Archive for the ‘Systems Thinking Concepts’ Category

2 Steps to Reduce Profits: Targets and Incentives

When I first was introduced to the theory of variation (by W. Edwards Deming) back in the 1980s.  I was taken aback by what this all meant.  The realization of the differences between common and special causes of variation are simple yet profound (please read: Service Metrics: What You Need to Understand).  This theory helps us understand that performance is 95% attributable to the system (work design, measures, management thinking, constraints, policies, regulations, etc.) and 5% is attributable to the individual.  Theory of variation also taught me that setting a target will not change the system, only a change in method (e.g., a change in the system itself) could facilitate improvement of performance.  A target or goal without a method is useless.

When an organization adds in incentives (financial rewards, pay for performance, etc.) it ignores the fundamental premise learned from the theory of variation that the individual is inextricably tied to the system in which they work.  In essence, this means all this attention to the individual is working on the small problem while ignoring the big problem (the system).  I am both thankful and cursed that Dr. Deming presented this thinking to me.

Some 5 years ago I was presented something that further explained the problem of targets.  John Seddon (my Vanguard partner) had studied failed organizational change management programs.  Taking Deming’s theory he expanded upon it.  He discovered when organizations set targets that this became the de facto purpose.  Instead of working to improve service or product we work to achieve a target set by (in some order) Wall Street (dividend), executives, managers, supervisors and front-line workers.  The problem with these financial and performance targets is that they do not create the value for the customer which drives the profit and not vice versa.  He further discovered that as command and control managers used these arbitrary measures with targets, method was constrained because the work winds up getting designed around reporting requirements and not the customer.

A better method is to define purpose from a customer perspective, derive measures related to this purpose which in turn liberates method and innovation. a simple but profound systemic relationship.  One that John Seddon references as systems thinking. 

We have seen too many times where an individual hits their targets, achieves their incentive and the company goes out of business (AIG comes to mind).  This is a failure to understand the theory of variation (Deming) and the relationship between purpose, measures and method (Seddon).  Until we begin to understand this theory and relationship we will continue to send our companies down the path to reduced profits.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at

Government Targets and Education: Why They are Destroying Our Future

I just read Mark Miles “My View – Education recession threatens state’s future” in the Indianapolis Star Sunday (June 7th, 2009).  Mr. Miles may be restating the obvious when he points to the fact that our educational gap will no doubt lead to a loss of economic power and a permanent national recession (quoted from McKinsey and Company).  Surely the fact we have fallen behind the likes of Finland and Canada (in a large way) is frightening.  Especially considering the US is as far behind Finland in math as Mexico is behind the US.  But what really frightens me is that Mr. Miles and Dr. Bennett (State Superintendent of Public Instruction) are coming up with solutions that will not benefit our State or our Country.

Dr. Bennett without doubt is doing his best and in no way imply that there is malicious intent, just wrong theory.  His proposed answer is to set targets for things like the 180-day school year and graduation rates.  All plausible ideas but totally the wrong thing to do.  There is no guarantee if we hit the targets that we will be any more competitive than we are now.  Test scores can go up, graduation targets achieved and 180-day school years guarantee us nothing in assuring that we will be competitive in an international marketplace, hopefully our larger aim.

I have stated in other posts why targets become the defacto purpose of indivdual schools.  I have already heard evidence of kids ending the school year by having 5 days of recess to meet the 180-day school year target, how does that help prepare our kids for the future?  Checking that one off the list does not help us become more competitive on an international stage.

The same for test scores and graduation rates.  By these becoming targets we only promote cheating and manipulation, to what end? Five years from now pretend we have 100% graduation rates and better test scores and still can’t compete on an international basis, but we met our target.   We manipulated or gamed the system to get those test scores and graduation rates to not get paid attention to.  This is foolishness.

Mr. Miles wants to drive more dollars from administrative and capital budgets into the class room.  This I agree with.  I disagree with focusing on “issues like accountability and teacher quality.”  Let me explain.  Teachers already have accountability, what has been taken away is the decision-making that is made from the administration and folks like Dr. Bennett.  Putting the decision-making back with the work will attract better quality teachers and liberate method (better teaching).  Having accountability without decision-making capabilities constrains method, a reason that we aren’t competitive or innovative in US businesses.  Teacher quality focuses too much on the individual and not enough on the broken system.  It was W. Edwards Deming that taught me that 95% of the performance of any system is attributable to the system (work design, purpose, measures that matter, government management thinking, regulations, etc.) and the individual is attributable to 5% of performance.

