Tag Archives: long term thinking

Creating a Quality Culture

This month Paul Borawski (CEO of ASQ) has asked the ASQ Influential Voices to share their thoughts on the Feelings and Quality Culture.

I don’t think creating a culture of continual management improvement is complex but it takes more commitment than most organizations seem to have. To build a culture that supports customer focused continuous improvement a management system needs to reinforce consistent behavior over the long term.

There is far too much saying certain things (customers are valued, people are our most important assets, etc.) but not backing those claims up with management systems that would be needed to operationalize those beliefs. Failing to do this just results in surface changes that have no depth or commitment and will shift with the winds (no culture change).

It is very difficult to create a culture that supports customer focused continuous improvement that doesn’t understand the failings of: extrinsic motivation and arbitrary numerical goals.

An understanding of variation and how to properly use data to aid improvement is also critical (otherwise huge amount of waste are generated on all sorts of fruitless efforts to explain common cause variation leaving far to little time to actually for on quality). An appreciation of the long term is necessary, which means reducing time spent on trivially urgent matters so focus can be given to important but not urgent matters.

And a respect for people is needed: a real respect, not just claims – which nearly every organization makes. The huge egos of most USA senior executives result in them taking huge amounts from the company to such an extent that they are inherently dis-respectful. The hero culture they profess with their pay package makes it extremely difficult for anyone to take them seriously when they claim to care about a culture that values the stakeholders of the organization.

Continue reading →

Moving Beyond Product Quality

This month Paul Borawski (CEO of ASQ) has asked the ASQ Influential Voices to share their thoughts on moving beyond product quality.

The opening paragraph of the Quality Council’s perspective is, “For some organizations, ‘quality’ remains a set of tools and techniques associated almost exclusively with quality control. For others, quality has evolved into a critical partner, closely linked with business model development and the enterprise-wide execution of long-term strategy to achieve results.

The way to move beyond just the set-of-tools mindset is very similar to the March topic on selling quality improvement.

What is needed to move beyond quality tools into a new management system is to make changes to the system that allow for that management system to be continually improved. Using the tools helps improve product quality a great deal. Much more can be done (both for product quality and overall effectiveness) if we don’t limit the use of modern improvement efforts to the manufacturing line.

At first it is often difficult to get managers and executives to accept the kind of change to their work that they will direct others to make. But once the process of improving the management system gets started, it takes a life of its own and is a very strong force to move beyond product quality.

Here are some previous posts on methods and strategies to move forward the organization into adopting a customer focused systemic effort to continuously improve every aspect of the organization – including the management system:

Long Term Thinking with Respect for People

Toyota nearly went bankrupt near 1950 and had to lay off a third of their employees. A huge focus of the Toyota Production System as envisioned by Taiichi Ohno was to secure the long term success of the company. The priority of doing so is easier to see when you respect people and are in danger of witnessing the destruction of their careers.

photo of John Hunter with a walking stick

I can’t find the quote (maybe Jon Miller, or someone else, can provide one), but I recall one along the lines of the first priority of management is providing long term viability of the company (my sense is this is first due to the respect of the workers and also for all the other stakeholders). The respect for people principle requires executive put the long term success of employees at the top of their thinking when making decisions for the company. I don’t believe it is a ranked list I believe there are several things right at the top that can’t be compromised (respect for people, safety of society, support for customers…).

This means innovating (Toyota Management System, Toyota Prius, Toyota Robots, Lexus brand, etc.) and seeking growth and profit with long term safety that does not risk the failure of the company. And it means planning for the worst case and making sure survivability (without layoffs etc.) is nearly assured. Only when that requirement is met are risks allowed. You do not leverage your company to put it at risk of failure in dire economic conditions even if that would allow you to be more profitable by various measures today. And you certainly don’t leverage just to take out big paychecks for a few short term thinkers.

The economic situation today is extremely uncertain. The whole eurozone financial situation is very questionable. The government debt burden in the USA and Japan is far too high (and of course Europe). China is still far from being a strong economy (they are huge, fast growing and powerful but it is still fairly fragile and risky).

The failures in the current financial system have not been addressed. Band-aids were applied to provide welfare to the largest 30 financial institutions in the form of hundreds of billions or trillions in aid. The system was left largely untouched. It is hard to imagine a more textbook example of failing to fix the causes and just treating the symptoms. This leaves a huge financial risk poised to cause havoc.

