Sunday, April 30, 2006

Airline Quality

Topic: Management Improvement

The Inmates Are Running The Asylums by Bill Waddell.

For instance, I found something called NWA's [Nortwest Airlines] "Customer First" Customer Service Guide. Incredibly, it includes the statement, "Ensure that you receive a response to your written complaints within 60 days of their receipt by our Customer Relations department." That's right - you tell them about a problem in writing and, by golly, within two months they'll get back to you.

I flew JetBlue Airways last week. The help at the counter was polite and friendly. While this is only one data point (and hardly a "high bar" to meet) it contrasts with most of my flying experience (in my experience Southwest has a good likelihood of meeting this goal). It would be nice if more airlines could be like Southwest (which manages to be profitable in a very challenging industry - LUV stock info).

"The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit."

JetBlue also offers free live TV. Not exactly a big deal to me as a customer, but as I watched I thought of all the times I hear people say it is not possible to improve and thought about the contrast. I would like to compare the challenge of making those improvements and getting live TV on planes flying across the country.

Airline quality worsens, report finds: "Southwest Airlines had the lowest rate of complaints, 0.18 per 100,000 passengers; US Airways had the highest, 1.86."

Airlines' service loses ground in quality rankings: "New York-based JetBlue (JBLU), which started flying in 2000, ranked No. 1 for a third-consecutive year in the study, which is based on various indicators of customer service."

It would be nice if Jetblue can add a pleasant flying experience alternative. The frustration caused by poor airline management has to rival that of poor management at GM and Ford. I must admit I wouldn't likely go into the airline business but there could be great opportunity since I imagine many others also avoid it given the history of losses that industry generates. But given the incredible dissatisfaction of customers, perhaps just managing sensibly will allow a good business opportunity. Southwest has done well for a long time, but they are really the only example (looking only at the US market).

Saturday, April 29, 2006

Most Meetings are Muda

Most Meetings are Muda (Waste) from Got Boondoggle:

I will not waste your time and regurgitate all the expert based meeting protocols like following an established agenda, having a meeting plan, taking meeting notes, etc. All these ideas are great and work well. Instead, I have a list of a few meeting musts that may guide you to more productive meeting time.

The post provides good tips on what to avoid. Given how many people know that many meetings are a waste of time, taking steps to improve meeting effectiveness is a good way to gain some credibility for management improvement activities. Doing so is very visible. Unfortunately, even with the simple and good ideas on how to do better - many meetings that are full of waste.

Here are some good tips from 37 folders; 9 tips for running more productive meetings:

Follow up - If you have been utilizing a project manager or note taker (and God knows you should), be sure to use a few minutes at the end for him or her to review any major new projects or action items that were generated in the meeting. Have the PM email the list of resolved and new action items to all the participants.

This is an important step missed far too often. Doing so helps make sure that everyone leaving he meeting has the same understanding of what has been decided: in addition to reviewing new assignments I would suggest review all significant decisions made. Far too often, people have very different ideas on what happened in previous meetings.

The Team Handbook also has good information on running effective meetings.

Curious Cat Management Improvement Dictionary: Muda definition

Friday, April 28, 2006

Why are you afraid of process?

Topic: Management Improvement

Why are you afraid of process? by Seth Godin

I spend a lot of time railing against organizations and teams that fall in love with process at the expense of innovation. This is not a post about that.

It's about the opposite.

Seth Godin does a great job helping people think creatively. I am glad he sees that process management is not in conflict with that. Many others fall into the trap of thinking it is, see our previous post: Not the End of Process.

Process management is necessary for management improvement. That is true in manufacturing, service, government, research and any other environment. The way process management will be done must be modified to be effective. I believe people react negatively to the concept because they see process as the "rules" such as when the explanation for poor service is given as "that is our policy." Don't mix up those excuses with proper process management and improvement strategies.


Thursday, April 20, 2006

Stop Demotivating Employees

Topic: Management Improvement

Why Your Employees Are Losing Motivation by David Sirota, Louis A. Mischkind, and Michael Irwin Meltzer from the Harvard Management Update:

Most companies have it all wrong. They don't have to motivate their employees. They have to stop demotivating them.

