Bill Hunter and Peter Scholtes

Topic: Management Improvement

I have recently updated Peter Scholtes' web site (author of the Team Handbook and the Leader's Handbook) and created a new web site for my father: Bill Hunter - williamghunter.net. They were friends and colleagues.

I frequently receive kind words from people who knew my father. A recent note:

I just thought I'd let you know how much I enjoyed your dad's class as a grad student in 1979 at UW-Madison. I'm sure you've heard many comments like this, but I'll add one more. He was a delightful and entertaining prof who clearly loved his subject. He made an impression on me one day by asking us a question about the British comedy radio program, The Goon Show, which I had heard. I think I was the only member of the class who raised his hand. After that moment, I always felt a special bond with him, because I thought it was great that he appreciated the wacky humor of that show.

I received a wonderful education at UW and your dad was no small part of it.

I have added a comments section on the site to post such notes. If you have a comment to share please send me a message to post. Even if only my relatives and I enjoy the notes, I think they are wonderful, so please send them in.

Manufacturing and the Economy

Topic: Macro Economics and Management Improvement

In Global Market, Iowa Manufacturers Fight for Survival:

The conventional wisdom has been that expanded trade would result in the United States losing low-pay, low-skilled manufacturing jobs, said David Swenson, an economic scientist at Iowa State University. But "a lot of the jobs that we have traditionally thought of as high value, high quality, high benefits are in trouble, too."

The conventional wisdom was that the rest of the world would not be able to compete with the United States for high wage, high value jobs. It turns out the rest of the world is much more able to compete for that work than was expected.

The highest value jobs can be done effectively out of the United States for a variety of reasons. Partially the conventional wisdom in the United States was based on a fantasy world created after World War II when the United States was the dominant economic power. Partially the success of economic (and other) policies of the United States during that period allowed the United States to flourish in the post war period (given the same starting point less effective policies would have lead to less success for the United States and created less of a sense that the natural state was one in which the United States was spectacularly wealthy compared to the rest of the world).

Partially the conventional wisdom was wrong because the wealth that exists in the world today has allowed for huge investments to be made amazingly quickly. That allowed changes to the macro economic environment faster than I can imagine any reasonable person would have expected in 1985. And partially the effectiveness of especially China (but also many other countries in Asia mainly) in improving their economy have been much more successful than could have been reasonably expected. Partially the very high wages paid, might just be too high, we will see. The success of multi-national companies in speeding up the adoption of effective management policies has also been important. Granted I believe the management practiced by most could be greatly improved but still...

I believe we can expect that there will be real competition for high value work from a wide number of countries. That is the reality of the world today. Countries that desire economic wealth are going to find that other countries want high value work also (and are not willing to seed a huge percentage of those jobs to the United States or anyone else). To retain and gain high value work all countries will have to compete with each other. Previous post on science and engineering jobs.

More from, In Global Market, Iowa Manufacturers Fight for Survival:

Two movements that are dramatically changing Iowa manufacturing floors are technology and lean manufacturing disciplines, such as Kaizen, a Japanese approach for continuous improvement.

With nearly 30 percent of the residents in Des Moines, Lee and Henry counties employed in manufacturing, said Hinkle, "it made sense to make southeast Iowa a lean stronghold."

I think we often talk as though manufacturing in the United States is not feasible. Yes, things are changing, and have been for several decades. But the United States is still the largest manufacturer in the world.

I had a great deal of difficulty finding statistics on this (any suggestions for good source of macro-economic statistics on manufacturing would be appreciated). Google and the others still have plenty of room to improve search results. From the WorldBank, I located manufacturing statistics from 2001 (using "value added" - the link to the details on what the figures mean on the page don't work - I would guess the figures are in constant dollars but I can't say for sure).

Country	1990	2001	% increase
United States	1,040,600	1,422,999	39
Japan	810,231	865,809	7
China	116,572	407,513	251
Germany	456,405	385,923	-15
United Kingdom	206,718	220,429	7
France	228,270	217,534	-5
Korea	64,604	117,575	83
Mexico	49,992	110,381	120
India	48,807	67,143	27
World	4,412,837	5,404,373	22

Summers conservatively estimates the company will implement 25,000 employee recommendations throughout its operations this year. The company has 3,800 Iowa employees, called members, with 11,000 worldwide, mostly in the United States.

"Those suggestions are driven by shop floor members who understand where the waste is in their jobs," he said.

Employees are trained in lean techniques and are "encouraged and rewarded to generate and implement improvement ideas."

Mead said about once a quarter, employees work on a lean project within their work area or in other plant operations.

A substantial determinate of where high paid manufacturing (and other) jobs will be is how effectively locations produce. By using lean manufacturing methods (and the like) and taping the brainpower of employees the odds of keeping such jobs in Iowa, and anywhere else is increased. Is it certain to work? No. But the odds of keeping such jobs without using such management improvement strategies is much worse.

The ratio of manufacturing output to total economic output is not declining much (see chart). Yet, Quality management, lean manufacturing, applied technology, technological innovation, etc. have increased productivity to such an extent that we are increasing production and decreasing employment. I could not find the statistics but my belief is that manufacturing employment has declined substantially globally.

Jobs are leaving the manufacturing sector everywhere. Again, I can't find a source now but my understanding is manufacturing employment in China is down more than manufacturing employment is down in the United States in the last 2 decades. How? Remember that China has radically altered their economy. What existed 20 years ago (and even 10 years ago) was employment at factories largely in name only - employees that had nothing to do. Part of that change is the vastly increased output shown above, another part is the reduction of staff at factories that now are managed to make a profit.

It is true (in my belief - and based on the statistics above and in the graphs) that the United States has been decreasing manufacturing employment. And it is also true other countries - notably: China, Korea and Mexico are increasing manufacturing output. However, I believe the there has been no increase (in fact I believe their has been a decrease) in manufacturing jobs worldwide. The impact of lower wages (in competitive countries), while a factor, is much less important than other factors in the decline of manufacturing jobs in the United States.

