Tag Archives: leadership

Revolutionary Management Improvement May Be Needed But Most Management Change is Evolutionary

This month the ASQ Influential Bloggers were asked to respond to the question – will the future of quality be evolutionary or revolutionary?

I think it has been and will continue to be both.

Revolutionary change is powerful but very difficult for entrenched people and organizations to actually pull off. It is much easy to dream about doing so.

Often even revolutionary ideas are adopted in a more evolutionary way: partial adoption of some practices based on the insight provided by the revolutionary idea. I think this is where the biggest impact of W. Edwards Deming’s ideas have been. I see him as the most revolutionary and worthwhile management thinker we have had. But even so, few organizations adopted the revolutionary ideas. Most organizations nibbled on the edges and still have a long way to go to finally get to a management system he was prompting 30,40 or more years ago.

A few organizations really did some revolutionary things based on Deming’s ideas, for example: Toyota. Toyota had some revolutionary moves and adopted many revolutionary ideas brought forward by numerous people including Taichii Ohno. But even so the largest impact has been all those that have followed after Toyota with the lean manufacturing strategies.

And most other companies have taken evolutionary steps from old management paradigms to adopt some new thinking when trying out lean thinking. And frankly most of those efforts are so misguided or incredible small they barely qualify. But for those that successfully improved their management system they were mainly evolutionary.

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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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Toyota Posts Record Profit: Splits $15 million in Pay and Bonus for top 21 Executives

After posting record profits of $17.9 billion Toyota proposes to increase the pay and bonus for the top 21 executives to $14.9 million. That is not as you might expect just the increase in the bonus to the CEO. That is the entire pay and bonus for the top 21 executives. That places all 21 together below the top 50 CEO paydays in the USA.

Toyota’s net income for the year surged 89.5%. While the profits are partially due to good management at Toyota the decline in value of the yen also greatly aided results.

Management Pockets A 19% Raise As Toyota Racks Up Records Profits

Toyota proposed 1.52 billion yen ($14.9 million) in combined compensation and bonuses to 21 directors, including President Akio Toyoda, in a notice to shareholders Tuesday. The Toyota City, Japan-based company paid 1.28 billion yen the previous fiscal year.

By comparison, total pay for union workers increased 8.2 percent [this was linked to an article as a source but the link was broken, so I removed it] on average from last fiscal year. The carmaker granted the union’s request for workers’ average bonus to rise to 2.44 million yen, the equivalent of 6.8 months of salary.

The company forecasts a 2% slip in net profit to $17.5 billion for 2015.

Toyota continues to generate cash flow extremely well and has over $20 billion in cash at the end of their 2014 FY. They are also increasing the dividend to stockholders and buying back more stock.

Less than a handful of USA CEOs that is took more from their companies treasuries than all 21 off the Toyota leaders take together led their company to greater earnings than Toyota (only a few companies earned more: Apple, Google, Exxon…). The thievery practiced by senior executives in the USA is immoral and incredibly disrespectful to the other workers at the company and the stockholders.

ExxonMobil did earn more and their CEO took $28.1 million. I think Chevron and Wells Fargo may have earned more than Toyota with a CEOs taking $20.2 and $19.3 million respectively.

Alan Mulally, Ford CEO, took $23.2 million while the company earned $7 billion. If you can ignore his massive and disrespectful taking what he doesn’t deserve he has been an acceptable CEO in other ways.

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Bad Weather is Part of the Transportation System

The job of managers is to create a robust system that delivers value to customers. A system that fails constantly (fails during the continual variation the system faces) is a failed system. Bad weather is part of the variation airlines face. Any management system has to cope with the variation that it faces. The management system must be designed and managed so that the organization successfully delivers value to customers under the conditions the organization will face.

The air travel system in the USA is a disgrace for so many reasons it is hard to catalogue them all. One, of many, is how fragile the system is; causing massive (nation-wide) customer harm multiple times a year due to weather. Weather is sometimes bad. If your organization fails when there is bad weather, fix that problem (make your system robust in the face of bad weather), because you are not going to be able to fix the weather to let your un-robust system be effective as it is.

