When Performance-related Pay Backfires

Posted on August 3, 2009 by John Hunter

When Economic Incentives Backfire by Samuel Bowles, Sante Fe Institute

Dozens of recent experiments show that rewarding self-interest with Economic incentives can backfire when they undermine what Adam Smith called “the moral sentiments.”

Punished by Rewards, by Alfie Kohn, is a great book on this topic. The area of “motivating” employees is one it is often hard for managers to learn. Even managers that have been studying Deming, Ackoff, Ohno… for years still have trouble with the idea that trying to find the right incentive scheme to motivate the right behavior is the wrong approach. Read the The Human Side Of Enterprise by Douglas Mcgregor (in 1960) to re-enforce the understanding of human motivation provided by Toyota’s respect for people principles.

Managers need to eliminate de-motivation in the work systems not try and find bonus schemes to motivate behavior. Eliminating de-motivation is often much more work. You can’t just get some money from the bonus pool and start giving it away. You have to manage. But if you are a manager you shouldn’t be afraid to actually manage the system and make it better.

Related: “Pay for Performance” is a Bad Idea – Reward and Incentive Programs are Ineffective — Even Harmful by Peter Scholtes – The Defect Black Market – What’s the Value of a Big Bonus? – Problems with Bonuses – Losses Covered Up to Protect Bonuses – Stop Demotivating Employees

When performance-related pay backfires:
Continue reading →

Posted in Competition, Data, Deming, Economics, Management, Performance Appraisal, Psychology, quote, Statistics, Systems thinking | Tagged , , , , , , | 4 Comments

Management Improvement Carnival #71

Posted on August 1, 2009 by John Hunter

Read the previous management carnivals.

  • Caring for Your People: Part of the Boss’s Job by Wally Bock – “Caring for your people means helping them grow and develop. You can help them develop skills to keep them out of trouble in the future.”
  • Maker’s Schedule, Manager’s Schedule by Paul Graham – “You can’t write or program well in units of an hour. That’s barely enough time to get started. When you’re operating on the maker’s schedule, meetings are a disaster.”
  • Getting things done when you’re not in charge by Kathleen Fasanella – “This can be difficult but you need to negotiate for permission to work on projects that your employer may not consider to be real work. These projects should be opportunities to experiment with processes or changes that can result in big savings. Not all of these will pan out but I guarantee that you’ll end up using what you learned in future projects.”
  • Are Lean and Kanban being stretched to the breaking point? by Si Alhir – “As a tool, a Kanban System supports making the work visible. However, visibility may be necessary, but is it sufficient for self organization and continuous improvement?”
  • Measuring for Improvement by Mark Graban – “Process measures are important — having the right measures, in a timely way is critical to any lean implementation.”
  • Another Post on Lean Management by Lee Fried – “The best way to see this is to visit their visual system and see if they are tracking their own data, that it is up to date and that it is clear what processes they are working to improve. If there is no visual or it is being maintained by management it is obvious that they need to re-commit.”
  • Standard work, by any other name… by Dan Markovitz – “Standard work is not just something for the metal stamping line, or for the invoicing process. Standard work can be — should be, must be — applied to the way you work on an individual level as well. Because when you start applying lean principles to your own work, you’ll not only improve your own performance, you’ll set a model that will inspire others as well.”

    • Continue reading →

Posted in Carnival | Tagged | 1 Comment

Lean Manufacturing Webcast from India

Posted on July 28, 2009 by John Hunter

This lean thinking webcast from India actually does a pretty decent job of providing an overview (for a business TV channel) even if they get some things a bit confused. The discuss TQM in India preceding lean which is an accurate view in my opinion – quality management shared many lean principles. They even talk of lean at Ford doing lean first. But they get the decades for that a bit off. They seem to mash together the “quality is job one” refocus on quality lead by Dr. Deming in the 1980’s with Henry Ford in the early 1900’s.

The webcast includes Jim Womack discussing lean thinking. He mentions the misunderstanding of lean as primarily cost cutting.

