Ackoff: Corporations Are Not Led By Those Seeking to Maximize Shareholder Value

Posted on August 23, 2012 by John Hunter

If I had to limit myself to a handful of management experts, Russel Ackoff would definitely be in that group. Thankfully there is no such limit. Ackoff once again provides great insight, with great wit, in the above clip.

A corporation says that its principle value is maximizing shareholder value. That’s non-sense. If that were the case executives wouldn’t fly around on private jets and have Philippine mahogany lined offices and the rest of it. The principle function to those executives is to provide those executives with the quality of work life that they like. And profit is merely a means which guarantees their ability to do it.
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If we are going to talk about values, we got to talk about what the values are in action, not in proclamation.

Related: Ackoff, Idealized Design and Bell Labs – Dr. Russell Ackoff Webcast on Systems Thinking – A Theory of a System for Educators and Managers – CEOs Plundering Corporate Coffers

Posted in Fun, Management, Systems thinking, webcast | Tagged , , , , , , , , | 8 Comments

Creating a Quality Culture

Posted on August 21, 2012 by John Hunter

This month Paul Borawski (CEO of ASQ) has asked the ASQ Influential Voices to share their thoughts on the Feelings and Quality Culture.

I don’t think creating a culture of continual management improvement is complex but it takes more commitment than most organizations seem to have. To build a culture that supports customer focused continuous improvement a management system needs to reinforce consistent behavior over the long term.

There is far too much saying certain things (customers are valued, people are our most important assets, etc.) but not backing those claims up with management systems that would be needed to operationalize those beliefs. Failing to do this just results in surface changes that have no depth or commitment and will shift with the winds (no culture change).

It is very difficult to create a culture that supports customer focused continuous improvement that doesn’t understand the failings of: extrinsic motivation and arbitrary numerical goals.

An understanding of variation and how to properly use data to aid improvement is also critical (otherwise huge amount of waste are generated on all sorts of fruitless efforts to explain common cause variation leaving far to little time to actually for on quality). An appreciation of the long term is necessary, which means reducing time spent on trivially urgent matters so focus can be given to important but not urgent matters.

And a respect for people is needed: a real respect, not just claims – which nearly every organization makes. The huge egos of most USA senior executives result in them taking huge amounts from the company to such an extent that they are inherently dis-respectful. The hero culture they profess with their pay package makes it extremely difficult for anyone to take them seriously when they claim to care about a culture that values the stakeholders of the organization.

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Posted in Management, Respect, Systems thinking | Tagged , , , , | 2 Comments

Management Improvement Blog Carnival #176

Posted on August 20, 2012 by John Hunter

Karl Scotland is hosting the 176th Management Improvement Carnival. Highlights include:

  • One set of posts that caught my eye was on Agile Fluency. The original post by James Shore and Diana Larsen proposes “a model of Agile fluency that will help you achieve Agile’s benefits. Fluency evolves through four distinct stages, each with its own benefits, costs of adoption, and key metrics”. Dave Nicolette responded that “the gist of the article appears to be that we can effect organizational improvement in a large company by driving change from the level of individual software development teams…
  • No, Really: We Don’t Do Forced Ranking and Performance Reviews
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Leading Manufacturing Countries from 2000 to 2010: China, USA…

Posted on August 13, 2012 by John Hunter
chart showing leading manufacturing countries output from 2000-2010

Chart of manufacturing production by the top 10 manufacturing countries (2000 to 2010). The chart was created by the Curious Cat Economics Blog. You may use the chart with attribution. All data is shown in 2010 USD (United States Dollar).

Over the years I have been posting data on the manufacturing output of leading countries. In 2010 China finally overtook the USA to becoming the leading manufacturer (long after you would have thought listening to many news sources and political leaders). In a previous post on the Curious Cat Economics Blog I looked at the output of the top 10 manufacturing countries with a focus on 1980 to 2010.

In 1995 the USA was actually very close to losing the lead to Japan (though you wouldn’t think it looking at the recent data). I believe China will be different, I believe China is going to build on their lead. There has been some talk for several years of manufacturing moving out of China seeking lower cost countries. The data doesn’t support any decline in Chinese manufacturing (or significant moves away from China toward other South-East Asian countries). Indonesia has grown quickly (and is the largest SE Asian manufacturing country), but their total manufacturing output is less than China grew by per year for the last 5 years.

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Posted in China, Manufacturing | Tagged , , , , , , , , , | 2 Comments

Curious Cat Management Improvement Blog Carnival #175

Posted on August 10, 2012 by John Hunter

The Curious Cat Management Improvement Blog Carnival has been published since 2006. We find great management blog posts and share them with you 3 times a month. We hope you find these post interesting and find some new blogs to start reading. Follow me online: Google+, Twitter, Reddit, and more.