Instead airlines only response seems to be to get their friends in government to approve anti-competitive mergers to eliminate competition and allow failed organizations to become even larger and harm even more people. Airlines should design robust systems that work in the environment they will face (which they don’t do now).

Their planes don’t fall out the sky when they face bad weather. The engineers behind designing planes have made them very robust. Pilots have been trained to handle variation they will face. And yes, the system has been designed with adjustments to avoid flying into conditions that are risky.

The safety of the air transportation system is very good. The management of airlines in most every other aspect is pitiful, and has been for decades.

The managers running the airlines have done amazingly bad job of creating robust organizations capable of delivering given the variation they know they will face (weather, mechanical problems, IT problems, etc.) for decades. Poor management is the cause of these failures that result in harm to customers. Weather is not the cause. Poor management, over decades, resulting in incredible fragile systems that constantly punish customers is the responsibility of the airlines. And they have done an incredibly bad job at creating a robust system to deliver value to customers.

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Taking Risks Based on Evidence

My opinion has long been that football teams are too scared to take an action that is smart but opens the coach to criticism. So instead of attempting to make it on 4th down (if you don’t understand American football, just skip this post) they punt because that is the decision that is accepted as reasonable.

So instead of doing what is wise they do what avoids criticism. Fear drives them to take the less advantageous action. Now I have never looked hard at the numbers, but my impression is that it is well worth the risk to go for it on 4th down often. In a quick search I don’t see a paper by a Harvard professor (this article refers to it also – Fourth down: To punt or to go?) on going for it on 4th down but I found on by a University of California, Berkeley economist (David Romer wrote called “Do Firms Maximize? Evidence from Professional Football.”).

On the 1,604 fourth downs in the sample for which the analysis implies that teams are on average better off kicking, they went for it only nine times. But on the 1,068 fourth downs for which the analysis implies that teams are on average better off going for it, they kicked 959 times.

My guess is that the advantages to going for it on 4th down are greater for high school than college which is greater than the advantage for the pros (but I may be wrong). My guess is this difference is greater the more yardage is needed. Basically my feeling is the variation in high school is very high in high school and decreases with greater skill, experience and preparation. Also the kicking ability (punting and field goals) impacts the choices of going for it on 4th down and that dramatically increases in college. So if I am correct, I think pro coaches should be more aggressive on 4th down, but likely less aggressive than high school coaches should be.

But in any event the data should be explored and strategies should be tested.

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Managers Are Not Non-Leaders: Managers Need to Practice Things We Classify as Leadership Traits

Saying “Managers care about efficiency and leaders care about effectiveness” is like saying “Doctors care about theory and nurses care about patients.”

Managers that don’t care about effectiveness are lousy managers.
Leaders that don’t care about the gemba are lousy leaders.
Doctors that don’t care about patients are lousy doctors.
Nurses that don’t care about theory are lousy nurses.

Your role in the organization (and for the particular situation in question) and training and the situation will impact how you contribute. But the attitude that leaders are visionaries that think big thoughts, make decisions then tell everyone what to do (act as the brain for the organization) is outdated. Every list of what traits are for leaders that then contrasts them with managers that I have seen shows leadership traits managers need.

Seeking to separate leadership and management is a bad idea. If you want to have a few leadership traits that you want to focus on at various points (creating engagement, communicating a vision, building consensus, setting organizational direction) that is fine. But those things are traits managers need; they are not traits reserved for some separate leadership cadre.

And disconnected leaders that don’t understand the organization, the organizations customers etc. are not going to lead well (normally the contrast lists have the managers doing all the hands on stuff, at the gemba, with customers etc.). Nurses may not have as complete an understanding of the theories behind medical treatment decisions but they need to know a great deal of theory to do their jobs well. Everyone contributes and has different roles to play but I don’t see value in the contrast of leaders and managers mentality.

