Archive for the ‘Latest Posts’ Category

AIG: It Just Got Worse

 

American International Group, Inc.

Image via Wikipedia

Here we go, ignorant has graduated to stupid.  AIG has a solution for their compensation system . . . let’s rank employees.  Are you kidding?

I just wrote about why this is a bad idea back in October for IQPC in Better Thinking: The Case Against Targets, Rewards, Incentives, Performance Appraisals and Ranking Workers.  It was W. Edwards Deming that woke me to the ills of ranking employees.  Forced distribution of employees ranking them on a scale of 1 to 4 is the dumbest idea since Jack Welch did it at GE and many other companies before him.

It is not just the fact that the “1″ employees can be only 10% of the workforce, “2″ employees are 20%, “3″ employees are 50% and “4″ employees are 20%, the problem is that cooperation just flew out the window.  Workers fighting against each other to achieve “1″ status in an organization that needs to fix a broken system you need more cooperation . . . not less.

To optimize a system we really have to get this part right.  Remember The 95/5 Rule?  That 95% of the performance of any organization is attributable to the system and not the individual.  The system made up of work design, structure, measures, management, technology, etc. makes pay-for-performance the wrong thing to do.

Robert Benmosche (the CEO) is suboptimizing an obviously broken system that played an important role one of the largest financial meltdowns in history.  Ranking workers will encourage more dysfunctional behavior to achieve “1″ status.   My advice to Mr. Benmossche is to fix the system, the people are fine.

Leave me a comment. . . share your opinion!  Click on comments below.

Make the new decade a profitable and rewarding one, start a new path here.  Download free from www.newsystemsthinking.com “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 www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

Undercover Boss, Larry O’Donnell and Systems Thinking

 

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I have been wanting to watch the show Undercover Boss on CBS, but have been too depressed from the Indianapolis Colts Super Bowl loss to watch.  I did finally get to it this morning.  I’m glad I did.

One thing we do in systems thinking is perform “check” to understand the what and why of current performance.  We always ask the CEO to get knowledge with us and with a new client starting next week this is a good reminder of why we start this way.  In this show, Larry O’Donnell President and COO of Waste Management does just this.

I was touched by the personal story of his daughter (Lindley) that suffered some brain damage from someone not following “proper procedure” (more on this later).  I encountered a similar experience when I lost my son to SIDS (at 3 months old).  These things stay with you and help shape your life.

Randy (Larry O’Donnell) went to the work and whether for show or not . . . he got knowledge of the work.  The telling statement of his introduction was that he wanted to see the effects of his “targets and cost-cutting” on the organization.  I knew then he was in for some big surprises.

Targets and the focus on costs always increase costs and focus the organization on the wrong things.  I am grateful for W. Edwards Deming pointing this out to me and John Seddon for advancing the conversation in this area.  Both men understood that such foolishness (focus on targets and costs) created a management paradox.

More importantly, Mr. O’Donnell began to understand the unintended consequences associated with corporate mandates void of knowledge.  In command and control fashion, policies were payed out and as usual  the mid-level manager got squeezed at the end (even though what was happening above the mid-level manager was responsible).  The culture was set to be a command and control one and the dysfunction and waste was soon to follow.

What resulted was a series of predictable events.  Here are a few:

  • A productivity focus led to the time clock debachle where the worker was docked 2 minutes for every minute late. Again, don’t blame the mid-level manager as Kevin (no doubt) believed he was doing what was expected from corporate.
  • A productivity focus on trash routes led to monitoring (always a waste), using a can for pee breaks, and not allowing the front-line worker to interact with customers.
  • Cutbacks that led Jaclyn to have to cover multiple jobs.

The interesting thing I have found working with the likes of front-line workers similar to Sandy, Fred, Janice, Walter and Jaclyn is that most workers are extraordinary and each has their own story.  The system they work in is broken.  Put a good person in a bad system and the system will win every time.

I was somewhat bothered by the call-out of Kevin the manager.  He most likely isn’t the problem it is the system the executives put in place.  Better questions may have led to why Kevin felt he needed a time rule for workers (we call these system conditions).

Recommendations for Mr. O’Donnell moving forward:

  • Put the decision-making back with the work and this will avoid managing from the financials and productivity numbers off of reports in command and control fashion.  Cuture will improve when the work AND worker become more relevant.
  • Forget the task forces and programs and take action based on what you find when getting knowledge. This goes back to Ross Perot’s “if you see a snake . . . kill it, don’t appoint a committee on snakes.”
  • His biggest problem is the command and control thinking that will overcome all the good that he may have learned.  Bottom-line is the thinking has to change about the design and management of work from command and control to systems thinking.
  • Dump the production numbers and targets in favor of customer measures derived from customer purpose.  These customer measures will lead to better productivity and greater profit.
  • Look for other system conditions that are preventing the organization from peak performance.
  • Understand that efficient is not the same as effective.

