Tag Archives: research

Eliminate the Waste of Waiting in Line with Queuing Theory

One thing that frustrates me is how managers fail to adopt proven strategies for decades. One very obvious example is using queuing theory to setup lines.

Yes it may be even better to adopt strategies to eliminate as much waiting in line as possible, but if there is still waiting in line occurring and you are not having one queue served by multiple representatives shame on you and your company.

Related: Customer Focus and Internet Travel SearchYouTube Uses Multivariate Experiment To Improve Sign-ups 15%Making Life Difficult for Customers

The Achilles’ Heel of Agile

Guest post by Jurgen Appelo

When I wrote this, I was working in a big open office space in the Van Nelle Factory in Rotterdam (see photo). About 100 people work in an office that was the first of its kind in Europe, when it was built in 1929. And more than 80 years later, architecture lovers from all over the world still come to admire it, take pictures, and make drawings. I sometimes waved at them.

photo of open office style at Van Nelle Office
Van Nelle office, reprinted by permission of Stephan Meijer

A big open office space has advantages and disadvantages. Advantages are flexibility and easy communication. The main disadvantage is that it is a shared resource for all who work there. Climate, sound, and light are hard to manage in a space like that, and the optimal configuration for the whole is never optimal for all. But our office manager did the best she could in trying to maximize pleasant working conditions, while maintaining tight rules to keep things under control. A shared open office is not the ideal environment to give people full responsibility over their own working space.

Self-organization is usually promoted in agile software development. But when shared resources are not managed by a central authority, self-organization often results in the Tragedy of the Commons. The name refers to a situation in which multiple self-organizing systems, all acting in their own self-interest, overexploit a shared limited resource, even when they all know it is not in anyone’s interest for this to happen. The impact that humanity has on CO2 levels in the air, trees in the forests, and fish in the sea, is right now the most debated and intensively researched case of the Tragedy of the Commons. Organizations also have shared resources, like budgets, office space, and system administrators. We could see them as the business-equivalent of the air we breathe, the landscape we change, and the fish we eat.

Research indicates that four ingredients (called the four I’s) are needed for sustainability of shared resources [Van Vugt 2009:42]:

  • Institutions [managers] who work on building trusting relationships between competing systems [teams] in order to increase acceptance of common rules;
  • Information that increases understanding of the physical and social environment, in order to reduce uncertainty (because uncertainty results in bias towards self-interest);
  • Identity, or a need for a social “belonging” that encompasses all participants, to improve and broaden one’s sense of community and reduce competition between teams;
  • Incentives that address the need to improve oneself, while punishing overuse and rewarding responsible use.

Research shows that it is imperative that there is some form of management (or governance) to protect these shared resources by working on these four I’s. (I realize that most modern day governments are not setting a good example of how to do that.) In the case of shared resources, whether it concerns money, space, or system administrators, someone outside of the development teams must keep an eye on long-term sustainability instead of short-term gains by individual teams.

The Tragedy of the Commons is the Achilles’ heel of Agile. It takes management to protect that heel, in order to prevent teams from depleting resources, and crippling the organization.

This article is an adaptation from Management 3.0: Leading Agile Developers, Developing Agile Leaders, by Jurgen Appelo. The book will be published by Addison-Wesley, in Mike Cohn’s Signature Series.

Related: Embrace Diversity, Erase Uniformitymanagement 3.0agile software development booksVW Phaeton assembly plant

Workers Allowed Recreational Use of the Internet are More Productive

Freedom to surf: workers more productive if allowed to use the internet for leisure

“People who do surf the Internet for fun at work – within a reasonable limit of less than 20% of their total time in the office – are more productive by about 9% than those who don’t,”

According to the study of 300 workers, 70% of people who use the Internet at work engage in WILB. Among the most popular Workplace Internet Leisure Browsing (WILB) activities are searching for information about products, reading online news sites. Playing online games was the fifth most popular, while watching YouTube movies was seventh.