From what I have seen mainly the manager v. leader comparisons seem to be about belittling managers and elevating leaders; but leaders are this vague concept that isn’t well defined. Who are these leaders? Are they only senior executives? They can’t be managers because you are contrasting them with managers – by the contrasting model used they can’t be leaders and managers.

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Leadership and Management

I don’t think the attempts to separate leadership and management are useful. I read plenty of things that are variations on Peter Drucker’s:

“Management is doing things right; leadership is doing the right things.”

A manager that is not concerned about doing the right things is a lousy manager. And a leader that doesn’t care about doing things right is a lousy leader.

Another theme of this contrasting type quote says some version of:

“Managers care about efficiency and leaders care about effectiveness”

A manager who doesn’t strive to be effective is also a lousy manager. It is also odd to suppose the detached leader (the type that lets the manager deal with the mundane while they dream), one that doesn’t concern themselves with customer focus, value chains, going to the gemba really has a clue about effectiveness. The idea seems mainly to view a manager is a cog looking at some tiny process and making it efficient without understanding the organization as a system or value chains or customer focus.

I think, the main problem is all of the attempts to contrast leaders and managers. Much of the time people are saying managers don’t do things they certainly should be doing.

The desire to express how leadership traits can be used by those without organizational authority are useful. Discussion of how certain traits can be seen as within the domain of leadership I suppose may be useful (it can help our minds see how various traits and practices combine to help get results – and we can categorize these under “leadership”).

Leaders that are primarily “big thinkers” and motivators without a clue about how to actually do the things they advocate (the model of “managers” deal with the implementation with blinders to the system while “leaders” are “above the fray”) is not useful in my opinion. It does note a somewhat common practice (in organizations today) but not one that is wise. Separating leadership from the gemba is not wise. Separating leadership from a deep understanding of customers is not wise. Separating leadership from how the organization actually works is not wise.

Plenty of others seem to disagree with my opinion though, there are many articles, blog posts, podcasts, talks… on separating leadership from management.

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Executive Leadership

Senior executives must lead management improvement efforts. When senior executives only give lip service to management efforts the result is normally the same: little happens.

When Dr. Deming was working with companies after the 1980’s NBC white paper, If Japan Can Why Can’t We, he wouldn’t work with companies if the CEO wasn’t attending the meetings and learning how to manage the organization better. Dr. Deming had seen far too many CEOs want improvement but wanted to delegate the effort of getting there. Dr. Deming saw when senior executives delegated improving the management system it didn’t work.

There are a number of problems with senior executives not taking improvement seriously. First, and most common, they don’t really believe it and have no interest in improving practices – they just want to magically get better results without improving how things are done.

Second many senior executives don’t understand what management improvement is about. They think it is something those other people do on the factor floor or in the call center or somewhere. The most important changes will be in the c-suite for organizations that make substantial improvements. But when executives are out of touch (as so many are) in both management practice and how their organization actually works (at the gemba) then improvement efforts are extremely difficult.

If those senior executives are taking part in the improving the management system they will learn and then will be able to help improve the management system. If they are not engaged in actively working PDSA (on their workload) learning about variation, looking at their organization as a system, making changes to the organization given an understanding of respect for people the potential gains are severely limited.

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Quality Processes in Unexpected Places

This month Paul Borawski asked ASQ’s Influential Voices to explore the use of quality tools in unexpected places.

The most surprising example of this practice that I recall is the Madison, Wisconsin police department surveying those they arrested to get customer feedback. It is obvious that such “customers” are going to be biased. Still the police department was able to get actionable information by seeking the voice of the customer.

photo of a red berry and leaves

Unrelated photo from Singapore Botanical Garden by John Hunter.

Certain of the police department’s aims are not going to match well with those they arrest (most obviously those arrested wish the police department didn’t arrest them). The police department sought the voice of the customer from all those they interacted with (which included those they arrested, but also included those reporting crimes, victims, relatives of those they arrested etc.).

The aim of the police department is not to arrest people. Doing so is necessary but doing so is most similar in the management context to catching an error to remove that bad result. It is better to improve processes so bad results are avoided. How the police interact with the public can improve the process to help steer people’s actions away from those that will require arrests.

