Category Archives: Systems thinking

Bell Labs Designing a New Phone System Using Idealized Design

I remember hearing this same story when Russ Ackoff spoke at the Hunter Conference on Quality (which was named in honor of my father) in Madison, Wisconsin.

If you haven’t heard this story you are in for a treat. And if you haven’t heard Russell Ackoff before you get to enjoy a great storyteller.

"Tape" of Ackoff’s Bell Lab Lecture at the US Navy.

If you would limit yourself to paying attention to 5 thinkers to advance your understanding of managing organizations Ackoff should be one of them. Of course, many managers don’t even try to learn from 5 leading management thinkers to do their jobs better over their career. So for many people just learning from Ackoff, Deming, Scholtes etc. they would be far ahead of the path they are now for their career. Of course you are not limited to learning from 5 people so you can learn from more if you want to be a better manager and leader.

I probably remember a great deal from maybe 5 talks from the more than 5 years I attended the Hunter Conference (and they were the best conferences I have attended – this might explain why the last conference I attended was maybe 7 years ago). This was one of them. And I realized that Ackoff was someone I could learn a great deal from and it caused me to learn a great deal from Russ Ackoff over the next decade.

Watch the video for much more but the basic idea of idealized design is to create a new design for a product, service or the organization based on existing feasibility but without the constraints of the existing setup. Then you can use that ideal to figure out a plan to move from the existing state to that idealized design. Russell Ackoff co-authored a good book on the topic: Idealized Design.

Related: Ackoff, Idealized Design and Bell Labs (2006)Corporations Are Not Led By Those Seeking to Maximize Shareholder Value, Russ AckoffTransformation and Redesign at the White House Communications AgencyRussell L. Ackoff: 1919 -2009Dr. Russell Ackoff Webcast on Systems ThinkingDesigning a New Organization (2005)

Integrating Technical and Human Management Systems

ASQ has asked the Influential Voices on quality management to look at the question of integrating technical quality and human management systems. How do different systems—technical or human—work together? How should they work together?

My view is that the management system must integrate these facets together. A common problem that companies face is that they bring in technical tools (such as control charts, PDSA improvement cycle, design of experiments, kanban, etc.) without an appreciation for the organization as a system. Part of understanding the organization as a system is understanding psychology within this context (as W. Edwards Deming discussed frequently and emphasized in his management system).

To try and implement quality tools without addressing the systemic barriers (due to the management system and specifically the human component of that system) is a path to very limited success. The failure to address how the organization’s existing management system drives behaviors that are often counter to the professed aims of the organization greatly reduces the ability to use technical tools to improve.

If the organization rewards those in one silo (say purchasing) based on savings they make in cutting the cost of supplies it will be very difficult for the organization to optimize the system as a whole. If the purchasing department gets bonuses and promotions by cutting costs that is where they will focus and the total costs to the organization are not going to be their focus. Attempts to create ever more complex extrinsic incentives to make sure the incentives don’t leave to sub-optimization are rarely effective. They can avoid the most obvious sub-optimization but rarely lead to anything close to actually optimizing the overall system.

image of the cover of Managmenet Matters by John Hunter

Management Matters by John Hunter

It is critical to create an integrated system that focuses on letting people use their brains to continually improve the organization. This process doesn’t lend itself to easy recipes for success. It requires thoughtful application of good management improvement ideas based on the current capabilities of the organization and the short, medium and long term priorities the organization is willing to commit to.

There are principles that must be present:

  • a commitment to treating everyone in the organization as a valuable partner
  • allowing those closest to issues to figure out how to deal with them (and to provide them the tools, training and management system necessary to do so effectively) – see the last point
  • a commitment to continual improvement, learning and experimentation
  • providing everyone the tools (often, this means mental tools as much as physical tools or even quality tools such as a control chart). By mental tools, I mean the ability to use the quality tools and concepts. This often requires training and coaching in addition to a management system that allows it. Each of these is often a problem that is not adequately addressed in most organizations.
  • an understanding of what data is and is not telling us.

An integrated management system with an appreciation for the importance of people centered management is the only way to get the true benefit of the technical tools available.

