Category Archives: Deconstructing Deming

Deconstructing Deming XI B – Eliminate numerical goals for management

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11. Part B. Eliminate numerical goals for management.

W. Edwards Deming.jpgA supposed corollary to the elimination of numerical quotas for the workforce.

This topic seems to form a very large part of what passes for exploration and development of Deming’s ideas in the present day. It gets tied in to criticisms of remuneration practices and annual appraisal, and target-setting in general (management by objectives). It seems to me that interest flows principally from a community who have some passionately held emotional attitudes to these issues. Advocates are enthusiastic to advance the views of theorists like Alfie Kohn who deny, in terms, the effectiveness of traditional incentives. It is sad that those attitudes stifle analytical debate. I fear that the problem started with Deming himself.

Deming’s detailed arguments are set out in Out of the Crisis (at pp75-76). There are two principle reasoned objections.

  1. Managers will seek empty justification from the most convenient executive time series to hand.
  2. Surely, if we can improve now, we would have done so previously, so managers will fall back on (1).

The executive time series

I’ve used the time series below in some other blogs (here in 2013 and here in 2012). It represents the anual number of suicides on UK railways. This is just the data up to 2013.
RailwaySuicides2

The process behaviour chart shows a stable system of trouble. There is variation from year to year but no significant (sic) pattern. There is noise but no signal. There is an average of just over 200 fatalities, varying irregularly between around 175 and 250. Sadly, as I have discussed in earlier blogs, simply selecting a pair of observations enables a polemicist to advance any theory they choose.

In Railway Suicides in the UK: risk factors and prevention strategies, Kamaldeep Bhui and Jason Chalangary of the Wolfson Institute of Preventive Medicine, and Edgar Jones of the Institute of Psychiatry, King’s College, London quoted the Rail Safety and Standards Board (RSSB) in the following two assertions.

  • Suicides rose from 192 in 2001-02 to a peak 233 in 2009-10; and
  • The total fell from 233 to 208 in 2010-11 because of actions taken.

Each of these points is what Don Wheeler calls an executive time series. Selective attention, or inattention, on just two numbers from a sequence of irregular variation can be used to justify any theory. Deming feared such behaviour could be perverted to justify satisfaction of any goal. Of course, the process behaviour chart, nowhere more strongly advocated than by Deming himself in Out of the Crisis, is the robust defence against such deceptions. Diligent criticism of historical data by means of process behaviour charts is exactly what is needed to improve the business and exactly what guards against success-oriented interpretations.

Wishful thinking, and the more subtle cognitive biases studied by Daniel Kahneman and others, will always assist us in finding support for our position somewhere in the data. Process behaviour charts keep us objective.

If not now, when?

If I am not for myself, then who will be for me?
And when I am for myself, then what am “I”?
And if not now, when?

Hillel the Elder

Deming criticises managerial targets on the grounds that, were the means of achieving the target known, it would already have been achieved and, further, that without having the means efforts are futile at best. It’s important to remember that Deming is not here, I think, talking about efforts to stabilise a business process. Deming is talking about working to improve an already stable, but incapable, process.

There are trite reasons why a target might legitimately be mandated where it has not been historically realised. External market conditions change. A manager might unremarkably be instructed to “Make 20% more of product X and 40% less of product Y“. That plays in to the broader picture of targets’ role in co-ordinating the parts of a system, internal to the organisation of more widely. It may be a straightforward matter to change the output of a well-understood, stable system by an adjustment of the inputs.

Deming says:

If you have a stable system, then there is no use to specify a goal. You will get whatever the system will deliver.

But it is the manager’s job to work on a stable system to improve its capability (Out of the Crisis at pp321-322). That requires capital and a plan. It involves a target because the target captures the consensus of the whole system as to what is required, how much to spend, what the new system looks like to its customer. Simply settling for the existing process, being managed through systematic productivity to do its best, is exactly what Deming criticises at his Point 1 (Constancy of purpose for improvement).

Numerical goals are essential

… a manager is an information channel of decidedly limited capacity.

Kenneth Arrow
Essays in the Theory of Risk-Bearing

Deming’s followers have, to some extent, conceded those criticisms. They say that it is only arbitrary targets that are deprecated and not the legitimate Voice of the Customer/ Voice of the Business. But I think they make a distinction without a difference through the weasel words “arbitrary” and “legitimate”. Deming himself was content to allow managerial targets relating to two categories of existential risk.