Related: Curious Cat Lean Management Resources – 2008 Deming Prize: Tata Steel – Lean management in India – TVS Group Director on India, Manufacturing and the Economy

Posted in Deming, India, Lean thinking, Management, Toyota Production System (TPS), webcast | Tagged , , , , | 1 Comment

Akio Toyoda’s Message Shows Real Leadership

Posted on July 26, 2009 by John Hunter

Speech by Akio Toyoda

Since the birth of Toyota, the company’s philosophy has always been to “contribute to society.”
…
“Contributing to society” at Toyota means two things. First, it means, “to manufacture automobiles that meet the needs of society and enrich people’s lives.” And second, “to take root in the communities we serve by creating jobs, earning profits and paying taxes, thereby enriching the local economies where we operate.”
…
Toyota has overcome many challenges during its seven decades of business. What has made this possible is the way we make our cars under our “customer first” and “genchi genbutsu” principles
…
Rather than asking, “How many cars will we sell?” or, “How much money will we make by selling these cars?” we need to ask ourselves, “What kind of cars will make people happy?” as well as, “What pricing will attract them in each region?” Then we must make those cars.
…
Through these processes, I would like to make Toyota’s product development and product lineup more region-focused. We will change our policy from achieving “a full lineup everywhere” to “a lineup necessary to meet the needs of each region”. We will also launch new vehicles that anticipate consumer needs and are exciting to drive.
…
At the press conference in January, I talked about my desire to become “a president who is closest to the frontlines, or gemba.” I believe that the essence of management lies in the gemba, and Toyota employees play a vital role there.

Once again Toyota shows they are the type of management I want to invest in. In my last post I discussed another: Jeff Bezos at Amazon. Google management is another management system I am glad to invest in. Toyota, Amazon and Google are 3 of my 12 stocks for 10 year portfolio.

Toyota continues to show they are an exceptional company that doesn’t waver due to short term pressures. They know the management system they have in place is excellent. They always try to improve. And they react to evidence that shows they have room to improve. They then access the situation and move forward.

via: Toyoda on Toyota: A New Regime, A New Future

Related: New Toyota CEO’s Views (2005) – Interview with Toyota President (2006) – Deming Companies – “2007 has been a difficult year for Toyota” – No Excessive Senior Executive Pay at Toyota – Webcast on the Toyota Development Process

Continue reading →

Posted in Customer focus, Deming, Lean thinking, Management, Manufacturing, quote, Systems thinking, Toyota Production System (TPS) | Tagged , , , , , , , , , , | 14 Comments

Zappos and Amazon Sitting in a Tree…

Posted on July 23, 2009 by John Hunter

Amazon is acquiring the unique company – Zappos: we have written about Zappos previously: Paying New Employees to Quit. Jeff Bezos uses the webcast above to talk to the employees of Zappos. Excellent job. The letter from Tony Hsieh, the Zappo’s CEO, to employees is fantastic. This is a CEO that respects employees. These are leaders I would follow and invest in (and in fact I am glad I do own Amazon stock).

First, I want to apologize for the suddenness of this announcement. As you know, one of our core values is to Build Open and Honest Relationships With Communication, and if I could have it my way, I would have shared much earlier that we were in discussions with Amazon so that all employees could be involved in the decision process that we went through along the way. Unfortunately, because Amazon is a public company, there are securities laws that prevented us from talking about this to most of our employees until today.
…
Several months ago, they reached out to us and said they wanted to join forces with us so that we could accelerate the growth of our business, our brand, and our culture. When they said they wanted us to continue to build the Zappos brand (as opposed to folding us into Amazon), we decided it was worth exploring what a partnership would look like.

We learned that they truly wanted us to continue to build the Zappos brand and continue to build the Zappos culture in our own unique way. I think “unique” was their way of saying “fun and a little weird.” 🙂

Over the past several months, as we got to know each other better, both sides became more and more excited about the possibilities for leveraging each other’s strengths. We realized that we are both very customer-focused companies — we just focus on different ways of making our customers happy.

Amazon focuses on low prices, vast selection and convenience to make their customers happy, while Zappos does it through developing relationships, creating personal emotional connections, and delivering high touch (“WOW”) customer service.