The way to create an economy that continues to provide good jobs is to apply the ideas of Deming, lean thinking, customer focus, statistical tools, systems thinking, etc.. We should realize that the United States was in a position from 1950-2000 that was abnormal and is not something that can be expected to return. To achieve economic success in the next 50 years will require doing what we did well last century well again, improving things we could get away with doing poorly and learning and applying new ideas (in management and elsewhere).

As I have stated before, as a county, the United States still has the advantage when looking at the likelihood of economic success in the future. But that advantage is much less than it was in 1950 or even 1970. The conventional wisdom was that the United States could move to "high value" work where we could continue to exist in the way we did in the middle of the last century.

Those who thought moving to high skill jobs was the way to protect economic gains, knew that it was only a temporary state. They implied we could take advantage of that time to become more effective and maintain a significant advantage over others. It turns a handful of countries have reached a very competitive state for even high skill jobs much quicker than most anyone expected.

The future is very bright for the world and for the United States. But the United States is going to have quite a few challengers for providing a location for high skill jobs. It will be very interesting to see what happens in the next 20-50 years.



Is the United States going to be the largest manufacturer in the world 20 years from now? I doubt it, but if you have to pick one country it has at least as much chance as any other (I would imagine today many would give the odds to China, and I would as well). What other country? Japan, I doubt it. Enough of Europe forming into a country, possible but unlikely.

So I would guess China #1 and USA #2 in manufacturing in the year 2025. Hardly a failure to be the second largest manufacturing country in the world. And there is plenty that could go wrong in China and cause it to slip and not catch the United States. But we have experienced amazingly quick macro economic changes recently, so 25 years might leave room for much more change than seems likely today.

Is the United States going to have the largest GDP? I believe so. What countries are likely to do well? That is not an easy question. China and India have done very well the last 10 years. Continuing that success for the next 25 years will not be easy. Again it will be interesting to see what develops.

I believe many factors will define what countries do well: educational system, health care system, existing economic wealth, freedom (economic, personal and political), lack of corruption, the rule of law, management, banking and securities system, innovation system, support for scientific innovation, providing opportunities for all citizens to contribute...

I would guess the USA [GDP growth 1980 to 1990, 1990 to 2003 3.6, 3.3], India [5.7, 5.9], China [10.3, 9.6], Singapore [6.7, 6.3], Thailand [7.6, 3.7], Korea [9.0, 5.5], Costa Rica [3.0, 4.8], United Kingdom [3.2, 2.7], Spain [3.1,2.8] and Mexico [1.1, 3.0] (I may be more hopeful in this pick than rational) will do well (as measured by GDP and increase in total wealth). Others that have a good chance: Malaysia [5.3, 5.9], Australia [3.4, 3.8], Canada [3.2, 3.3], Japan [3.9, 1.2], Vietnam [4.6, 7.5], Chile [4.2, 5.6], Brazil [2.7, 2.6], Egypt [5.4, 4.5], Uganda [2.9, 6.8] and many countries in Europe. Many others also have a chance but success is not going to be easy. The countries listed above will provide formidable competition. However, with proper planning and execution most countries have a chance for great success in the next 25 years, and all do looking 100 years into the future.

Management Training Program

Topic: Management Improvement

Fog Creek Software Management Training Program by Joel Spolsky:

Finally, when you're really really good, they let you hang around with Yussef on the ovens. Yussef was about 100 years old and so good at running the ovens it was scary. When Gabbi tried to show me how to solve the problem of bread sticking to the conveyer belts on the way out of the oven, he ran back and forth like a lunatic for ten minutes, turning knobs, pulling levers, redirecting heat, and burning a few hundred loaves while he struggled to get things under control.

But Yussef, facing the same problem, turned one tiny knob on a seemingly-unrelated chimney about one degree to the right. It made no sense, he couldn't explain why it worked, but it did: it solved the problem instantly and suddenly perfect loaves started popping out. It took me another couple of years to really understand the complex relationships between heat and humidity inside an 80 foot tunnel oven, but it would have taken ten more years before I could solve problems as well as Yussef did.

From the Lion of Lean (an interview with James Womack):

So I said to the Toyota executive, "You've only got two or three suppliers per category, and you never take bids. How do you know you aren't being ripped off?" So this guy, who was around 60, gives me an incredibly frosty look and says, "Because I know everything." Everything? "That's my job," he says.

Reading "Because I know everything" brings to mind an arrogant blowhard to many in America (I think). Probably because most who would say that, are arrogant blowhards. But when someone has worked (a Toyota executive or a baker) for 40+ years in the same area those words can have quite a different meaning than a 31 year old MBA working in this third industry. Managing with constancy of purpose and long term thinking can make a big difference.

Joel Spolsky runs a software company with a different vision than most owners or managers. I don't think he attempts to follow Deming or Lean Thinking or Ackoff. He has very interesting ideas on managing, that he developed himself, as far as I know.

Thus: how do we develop the next generation of managers? We don't really want to hire MBAs, because there's too much evidence that MBAs substitute book-learnin' for common sense or experience. We'd much rather hire someone who created and ran a profitable lemonade stand than someone who has taken two years of finance courses at Harvard, especially since the Harvard MBA is going to think he knows a lot more than he really does.

Our latest thinking is just to train a new generation of leaders from the ground up.

To that end, today we're launching an experimental new program, the Fog Creek Software Management Training Program.

I think this would be a great opportunity for the right person.

A sample of some of his management philosophy.

Hitting the High Notes:

For the last five years I've been testing that theory in the real world. The formula for the company I started with Michael Pryor in September, 2000 can be summarized in four steps:

Best Working Conditions

→

Best Programmers

→

Best Software

→

Profit!