The attraction of WILB, according to Dr Coker, can be attributed to people’s imperfect concentration. “People need to zone out for a bit to get back their concentration.”

I wouldn’t take 1 study of 300 workers as the final word on the topic but I believe as a general principle it is a good idea to allow recreational internet use when appropriate, as I wrote in 2006. Such access does create the possibility for abuse but managing that risk is better than policies that are far too restrictive.

Related: Hire People You Can Trust to Do Their JobRespect for People – Understanding PsychologyManagement By IT Crowd Bosses
Continue reading

CEO’s Castles and Company Performance

Where are the Shareholders’ Mansions? CEOs’ Home Purchases, Stock Sales, and Subsequent Company Performance by Crocker H. Liu, Arizona State University and David Yermack, New York University – Stern School of Business

We study real estate purchases by major company CEOs, compiling a database of the principal residences of nearly every top executive in the Standard & Poor’s 500 index. When a CEO buys real estate, future company performance is inversely related to the CEO’s liquidation of company shares and options for financing the transaction. We also find that, regardless of the source of finance, future company performance deteriorates when CEOs acquire extremely large or costly mansions and estates. We therefore interpret large home acquisitions as signals of CEO entrenchment. Our research also provides useful insights for calibrating utility based models of executive compensation and for understanding patterns of Veblenian conspicuous consumption.

To understand better the reasons behind the underperformance of companies whose CEOs acquire very large homesteads, we read news stories about major events affecting the firms in our sample in which a CEO acquires a property with at least 10 acres or a 10,000 square foot house. These news stories suggest parallels between the CEOs’ oversight of their personal assets and management of their companies. No less than nine of the 25 CEOs attempted major corporate acquisitions in the two years following their personal acquisitions of very large real estate,9 and seven of the 25 announced significant capital investment initiatives involving the construction or expansion of corporate facilities. An additional two firms became mired in accounting scandals shortly after their CEOs purchased mansions, and one firm saw a previously agreed merger collapse.

Using a database of principal residences of company CEOs, we study whether these executives’ decisions about home ownership contain information useful for predicting the future path of their companies’ stock prices. We find that CEOs who acquire extremely large properties exhibit inferior ex post stock performance, a result consistent with large mansions and estates being proxies for CEO entrenchment. We also find that the method of financing a home’s acquisition is informative about future stock returns. A general pattern of CEO sales of their firms’ shares and options exists over the twelve months leading up to the date of home acquisition. However, when the CEO does not sell any shares, his stock performs significantly better ex post than the stocks of firms whose CEOs do liquidate equity to finance their houses. The retention of company shares simultaneous with a new home purchase, despite the presence of an evident personal liquidity need, appears to send a signal of commitment by a CEO to his company.

That we put in power CEO’s that see themselves as nobility with the right to build castles (and many of these CEO castles dwarf all but the most conspicuous castle built by nobility) by taking the wealth produced by others from corporate coffers is a sign of our failure to select acceptable leaders for companies.

Related: Another Year of CEO’s Taking Hugely Excessive PayExcessive Executive PayExposing CEO Pay ExcessesNarcissistic Cadre of Senior Executives9 Deadly Diseases

Toyota Develops Thought-controlled Wheelchair

Toyota has developed a thought-controlled wheelchair (along with Japanese government research institute, RIKEN, and Genesis Research Institute). Honda has also developed a system that allows a person to control a robot through thoughts. Both companies continue to invest in innovation and science and engineering. The story of a bad economy and bad sales for a year or two is what you read in most newspapers. In my opinion the more important story is why Toyota and Honda will be dominant companies 20 years from now. And that story is based on their superior management and focus on long term success instead of short term quarterly results.

Yes Toyota can improve their performance, based on the last few years. Does management understand what they need to do? I think so. Does management understand that the system needs to be improved rather than the numbers on the spreadsheets of various managers have to be made better? I think so. Do I think most companies today, with bad results, understand the difference between bad numbers on spreadsheets that are used to judge various managers and a system that needs to be improved? No.

