Acknowledging Failure and Learning and Improving

The Importance of the Knowledge Distillery by Kevin Meyer

Failure is important. Teaching kids to learn from failure even more so. Maybe you're simply not cut out to be a dodge ball athlete. Best if you learn that early. Modern society generally moves in the same direction. Instead of trying to just create equal opportunity, there is a tendency to want to create equal outcomes - to cushion or even eliminate the impact of difference, or even failure.

Acknowledging failure is important.  We have created situation where success and failure are reduced (in seeking to reduce failure).  But we also just ignore failure when it happens.  Doing that doesn't eliminate failure it just eliminates the incentive to improve.

I completely agree our desire to avoid failure or even criticism is a big problem.

Related: Failure: Honda’s Secret to Success - Creating a Nation of Wimps

We often lower standards so that we avoid having to face failure.  I have failed plenty of times.  It isn't some horrible result.  Learn and more on.  Don't just pretend you don't fail because failure is seen as something to be stigmatized.  You will have more success by challenging your self, accepting and learning from failure than you will by avoiding challenges and failures at all costs.

Obviously depending on the consequences of failure you should adjust your strategies.  If the consequences are really bad then use strategies that are very unlikely to fail.

Shielding people from failure is a sign you don't respect them.  If I respect someone I know they can accept failure and I don't have to treat them like a little kid.

How to Grow Manufacturing in the USA

American factories, foreign lands: How can we keep our companies here?

Lower cost of labor is only part of a more complicated story. Apple, and other manufacturers, need flexible and responsive partners that can, and are willing to, react quickly to changing demands. This more nimble and cooperative supply chain is a valuable asset–a competitive advantage for manufacturers.
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What can we do to keep even more companies from taking their manufacturing facilities abroad?

Lots of things can be done to improve the results of manufacturing in the USA.  First though we should realize the manufacturing results for the USA are really pretty good.

China's results are exceptional but the USA has done well.  Manufacturing jobs have decreased everywhere dramatically - the USA job losses (while current data is hard to get) are possibly than global manufacturing job losses.

The biggest thing that could be done to improve the manufacturing situation in the USA is significant fixes to the health care system.  The cost of support the broken USA system is enormous.  The second is to have managers of our organizations understand current management concepts like lean manufacturing and Deming's ideas.

They would then understand the weaknesses in spreadsheet thinking that lead to seeing outsourcing to cheap countries as the solution to all problems.  They would see the benefits of producing close to consumers (which also means in the case of some that manufacturing everything in the USA moving some production offshore - for offshore customers - may well make sense).

Putting the focus on improving the processes the company uses instead of just looking for a cheaper way to do what they do increases the desirability of the USA.  Currently (this will change) the USA has people better prepared to take on a leadership role in improvements.  By valuing the brainpower of your employees the desirability of locating in the USA is increased.  This is merely due to current practices around the globe, this advantage for the USA will change (Japan and Germany are very strong in this area as is much of Europe).

Related: Manufacturing Employment Data: USA, Japan, Germany, UK... 1990-2009

Great Companies to Work For and Invest In

What Are the Amazing Companies?

If I hear one more reference to Semco as an example of an amazing company, I’m going to scream. Really. And I’ve also heard the names of W.L. Gore, Whole Foods Market, and Southwest Airlines a few times too often. Can we move on with the good examples please?

I don't see why the same companies are so annoying to so many people. But you certainly are in the majority of people that share that attitude. People don't seem to say, jeez can't we get paste the ideas of Einstein, I am so tired of paying attention to what he said. Trader Joe's is pretty cool (private co, but the few shareholders I bet are doing well). Crutchfield is cool too. Cannon does lots of good stuff (maybe not for shareholders?). Netflix is good (a couple years ago maybe people didn't want to hear about them anymore, now that the press has been bashing them maybe it is ok, to acknowledge they are still pretty great). Have you heard of Apple? They do some cool stuff :-P Danaher does some good stuff (lean) - they are large but really quiet about lean, compared to some others. Ritz Carlton is one you used to hear about a lot but not so much anymore, I am pretty sure they are still good. Zappos seems pretty good (and their parent Amazon) - maybe they are too popular too? Google (too popular - too many people saying bad things now)? Another private one I hear good things about is SAS Software. Staying great is hard. I think companies like Toyota, Gore, Southwest Airlines... deserve lot and lots of attention. Related: What Companies are Practicing Deming Ideas - Trust Employees to Make Decisions - Build an Environment Where Intrinsic Motivation Flourishes