Clear, simple and right. Douglas McGregor explored this topic well in 1960. He explained theory X management (managers believe the workers will do only what they are forced, coerced into doing) and theory Y management (managers believe the workers want to do a good job and the managers job is to help them do so) in his excellent book: The Human Side Of Enterprise.

According to the Harvard Business School article:

To maintain the enthusiasm employees bring to their jobs initially, management must understand the three sets of goals that the great majority of workers seek from their work - —and then satisfy those goals:
  • Equity: To be respected and to be treated fairly in areas such as pay, benefits, and job security.
  • Achievement: To be proud of one's job, accomplishments, and employer.
  • Camaraderie: To have good, productive relationships with fellow employees.
One goal cannot be substituted for another. Improved recognition cannot replace better pay, money cannot substitute for taking pride in a job well done, and pride alone will not pay the mortgage.

It would be nice if we can do a better job in the next 46 years of incorporating theory Y style into our management systems. The article provides good ideas on what management should do. While not amazing new ideas, the ideas presented are good ideas that management far too often fails to properly apply.

Tuesday, April 18, 2006

Blogging is Good for You

Blogs 'essential' to a good career

For those with blogs this is a nice article to read - good positive reinforcement. It is probably a good marketing move to write an article that bloggers will like. Many will then post their thoughts on your article on their blog.

The article is a bit overly enthusiastic still it includes some good points. And these points are especially valuable for those interested a creating a career in management consulting: particularly as an individual or part of a small firm where the individual marketing can make a difference. Marketing is often one of the most difficult parts of making a successful career as a consultant. As the article says:

You can't make it on your own unless you're good at selling yourself. One of the most cost-effective and efficient ways of marketing yourself is with a blog.

Monday, April 17, 2006

Lean Accounting: What's It All About?

Lean Accounting: What's It All About? by Brian H. Maskell and Bruce L. Baggaley:

Companies using Lean Accounting have better information for decision-making, have simple and timely reports that are clearly understood by everyone in the company, they understand the true financial impact of lean changes, they focus the business around the value created for the customers, and Lean Accounting actively drives the lean transformation. This helps the company to grow, to add more value for the customers, and to increase cash flow and value for the stock-holders and owners.

This article reviews the thoughts presented at the 2005 lean accounting summit. The 2006 summit takes place in September. Jim Womack, Norman Bodek and Richard Schonberger are presenting at the conference.

See the Curious Cat Management Improvement Calendar

Sunday, April 16, 2006

Quality and Costs

finding the balance between quality and cost by Thomas Nolan Maureen Bisognano

One of the steps toward a system for improving value is recognizing that waste removal is an essential component of that system, not just a by-product of defect reduction. To alleviate discomfort with setting aims for cost reduction, senior leaders should:

Set aims for cost reduction while also mandating that quality must be maintained or improved by the effort.

In the article they discuss the view provided by Kano's model of customer satisfaction - read more about it.

Deming explained that increasing quality decreases costs. Page 3 of Out of the Crisis: Improve Quality --> Costs decrease because of less rework, fewer mistakes, fewer delays...

Like most models this does not explain everything. Achieving some quality desires does cost more. And the article examines how to look at the issue of cost reduction in health care, where the view that higher quality costs more persists to a larger extent than elsewhere. There is significant room in health care for adopting improvement that will improve quality and reduce costs because the systems are so poorly designed they are both increasing costs and decreasing quality over what could be achieved.


Saturday, April 15, 2006

China's Manufacturing Economy

Topic: economics, manufacturing

Brad Setser posts on manufacturing comparisons: Have China’s manufacturing powers been exaggerated?

I am all for pushing against over-generalizations that get repeated so often that they become conventional wisdom. The oft-stated argument that France isn't growing is one example. In fact, France has grown faster than either Germany or Italy over the past few years, and France grew for the same reason the US grew: soaring real estate prices have pumped up domestic demand.

But I would submit that the real story here is the growth in China's conventional wisdom to improve our understanding of the real situation. I agree with him that the growth in China's manufacturing sector is the most important story.