I have discussed the various offshoots of the ideas discussed here and delved into more details in many previous posts and in my book – Management Matters: Building Enterprise Capability. An article, by my father, also addresses this area very well, while explaining how to capture and improve using two resources, largely untapped in American organizations, are potential information and employee creativity. It is only by engaging the minds of everyone that the tools of “technical” quality will result in even a decent fraction of the benefit they potentially can provide if used well.

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Unintended Consequences

Using data to understand your processes and improve them is very useful.

But using data often results in unintended consequences. If you don’t have a good understanding on the pressures collecting data will bring to bear on the system you can create pressure for results that damage the delivery of value to customers.

In this example there are requirements to take action if certain conditions are present. In this case, if the airplane is pushed back from the gate for more than 3 hours without taking off passengers must be given the opportunity to get off.

The Tarmac Delay Rule in 2010 has led to a jump in the rate of flight cancellations

Indeed, to avoid the fines, airlines are now far more likely to cancel flights that are sitting at the gate or on the tarmac than they once were, explains Vikrant Vaze, an assistant professor of engineering at Dartmouth and a co-author of the study. That means you’re now more likely to board your plane, sit there, and then still have the flight canceled.

It doesn’t seem the conditions imposed are unreasonable to me. But the expectation was for airlines to make sensible adjustments and not force customers to wait so long in the airplane sitting on the ground. The system could be improved by having more gates in operation, not pushing loading planes if you knew plane wasn’t going to leave for more than 30 minutes, etc.. But when customer value is taken very lightly (as USA airlines do) it isn’t surprising the USA airlines would take a very customer unfriendly method to avoid the issue that was the source of the new rules.

Distorting the system or distorting the data are often the result, instead of the process improvement that is desired and expected.

Related: Bad Weather is Part of the Transportation SystemPoor Customer Service at USA AirlinesData is Important and You Must Confirm What the Data Actually SaysUnited Breaks GuitarsRespect for Employees at Southwest Airlines

Giving Executives 40% of Revenue is Insane

I have previous written on my belief that excessive executive compensation had reached the level of a deadly disease of western management (building on the W. Edwards Deming’s list of 7 deadly diseases). I named excessive executive pay and a broken “intellectual property” system as new deadly diseases in 2007.

Here is a graphic from, It’s Twitter’s birthday, and its executives are getting huge stock-based gifts, showing the massive executive give-away at Twitter.

chart showing how much Twitter gave to executives as percent of total revenue

Twitter has given executives $2,000,000,000 in just stock based compensation from 2011 through 2015. Twitter’s revenue for those 4 years was only $4,709,000,000. So Twitter gave executives 42.5% of revenue. This is of revenue, not earnings, Twitter isn’t even profitable.

Granted this is an extremely bad case but this pattern of giving away hundreds of millions of dollars to executives is common. It is destructive. It is disrespectful. It is a stain on those participating in the looting of companies for the benefit of the executive bureaucrats – those that enable them to siphon off the returns generated by companies into their pockets.

Related: Toyota Post Record Profit: Splits $15 million in Pay and Bonus for top 21 Executives (2014)Business 901 Podcast: Two New Deadly Diseases for Business (2013)Massive Bonuses Encourage Executives to Take Massive Risks (leverage etc.)

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Change Management: Create a Culture Seeking Continual Improvement or Use Band-Aids?

Successfully shepherding change within an organization is often a challenge. Often change management strategies are mainly about how to cope with a toxic culture but exclude the option of fixing the toxic culture. Why not address the root causes instead of trying band-aids?

The most effective strategy is to build an organizational culture into one that promotes continual improvement. A continual improvement culture is one that is constantly changing to improve (grounded in long term principles: respect for people, experiment, iterate quickly, etc.).

You can try to push change in an ad hoc basis by adopting some strategies to create a similar feeling about the individual change effort. But that isn’t as effective as establishing them in the culture are. Strategies such as: going the gemba, pdsa, build trust via respect for people…

These tools and concepts build trust within the organization. The do that by showing people are respected and that the change effort isn’t just another in the long line of wasted effort for ineffectual change. The first part can be addressed, normally the second part can’t be addressed effectively. Often that is at the core of the issue with why the change effort isn’t working. It is a bad solutions. It hasn’t been tested on a small scale. It hasn’t been iterated numerous times to take a seed of an idea and grow it into a proven and effective change that will be successful. If it had been, many people would be clamoring for the improvement (not everyone, true, but enough people).