We have a disease in this country. Dr. Deming pointed it out with regards to the movement of Japan (in Post WWII) from command and control thinking (scientific management theory) to systems thinking.  The Japanese were motivated to learn a new way.  Having visited Europe on a number of occasions in the past 5 years, there are signs that they are understanding a change of thinking is in order (some more, some less).  How much further do we need to fall to change thinking?

I can only hope that Mr. Miles and Dr. Bennett learn sooner rather than later that it is the system and method and not the targets, accountability or individual teacher.  “World class educational attainment” requires new thinking.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at

Looking for ROI . . . in All the Wrong Places

I recently have come across an number of management articles on different internet sites Rot the boy next doorwhere people are advocating ROI.  I like ROI . . . it’s like a phonetic spelling of “Roy”, the measurement next door and the boy next door.  Sometimes that can be a good thing or a bad thing.  The measure (or neighbor) that is misunderstood and sometimes annoying.  I digress.

I have seen ROI used to measure projects, departments, units, sales, people, contracts, etc.  The worse use is looking at a part of the company and asking for an ROI.  A call center is easy to talk about here because most everyone believes this is a part that can be easily outsourced or shared (bad assumption), so let’s pluck this piece off and show an ROI.  This is command and control thinking at work . . . separate the pieces and optimize them. 

With call centers, a lot of their demand (calls) is not created by them.  I have submitted in other blogs and posts that between 25% and 75% of their demands are failure demands (chase calls, problems, etc.).  Sometimes they are created by the call center, but more often then not they are created by other parts of the system.  Meaning they don’t create their own demand, so why is that even important?  Because scientific management theory is all about optimizing parts.  But optimization of each part does NOT make the system better, it suboptimizes at the expense of the whole system.  You can’t have a 120-piece orchestra with 120 prima donnas (well you can, but no one would want to hear it).  Systems thinking understand this is all foolishness and what matters is the system.

OK, reality check time.  The call center is part of the system, you know the organization.  So are the sales department, operations, finance, HR, etc.  I love the one about HR being a profit center needing to show ROI.  But I have seen such stupidity and that’s why it gets outsourced a lot, it’s seen as an expense and not a valuable part of the system.

The problem is not just the stupidity, but the waste that goes along with it.  We have department chargebacks, competitions, finger-pointing, turf battles, revenue allocations . . . it’s all just waste.  There is no value in all this activity except to hire more bean counters.  The only ROI that really matters is the company ROI, meaning at the end of the day did the organization provide a product or service that had value from a customer perspective.  If they did provide a value product/service that customers wanted with little waste . . . ROI will find himself right next door where he lives and maybe just not be quite as annoying.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at

Semmelweiss Syndrome: A Barrier to Business Improvement

Assuming most readers of this blog have some familiarity with systems thinking from my previous 100+ blogs may be a stretch, but the question came up a few times last week as to what is preventing companies from achieving business improvement by adoption of new thinking? 

Let’s start with one Ignaz Philipp Semmelweis a mid-1800s physician that worked in a Vienna hospital where almost 1 in 3 women would die after childbirth of “childbed fever.”  The reasons for the deaths were things such as “wounded modesty”, “guilt and fear complexes”, “cosmic influences” and “sudden changes in weather and temperature.”  Dr. Semmelweiss wouldn’t buy any of it and set out for a cure.  Through a freak occurrence a physician friend died after accidentally cutting himself dissecting a corpse.  the symptoms were strangely similar to that of childbed fever.  With no knowledge of infection at the time, Dr. Semmelweiss was able to conclude that physicians were commingling infection one patient to another through the physicians themselves.  His discovery was nothing short of brilliant, he found that by having physicians and other care givers wash their hands the death rate spiraled down to almost zero.  But Semmelweiss ran into a problem (even with data) he was labeled a “nut case” because of his insistence on hand-washing.  The physicians of the day just couldn’t accept that they had been killing their patients because of their lack of hand washing.  Political pressure dumped the hand washing, the death rate went back up and Semmelweiss went crazy.  Having a better way and knowing that changing thinking is hard for people to believe . . . if it was that easy they would have discovered it by now. Thus, the “Semmelweiss Syndrome” that I am coining right here in this blog.

Individuals and organizations have invested heavily into training for Six Sigma, Lean, TQM, ISO and other organization change management programs.  I can’t say they haven’t improved things, but as a “reformed” Lean Six Sigma Master Black Belt I can only say that we are doing the wrong thing righter.  Until we begin to address the fundamental thinking problem of command and control thinking, we stand little chance of sustainability or large leaps in improvement.

