Nicole Radziwill is hosting Management Improvement Blog Carnival #161. Highlights from this edition include:
Make sure you check out the full carnival post on the Quality and Innovation blog.
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.
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 Our outdated and harmful laws, regulation and tolerated behavior relating to patents, copyright and “intellectual property” is the other.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.
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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.
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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
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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 Style – Obscene CEO Pay, 2005 data – Executives Again Treating Corporate Treasuries as Their Money – “Too often, executive compensation in the U.S. is ridiculously out of line with performance” Warren Buffett – Leverage, Complex Deals and Mania – The 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 Toyota – Brooks Brother Bureaucrats – Losses Covered Up to Protect Bonuses
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…).
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 Career – Productivity Improvement for Entrepreneurs (and Everybody Else Really) – Involve IT Staff in Business Process Improvement – The Myth of the Genius Programmer – Management sub-reddit
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, it is important to predict the results. 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.
PDSA Improvement cycle graphic from my book – Management Matters
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 (when you look at the whole process, multiple turns through the PDSA cycle) – 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.
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.
I believe there are big benefits to knowing how to code (programing, software development). What is possible for your organization is often significantly impacted by understanding how to properly use software (and create it, coding, when needed). The lack of understanding of software is a significant problem not just for those wanting a job coding (that are available for those with the right skills) but also for those making decisions about what the organization should do.
The profound ignorance (meant not in a pejorative way but in the descriptive way) of software is a significant problem for managers today. The critical role of software in our organizations is only growing. And the importance of understanding software (which coding provides in a way no other learning does) is only increasing. My guess is a decade or two or three from now a understanding of coding will not be nearly as critical for managers. I am just guessing the nature of coding will be significantly changed and not understanding the details needed to code will not be as critical as it is today. Maybe I am wrong about the importance of understanding coding fading over time (it is more a feeling than a chain of logic I can clearly explain easily).
There are many indirect benefits of learning to code. In the same way that those with an education in engineering do very well in their careers overall, even if they take a path where they are no longer engineers a background in coding prepares you well for your career. Actually, similar to engineering, part of this effect may well be those that can graduate with an engineering degree and those that can be employed for several years as a software developer have skills and abilities that would have made them successful even if they didn’t pass through those experiences (still I think, those experiences to add to their success).
Good programmers have a strong tendency to think in ways that those interested in management improvement need (and, sadly, often lack): systems thinking, customer focus, efficiency focused [good coders often hate wasting their time and naturally despise non-value added steps], a willingness to speak up about things that need to be improved, a desire to make a difference, passion for what they do…
If you work along side good programmers these traits will be reinforced every day (this was my favorite part of my last job – working with great programmers that pursued these principles and re-enforced my doing so also). Yes there are also things you might have to temper in dealings with non-coders (being a bit kinder/less-direct about perceived failures, for example). Also some coders can be so engaged they expect an unsustainable commitment from peers (this is one of the great benefits of a good agile software development system – a focus on creating an environment for sustainable development [not expecting unreasonable effort/hours on the part of coders]).
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, LinkedIn, instant management consulting, and more.
Ruby Beach, Olympic National Park, Washington, by John Hunter
Why Use Lean if So Many Fail To Do So Effectively
If less than 1% of companies are successful with Lean, why are we doing it?
Lots of us are not. I would say the efforts I see “fail” are because they don’t do it. They have something they call TQM, six sigma, lean management or whatever and try out 10-30% of it in some half-measures, with big doses of Dilbert’s pointy haired boss methods and then don’t get great results. Wow.
The biggest complaint (with some merit) I see is why is lean/Deming/six sigma… so hard to actually do. If companies constantly fail to do it at all (even when they use the name) isn’t that an issue. Isn’t that a weakness of the “solution.” My answer is: yes. The caveat is, until someone comes up with the management system that both gets the results using Deming’s management ideas can, and is super easy for organizations to actually fully adopt (and have the great success that doing so provides) I know of nothing better than trying to do these things.
Certainly I believe you are much better off attempting to use Deming, lean or six sigma than listen to someone that tells you they have management instant pudding that will give you great results with no effort.
My belief is that a partial success rate is much higher than 1%. While many organization never go beyond slapping a few good tools on a outdated management system those few tools actually have good results. Maybe 50% of the implementations are so lame they have almost no positive results (not even getting improvement worth the time and effort). They could be seen as “failures,” to me. Those that actually have a right to say they are practicing “lean” I would say is a pretty small number but still above 1%?
There is also an advantage to this stuff being hard to do. You really don’t have to invent anything new. If you just have persistence and keep continually improving along the path applying ideas proven over decades from Deming, Ohno, McGregor, Christensen, Drucker, Scholtes, Womack, Roger Hoerl (six sigma)… you have a great advantage over all those organizations that ignored the ideas or made a bit of effort and then gave up.
Related: Engage in Improving the Management System – Rethinking or Moving Beyond Deming Often Just Means Applying More of What Dr. Deming Actually Said – Management Advice Failures – Management Improvement Flavors – Has Six Sigma Been a Success?