Deming and Performance Appraisal

Posted on April 22, 2008 by John Hunter

Guest post by Ron Kingen (originally posted to the Deming Electronic Network)

Several weeks ago someone in the DEN list ask what did Dr. Deming recommend about this issue, well I ask that very question of Dr. Deming back in the 80’s when I had the good fortune to work with him. I had expressed my concern to Dr. Deming about several of his fourteen points that I either didn’t understand completely or did not fit with my experience and/or education. Dr. Deming suggested we talk about it over dinner – during the subsequent dinner discussion Dr. Deming made several points relative to performance improvement (not appraisal):

  1. Hire good people – one of the most critical decisions we all make.
  2. Train and educate them – even if they come from the best universities and are at the top of their class.
  3. Coach them, constantly, don’t wait for an annual appraisal to correct an issue or behavior.
  4. It is the system that must be improved to ensure people work to their potential.
  5. Recognize your top performers, but money isn’t the best method of recognition, in fact, it can be counterproductive.
  6. Work with your low performers to understand their issues and difficulties; give them support and assistance. If they can’t improve and are truly performance outliers , don’t keep them, they will affect the over system.

The advice seemed valid, but I told him my company insisted we do performance appraisals. He laughed, he suggested I change the system; but Dr. Deming knew I worked for General Motors and that wouldn’t be easy. So he recommended I become a rebel and change my part of the system; which I did try. At the time I worked for one of the most progressive divisions within GM and was fortunate to work with many talented GM people and several well know and recognized experts, but I was convinced the best system change option was to leave GM.
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Posted in Deming, Management, Performance Appraisal, Systems thinking | Tagged , , | 1 Comment

Find Joy and Success in Business

Posted on April 21, 2008 by John Hunter

David Heinemeier Hansson Talk [the broken link has been removed] at Startup School 2008 (Paul Graham‘s Y-combinator school). It is helpful to appreciate the importance of some simple ideas. Working on web focused businesses people often get carried away with the huge potential and sometimes lose touch with reality. While the ideas are more obvious when looking at web related business their is plenty here for many companies (the second half might be more helpful for many).

In this talk David does a great job of explaining how 37 signals has chosen to work. They are not concerned with becoming large. They focus on doing what they want to do – creating great software solutions (see: Systemic Workplace Experiments). And on making money to allow them to stay in business.

Some tidbits of advice: create great applications, charge people money, make a profit. Yes to those outside the web world this might seem obvious… He discusses a very similar idea to the idea of 1,000 true fans. He mentions to bring in a $1 million, all you need is 2,000 customers paying $40/month. 37 Signals has done well focusing on small business. Don’t be in such a hurry.

Related: Why is 37signals so arrogant? – Complicating Simplicity – Joy in Software Development – Great Marissa Mayer Webcast on Google Innovation

Posted in Customer focus, Deming, Fun, Innovation, IT, Management, Psychology, Respect, Software Development | Tagged , , , | 3 Comments

The Defect Black Market

Posted on April 18, 2008 by John Hunter

The Defect Black Market

It all started a week before, when the CTO of Damon’s midsize warehousing and transportation company in Northern California announced an innovative program to motivate employees and boost the quality of their logistics software. For every bug found by a tester and fixed by a programmer, both would get $10.

Well, this doesn’t sound very well thought out. Bonuses often distort behavior. Dr. Deming was not against such targets and bonuses because he thought they would not result in bugs being fixed: Dr. Deming on the problems with targets or goals. It is a question of how that will happen. The system being distorted is the most likely result of any such system.

Everyone worked a bit harder the next day. Testers made sure to check and double-check every test case they ran, while developers worked through lunch to fix their assigned bugs. And it paid off. On that second day each had earned an average bonus of $50.

Everyone worked even harder on the third day. On the fourth day, however, the well had started to dry up. The testers ran, re-ran, and re-ran again the test cases, but they could only find a handful of issues. The developers strained the issue-tracking system, constantly reloading the “unassigned bugs” page and rushing to self-assign anything that appeared.

And then something strange happened at lunch. Instead of going out to eat with his usual teammates, one of the developers went out with a tester. Soon after, another developer went out with another tester. Within a few minutes, almost all of the developers had paired up with testers.

As the developers returned from lunch, they immediately got to work. Instead of scavenging for newly found bugs, they worked on “code refactoring” and new functionality. And as soon as they deployed their changes, testers found bugs — minor, obscure bugs that a developer could easily overlook. And just as quickly as testers found bugs, the developers were able to fix them and re-deploy. By the end of the day, developers and testers had earned an average of $120.

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Posted in Data, Deming, IT, Management, quote, Respect, Software Development | Tagged , , , , , | 9 Comments

Gary Convis is the New CEO of Dana

Posted on April 17, 2008 by John Hunter

Another former Toyota USA leader is talking a leading role at another company. Gary Convis from Toyota retired last year.