I don’t know about the circumstances surrounding Lindley and “proper procedure.”  But speaking to our tragedy, our babysitter understood that not allowing our son to sleep on his stomach was something we talked about and we could deem it not following “proper procedure.”  Mistakes happen, but I believe they happen for a reason and forgiveness becomes the really important part.

Leave me a comment. . . share your opinion!  Click on comments below.

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 www.newsystemsthinking.com “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 www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

Quotas for Innovation?

Listening to more senseless drivel on CNBC, we need more innovation in the US.  The investment community’s answer . . . quotas for innovation.  Here we go, quotas, rewards, incentives to get innovation.

How about the design and management of work as a huge opportunity for innovation.  Redesign these pieces and we might even get competitive.

Think of it we don’t need a CIO (Chief Innovation Officer) or quotas or other dysfunctional lame-brain ideas like this.  We need to engage the minds of those on the front-line and use the other 90% of the organization that are deemed not educated enough to innovate by command and control managers.  A missed opportunity.

Then, we have all these poor work designs that do everything possible to “dumb down” the worker with technology, front/back office, scripts, standardization and the list goes on.  How about a change of pace?  Engaging the brains of these folks.

I hear it all the time, they aren’t interested in “that” they just want to do their work.  This thinking is pitiful, I have never found a worker not interested in their work . . . beaten down, yes . . . but all are interested.  Many workers think management couldn’t be any dumber, just managers aren’t in earshot of these comments.

Making all employees and their jobs relevant takes guts, but the rewards are innovation and unrivaled culture.  People love their job when given decision-making responsibility and not just accountability.  Workers deserve a better work design and managers would benefit greatly from this thinking.

The barrier is scores of years of productivity and financial brain-washing that has pushed us to having quotas for innovation.  After all, why not?  They exist for everything else.

Electric shock treatment withstanding, there is a need to rediscover the individual worker through better management thinking and better work design.  Innovation through quotas is more of the same wrong thinking.  When will it all end?

Leave me a comment. . . share your opinion!  Click on comments below.

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 www.newsystemsthinking.com “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 www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

Less Financial Regulation, More Deming Thinking

The seal of the United States Department of th...
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I’ve said it before and I will say it again . . . all this talk of regulation as the answer is disturbing.  We have no chance in the US to compete globally unless we realize that more monitoring and inspection is not the answer.  We stand a rare chance of having the same type of crisis as the one we just had.

Seriously, the problem with regulation is expensive monitoring to achieve “gotcha moments.”  It sounds very desirable at the moment, but it is a red herring.  The central issue of targets, incentives and rewards is missed.

Targets, incentives and rewards drive wrong behavior and less profits.  The country of working together has turned into throwing everyone under the bus to achieve stardom and wealth.  This thinking has made us unable to compete on a global scale.

W. Edwards Deming taught us that incentive pay and rewards leads to trouble for any system.  Accompanied by targets we have Machiavellian managers running around creating chaos to hit their numbers while the ship sinks.  Correct the thinking around compensation and the regulation conversation becomes moot.

In my open letter to Treasury Secretary Geithner I asked that he only regulate those banks that had these types of incentive-based compensation systems.  The others wouldn’t require such as their focus would be to improve service and innovation with the focus on the customer and not themselves.

I haven’t heard back from Mr. Geithner and I suspect he has other worries (like AIG among them).  But for the financial institutions caught up in this there is the promise of greater financial reward and profits with different thinking.

Leave me a comment. . . share your opinion!  Click on comments below.

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 www.newsystemsthinking.com “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 www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

Advice for Outsourcers

Bigger
Reading an article in the Wall Street Journal called “Advice for Outsourcers: Think Bigger.”  This is basically a call for companies to do more outsourcing of not just the easy stuff, but to off-shore the more complex things too.  This article pretends that we actually do offshoring well on simple things and I found that nothing could be further from the truth.

The category of simple things are outlined in the article as “easy to learn  – things like software support and call-center operations.”  Rarely are either of these things easy and more importantly finding a company that actually does them well is like finding the another Hope Diamond.  A survey of customers would confirm this as fact.

So before we graduate to “bigger” offshoring let’s review the fact that in most cases we are outsourcing organizational waste.  The emphasis on reducing transaction (or visible) costs are blinding them to the total cost increase from this mentality.  Business cost reduction comes from improving flow, not focusing on costs.

The functional design and technology approaches are increasing these end-to-end costs.  The functional separation of work led to the poor design of most service organizations and is perpetuated by entrapping technology.  Organizations are missing one of the biggest opportunities for improvement . . . the design of the work.

