I am a big fan of Dr. Deming’s ideas on management. The way I see one of the quotes of Dr. Deming used I don’t agree with. Dr. Deming said “How could they know?” to explain why people continued to follow less successful practices (for example, page 55 of Out of the Crisis). How could they know of better practices, he would say.

I must say I have always thought the answer to that question was pretty easy. They could learn about the job they were paid to do. It is a shame that many organizations do a very poor job of preparing or coaching those they promote into management for their new position. However, I don’t see that as an excuse to fail to learn yourself.

There are plenty of books with great information. How could they know? They could read.

Yes, there are also plenty of management books filled with nonsense. That does make it a bit more difficult. But I still don’t have much sympathy for hearing, “how could they know” as a reason for continuing performance appraisals or failing to understand variation or falling to know that “motivating” through monetary rewards backfires or… If you wish to manage human systems I don’t think it is too much to expect you to know about how to do so, and have the knowledge to distinguish nonsense from well reasoned thoughts.

If you want to take on a management job you should take your responsibility seriously. Choosing not to take advantage of the wealth of great material in the past 70 years on how to manage more effectively is not a decent excuse. How could they know? They could take responsibility to learn. If they chose not to do so that is their choice. They chose not to know. I guess some can see that as an acceptable excuse. I don’t.

If they are trying to apply ideas and having trouble: I have sympathy for that. Applying ideas on management is not easy. Human systems are complex and there are no simple guides that tell what is needed in your specific situation and organization. but ignorance of basic management principles, with no evidence of concerted efforts to learn I don’t have sympathy for.

I seem to expect more from managers than most people I talk with. Most seem to find it a perfectly acceptable excuse that a manager never bothered to learn about management. I don’t really understand that. Dr. Deming did seem to hold senior executives accountable for failing their organizations, but he was more accepting of manager’s ignorance than I am.

Read and use The Leader’s Handbook and The Improvement Guide and you will be well ahead of most of the management practice I see.

Related: Curious Cat Essential Management BooksBad Management Results in LayoffsThe Importance of Management Improvement

Selling Quality Improvement

In this month’s ASQ influential quality voices post, Paul Borawski asks How Do You “Sell” Quality?

I am amazed how difficult it is to sell quality improvement. I look at organizations I interact with and easily see systemic failures due to faults that can be corrected by adopting management improvement strategies that are decades old. Yet executives resist improving. The desire to retain the comforting embrace of existing practices is amazingly strong.

What sells to executives are usually ideas that require little change in thinking or practice but promise to eliminate current problems. What Dr. Deming called “instant pudding” solutions sell well. They are what executives have historically bought, and they don’t work. I can’t actually understand how people continue to be sold such magic solutions but they do.

If you want to enable effective management improvement, as I do, you need to both have buyers for what you offer and offer something that works. Honestly I am not much of a salesperson. Based on what I see executives buy the sale should be packaged in a way that minimize any effort on the executive’s part. However, that doesn’t interest me because it nearly always leads to failed improvement efforts. For years (decades?) Dilbert has provided a humorous view on the continuing tragedy of these efforts.

Another sales option is look for desperate executives that have already tried taking the easy way out 5 or 6 or 7 times and are still in desperate for improvement. Once they can’t see any options offering simple solutions they may be willing to work at a solution.

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Massively Unjust Executive Compensation Damages Companies and Investments

For years I have believed the massively unjust executive compensation packages have been doing great harm to American businesses. As an investor, one of the big risks that has to be evaluated is how much of the business profits executives will divert to their personal bank accounts. And investors also have to worry about the risks executives take to reach huge incentives which then greatly damage your investment.

In 2007, I added two of my own deadly diseases to Dr. Deming’s list. These deadly diseases have emerged since Dr. Deming created the list of 7 deadly diseases (which started out at 5 deadly diseases- he added 2 more later). Excessive executive compensation is one of those new deadly diseases. Our outdated and harmful laws, regulation and tolerated behavior relating to patents, copyright and “intellectual property” is the other.

The Incentive Bubble by Mihir Desai, Harvard Business Review

Mature corporations without large shareholders may become bloated with perquisites or preoccupied by empire building that satisfies managers rather than shareholders—the classic principal-agent problem.

