Tag Archives: government

Burning Toast: American Health System Style

Democrats and Republicans have created a health care system in the USA over the last 40 years that “burns toast” at an alarming rate. As the symptoms of their health care system are displayed they call in people to blame for burning toast.

Their participation in the “you burn, I’ll scrape” system is even worse than the normal burning then scraping process. They create a bad system over decades and ignore the burnt toast just telling people to put up with it. And when some burnt toast can’t be ignored any longer they then blame individuals for each piece of burnt toast.

They demand that those they bring before them to blame, scrape off the burnt toast. And they act shocked that the “toaster” burns toast. It is the same “toaster” they designed and maintain at the behest of those benefiting from burnt toast and of course it burns toast (those results are the natural outcome of the system they designed and maintain).

We need to fix the decades old broken toaster that the Democrats and Republicans built and have maintained. Dr. Deming called excessive healthcare costs a deadly disease decades ago yet Democrats and Republicans allowed it to continue harming us year after year and decade after decade.

We don’t need distractions blaming a few individual for what the two parties have created and maintained for decades. We need leaders to address the real issues and stop the distraction that those benefiting from the current system want to continue to see from those in Washington.

You don’t fix the system if all you do is blame individuals for each piece of burnt toast. Fixing blame on each piece of burnt toast is exactly what those that have continued to make sure the system is designed to continually burn toast love to see. It is a good way to make sure the fixes needed to the design of the toaster are not addressed. Both political parties have done well by those they receive payments from to ensure that the current toaster isn’t changed.

For decades the data shows the USA health care system costs are nearly double that of other rich countries with no better results. And we are not comparing to some perfect ideal, those efforts we compare to need much improvement themselves. So how bad much the USA health care system be to cost nearly twice as much as those systems that have plenty of room for improvement themselves?

Decades Later The USA Health Care System is Still a Deadly Disease for Our Economy

Decades ago W. Edwards Deming named 7 deadly diseases of western management. One of those was excessive health care costs. Sadly that deadly disease has become much worse in the last several decades.

Americans pay 300% more for this prostate cancer drug than much of the rest of the world

Xtandi, a prostate cancer drug co-licenced by Japan’s Astellas Pharma and Medivation Inc. was developed at a U.S. university with grants funded by taxpayer dollars. That gives the federal government the right to revoke the patent if the terms are unreasonable, said the letter, dated Monday.

“We do not think that charging U.S. residents more than anyone else in the world meets the obligation to make the invention available to U.S. residents on reasonable terms,” said the letter, which had Sen. and presidential candidate Bernie Sanders, Sen. Elizabeth Warren and Rep. Elijah Cummings among its signatories.

This specific example also highlights what I classified as a new deadly disease in 2007 – the broken patent and trademark system.

Both of these deadly diseases greatly damage the USA economy and the economic condition of USA citizens. It is disgraceful that the Democratic and Repulbican parties have allowed these deadly diseases to ravage the USA economy for decades.

The drug price situation in the USA is greatly exsaserbated by the corrupt political process. Drug companies give large amounts of cash to those we elect and then those we elect create system that damage the USA economy and provide drug companies huge extra profits inside the USA (those profits then allow the companies to charge other countries even less and still make a great return on their investment). I wrote about this in 2005: Excessive Drug Prices in the USA (and several times since then, Drug Price Crisis [2008] – it is a long term, huge economic problem for the USA).

Health care is extremely expensive everywhere. But in the USA the health care system is twice as costly as other rich countries. This is an enormous burden on the USA economy. Nothing else comes close to being as costly in terms of direct spending. And there a a great deal of other damage done that can’t be seen in just the 100% more the USA spends on health care than other rich countries spend. And the health outcomes are no better for the extra hundres of billions of dollars spent every year for health care in the USA.

The costs of decades of failure are extrodinary. We shouldn’t allow the political parties to continue to fail to sensibly address these problems. Even if we can just get to the point of costing 50% more than other rich countries our economy will be greatly enhanced, but we have not even been able to reduce the health care tax the USA health care system puts on us to just 50% more than other countries. That is a pretty sad state of affairs especially when you consider that other countries are not doing a great job – so we are twice as costly, not as some extremely wonderful amazing system but twice as costly as mediocre comparisons.

Extremely inflatted drug prices in the USA are a significant part of the problem but still only a portion of a system that has been costly the USA economy and citizens hundreds of billions of dollars a year (and untold soffuering in many other ways) for decades. We have to do better.