However, those two examples are not of any qualitatively different type from the “Increase sales by 10%” that he condemns. Certainly back when Deming was writing Out of the Crisis most OELs were based on LD50 studies, a methodology that I am sure Deming would have been the first to criticise.

Properly defined targets are essential to business survival as they are one of the principal means by which the integrated function of the whole system is communicated. If my factory is producing more than I can sell, I will not work on increasing capacity until somebody promises me that there is a plan to improve sales. And I need to know the target of the sales plan to know where to aim with plant capacity. It is no good just to say “Make as much as you can. Sell as much as you can.” That is to guarantee discoordination and inefficiency. It is unsurprising that Deming’s thinking has found so little real world implementation when he seeks to deprive managers of one of the principle tools of managing.

Targets are dangerous

I have previously blogged about what is needed to implement effective targets. An ill judged target can induce perverse incentives. These can be catastrophic for an organisation, particularly one where the rigorous criticism of historical data is absent.

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Deconstructing Deming XI A – Eliminate numerical quotas for the workforce

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11. Part A. Eliminate numerical quotas for the workforce.

W Edwards DemingI find this probably the most confused part of Deming’s thinking. Carefully reading Out of the Crisis (at pp70-75) Deming’s attack is not on standardised work, that is advocated as central to his message, but against specifications for the volume of work: calls answered per hour, finished parts per day.

Deming recognises management’s need to predict costs and revenues but condemns quotas as destructive of achieving productivity.

Deming also deprecates such quotas as corroding workplace pride. I shall return to that in Point 12.

Deming’s criticism of work quotas goes as follows.

  • Some individuals may achieve them easily and their productive capacity will then stand idle.
  • Some individuals may struggle and suffer poor moral.
  • Some individuals may compromise quality so as to make a quota or so as to make it sooner.
  • Achievement of quotas may be frustrated by faults in “the system” which are outside the individual worker’s control.

Deming gives the following example of how he would advise financial planning in a call centre of 500 people (at pp73-74).

  1. Set a preliminary budget.
  2. Make it clear to every one of the 500 that their aim is to give satisfaction to the customer, to take pride in their work.
  3. Everybody will keep a record of calls made.
  4. Customers with special problems will be referred to the supervisor.
  5. At the end of each week, sample 100 individuals’ record and summarise the data.
  6. Repeat steps 2 to 5 for several weeks.
  7. Analyse the data.
  8. Establish a continuing study following the above steps but on a reducing basis.
  9. Use the data to predict costs.

Now there is much merit in forecasting costs based on actual data. Further, improving performance based on the relentless criticism of historical data is essential. However, I think Deming’s prescription naïve and idealistic. The trick is to extract the ideals and industrialise them.

Planning

The simple matter is that any new enterprise has to be established on the basis of a robust business plan. There is competition for resources: people, capital, infrastructure … and everyone has to make their case. It is impossible to do that without judgment. No matter how much historical data or even qualitative experience is to hand we cannot simply project it into the future without establishing further conditions (RearView). It is unlikely this can ever be done exactly in a new establishment.

That competition for resources then prevents us from taking an overly conservative view of what can be achieved. Setting the bar too low for call centre operators starts off from an uncompetitive position. Further, the modest answering rate in the plan has to be resourced with infrastructure. Intentions to improve the answering rate post-launch are all very well but what will happen to the personnel and materiel that we bought in to accommodate the unambitious start-up?

Sometimes work needs to be set at a rate that is recognised by a team of co-workers and other parts of the organisation. Excess production is as contrary to the philosophy of lean operations as is shortage. The idea of takt time allows production lines to be balanced, receipts and deliveries co-ordinated, stock turns to be minimised and cash flows improved. In many situations that is sufficient to answer Deming’s fears about individuals distorting production to bank an accomplished target.

Stretch

What is now proved was once but imagined.

William Blake

Is it so wrong to set a target that nobody involved has seen achieved before? Deming would say that it was fine so long as there was a plan defining the means by which this could be achieved. There are many compelling stories from sports science telling how records have been broken by incremental improvement (e.g. Dave Brailsford and the GB cycling team).

