Tag Archives: organization as a system

Ritz Carlton and Home Depot

Don MacAskill writes of his great service from Ritz-Carlton and horrible service from Home Depot. Neither result is surprising, see related posts below. On the Ritz:

The next day, Ritz employees were still greeting us in the halls by our name and wishing us “Happy Anniversary”. The bottom line: We felt special. We felt pampered. We felt like the Ladies and Gentlemen of the Ritz-Carlton knew us personally and really cared about making sure we were happy. They’ve earned a customer for life.

Ritz-Carlton’s motto [the broken link was removed, sadly while they strive to be ladies and gentlemen Ritz-Carlton hasn’t learned basic web usability practices such as not breaking web links] is “We are ladies and gentlemen serving ladies and gentlemen.” And they actually turn those words into reality. They are not platitudes with no action. The system is guided toward achieving that vision.

Worst. Service. Ever: Home Depot & HOMExperts [the broken link was removed] (which includes videos of NBC investigation of customer service problems [the broken link was removed]):

As the CEO of a company that strives to provide top-notch customer service, this has been incredible to watch. At no time during the process, other than the design and purchasing phase, have we felt taken care of, or even like our satisfaction was even a consideration. I wish I could say that the experience has been highly educational, like my visit to the Ritz-Carlton, but I have to imagine that any human being would realize that this is ludicrously bad customer service. The two companies involved, The Home Depot and their contractors, HOMExperts, must have some serious problems internally.

Related: Customer Focus at the Ritz – Effective Leadership Strategies are Driven by Total Quality Management (TQM) Principles [the broken link was removed] – 1999 Ritz Baldrige Application Summary [the broken link was removed] – Not Lean RetailingMore on Obscene CEO Pay

What is Wrong with MBA’s

Two interesting posts from Compound Thinking: What is Management? [the broken link was removed – this is one of many examples of a good blog’s domain lapsing and being bought by someone to promote unrelated items.]:

Management is helping others become great.

Well said. As Deming would say management’s responsibility is to work on improving the system (to allow everyone in the system to do great work). This encompasses a wide variety of things, including:

  • creating sensible hiring processes
  • designing systems that allow people to do great work and take pride in what they do
  • providing a system of education and training

What’s wrong with MBAs? [the broken link was removed]:

MBA graduates generally aren’t the kind of people dedicated to helping other people achieve greatness.

Instead, they want to achieve greatness on their own — which can be a worthy goal. It’s just a terrible goal for a manager. Good managers are relentlessly focused on helping the people they work for perform at their best.

There certainly is something about MBA graduates that they often focus on measuring how important they are and how much they should be paid. I believe his statement that “managers should be dedicated to helping others achieve greatness.” This can run counter to performance appraisals schemes where people have to claim responsibility for successes in order to get more cash.

It is hard enough to create and sustain great management systems without adding more challenges to achieving success. When the management system results in having credit for each success fought over (to allocate credit to whoever convinces others they deserve the credit) it is much harder.

Related: Joel’s MBADeming’s 14 obligations of managementposts about respect for peopleSeven Deadly Diseases

Righter Performance Appraisal

Speaking of “doing the wrong things righter” Microsoft has eliminated forced rankings in performance appraisal: to do performance appraisals righter.

Microsoft exec puts her stamp on human resources:

The forced curve was company policy. And it climbed up a list of employee gripes that grew as Microsoft’s stock, which accounts for much of the company’s compensation, languished.

In May, after barely a year as Microsoft’s human-resources chief, Lisa Brummel swept away “artifacts of the past,” starting with the widely disliked forced curve.

Good (see mini-Microsoft and our previous related post: Performance Without Appraisal), but the rest of the artifacts of the present should also be swept away.

Related: Failed Practice: Forced RankingNew Rules for Management? No!Performance Appraisal ProblemsDeming on Performance AppraisalsProblems Caused by Performance Appraisal

“The performance-management system tells you what it is in this company that we value and reward,” said Herman Aguinis, a professor of management at the University of Colorado at Denver Business School, and author of a recent book on the topic. “If you’re changing the things that you value and reward, people are going to change their behaviors accordingly, so it is a very powerful tool to change a company’s culture.”