Out of Touch Executives Damage Companies: Go to the Gemba

When your customer service organization is universally recognized as horrible adding sales requirements to customer service representatives jobs is a really bad practice. Sadly it isn’t at all surprising to learn of management doing just that at our largest companies. Within a system where cash and corruption buys freedom from market forces (see below for more details) such practices can continue.

Such customer hostile practices shouldn’t continue. They shouldn’t be allowed to continue. And even though the company’s cash has bought politically corrupt parties to allow such a system to survive it isn’t even in the selfish interest of the business. They could use the cover provided by bought-and-paid-for-politicians-and-parties to maintain monopolistic pricing (which is wrong ethically and economically but could be seen as in the self interest of a business). But still provide good service (even while you take monopolistic profits allowed with corrupt, though legal, cash payments).

Of course, Adam Smith knew the likely path to corruption of markets made up of people; and he specifically cautioned that a capitalist economic system has to prevent powerful entities efforts to distort markets for individual gain (perfect competition = capitalism, non-competitive markets = what business want, as Adam Smith well knew, but this is precisely not capitalism). Sadly few people taking about the free-market or capitalism understand that their support of cronyist policies are not capitalist (I suppose some people mouthing those words are just preaching false ideas to people known to be idiots, but really most don’t seem to understand capitalism).

Anyway, this class of protected businesses supported by a corrupt political and government (regulators in government) sector is a significant part of the system that allows the customer hostility of those politically connected large businesses to get away with a business model based on customer hostility, but wasn’t really what I meant to write about here.

Comcast executives have to know they are running a company either rated the worst company in the country or close to it year after year. They, along with several others in their industry, as well as the cell phone service providers and too-big-to-fail-banks routinely are the leaders of companies most reviled by customers. Airlines are also up their for treating customer horribly but they are a bit different than the others (political corruption is much less of the reason for their ability to abuse customers for decades than is for the others listed above).

Leaked Comcast employee metrics show what we figured: Sell or perish [Updated]
Training materials explicitly require a “sell” phase, even in support calls.

The company’s choice to transform what is traditionally a non-revenue-generating area—customer service—into a revenue-generating one is playing out with almost hilariously Kafkaesque consequences. It is the nature of large corporations like Comcast to have dozens of layers of management through which leadership instructions and directives are filtered. The bigger the company, the more likely that members of senior leadership (like Tom Karinshak) typically make broad policy and leave specific implementations to lower levels.

Here, what was likely praised in the boardroom as an “innovative” strategy to raise revenue is instead doing much to alienate customers and employees alike. Karinshak’s assurances that he doesn’t want employees to feel pressured to sell in spite of hard evidence that Comcast demands just that are hard to square with the content of the document.

So what is going on here? Most people can easily see this is likely a horrible practice. It is a practice that a well run company theoretically could pull off without harming customers too much. But for a company like Comcast to do this it is obviously going to be horrible for customers (same for all those too-big to fail banks, cell phone service providers and other ISPs and cable TV providers).

Lets just pretend Comcast’s current leadership executives were all replaced with readers of the Curious Cat Management Improvement blog. And lets say that for now you are suppose to focus on improving the policies in place (while thinking about policy changes for later but not making them yet).

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Business 901 Podcast: Two New Deadly Diseases for Business

I continue to record podcasts as I promote my new book – Management Matters: Building Enterprise Capability. In this podcast I discuss the 2 new deadly diseases facing companies. The second part of the Business 901 podcast will be posted soon.

Links to more information on items discussed in the podcast: Dr. Deming’s 7 Deadly Diseases + 2

Executive pay:

I have created a new subreddit for posting links to interesting items about the new deadly diseases for business.

5s at NASA

NASA did some amazing things culminating with landing on Moon. Much of what they did was doing many small things very well. They used 5s, checklists, gemba thinking, usability, simplicity, testing out on a small scale and much more.

Here are a few photos from the Smithsonian Air and Space museum in Washington DC. I also have some nicer NASA 5s photos from the new Annex near Dulles Airport, but, ironically, I can’t find them.

photo of container labeled with many compartments for NASA

These kits were used by NASA astronauts on the Apollo 11 mission to the moon. Obviously NASA had to have everything that might be needed where it was needed (picking up something from the supply closet in building 2 wasn’t an option).

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Better Management in Government

This month Paul Borawski (CEO of ASQ) has asked the ASQ Influential Voices to share their thoughts on quality management in the public sector.

photo of John Hunter with the US Capital in the Background

John Hunter with the US Capital in the background, Washington DC

I have been involved in quality improvement in government at the Office of Secretary of Defense Quality Management Office and the White House Military Office and elsewhere. Transformation and Redesign at the White House Communications Agency by March Laree Jacques provides a nice look at some good efforts. I also was on the board of the Public Sector Network which became the ASQ Government Division. There is lots of great work that has been done.

