Tag Archives: targets

Purpose, Measures and Method

In service organizations, the systemic relationship between purpose, measures and method are often clouded by the measures used in command and control organizations.  These measures have nothing to do with what matters to customers, but they drive all the ingenuity of the manager and worker.  They typically have to do with activity and financial targets and become de facto purposes instead of what the expressed purpose should be  . . . serve the customer.

When organizations understand their real purpose (serving customers) they will be handed a whole new set of measures that can be used to understand and improve performance.  An organization can achieve cost reductions and business improvement by studying demand in customer terms vs. the typical command and control view of demand as production units.  Managements actions become improving the system instead of paying attention to workers.  With management and worker having a shared aim and useful measures new methods can be uncovered that create value for customer demands.  Control over the work is greater than when command and control targets are used.  Working in unison (management and worker) changes the culture to something positive.  Instead of manipulating reports and measures an organization reduces waste and improves customer service.  Now that is organizational change management leadership we can believe in.

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Training and Tools: Not the way to Sustained Improvement

This is a bitter pill to swallow, especially for someone like myself that has done tools training for most of my career.  At first, in Deming fashion I attempted to balance the concepts and tools, but customers demanded fast results and management wanted change as long as they didn’t have to change.  Unfortunately, as time went by I was swept up like most in my field in to Six Sigma, “Lean” or Lean Six Sigma.  Don’t get me wrong the tools and training made me money and did get improvements, but thinking really didn’t change and business improvement wasn’t what it should have been.  Organizational change management became something for the front-line done through projects, training and tools while management “supported” it with words, but not action.  This method leads to unsustainable change, because every time a crisis would come up the improvement would not endure.  Management’s focus on financial targets would ultimately lead to set backs and the gains would have to be sacrificed for short-term thinking.

In Six Sigma, I was fortunately taught by people with Deming backgrounds in getting my Black Belt (BB)and Master Black Belt (MBB), but as I saw how Six Sigma was used in organizations it became clear that projects were the way to improvement.  Constantly finding a project with projected cost savings played right into the command and control mentality of management.  The focus was on business cost reduction.  Management wouldn’t have to get their hands “dirty” as they could sponsor projects and have BBs and MBBs run the projects fully loaded with statistical tools.  Personally, I found this structure elitist as only BBs and MBBs could run the projects.  Regardless, no change in thinking by management was required . . . just support.

I have run into many situations over the years where executives wanted the improvement, but didn’t want to talk about why performance appraisals, financial targets, work standards, etc. were making their companies worse.  One organization insisted I was “disrespecting” their style of management (I’d been working with the company for two years) and I came to realize that (to some degree) I really was . . . the only difference now is I own it.  I can have an honest conversation about command and control vs. systems thinking.  Command and control thinkers can learn better methods by understanding the work and adopting a system thinking approach, but they need to be open to changing their thinking . . . and that has to be born from intrinsic curiosity.

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Government Shared Services – A Recipe for Disaster

just read an article from Govtech.com displaying the “efficiencies” gained from a shared services strategy in the states of California (CIO – Teri Takai) and Michigan (CIO – Ken Theis).  Maybe this is the reason that these two state deficits are so large.

Shared services usually means either we are consolidating front office activities or back office activities to gain economies of scale.  The problem is that we have created front and back offices that are not designed very well to handle customer demand.  Front and back offices are designed with the assumption that all the work received is value work and thus treated as something to be processed.  The reality is much of the work is failure work, work that is rework, “status inquiries or progress chasing.

Information Technology in these situations leads to locking in costs rather becoming an enabler.  Work is broken down into tasks that can be electronically sent to the “right” people.  Managers then monitor the activity and performance to pre-determined targets.  End game:  Targets are hit, but poor service generates increasing failure demand.  The activity and performance measures take the attention away from the purpose of the activity and reality of the work.  Ultimately, leading to the need for additional staff to accommodate the increase in failure demand.

Economies of scale is a driver of the shared services strategy, but it is the economies of flow (Taiichi Ohno) not scale that will drive costs down and improve service.   Understanding the predictability of failure demand will help identify and stop the causes by redesign of services that can then provide value.  Understanding value demands will help managers design services that allow citizens to get what they demand from the service.

Some services may not require a front and back office split and by having tasks split create more waste and worsen service.  Some services are provisioned better with just a front office (especially those that have high complexity).