But what about setting an ambitious stretch target without a plan for achieving it? That would be brave indeed. It would be based on no more than an exhortation to the call centre operators to work more furiously, more furiously than anyone had ever done before. I cannot say that would never work. In my athletics days I ran some of my best times when team mates were urging me on from the sidelines. However, as a business strategy it faces the social realities of employees’ collective ability to resist quietly that to which they do not assent. With a carefully recruited and motivated team it could work. It would certainly require a high degree of collective problem solving and improvement by the operators. But of all strategies for operational excellence it looks the most limited and the most risky. There is no obvious Plan B.

The Ringelmann effect

There is a tension between unrealistic stretch targets and a further problem that Deming ignores entirely, the Ringelmann effect. It may sadden the hearts of those who believe in the inherent fulfilling joy of work and best intentions of workers to do a good job but evidence is overwhelming that there are situations where individuals exert less effort in a group environment than they would if acting individually.

In 1913, Max Ringelmann conducted experiments that showed that individuals pulled less strenuously on a rope when pulling in a group than when pulling alone.

A realistically set and communicated takt time can assist in concentrating effort and communicating common work standards and the expectations of peers.

The poor supervisor

If Deming was so pessimistic as to believe that workers would sacrifice quality to hit targets then they would surely be more than happy to shunt enquiries off to their supervisor in order to post commendable performance. All that Deming’s proposal does is to divert the whole problem of difficult calls to the supervisor who, presumably, is either beset with his own performance problems or operates outside business measurement.

Deconstructing Deming X – Eliminate slogans!

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10. Eliminate slogans, exhortations and targets for the workforce.

W Edwards Deming

Neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds.

Inscription on the James Farley Post Office, New York City, New York, USA
William Mitchell Kendall pace Herodotus

Now, that’s what I call a slogan. Is this what Point 10 of Deming’s 14 Points was condemning? There are three heads here, all making quite distinct criticisms of modern management. The important dimension of this criticism is the way in which managers use data in communicating with the wider organisation, in setting imperatives and priorities and in determining what individual workers will consider important when they are free from immediate supervision.

Eliminate slogans!

The US postal inscription at the head of this blog certainly falls within the category of slogans. Apparently the root of the word “slogan” is the Scottish Gaelic sluagh-ghairm meaning a battle cry. It seeks to articulate a solidarity and commitment to purpose that transcends individual doubts or rationalisation. That is what the US postal inscription seeks to do. Beyond the data on customer satisfaction, the demands of the business to protect and promote its reputation, the service levels in place for individual value streams, the tension between current performance and aspiration, the disappointment of missed objectives, it seeks to draw together the whole of the organisation around an ideal.

Slogans are part of the broader oral culture of an organisation. In the words of Lawrence Freedman (Strategy: A History, Oxford, 2013, p564) stories, and I think by extension slogans:

[make] it possible to avoid abstractions, reduce complexity, and make vital points indirectly, stressing the importance of being alert to serendipitous opportunities, discontented staff, or the one small point that might ruin an otherwise brilliant campaign.

But Freedman was quick to point out the use of stories by consultants and in organisations frequently confused anecdote with data. They were commonly used selectively and often contrived. Freedman sought to extract some residual value from the culture of business stories, in particular drawing on the work of psychologist Jerome Bruner along with Daniel Kahneman’s System 1 and System 2 thinking. The purpose of the narrative of an organisation, including its slogans and shared stories, is not to predict events but to define a context for action when reality is inevitably overtaken by a special cause.

In building such a rich narrative, slogans alone are an inert and lifeless tactic unless woven with the continual, rigorous criticism of historical data. In fact, it is the process behaviour chart that acts as the armature around which the narrative can be wound. Building the narrative will be critical to how individuals respond to the messages of the chart.

Deming himself coined plenty of slogans: “Drive out fear”, “Create joy in work”, … . They are not forbidden. But to be effective they must form a verisimilar commentary on, and motivation for, the hard numbers and ineluctable signals of the process behaviour chart.

Eliminate exhortations!

I had thought I would dismiss this in a single clause. It is, though, a little more complicated. The sports team captain who urges her teammates onwards to take the last gasp scoring opportunity doesn’t necessarily urge in vain. There is no analysis of this scenario. It is only muscle, nerve, sweat and emotion.