True, so tell your people you value them for how there performance evaluation looks each year (not for them but the disembodied evaluation)? This is similar to Seth Godin’s post where he talks about hiring people based on good interviewing skills versus what is actually needed to do the job. This in not to say performance need not be managed, managers should be managing the people that work for them and the systems within the organization. The performance appraisal is just the wrong method.

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Excessive CEO Pay

Overpaid CEOs and Underpaid Managers: Fairness and Executive Compensation by James B. Wade, Charles A. O’Reilly, III and Timothy G. Pollock:

We also find evidence suggesting that CEOs serve as a key referent for employees in determining whether their own situation is “fair,” and this influences their reactions to their own compensation. More specifically, we find that when lower-level managers are underpaid relative to the CEO, that is, underpaid more than the CEO or overpaid less, they are more likely to leave the organization.

Essentially if the CEO is extremely overpaid, even if other executives and managers are overpaid (compared to those outside the company) the others feel they are not being treated fairly and turnover increases. Their data is from the 1980’s and they argue (sensibly to me) that the effects may be larger now. We have all seen CEO pay become much more excessive in the last few decades. That fact, convinced Drucker that the issue of unfair CEO pay demanded very strong denunciation from him over the last decade of his life.

Related: Excessive Executive PayMore on Obscene CEO PayWarren Buffett’s Shareholder LetterManagement Guru Peter Drucker 1909-2005Trust: Respect for PeopleDrucker Opinion Essays from the WSJToyota’s CEO ethical pay:

In a reflection of Toyota’s team-oriented approach, its executive pay is paltry by U.S. standards. Analyst Ron Tadross at Banc of America Securities estimates the total annual compensation of Toyota’s CEO at under $1 million – about as much as a vice president at GM or Ford Motor Co. makes in a good year.

CEO’s that take such unethical large pay today are the robber barons of today and will deserve the judgement of history for the actions they take (I would imagine they are perfectly happy to take the money now and worry about opinions later). And those that approve such pay also deserve sharp criticism.

Incentive Programs are Ineffective

Reward and Incentive Programs are Ineffective — Even Harmful by Peter Scholtes

The greatest management conceit is that we can “motivate” people. We can’t. Motivation is there, inside people. Our people were motivated when we hired them and everyday, when they come to work, they arrive with the intention of doing a good job. Managers cannot motivate. They can, however, de-motivate. Herzberg established this over 30 years ago (Herzberg, Frederick “One More Time: How Do You Motivate Employees?” Harvard Business Review, September-October 1987, pp. 109-120. This is a reprint with commentary, of an earlier classic paper.)

The greatest managerial cynicism is that workers are withholding a certain amount of effort that must be bribed from them by means of various incentives, rewards, contests, or merit pay programs.

Related: Stop Demotivating EmployeesPerformance Without Appraisalblog posts on respect for peopleEliminate SlogansThe Leader’s HandbookTheory X management

Thoughts on Hospital Management by Deming

Dr. W. Edwards Deming, 1951

The latest newsletter from the W. Edwards Deming Institute [new link since the old link was broken] includes the photo of Dr. Deming from 1951 and: Some notes on management in a hospital by W. Edwards Deming, Ph.D.:

Fifteen hours elapse between dinner and breakfast. I was hungry in the middle of the night, first night. Fortunately had candy bars on hand. I have learned how to acquire and store up food like a squirrel if I get hungry during the night.

Dr. Deming had a sense of humor (the smile in the picture is quite different from the photos I normally see).

A physician cannot change the system. A head nurse cannot change the system. Meanwhile, who would know? To work harder will not solve the problem. The nurses couldn’t work any harder.

I will attend the W. Edwards Deming Institute Fall Conference in Washington DC, October 14th and 15th – send me a note if you plan on attending.