But, to me, that story is so over-reported that many get the wrong impression. The constant mention of the erroding manufacturing sector on the USA I believe leads many to think it is shrinking and small. Yet output continues to increase and the share of worldwide manufacturing output is holding steady. China is gaining substantial ground but the Chinese increase has largely come from Japan and Europe. To me this understanding is important because of my felling about the misperceptions of many. But this is nothing more than my judgement.

Two factors that are also reported have truth. First manufacturing plants have been shutting down in the USA and the production has been replaced by Chinese production, in many cases. Second manufacturing jobs are decreasing in the USA. However, this decrease is often mentioned as "moving the jobs elsewhere" which to me is misleading since the overall number of manufacturing jobs worldwide continues to decrease. The decrease in the USA has been less than it has worldwide therefore to me the main cause should be seen as manufacturing productivity increases worldwide (though this is open to debate).

By gaining better understanding of what the data actually shows I think we will better be able to predict what will happen in the future and be better able to design sensible policies.

Related previous posts:

Thursday, April 13, 2006

Dell, Reddit and Customer Focus

Topic: management improvement, internet

Reddit is a site for what's new and popular on the web (votes by the user community rate web links). That user community is highly skewed toward software engineers who are a bit irreverent (as some of the language in this post shows).

Today Reddit linked to: Introducing the Dell De-Crapifier... which is essentially a tool to help you get rid of all the extra software you get with the Dell computer. Dell gets paid by software companies to pre-install software on the computer (Google may pay $1 billion over 3 years).

It's a very dissatifiying experience to pull a brand new computer out of the box and be spammed with a bunch of trial software. After removing all of the crap, ([which] took a significant amount of time) it booted much faster and performed like it should. I kept thinking it would be nice to have an automated way to remove all this stuff. Thus was born the Dell De-Crapifier script.

Now, to be fair, I know most all of the major PC manufacturers have similar practices of installing trialware. I would suspect they don't make any profit on the hardware (or even a loss) and they make their money on the kickbacks from the software companies. I don't know.

The comments to the post are full of gems like:

Why not demand a better product from OEMs rather than cleanin up their crap for them and letting them continue to give customers what they don't want?

It's the OS that sucks.

Try a Linux machine that doesn't need this crap.

Reddit is full of software people who don't like Windows (Linux is their OS of choice). They take every opportunity to disparage Windows.

How do you use this? I just bought an Inspiron 6000 and want to murder it but then I came across this program.

Yeah the tool is not something most can really use easily.

Anything similar available for a Hewlett Packard. I've got tonnes of pre-installed stuff on it and boot time is paaaaaaaaainful.

I thought this was an amusing post and it points to a real customer focus problem. Dell is complicating customers lives and is likely very influenced by the money they are paid to do so. I am sure they would claim the extra software is a feature that adds value to customers (and some is I am sure for some customers).

One of the things Dell is doing with this practice is a form of price discrimination (in this case a knowledge and time wasting discrimination). Dell allows users who are knowledgeable to get rid of the extra stuff (similar to allowing users to get a lower price under certain conditions). This solution is not a lean solution which factors in the time of the customer.

I think most of Dell's users do not notice what Dell is doing, exactly. Reddit readers, however, by and large, do, which is one thing that makes reading Reddit fun. I find Reddit's users can point out, not just problems, but the systemic causes of those problems (so they vote up the links that do exactly this).

Most customers might not see the chain leading to their frustration but the do know they don't like that the computer is slow and they have to wade through all sorts of software (much of which they don't need or want). I think the author was exactly right that the source of the problem is Dell's monetary incentive is to get paid to add more and more stuff not to give the users what they need.

Reddit has very large number of software engineers and similar people, so the highest rated links have strong biases favored by such people (who tend to have high expectation and enjoy pointing out emperors without cloths). And even that is too general as the site is very biased toward Ruby on Rails, Paul Graham and Lisp. The most popular link of all time is Paul Graham on web 2.0.

Reddit pointed to another fun post yesterday. How the techno-geeks kicked my ass for my own good:

"Excuse me, but do you know that the percentages don't add up correctly on the graph on page 27 of the workbook?"