The English team just suffered a humiliating exit from the Cricket World Cup. The head coach’s response was “We’ll have to look at the data.” Andrew Miller in The Times (London) (10 March 2015) reflected most cricket fans’ view when he observed that “a team of meticulously prepared cricketers suffered a collective loss of nerve and confidence.” Exhortations might not have gone amiss.

It is not, though, a management strategy. If your principal means of managing risk, achieving compelling objectives, creating value and consistently delivering customer excellence, day in, day out is to yell “one more heave!” then you had better not lose your voice. In the long run, I am on the side of the analysts.

Slogans and exhortations will prove a brittle veneer on a stable system of trouble (RearView). It is there that they will inevitably corrode engagement, breed cynicism, foster distrust, and mask decline. Only the process behaviour chart can guard against the risk.

Eliminate targets for the workforce!

This one is more complicated. How do I communicate to the rest of the organisation what I need from them? What are the consequences when they don’t deliver? How do the rest of the organisation communicate with me? This really breaks down into two separate topics and they happen to be the two halves of Deming’s Point 11.

I shall return to those in my next two posts in the Deconstructing Deming series.

 

Deconstructing Deming IX – Break down barriers between staff areas

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9. Break down barriers between staff areas.

W Edwards Deming

Something there is that doesn’t love a wall,
That wants it down!

Robert Frost
Mending Wall (1914)

Point 9 of Deming’s 14 Points. One that is always attractive to a self describing iconoclast. Barriers must be bad if they prevent the exchange and interaction of ideas, or worse if they lead to optimisation within a subunit that suboptimises the wider system. Deming was thinking of managers such as John Browett. Browett was given charge of Apple’s retail operations and immediately started to cut staff numbers and hours in order to reduce his own budget. However, Apple’s avowed strategy is to foster reputation and brand loyalty through a distinctive, unconventional and delightfully effective Apple Store encounter. My wife is more of an enthusiast for Apple products than I, but I am always wowed by our Store visits.

I feel sorry for Browett as he was clearly left to guess the corporation’s strategy. Some organisational functions are just there because they enable the principle value streams. Without them profits would fall. Silo management is the term mockingly used to satirise a management dominated by pillars of functional expertise bolstered by professional status and mute to its “rival” silos.

Deming reminded us that somebody in a leadership position does need to maintain a synoptic view of the business system to prevent Browett type misunderstandings.

Deming system diagramAnybody who has been to a Deming seminar will have seen the Deming system diagram. Deming invited participants to focus on the system that created revenues for the organisation and, further, to see that system as a network of processes. Deming used the diagram to emphasis that the critical business processes transect organisational boundaries. Raw materials, whether physical or transactional, run into and out of the silos. Some processes don’t transform the raw materials but act as critical support for the supplier-customer strand. Deming argued that equipment maintenance, product development etc. are nonetheless processes transforming their own inputs into vital enablers and accelerants of the revenue generating activities.

Further, held Deming, those processes run across the external boundaries of the organisation into suppliers and customer. A manufacturer making car tyres is part of a bigger picture including the manufacture of the tyre rubber and even the way the end user drives his motor car. Only by understanding the whole can the tyre performance be optimised, customer value maximised, and growing market share and revenues realised.

Yet the power of the functions remains and is seldom mitigated by implementing process management. Process management is something with which organisations still struggle.Those who try to follow the idea of dispersing expertise into the processes frequently find that individuals embedded in cross-functional teams perform less well than within their concentrated centres of excellence. It is worth remembering how two counterbalancing forces arise.

Behaviour

Any proposed system of reward must be risk assessed against the behaviours it is likely to encourage or discourage. Managers given the job of reducing the cost of running their own silo will do just that. All managers are optimising within their own bounded rationality.

Goal deployment

One tactic that can help prevent managers from optimising their own subsystem at the expense of the greater is to adopt some system of goal deployment such as hoshin kanri. Visibility, both horizontally and vertically, of how individual results contribute to organisational goals, effected through objective supervision and strategic governance, ought to discourage suboptimisation and reveal any such trends at an early time.

Professional expertise is important

In 1776, Scottish philosopher Adam Smith told the parable of the pin maker. Smith set out a detailed argument for the benefits of specialisation and the division of labour. The silos provide the means of rewarding the development of expertise in itself, something whose value may only be seen in the future, and of fostering the application of that expertise in management.