It's a pretty convenient formula, especially since our real goal in starting Fog Creek was to create a software company where we would want to work. I made the claim, in those days, that good working conditions (or, awkwardly, "building the company where the best software developers in the world would want to work") would lead to profits

Bionic Office:

The monthly rent for our offices, when fully occupied, will run about $700 per employee. The build-out was done on budget and paid for almost entirely by the landlord. I suspect that $700 per person is on the high side for software developers throughout the world, but if it means we can hire from the 99.9 percentile instead of the 99 percentile, it'll be worth it.

OpenOffice 2.0

Topic: Software - Open Source - Freeware

OpenOffice 2.0, the excellent freeware office suite is now available. It is great free software that imports Microsoft formatted documents and creates the same amazingly well.

Open Office runs on Apple, Linux, Microsoft and more operating systems and installs easily. One nice feature is that you can create pdf documents from any file (text, spreadsheet, presentation) with the click of one button. They also added a new database in release 2.0.

I've used the previous edition for quite some time and think it is very good; it is amazing such a product is free. More excellent freeware: Firefox and Picassa (for photos).

Why Fix the Escalator?

Topic: Management Improvement

Why Fix the Escalator? from the Lean manufacturing blog on a visit to the NUMMI plant:

A very large permanent sign above the escalator said something like:

"Sorry for inoperative escalator. It would cost $120k to repair. We feel money could be better spent on other things. Please accept our apologies."

Wow. The frugality and practicality of TPS was illustrated by that sign, our tour group thought. Rather than a knee-jerk reaction of fixing it when broken, somebody asked that powerful question: "Why?"
...
Another question I'm challenging myself with: If this had been a GM plant, would I be criticizing them for being cheap?

Good points and questions. I have another question, why was the escalator put there in the first place? I did not visit the plant but it sounds like it isn't needed. Did something change, or was it a wasteful decision in the first place?

I think we all (including me) have to be careful when we make judgments of those we respect or find wanting. It seems our judgments often have more to do with our opinion of the person or company, than the specific behavior we believe we are judging. At times this is wise, I believe, but you should remember the basis for your opinion.

Right now, I will give Google the benefit of the doubt. If Google does something that I don't understand, I figure they probably understand something that I don't. And it similarly makes sense to think - if Toyota makes a certain decision there is a likelihood it was a good decision.

So if my first judgment was "that it was not the best decision" then maybe I should think more before I commit. I think it is important to understand your thought process in making a decision. So I think it is wise to ask: "If this had been a GM plant, would I be criticizing them for being cheap?"

Going Beyond (or away from) Lean Thinking?

Topic: Management Improvement

Continuous Improvement - Lean Alone No Longer Cutting It by Tonya Vinas, IndustryWeek:

It's a dicey time for manufacturers that have spent the past five to 10 years on the lean journey. They and their top-level executives are finding that lean alone is not enough.

Well I would agree "lean," as it is commonly implemented, is not enough. I believe additionaly ideas from Deming that are missing from many lean efforts would be helpful (Toyota applies Deming's ideas to a much greater extent than those modifying Toyota's practices for their organization). Those concepts will mainly aid long term continual improvement of the organization (rather than provide short term quick fixes).

I think [what is] also happening is a demand for immediate cost cutting that lean doesn't always provide. Sometimes kaizen events result in immediate savings, but in the face of the increases these companies are facing, kaizen-derived savings are, again, probably not deep enough, especially with the allure of incredibly cheap labor in China.

I think moves away from lean, that are the result of gut reactions to such worries, are likely. Also I feel that the rapidly movement of managers and their desire to "make their mark" in their new job, results in new managers making changes (away from lean) mainly to show the impact they have (or because they are not familiar or comfortable with lean concepts). Neither are good reasons for changes, in my opinion.

I think the article raises some interesting questions. I, also, believe the practice of lean is increasing. I would be interested if the readers of our blog think lean thinking is increasing or is on the decline.

Deming's Ideas at Markey's Audio Visual

Last week at the Deming Institute seminar: How to Create Unethical, Ineffective Organizations That Go Out of Business, Mark Miller, General Manager, Markey's Audio Visual spoke on Markey's experience adopting Deming's ideas.

It was a great presentation. He did a great job of explaining what it was like to work at a company focused on applying Deming's management philosophy. I capture some of the points he talked about below.

1986 Markey's started providing Audio Visual support to all Deming's seminars. The technicians came back after 3 sessions to encourage Mark Miller (employee number 16 at Markey's) to attend, himself. He went to a Deming 4 day and decided the owners should attend. They did and then Markey's sent employees to attend future Deming 4 day seminars.

He recommended, The Team Handbook and The Leader's Handbook by Peter Scholtes.

Points:

• Constancy of Purpose
• Their business has greatly changed. Customers used to need a service provider to project onto a screen,– now they all own projectors for laptops‚ Markey's needs to anticipate the changing needs of customers and anticipate those needs
  
• Page 141 of Out of the Crisis: "Profit in business comes from repeat customers, customers that boast about your product of service" (Markey's uses Deming's books in the training for staff)
• He facilitates all training sessions (everybody goes through training in groups of 10-12). Half day. They have the afternoon to go observe customer service and write down their experience with 3 customer service interactions.
• Unknown and unknowable - not really unknown just un-measurable (again taught to all employees)
• Gemba - where the real work gets done (the customer interaction - he stressed time and again that the key to their success was Markey's employees interaction with customers - Markey's aims to provide the best customer experience the customer has with any company)
  
• In 1991 he asked owners do you want to offer jobs or careers - they decided careers started offering 401k... weeks later (statements about valuing employees are not what matters, action based on those statements are what matters)
  
• Trust - assume people are good
• Break down barriers between departments - Markey's doesn't charge internally. Indianapolis looses money - they own the high end equipment used by the other offices.
• Intrinsic motivation v. Extrinsic motivation - he has the chart from page 122 of New Economics in Deming's handwriting on his wall.
• 215 employees $30 million in business (about $3 million before Deming)
• Commission pay - after 10 people attended Deming seminar they stopped using commission pay "people are not motivated by money" people do have salaries they want or need and will change jobs... to get what they need. For commissioned employees pay set at average of last 3 years salary for 7 commission employees - 1 left.
• No performance reviews - they do have an annual conversation. No ranking or rating. Discuss what you like about your job, who you work with, what do you want to do in 1, 5 years, what frustrates you, how am I holding you back, don't talk about pay. Talk closely with his reports on about daily basis.
• Promote from within - mainly
• No layoffs - did once in Toledo when a major customer left (offered jobs in other cities...)
• They use the "Predictive index"
  

From Markey's home page: "Dedicated to quality, Markey's strives to continually improve their industry. Directed by the management philosophy of Dr. W. Edwards Deming, Markey's aim is to meet and exceed their customer's expectations."