Continue reading →

Manufacturing Skills Gap or Management Skills Gap?

I stumble across articles discussing the problem of manufacturers having difficulty finding workers with the skills they need (in the USA largely, but elsewhere too) somewhat regularly. While it is true that companies have this problem, I think looking at the problem in that way might not be the most insightful view. Is the problem just that potential workers don’t having the right skills or the result of a long term management skills gap?

To me, the current manufacturing skills gap results directly from short term thinking and disrespect for workers practiced by those with management skills shortages over the last few decades. Those leading the manufacturing firms have shown they will flee the USA with the latest change in the wind, chasing short term bonuses and faulty spreadsheet thinking. Expecting people to spend lots of time and money to develop skills that would be valuable for the long term at manufacturing firms given this management skills shortage feels like putting the blame in the wrong place to me.

Why should workers tie their futures to short term thinking managers practicing disrespect for people? Especially when those managers seem to just find ways to blame everyone else for their problems. As once again they do in blaming potential workers for their hiring problem. The actions taken based on the collective management skill shortage in the manufacturing industry over the last few decades has contributed greatly to the current state.

If managers had all been managing like Toyota managers for the last 30 years I don’t think the manufacturing skill gap would be significant. The management skill gap is more important than the manufacturing skill gap in my opinion. To some extent the manufacturing skill gap could still exist, market are in a constant state of flux, so gaps appear. But if their wasn’t such a large management skill gap it would be a minor issue, I believe.

That still leaves companies today having to deal with the current marketplace to try and find skilled workers. But I think instead of seeing the problem as solely a supplier issue (our suppliers can’t provide us what we need) manufacturing firms would be better served to look at their past, and current, management skills gap and fix that problem. They have control over that problem. And fixing that will provide a much more solid long term management base to cope and prosper in the marketplace.

Another management issue may well be the hiring process itself. As I have written about many times, the recruitment process is highly inefficient and ineffective. When you see workers as long term partners the exact skills they have today are much less significant than their ability to meet the organizations needs over the long term. In general, information technology recruiting has the worst case of focusing on silly skills that are really not important to hiring the right people, but this also can affect manufacturing hiring.

Practical Ways to Respect People

What matters is not your stated respect for people but your revealed respect for people. Here are some ideas that I collected on how to practice respect for people.

Don’t waste people’s time: have meetings only when necessary and provide agendas in advance. Use email effectively instead of presenting material in meetings that can better be presented in email. Don’t have complex benefit manuals, aimed at making lawyers happy, that employees are expected to use.
Do what you say you will.
Provide bad news early (don’t hope it will get fixed somehow so you don’t have to address it, let people know what is going on and let them help).
Pay people fairly – I would venture to say most senior executive pay today is inherently disrespectful, If I am wrong about the “most” part, certainly a huge amount executive pay is inherently disrespectful.
Put the long term success of all stakeholders as the focus (don’t risk people’s jobs for short term bonuses, don’t use large amounts of leverage risking the future of the company…). Respect all stakeholders and provide them confidence their long term success is important. Companies that find themselves laying off workers due to management’s failure to succeed over the long term are not being respectful to those workers. That failure is most obvious today, but the important improvement is not in handling the layoff today, it is in the behavior for years before that did not build a system that was successful in the long term.
Tell people what they can do to improve. It is respectful to help people improve. Not mentioning weaknesses that should be worked on is treating a person like a child that needs to be shielded from any hint of criticism.
Don’t expect a few people to do far more than their fair share of work because management allows poor performance to continue un-addressed.

Continue reading →

Short Term Investing Focus

Buffett’s New CEO Shows Analysts, Hedge-Fund Managers to Door

Buffett’s Berkshire Hathaway Inc. completed the buyout yesterday after winning the approval of Burlington Northern investors. The deal, valued at $100 a share, allows Rose to hand out returns of nearly 300 percent, plus dividends, to investors who bought stock the day he was named CEO in 2000. The problem, he said, is that shareholders with that length of commitment are dwindling in number and influence.

“When I started as CEO 10 years ago, the typical investor had a time frame of three to five to seven years,” Rose said in an interview. “Year-by-year, that’s gotten shorter.”

The increased focus on short-term results, fueled by real- time media and quarterly analyst calls, can be a distraction for a railroad executive who needs to buy locomotives that run for 20 years and put down tracks that last for 40, Rose said. Burlington Northern said last month it would commit $2.4 billion this year to capital projects, including track, signal systems and locomotives, about $240 million less than in 2009.