But still you can use strategies to cope with lack of trust in your intentions with the change and lack of trust in the effectiveness and fear of change. Some of those are included in the links below. But mainly my strategy is based on focusing on building the proper culture for long term excellence and the change management strategies are just short term coping mechanisms to help deal with the initial challenges. Using those strategies as a long term solution for dealing with change in a toxic culture isn’t a very sensible way to manage.

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The Mission Statement Must Guide Action In Order To Matter

Does Mission Matter? That is the question raised this month by Pat La Londe for the ASQ Influential Voices.

I have discussed a similar topic in a previous post: Vision can be a Powerful Driver but Most Often It is Just a Few Pretty Words. I believe that post captures exactly how I feel about the question “does mission matter?”

It doesn’t matter if it is just words on paper that has no impact on how business is done. And sadly that is more common than having a mission that actually matters because it actually guides how decisions are made and how the business delivers products and services.

A phrase in your mission statement that your company values employees matters only to the extent the company manifests a respect for people. A phrase about the importance of customers matters only to the extent the company delivers customer delight.

From a post I wrote on The W. Edwards Deming Institute blog, Hallmark Building Supplies: Applying Deming as a Business Strategy:

[Hallmark Building Supplies] uses the purpose statement to make decisions on a regular basis. This is one of the keys to a good purpose statement. If the purpose statement doesn’t guide what is happening it is not providing much value.

The video above gives a good illustration about how companies operate when aim/purpose/mission etc. drive business decisions. When this happens mission matters a great deal. It provides focus to everyone as they do their work and prioritize how to continually improve the organization every day. The video also provides an illustration about how leaders behave when they understand the organization as a system.

Related: Aligning Marketing Vision and ManagementAckoff: Corporations Are Led By Those Seeking to Maximize Their Welfare not Shareholder ValueTrust Your Staff to Make Decisions (you can’t do this well unless there is a shared understanding of what the priorities are)

What to Do To Create a Continual Improvement Culture

This month the ASQ Influential Voices discussion explores what to do and avoid in order to create a performance culture? James Lawther shared his ideas on what not to do to get things started.

I have discussed steps to take in order to build a culture of continual improvement in numerous posts over the years (see related links below). What it boils down to is building a system that supports that culture. Your culture is the result not your aim.

David Heinemeier Hansson put it well recently in his essay, CEO’s are the last to know:

But the bottom line is that culture is what culture does. Culture isn’t what you intend it to be. It’s not what you hope or aspire for it to be. It’s what you do.

In order to create a culture that enhances your effort to continually improve you must crate systems that move things in that direction. Part of that system will be the continual assessment of how your organization is falling short of your desired culture. This requires honest assessment of the current state. And it requires those in leadership to design systems to get a clear picture on what is really happening in their organization.

As I said on Twitter in relation to that article leaders need to understand danger of “losing touch” and take steps to counter that risk. Often the explanation for why something happened (a process producing a failure, a leader not being aware of the real culture…) is an explanation of what the system needs to be designed to address.

wall mosaic with tree, animals and people

Mosaic on an outside wall of a temple at Wat Xieng Thong in Luang Prabang, Laos. By John Hunter.

In many organization CEOs are not aware of what is going on. This is a weakness that must be addressed systemically. Many of the better management methods proposed by W. Edwards Deming address this issue. CEOs are given a false picture when they focus on results instead of the management system. CEOs are given a false picture when they crate a climate of fear. CEOs are given a false picture in organizations focused on achieving bonuses instead of continual improvement.

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Publish Articles Promoting Better Management Using Open Journals

William Woodall shared this wonderful article he wrote with George E. P. Box with me, Innovation, Quality Engineering, and Statistics. My thoughts on being able to read it online:

Thanks Bill, it is a great article. And thanks for having it openly available. I really wish professors would stop allowing their work to be published by those seeking to close access to the ideas we are trying to promote. I realize there are pressures to publish in historically prestigious journals.

