Posts about Management Articles

The Theory of Knowledge in Deming’s Management System: How Do We Know What We Know?

I contributed an article to the Process Excellence Network’s Deming Files that was published yesterday: How Do We Know What We Know?. I took on the task of explaining the theory of knowledge, as one article in a four part series looking at the four components of Dr. Deming’s System of Profound Knowledge.

The other 3 articles are:

I hope you enjoy all 4 articles. Every two weeks a new article is published by the Deming Files exploring Dr. Deming’s ideas on management. The articles provide a nice dose of views on applying Deming’s ideas today. The network also has series on Drucker ideas and articles on many other management topics (six sigma, lean, etc.).

Related: Deming on Management2009 post: How do we Know What we KnowData Doesn’t Lie, We Can Draw Incorrect Conclusions from DataCorrelation is Not Causation

Managing Our Way to Economic Success

From Managing Our Way to Economic Success, Two Untapped Resources by William G. Hunter, my father. Written in 1986, but still plenty relevant. We have made some good progress, but there is much more to do: we have barely started adopting these ideas systemically.

there are two enormously valuable untapped resources in many companies: potential information and employee creativity. The two are connected. One of the best ways to generate potential information to turn it into kinetic information that can produce tangible results is to train all employees in some of the simple, effective ways to do this. Rely on their desire to do a good job, to contribute, to be recognized, to be a real part of the organization. They want to be treated like responsible human beings, not like unthinking automatons.

W. Edwards Deming has illustrated one of the troubles with U.S. industry in terms of making toast. He says, “Let’s play American industry. I’ll burn. You scrape.” Use of statistical tools, however, allows you to reduce waste, scrap, rework, and machine downtime. It costs just as much to make defective products as it does to make good products. Eliminate defects and other things that cause inefficiencies, and you reduce costs, increase quality, and raise productivity. Note that quality and productivity are not trade-offs. They increase together.

Potential information surrounds all industrial processes. Statistical techniques, many of which are simple yet powerful, are tools that employees can use to tap and exploit this potential information so that increasingly higher levels of productivity, quality, and innovation can be attained. Engaging the brains as well as the brawn of employees in this way improves morale and participation…and profits.

What is called for is constant, never-ending improvement of all processes in the organization. What management needs, too, is constant, never-ending improvement of ideas.

Related: William Hunter, articles and booksInvest in New Management Methods Not a Failing CompanyThe Importance of Management ImprovementStatistics for Experimenters

More Reasons to Avoid Layoffs

Lay Off the Layoffs by Jeffrey Pfeffer

As its former head of human resources once told me: “If people are your most important assets, why would you get rid of them?”

In fact, there is a growing body of academic research suggesting that firms incur big costs when they cut workers. Some of these costs are obvious, such as the direct costs of severance and outplacement, and some are intuitive, such as the toll on morale and productivity as anxiety (“Will I be next?”) infects remaining workers.

research paints a fairly consistent picture: layoffs don’t work. And for good reason. In Responsible Restructuring, University of Colorado professor Wayne Cascio lists the direct and indirect costs of layoffs: severance pay; paying out accrued vacation and sick pay; outplacement costs; higher unemployment-insurance taxes; the cost of rehiring employees when business improves; low morale and risk-averse survivors; potential lawsuits, sabotage, or even workplace violence from aggrieved employees or former employees; loss of institutional memory and knowledge; diminished trust in management; and reduced productivity.

As bad as the effects of layoffs are on companies and the economy, perhaps the biggest damage is done to the people themselves. Here the consequences are, not surprisingly, devastating. Layoffs literally kill people. In the United States, when you lose your job, you lose your health insurance, unless you can afford to temporarily maintain it under the pricey COBRA provisions. Studies consistently show a connection between not having health insurance and individual mortality rates.

Related: Five Managerial Fallacies Concerning Layoffs – Honda has Never had Layoffs and has been Profitable Every YearThe Trouble with Performance Reviews by Jeffrey PfefferCutting Hours Instead of PeopleFiring Workers Isn’t Fixing Problems

The Trouble with Incentives: They Work

Gipsie B. Ranney has a great new article – The Trouble with Incentives: They Work

I have wondered whether the escalation of pay, perks and parachutes for CEOs actually tends to attract individuals who are primarily extrinsically motivated, rather than individuals who are seriously interested in creating value. Several recent examples appear to be consistent with this view.

