Targets Distorting the System

Topic: Management Improvement

I still rember Dr. Brian Joiner speaking about process improvement and the role of data well over a decade ago. He spoke of 3 ways to improve the figures: distort the data, distort the system and improve the sytem. Improving the system is the most difficult.

There is an interesting article on the effects of distorting the syste: Tony Blair says he will ensure NHS targets do not stop people from seeing their GPs when they want to, from BBC News.

The promise follows claims that some GPs' surgeries are refusing to set appointments more than two days in advance because of the targets.

In order to make the data meet the targets the system is distorted to achieve the target, rather than to serve the customer.

From Peter Scholtes' article published in National Productivity Review in 1993, Total Quality or Performance Appraisal: Choose One:

Distorting the numbers, a form of creative accounting aimed at looking good rather than doing well, is rampant in American business. Given a standard to reduce employee turnover, one vice president of human resources simply changed the formula for calculating turnover. This change reduced the turnover ratio while improving nothing. Distorting the system often occurs because performance appraisal encourages individuals to squeeze or circumvent the system for their short-term individual gain, rather than improve it for collective long-term gain. The sales force pulls out all stops to meet one quarter's sales quota and sales sag in the following quarter.

As Deming said: "A numerical goal without a method is nonsense." and "Where there is fear you do not get honest figures." Source MAQIN Newsletter: Quality at Work - Spring 2005.

From Mechanistic to Social Systemic Thinking

Topic: Management Improvement

The Ackoff Center has posted a presentation, From Mechanistic to Social Systemic Thinking (pdf format), given by Russell Ackoff in November 1993 at the Systems Thinking in Action Conference. As usual he presents many great ideas well. And ten years later the ideas presented are still fresh and worth reading. The ideas are more familiar than they were in 1993 but are still powerful. The presentation concluded with

Now, I don't want to take any more of your time, but it's easy to show that the interest in design, quality, and learning all derive from the same transformation in our concept of the nature of reality.

Russell Ackoff Biography and links to more of his papers and resources on his ideas.

Dilbert and Deming

Topic: Management Improvement

6 June 2005 Dilbert Strip on motivational posters:

The point of that poster is your spirit should soar like an eagle while you continue to do mundane work

Dilbert can show the silliness that is common place in many workplaces, as just that - silly. Point 10 of Deming's 14 points called on management to eliminate slogans. Deming refined the wording as he learned: the text from the Deming Institute site now states:

Eliminate slogans, exhortations, and targets asking for zero defects or new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force.

That text works well for me, but I think Dilbert provides a great service in pointing out the same idea that such slogans are silly and even harmful in a way many others find more accessible. Of course most managers don't seem to notice when Dilbert points out that a management "tool" they use lacks value - that the "emperor has no clothes" (The Emperor'’s New Suit by Hans Christian Andersen, 1837).

Six Sigma and the Evolution of Statistical Management Methods

Six-Sigma: the Evolution of 100 Years of Business Improvement Methodology by Ronald D. Snee.

The article includes a nice very quick summary of the development of statistical methods to aid management improvement in the last 100 years. Then the article gives a good overview of Six Sigma.

There are four aspects of the Six-Sigma method...

First, Six-Sigma places a clear focus on getting bottomline results...

Next, Six-Sigma builds on improvement methods that have been shown to be effective and integrates the human and process elements of improvement...

The third key characteristic of Six-Sigma is that it sequences and links the improvement tools into an overall approach...

The fourth key characteristic is that Six-Sigma creates an infrastructure of
Champions, Master Black Belts (MBB), Black Belts (BB) and Green Belts (GB) that
lead, deploy and implement the approach...

Six-Sigma is based on the scientific method, utilising statistical thinking and methods (Hoerl and Snee, 2002). Statistical thinking, therefore, is fundamental to the methodology because Six-Sigma is action-oriented, focuses on processes used to serve customers, and defect reduction through variation reduction and improvement goals.

And the article closes with a case study.