The organizations that deliver the training are also a barrier, they are doing quite well thank you.  The last thing they want to hear is that their training is outdated and there are better ways to achieve improvement.

I don’t know what the future holds, I am hopeful that I don’t wind up like Semmelweiss.  Despondent (and (somewhat mad) he wound up cutting his hand and thrusting it into a corpse, within three weeks he had died of the same disease he had tried so hard to defeat.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at

Misconceptions: W. Edwards Deming and Systems Thinking

I find it interesting that the most quoted Deming phrase on Twitter is “It is not necessary to change, survival is not mandatory.”  This is probably because Tony Robbins used it.  I have added another series of Deming phrases and one this past week drew many questions, it reads:

“For Quality:
Stamp out fires, automate, computerize, MBO, install merit pay, rank people,
best efforts, zero defects.
Missing ingredient:
Profound Knowledge.”

Too often I have seen folks try to fit Deming into their own paradigm rather than realizing he was on a whole different plane of thinking.  We are guilty of making Deming what we wanted him to be, instead of who he was.  Hopefully, this will encourage people to read Out of the Crisis and The New Economics

I first went to one of Dr. Deming’s four-day seminars back in 1987 and saw him him many times there after.  The problem with this is I (like many Deming supporters) got more enthralled by the man, rather than the thinking.  This made it easy to make him be what fit our existing paradigm where he really wanted to change our mindset.

History has shown that the “sticky” issues have long been ignored.  We still automate or overuse technology whether we need to or not.  Many organizations are still using MBO.  Merit pay and ranking people are still in place to “motivate” people.  We still try to overcome systemic business problems by best efforts and zero defects.  The thinking never changed.

I have written many management articles and blogs regarding systems thinking where hopefully I am addressing more of the thinking than the man without ignoring Dr. Deming’s tremendous contributions. Like his System of Profound Knowledge (from The New Economics): appreciation for a system, theory of variation, theory of knowledge and psychology.  They all teach us a different way to think and in a management paradox to the way management currently thinks.

This is my 100th blog. I am hopeful that we can begin to address the fundamental thinking problem that stands in the way of a majority of organizations.  The conventional wisdom of command and control thinking has all the momentum. But to quote Socrates: “You can’t find the truth by counting heads” and so our search for profound knowledge continues.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at

Changing Culture in Hard Times . . . the Easy Way

I have heard over and over again HR professionals fretting over the culture of their organizations.  To me it is puzzling, why is there low morale?  You mean the secret formula hasn’t made it to your ears or eyes?

OK, I’ll let you in on the secret.  The problem is that our thinking is old, not Civil War old mind you, but I consider anything pre-Titanic old.  We have based our thinking on that of Frederick Winslow Taylor and AP Sloan.  So what does that mean?  It means that we have functional separation of work and separated the decision-making from the work and the worker.  It means we have introduced entrapping technology to dumb down the worker so that they check their brains at the door.  It means we have built systems with scripts, policies and procedures that that allow little opportunity to innovate or serve the customer.  It means hitting financial and performance targets that we know degrade service to the customer, but allow the worker to achieve an award for poor service and increased costs.  All of this is command and control thinking at work.

So what if we thought differently about the work? You know, made it more interesting.  Put the decision-making back with the work instead of some management report that can’t tell you what is really going on.  Gave the worker new measures that weren’t top-down, but outside-in allowing the worker to figure out the best way to serve the customer and liberating method.  Allow the worker to pull technology that enables their work vs. the push method that entraps them. Now that would be cool for any organizational change management program to do all that!  There is a method for doing all this called systems thinking.

However moving from command and control thinking to systems thinking requires us to take a different approach then what ISO, Lean, Six Sigma, TQM or other change management programs have to offer.  Culture really isn’t that hard to change, are you ready to think differently?

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from “Understanding Your Organization as a System.”   Reach him on Twitter at

Pay for Performance in Education: Part 2

In the “Our Opinion” section of the paper.  There is an opinion/blog called Rewards due for our best teachers that ignores any reference to research or back the supported theory that pay for performance is a better way to run a school system.  I am not a teacher (and never have been), I do have children in school that I am concerned about.  Let’s review the article.