I must have mumbled something like "Oh - ok, thanks for telling me" while inside I was thinking "Who the hell cares, and why are you skipping so far ahead in the workbook before we even begin?"

After that I must have tried some lame icebreaker exercise that I thought was creative and fun. They ridiculed it and refused to participate. I felt like I had stepped into a bad dream.

All day I endured challenge, tough questions, attacks to my credibility and tough stares.

That is exactly what the Reddit readers will do to anything they see. Great fun to read (for me anyway) I don't think speaking in front of them would be as enjoyable.

Mainly I think these critical looks at practices are fun reading, but there is also a management issue to understand. There are many smart people who know how to voice their opinion (and the internet can connect that voice to large numbers of people). In this day and age, if you think your imperial halo with protect you from the masses you had better hope none of these people get a look at what you offer. If you are figuratively naked, they will see, and they will shout that fact from the mountain top.

Wednesday, April 12, 2006

Lean Education Academic Network Spring Meeting

Topic: Management Improvement

The Lean Education Academic Network (LEAN) is having their Spring meeting at the University of Kentucky in Lexington May 10th - May 12th. This is targeted at educators and students (a fairly small slice of our audience): still it looks interesting so here are some details.

The agenda includes:

Tour Summit Polymer, considered by the Toyota Supplier Support Center to be the leanest manufacturing facility in the US. And a tour of the Lean Boot Camp in groups, meet with students, see learning factories.

The LEAN site includes some presentations from the winter meeting.

See the Curious Cat Management Improvement Calendar for more related conferences and seminars. Including my co-presentation of How to Create Unethical, Ineffective Organizations That Go Out of Business sponsored by the Deming Institute coming up in Boston April 24th to 26th.

Jussi Kyllonen, John Hunter and Joyce Orsini (President of The W. Edwards Deming Institute, and Director of The Deming Scholars MBA Program at Fordham University) will facilitate the seminar. Louis E. Lataif, Dean of Boston University'’s School of Management, former President of Ford Europe, and a leader in transformation will present a session titled: "Every management system is perfectly designed (to get what it'’s getting)."

Why You Need a Roth IRA

Topic: Investing (USA)

Why You Need a Roth IRA by Erin Burt:

If a 25-year-old contributes $4,000 each year until she retires and makes an average annual return of 8% on her investment, she'll have more than $1.1 million saved by the time she retires at age 65. And the money is all hers -- she won't have to give the IRS a cent of it if she waits until retirement to cash out.
If that same 25-year-old invested that same $4,000 a year in a regular taxable account earning the same 8% return, she'd only have about $802,000 after 40 years if her earnings were taxed at 15%. That's more than one-fourth less money than if she'd gone with the Roth.

And the second figure would be less, if the tax rate were higher than 15%. The Roth IRA is a great way to save money. With a Roth IRA you pay taxes on the money you put in (unlike a traditional IRA), but you pay no taxes on the money you take out (once you reach retirement age). The tax benefit of avoiding taxes on the accumulated funds is much greater than the tax deduction up front (if you have a long period of time to invest and your return is good: you also have to consider the difference in tax rates today versus at retirement).

Which IRA Is Best? - short article from Smart Money.

Along with matching contributions from an employer on a 401k plan (where you can get an immediate 100% return and accumulate gain tax deferred) the Roth IRA is where you should invest if at all possible (see more on articles on investing for retirement).

Tuesday, April 11, 2006

Lean Material Handling

Don't Ignore your Water Spider a great post by Mike Wroblewski:

The second night was little better and I quickly evaluated the improvements from the night before. Later that second night, I made more improvements. Each day, I continued the cycle of experimenting with the improvements and making adjustments to see what worked best. By the end of the week, my pedometer reading hit only 10,000 steps or five miles and not one line operator had to get their own parts or screamed for me the entire shift.

More lean manufacturing articles.

Sunday, April 09, 2006

PBS Documentary: Improving Hospitals

Topic: Management Improvement

Clare Crawford-Mason and Llyod Dobyns have teamed up on a new documentary. Previously they created If Japan Can-Why Can't We? and the Deming Library Tapes.