Continue reading →

Posted in Creativity, Customer focus, Deming, Fun, Innovation, Investing, Management, Respect, Systems thinking | Tagged , , , , , , , | 7 Comments

Narcissistic Cadre of Senior Executives

Posted on July 22, 2009 by John Hunter

In yet another voice against the looting mentality of the current crop of executives Chris Bones, dean of Henley Business School writes a A crisis of confidence?

This has resulted in the creation of a narcissistic cadre of senior executives who knew no right but their own perception and brooked no criticism or check on their ambition. In their demands for personal rewards we have seen them in their true light.
…
Secondly, a responsible organisation should set limits above which senior reward will not stray. I cannot see a reason why any annual bonus plan should be worth more than 100% of salary or should pay out more than 50% of this in the year in question. I do not think there is any justification for the annual value of chief executives’ rewards to be more than 20 times that of the average employee. Rocketing executive pay is in no one’s interests, except the small number of executives involved, and limiting it voluntarily is a better solution than the state intervening through taxation changes.
…
Business schools can help rebuild confidence in business leadership. But they too have to change—to become critical friend rather than fawning supporter. MBA programmes have to produce values-driven general managers, not finance-driven technocrats. They must build critical thinkers with the ability to make decisions that benefit all stakeholders, not just themselves.

It really is a shame that the executives leading so many companies are so moral, ethically and managerially bankrupt. We need to stop allowing such people to become executives in organizations. With such fundamental problems in their basic understanding of human systems the correct solution is to stop allowing such flawed people to have power not to try and convince such flawed people to behave responsibly.

That executives believe they should act as royalty taking what they wish from the value produced by others is so fundamental a failure that I do not believe reform is the best solution. They should just be removed. If you are lucky some competitor will hire them and you can gain not only from their removal but from the damage they cause your competitor.

Related: Warren Buffett on Excessive CEO Pay – Honda Executives not Overpaid – Unconscionable Executive Pay – Tilting at Ludicrous CEO Pay 2008 – Looting: Bankruptcy for Profit – More on Obscene CEO Pay

Posted in Economics, Psychology, Systems thinking | Tagged , , ,

Management Improvement Carnival #70

Posted on July 20, 2009 by John Hunter

Shaun Sayers is hosting the Management Improvement Carnival #70 on the Capable People blog, highlights include:

  • 8 ways to get total involvement by Jon Miller: “How do we get total involvement from our people in the good things?”
  • Total company involvement by Peter Abilla: “Most vision or mission statements are hollow, uninspirational artifacts. Sloganeering, as it were: they sound good, but fail to mobilize a team”
  • The limits of customer involvement by Shaun Sayers: “I’m noticing a growing tendency for an over-use of certain platitudes, such as ‘customer involvement’ and ‘leadership’ without much of an attempt to add substance, or give any clues as to what that may add up to in terms of planning, implementation or measurement”

Please submit suggestions for post to include in future editions of the management improvement carnival. The Curious Cat Management Blog Directory provides links to many management blogs.

Posted in Carnival | Tagged ,

Three Years of Real-World IT Projects In Ruby

Posted on July 16, 2009 by John Hunter

Nice webcast by Martin Fowler, Three Years of Real-World Ruby. This talk is probably only of interest to those of you in software development, but for them I think it is an excellent presentation.

At work we have been use Ruby for the last 3 years and have found it to be a powerful language that helps make writing software applications fun. And that is important. By providing a powerful language and a rails framework that takes away much of the drudgery of writing code you can create an environment where develops are happy and productive. We are hiring, by the way.

The talk provides a good background on their experience using ruby to manage projects; and how they manage ruby application development projects.

Related: Combinatorial Testing for Software – Checklists in Software Development – Future Directions for Agile Management

Posted in IT, Software Development, webcast | Tagged , , , , , ,

Management Improvement Carnival #69

Posted on July 13, 2009 by John Hunter

The Curious Cat Management Improvement Carnival provide links to recent blog posts for those interesting in improving management of organizations.