2005 Deming Prize

2005 the Deming Prize Winners Announced:

The Deming Application Prize (alphabetical order)

Hosei Brake Industry Co., Limited(Japan) - web site
Krishna Maruti Limited, Seat Division(India)
Rane Engine Valves Limited(India) - web site
Rane TRW Steering Systems Limited, Steering Gear Division(India) - web site

Once again India has dominated the prize. From our 2004 Deming Prize post: "In recent years, Thailand and India have been the home to nearly all awardees: 6 of 7 in 2003, 2 of 2 in 2002 and 3 of 4 in 2001. Prior to this new trend, nearly all awardees were based in Japan,"

Also announced:

The Deming Prize for Individuals
Mr. Hajime Sasaki, Chairman of the Board, NEC Corporation (Japan) - bio

The Japan Quality Medal
Thai Acrylic Fibre Co., Limited (Thailand) - web site (2001 Deming Prize)

Marketing in a Lean Company

Where Is Marketing In All of This?:

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 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

Toyota Engineers a New Plant: the Living Kind

Topic: Management Improvement

Toyota Engineers...a Shrub

Toyota Motor Corp has developed a derivative of the Cherry Sage shrub that is optimized for absorbing pollutants from the air.

It seems Toyota is dominating the management improvement news in the same way Google is dominating the rest of the business news. It seems like Toyota is mentioned positively nearly as much as other companies combined on the management blogs that I read most often. And I am contributing to that. I doubt I would bother to write about this if it were most other companies. But then other companies don't have letter signed by the President like the one I quote below.

And this seems to be another small example of Toyota's vision, see our previous post on Toyota as Homebuilder and Biotechnology researcher.

Toyota's web site includes an environmental and social report stating Toyota's vision:

it is essential that we continue to live by our guiding principles and to evolve with the times. This requires that we do three things.

First, making things that benefit both people and the world as a whole.
...
Second, as a member of society, we must fulfill our responsibilities to all stakeholders. We must provide to customers cleaner, safer, and more attractive products with excellent value. To shareholders, we must enhance share value through long-term and stable growth by increasing profits and paying appropriate dividends. With business partners, we must engage in fair business based on a spirit of mutual benefit.

To our employees, we must provide a workplace where they can work with pride based on mutual trust and responsibility between labor and management, and respect for people. And to local and global communities, we must continue to act as a good corporate citizen by engaging in activities that contribute to economic development and employment as well as engaging in environmental and philanthropic activities.

Third, we must develop the human resources and create a positive business culture to carry out these activities. I believe that steady personal development of human resources fosters good work skills and work ethic, and this in turn creates a good corporate business culture, which must be supported and maintained by the development of proper structures.
...
I look forward to receiving your honest comments and opinions concerning this report.

Katsuaki Watanabe
President, Toyota Motor Corporation
July 2005

What a great sentiment (see our previous post on the Purpose of an Organization). Many organizations talk a good game (like many countries have constitutions that look great on paper) but one of the many things that separates companies like Toyota is that they actually execute based on their expressed vision.

Still, as some of the comments on the original blog post mention engineer plants and related human activity has risks - the Invasive Species Weblog points to some of the risks. Balance is needed as we, as a global society, innovate to assure we do not cause more problems than benefits.

Glacier National Park Photos

Topic: Travel photos

I have posted the first batch of photos from my trip to Glacier National Park this June. See all Glacier National Park photos, I have posted so far. Previous posts show photos from North Cascades National Park, Olympic National Park and Mount Saint Helens on the same trip.

I was lucky enough to have 6 days to hike around in the Park. While rainy and overcast much during much of my visit I still was able to take in great views at times.

The last two days the sun was out for much of the day and the most spectacular photos are from those days (which are not posted yet).

My current method of posting photos is taking way too long. I looked at the newest version of Picasa (which Google bought earlier this year) and I think I will try using it to use it to automate more of the process. Hopefully that will allow me to get more photos posted soon.

Photos from other trips: Curious Cat Travel Photos.

Lean Manufacturing Webinar

Plant Design for Lean Manufacturing - view webinar archive

This webinar archive is a series of slides with an audio track (my guess is the slides should be flipped as you listen though this didn't happen for me). Use of webinars to present management improvement content over the web is fairly limited at this time. And archived webinars that are available on the public web (not hidden behind locked doors (login required) - whether they are free or require a fee).

I think there is much to improve in how we take advantage of this technology. Over time this method of presenting information could prove very valuable. It is good to see people trying to figure out how we can use this technology to deliver information more effectively.

It is good that they make an archive of the webinar available online (it would be better if it were not hidden behind a login system - even a free as this one is) but still I am glad to link to them which provides them potential customers.

The business model used by those providing the content will determine if they should charge for the content, or give it away. I strongly believe that in almost all cases it is best to make significant content available for free on the public web (not behind login systems).

In some cases that free content may serve to market other similar content that is available for sale. For example if an organization had webinars they wanted to sell I would strongly suggest having an entire webinar online available for free (an archive of the webinar). It could also serve to market other products or services (books, consulting, etc.).

