Tag Archives: organization as a system

Trust: Respect for People

Respect for People [the broken link was removed*], Toyota.co.jp

Respect for People has always been important to Toyota, and nowhere is this more evident than in the relationship among Toyota associates.

There has been only one exception to this rule throughout Toyota’s entire history. In June 1950, during a postwar period of great hardship in Japan, the company was forced to choose between corporate restructuring or risking complete collapse. Then-President Kiichiro Toyoda battled for months for the sake of his employees, but ever-worsening conditions showed the company to be unsustainable without significant change.

Management then vowed that this would be the first and last time such an event would come to pass at Toyota, and, in a gesture of respect to former employees, Kiichiro resigned from his position as president of the company.

A bit different than laying off tens of thousands of workers and then taking huge bonuses [the broken link was removed]. And in case you don’t know, I think Toyota’s approach is more honorable and what should be aimed for (I wouldn’t say the president always should resign but it should be a significant admission of failure).

Does this mean no workers ever come into conflict with Toyota management? No. But Toyota’s respect for workers is qualitatively different than that of most companies.

* sadly Toyota falls into the same short term thinking and failure to understand usability of internet technology trap that so many other organizations do. Many of those others fail in so many ways failing again isn’t so surprising, it is sad that Toyota can’t even follow basic long term thinking and web usability principles though.

Employee Ownership

H.C. Miller workers to earn ownership [the broken link was removed] by Richard Ryman.

I have always liked the idea of employee ownership. To me this can be a great help in creating a system where employees, owners, customers, suppliers work together. Alone an ESOP does little. But as part of a system of management it is something I think can be beneficial.

Employees of H.C. Miller Co. have learned to look at their company differently. And because they did, on July 31 they will become its owners.

The 120 or so employees of the 118-year-old company will implement an Employee Stock Ownership Plan. An ESOP is a retirement plan in which employees are assigned shares in the company annually. Those shares accumulate in a retirement account.

Employees shouldn’t allow too much of their savings to be tied to the company (see Enron). Of course those ignoring this advice that worked for Microsoft, Walmart… in their early days did quite well. Continue reading

The Customer Knows Best?

The Customer Knows Best? Better Think Again by Anthony W. Ulwick

It’s important to listen to customers – but not follow their words without skepticism. Ask them to design your next product and you’re likely to miss the mark, suggests this Harvard Business Review excerpt.

Excellent point. Some management ideas are pretty easy and straight forward. But many management practices require knowledge and judgment to apply them successfully. Easy solutions may be desired, but, often you must choose between easy and effective (hint, I suggest effective is the better target).

Listening to customers is important but it is not sufficient. W. Edwards Deming made this point emphatically on page 7 of the New Economics:

Does the customer invent new product of service? The customer generates nothing. No customer asked for electric lights… No customer asked for photography… No customer asked for an automobile… No customer asked for an integrated circuit.

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Find the Root Cause Instead of the Person to Blame

When encountering a problem or defect the inclination of many is to find a person to blame. W. Edwards Deming believed that the system was responsible for 93% of the problems and over time he increased that number to at least 97%. Why did he see it that way, while so many others first inclination is to blame someone?

As I see it the issue has to do with what is the effective way to improve. Often if you ask why do we have this problem or defect, people will point to some error by someone. So you can blame that person (there are reasons this is not a very accurate way to view the situation often but even without accepting that premise the blaming a person strategy is not wise). The reason the blaming a person is a bad idea is that your organization will improve much more effectively if you keep asking why.

Why did they make that error? Why did the process let them make that error? When you follow the why chain a couple more steps you can find root causes that will allow you to find a much more effective solution. You can then pilot (PDSA) an improvement strategy that doesn’t just amount to “Do a better job Joe” or “that is it Joe we are replacing you with Mary.” Neither of those strategies turns out to be very effective.

But investigating a bit more to find a root cause can result in finding solutions that improve the performance of all the workers. What kinds of things? You can apply poka yoke (mistake proofing) concepts. You can institute standard practices so that everyone is using the best methods – not whatever methods they have developed over time. You can rearrange the process to simplify the steps and eliminate chances for errors. These improvement, and many more, are sustainable and can be built upon over time.

In addition, the psychology effects of seeing people as the source of errors and defect instead of seeing people as the source of improvements to process weaknesses are powerful. If you find yourself thinking a problem or defect is the fault of a person try asking why a couple more times and see if you can find a system improvement that would eliminate or mitigate such problems in the future. That is a much more effective improvement strategy.

I always have had a bias toward finding system improvements but over time that bias has increased as I have applied management improvement concepts. As you gain experience working on improving systems you gain experience showing the wisdom of Deming’s 93-97% figures. My belief is that he increased the percentage of problems attributable to the system over time as he experienced the same thing.

Leading Lean: Missed Opportunity

Leading Lean: Missed Opportunity [the broken link was removed] by Jamie Flinchbaugh:

Three elements are needed to gain the benefits from using pull production to drive problems out into the open. First, you need strong problem-solving skills. Bringing a problem to the surface is only half of the battle-you still have to correct the problem. Second, you need an infrastructure capable of solving problems. This means persuading employees at all levels to respond to problems in real time. This does not happen overnight. Third, and perhaps most important, you need a culture that values solving problems as prevention, not crisis management, and is willing to step up even if the problems seem small at the moment.