There are many issues involved, but the biggest is that the leaders in government are normally not interested in having the government perform better. They have political agendas that they are more concerned with, performance just doesn’t matter (or in some cases they even want bad results because their political view is government is bad and therefore anything that makes it look good should be avoided). So they turn the focus of the government to achieving the political aims they have and starve government organizations of talent and money that are not focused exclusively on their agenda.

This doesn’t have to be the case. If politicians cared about the results of their policies, not just the political points related to their agenda it would make sense to support better management strategies. By and large their actions indicate they are not really interested in the results.

Some in government are able to overcome bad leadership. And occasionally political leaders that actual care about results do emerge. In Dr. Deming’s Out of the Crisis he includes (on pages 245-247) an overview, by my father – William Hunter, of the efforts at the City of Madison (which was the first application of Deming’s ideas by government). My father talked to the Mayor (Joe Sensenbrenner) about a project to use management improvement ideas to improve city government performance and the Mayor went along and then became a great advocate.

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Dr. Deming in 1980 on Product Quality in Japan and the USA

I posted an interesting document to the Curious Cat Management Library: it includes Dr. Deming’s comments as part of a discussion organized by the Government Accounting Office in 1980 on Quality in Japan and the United States.

The document provides some interesting thoughts from Dr. Deming and others; Dr. Deming’s statements start on page 52 of the document. For those really interested in management improvement ideas it is a great read. I imagine most managers wouldn’t enjoy it though (it isn’t giving direct advice for today, but I found it very interesting).

Some selected quotes from the document follow. On his work with Japan in 1950:

This movement, I told them, will fail and nothing will happen unless management does their part. Management must know something about statistical techniques and know that if they are good one place, they will work in another. Management must see that they are used throughout the company.

Quality control must take root with simple statistical techniques that management and everyone in the company must learn. By these techniques, people begin to understand the different kinds of variation. Then quality control just grow with statistical theory and further experience. All this learning must be guided by a master. Remarkable results may come quick, but one has no right to expect results in a hurry. The learning period never ends.

The statistical control of quality is not for the timid and the halfhearted. There is no way to learn except to learn it and do it. You can read about swimming, but you might drown if you had to learn it that way!

One of the common themes at that time was Deming’s methods worked because Japanese people and culture were different. That wasn’t why the ideas worked, but it was an idea many people that wanted to keep doing things the old way liked to believe.

There may be a lot of difference, I made the statement on my first visit there that a Japanese man was never too old nor too successful to learn, and to wish to learn; to study and to learn. I know that people here also study and learn. I’ll be eighty next month in October. I study every day and learn every day. So you find studious people everywhere, but I think that you find in Japan the desire to learn, the willingness to learn.

You didn’t come to hear me on this; there are other people here much better qualified than I am to talk. But in Japan, a man works for the company; he doesn’t work to please somebody. He works for the company, he can argue for the company and stick with it when he has an idea because his position is secure. He doesn’t have to please somebody. It is so here in some companies, but only in a few. I think this is an important difference.

At the time the way QC circles worked in Japan was basically employee led kaizen. So companies that tried to copy Japan told workers: now go make things better like the workers we saw in Japan were doing. Well with management not changing (and understanding Deming’s ideas, lean thinking, variation, systems thinking…) and staff not given training to understand how to improve processes it didn’t work very well. We (those reading this blog) may all now understand the advantages one piece flow. I can’t imagine too many people would jump to that idea sitting in their QC circle without having been told about one piece flow (I know I wouldn’t have), and all the supporting knowledge needed to make that concept work.

QC circles can make tremendous contributions. But let me tell you this, Elmer. If it isn’t obvious to the workers that the managers are doing their part, which only they can do, I think that the workers just get fed up with trying in vain to improve their part of the work. Management must do their part: they must learn something about management.

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CEOs Want Health-Care Reform

Decades ago Dr. Deming emphasized the deadly disease of excessive health care costs in the USA. Since then, year after year, the situation has become worse (reaching $2.2 trillion in spending in 2007 – 16.2% of GDP). During that time senior executives has put forth very little serious effort (in comparison to the huge cost) to fix this problem. Finally, in the last few years, more and more senior executives are actively moving to address the ever worsening crisis (including, Howard Schultz, CEO at Starbucks).

