Monthly Archives: June 2014

The Productivity Paradox

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File:City of London skyline at dusk.jpgThis last week saw a further report from the Bank of England that UK productivity has fallen inexplicably behind the nation’s aspirations. There is a compelling picture of the development of productivity over time on the Office of National Statistics (“ONS”) website here.

There is general puzzlement, and disquiet, among UK economists as to why productivity is not improving. It seems to suggest that cutting the costs of production is not at the top of UK business agendas. It’s true that there are other important things to worry about: design and redesign of products and services, reputation, customer experience, workplace engagement, safety and sustainability.

But I suspect that there is nothing more important than productivity. It is only by learning how to do more with less that resources can be freed up to develop novel income streams. Even on matters of safety and environment, it is the efficient organisation that finds the resources to take those matters seriously.

The road to increased productivity is well mapped out. The continual improvement of the alignment between the Voice of the Process and the Voice of the Customer, by the means of diligent criticism of historical data is an open secret.

Bang! UK Passport Office hits the kerb

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Her Majesty's Passport OfficeThe UK’s Passport Office is in difficulties. They have a backlog that is resulting in customers’ passport applications being delayed. This is not a mere internal procedural inconvenience. The public has noticed the problem and started complaining. Emergency measures are being put in place to deal with the backlog. Politicians have become involved and are looking over their shoulders at their careers.

It is a typical organisational mess. There is a problem. Resources are thrown at it. Personalities wager their reputations. Any hero able to solve the problem will be feted and rewarded. There will be blame and punishment. Solutions will involve huge cost. The costs will be passed on to the customer because, in the end, there is no one else to pay.

A suggestion for investigation

From the outside, it is impossible to know the realities of what has caused the problem at HM Passport Office. However, I think I can respectfully and tentatively suggest some questions to ask in any inquiry as to how the mess occurred.

  • Had any surprising variation in passport processing occurred before the crisis hit?
  • If so, what action, if any, was taken?
  • Why was the action ineffective?
  • If no surprising variation was observed, were the managers measuring “upstream” indicators of process performance in addition to mere volumes?
  • Was historic data routinely interrogated to find signals among the noise?
  • If signals were only observed once it was too late to protect the customer, was the issuing process only marginally capable?

“Managing the passport issuing process on historical data is like …”

… trying to drive a car by watching the line in the rear-view mirror.

Myron Tribus

And, of course, that is what HM Passport Office and every manager has to do. There is only historical data. There is no data on the future. You cannot see out of the windscreen of the organisational SUV. Management is about subjecting the historic experience base to continual, rigorous statistical criticism to separate signal from noise. It is about having a good rear view mirror.

A properly managed, capable process will operate reliably, well within customer expectations. In process management terms, the Voice of the Process will be reliably aligned with the Voice of the Customer.

Forever improving the capability of the process gives it the elbow room or “rattle space” within which signals can occur that the customer never perceives. Those signals could represent changes in customer behaviour, problems within the organisation, or external events that have an impact. But the fact that they are unnoticed by the customer does not mean those signals are unimportant or can be neglected. It is by taking action to investigate those signals when they are detected, and by making necessary adjustments to work processes, that a future crisis can be averted.

While the customer is unaffected, the problem can be thoroughly investigated, solutions considered calmly and alternative remedies tested. Because the problem is invisible to the outside world there will be no sense of panic, political pressure, cash-flow deficit, reputational damage or destruction of employee engagement. The matter can be addressed soundly and privately.

Continual statistical analysis is the “rear view mirror”. It gives an historical picture as to how well the Voice of the Process emulates the Voice of the Customer. Coupled with a “roadmap” of the business, some supportive data from the “speedometer” and a little basic numeracy, the “rear view mirror” enables sensible predictions to be made about the near future.

Without that historical data, properly presented on live process behaviour charts to provide running statistical insight, then there is no rear view mirror. That is when the only business guidance is the Bang! when the organisation hits the kerb.

It looks like that is what happened at HM Passport Office. Everything was fine until the customers started complaining to the press. Bang! That’s how it looks to the customer and that is the only reality that counts.

#Bang!youhitthekerb

Deconstructing Deming V – Improve constantly and forever

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5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.

W Edwards Deming Point 5 of Deming’s 14 Points. Surely about this there can be no controversy.

Improvement means reducing operating costs, enhancing customer value, and developing flexibility and agility. Improvement means constantly diminishing the misalignment between the Voice of the Process and the Voice of the Customer.

The UK awaits fresh productivity statistics next month but the figures up to the end of 2013 make sobering reading. UK productivity has been in miserable decline since 2008. In response to tightening of demand, failures of liquidity, absence of safe investment alternatives, rises in taxation and straightened cash flows, the aggregate response of industry has been a decline in human efficiency.

The reasons this has happened are no doubt complex. The paradox remains that it is improvement in productivity that grows sustainable rewards, captures markets and releases working capital for new ventures. At first sight it appears the answer to all the ills of a recession.