“The money I spend this year really won’t pay off for three, four, five or seven years down the road,” said Rose, 50. “There’s the advent of the hedge fund which has changed the time horizon of what satisfies the institutional investor.”
…
“The speed of the news today I think has harmed, quite frankly, investors looking at long-term assets,” Rose told reporters in a news conference this week. A long-term perspective is “one thing that our country has kind of lost sight of, not just for the railroad equity investor but for a lot of investors.”

Decades ago Dr. Deming said short term focus was one of the seven deadly diseases of western management. Unfortunately we have made very little progress on the deadly diseases. The failed, health care system with it’s focus on a few special interests fighting to keep the broken system that does great harm to society but benefits the special interests is another a disease that has definitely gotten much worse.

Worker Retention at Zappos

Tony Hsieh, chief executive of Zappos, spoke at a recent y-combinator event (two great organizations we have mentioned before).

Facebook and Zappos’s Different Views on Worker Retention

“We actually want our employees stay with the company for a long time, for 10 years, maybe their entire life.”
…
“We now provide mentorship and training so employees can join at the entry level and, over a period of five to seven years, have the opportunity and training to become senior leaders in the company,” he said. “Constant growth is what will keep them in the company for a very long time.”
…
Hsieh said he wants Zappos to have a higher purpose than just driving profits and that if employees buy into it, it is easier to have great customer service and for employees to want to stay at the company. He’s outlined that in core values that the company uses to guide itself.

“For your employees, if you can inspire them through your vision, that’s not just about profits or being number one in the market,” Hsieh said. “I like to say the best businesses are the ones that figure out how to combine profits, passion and purpose and the vision and culture to do that.”

Great stuff. I must admit I would not find spending $700 million on an internet shoe and apparel retailer was a great idea for Amazon if it were not Zappos. I am happy to own a small portion of Zappos with such inspired leadership. The contrast in the respect for people Hsieh shows and so many other unethical CEO’s is amazing and inspiring. We need more such leadership examples to follow.

Dr. Deming Webcast on the 5 Deadly Diseases

The W. Edwards Deming Institute has posted Dr. Deming’s 1984 video on the 5 deadly diseases of western management.

Lack of constancy of purpose
Emphasis on short term profits – “creative” accounting, focus on quarterly profits
Annual Performance Appraisals – management by objective, management by fear
Mobility of management – [see Toyota for a great example of a company that operates on different principles – where the leadership has been with Toyota for decades]
Running a company on visible figures alone – many important factors are “unknown and unknowable.”

Dr. Deming added 2 diseases to reach his famous 7 deadly diseases: excessive medical care costs and excessive legal damage awards swelled by lawyers working on contingency fees.

Personally I believe all 7 of those diseases are still prevalent and causing damage. I do think some progress has been made on longer term thinking but far too many organizations still are extremely short term focused. And I would add two new deadly diseases of management: excessive executive compensation and an outdated intellectual property system.

Zappos and Amazon Sitting in a Tree…

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 →

Respect for People – Understanding Psychology

Process improvement tools offer great resources to improve results. Dr. Deming included understanding psychology as one of the 4 areas of his management system. He understood organizations where not machines but systems made up of people. Therefore management needs to reflect that reality. -Lee Fried discusses these ideas in It is All About the People:

We may organize and teach around the process, but it is the people that we really need to change if we want to show long-term sustainable improvement. This is exactly why every organization that treats Lean as a process improvement methodology or a set of tools fails in their efforts.
…
I know now that in the early stages of Lean transformation improvement should not be measured by project charts or number of improvement events. The foundational work of changing the way people think and behave needs to be done first, done correctly and done at the rate it can be absorbed by those that are doing the work in the first place.

I see building improvement capacity of the organization, which largely means building the capacity of the people, as an extremely important focus of improvement efforts. It is, at times, important to slow down the pace of change to ensure that people can adopt and incorporate the new concepts fully. If not, the improvements tend to only take effect on the surface.

Improvements in results are important but it is also critical to have management improvement concepts adopted as the natural way of doing business. And reaching that point most likely requires a focus on making that happen as well as improving processes. This split focus may seem to dilute effort but it is the most effective long term strategy (the time invested today in building capacity will make the management changes much more likely to sustain over the long term and will improve results over the long term).