So before running off to bigger and better outsourcing, let’s take a step back at our organizations.  Look at the waste being created in our end-to-end systems and rethink our approach.  A good place to start is in understanding failure demand (demand caused by a failure to do something or do something right for a customer).

Leave me a comment. . . share your opinion!  Click on comments below.

Make the new decade a profitable and rewarding one, start a new path here.  Download free from www.newsystemsthinking.com “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 www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

The Wall Street Journal: Over 60% of Improvement Projects Fail!

2010 Improvement
In the Wall Street Journal this morning in an article written by Dr. Satya S. Chakravorty titled “Where Process Improvement Projects Go Wrong,” the author states that 60% of all process-improvement projects fail.  I have found this to be true but with a larger percentage of failures.  In this article Dr. Chakravorty doesn’t cite a source for his statistics.  Too bad, I am sure there are plenty to support this claim (this will be a future mission for me).

Dr. Chakravorty outlines the problems in these failures by using a comparison of a stress-strain curve – stretching, yielding and failing (interesting comparison).  In the “stretching phase”  there is a willingness to tackle the new project and the tasks associated with it.  In the “yielding phase,” the expert moves on to another project and focus is lost.  Finally, in the “failing stage” with focus and expert gone, team members stop caring about the improvement project.

Dr. Chakravorty continues to outline what he learned from his observation of an aerospace company (paraphrased):

  1. A need for extended involvement of the expert.
  2. Performance appraisals need to be tied to the implementation of improvement projects.
  3. Improvement teams should have no more than 6-9 members and last no more than 6-8 weeks.
  4. Executives need to directly participate in improvement projects and not just support them.

Similarly, we have found that claimed gains in lean six sigma projects rarely materialize to the bottom line.  One company told us that with all the improvement projects they should have millions of dollars to the bottom line, but at final account none were seen.  This is a huge problem.

For the most part, I don’t care for the lessons learned by Dr. Chakravorty, I believe he misses the point.  The problem is NOT the expert, team size, length of project and certainly not performance appraisals and incentives.  He seems to have something with executive participation until the reason being for this involvement is to assess the viability of the project.  I believe he hasn’t learned anything.

No improvement effort stands a chance until we understand that the thinking is the problem.  More specifically, the thinking about the design and management of work.  A project is a coward’s approach to improvement,  this does nothing to change the thinking.

If we are to be successful, management thinking has to change too.  The same thinking that has led us down our current path will not suffice.  The new leadership strategy for improvement must be to change thinking.

So what needs to change?  Many of the things I have written in management articles and blog posts. The movement away from things like scientific management theory (functional separation of work), separation of decision-making from the work, targets, incentives, tools, and many other items found in my posts.

To continue down the path of wrong thinking is to spell disaster for any organization.

Leave me a comment. . . share your opinion!  Click on comments below.

Make the new decade a profitable and rewarding one, start a new path here.  Download free from www.newsystemsthinking.com “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 www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

Lean: Someone has Poisoned the Waterhole!

Perusing emails, websites and conversations on Twitter the purported “lean thinking” crowd seems to be a contradiction of terms. I have been in emotional conversations with some of these folks that claim foul when I categorize them as “toolheads” or “lean hornets.” Claims of “we really are about the thinking” is the feedback.

So, what is the big deal? Here is the rub. I like to view folks I encounter by what they do or claim to do. Most of these folks are posting to their blog . . . or when I visit their websites . . . or when I visit prospective customers that have worked with lean consultants about how they use tools (value stream maps, takt time, etc.) Someone has poisoned the water hole!

The classic came via email that I received from the Lean Enterprise Institute (LEI). Here is what was written:

“Lean tools are important, but they can’t deliver sustainable results — and often can’t achieve any results — unless we use them with a lean state of mind in an environment that supports problem solving through experimentation by means of Plan-Do-Check-Act.”

Wow! A revelation has taken place, maybe this whole 2012 thing is for real. But wait a minute . . . scroll down further and you see mistake-proofing and value stream mapping workshops for healthcare!!!!?

I appreciate the affirmation that tools don’t deliver. But we need deeds, not words.

I’m sorry my friends, but it was W. Edwards Deming that told us that we have one shot to train people the right way. We have been wrongly led down the tool path by LEI. They may regret the path, but the familiar quack of this duck still rings.

Dr. Deming and Taiichi Ohno taught us a way of thinking and both warned against tools. I find it to be a form of copying. The three questions John Seddon presented on whether a tool is needed stands true:

  1. Who invented the tool?
  2. What problem were they trying to solve?
  3. Do I have that problem?

I can taste the poison at this drinking hole . . . can you?

Leave me a comment. . . share your opinion! Click on comments below.

Systems thinking . . . Join us in 2010!

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 www.newsystemsthinking.com “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 www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

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