Deming was somewhat inimical to this idea and thought that managers should work in a variety of roles across functions as they ascended the hierarchy, as he felt they did in Japan. Yet it is critical in that environment to maintain the virtues of the silos as incubators of expertise. This is not so easily achieved.

Organisational boundaries exist for a reason

In The Democratic Corporation (1994) Russell Ackoff asked why we could not make a business out of mutually and severally co-operating individuals, each negotiating a web of personal contracts that made up the system that delivered the goods.

Nobel laureate economist Ronald Coase had already answered the question in his 1937 paper The Nature of the Firm. Coase explained why organisations are promoted and employ the people who might otherwise be a market of interacting individual contractors. It simply came down to the costs of operating such a market and the savings that could be made from making a global decision to bring some people and facilities under a single enduring roof.

Organisational and even function boundaries often arise from subtle cost structures. Perhaps these develop over time as more connected ways of remote working become commonplace. But it is important to analyse the forces that created and perpetuate the silos. Otherwise, it should be no surprise when the benefits of process management go unrealised.

Deconstructing Deming VIII – Drive out fear

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8. Drive out fear.

W Edwards Deming Point 8 of Deming’s 14 Points and quite my least favourite of all his slogans. As Harry Lime averred in the motion picture The Third Man:

Like the fella says, in Italy for 30 years under the Borgias they had warfare, terror, murder, and bloodshed, but they produced Michelangelo, Leonardo da Vinci, and the Renaissance. In Switzerland they had brotherly love – they had 500 years of democracy and peace, and what did that produce? The cuckoo clock.

It’s a wisecrack and not analysis but I quote Lime to remind myself that fear isn’t inevitably the debilitating sentiment that Deming made it out to be. Inspirational writer Helen Keller vividly captured an alternative reality.

Security is mostly a superstition. It does not exist in nature, nor do the children of humankind as a whole experience it. Avoiding danger is no safer in the long run than outright exposure. Life is either a daring adventure, or it is nothing at all.

In Out of the Crisis, Deming recounts several anecdotes of corrosive fear in the workplace. He directs his criticism at managers who threaten their subordinates with dire consequences for future outcomes that are, in fact, beyond the control of the workers. There is a recurring theme in Deming’s writing, and it is a good one, that many of the factors that determine an outcome are often outside the control of the person superficially held answerable. Any business process is influenced by diverse sources of variation. The aggregate of those sources determines the capability of the process and provides a fundamental bound on its future performance. An incapable process will never meet the aspirations of the business. Berating the person who works within it will never improve it because intervention is needed to re-engineer the process. Blind attempts to coax more out of an incapable process generally lead to over adjustment and even worse outcomes.

However, there have to be some people in an organisation for whom it wasn’t my fault isn’t available as an analysis of unsatisfactory outcomes. Some people willingly and enthusiastically own the goal of re-engineering the business process, of achieving higher and higher degrees of capability, of influencing the organisation’s environment, desensitising the system to external variation, of (following Eliyahu Goldratt) bringing the constraint back inside the system, fostering radical thinking, of managing unknown and unknowable risks.

Brian Joiner used to argue that it was wishful thinking to expect a prescribed outcome next year when the responsible manager had been incapable of achieving it last. Yet business is always a matter of resources and priorities. Typically, people do not energetically pursue objectives whose importance has not been urged upon them. They already have plenty to do. It is simply disingenuous to suggest that telling somebody that something is critical, and that they will be rewarded only for achieving it, is ultimately inexpedient.

Some people must manage and take responsibility for outcomes. They are responsible for the business system. They can change it.

There is nothing wrong in holding those who have the power to effect change responsible for outcomes.

Alternatively, some employees are responsible principally for operating a process in a disciplined and repeatable way. They are not responsible if that process is ultimately incapable but they are answerable for any lack of discipline. Their managers expect them to operate in a disciplined way, so do their co-workers. They should have no comfort that safety and security will be the consequence of failure to do their job.

Those workers will though, I fear, not be able to rest easily just because they turn up and do their job conscientiously. If management fail to take on the goal of the continual improvement of the alignment between the voice of the process and the voice of the customer then their diligence will be in vain. As business leader Ian MacGregor observed:

Management is a calling and people ought to be dedicated to it. British managers have far too much security. A poor manager should be dumped. What’s at stake is the happiness of society, not the comfort of managers.