Related: articles by Gary Convis – Toyota Management Speech by Gary Convis – Toyota Management Develops the New Camry – Quality Conversation with Gary Convis – Jim Press, Toyota N. American President, Moves to Chrysler

Dana Holding Corporation Names Gary L. Convis Chief Executive Officer

Dana Holding Corporation (NYSE: DAN) emerged from bankruptcy recently and today announced that it has named Gary L. Convis, 65, to the post of Chief Executive Officer. Convis was appointed to Dana’s new Board of Directors in January 2008 after retiring from Toyota Motor Corporation, where he had spent more than 20 years culminating in his role as Chairman of Toyota Motor Manufacturing, Kentucky.

“We are delighted to welcome Gary as Chief Executive Officer,” said Dana Executive Chairman John Devine, who had served as the company’s acting CEO since January. “Gary is widely respected as one of the leading experts in lean manufacturing and management systems, including the Toyota Production System. Along with his strong leadership and global industry experience, we believe he is an ideal choice as our new Chief Executive.”

“I am honored by the Board’s confidence in me to lead Dana,” Convis said. “I’m also eager to join with our people in establishing world-class manufacturing systems and returning this great company to the leadership ranks of the global automotive supply industry.”
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Posted in Lean thinking, Management, Manufacturing, Toyota Production System (TPS) | Tagged , | 1 Comment

Overview of 5 Nations Health Care Systems

Posted on April 16, 2008 by John Hunter

PBS presents a very nice overview of the heath care systems in Japan, United Kingdom, Germany, Taiwan and Switzerland in: Sick Around the World. It is a just a surface view of the overall system but even so does a good job of providing more understanding of the options available to fix the failed system in the USA. The US system costs over 50% more than others and has worse outcome measures than the alternatives (and leaves many without any coverage). And while the alternatives are not perfect the defenders of the status quo make claims about the alternatives are not accurate.

Table combines data from my previous post, International Health Care System Performance, and the PBS website:

Australia Canada Germany Japan Netherlands New Zealand Switzerland Taiwan UK USA
National health spending – Percent of GDP 9.5% 9.8% 10.7% 8.0% 9.2% 9.0% 11.6% 6.3% 8.3% 16.0%
Percent uninsured 0 0 <1 <2 0 0 16

Switzerland, spending 11.6% of GDP on health care, is the 2nd most expensive in the world.

Related: USA Spent $2.1 Trillion on Health Care in 2006 – Measuring the Health of Nations (USA ranks 19th of 19 nations studied) – Drug Prices in the USA – USA Health Care Costs 16% of GDP (2006) – Deadly Diseases of Western Management – 5 Million Lives Campaign

Posted in Economics, Health care, UK | Tagged , , , , , | 7 Comments

Management Improvement Carnival #33

Posted on April 15, 2008 by John Hunter

Shaun Sayers is hosting Management Improvement Carnival #33 on the Capable blog, some of the highlights include

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Making a Difference

Posted on April 13, 2008 by John Hunter

Kiva provides loans through partners (operating in the countries) to the entrepreneurs. Those partners do charge the entrepreneurs interest (to fund the operations of the lending partner). Kiva pays the principle back to you but does not pay interest. And if the entrepreneur defaults then you do not get your capital paid back (in other words you lose the money you loaned).

They do an excellent job of using the internet to allow people like me to feel connected to people we can help. And in so doing, they do an excellent job of implementing their strategy (providing funds for micro-loans) to achieve their goal (to alleviate poverty). “Kiva’s mission is to connect people through lending for the sake of alleviating poverty.”

Today I added $450 to my loan portfolio with Kiva and donated another $100 to Kiva. I added 5 loans in: Tanzania (2 loans), Uganda, Paraguay and Ecuador.

I am happy with the success of the Curious Cat blogs but I do have one item I wish would improve. I wish more Curious Cat readers would take advantage of Kiva. If you lend through Kiva, please add a comment with a link to your Kiva page and I will add you to our list of Curious Cat Kiva Contributors.

The Kiva web site includes all sorts of data on the partners making the loans (the capital at risk is provided by Kiva donors but a local organization services the loans…). For example, see the profile for Tujijenge Tanzania Ltd. This shows for example the Amount Repaid Vs Expected Rate (100% for this partner – no defaults or delinquency). The rates for all Kiva loans are 3.75% delinquent and .12% defaulted. They also show the Average Interest Rate Borrower Pays To Kiva Field Partner (which is 24% in this example) and the Average Local Money Lender Interest Rate (which is 60%).

One of things I really hope to see is some research on the results Kiva is producing. What kind of changes are these loans bringing about: specifically looking at Kiva. And also looking at various factors such as the interest rate and whether targeting my lending to those with lower average rates results in greater benefit. There is a great deal of unknown and unknowable numbers involved but some data would be interesting as well as analysis even without numbers of results.