Examine the System, Don't Look to Blame a Person

Stress Solutions, Not Blame by Kevin Meyer

A couple years ago I told you how the organization had created a nonpunitive reporting system for air traffic controllers to report incidents. That led to a dramatic change, which might initially be seen as a scary negative but as most of us immediately realize is a huge positive:

New numbers released by the Federal Aviation Administration show reports of air-traffic errors have nearly doubled in three years. The number of reported incidents in 2007 was 1040, and that number rose to 1887 in 2010, an 81 percent increase. This cultural change in safety reporting has produced a wealth of information to help the FAA identify potential risks in the system and take swift action to address them.

The point of using in-process and process result measures on well functioning processes is often overlooked. You don't want to spend too many resources collecting data that has little value, but proper process measures are very useful and should be monitored. Also this helps when you decide to improve (or radically change something somewhat related) and can catch things (unintended consequences) very quickly. The point of understanding the data (in context) is critical. Brian Joiner did a very good job of emphasizing this idea I think. If you want to reduce complaints it is usually pretty easy to do so, by making it really hard to complain. When you really care about customer focus, understanding if complaints are up do to better processes to encourage complaints or because your service is lousy is critical. Related: Find the Root Cause Instead of the Person to Blame - Dr. Deming, 94% belongs to the system (responsibility of management) 6% special - European Blackout: Not Human Error (System Failures)

Expressing Your Concerns and Opinions Publicly

Former Company Bashing

But somehow it doesn't seem quite right for these high level folks to take vicious and very public parting shots at their former employers' leadership on the way out.  We all have our opinions.  Often they differ from those above us.  And sometimes the difference is severe enough to make us leave.  But you know what?  That's life.  Why can't we respectfully accept a difference of opinion and move on?    I suppose I'm naive, but this kind of public and one-sided bashing of a firm and of those entrusted to run it seems  needless and unproductive.

It seems to me that is exactly what is going on. Those companies are constantly pushing their position. I don't see anything wrong with former employees sharing their thoughts. Why is what they say considered "bashing." They are expressing their opinion. People can chose to pay attention to that person or not.  I hardly think one person's blog post is pushing around companies like Google and Goldman Sachs unfairly.  The only way there is any impact at all on those companies is if the comments resonate with the general public due to many other pieces of supporting evidence found elsewhere.  A crazy rant will not have any impact.  Expressing concerns about serious failures may have an impact.  Even then it is going to be pretty small.

Some people want followers that don't question authority. Leading high technology thinkers don't take kindly to the "follow authority" and don't question authority idea. Where this line is drawn varies, there is a certain amount of following that has to be done, and their is a point at which expressing a contrary opinion should be silenced.

In my experience the point at which contrary opinions are normally silenced is far too soon. I see nothing at all wrong with what these people said. I am very happy they did so. It is a very positive contribution to the discussion that should be taking place.

Finance people do see pretty comfortable with the model of shutting up, not ruffling feathers and cashing big checks. For that reason a Goldman Sachs former employee expressing their opinions that might make authority uncomfortable is a bit unusual.

I think silicon valley is perfectly comfortable with people expressing their opinions. And I think that is the right approach. If the person does take stupid parting shots they will damage their credibility. If they express sensible differences of opinion with the current practices of the company they left they will likely gain more respect than they lose.

Related:  Ignoring Unpleasant Truths is Often Encouraged - Taking What You Don’t Deserve, CEO Style - Respect for People

The Potential Benefits, Risks and Folly of Stretch Goals

Some excepts from, The Folly of "Stretch Goals", visit the link to see the full discussion:

Jon Miller: Stretch goals are fine, but gaming the system, sandbagging, achieving the stretch goals through heroic effort, etc. are bad because this is not sustainable. In terms of excessive risk taking, this is a question of the risk-reward calculus and the person’s degree of risk aversion. It doesn’t take a stretch goal to make Enron leaders cheat when their auditors are turning a blind eye. They stole because they could, not because a leader set stretch goals for them. If the governance around the goals are solid and the downside of risk are significant, people will pursue stretch goals in a way that is not destructive. ... 