Great points. One of the counter intuitive things with lean is to make problems visible. So often people try to hide problems (which inventory can do – making it difficult to see emerging problems and to diagnose problems once they are finally discovered).

The idea that you then must improve the system as these problems are made visible is fairly obvious but is also worth emphasising since without it the problems increase.

I think the typical perfromance appraisal process adds to the desire to hide problems. As does excess mobility of management (just hide it until you move on). These show my Deming view of management leanings.

People: Team Members or Costs

Inside TPS at Toyota, Georgetown, Kentucky [the broken link was removed] by Ralph Rio:

Toyota believes people need to be intimately involved with the process to understand how to improve it. The team member writes the standardized work they use because the person performing the work is the true expert. People are trusted to understand the process and improve it.

Automation is used but is seen as a tool for helping people manage the process. This can be contrasted with the effort by GM in the 1990’s to spend billions of dollars on robots to save personnel costs.

Both Toyota and GM seek to use technology to improve but Toyota sees the technology as useful to help people to be more efficient, eliminate menial repetitive tasks, eliminate tasks that cause injury… and it seems to me GM saw technology as a way to eliminate people. The action showed a company that viewed people as a cost to be eliminated. GM did not act as though people were their “most important assets” as we so often hear, but see so little evidence of in the action of companies.

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Cease Mass Inspection for Quality

Comment in response to, Re-Discovering W. Edwards Deming, a partial quote from that post:

Not all of the Deming approach is part of core TPS thinking. In particular, Deming advocated a statistical sampling approach to quality inspection, while Toyota focuses on 100% inspection or eliminating the need for inspection through via the concepts of Poka Yoke and Jidoka. As much as I admire Deming and his philosophy, I agree with the Toyota innovation that it is better to prevent defects from occurring, or at least preventing defects from reaching the customer.

Thanks for your continually interesting blog. I think some might read this post and be confused about what Deming thought about sampling and inspection.

Deming’s point 3 is “Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place.” (Out of the Crisis, 1982). I think Toyota’s improvement of the system to build quality into the product is exactly what Deming had it mind.

Deming believed in improving the process, and doing so using process measures (which often may involve sampling) to guide improvement efforts. He did not believe in using inspection to select out the bad products, which is what inspection largely was before Deming.

He also talked about inspection of incoming material from suppliers – see Chapter 15 of Out of the Crisis.

He also did a great deal of work with sampling to improve population estimates for the US Census Bureau and others as well as on surveys and the sampling involved in surveys.

More on Deming’s thought on Inspection

Managing Innovation

TQM, ISO 9000, Six Sigma: Do Process Management Programs Discourage Innovation?

“In the appropriate setting, process management activities can help companies improve efficiency, but the risk is that you misapply these programs, in particular in areas where people are supposed to be innovative,” notes Benner. “Brand new technologies to produce products that don’t exist are difficult to measure. This kind of innovation may be crowded out when you focus too much on processes you can measure.”

Well I don’t think the idea that innovation is needed was not understood decades ago. It seems to be one of the typical refrains when people want to change – oh that old stuff was only about x and now we need to focus on Y.
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Marketing in a Lean Company

Where Is Marketing In All of This? [the broken link was removed]:

The problem with all of this is that it is based on the idea that sales and manufacturing are distinct entities, with a one way flow between them, rather than hopelessly intertwined elements of the same complicated business.

An essential element of lean manufacturing is a level loading of demand – or at least reasonably level. Toyota uses pricing to accomplish this.

It is becoming more and more apparent that lean is a company wide issue and that giving any department or function an exemption leads to failure.

I agree. The company needs to be viewed as one interdependent system not independent departments [the broken link was removed and replaced by a new link] . The system needs to be optimized as a whole. And that means optimizing the overall system not optimizing the individual departments independently.

World class management understands this concept. But so many of our current management practices undermine attempts to optimize the overall system: rating and ranking people, accounting systems, performance goals, focus on quarterly profits, etc. Some have difficulty understanding that optimizing individual components of a system is not the best strategy to optimize the overall system but that is the truth.

Book, online articles and web links on systems thinking

Measuring and Managing Performance in Organizations

Forward [the broken link was removed] (by Tom DeMarco and Timothy Lister) to Measuring and Managing Performance in Organizations:

measurement is almost always part of an effort to achieve some goal. You can’t always measure all aspects of progress against the goal, so you settle for some surrogate parameter, one that seems to represent the goal closely and is simple enough to measure. So, for example, if the goal is long-term profitability, you may seek to achieve that goal by measuring and tracking productivity. What you’re doing, in the abstract, is this:

measure [parameter] in the hopes of improving [goal]

When dysfunction occurs, the values of [parameter] go up comfortingly, but the values of [goal] get worse.

Previous post on this topic:

Tom DeMarco and Timothy Lister are authors of the excellent Peopleware: Productive Projects and Teams