Good News - How Hospitals Heal Themselves
A One-Hour Documentary Airing on Public Television Spring/Summer 2006
Reported by Former NBC Anchor Lloyd Dobyns

This rare good news documentary reports on a surprising solution to escalating costs, unnecessary deaths and waste in America's hospitals. Doctors and nurses tell how they did their best, working overtime, while hospital conditions worsened. They were delighted to learn a new way to improve patient care dramatically and reduce unnecessary deaths, suffering, errors, infections and costs without additional resources or government regulations.

A patient is not an automobile, but...
The unlikely solution was to use Toyota management principles (systems thinking, lean thinking, TPS) to improve their hospitals. Systems thinking allows leaders and staff to see the complex, modern workplace with "new eyes" and turn problems into improvements. It has saved up to 50 percent in costs, thousands of lives, and avoided hundreds of thousands of medical errors. Significant improvements have already begun in hospitals in several major cities.

A companion how-to book, The Nun and the Bureaucrat-How They Found an Unlikely Cure for America's Sick Hospitals: an excerpt is available from (you can also order a video or dvd of the program). "If you think that hospital care cannot be significantly improved in quality and cost, you have another think coming. Read this book." - Russell Ackoff

The documentary also describes America's deadly healthcare problem in detail for the first time on television:

The Problem
  • Doctors, nurses and administrators reveal the dangerous conditions of American hospitals, and
  • How the patient became lost in modern hospitals.

The Solution
  • How staff put patient care and safety first and quickly began to reduce waste and improve clinical outcomes;
  • How the reporting of errors and potential errors significantly increased and enabled better patient care when hospital administrators ceased focusing on blame; and
  • An MD administrator predicts these new methods will solve the malpractice crisis.

The documentary reports on SSM Health Care system with 20 hospitals and 21,000 employees across the Midwest and a Pittsburgh initiative involving more than 40 hospitals. In 1989 SSM CEO Sister Mary Jean Ryan began to adopt methods developed by Americans in the l950's to help Japanese industry. She also used the Malcolm Baldrige National Quality Award criteria to teach systems ideas.

Former Treasury Secretary Paul O'Neill, who raised safety and profits dramatically at Alcoa, when he was that company's CEO, using Toyota automobile manufacturing methods, introduced these ideas in l997 to the Pittsburgh hospitals with equally significant results.

No outside funds were required. Not incidentally, these hospitals leaders and staffs have done what the American automobile makers were not able to sustain as they tried such systems methods in the l980s. The automakers abandoned these ideas for short-term profits, and currently are suffering huge, possibly fatal, losses while Japanese car manufacturers prosper. Systems management can be used to make any organization from a hospital, school, government agency, manufacturing plant--even an entire nation--more effective, efficient, and competitive.

Contact your local PBS station for time of broadcast.

Update: Lean Blog Review

Friday, April 07, 2006

Manufacturing Jobs Data: USA and China

Topic: ,

Manufacturing Productivity and the Shifting US, China, and Global Job Scenes-1990 to 2005 (working paper - July 2005) by William Ward, Clemson University:

Manufacturing productivity growth from 1990 to 2004 should have taken away 7.5 million of the 17.7 million manufacturing jobs that existed in the US in 1990, while GDP growth should have added back (at the new productivity levels of 2004) 5.7 million manufacturing jobs-for a net loss of 1.8 million. In fact, the US economy lost 3.3 million manufacturing jobs during that period
I find that 100% of the (3.0 million) manufacturing jobs lost since 2000 were lost to manufacturing productivity growth and that 100% of the (1.8 million) jobs that should have been added back by GDP growth in the US after 2000 were shifted to other sectors of the US economy than manufacturing.

In this paper he is examines the factors leading to a reduction in manufacturing job worldwide. He concludes that job losses are mainly due to increased manufacturing productivity (worldwide, manufacturing productivity is increasing and jobs are decreasing - including China). Manufacturing output is also increasing worldwide, most notably in China, but also in the USA (which many seem to neglect when they talk about things like the "eroding manufacturing base in the USA").

