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Video Overview of the PDSA Cycle

Posted on December 20, 2009 by John Hunter

Robert Lloyd, PhD From the IHI Open School‘s, presents a nice overview of the PDSA Cycle (plan-do-study-act). The webcast includes an example of using PDSA to improve the discharge process for a hospital.

As I have said many times the keys to success are to turn the PDSA cycle rapidly, predict the results in advance, and analyze the results to continually improve. the Improvement Handbook is an excellent resource.

The IHI Open School is a great resource and exactly the type of thing organizations with a mission to improve performance should be doing. Provide resources online that are easy for people to access and then apply in their organization. See more management webcasts.

Posted in Deming, Health care, Management, Process improvement, Quality tools, Science, webcast | Tagged Deming, Health care, management webcast, Process improvement, Quality tools | 2 Comments

The CEO is Only One Person

Posted on December 14, 2009 by John Hunter

The CEO is important but they are only one person. Rarely do they determine the success of a company. The instances where they seem to are so rare as to almost seem like just random luck. I think they can make a difference, but that they make a significant difference rarely. Steve Jobs seems to have made a huge difference to Apple, for example (and Jeffery Bezos at Amazon – note both of these examples are also founders of the company). Jason Zweig has a good article on Why a New CEO Isn’t Always a Panacea

Management is important, which is why Warren Buffett puts such stock in the character of the people who run the companies he invests in. But management isn’t nearly as important as many investors think, which is why Benjamin Graham, Mr. Buffett’s mentor, paid so little attention to it. In fact, Mr. Graham seldom bothered to meet the managers of the companies he invested in, partly because he felt they would tell him only what they wished him to hear and partly because he didn’t want his judgments of business value to be influenced by impressions of personal character.

If you took the CEOs with the best track records and brought them in to run the businesses with the worst performance, how often would those companies become more profitable? According to economist Antoinette Schoar of Massachusetts Institute of Technology’s Sloan School of Management, who has studied the effects of hundreds of management changes, the answer is roughly 60%. That isn’t much better than the flip of a coin.

“Some people,” Prof. Schoar says, “may have this almost blind belief that the manager at the top changes everything. Our results show that managers do matter, but they don’t change everything.”

Since the 1970s, several other studies have measured what happens when companies bring in new bosses. Most of the findings have been consistent: Changes in leadership account for roughly 10% of the variance in corporate profitability on average.
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a company will be much more inclined to replace the CEO after a run of bad losses—and to bring him in from a firm that has been on a hot streak. That leads to an illusion: “You change the CEO,” Dr. Kahneman says, “then performance reverts to the mean, and you attribute the improvement to the new guy.”

Furthermore, the hot profits at the new CEO’s former company are likely to cool off—by regression to the mean alone. When investors see that, they will mistakenly conclude that he is such a good boss that his old firm can’t thrive without him.

The management system is far more important than one person. Jim Press, Toyota N. American President, Moves to Chrysler (don’t expect much – Sept 2007). We are often fooled by randomness (understanding psychology lets you know this truth and factor it into your thinking): Illusions – Optical and Other, Attributing Random Results to a Special Cause, Seeing Patterns Where None Exists.

CEOs like to think they are royalty and take huge amounts of money from the company’s treasury, as a way, they hope, of providing evidence of this false belief. Don’t be fooled.

Jason Zwieg is the editor of the last few issues of the Intelligent Investor where he adds commentary on Benjamin Graham’s classic.

Posted in Management, Systems thinking | Tagged executive pay, Investing, leadership, management, Systems thinking | 6 Comments

Management Improvement Carnival #84

Posted on December 12, 2009 by John Hunter

The Curious Cat Management Improvement Carnival provides links to recent blog posts on improving the management of organizations.