  • Reflections on My (Brief) Time with Dr. Deming by Mike Stoecklein – “He was harsh and stern with senior management at the seminars – wanting to shake them into the realization of what their jobs were and that they were not currently doing it. He was sparing with the use of the word ‘leader’. However, he was always very kind and patient one-on-one.”
  • Beyond the Kanban Board: An Executive’s Work Visualization by Simon Marcus – “My goals in this approach include minimizing the likelihood that I will be a bottleneck, allowing great ideas to surface from wherever they surface and feeling comfortable with a lot of things happening around me because I know our teams know how to execute.”
  • Ford Gets It – Do You? by Bill Waddell – “The heart and soul of Toyota’s success was SMED – flexibility – the ability to make lots of things in one factory without losing too much capacity in the process.”
  • What to look for on a gemba walk? by Michel Baudin – “Following the flow. Pretending you are a work piece and following the process backwards from the end to the beginning, noting where and how many times it waits for transportation or processing, how operators perceive upstream and downstream colleagues, the tools, fixtures and storage devices used at each operation.”

    • Continue reading →

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Customer Focus by Everyone

Posted on August 7, 2012 by John Hunter

There are many critical elements to a management system. One that is fundamental, yet still poorly executed far too often, is creating a system where all staff can focus on enhancing value to the customer every day.

If your enterprise does not focus on this, it should. If you think your enterprise does, my first, second and third suggestions are to think more critically about whether it really does. If the answer is yes, then you are lucky to work in such an organization.

Saying that customers are valued is easy. Actually designing systems to focus on providing value and continually improving to provide value more effectively is not. It really shouldn’t be obvious to a customer in 5 minutes of interacting with your organization that it is obvious customers are not very important.

It is very difficult to create a system with customer focus by all staff without several basic supports in place. Respect for people needs to be practiced – not just mentioned. If there isn’t time to work on improvements to the system, often meaning you have the equivalent of sickness management instead of a “health care system” that is a shame. The reality of most organizations seems to be to make it very annoying for customers to even bring an issue they are having to the attention of the organization and even then the gaol is to use the absolute least amount of effort for the band-aid that can be tolerated.

Staff have to be given authority to act in the interest of customers. But this can lead to chaos if a good system isn’t in place to steer this process. And without processes in place to capture (systemically) needed improvements there will be huge waste.

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Posted in Customer focus, Deming, Management, Systems thinking | Tagged , , , , , | 6 Comments

My New Book: Management Matters

Posted on August 2, 2012 by John Hunter
Image of the book cover of Management Matters by John Hunter

Management Matters by John Hunter is now available.

I have a new book in progress: Management Matters. It is now available in “pre-release format” via leanpub. The idea I am experimenting with (supported by leanpub) is pre-publishing the book online. The ebook is available for purchase now, and comes with free access to the updates.

My plan is to continue working on the book for the next few months and have it “release ready” by October, 2012. One of the advantages of this method is that I can incorporate ideas based on feedback from the early readers of the book.

There are several other interesting aspects to publishing in this way. Leanpub allows a suggested retail price, and a minimum price. So I can set a suggested price and a minimum price and the purchaser gets to decide what price to pay (they can even pay over suggested retail price – which does happen). The leanpub model provides nearly all the revenue to the author (unlike traditional models) – the author gets 90% of the price paid, less 50 cents per book (so $8.50 of a $10 purchase).

They provide the book in pdf, mobi (Kindle) and epub (iPad, Nook, etc.) formats. And the books do not have any Digital Rights Management (DRM) entanglements.

Management Matters covers topics familiar to those who have been reading this blog for years. It is an attempt to put in one place the overall management system that is most valuable (which as you know, based on the blog, is largely based upon Dr. Deming’s ideas – which means lean manufacturing are widely covered too).

I hope the book is now in a state where those who are interested would find it useful, but it is in what I consider draft format. I still have much editing to do and content to add.

Leanpub also provides a sample book (where a portion of the content can be downloaded to decide if you want to buy). If you are interested please give it a try and let me know your thoughts.

Posted in Books, curiouscat.com, Deming, Lean thinking, Management, Process improvement, Psychology, Quality tools, quote, Respect, Systems thinking | Tagged , , , , , , , , , , | 3 Comments

Curious Cat Management Improvement Blog Carnival #174

Posted on August 1, 2012 by John Hunter

The Curious Cat management blog carnival is published 3 times a month with hand picked recent management blog posts. I also collect management improvement articles for the Curious Cat Management Articles site; an RSS feed of new article additions is available.

  • How to Identify Your Team or Organization’s Purpose by Jesse Lyn Stoner – “What is the end-result that you offer? Look at your purpose from the viewpoint of the result, not the products or services you offer.”
  • What we can learn from Russell L. Ackoff by Aleksis Tulonen – “If you want to (dis)solve the problem you need to understand how (dis)solving the problem will affect the system and what the problem really is. Gathering the mental constructs of several people with different mindsets will gain you more understanding of what you are dealing with.”
    • photo of White House Rose Garden with Oval Office in the background

    White House Rose Garden, Washington DC. By John Hunter. See more photos from Washington DC.