An important issue with regard to incentives is possible effects on teamwork and cooperation. If the incentive system is set up as a zero-sum game, then for me to win, you have to lose. This is a very effective way to ensure that there is little or no teamwork or cooperation. Interactions between individuals and groups are likely to become negative, to the detriment of the organization as a whole. When incentives are based on narrow functional objectives, achieving those objectives may guarantee that the system as a whole will be suboptimized.

the Mayo Clinic, “which is among the highest-quality, lowest-cost healthcare systems in the country.” He reports that “decades ago Mayo recognized that the first thing it needed to do was eliminate the financial barriers. It pooled all the money the doctors and the hospital system received and began paying everyone a salary, so that the doctors’ goal in patient care couldn’t be increasing their income. Mayo promoted leaders who focused first on what was best for patients, and then on how to make this financially possible.” He goes on to say, “the core tenet of the Mayo Clinic is ‘The needs of the patient come first’ – not the convenience of the doctors, not their revenues. The doctors and nurses, and even the janitors, sat in meetings almost weekly, working on ideas to make the service and the care better, not to get more money out of patients.”

Could it be that physicians, insurers, drug companies, and patients are simply acting rational to the system? The players are incentivized to behave as they do. The system delivers what it is designed to deliver.

She sums it up very well:

There may be cases in which incentives work only as intended, but I suspect they are relatively rare. The trouble is that we are usually dealing with complex systems (people and organizations) that may behave not at all like our myths would predict. The best policy may be to avoid incentives altogether and focus instead on creating systems in which intrinsic motivation, cooperation, ethical behavior, trust, creativity, and joy in work can flourish.

Find more articles on management improvement in the Curious Cat Management Improvement Library, including: An Interim Report on Motivation in the Workplace by Gipsie Ranney, Remembering NUMMI by Gipsie Ranney and Improving Problem Solving by Ian Bradbury and Gipsie Ranney.

When you can’t prevent arbitrary targets and rewards based on meeting them the strategy I attempt to put in place is figure out how the system will be distorted in order to meet those targets and then put in measures that will discourage such distortions. It isn’t perfect but can help prevent some of the worst distortions (and degradation of system-wide performance they cause).

Related: Righter IncentivizationThe Defect Black MarketDr. Deming on the problems with managing with targets (and incentives based on them)Extrinsic Incentives Kill Creativity

Penske to Buy Saturn from GM

Penske to Buy Saturn from GM

“When Saturn launched in the 1980s, it was the new, new thing, with the best dealer service and no-haggle pricing that put customers at ease,” said independent marketing consultant Dennis Keene. “But in recent years, it has just been another GM division, operating the same as Chevy or Pontiac, with nothing to differentiate it and a marketing message that keeps changing, so that people haven’t been able to get a handle on what the brand is supposed to be.”

First off, he won’t own any manufacturing plants. Saturn will continue to buy today’s vehicles from GM for at least two years. Penske will talk to other auto manufacturers in Europe and Asia about supplying new products after that. “We are going to be a sales, service, and marketing company, not an OEM [original equipment manufacturer],” he said. Eventually, Penske explained, he wants at least some Saturn vehicles to once again be manufactured in the U.S., though that may not be the case in the short run after the agreement with GM runs out.

I thought Saturn was the worst management failure at GM, among many (NUMMI, and GM’s Failure to Manage Effectively, for example). They really did some great things early on with rethinking the system of manufacturing and selling cars. But GM failed to take care of the innovative division. I hoped that Saturn would gain a new, better, management that build Saturn toward the potential it has. Contracting out manufacturing however, is a horrible idea, I believe. Unfortunately I think this ends the hope for a great Saturn.

Saturn still have the potential to do ok, given how bad the dealership experience is for most other companies. The dealer experience, even for Toyota and Lexus is still not at all congruous with the customer focus principles of lean (for example, motivating sales people to make as bad a deal for customers as they can – paying them more the more they get for the dealership at the expense of the customer). And other car companies have quite a bit to learn from the sales practices of Saturn and Car Max.

Related: Big Failed Three, Meet the Successful EightHonda has Never had Layoffs and has been Profitable Every YearPeople: Team Members or CostsInvest in New Management Methods Not a Failing Company, 1986

NUMMI, and GM’s Failure to Manage Effectively

Gipsie Ranney recently sent me an article on her thoughts on NUMMI and the current problems with the Big Three car makers to post to the Curious Cat Management Improvement Library. NUMMI is the plant that Toyota and General Motors run together as a joint venture. The article is excellent.