Related: Using Capitalism to Make the World Better – Frontline Explores Kiva in Uganda – Providing a Helping Hand via Kiva – Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts – Microfinance research links

Posted in Economics, Fun, Respect | Tagged , , | 5 Comments

Toyota Building Second Plant in India

Posted on April 11, 2008 by John Hunter

Toyota is investing $350 million in a second Indian manufacturing plant. The plant is focused on producing vehicles for the local market – as the Toyota Production System suggests that production be close to the market.

Toyota to invest Rs1,400 crore for “strategic” small car in India

The new plant will have a production capacity of 100,000 units and will become operational by 2010, he added. The company’s current plant has a capacity of 63,000 units a year.

The plant will make the Corolla sedans along with the small cars The company plans to have high level of localisation for the small car by procuring several components and sub-systems from Indian vendors. Primarily the car maker plans to sell the small car in the fast growing domestic market, though some will be exported as well, the company stated.
…
The Japan-based automaker said last year that it plans to capture 10 per cent of India’s market. In 2007 Toyota sales accounted for a mere 0.6 per cent of the Indian car market

Related: Manufacturing Takes off in India – Toyota Chairman Comments on India and Thailand – Top 10 Manufacturing Countries 2006 – Indian companies have received as many awards as companies from all other countries combined since 2000 – Toyota to Build New Plant in India to Make Small Cars – TVS Group Director on India – Manufacturing, Economy

Posted in India, Manufacturing, Toyota Production System (TPS) | Tagged , , , | 1 Comment

Confusing Customer Focus

Posted on April 10, 2008 by John Hunter

Misuse of the “Customer” Concept

“We are told that the airlines are our customers,” FAA inspector Charlambe “Bobby” Boutris said. “But we have a more important customer, the taxpayers” who want government to ensure a safe aviation system.

That’s crazy. The FAA is supposed to be serving and protecting the passengers, not the airlines. This is like a supervisor in a workplace treating their employee as a customer… even in a “servant leadership” environment, that’s not right.

“Customer focus” is good, but only if you properly define customer relationships. I’d prefer the FAA think of me and my fellow travelers as the “customer,” not the airlines.

I agree there are several different customers. This is actually not uncommon outside of government but for government agencies multiple “customers” that might have divergent desires are more frequent. But the “customer” frame of reference I still think has value.

I actually think the problem is the way people choose to interpret the idea. If I buy a car from a dealer they don’t sell it to me for $100. They don’t agree to not tell the government so I can avoid sales tax. They don’t agree to sell me a car that is not legal in the state. Customer service does not mean do what is in the interest of the customer irregardless of laws, regulations, good business practices, etc..

I would say doctors don’t give patients anti-biotics for viral infections (but actually they do). They shouldn’t. When doctors behave irresponsibly and give antibiotics in ways that harm the heath of society, some might try to claim it is because they are giving the patient/customer what they want. That is not a reasonable excuse.
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Posted in Customer focus, Management, Public Sector | Tagged , , , | 4 Comments

Packaging Improvement

Posted on April 9, 2008 by John Hunter

McDonald’s Branding Makes Food Tastier for Tots

Researchers at Stanford University have found that children tend to rate food that is wrapped up in McDonald’s-branded paper as tasting better than the same food wrapped in plain paper — a finding that suggests that even the youngest consumers are heavily influenced by advertising. The new study was released Monday in the Archives of Pediatric and Adolescent Medicine.

The study had 63 children, aged 3 to 5 years old, tasting five pairs of identical foods and beverages — one in McDonald’s wrapping and the other in unbranded packaging. The researchers then asked them a simple question: “Which one tastes better?” An overwhelming number of the children said the food in the McDonald’s wrapping was tastier.

Oddly enough, this applied even to vegetables and milk. Sixty-one percent of the children in the study preferred the taste of carrots and 54 percent preferred the taste of milk if they were reminded by the packaging that it came from McDonald’s.

This is another reminder that tackling problems directly is not always the best strategy. The packaging doesn’t actually change the taste, but really it is not the taste that is likely a concern but rather the perception of taste. To me this is very similar to the studies on people preferring wine they are told costs more.

Ignore psychology at your peril: in marketing and in management. Deming’s management system include 4 interdependent areas: understanding variation, systems thinking, theory of knowledge and understanding psychology.

Effects of Fast Food Branding on Young Children’s Taste Preferences (I think this is the study referenced in the article though it was published in August 2007 – John).

Related: Indian researcher shows most people do judge a drink by its container – Marketing in a Lean Company – The Psychology of Too Much Choice – Be Careful What You Measure

Posted in Creativity, Customer focus, Management, Psychology, Science | Tagged , | 4 Comments