Open Source Management Terms

Topic: Management Improvement

Statistical Method Helps Boost Bottom Lines, Batting Averages by Jon Van, Chicago Tribune:

Using statistical techniques embraced by quality guru W. Edwards Deming, Holland has worked for a generation guiding enterprises large and small to boost efficiency.
...
Yet getting management support for an MVT project is vital, Holland said, because experience shows that only 25 percent of ideas intended to improve a process will have a positive effect. The others will either have no effect or will hurt. Managers hate to see experimental results shoot down ideas they were certain would help, he said.

The article also mentions:

While Holland claims MVT as his own, others say it is really just a variation of strategies widely used in business.

"Multifactor experiments have been around for a long time," said Ajit Tamhane, Northwestern University professor of statistics and industrial engineering and management sciences.
...
David Coit, a Rutgers University professor of industrial systems engineering, said that Holland's MVT is very much like a quality-enhancing scheme called design of experiments.

So often we seem to focus on proprietary solutions. Instead it seems to me, most often what is needed is to do a good job of applying the ideas that have been known for decades. Deming ideas, design of experiments, lean thinking, experimentation, etc. are not secrets. There is a long history of how to apply these ideas to improve organizational performance.

QualPro obviously does well marketing itself (see press clippings from their web site) selling the concept of proprietary solutions to press organizations. Raising the question of whether the proprietary solutions really offers unique ideas, as the The Tribune article did was uncommon in my experience.

I like those encouraging the adoption of statistical tools to improvement management but I find the practice of trademarking terms like Six Sigma and MVT a bad way to encourage innovation in the practice of management. While it is nice to see Six Sigma efforts and others use statistical tools (such as design of experiments) I would encourage people to stay with "open source" management terms and remain part of a community looking to improve the practice of management.

China and the Sugar Industry Tax Consumers

Topic: Economics

China to Raise Tariffs On Clothing Exports, from the Washington Post:

The Chinese action would raise export duties on 74 categories of Chinese clothing from token amounts announced late last year to a range of 12 to 48 cents per garment, starting June 1.

If the Chinese government must reduce the amount of the world textile trade that their country is taking, or face retaliation from other countries, this is a very smart move. Essentially China gets to tax the United States, Europe, etc. and be thanked for doing so by the governments of those countries. Such is the odd nature of international trade these days.

The Chinese government is going to tax textiles being exported by China. Therefore when an American picks up a shirt at the mall it will include a new tax to the Chinese government and this is seen as a good thing by the American government. An alternative would be for the American government to tax imports. Then the tax paid by the American consumer would go to the United States government instead. It seems odd that the American government thinks it is better to pay a tax to the Chinese government than to the American government but that seems to be what their policy and statements support.

Another alternative (to regulate trade) is to use quotas (or tariffs so large they are effectively quotas - for example a 10 cent tariff [import tax] on plain t-shirts would still allow foreign competition to compete in the marketplace [even with the extra tax], however, if the tax were $10 a shirt it would effectively be impossible to compete). Quotas benefit those who are protected from foreign competition (the companies themselves, rather than either government, get to pocket the "protection tax"). The American sugar industry support system is a very good example of this. CAFTA (the Central American Free Trade Agreement) is in political danger because those businesses currently pocketing huge amounts in "protection taxes" on American consumers are fearful their special deals under current laws will be weakened.

• Star Tribune Editorial - CAFTA, sí - More would win than lose


• Big Sugar and the Fight Over CAFTA from the Facing South Blog


• Special Interests Often Outweigh the Greater Needs of America by Brett D. Schaefer, The Heritage Foundation


• A Sweet Deal for the Sugar Industry by Doug Bandow, Cato Institute. "You can never get enough from consumers and taxpayers. That apparently is the sugar industry's motto. Collect subsidies. Ban trade. Outlaw your competitors. Let the American people pay."


• Sugar Farmers Flex Muscle by Andrew Martin, The Chicago Tribune. "The result is that U.S. sugar costs about 23 cents per pound while sugar on the world market costs about 9 cents per pound"

International trade is a very complex topic. The arguments for how to make trade "fair" not just "free" are worthwhile. I believe it is healthy to debate the topic. Free market capitalism includes the tenet that free trade benefits the economies of trading partners (due to comparative advantage) also requires that the government regulate the free hand of the market when needed. And international trade includes instances where regulation is needed.