Related: PBS Documentary: How Hospitals Heal ThemselvesDestroyed by Best Effortsblog posts on Deming’s management ideas

Distort the System

From our post: Targets Distorting the System, Dr. Brian Joiner:

spoke of 3 ways to improve the figures: distort the data, distort the system and improve the system. Improving the system is the most difficult.

Another example of this in practice: Recount helps one university rise in the rankings [the broken link was removed]:

Behnke, who says he’s no fan of rankings, said he recently spoke to a provost at another institution who was capping class sizes at 19 to boost the “Classes Under 20” number.

I am sure “classes under 20” is a proxy for an intimate learning environment and interaction with knowledgeable professors that can teach well. You can’t directly measure the benefit of interaction with a professor in a small group on learning to create data to be used in ranking schools (Deming on unknown and unknowable figures). So classes with under 20 students and % of faculty with PhDs… are used as proxies for this idea.

If the proxy is the focus (as in school rankings) then distorting the system to create better looking data is a likely result. The purpose behind the action has great significance. If an institution desired to create a better learning environment and they used say a cause and effect diagram to find a group of problems and then determined one appropriate improvement step was to reduce class size (and perhaps another was to reduce the importance of tests and perhaps another was to provide professors training on effective teaching strategies) that a sensible path to improving the system.

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Why I hate programming competitions [the broken link was removed] by Mike Vanier

Most aspects of Deming’s thinking seemed natural to me from the start. Some ideas have taken longer (it took me awhile to be won over to the harm caused by performance appraisals, for example). Competition is another area that I still struggle with. I have been moved greatly by my experience and the thoughts of people like Alfie Kohn (No Contest: The Case Against Competition). But I still hold more promise for some aspects of competition and I hold less concern than some about other aspects of competition. Still I agree that there is a good deal to learn about the dangers of competition which often creates havoc within a system.

As someone who loves programming and cares very deeply about teaching programming to undergraduates, I would like to express my opinions on why programming competitions are (for the most part) a bad thing, and on what I’d rather see in place of them that might serve the same end, but would more accurately reflect the bigger picture of what it means to be a good programmer.

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Another Quota Failure Example

Innocent People Placed On ‘Watch List’ To Meet Quota

You could be on a secret government database or watch list for simply taking a picture on an airplane. Some federal air marshals say they’re reporting your actions to meet a quota, even though some top officials deny it.

The air marshals, whose identities are being concealed, told 7NEWS that they’re required to submit at least one report a month. If they don’t, there’s no raise, no bonus, no awards and no special assignments.

“Innocent passengers are being entered into an international intelligence database as suspicious persons, acting in a suspicious manner on an aircraft … and they did nothing wrong,” said one federal air marshal.

If this is accurate it is another example of the problems caused by using quotas. Read some excellent thoughts on management problems caused by quotas – from Jim McIngvale [the broken link was removed], CEO Gallery Furniture and author of Always Think Big.

However, as I was to learn from Dr Deming, this was judging performance using arbitrary goals, which fostered short-term thinking – the only thing they cared about was: Did I make my quota this week? Misguided focus. The focus was not at all on the customer. The focus was: How much money can I make off this customer?

It created a lot of internal conflict. What type of internal conflict? Well, the salespeople hated having new salespeople hired on the floor, because they felt like it would cut into their commission…

Also, judging performance using arbitrary goals fostered a giant amount of fudging of the figures.

The risks to your business of relying on quotas are substantial. Be careful.

CEO Flight Attendant

Street Smarts: Learning From JetBlue by Norm Brodsky.

The Jet Blue CEO works (once a month he estimates) as a flight attendant. He interacts directly with customers in real world situations (not just talking to travel managers in his office). This getting out and seeing work in action is exposed a great deal, including a lean management concept, Genchi Genbutsu – to go to see the problem in situ (not just reading a report about it).

he’s shaping the company culture. Employees see him working the crowd, going out of his way to help a customer, and they do the same. They hear him talking about the plans to introduce new services, and they spread the word.

The value of such action is related to how it is done. Executives that really just want to check off a box so they can get back to their “real work” add little value and probably do more harm than good. Continue reading