The Star correctly notes that “people enter a career of teaching for all sorts of reasons.  Seldom, if ever, is it for the money.”  Ding, ding, ding . . . they do it because they are intrinsically motivated to do the right thing.  Then the article says that people will respond positively to financial incentives.  W. Edwards Deming and Douglas McGregor (Theory X and Y) taught me that motivation that lasts is intrinsic (Theory Y) and that extrinsic motivation drives out the intrinsic motivation. It was Frederick Herzburg that told us that if we give two groups a task, one with an incentive and one without, that at the first call for a break the group with the incentive took the break and the group without the incentive worked on as their motivation was intrinsic.

The proposed incentive itself ($20,000 for the top 10 schools) wouldn’t benefit very many teachers or students.  The argument will be that we can wind up with some best practice that can be copied by other schools.  This is pure foolishness, copying without theory leads to disaster, this is always a bad idea.

The pay for performance has plenty of examples of bad outcomes.  AIG had a reward system where the de facto purpose became to achieve the reward.  I understand we are  not talking about millions, but this will predictably drive bad behavior (and outcomes) to win the award.  The “normal workings” of the marketplace have not worked for some time (go ask GM, Chrysler and Ford).  Scientific management theory was a break through in the late 1800s, but Deming, Ohno and others have shown us there is a better way.

The better way includes an understanding that the performance of our school systems is 5% the teacher and 95% the education system.  To propose such folly of pay for performance, focuses us on the 5% and not the 95%.  The sooner we look to our education as a system the sooner we can start to make a system that keeps kids in school (intrinsically) and have education that fits the needs of our industry.  Clearly, rehashing old theories that focus on individual performance is not the way to achieve improvement. 

The better way involves understand purpose, customer demand, value, flow and measures that matter.  You will find better ways by taking this systems thinking approach.  This is not an ideology (Republican and Democrat) this is a matter of method and doing the right thing by our children.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at

A Step Back: Pay for Performance in Schools

The artificial competition being created by the State’s Superintendent of Public Instruction (Tony Bennett) is a non-starter.  This approach is a first step down a bad path . . . backwards.  Now more than ever, we need cooperation amongst schools in search of better methods to educate our children.  Additionally, this has started a feud between two folks that need to work together . . . the State Superintendent and the Indiana State Teacher’s Association.

Innovation in education comes from the folks working together in a system that for a long time has been broken.  The teachers are in the best position to understand the effects of new methods that will improve results and not results that will give them new methods.  Administrators need to be understanding their systems and improving them rather than being wrapped up with new targets of increasing graduation or “No Child Left Behind” programs (see my blog The Waste of Targets in No Child left Behind

The focus of results and rewards is a command and control mentality born from scientific management theory.  The words of W. Edwards Deming ring true, “The management of results only makes things worse.”  In service industry I have always found results and rewards to get less rather than more.  New thinking is in order . . . systems thinking.  Where government management is working on the system of education and constantly asking the question “By what method?” and not pounding the table for results.  No  matter how hard the pounding for results with “carrots and sticks”, it will always be reliant on method.

I do commend Dr. Bennett on bringing a group of school superintendents together  to discuss ideas.  It would prudent to see a more diverse group of superintendents, principals, teachers and businesses working together to find new methods that will give our children education in professions that will be needed coming out of this economic crisis.  This would be an improvement over the “pay for performance” and target riddled approach.  Cooperation over competition will liberate method and lead us to a better way.

CRM: Worth the Gamble?

This video is a classic, take a couple of moments to watch.  You will enjoy.

Is this the future of CRM?  Sounds a bit intrusive, doesn’t it.  As a customer, it gives me the heebie-jeebies.  I really don’t want all that information known about me by every one I do business with.  I just want companies to know what I feel they need to know to provide me with the service or product I desire . . . but please, no more.

CRM (Customer Relationship Management) has the following benefits from what I have researched:

  • More focused “marketing”
  • A way of tracking customer’s buying behaviors
  • A sales tool
  • Builds better customer relationships 

I am not sure how much is too much, but the thirst for information by companies is insatiable.  But in the words of W. Edwards Deming, “Information is not knowledge, let’s not confuse the two.”  Knowledge about customers comes at the “touchpoints” of the organization (or the points of transaction as my Vanguard partners would say).  What this means is that we can be misled by data without understanding the context in which it is used.  In a previous blog, Death by Call Center executives believed (from reports) that sales calls were not being converted into sales when the reality was that they were receiving more calls through the sales line because customers were avoiding their IVR system.