Dan Markovitz: However, if you had the opportunity to make a HUGE bonus — millions or tens of millions of dollars — for achieving certain stretch sales targets in China, for example, you might be sorely tempted to act differently... 

Jon Miller: But my point was that cheating is not caused by stretch goals, it is caused by poor governance around the performance and rewards process... The more interesting question is why leaders continue to set up such systems. Are they stupid? Evil? Or do such systems produce results?

I think stretch goals are fine when people understand - they are giving scope to the effort. If I want breakthrough improvement quickly it may mean considering radical solutions. That can be helpful to shape people's vision. But there are risks. As Brian Joiner said there are 3 ways to improve figures ("results")

• distorting the system
• distorting the data
• improving the system (which tends to be more difficult though likely what is desired)

Improving the system is far more difficult than the first 2. Cheating can be encouraged by managers. Stretch goals can increase this encouragement. A culture that pushes the right values and discourages the wrong ones can discourage cheating. Understanding variation is very helpful (it both dramatical reduces silly reaction to variation - the fear of those silly reactions often cause people to cheat "distort the figures or system" ).

An understanding data is only a proxy for the real situation (the number is not real situation) is helpful as is understanding the arbitrary goal is essentially meaningless (it exists to give scope to efforts not to be met - 67.3% improvement when 75% improvement was the "goal" is not failure - an understanding of variation would assure this mistake was not made).

The problem is many organizations are ruled by spreadsheet managers that don't understand variation, are ruled by the tyranny of arbitrary targets (bonus and promotions)... In these situations goals do often become a big part of the reason for cheating. Stretch goals can help shape the effort. The risk (and much more common result, I think) is that they result in distortions of the system and data to achieve those results.

To answer Jon's question I think you can use goals and incentives to reach numerical targets. The risk, as Gipsie Ranny says is the organization may be ruined in the long term. But if the executives are fearful and have large enough incentives to achieve numerical targets they goals and targets can achieve the goal - but at a great cost, I believe. I believe they are more ignorant than evil (though some know the damage they are risking or causing).

A strong management system reduces much of the potential negative consequences of targets. A big problem is those organizations that most rely on targets are those that are least protected from the risks of using them.

Related: The Defect Black Market - Targets Distorting the System - The Problem with Targets

Toyota is Smart Enough to Stick with What Works, Right?

I don't believe Toyota is foolish enough to have "dramatically changed the way the company is managed." If so Toyota will suffer and the big 3 will be given their chance to dominate once again.

Akio Toyoda: Toyota's comeback kid paints the typical American magazine picture of radical CEO doing radical things to shake up company and general be heroic.  They don't seem to like to say, Toyota refocused on what has made it great for decades.  They updated a few things to deal with the current state of the company.  And they will continue to do use thee same great management concepts they did for the last 30 years for the next 30.  And American executives don't want to be seen that way - they want to be portrayed as heros.  Hopefully Akio Toyoda hasn't adopted that narcissistic tendency from his American peers.

I imagine (and hope) that it is just like all the stories talking about the Toyota crisis that wasn't.  The story of Toyota has been great management for 50 years.  They haven't been so foolish as to drop that at any other time.  I doubt Akio Toyoda is that foolish today.

Yes, Toyota needs to constantly question if they are failing to perform as they should, if they are slipping...  And they need to constantly improve not just the factory but the management processes.  Doing so is not dramatically changing, that is continuing what has been done.

American companies are so concerned with financial rewards and making themselves seem like heros they have to present everything as dramatic changes.  If Akio Toyoda has fallen to that American narcissistic disease Toyota's long term future is no better than any other car companies (and worse than Honda's).  But I don't think Toyota or Toyoda are that foolish.