I do not believe the bad earnings for the last year for Toyota are indicative of a failed system. The results do show a weakness in the Toyota system that allowed them to perform this poorly during this credit crisis. The risk to Toyota’s future is that they become too focused on short term results, mistakenly thinking the problem to be fixed in the bad quarterly results recently. They need to focus on improving the system for the long term. And the recent experience likely shows some areas that need to be improved. But in no way do the fundamental tenants of the management system need to be changed. For many other companies today, changing fundamental aspects of their management is what is needed.

Related: Toyota as HomebuilderHonda’s Robolegs Help People WalkHonda has Never had Layoffs and has been Profitable Every YearToyota’s Partner RobotNUMMI, and GM’s Failure to Manage EffectivelyToyota iUnitInvest in New Management Methods Not a Failing Company by William Hunter, 1986
Continue reading

Inside Honda’s Brain

Inside Honda’s brain by Alex Taylor III

why is Honda playing with robots? Or, for that matter, airplanes? Honda is building a factory in North Carolina to manufacture the Hondajet, a sporty twin-engine runabout that carries six passengers. Or solar energy? Honda has established a subsidiary to make and market thin-film solar-power cells. Or soybeans? Honda grows soybeans in Ohio so that it can fill up cargo containers being shipped back to Japan. The list goes on. All this sounds irrelevant to a company that built some 24 million engines last year and stuffed them into everything from cars to weed whackers.

Since 2002 its revenues have grown nearly 40%, to $94.8 billion. Its operating profits, with margins ranging from 7.3% to 9.1%, are among the best in the industry.

The wellspring of Honda’s creative juices is Honda R&D, a wholly owned subsidiary of Honda Motor. Based in Saitama, west of Tokyo, R&D engineers create every product that Honda makes – from lawn mowers to motorcycles and automobiles – and pursue projects like Asimo and Hondajet on the side. Defiantly individualistic, R&D insists on devising its own solutions and shuns outside alliances. On paper it reports to Honda Motor, but it is powerful enough to have produced every CEO since the company was founded in 1948.

The engineer in Fukui [Honda’s president and CEO] cannot help but be intrigued by what his former colleagues are up to, and his office is only a few steps away from Kato’s. But even with the CEO just down the hall, says Kato, “We want to look down the road. We do not want to be influenced by the business.”

mistakes like the Insight are also the exception. R&D has provided Honda with a long list of engineering firsts that consumers liked, including the motorcycle airbag, the low-polluting four-stroke marine engine, and ultralow-emission cars.

Related: Toyota as HomebuilderS&P 500 CEOs – More Engineering GraduatesMore on Non-Auto ToyotaAsimo Robot, Running and Climbing StairsApplied ResearchGoogle Engineering Energy

Management Advice Failures

Topic: Management Improvement

Management Advice: Which 90% is Crap? by Bob Sutton, Stanford University:

At first, I couldn’t believe that someone as well-read as Hamel claimed an old idea was new and that he had invented it. But I eventually realized the problem wasn’t Gary Hamel, or any other individual making claims of originality. Rather, his column reflected a prevailing practice in the business knowledge business. I asked two former Fortune columnists why “Hamel’s Law” and similar claims that old ideas are brand new appear so often in the business press.Both emphasized that you couldn’t blame Hamel – that was just how things were done. Both writers even speculated that some Fortune editor probably had inserted the phrase, “Hamel’s Law,” to create the impression that the magazine publishes exciting new ideas. After all old news doesn’t sell magazines!

I share this frustration with declaring old ideas new: Management Improvement, Better and Different, Quality, SPC and Your Career, Deming and Six Sigma, Management Lessons from Terry Ryan, Everybody Wants It, Toyota’s Got It, Fashion-Incubator on Deming’s Ideas and on and on.
Continue reading