How Do You Get from Here to Agile? Iterate. by Mike Cohn – “…following an iterative transition process. Making small changes on a continual basis is a logical way to adopt a development process that is itself iterative.”
What is Lean? by Mike Wroblewski – “Do we measure leanness on the number of lean tools being used? Let’s see, 5-S check, Kanban check, Regular kaizen events check, A3 no, TPM no, VSM no, (add as many tools to your checklist as your experience tells you)….sorry you are not lean…”
How to Deal with a Bad Boss — 3 Approaches by Harwell Thrasher – “There are basically three approaches to dealing with a bad boss: leave, get rid of the boss, or make the situation better.”
Defining the Problem Statement by Tim McMahon – “The problem statement should not address more than one problem. The problem statement should not assign a cause. The problem statement should not assign blame. The problem statement should not offer a solution.”
Hospitals Saving Millions with Staff Suggestions by Mark Graban – “The baseline number that Norman Bodek often cites for companies like Toyota or Canon is that the company saves $4,000 per employee based on employee kaizen suggestions.”
How Much Time In Gemba? by Lee Fried – “Each leader has very clear standard work which includes checking on local standards, progress of improvements and walking frontline processes.”
2 Quick Tips on Meetings by Jamie Flinchbaugh – “First, consider if you even need the meeting to begin with…”
The Advantages of A1 Thinking Over A3 Thinking by Jon Miller – “The A1 thinking document is four times larger than the A3 document. It is big. You can read it from across the room. The caveat is that you have to write at least four times as big as you would on an A3. Don’t use the extra space to cram in more information!”
Historical Data on the Largest Manufacturing Countries by John Hunter – The first chart shows the USA’s share of the manufacturing output… at 28.1% in 1990, 32% in 2000, 28% in 2005, and 24% in 2008. China’s share has grown from 4% in 1990, 10% in 2000, 13% in 2005 to 18% in 2008.

Posted in Carnival, Management | Tagged Carnival | 1 Comment

Habits

Posted on December 10, 2009 by John Hunter

Some things about what people do also have their roots in psychology. Deming had an understanding of psychology as one of 4 areas in his system of management. A huge factor in what people do is based on what they are used to doing – habits. It is often difficult for people to change – not necessarily because they don’t want to, or the alternative is more difficult or they think it is unwise. It is difficult just because they are in the habit of doing something else.

William James explored the power of habits – The Laws of Habit

Often I favor convincing people why certain actions are best and then they can chose to take those actions. But you can also get people in the habit of the actions you seek to encourage and then let the power of habit work. For health, I think this, often is a good strategy.

But it also is done in many ways that culture is established in an organization. You enforce that meetings must have an agenda. Then it becomes a habit. You enforce that decisions are based on data. Then it becomes a habit. You enforce that the work area must be clean. Then it becomes a habit.

Two ways you can notice that things are becoming a habit:

1) when people bring “work” ideas to their personal life – Visual Management and Self-Reliance, Laundry Kaizen [the broken link was removed].

2) you find yourself in a new environment where the habit is not practiced and you are uncomfortable. You go to a new organization and 5s is not being practiced and you feel uncomfortable. You go to meetings without agendas and they seem to wander and waste time and you can’t imagine why they don’t use an agenda and follow it.

When the ideas have reached the level of habits you have changed. I think with health issues this is the understanding people should have. How do I change things so people adopt good habits. Then you have to find strategies that effectively move people to adopt those habits.

The strategy is based on the idea that adopting the habit can be easier than convincing someone to change with the power of pure logic. But it is also important that as habits are adopted to explain the reasoning about why the habits are important. By understanding the role those habits play in successful health, for example, a person knows how to adapt to changing circumstances. And they know what are the key factors that should remain as new methods are adapted over time. Explaining why 5s is valuable is important even beyond the habit.

If you get someone to behave in a certain way to get some incentive you rarely get the change in psychology. They don’t adopt a new habit. They do something to get what you offer. They will continue to do it if the incentive is offered. If not, they stop. Does Rewarding Children Backfire?

In response to: In search of metrics [the broken link was removed]

Posted in Deming, Management, Process improvement, Psychology, quote, Systems thinking | Tagged curiouscat, Deming, extrinsic motivation, John Hunter, managing people, motivation, Psychology, quote | 7 Comments

The Biggest Manufacturing Countries in 2008 with Historical Data

Posted on December 7, 2009 by John Hunter

Once again the USA was the leading country in manufacturing for 2008. And once again China grew their manufacturing output amazingly. In a change with recent trends Japan grew output significantly. Of course, the 2009 data is going to show the impact of a very severe worldwide recession.

Chart showing percent of output by top manufacturing countries from 1990 to 2008

Chart showing the percentage output of top manufacturing countries from 1990-2008 by Curious Cat Management Blog, Creative Commons Attribution.

The first chart shows the USA’s share of the manufacturing output, of the countries that manufactured over $185 billion in 2008, at 28.1% in 1990, 27.7% in 1995, 32% in 2000, 28% in 2005, 28% in 2006, 26% in 2007 and 24% in 2008. China’s share has grown from 4% in 1990, 6% in 1995, 10% in 2000, 13% in 2005, 14% in 2006, 16% in 2007 to 18% in 2008. Japan’s share has fallen from 22% in 1990 to 14% in 2008. The USA has about 4.5% of the world population, China about 20%. See Curious Cat Investment blog post” Data on the Largest Manufacturing Countries in 2008.