For professors that have “made it” you will do a great service to others (and help promote the ideas in your field that you have devoted your life to) by refusing to submit to closed science journals (or closed professional society journals etc.). For those trying to secure full professorships I wish they would too, but I realize the hard choices they face.

The maximum closed-ness we should tolerate, in my opinion, is closed access for 1 year after which it becomes open. Require this in writing in the agreement, don’t just accept that the current practice is to promote the sharing of ideas; if it isn’t in writing some person may have the publisher adopt closed science later and block access to the content you wanted to share.

It is especially distressing, to me, when government dollars fund the time the professor spends and then the end result is closed to the public. Thankfully some universities and some government agencies paying for the writing of these articles are demanding that the articles be published in an open access fashion.

On the other hand if you want to publish on rate and rank, the value of annual performance appraisals, bonuses for hitting targets etc. feel free to use closed science publishers.

Related: The Future of Scholarly Publication (2005)Fields Medalist Tim Gowers Takes Action To Stop Cooperating with Anti-Open Science CartelHarvard Steps Up Defense Against Abusive Journal Publishers25 provosts from top universities jointly released a letter supporting current legislation to require open publication of scientific research (2005)Problems with Management and Business Books

The Aim Should be the Best Life – Not Work v. Life Balance

My father had the most job satisfaction of anyone I have known. He had no separation between work and life. We toured factories on vacation. I visited Davidson College in North Carolina because he was consulting with a client in Charlotte before we went up to Duke and North Carolina for visits and asked the CEO what school I should visit. His grad students would call the house frequently.

Many of his best friends were colleagues. That is how I grew to know people like George Box, Brian Joiner, Soren Bisgaard and Peter Scholtes as I grew up. Various permutations of our family lived overseas based on his jobs in London (before kids), Singapore, Nigeria and China. Those experiences dramatically impacted all our lives and they were not about separating work from life.

The desire for a life embedded in other cultures and for travel drove decisions about work. He lived in Japan (because of his Dad’s job) for 2 years as a kid and that sparked his desire to do more of that as an adult.

My little brother, Justin, pushing me on a scooter at our house in Singapore.

My little brother, Justin, pushing me on a scooter at our house in Singapore.

The sensible aim is to optimize your life. Work is a big part of life. As with any system the results depend on the overall system not the performance of individual parts taken separately. Dad also died young. He was happy to have lived such a good life, even if he wished he could have lived longer he wasn’t bitter about missing anything.

When he learned he would die (of cancer) he mainly continued what he had always been doing living life and working on what he thought was worthwhile. One project he did take on, along with George Box, was creating the Center of Quality and Productivity Improvement at the University of Wisconsin-Madison. George’s speech about Dad’s work provides a nice look at how work and life – William G. Hunter: An Innovator and Catalyst for Quality Improvement.

He honestly looked back on his life and felt he had a life that few could have topped, even though it was cut short. He was certainly optimistic and positive. But my sense was this was his honest assessment, it wasn’t just some fake front he put on for others. He had been living his life as well as he could his whole life. And continuing to live it as long as he could was all he wanted to do.

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Lessons for Managers from Wisconsin and Duke Basketball

What can managers learn from Duke and Wisconsin’s basketball teams? Duke and Wisconsin are in the college basketball championship game tonight. They reached this stage through a great deal of hard work, skill, training and coaching.

Raw talent matters to mangers and even more to college basketball coaches. But raw talent alone won’t succeed (for college basketball teams a great system starved of raw talent would also fail).

The lesson many people miss is that college teams are mostly about developing a team that wins. Developing individual players is a part of that, but it is subordinate to developing a team. I think college coaches understand this reality much more than most managers do. But a management system that develops a team that succeeds is also critical to the success of business.

Managers can learn from successful college basketball programs the importance of creating a successful team. Part of doing that is developing individual skills of players. A huge part of it is developing an understanding of the system within which those players must operate.

Recruiting is an important part of developing an elite college basketball team. And it is critical to developing a world class business organization (though recruiting is less important to business, in my opinion). Recruiting is important in business, but it is easier to be very successful with good people, the skills needed in business are not often so rare as those needed in high level basketball.

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