In order for these pay mechanisms to be successful, managers and investors should be rewarded only for success beyond what would normally be generated. Said another way, there are returns that one can generate by doing little, and managers and investors shouldn’t be compensated for those returns.

A very important point to consider in calculating “excess” returns is an understanding of variation. This core component of Dr. Deming’s management system is not understood by most executives today and leads to mis-assigning credit and blame. In addition, an appreciation of systems thinking shows the fallacy of assigning individual causal credit or blame when in reality much of the result is systemic in nature (result of the system with little ability to sensibly assign individual cause – not that those wishing to have huge transfers of corporate wealth deposited in their bank account won’t pay lots of money to people that will create fancy formulas to try and justify such payments).

The rapid spread of stock options over the past two decades resulted in large windfalls for managers because no effort was made to subtract average performance during a period of remarkable returns in asset markets. Moreover, wide varieties of misbehavior have been traced to incentives created by the “cliffs” in most compensation packages: strike prices and vesting dates. Reaching for extra earnings by cutting small corners when such large amounts were at stake was inevitable. The corporate governance crises of the past 15 years had many roots; large stock option grants and the distorted incentives they provide loom large among them.

Absent regulators, irresponsible intermediaries, and oblivious homeowners were all important agents in creating the financial crisis, but the transformation of investment banks into risk-hungry institutions was central to it—and that transformation is connected to the growth of financial-markets-based compensation. At a basic level, the appetite for risk by managers of investment banks can be linked to the rise of compensation structures that provided them with highly asymmetrical incentives

Second, it is tempting to diminish the role of the skewed incentives identified above and reorient the debate toward ethics and morality: If only we hadn’t lost our sense of right and wrong. Such complaints may be well-grounded, but they obscure just how important these high-powered incentives are. More can be achieved by understanding incentive structures and the ideas that underpin them than by bemoaning a decline in character or promoting the virtues of professionalism. And moving away from shareholder-centered capitalism toward stakeholder capitalism risks overcorrecting the excesses of the past three decades. Indeed, capitalism appears to be serving managers and investment managers at the expense of shareholders.

Well said. From a Deming management perspective I see the huge problems created by the deadly disease of unjustly outsized executive compensation. And as an investor I see great risk in executives destroying investment returns as they try and extract hugely excessive amounts of the profits the organization makes to their personal treasuries.

Related: Taking What You Don’t Deserve, CEO StyleObscene CEO Pay, 2005 dataExecutives Again Treating Corporate Treasuries as Their Money“Too often, executive compensation in the U.S. is ridiculously out of line with performance” Warren BuffettLeverage, Complex Deals and ManiaThe soaring executive pay in the 1990’s turned Drucker into a leading critic of unjust pay (and those levels were tiny compared to what executives are taking from treasuries today) – No Excessive Senior Executive Pay at ToyotaBrooks Brother BureaucratsLosses Covered Up to Protect Bonuses

Management Improvement Blog Carnival #160

monkey at the Singapore Zoo

Monkey at the Singapore Zoo by John Hunter

The Curious Cat Management blog carnival highlights recent management blog posts 3 times each month. The posts generally focus on the areas I have focused on in the Curious Cat Management Guide since 1996 (Deming, innovation, lean manufacturing, customer focus, process improvement…).

  • Reflections on the 100th Birthday of Taiichi Ohno by Masaaki Imai – “Taiichi Ohno always placed respect for the worker first in his approach to kaizen. His focus was always on the customer, both external and internal”
  • A Lean Leader strengthens the business by developing people through coaching process improvement at the gemba by Jeff Liker – “Thinking of a leader as a teacher and coach, as managing from the gemba, believing deeply that people are the only appreciating assets of the company, believing in the value of intentionally creating a common culture and being a role model of that culture, and that the adaptiveness of the business to meet the challenges of the environment comes from how people are developed all the way down to the worker is quite different than the leader as the captain of the ship steering it cleverly through brilliant personal insights.”
  • Inspiration Stimulates Productivity and Engagement by Nicole Radziwill – “I’d also like to propose that engagement is a symptom – a consequence of feeling good and having a high quality consciousness! Let’s work on the root causes, and focus less on the symptoms.”
  • Kanban Networks Exerciseby Yuval Yeret – “The exercise brought to life the complexity of the organization’s network but highlighted how a Kanban system can simplify its operation as well as drive towards improvement. There were several A-Ha moments of understanding how Limited WIP would solve systemic problems currently haunting the organization.”
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Engineering Management Thoughts Based on Facebook Experience

Yishan Wong is the new CEO at Reddit, an excellent social media site I have written about previously. In looking at his background I found some interesting articles he wrote on engineering management based on his experience at Facebook engineering.