Webinars can have great interaction. Providing significantly useful free archived webinars (live webinars could be provided for free too if the reward was worth the cost) covering some content. If the public finds that free content valuable it can be about the most effective marketing in many ways including for gaining customers for live interactive webinars on more advanced topics.

Webinars also allow the presenter to do multiple two hour sessions for different clients anywhere in the world in the same day. So you could customize your content to specific client needs. Also each of those sessions could include employees from multiple sites around the globe.

I think this lean webinar is an example of the very early stages of what can be developed into a valuable tool used to improve the adoption of lean thinking and management improvement. My guess is 5 years from now several management improvement organizations will be using this technology very effectively in their business (and it will help them grow). I believe those that choose to provide significant content, for free, on their web sites will have a significant advantage in becoming one of those organizations.

This is especially true for any organization that is not a huge consulting firm already. Those huge firms can get away with poor use of the internet (it still isn't wise but they have the "fat" to choose not to take advantage of the internet effectively). I believe the advice, to provide significant free content, would be valuable for the large consulting firms also. But they often have personal relationships with those who will buy and so are in less need of marketing help.

If you go to major management consulting firms it is amazing how poor their web sites are. They seemed to be designed by people that read emails that their secretaries have printed out for them. I don't understand how they are hired by companies to provide very high paid advice on how to manage in the internet age but they seem to.

How about this explanation by Accenture on why you should hire them: Supply Chain Management Services: Six Sigma. That doesn't tell me much. At least Accenture has opened up a little bit and provides some articles online without having to sign in.

Wipro has been saying they are applying Toyota's methods and can help you do so to if you hire them. Go to their web site and search for Toyota: 3 results - 2 are the same news release and one tells you where their booth will be located at a conference. Search for Deming, Lean Manufacturing, Lean Thinking and Six Sigma were similarly useless. This "case study" is about the most informative (which it is not at all).

Try to download a white paper from Wipro and they force you to fill out a form (I can't tell if they want to charge you or not) and you are asked for various things including "Please enter Organization email id" - I don't know what that even means. I have mentioned to the weaknesses I saw with Wipro's site to an employee who wrote me about adding Wipro to our Management Improvement Directory but I guess Wipro decided they knew better than I, which is, of course, their right.

Those two examples are emblematic of my experience that the larger consulting firms provide the almost nothing of any use to those interested in management improvement on their sites. And it is largely the case that consultants with the highest name recognition have the least valuable information on their sites. I think this is a mistake, but it makes it very easy for even a single consultant to provide a more useful web resource than the largest consulting firms.

And webinars are one more tool that give small firms the opportunity to reach a large market. And I think over time this interactive web learning will be very effective. If you know of good webinars available online please let me know.

Science and Engineering

Topic: Science, Engineering and Economics

Broad Federal Effort Urgently Needed to Create New, High-Quality Jobs for All Americans in the 21st Century, news release on a report from the National Academies Committee on Science, Engineering, and Public Policy - Rising Above The Gathering Storm: Energizing and
Employing America for a Brighter Economic Future:

U.S. 12th-graders recently performed below the international average for 21 countries on a test of general knowledge in mathematics and science.

This is not a new discovery, but the continuing persistence of this result is none-the-less an important issue to consider.

In 2001 U.S. industry spent more on tort litigation than on research and development.

As Dr. Deming stated decades ago "Excessive legal damage awards swelled by lawyers working on contingency fees" is one of the seven deadly diseases of the American economy.

The report makes four major recommendations:

• Increase America's talent pool by vastly improving K-12 mathematics and science education.
• Sustain and strengthen the nation's commitment to long-term basic research.
• Develop, recruit, and retain top students, scientists, and engineers from both the United States and abroad.
• Ensure that the United States is the premier place in the world for innovation.

Hopefully significant action will be taken as the result of this report (or for any reason, actually). The continuing decline of the relative position (to the rest of the world) of the United States science and engineering success will not stop. The only question is how quick that decline will be By taking this, and similar, reports seriously, and then taking action, the decline of that relative position can be slowed.

Partially the relative position of the United States is falling because others are improving significantly. I am glad that is true. The portion of the decline due to the very slow improvement (or absolute decline) in the scientific and engineering success of the United States is something I hope can be changed. I believe improving the application of science and engineering will grow the "pie" for everyone.

Interesting specific example provided in the news release:

Last year chemical companies shuttered 70 facilities in the United States and have tagged 40 more for closure. Of 120 chemical plants being built around the world with price tags of $1 billion or more, one is in the United States and 50 are in China.

It is one, small, example of why I feel this is an economic issue. And while obviously a politically motivated move why the title of the report has some merit (I still think it still silly that the news release and report don't mention science or engineering in their titles, but mention the economy and jobs).

previous posts on similar topics:

• Science and Engineering Doctoral Degrees Worldwide
• Science and Engineering Fellowships Legislation
  
• Leverage Universities to Transform State Economy
• Funding Basic Research

Malcolm Gladwell - Synchronicity

Topic: Synchronicity - Management Improvement

Today I had lunch with a friend of mine, Sean Stickle, who continually provides me with interesting ideas to contemplate. One of the things he mentioned during lunch was a story in the New Yorker about the current college admission process.

On the way home I listened to a podcast (on my Zen Micro player). I have been meaning to write about what a nice addition listening to podcasts has been to my commute, but I always seem to have more important things to do (or write about). The podcasts I have listened to so far, while somewhat interesting (for those interested in management improvement) have been heavily focused on those also interested in software development.

Well the podcast today was, "Human Nature," and discussed the flaws of relying on customer surveys. It reminded me exactly of Deming's warning against the dangers of relying on surveys. Obviously there are good things to learn from surveying and talking to your customers, but Deming understood that asking customers about what innovations they would like was dangerous. Well that is basically what the speaker talked about. And he gave some excellent detailed examples (New Coke and Aeron Chairs). So again, I thought really should post about the benefit of listening to these podcasts. But I didn't.