The question of what would be a "fair" international trade agreement for textiles is much more complex than understanding the effect of China's announced move to tax exports. That move is pretty obviously a win for the Chinese government: they get to effectively tax citizens of other countries. Just as companies in the United States are the beneficiaries of the current law that lets them collect the benefits of the "protection tax" (on sugar) from the American consumer (and those beneficiaries remember to pass on a share of the benefits to the politicians that provide them the bounty).

We need to increase the economic literacy of the public so they can effectively participate in the debate over international trade. This debate is going to remain an important topic for decades. It is hard to believe more than a few thousand people in the United States really want to have hundreds of millions of people pay excessive sugar prices (over twice what the rest of the world pays) to benefit a very few. Why politicians support those who give them large amounts of money is not hard to understand. Even those politicians who tend to support free trade seem to find excuses to oppose free trade for those who give them money.

Roger Hoerl's Perspective on the Future of Six-Sigma

One Perspective on the Future of Six-Sigma by Roger Hoerl. Originally published in the International Journal of Six Sigma and Competitive Advantage 2004 - Vol. 1, No.1 pp. 112 - 119.

Six-Sigma has maintained momentum for over ten years now, longer than many pundits expected. However, the key question remains: how long will Six-Sigma remain front-page news? The answer is that it will remain front-page news as long as it delivers front-page results. A second, and related question is: how might the initiative morph and evolve in order to remain relevant going forward? This paper suggests that several emerging trends will continue, such as migration to financial services and healthcare, standardisation of Design for Six-Sigma (DFSS), and further globalisation. Longer term, a key challenge appears to be integration into normal operations, rather than managing Six-Sigma as a separate initiative.

Roger Hoerl, leader of the Applied Statistics Lab at GE Global Research, is one of the leading lights in the Six Sigma movement - in my opinion. He has also co-authored several excellent books:

• Six Sigma Beyond the Factory Floor: Deployment Strategies for Financial Services, Health Care, and the Rest of the Real Economy by Ron D. Snee and Roger W. Hoerl, 2004. Highly Recommended.
• Statistical Thinking : Improving Business Performance by Roger Hoerl and Ronald D. Snee, 2001. A great book on how to apply statistical thinking to improve business results. More details on Statistical Thinking.

You can also view more articles by Roger Hoerl via the Curious Cat Management Improvement Library.

Curious Cat Blogs

Topic: Management Improvement

We have started a new blog, Curious Cat Management Articles, specifically to highlight management improvement articles on topics like: Lean Manufacturing, Deming, Six Sigma, Continuous Improvement, Innovation, Customer Focus, SPC and System Thinking.

We are still working out the best way we can use blogs effectively. Our current plan has several blogs targeted for slightly different audiences (so you may be interested in one, or several or all). The current Curious Cat Blogs:

• curiouscat.com Blog (this blog) - focused on management improvement, economics, investment, travel, the internet and the curiouscat.com web site. These posts will have much more of our own commentary. Right now (this may change of course), we plan on including short posts on several selected management improvement articles that are added to the Curious Cat Management Improvement Library. So if you are pressed for time you can just try the articles and posts we mention here.
  
• Curious Cat Management Articles - focused on short posts mainly linking to articles on systems thinking, continuous improvement, lean thinking, Deming's ideas, customer focus, six sigma, design of experiments, quality management and related topics. We will continue to collect the best online management improvement resources at the Curious Cat Management Improvement Library. We plan on including many short posts here that might be of interest. We hope this will serve as a good source for articles and blog posts on the management improvement topics we focus on. We see this now as a quick way for those focused on management improvement to keep up with what is being said online about the topic.
  
• Curious Cat Science Blog - focused on innovation, research and education in science and engineering.
• Curious Cat Articles and Links Blog - posts about blog posts, online articles and web resources of general interest (largely focused on the internet, economics and business).