He starts with “make hiring your number one priority, always.” To me this is a specific knowledge worker issue. Hiring is always important but the importance in knowledge worker settings (especially when there is quite a bit of poaching good people going on) is elevated. The system thinking affects are obvious from his article including: “Succesfully hiring the best people at all levels means that down the road, your internal promotion pipeline is strong.” This is especially important given his emphasis on promotion from within – of course he wasn’t hired from within for the CEO job at Reddit :-).

Of course as a Deming management advocate I appreciate his article stating process should be implemented by those who do the work. I do strongly disagree with his seeming desire for unformed processes. I strongly believe making processes clear and consistent is critical as is an effective culture of continual improvement.

He further writes: “All external management hires must be able to write code and show a high level of technical proficiency, up to and including the head of the technical department. If the company is a technology company, this should also include the CEO.” I disagree with this idea. I do agree it is preferable. My belief is that one reason (there are many others) we have done so poorly at improving management over the years is we treat it as the promotion path for technical experts (programers, accountants, production, sales…). They often end up focused not on the management of the system but mucking around in details others should take care of. I do believe in the value of a long history of dealing with the company. It is very valuable to know how to write excellent code, I just don’t see that as the top requirement.

Related: Learn to Code to Help Your CareerProductivity Improvement for Entrepreneurs (and Everybody Else Really)Involve IT Staff in Business Process ImprovementThe Myth of the Genius ProgrammerManagement sub-reddit

Keys to the Effective Use of the PDSA Improvement Cycle

The PDSA improvement cycle was created by Walter Shewhart where Dr. Deming learned about it. An improvement process is now part of many management improvement methods (A3 for lean manufacturing, DMAIC for six sigma and many other modifications). They are fairly similar in many ways. The PDSA cycle (Plan, Do, Study, Act) has a few key pieces that are either absent in most others processes of greatly de-emphasized which is why I prefer it (A3 is my second favorite).

The PDSA cycle is a learning cycle based on experiments. When using the PDSA cycle prediction of the results are important. This is important for several reasons but most notably due to an understanding of the theory of knowledge. We will learn much more if we write down our prediction. Otherwise we often just think (after the fact); yeah that is pretty much what I expected (even if it wasn’t). Also we often fail to think specifically enough at the start to even have a prediction. Forcing yourself to make a prediction gets you to think more carefully up front and can help you set better experiments.

An organization using PDSA well will turn the PDSA cycle several times on any topic and do so quickly. In a 3 month period turning it 5 times might be good. Often those organizations that struggle will only turn it once (if they are lucky and even reach the study stage). The biggest reason for effective PDSA cycles taking a bit longer is wanting more data than 2 weeks provides. Still it is better to turn it several times will less data – allowing yourself to learn and adjust than taking one long turn.

The plan stage may well take 80% (or even more) of the effort on the first turn of the PDSA cycle in a new series. The Do stage may well take 80% of of the time – it usually doesn’t take much effort (to just collect a bit of extra data) but it may take time for that data to be ready to collect. In the 2nd, 3rd… turns of the PDSA cycle the Plan stage often takes very little time. Basically you are just adjusting a bit from the first time and then moving forward to gather more data. Occasionally you may learn you missed some very important ideas up front; then the plan stage may again take some time (normally if you radically change your plans).

Remember to think of Do as doing-the-experiment. If you are “doing” a bunch of work (not running an experiment and collecting data) that probably isn’t “do” in the PDSA sense.

Study should not take much time. The plan should have already have laid out what data is important and an expectation of what results will be achieved and provide a good idea on next steps. Only if you are surprised (or in the not very common case that you really have no idea what should come next until you experiment) will the study phase take long.

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Management Improvement Blog Carnival #159

David Kasprzak is hosting Management Improvement Blog Carnival #159 on My Flexible Pencil. Highlights from this edition include:

Make sure you check out the full carnival post on My Flexible Pencil.