As I said a few years ago, and still believe, Toyota's crisis was not a crisis.  Toyota did seem to slip a bit in trying to get away with shortcuts to quick results.  It was a fairly minor slip and all they needed to do was return to what had worked so well for decades.

Related: Toyota Stops Lines – Lots of Lines - Akio Toyoda’s Message Shows Real Leadership - Toyota Execution Not Close to Being Copied

Comment on the post from Jeff Liker:

I met with Akio Toyoda twice for a total of 4 hours and have been watching his actions closely. His philosophy is very simple:  "back to the basics of the Toyota Way."  That is all he says and all he does.  On the other hand he believes Toyota has become too bureaucratic and needs more regional autonomy and more entrepreneurial-like innovation.  In the Toyota Way 2001 they cite his Great, Great grandfather, Sakichi Toyoda, as saying: 'it is a big world out there, open the window."

So Akio Toyoda has taken actions to open up the company more to the outside world, including various partnerships, and a more intense focus on listening to the customer and innovating to stay ahead of the competition.  He also learned in the recall crisis that Toyota was slow to respond to media attacks and thus in some cases needs faster decision making leading which led to cutting the board of directors in half…. A good thing for Toyota in my view.

I do believe Toyota could do a better job of listening to the customer.  A big part of customer issues is the very customer unfriendly dealer process - pricing based on how foolish or lazy the customer is.  I doubt Toyota is willing to try and tackle this though.  It is easier to let the customer lose and keep the politicians happy.  Politicians are paid a great deal by dealers to create legal framework that makes it very hard for car companies to provide make customers value the top priority.  The dealers essentially pay politicians to allow dealers to prosper at the expense of customers; the business practices that close to noone would say are in citizen's interests.  Yes it is hard to deal with this.  Toyota has been doing what it can to accept the current system and reduce some of the negative impacts on customers.  But it is still the most obvious area of significant systemic failure to customers I believe.

I think the bureaucratic issues do need to be addressed.  And increasing the speed at which strategic/critical decisions get made is wise.  Opening up to the outside world is wise.  It is also dangerous if you start accepting the latest fads without thinking.  Obviously no-one intentionally does this.  But it happens a great deal.

Customer Un-service by Automakers

Why The ‘Check Engine’ Light Must Be Banned

all the average motorist sees is that little drawing of an engine bisected by a lightning bolt. And all that tells them is basically nothing. ... the state of things now is that your car actually could do more than just throw an error code at consumers. It contains an advanced system to diagnose itself, but the actual information from that diagnosis is not available to the car's owner; the average owner must pay a dealer or mechanic to provide him or her with the codes, and what those codes mean. This is absurd. Early on, when in-dash displays were rare, one could understand why cars didn't just display what codes were being thrown (though I think a little in-dash receipt-type printer would have been cool). But today's dash displays capable of displaying text, or at a minimum numerical codes, have been commonplace in cars for at least a decade.

Exactly right.

Which is why we need a federal mandate that bans the generic "check engine" light in new cars and instead requires, on dash, OBD-II codes and a basic description.

I can understand thinking this based on the extremely poor record of manufacturers. How is this not done already? Seems very similar to their fighting air bags for decades before adding them under federal mandate. And then finding out drivers like safety and advertising about their air bags. With such past evidence I can understand thinking the manufactures are too out of touch to improve without federal mandates. Toyota, Honda, Ford, Volvo... please do what would have been the right thing a decade ago and make your diagnostics useful for customers. Don't require us to suffer until we finally have to get the government to do what you should have done years ago. I suppose maybe two million sensors on a crash test dummy helps (as Lexus keeps spouting in ads). Though I must admit it sounds an awful lot like hype, rather than valuable engineering info. I can't imagine that more than 80% of your customers would care much more about useful information from the diagnostics in their car, than flashy dummies. I find it hard to believe you get valuable information about car design from that many censors. A higher number isn't better if it doesn't translate into better design. If it does, great, we still want to know what is wrong with our car. I would think some manufactures have already done the right thing, but I don't know who. Add comments, if you know. Related: Customer Focus and Internet Travel Search - Making Life Difficult for Customers - Good Customer Service Example