The interaction police officers have with the public is a critical gemba for meeting the police department’s aim. Reducing crime and encouraging a peaceful society is aided by knowing the conditions of that gemba and knowing how attempts to improve are being felt at the gemba.

All customer feedback includes bias and personal preferences and potentially desires that are contrary to the aims for the organization (wanting services for free, for example). Understanding this and how important understanding customer/user feedback on the gemba is, it really shouldn’t be surprising that the police would want that data. But I think it may well be that process thinking, evidence based management and such ideas are still not widely practiced as so the Madison police department’s actions are still surprising to many.

Quality Leadership: The First Step Towards Quality Policing by David Couper and Sabine Lobitz

Our business is policing, our customers are the citizens within our jurisdictions, and our product is police service (everything from crime fighting and conflict management to safety and prevention programs.)

If we are to cure this we must start to pay attention to the new ideas and trends in the workplace mentioned earlier that are helping America’s businesses; a commitment to people, how people are treated — employees as well as citizens, the development of a people-oriented workplace, and leadership can and does make a difference.

If we change the way in which we lead the men and women in our police organizations, we can achieve quality in policing. However, wanting to change and changing are worlds apart. The road to change is littered by good intentions and short-term efforts.

This article, from 1987, illustrates the respect for people principle was alive and being practiced 25 years ago; most organizations need to do a great deal more work on applying practices that show respect for people.

Related: Quality Improvement and Government: Ten Hard Lessons From the Madison Experience by David C. Couper, Chief of Police, City of Madison, Wisconsin – SWAT Raids, Failure to Apply System Thinking in Law EnforcementMeasuring What Matters: Developing Measures of What the Police DoThe Public Sector and W. Edwards DemingDoing More with Less in the Public Sector – A Progress Report from Madison, Wisconsin

The Market Discounts Proven Company Leadership Far Too Quickly

Developing a strong executive leadership culture is not a short term effort. It isn’t based on one person. It almost never deteriorates quickly. Yet markets continually overact to minor blips on the long term success of companies. I think this is mainly due to a failure to appreciate systems and a failure to appreciate variation along with plenty of other contributing factors.

The market’s weakness does provide investment opportunities. Though taking advantages of them is much more difficult than spotting a general weakness. While excellent management almost never becomes pitiful overnight (regardless of how often talking heads would have you believe) business can change very quickly due to rapidly changing market conditions. Avoiding the purchases when the underlying business has sustained a significant blow that excellent management will deal with but which will reduce the value of the enterprise going forward is key to taking advantage of the market’s silly overreaction to bad news (or even calling things “bad news” that are not actually bad just not as awesome as some were hoping for).

My positive opinion of Toyota’s management has continued for a long time. A few years ago an amazing number of people were all excited about the “decline of Toyota” and wrote about how Toyota’s ways had to change. I wrote at the time was this is needless hysteria and if Toyota just focused a bit more on applying the Toyota’s management methods they would be in great shape. The problems were due to Toyota’s mistakes in practicing the Toyota Production System not in a weakness of those practices.

Looking at a chart of Toyota’s stock price from 2007 to today it peaks at about $137 in January 2007 and bottoms at $58 in early 2009 and now is at $96. Toyota’s stock price has been priced richly due to respect for management and consistently strong cash flow. As it fell below $75 there you no longer had to pay a premium for excellent management, but that management was still there. I like getting bargains when I buy stocks. One of the things I have learned I am too focused on bargains and I should be more willing to accept less of a bargain to get great management systems – so I have adjusted, and have improved my results. When I can get a great bargain and great management it is wonderful, though sadly a rare occurrence. Toyota’s price now seems reasonable, but not a huge bargain.

The market continually gets overly excited by either actual problems or perceived problems. I wrote about this happening with Netflix 2 years ago. Netflix made some mistakes and faced some tough business issues. The evidence of sound, sensible, effective management vastly outweighed the evidence for management failure – yet there were hundreds of articles about the pitiful failure of Netflix management.

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