Even with just this data, it is obvious the belief in a decades long steep decline in USA manufacturing is not in evidence. And, in fact the USA’s output has grown substantially over this period. It has just grown more slowly than that of China (as has every other country), and so while output in the USA has grown the percentage with China has shrunk. The percentage of manufacturing output by the USA (excluding output from China) was 29.3% in 1990 and 29.6% in 2008. The second chart shows manufacturing output over time.

charts showing the top manufacturing countries output from 1990-2008

Chart showing the output of the top manufacturing countries from 1990-2008 by Curious Cat Management Blog, Creative Commons Attribution.

The 2008 China data is not provided for manufacturing alone (the latest UN Data, for global manufacturing, in billions of current USA dollars). The percentage of manufacturing (to manufacturing, mining and utilities) was 78% for 2005-2007 (I used 78% of the manufacturing, mining and utilities figure provided in the 2008 data). There is a good chance this overstates China manufacturing output in 2008 (due to very high commodity prices in 2008).

Hopefully these charts provide some evidence of what is really going on with global manufacturing and counteracts the hype, to some extent. Global economic data is not perfect. These figures are an attempt to capture the economic reality in the world but they are not a perfect proxy. This data is shown in 2008 USA dollars which is good in the sense that it shows all countries in the same light and we can compare the 1995 USA figure to 2005 without worrying about inflation. However foreign exchange fluctuations over time can show a country, for example, having a decline in manufacturing output in some year when in fact the output increased (just the decline against the USA dollar that year results in the data showing a decrease – which is accurate when measured in terms of USA dollars).

If the dollar declines substantially between when the 2008 data was calculated and the 2009 data is calculated that will give result in the data showing a substantial increase in those countries that had a currency strengthen against the USA dollar. At this time the Chinese Renminbi has not strengthened while most other currencies have – the Chinese government is retaining a peg to a specific exchange rate.

Korea (1.8% in 1990, 3% in 2008), Mexico (1.7% to 2.6%) and India (1.4% to 2.5%) were the only countries to increase their percentage of manufacturing output (other than China, of course, which grew from 3.9% to 18.5%).

Posted in Data, Economics, Manufacturing | Tagged charts, curiouscat, Data, economic data, Economics, John Hunter, Manufacturing, quote | 5 Comments

Eric Schmidt on Google in 2010 and the Economy

Posted on December 3, 2009 by John Hunter

CEO Eric Schmidt Reveals ‘Centerpiece’ Of Google’s 2010 Strategy, speaking at the White House jobs summit.

Google is definitely hiring. “We’re hiring a couple thousand people over the next year,” he said.

And looking at the White House summit he said, “The basic message today is that with small business – which is the primary source of jobs – we need to figure out the loan problem. The banks aren’t really lending to them and anything that the government can do to accelerate that, needs to happen right now.”
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“Cloud computing is the centerpiece of our strategy. It’s a new model. You basically put all your information on servers and you have fast networks and lots of different kinds of personal computers and mobile phones that can use the applications… it’s a powerful model and it’s where the industry is going. It is the centerpiece of our 2010 strategy.”
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Piper Jaffray analyst Gene Munster today said in a note, that by 2016, 78% of Google’s revenue will still be from search. Schmidt agreed.

“My guess is that advertising and search ads will be the lion’s share of our business for quite a long time,” he said. “The reason is, it’s such a large part of our business and it continues to grow quite well.”

I continue to own Google and have it in my 12 stocks for 10 years portfolio.

Posted in Economics, Google | Tagged Economics, Google, Investing, IT, jobs | Comments Off

Management Improvement Carnival #83

Posted on December 2, 2009 by John Hunter

Jon Miller is hosting the Management Improvement Carnival #83 on the Gemba Panta Rei blog, highlights include:

How to Explain “How To”

I am constantly referring people to Bryan Lund‘s valuable TWI Blog wherein one can find public domain Training Within Industry documents as well as Bryan’s articles and practical insights. He shows us an example of a job breakdown sheet on how to compress hundreds of digital photos in under 1 minute. Follow the link at the end of the article to see the image.

We Need Standards

Group Healthcare Cooperative lean healthcare sensei Lee Fried asked, Who owns standard work? and shares the surprising insight he gained from his recent exposure to some Japanese lean sensei, and their answer to his question.

Problem statement: The Cost of U.S. Healthcare is Too High

John Shook attempts to add some reason into the national shouting match… er, the debate on U.S. healthcare. He delves deeply into the data. Read about the cost problem we have in U.S. healthcare in The U.S. Versus the World Healthcare Cost Gap. John Shook makes judicious use of charts and tables. Now if we could only just fit that all on one A3 sized sheet and drop leaflets all over Washington D.C…

Posted in Carnival | Tagged Carnival | Comments Off

No More Executive Bonuses!