  • Starving the Golden Goose by Michael Neiss – “Where they [the Human Resource Department] should be obsessed with growing talent, they have become partners in reducing investments in that talent….starving the golden goose into a slow death… Fear doesn’t increase engagement, it increases caution.”
  • One Point Lesson: Kamishibai by Jon Miller – “The kamishibai board is particularly useful when there is a will and desire for managers to practice genchi genbutsu (go see what’s really happening) but they are unsure how to structure day or even what to do when they are on the shop floor.”
  • Stop Fighting Fires by Tim McMahon – “For the first question, you might use the “5 Whys” method of continuing to ask why until you reach something that really is a “root cause” rather than being a symptom/result of a more fundamental problem.”
  • Systems and Individuals by John Dowd – “The point is that fixing the system requires action on the system, not the individual parts.”
  • Medical Errors in Hospitals Still Occur at Alarming Rate by Mark Graban – “Seems like this, and many other medical mistakes, are cultural and social problems more than they are technical problems.”
  • Does Kanban Respect People, Self Organisation and Continuous Improvement by Karl Scotland – “A Kanban System is more than just a basic tool to be used to manage the work. It is a way of working which frees people to think for themselves in the pursuit of achieving success through improved productivity and quality.”

    • Continue reading →

Posted in Carnival | Tagged

Peter Scholtes

Posted on July 11, 2009 by John Hunter
photo of George Box, John Hunter and Peter Scholtes

George Box, John Hunter and Peter Scholtes, Madison, Wisconsin, 2008.

Peter Scholtes died peacefully this morning [11 July 2009] in Madison, Wisconsin. His family was with him.

My father wrote about the First Street Garage project in W. Edwards Deming’s Out of the Crisis (pages 245-247). Peter (who was working for the City of Madison at the time) and he became good friends working on that project together. Peter went to work for Joiner Associates afterwards and was a primary author of the Team Handbook. And Peter spent many years working with Dr. W. Edwards Deming and moving forward Dr. Deming’s ideas.

I would meet with Peter when consulted in Washington DC (which he did a good deal) and when I would visit Madison. He was extremely funny, compassionate, competent and effective. It was always a joy and educational to spend time with him. His Leader’s Handbook is the first management book I recommend to anyone. Peter enriched my life and the lives of many of others. And he will continue to do so through his works and those who were influenced by him.

Peter was a great friend and a wonderful person to talk with. I valued our shared interest in improving people’s lives by improving the practice of management. Peter was a priest before moving into management improvement. He retained his focus on helping people lead rewarding lives as a consultant. And we shared the desire to make the huge amount of time people spend working a much more rewarding experience. Making progress in that vein requires not just a wish to do so but the ability to learn and effectively apply ideas to affect real improvement. He was exceptionally gifted at this difficult task and was aided here, as with most things he did, by his considerable empathy and respect for others. His books provide evidence of this gift and effort. And those who were lucky enough to hear him speak enjoyed his ability to use humor to great affect in the effort.

In one of his last speeches, for example, when he speaking at the Deming conference (where the photo was taken) he used the action of kissing to underscore a point he was making about systems thinking and he described the challenges of gathering accurate data by recounting a radio interview he had heard about a research scientist who, in order to accurately assess the hibernation activities of bears, had to discretely sneak up on them during hibernation and well… take their temperatures in a non-genteel way.

I am very lucky to have developed friendship’s with several of my father’s friends. The photo shows me with two during my last visit to Madison: Peter and George Box.

It was a happy surprise when I found out Peter Scholtes wrote They Will Know We are Christians by our Love (link to a nice mp3 recording of the song). I think it is a wonderful song. Here are the words to that song (and a webcast is below):

We are one in the spirit we are one in the Lord
We are one in the spirit we are one in the Lord
And we pray that all unity will one day be restored

And they’ll Know we are Christians by our love, by our love
Yes they’ll know we are Christians by our love.

We will walk with each other we will walk hand in hand
We will walk with each other we will walk hand in hand
And together we’ll spread the news that God is in our land.

We will work with each other we will work side by side
We will work with each other we will work side by side
And we’ll guard each man’s dignity and save each man’s pride

All praise to the father from whom all things come
And all praise to Christ Jesus his only son
And all praise to the spirit who makes us one.

Continue reading →

Posted in Deming, Management, quote, Systems thinking | Tagged , , , , , | 34 Comments