How will you know?

In their seminal model for improving productivity, Thomas Nolan and Lloyd Provost posed the question:

How will you know when a change is an improvement?

It is such a simple questions but it is too seldom asked and I suspect that itself is a major barrier to improvement.

We are beset by human induced change, by government and by business managers. The essential discipline is critically to question whether such change results in an improvement. It is an unpopular question. Nobody who champions a particular change wants to be proved wrong, or confronted with a marginal improvement that fails to live up to an extravagant promise.

Business measurement is mandated in the modern corporation. Businesses, governments, organisations abound with KPIs, metrics, “Big Ys”, results measures … and often a distracting argument over what to call them. There is no lack of numbers for answering the question. We are constantly assured that we now have the Big Data whose absence frustrated past strategy.

The habitual analytic tool in old-style businesses was what Don Wheeler mischievously named the executive time series, two numbers, one larger (or smaller) than the other, selected to show movement in the desired direction. That is, as Scottish folklorist Andrew Lang put it:

… using statistics in the same way that a drunk uses lamp-posts — for support rather than illumination.

It is a moral certainty that no two measurements will yield the same number. One will be larger than the other. It will be easy to select two to support any pet project or theory.

Building a persuasive case that improvement has happened firstly requires a rigorously constructed baseline. Without an objective description of the historical experience base, claims as to improvement are simply speculative.

And beyond that, what the executive time series cannot do is distinguish signal from noise. It cannot help because the answer to the question When will you know …? is When there is a signal in the data. That can only be answered with the diligent and rigorous use of process behaviour charts.

At the top of this page is a “RearView” tab. Without the trenchant and determined use of process behaviour charts there is not even a white line in the rear view mirror. The only signal will come from the “bang” when we hit the kerb.

What to improve

Deming’s further message was that it was every process that was to be improved, not simply those whose customer was the end consumer. Many processes have internal customers with their own voice. Processes of management of human resources, maintenance and accounting can all have a critical impact on organisation performance. They must keep on getting better too.

Being held to account is never comfortable but neither is the realisation that we have surrendered control of assets without the means of knowing when such assets are incrementally put to increasingly efficient, effective and agile use.

We need louder demands of “Show me!”

The dark side of discipline

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W Edwards Deming was very impressed with Japanese railways. In Out of the Crisis (1986) he wrote this.

The economy of a single plan that will work is obvious. As an example, may I cite a proposed itinerary in Japan:

          1725 h Leave Taku City.
          1923 h Arrive Hakata.
Change trains.
          1924 h Leave Hakata [for Osaka, at 210 km/hr]

Only one minute to change trains? You don’t need a whole minute. You will have 30 seconds left over. No alternate plan was necessary.

My friend Bob King … while in Japan in November 1983 received these instructions to reach by train a company that he was to visit.

          0903 h Board the train. Pay no attention to trains at 0858, 0901.
          0957 h Off.

No further instruction was needed.

Deming seemed to assume that these outcomes were delivered by a capable and, moreover, stable system. That may well have been the case in 1983. However, by 2005 matters had drifted.

Aftermath of the Amagasaki rail crashThe other night I watched, recorded from the BBC, the documentary Brakeless: Why Trains Crash about the Amagasaki rail crash on 25 April 2005. I fear that it is no longer available in BBC iPlayer. However, most of the documentaries in this BBC Storyville strand are independently produced and usually have some limited theatrical release or are available elsewhere. I now see that the documentary is available here on Dailymotion.

The documentary painted a system of “discipline” on the railway where drivers were held directly responsible for outcomes, overridingly punctuality. This was not a documentary aimed at engineers but the first thing missing for me was any risk assessment of the way the railway was run. Perhaps it was there but it is difficult to see what thought process would lead to a failure to mitigate the risks of production pressures.

However, beyond that, for me the documentary raised some important issues of process discipline. We must be very careful when we make anyone working within a process responsible for its outputs. That sounds a strange thing to say but Paul Jennings at Rolls-Royce always used to remind me You can’t work on outcomes.

The difficulty that the Amagasaki train drivers had was that the railway was inherently subject to sources of variation over which the drivers had no control. In the face of those sources of variation, they were pressured to maintain the discipline of a punctual timetable. They way they did that was to transgress other dimensions of process discipline, in the Amagasaki case, speed limits.

Anybody at work must diligently follow the process given to them. But if that process does not deliver the intended outcome then that is the responsibility of the manager who owns the process, not the worker. When a worker, with the best of intentions, seeks independently to modify the process, they are in a poor position, constrained as they are by their own bounded rationality. They will inevitably by trapped by System 1 thinking.

Of course, it is great when workers can get involved with the manager’s efforts to align the voice of the process with the voice of the customer. However, the experimentation stops when they start operating the process live.

Fundamentally, it is a moral certainty that purblind pursuit of a target will lead to over-adjustment by the worker, what Deming called “tampering”. That in turn leads to increased costs, aggravated risk and vitiated consumer satisfaction.