I estimate global manufacturing employment to have been between 150 million and 200 million workers in 2002, with those numbers reflecting a global decline of 20-30 million manufacturing employees in 2002 compared to 1995.

So 10-20% of manufacturing jobs disappeared worldwide from 1995 to 2002. China lost between 17% and 34%; the US lost 11.4%.

I conclude that, during the period 1990 to early-2005, US manufacturing productivity growth cost the US several times more manufacturing jobs than all other factors combined-—including global competition.

I have to be careful because I believe productivity gains are the main reason for decreasing number of manufacturing jobs (that is just what seems right to me) so I am very ready to accept claims that the data shows that this is true. Nevertheless, William Ward makes the case well.

Manufacturing as Percent of Total Civilian Employment, 1990 and 2004 (2003 for UK and France) as well as Productivity Growth and Employment Changes.

Country199020041992-2003 productivity growth1992-2003 change in manufacturing jobs
United States18.0%11.8%57%*-13.6
China (estimates - see paper)

United Kingdom22.3%14.9%35.9%-18.1%
* US productively gains estimated based on 1990-2003 figures in the paper
Based on charts in the paper (based on Comparative Civilian Labor Force Statistics, 10 Countries, 1960-2004 and Output per hour in manufacturing, 15 countries or areas, 1950-2004

As an epilogue to his paper, he states: "I end this paper with an appeal for the multilateral organizations to commit themselves to the task of providing researchers and policy analysts with datasets capable of reflecting the full extent of global economic relations." I agree. It is difficult to find good data to get a clear picture of global manufacturing especially since these shifts are taking place with ever greater speed.

Related Posts:

How Whirlpool Defines Innovation

How Whirlpool Defines Innovation

now we say if we're going to put any money in an innovation project, it has to sit on a migration path, it has to be something that the customer really wants, and it's got to return an above-average profit.

I'm not sure I really agree with this description. However, perhaps within Whirlpool this is a helpful definition, as George Box says: "all models are wrong, some are useful." Perhaps viewing innovation in this way is useful to them. Gary Hamel consults for Whirlpool and knows a great deal about innovation so who am I to judge.

We trained these people called I-mentors who are kind of like Six Sigma black belts. They have real jobs, but they've also had special training in how to facilitate innovation projects and help people with their idea. We have nearly 600 of them around the world, so it's very likely that in your location or the department next to you there's an I-mentor who you can talk to.

Before innovation, we would take big risks or we wouldn't take the risk at all. I'm talking hundreds of thousands of dollars. This process has taught us you can take smaller calculated risks; $25,000 can tell you a lot in the marketplace. To date, we've shelved about 670 concepts. We hate to say we're killing a project; we say it's been shelved. It's still a struggle for us.

Innovation continues to be an important factor for management improvement. And looking at what is working is worthwhile. I still believe innovation without other aspects of Deming's ideas (constancy or purpose, stability of management, long term thinking, not managing on visible figures alone) are likely to be less successful.

Wednesday, April 05, 2006

Lean Enterprise Institute Expands

Lean Enterprise Institute Expands Services to Growing Lean Community

"LEI is introducing new programs, led by new people, at a new location to improve the practice of lean, the search for lean knowledge, and how we share the knowledge across the world," said James P. Womack, LEI founder and chairman. Based on customer research, LEI has formed into four units -- Lean Learning Materials, Lean Education, Lean Enterprise Partners, and Lean Events -- to align with the needs of the Lean Community, Womack said.

Lean Learning Materials will expand the depth and breadth of LEI's publications and training materials to functional areas beyond operations, including product development, supplier management, policy management, and the consumption process from the standpoint of the customer. It also will develop materials for senior executives leading lean transformations.

Lean Education will expand LEI's popular workshop series to include all functional areas in enterprises while developing lean leadership courses for senior managers in a wide range of industries.

Michael Brassard is president, Lean Learning Materials. Prior to joining LEI, he was a partner in Brassard & Ritter, LLC, a publisher of business improvement resources. Before that, he was project director and founding staff member of GOAL/QPC, an international research, training, consulting, and publishing organization. In 20 years with GOAL/QPC, Brassard served as senior consultant, trainer, and author as well as director of learning events and product development. He also is the author, co-author, or editor of eight books on organizational improvement systems and tools, including many of the titles in the Memory Jogger series that has sold over eight million copies worldwide in a dozen languages.