They seem to be realizing that hoping the problem will just fix itself is not a great strategy. Finally senior executives are realizing they need to have the government address the systemic failures. Those executives need to keep up their efforts because those seeking to retain the system that doesn’t work, because they personally benefit from it, have been doing a great job of preventing progress for decades. Until a critical mass of senior executives demand change from Washington the chance of improving the relative performance of the USA health system in comparison to other countries is very bleak (we have just been getting more expensive and less effective [relative to other countries] over time).

CEOs Secretly Want Health-Care Reform

Carl T. Camden, CEO of Kelly Services (KELYA). Managing insurance for his vast, geographically dispersed workforce of temporary workers is horrendously expensive, he complains: “My health-care costs total more than my profits.”
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But in private, “CEOs overwhelmingly want out of this business,” says Benjamin Sasse, an Assistant Secretary of Health & Human Services under President George W. Bush who’s now an assistant professor at the University of Texas at Austin. “They just do not want to be seen as more willing to dump [benefits] than their competitors are.” Sasse says many CEOs he has talked with would even pay a new tax if it got them out of the insurance business.

Why Congress Won’t Investigate Wall Street

The famous Pecora Commission of 1933 and 1934 was one of the most successful congressional investigations of all time, an instance when oversight worked exactly as it should. The subject was the massively corrupt investment practices of the 1920s. In the course of its investigation, the Senate Banking Committee, which brought on as its counsel a former New York assistant district attorney named Ferdinand Pecora, heard testimony from the lords of finance that cemented public suspicion of Wall Street. Along the way, the investigations formed the rationale for the Glass-Steagall Act, the Securities Exchange Act, and other financial regulations of the Roosevelt era.
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Over the years, federal agencies have been defunded, their workers have grown dispirited, their managers, drawn in many cases from antiregulatory organizations, have seemed to care far more about industry than the public.
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And while today’s chastened Democrats might be ready to reregulate the banks, they are no more willing to scrutinize the bad ideas of the Clinton years than Republicans are the bad ideas of the Bush years.

“We may now need to be reminded what Wall Street was like before Uncle Sam stationed a policeman at its corner,” Pecora wrote in 1939, “lest, in time to come, some attempt be made to abolish that post.” Well, the time did come. The attempt was made. And we could use that reminder today.

Well said. The incredibly dire current economic results should encourage some thought about choices we have made. The failures of the political leaders (putting their donors interests above the public interest) is something that should be investigated seriously. The economy declined 6.3% in the fourth quarter of last year and 6.1% in the first quarter of 2009. And we have paid several hundred billion to bail out bankers; the same bankers that had congress repeal the regulation that prevented such enormous failures in the past.

It would be nice if we at least learned our lesson, but I don’t think we are remotely close to learning our lesson. There seems to be some tilt away from the most egregious excesses of the last 25 years of financial deregulation. But only minor adjustments around the edges seem to be under consideration at this time.

Community Banks Ask Why They Must Pay for Wall Street Greed

Minnesota Bank Asks Why It Pays for Wall Street Greed

TCF is among more than 8,300 banks and lenders insured by the FDIC facing increased fees and a one-time “emergency” charge designed to raise $27 billion this year for the agency’s depleted coffers.
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Community banks rely more on deposit funding, so they suffer a “much heavier burden” as a result of deposit insurance proportionate to size than peers such as New York-based Citigroup Inc. and Wells Fargo & Co., with its headquarters in San Francisco, Fine said.
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Community lenders “are feeling like they are paying for the incompetence and greed of Wall Street,” Fine said this week in an interview.
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FDIC assessments are set per $100 in deposits and not weighted by bank size. That’s a formula that could be modified to shift the cost burden to the largest banks “that caused this train wreck,” Fine said. TCF never “securitized anything, we never engaged in any of those unscrupulous activities,” said Cooper, 65.

I am not very surprised that politicians provide big favors to those that give them huge amounts of money (former investment banks, farming interests, private plane owners, Fortune 100 companies, owners of oceanfront mansions, private equity speculators…). I am a bit surprised how much money is being lavished on those huge donors now, with the bailouts. Especially with how lacking in even minor consequences those huge gifts to their donors are (normally if the payoffs to supports get too huge there are at least some cover provided by putting in consequences for this “need” to send taxpayer money to their contributors).

The FDIC is a great government program. But allowing huge banks to take enormous risks and then passing on the much of the costs, of a small portion of those risks (FDIC insured deposit accounts), to banks that do not act as irresponsibly as the risk takers is a bad idea. Insurance should have increasing costs based on increasingly risky behavior.
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