Tonight, I stumbled across a blog post: The Business Model of Business Schools:

A great article by Malcolm Gladwell called the " the social logic of ivy league admissions" in the New Yorker magazine is linked to. This is a must read.

In looking at that article, I realized it was the exact article Sean had mentioned at lunch. I then went to the authors web site and noticed he also wrote The Tipping Point. At which time I realized the podcast I listened to on the way home was by the same guy: Malcolm Gladwell. And I decided it was time to write a post.

The podcast really is worth listening to, Human Nature:

Malcolm explores why we can't trust people's opinions -- because we don't have the language to express our feelings. His examples include the story of New Coke and how Coke's market research misled them, and the development of Herman-Miller's Aeron chair, the best-selling chair in the history of office chairs, which succeeded in spite of research that suggested it would fail.

IT Conversations has excellent podcasts by leading thinkers including Jeff Bezos, Paul Graham and Clayton Christensen (Sean also introduced me into Graham and Christensen).

I'll try to post something more on podcasts and good sources for those interested in management improvement but there is also tons of information online for those who don't want to wait for me to get around to posting. I figure those reading this blog, might, like me, be a bit behind the leading gadget users. Many might actually own iPods. But I figure many may not have taken the time to discover that they can not only listen to great music, but also listen to great thinkers present their ideas using mp3 players.

Malcolm Gladwell's new book is Blink.

Box on Quality

Topic: Management Improvement

Dr. George Box is not as well known in the general management community as his ideas merit (in my biased opinion - photo of Bill Hunter and George Box). He is well know in the statistics field as one of the leading statistical minds. Box on Quality is an excellent book that gathers his essays from his 65th to 80th year. The book has just been issued in paperback (which helps as the hardback was pricey).

While some of the essays are aimed at a reader with an advanced understanding of statistics, many of the articles are aimed at any manager attempting to apply Quality Management principles (SPC, Deming, process improvement, six sigma, etc.). An except from the book provides a table of contents and an introduction.

Some of the articles from the book are available online. I encourage you to take a look at several of the articles and then go ahead and add this book to your prized management resources, if you find them worthwhile.

• Good Quality Costs Less? How Come?
  
• When Murphy Speaks -Listen
  
• How to Get Lucky
• Six Sigma, Process Drift, Capability Indices, and Feedback Adjustment (with Alberto Luceneo)
• Statistics as a Catalyst to Learning
• Teaching Engineers Experimental Design With a Paper Helicopter
  

30 Year Fixed Rate Mortgage Rates

Topic: Economics and Investing

Fairly frequently I am asked, by friends, for investing advice. One topic I am asked about frequently is mortgages (locking in rates, etc.). Often they are concerned about what a Federal Reserve decision to raise or lower rates will effect the 30 year fixed mortgage rate. Essentially the decision by the Fed won't have any predictable impact (this is not the complete truth but close enough for the question being asked - this article has more, though it still just provides a cursory view of the situation).

The chart here, shows 30 year fixed mortgage rates from 2000-2005 versus the federal funds rate. I don't see any evidence that increases or decreases of the Fed Funds rate have a predictable impact on the 30 year fixed rate mortgage. For a larger chart and charts from 1980-1999 see 30 Year Fixed Mortgage Rates are Not Correlated with Federal Funds Rates.

I actually looked around for such charts online (to show a friend last week) but couldn't find any (I sure they must be there but still I couldn't find them). So I decided to create them myself. I used data from the Federal Reserve on historical rates. I was convinced the data would back up my belief but it is good idea to verify the data supports your beliefs (or learn that it doesn't so you can update your beliefs).

More investment info:

• Curious Cat Investment Library
• Real Estate Investing Articles
  
• Curious Cat Investment Books
• Curious Cat Investment Glossary
  

More Lean Government

Topic: Management Improvement

Lean thinking ideas are about eliminating waste. Some who believe the government should just be smaller, talk about a lean government, but that is not the same thing as a government that applies the concepts of lean thinking.

Toyota is very lean and very large. Most business apply lean concepts with the goal of growing the size of their organization as they are better able to serve customers and compete in the marketplace.

The first Public Sector Shingo Prizes have been awarded by the Shingo Prize for Excellence in Manufacturing.

The gold recipient is Robins Air Force Base, Warner Robins Air Logistics Center:

C-5 began its Lean journey in 2001, and the successful Lean implementation has produced dramatic results in quality, cost, and delivery. Flow days have been reduced by 30%, while defects per aircraft dropped dramatically. In 2004 and 2005, C-5 PDM accomplished 100% on-time delivery, while increasing the number of aircraft produced.

Silver recipients are, Letterkenny Army Depot, Patriot Missile, Air Defense System:

The "Capability Based Depot" has tripled its workload in the last 3 years while returning $21.5 million to their customers. Letterkenny has employed lean concepts to obtain a 99% customer satisfaction rate, the highest on-time-delivery rate in the Army, and to reduce its accident rate by 50%.

Tinker Air Force Base, Oklahoma City Air Logistics Center:

the Tanker Division utilized an array of process improvement tools to facilitate improvements while increasing quality, efficiency and safety; thus enabling them to become the benchmark effort in lean implementation for Tinker Air Force Base. The results were dramatic: within four years, the average yearly flow time for a KC-135 PDM dropped 52%, the number of aircraft on station (WIP) decreased 49%, and capacity increased 75%.

Hill Air Force Base, Ogden Air Logistics Center, F-16 Common Configuration Implementation Program:

Since incorporating Lean tools and techniques into its process and establishing the U.S. Air Force's first organic cellular flow line in early 2004, CCIP has realized a 30% reduction in flow days, an 80% increase in defect-free aircraft, and a 50% reduction in WIP.