A better (systems thinking) way to get knowledge is to perform “check” (understand purpose, value, flow and constraints) at your touchpoints so the context of the information can be realized.  You can not substitute information for knowledge.  For this reason, I continue to hear about the failure of CRM and the data analytics that go along with it.  These are expensive propositions with software and databases.  Before gambling on a CRM implementation, a service organization should first take time to understand the customer management process.  I believe it is necessary to understand demand, value and flow, something we don’t see from vendors pushing CRM solutions.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at

AT&T: What End-to-End Customer Service is

As many of my readers know, I recently switched cable services from Comcast to AT&T and also purchased faster internet service.  Consider this Part II to AT&T: How Not to Do a Survey.  This is probably multiple blogs as the events are something out of an old horror movie, except it is real.  The reality show continues:

Wednesday:  I was scheduled  to have a service technician (tech) in between between 8 – 10 AM.  At 9 AM I received a call from Michigan telling me to expect the service technician between 8 and 10 and that he would call ahead of time.  I am not sure of the purpose of the call and would have to consider it waste from a customer perspective.

The tech came 20 minutes later (no call ahead, making the Michigan call worthless), he asked me a series of questions.  Many that the salesperson had already asked (waste) and began the installation process.  Seven hours later he finished and many problems were uncovered during this process the most notable were my security system was improperly wired (not AT&T problem) and an hour wait for the cable to be properly provisioned (more waste).  Ultimately, things seemed to work OK when he left.  A few hours later my internet was constantly getting a router-router error kicking me off the internet everytime a wireless connection from a laptop or iPod touch was started.  The final straw was the TV locking up over and over again.

Thursday:  I called the customer service line next day and after navigating my way through the IVR (3 minutes) I was able to talk to a customer support representative that helped unlock my TV and fixed my conflict of my routers, but I discovered that AT&T could only see 3 boxes and not the 4 located at my home.  Total call time almost 60 minutes.

Friday:  The TV locked up again and I called support, navigated the IVR and was informed that the TV that was locked was the one they didn’t show in their system meaning a tech would need to come to the house again on Monday.  While getting the necessary information off the router (during the troubleshooting process) the whole system went down phone lines, internet and cable.  I reset the router and while the system was coming back up the customer support rep called me on my cell.  The system came up and things were running again.  Total call time over 90 minutes.

Saturday: our main TV goes down while watching Pirates of the Caribbean. I call customer support (again) and to be honest I really don’t want the IVR at this point.  I am basically told that I am hosed until the tech comes in on Monday. Total call time 14 minutes.

Monday, the box that wasn’t recognized by the customer support reps was caused by a line split something the first tech missed.  The problem with my router-router error was diagnosed as conflicting firewalls between the my AT&T router and my Apple router – a problem we resolved Thursday night without taking down my Apple router now required taking it down.  This leads me to now have a Mac that has questionable connection via the Airport rather than being through the direct connection to the router (more than I want to know too).  The short of this:  good internet connectivity except on my wife’s Mac . . . just kill me now. (4 hours to resolve all issues including a new router because the one I was given was defective and a phone call from home office saying the tech was taking too long).  I will be having to call again this weekend to resolve my wife’s Mac issue or I may be in deep manure.

One other tidbit, the salesperson overstated the capabilities of the system. The system does not:

  • Allow me to have 3 HD channels working at once, only two
  • I can record or pause only on 1 TV not all 4
  • Slice, dice or crawl on its belly like a reptile (OK, made that one up)

I am afraid to see how my first bill looks when it arrives.  Now you understand why the survey for the salesperson proceeded the service.  I did not answer the survey because I did not know if the service was accurately represented – it was not. 

I received a second survey via email for one of the phone calls I made – I just don’t know which phone call because the survey doesn’t identify which of the three.  Further, the language in the survey doesn’t identify the problem in a way I understand or the multiple problems I encountered.  The only way for management to understand is to experience it as I did.  No mystery shopping or fake customers are needed, these things are happening everyday to real customers.  Get off your rumps and go see for yourself.

A systems thinking organization understands the end-to-end customer management process is what matters to me . . . the customer.  I did not expect to have a tech in my house 11 hours or spend almost 3 hours (and counting) to play troubleshooter.  The waste in this system is enormous and 95% of what I saw was attributable to the system that AT&Ts management put in place.  Only 5% of what I saw was attributable to the worker.  The work design is broken, not the individual.

I can only hope that AT&T and its competitors read this and understand the opportunity for improvement is great, but the command and control style of management that they display is broken.  Business improvement can be accomplished there is a better way.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at

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