  • Why smart managers do stupid things by John Stepper – “What You See Is All There Is. Over and over, he demonstrates how people systematically disregard basic probability and other facts in order to (quickly and easily) make up a story that fits with the things they see.”
  • Downtime Antipatterns for SaaS owners, ZipCar edition – “Use an automated system to point DNS entries to a ‘sorry, we’re down, please see http://status.zipcar.com’ page running on a commodity VPS in a completely different datacenter. Provide useful information to the customer RIGHT AWAY, and don’t leave them wondering why the page isn’t loading.”
  • Espoused Vs. In-Use by Anthony DaSilva – “From over 10,000 empirical cases collected over decades of study, Mr. Argyris has discovered that most people (at all levels in an org) espouse Model II guidance while their daily theory in-use is driven by Model I.”

    • Continue reading →

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Corporate Social Responsibility

Posted on July 26, 2012 by John Hunter

This month Paul Borawski (CEO of ASQ) has asked the ASQ Influential Voices to share their thoughts on the Intersection of Quality and Social Responsibility.

An understanding of system thinking allows people to see the relationships of connected elements in a system. As you gain the insight provided by such knowledge, the ignorance of connections seems odd. It is hard to have an appreciation for systems thinking and not appreciate the fundamental interconnection between people, corporations and society.

Respect for people is another management principle that extends to social responsibility. Some companies may see respect for people as only respect for workers but a wiser approach is to view it as respect for all people (as Deming, Toyota, Patagonia and many others do).

Society makes the rules for how we live together. Corporations are allowed because society decided there was a benefit to society to allow them. One can argue the benefit to society is entirely independent of social responsibility. The argument that by ignoring the reason they are allowed to exist will result in that aim being met effectively isn’t what any quality management flavor I know of would suggest.

In the time of the robber barons in the 19th century those leading corporations tried to make the claim that the business world was amoral (morality didn’t apply in that realm). As a society we rejected that assertion. Society has decided morality and ethics do apply to business leaders. Even if so many business leaders themselves show a shocking failure to act ethically in practice (see the endless line of banking executive failures, etc.). The attitude of so many current CEO’s (that you deserve whatever you can take and if you are not caught and stopped it was fine) is passed onto those they work closely with. It is no wonder those people, that are suppose to be leading the organization, instead are just bleeding the organization for whatever they can get away with. That result is very likely when you fail to encourage systems thinking and respect for people (inside and outside the company).

There are many reasons for a corporation to be moral and practice social responsibility but the most important is that is it the ethical thing to do. In addition to that it will be effective. When you create a culture that treats the system as it doesn’t matter that is damaging. We currently do a bad job of systems thinking in general. Building an appreciation for systems thinking will provide great benefits. Ignoring the system impacts so you can justify unethical behavior is damaging.

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Value Stream Mapping for Fun and Profit

Posted on July 24, 2012 by Guest Post

Guest post by Evan Durant, author of the Kaizen Notebook blog [The broken link was removed].

I tend to get a little preachy about the importance of value stream maps, but they really can be useful tools not only to plan an improvement effort but also to monitor your progress going forward. In particular they provide a way to quantify the impact of changes to your process. Here’s a real life example as a case in point.

For a particular value stream a team went to gemba, followed the flow of material and information, collected process cycle times, and counted inventory. When everything was mapped and all the data tallied, here was the current state that they came up with:

Total Lead Time:
16.8 days
Process Lead Time: 2.2 days
Process Time: 1.9 days
Operator Cycle Time: 8.2 minutes

So what does all this mean? First of all the Total Lead Time represents the amount of time that a new piece of raw material would take to enter the value stream, be worked on, wait around with all the rest of the material in process, and then finally make its way to the customer. This number is usually driven higher by large amounts of in-process inventory caused by pushing between operations.

Second, the Process Lead Time is the amount of time it would take to process a single batch through the process, if it didn’t have to wait behind any other batches. Note that even though parts are processed one at a time through all of the manual operations, a certain amount of batching is required to overcome long machine cycle times in automatic operations. Also we do not ship parts to the customer one at a time, but rather in standard package sizes.

Third, we have the Process Time. This is the total amount of value added time, manual and automatic processing, that a part sees in the value stream.

Finally the Operator Cycle Time (also called manual time) is the amount of actual “touch” time required to make a part. The difference between the Process Time and the Operator Cycle Time is the Machine Cycle Time (also called automatic time). This is when a batch of parts is on a machine that does not require any operator intervention during a cycle. (We have a lot of machine cycle time in this value stream.)

Then the team applied the concepts of flow and pull to reduce overproduction and pace the value stream to the rate of customer demand. The results of the future state map were as follows:

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