The answer to a question asked by someone else on the tour was stunning to me. The person asked what kind of computerized inventory system they had at NUMMI. The leader of the tour at the time – a materials management person – responded, “we don’t have one; the Japanese say that computerized inventory systems lie.”

The most remarkable insight I gained at NUMMI came as an answer to a question from a member of the touring group. The person asked what had been learned about the reasons that management/labor conflict had been reduced so much. The tour guide answered, “The answer we get from members of the labor force is that the Japanese do what they say they will do.” This was the same labor force that had held the record for most grievances filed per year in an assembly plant in the U.S.

The Big Three are responsible for managing their organizations wisely. I think that will take more than money. It will take a different culture and a different mind.

I agree. The problem is that management fails to manage well and has been failing to do so for decades. They have improved over the last few decades but not nearly fast or consistently enough. Gipsie worked closely with Dr. Deming and serves on the W. Edwards Deming Institute Board of Trustees.

Related: Could Toyota Fix GM (2005)At Ford, Quality Was Our Motto in the 1980sBig Failed Three, Meet the Successful EightWhy Fix the Escalator?Invest in New Management Methods Not a Failing Company (AMC) by William Hunter, 1986 – Ford and Managing the Supplier RelationshipNo Excessive Senior Executive Pay at Toyota

Hire People You Can Trust to Do Their Job

How great companies turn crisis into opportunity

The right people don’t need to be managed. The moment you feel the need to tightly manage someone, you’ve made a hiring mistake.

The right people don’t think they have a job: They have responsibilities. If I’m a climber, my job is not [just] to belay. My responsibility is that if we get in trouble, I don’t let my partner down.

The right people do what they say they will do, which means being really careful about what they say they will do. It’s key in difficult times. In difficult environments our results are our responsibility. People who take credit in good times and blame external forces in bad times do not deserve to lead. End of story.

I think he makes a very good point, but may overstate it just a bit. The right people do need management to do their job: to provide guidance, to work on improving the organizational system, to coach employees when needed, to plan for the future, to determine where to focus the organizations resources… But they don’t need to be micro-managed. They can be expected to do what is needed when the proper conditions are set, including a clear understanding of what is needed, communication of current conditions and changing needs, a shared understanding of roles (for people and organizations)…

Also, just to be clear, it can be the right thing to closely manage someone as they are learning. This is true when a new employee starts with the company. And also when they take on new responsibilities. I would have no problem with a company tightly managing a new supervisor. In my experience the exact opposite problem is much more common, moving people into supervisory roles with little support, to sink or swim on their own (well perhaps sinking those around them too). At both times they should get the support they need and the freedom they need to work effectively.

Related: Keeping Good EmployeesFlaws in Understanding Psychology Lead to Flawed ManagementPeople are Our Most Important Assetposts on managing peopleThe Joy of Work

Online Management Resources

Since long before I started this blog I have maintained the Curious Cat Management Improvement web site. In fact, that web site has been online since 1996; the blog started in 2004. I feel the web site has tremendous resources for managers looking to improve the performance of their organization (or course I am a bit biased).

Continue reading

Management Articles, Posts…

Reddit is a web site that ranks web pages by user votes. If you login and vote yourself they will develop a pattern of what you like and can show you a list of the pages you are likely to enjoy. I believe this is done by matching your likes and dislikes with others. When showing you a list of recommended links it gives some importance to up votes by anyone and more priority to up votes by those that have shown a tendency to like what you do.

I have recently setup a management sub-reddit (a distinct topic-focused-area on the management improvement topics covered in this blog). If you sign up you can not only vote on the links displayed but add new links (that then will be voted on by others). I think Reddit does a very good job of using social aspects of the internet to provide recommendations that are worthwhile (I have used the site for years). The success of this management subreddit depends on reaching a critical mass of users. So I encourage you to give it a try and vote on links you enjoy and add new articles, web sites, blog posts… The benefit of this subreddit will grow as we grow the number of participants.

I have also recently added a page to johnhunter.com with links to my online presence on various sites (such as: StumbleUpon, Kiva, LinkedIn…).

Related: Dell, Reddit and Customer FocusCurious Cat Management Improvement SearchCurious Cat Management Improvement Library

  • Recent Trackbacks

  • Comments