Posted on November 30, 2009 by John Hunter

Henry Mintzberg, wrote an excellent article for the Wall Street Journal today, No More Executive Bonuses!

Don’t pay any bonuses. Nothing.

This may sound extreme. But when you look at the way the compensation game is played – and the assumptions that are made by those who want to reform it – you can come to no other conclusion. The system simply can’t be fixed. Executive bonuses – especially in the form of stock and option grants—represent the most prominent form of legal corruption that has been undermining our large corporations and bringing down the global economy. Get rid of them and we will all be better off for it.
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So, again, there is but one solution: Eliminate bonuses. Period. Pay people, including the CEO, fairly. As an executive, if you want a bonus, buy the stock, like everyone else. Bet on your company for real, personally.
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All this compensation madness is not about markets or talents or incentives, but rather about insiders hijacking established institutions for their personal benefit.

Too many large corporations today are starved for leadership – true leadership, meaning engaged leadership embedded in concerned management. And the global economy desperately needs renewed enterprise, embedded in the belief that companies are communities. Getting rid of executive bonuses, and the gambling games that accompany them, is the place to start.

It is an great article on bad pay systems that let a few top executives (and their hand picked board members) in many companies to loot the treasury of the company. I have written about this problem many times, including: CEOs Plundering Corporate Coffers – Excessive Executive Pay (2005) – Narcissistic Cadre of Senior Executives – The Best Leadership Is Good Management – Another Year of CEO’s Taking Hugely Excessive Pay – More on Obscene CEO Pay – More on Failed Executives

There are executives that don’t act like corrupt dictators looting their country, unfortunately they are less common than those that act like looters. And they all seem to have built cultures that taking respect for people is more important that feeding a few bloated egos. Akio Toyoda’s Message Shows Real Leadership, Tony Hsieh, the Zappo’s CEO – Warren Buffett – Honda has Never had Layoffs and has been Profitable Every Year

The obscene pay is not just a matter of people taking a tens of millions of dollars they don’t deserve. Companies whole management systems are distorted in ways that lead the company to risk all the other stakeholders future for the potential gain of a few senior executives.

Posted in Deming, Management, Performance Appraisal | Tagged bonus, commentary, ethics, executive pay, leadership, management, overpaid executives, respect for people | 5 Comments

Management Blog Posts From March 2006

Posted on November 27, 2009 by John Hunter

Photo of sunset in Mount Rainier National Park by John Hunter

Cease Mass Inspection for Quality – “Deming point 3 is ‘Cease dependence on inspection to achieve quality.’ Eliminate the need for inspection on a mass basis by building quality into the product in the first place.”
Lean Management – most organizations will not seriously consider changing the current management thought process without drastic threat (bankruptcy) or numerous successful improvements that give credibility to the new management ideas…
Using Design of Experiments – While the adoption of DoE is still growing slowly, an increasing number of organizations are using DoE to improve. In the past most companies (in most industries anyway) did not have to compete with others that were using DoE to improve…
Saving for Retirement – Savings for retirement is difficult mainly because of our trouble planning for the long term, it is not at all a complex problem. The fable of the ant and the grasshopper illustrates this point very simply and it is really that simple…
Six Sigma and Bad Management, is not Really Six Sigma – if you read the work of Roger Hoerl, Soren Bisgaard, Forrest Breyfogle III… and learn and apply what they talk about as Six Sigma you will definitely have to address bad management practices…
Deming and Toyota – I believe Toyota applied Deming’s ideas to create a management system and continued to develop that system to create the Toyota Production System)…
No More Lean Excuses – Within a couple minutes the service person had picked up a Canon A700 and explained how to open the door for batteries. I happen to think the instructions, and design, could be much better but..

Posted in Carnival, Deming | Tagged blogs, Deming, lean manufacturing | Comments Off

Making Better Decisions

Posted on November 24, 2009 by John Hunter

I think the most important thing you can do to make better decisions is to learn from the decisions you make. It sounds easy, but very few people do so effectively.

The best strategy to learn from decisions is to:

predict the results of your decisions
write down those predictions
Then analyze the results
Then adjust future predictions and decisions based on what you learn

Failing to do this leads most people to fail to learn from there decisions. It is hard to improve when you don’t learn. The similarity to the PDSA improvement cycle is not a surprise. Both are about learning so you can adopt more effective strategies.

Posted in Management, Process improvement, quote, Systems thinking | Tagged Career, continual improvement, Data, John Hunter, learning, management, Process improvement, Quality tools, quote, Systems thinking, tips | 4 Comments