Hill Air Force Base, Ogden Air Logistics Center, Commodities Branch:

Utilizing lean process improvement tools, shop technicians have reduced the cycle time from 145 days to less than 18 days and decreased the production floor footprint by 33%, thereby increasing capacity to accept a new A-10 pylon workload into the existing parameters of the organization. Additionally, the team was able to eliminate all back orders, and is meeting production demands with an unprecedented 100% on-time delivery rate!

Related links:

• Previous Lean Government post
• Public Sector Continuous Improvement Site
  

The Toyota Way Fieldbook

Topic: Management Improvement

The Toyota Way Fieldbook - a Practical Guide to implementing Toyota's 4Ps by Jeffrey Liker has just been released. For this book he is joined by David Meier, and they delve into applying the concepts from his excellent book: The Toyota Way. Toyota's 4Ps: Philosophy, Processes, People, and Partners.

"The Toyota Way Fieldbook details the language, concepts, and tools that managers need to use Toyota's success-proven practices in any organization. Readers are given valuable insights into the company's system and culture along with diagnostic tools, work sheets, and exercises--many adapted directly from Toyota originals."

Jeffrey Liker's web site
Lean Thinking articles

Deming Institute Conference

Topic: Management Improvement

For those who might be interested in meeting in person, I will be in Indiana for the Deming Institute Conference and the seminar, How to Create Unethical, Ineffective Organizations That Go Out of Business, this month.

Feel free to drop me a note if you want to try and meet. I look forward to seeing some of you.

Lean Government

Topic: Management Improvement

Making Government Work by Tom Vilsack via Panta Rei:

We redesigned the child welfare system to place greater focus on the complex and hard cases that people live out every day. We cut down paperwork so workers would have more time to spend helping children. That effort was part of our charter agency effort, which the Kennedy School at Harvard and the Ash Institute recently recognized as an Innovation of the Year award winner.

We committed ourselves to reconfiguring the way permitting and other processes worked in our government. By using Kaizen and other forward-thinking management techniques, we cut down the amount of time and staff used in the permitting process without sacrificing quality.

All of these efforts and results are outlined in our results website, at www.resultsiowa.org.

The Innovation Awards have long been a good source for learning about some of the good work done in government.

I am intrigued by what I see on the resultsiowa.org web site. I need to spend more time looking at it but at the very least they have put significant thought into their strategic priorities. That is important, and something rarely done well.

I was one of the founding board members on the ASQ Public Sector Network (now the ASQ Government Division). I also, created and have maintained the Public Sector Continuous Improvement web site for a decade. Some additional details on my background.

There have been many great efforts in the government, but still so much more needs to be done. Here are articles exploring what has been done:

• Doing More With Less in the Public Sector: A Progress Report from Madison, Wisconsin by William G. Hunter, Jan O'Neill, and Carol Wallen
• Transformation and Redesign at the White House Communications Agency by March Laree Jacques
• Quality in the Community: One City's Experience
  by George Box, Laurel W. Joiner, Sue Rohan and F. Joseph Sensenbrenner
• Quality Best Practices in Government by Thomas J. Mosgaller
• "Quality Comes to City Hall," Joseph Sensenbrenner. The former mayor of Madison reports on his experience. HBR, March 1991, reprint number 91208.

Ok, so I am biased. My father, Bill Hunter, was a significant part of the success in Madison, Wisconsin. And I worked with Gerald Suarez at the White House Military Office (after the article above was written). Well it is my blog, so I get to include what I think is most worth including. There is a great deal of great work being done in government.

I was skeptical reading Governor Vilsack's statement:

I don't believe in platitudes. I believe in making sure that government works and fulfills its promises to our communities.

Who admits they believe in platitudes? Unfortunately many politicians say they want do improve the management of government, but few actually follow through on those statements. The web site indicates he may be serious. I am intrigued enough to spend some time seeing what they are up to in Iowa.

John Hunter

The Dramatic Spread of Lean Thinking

Topic: Management Improvement and Economics

The Dramatic Spread of Lean Thinking by Jim Womack:

Currently we are experiencing an explosion of interest in applying lean thinking to practically every process in every corner of the world. And it is causing all of us in the Lean Community to think about how we can best serve the needs we are hearing about.
...
I am delighted with the spread of lean thinking far beyond the factory and far beyond the high-wage economies to every corner of the world and to every value-creating activity. My greatest concern is that we bring the best methods to bear and create the maximum amount of knowledge exchange across the global Lean Community so these initiatives will all succeed. Life will be better for all of us if they do.

Life indeed will be better for all of us with the improvement of management. The benefits of economic success are large. Good jobs are desired everywhere: USA, India, Germany, Singapore... Those jobs provide positive externalities that create a reinforcing loop of improving conditions.

There are many important factors (education, investment, political stability, rule of law...) to economic success. Effective management is among the factors that can provide dramatic increases in the standard of living of a country or community. As Jim Womack states:

I'm always amazed that my friends in high-wage countries seem to think that workers in low-wage countries will be happy to continue forever making cheap products for first-world consumers at low wages. In fact, like all of us, they want to sell products to high-wage countries at steadily rising wages, so they can become high-wage countries too

I also find this trait odd. I think it is because those in high wage countries think living in a society with a large percentage of high wage jobs is their birthright. They do not seem to realize you can go back just to the grandparents of their friends and colleagues and find a society where most jobs were low wage jobs.

I think the prospects for economic success for several generations hence is good. But it will require a better performance as a society (management must improve, in addition to the health care system, education...). The mobility of capital, ideas and people means that if countries do not adopt highly successful methods they are in much greater danger of being outdone by others.

There is not only risk but also great opportunity. To take advantage of the opportunity, participants must have the ability to offer others something of value. I believe this opportunity is indeed great. My vision for myself is to assist those who want to improve management in order to participate in the opportunities that will be available to those who have value to offer the world.

However, there is a real risk for any country that fails to take the challenge seriously that they will be passed by. The United States of America has many advantages that give us a much easier path to success than others. However, those advantages are likely to shrink going forward and the importance of making the most of all opportunities (through ideas such as: lean thinking, Deming, systems thinking, effective use of data, innovation...) is increasingly important.