My fear is Ms. Takai and Mr. Theis believe that front and back office designs should be driven by IT.  IT analysts and consultants that identify the tasks to be done and the processes these tasks belong to, creating standardized work.  But the standard work is not able to absorb the variety of demand and by placing these demands ensures that information technology will lock in costs.  The costs of a shared service design is in the flow not transactions.  It is the total volume of transactions and its accompanying costs of delivering the service that are important, not the cost per transaction.  Assumptions that costs are in transactions leads to building shared services departments that deliver high cost and poor quality services.  IT guarantees locking in this waste.

What should be done?
Do we need a front and back office? Or is a front office design a better way to handle demand.  Only by studying customer demand can we be sure.

Before any shared services strategy takes place we need to understand current service performance.  This can be accomplished by studying customer demand (what customers want), capability (how well it is delivered), the value work (the service customers want efficiently), waste and its causes.  We can then improve service where it is currently delivered and then have a knowledge-based discussion on shared services opportunities.

These same arguments exist for the private sector and not just government management.   Systems thinking is a better way.

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A Friendly Game of Rewards and Targets

I was playing a game of golf with an executive of an organization last summer.  His company was an advocate of using targets in management.  I had heard all the reasons in past debates.  His debates were:  They motivate people, they are good for setting direction (especially used when a manager fails to achieve the target), if reasonably set they help or if the people given the target help set it than it’s OK.  He believed that incentives would allow his people to achieve any target and his company was full of them to prove it.

I would counter that targets when wrongly set would sub-optimize the system, frustrate the worker, that workers will work to the target and then stop, knowing whether a measure needs to go up or down is good enough because with a target we may never know what a system is capable of achieving.  We had talked about the problems of incentives with the cheating and frustration that happens in organizations.  Ultimately, all my systems thinking knowledge wasn’t going to change his mind and I have learned that change comes from curiosity.  Curiosity about making a company better through business improvement methods (not tools or targets) that call out scientific management theory as making systems worse.

As we stepped up on the first tee, I told the executive that I would pay him $200 if he would shoot par 72 (a clear target and incentive).  I knew he had never broken 90, so I felt safe.  He laughed it off.  By the 7th green, he was 8 over par . . . I told him he wasn’t trying hard enough and offered $500 if he broke 80.  I badgered him the rest of the way with new targets and incentives until frustrated he begged me to stop.  I replied “now you know what it is like to work for your company.”

I don’t know if this command and control thinker will be curious enough to change, but I hope that our encounter at least gives him pause.  Stay tuned!

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Targets are Killing US (US Business)

I am always amazed at what executives (senior and junior) do to “manage” their organizations.  Are they brain-washed into a command and control mentality?  Or maybe it is a gene that has not been mapped yet.  Regardless, targets are the principle tool that executives use.  Maybe it is something in the leadership development program.

Budgets become the basis of all decision-making.  Executives claim that this is to ensure shareholder value.  In reality, it creates more unstable systems and sub-optimal performance.  Middle managers stuck with objectives that if achieved (by all) don’t guarantee that the company will make money.  Business improvement based on managing costs will almost always increase them.

Measures become focused on targets that are related to productivity and activity instead of purpose.  Management edicts of these top-down measurements/targets usually result in cheating.  For example:

“When I was the corporate purchasing manager for an industrial distributor.  I had the opportunity to increase my bonus based on soemthing called GMROI (Gross Margin Return on Inventory).  I could more than double my salary based on a high gross margin and a low inventory level.  I was not able to effect gross margin (sales function), but I was able to lower the inventory around bonus time.  I achieved an 80% bonus one year, but almost put the company out of business.  We had no inventory, customers were pissed.  I achieved my target at the expense of the organization.”

Unless measures are related to purpose they have no use and the purpose has nothing to do with the top-down, “command and control” hierarchy.  People’s engenuity is engaged in survival, not business improvement.

A better way is to take a systems thinking view, starting from the outside-in (customer view) they can then begin to see waste in their current system.  Systems thinking leads to an approach that allows design against demand instead of demands from the executive suite.  As waste is removed, flow improves lessening costs and providing opportunities for growth (innovation).

A systems view creates a compelling case for change and better design of work, measures and the elimination of targets.  Why eliminate targets?  A lot of reasons . . . they distort the purpose of the organization, create sub-optimization, prevent cooperation, promote cheating, and are typically focused on activity (wrong measures).

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