Others at LEI include David LaHote, David Logozzo and Helen Zak.

Womack Podcast on GM

Topic: Management Improvement, Toyota Production System

Womack Audio on (14 minutes) via the Lean Blog, where they quote from the audio:

"What do they worry about? They worry about the fact the system is still driven out of Japan and they're everywhere now in terms of factories, in terms of R&D, but the fact is, to put the discipline in the system, that force, that energy is still coming out of Toyota City. How do they diffuse that energy so it's not coming from one place? I don't have the answer. They don't have the answer. But they think about it every day."

Recent post on Evolving Exellence about this topic - in a broad sense: Toyota's Achilles Heel


Monday, April 03, 2006

Problems with Bonuses

What sort of bonuses should we pay? by Seth Godin:

Money, it's been shown time and time again, is a demotivator. I'm not talking about a fair or even generous salary. Being a cheapskate is no way to find a great employee. But once people have joined your team, incremental money--bonuses and the like--usually demotivate people.

He is right. Why salary bonus and other incentives fail to meet their objectives by Dale Asberry.

Lean Manufacturing Visionary Jim Womack On Frontiers Of Lean Thinking by Jim Womack

by bonus systems motivating sales staff to make the month or make the quarter and producing a wave of orders at the end of the reporting period. A better approach to these problems is to revamp the bonuses so they are rolling averages rather that don't encourage big batches of orders.

Good resources:

Even with salespeople bonus are usually a bad idea, Deming's ideas at Markey's Audio Visual:

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.

commission pay and bonus often set up a conflict between what is in the interest of the company and the employee. They lead to bunching of orders around quarterly quotas, deadlines and competitions. They lead salespeople to think their job is to sell whatever pays them the most not to assist the customer.

Sunday, April 02, 2006

Toyota Powers to the Front

Toyota powers to the front

(Toyota President, Katsuaki Watanabe) eschews the normal management mantra of shareholder value above all. A company’s purpose, Watanabe insists, is to be useful to society.

W. Edwards Deming described the purpose of an organization in New Economics, on page 51, as:

The aim proposed here for any organization is for everybody to gain -
stockholders, employees, suppliers, customers, community, the environment - over the long term.

More from our previous post on the purpose of an organization

More lean thinking (Toyota Production System) articles.

Saturday, April 01, 2006

People: Team Members or Costs

Inside TPS at Toyota, Georgetown, Kentucky by Ralph Rio:

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

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

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

Toyota does try to reduce overall costs (including labor costs) by continually improving and making cars more and more efficiently (so they can produce cars using fewer hours of labor in the future than they need today). Trying to become more efficient by enganging everyone in the effort is a part of the system of management at Toyota. The current Toyota employees are an important part of the system and are not viewed as a cost to eliminate. The management used by many other companies seems to view employees as just a marginal costs to be eliminated whenever possible.

Reinventing the Industrial Giant by Nitin Nohria, Davis Dyer and Frederick Dalzell:

There are many skeptics who believe that GM will not be able to successfully reinvent itself. Its recent history suggests that GM has had difficulties accomplishing this in the past. In the 1980s, under the leadership of Roger Smith, GM tried to transform itself into the "21st Century Corporation." The plan was to revamp all of the assembly plants and replace workers with robots and other forms of computerization. The company was to spend $40 billion on this project. However, this project was a failure.

Can't Run Robots Without People by Hedrick Smith:

You literally can order in Japan a Toyota car and within two weeks get the car and they literally make it from your order.
Now Roger Smith's response to that in the early 1980s was classic. American technology, we're going to automate. We're going to robotize. We're going to do everything we can to make this the most modern company in the world.
I talked with Harry Pierce, who was executive vice president of the new team at General Motors, and he said, "We had this view that we could literally leapfrog the competition by taking technology and literally replacing people overnight. We went on a great buying spree. We loaded up plants with robotics."
You can't run robots without people. You can't run robots unless you have people who can program and can fix them.