I realize this big picture view might seem a bit overly dramatic to some. The value of Deming's ideas, lean thinking, management improvement... are not dependent on this big picture view. However, it is a significant part of why I care about management improvement. Yes management improvement should help us be more successful at work. But effective management can indeed "advance commerce, prosperity and peace."

Ford and Managing the Supplier Relationship

Topic: Management Improvement

There have a been a number of articles (Ford to slash vendors of key parts - Ford Rethinks Supply Strategy and posts (A "Kinder and Gentler" Lean Supply Base? - Ford Adopts Toyota-style Supplier Strategy) about supplier management, many springing from Ford's announcement.

My first thought on reading the stories about the press release was, didn't Ford already say they were going to do this in the 1980's or 1990's?

John Weiser, Spring 1997 Executive-in-Residence, Graduate School of Management:

When Ford Motor Company embraced the Deming initiative, Ford's president told his suppliers:

"We are in the process of making a major change when it comes to dealing with our supplying companies. My goal is that this will become a truly partnership effort, rather than the type of arm's length relationship that has all too often been the way we have worked in the past."

Here is a speech by the President of RadioShack Corporation, The Supply Chain of the Future: A Focus on the Customer:

The Ford supply chain had become ossified [1970's]. It was no longer agile, not to mention adaptable to competition or aligned with suppliers or customer demand.

The irony, of course, was that as Detroit became bloated and inefficient, competitors on the other side of the world were staying true to Ford's early lessons - Japanese automakers were Agile, Adaptable, and Aligned, and practiced a highly efficient form of kerietsu.
...
Interestingly, the Japanese learned kaizen from someone who Ford and others rejected - a man named Deming.

What Deming tried to re-introduce to Ford [in the 1980s] was a more modern and refined version of what had made Ford great.

Here's what I mean - During the early days, Ford and his associates were dissatisfied with the price that an auto body manufacturer was demanding.

They wanted him to get his price down, just as today's Big Three want their suppliers to reduce prices.

The difference was that Ford and his co-workers didn't just tell the supplier to cut his price.

They looked at the supplier's product and taught the supplier how to make it more efficiently.

The supplier's production costs dropped so far that the supplier could not only give Ford the price he wanted, but also make more money for himself.

Ford said they were committed to the Deming philosophy in the 1980's and 1990's. Donald Petersen, former CEO of Ford Motor Company, was one of those included in the Deming Library Tapes.

Point 4 (of Deming's 14 points): End the practice of awarding business on the basis of price tag alone. Instead, minimize total cost in the long run. Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust.

Also see The Car Quality Guru America Turned Away.

Nothing has changed from 1990 to today that explains why Ford saying they are going to deal with suppliers differently now should work any better then such statements 15 years ago. Until they acknowledge what problems in their management system have caused them to fail to use sensible management practices that have been well know for decades I see no reason to believe there claims that they will behave differently this.

The difficulty is not in reducing the number of suppliers. The difficulty is that you must change the nature of your relationship with the suppliers. And that will require changing the nature of the management systems within Ford. The various factors involved are interdependent.

You cannot expect to achieve success by adopting an individual component of an interdependent system of management. In the 1980's Ford had leadership that understood the need for improving the entire system of management. They were able to make changes. It is possible that with the right leadership the gains made in the 1980s and early 1990s could be built upon. But the evidence that Ford understands what is required, is missing, in my opinion.

From, Ford Adopts Toyota-style Supplier Strategy:

On one of our Lean benchmarking trips to Japan everyone in our group was particularly impressed by the story told by a small Toyota supplier of elbow joints we visited. This company gave up and told Toyota "we can't meet your requirements" on cost only to have a Toyota engineer come and live at their company until together they were able to redesign both their product and process to meet cost targets. Toyota refused to let even a small supplier fail.

The mentality behind this type of behavior is not one of reducing suppliers but of a system of management. One interdependent portion of that system is the reduction of suppliers so you and the suppliers are truly partners. A different understanding of the purpose of the organization is helpful. You have obligations to your customers and suppliers.

While looking analytically at one of these obligations you may conclude you would be better off free from such an obligation the system is optimized when such interdependencies exist and are nourished.

Performance Without Appraisal

Topic: Management Improvement

In response to the Alternatives to Stack Ranking? post on the popular Mini-Microsoft blog.

I'm also taking some time to contemplate on Deming's points and assess how Microsoft is doing against them.
...
What I would deeply appreciate is real-world experience from people living with stack ranking alternatives.

I strongly suggest chapter 9 (Performance Without Appraisal) of The Leader's Handbooks, by Peter Scholtes. You mentioned Deming. When asked "If we eliminate performance appraisals, as you suggest, what do we do instead?" Dr. Deming's reply: Whatever Peter Scholtes says." (page 296).

Abolishing Performance Appraisals by Tom Coens and Mary Jenkins also provides great practical examples.

------------------

Actually, I just noticed the previous post to the mini-microsoft blog pointed to us.

I keep looking at the books about how to grow beyond using industrial-era performance reviews (yes, anti-stack ranking books are out there). I don't think I'll be able to fit the books in so they'll have to wait until I get back. But I am printing out for reading later some various anti-stank ranking articles I found, especially this one over at Curious Cat:

* Total Quality or Performance Appraisal: Choose One by Peter Scholtes.

The comments on the mini-microsoft blog shows performance appraisal continues to be an emotional topic. People on opposite sides of the debate are very passionate.

I admit it took me longer to accept Dr. Deming's thoughts on performance appraisal than other ideas (and that is even with Peter Scholtes being a friend which gave me the opportunity to discuss the idea with him). So I understand it is not an easy concept to accept. Management Craft has also been focusing considerable energy on this topic recently.

This is the 100th post to the Curious Cat Management Improvement blog.

Previous Performance Without Appraisal post.