An article on how Tesla is reviving the shuttered NUMMI plant in Fremont, CA, with a production line designed by Toyota Alumnus Gilbert Passin.

See on www.bloomberg.com

Cliff Kuang:

Amidst all the doom-and-gloom about the death of American manufacturing, the one, simple fact that’s usually forgotten is that we’re still the world’s No. 1 manufacturer. No joke, and not a typo: We produce one fifth of the world’s total manufacturing output.

The difference between how Americans once made stuff and how that stuff is made today is that manufacturing in the U.S. has reached a stunning level of efficiency that can be hard to really comprehend. Unless, of course, you visit a factory like the one that makes Herman Miller’s Aeron chair. We recently did, and saw a process which has yielded a 500% increase in productivity and a 1,000% increase in quality since 1998…

See on www.fastcodesign.com

Dateline 3/19/2012, Anoka County, MN: County taking Lean approach to government. The approach to improve the processing of paternity cases was designed by outside consultants, Innovation Process Design, LLC. Their were implemented “using the Kaizen process.” Since recommendations from outside consultants couldn’t possibly be implemented by individual employee suggestions, “Kaizen” obviously does not have the same meaning as in the Aisin story. Drilling through from the article, you reach a government website from the EPA, which defines Kaizens as “rapid improvement processes,” organized in the form of events.

That Kaizen should mean something so radically different in the Japan and the US would not be a problem if the success of the original, Japanese Kaizen were not used to promote the made-in-the-USA Kaizen events. One particularly unfortunate consequence is the quasi-total absence of Kaizen activity in the original senses in US factories that are not Japanese transplants.

When demand dropped off a cliff — only to bounce back dramatically a year later — a lean overhaul helped the truck-trailer manufacturer diversify and create the flexibility it needed to survive.

See on www.industryweek.com

A leading multi-brand, multi-channel distributor and retailer of mobile telecommunications devices, accessories and telecom services in the Middle East, Axiom Telecom was recognized for its commitment to customer service and implementation of several globally acclaimed corporate practices such as the Toyota Production System (TPS), 5s, Kaizen, A3 philosophy and customized all of these into its own approach which is the ‘ Axiom Improvement Management System (AIMS)’ program.

See on uk.zawya.com

See on tera-tps.blogspot.fr

For a successful Lean implementation, the results reported in this article are about par. Without applying Lean, they would be extraordinary.

Supplier factories that adopted lean principles showed defect rates 50 per cent lower than those that didn’t. It also revealed delivery lead times from lean factories were, on average, 40 per cent quicker. Productivity increases of 10 to 20 per cent and a reduction in the time taken to introduce a new model by 30 per cent were also reported from lean factories.

See on www.supplymanagement.com

This article is a critical review of a book called Lean Startup that I haven’t read yet and won’t comment about. The review itself, however, contains some surprising statements, about, for example, ISO-9000 being a technique that emerged as part of Lean, or a about Lean being “a system designed to produce a million identical, high-quality Corollas, Camrys, and Siennas.”

I am used to thinking of ISO-9000 as the product of an international body that is unrelated to Lean, and whose implementation is centered on compliance with generic procedures rather than effectiveness. Not exactly the Lean approach to quality.

The reviewer also appears to be confusing Lean with the system developed by Ford for Model Ts 100 years ago. Lean actually includes approaches to production for Low-Volume/High-Mix as well as High-Volume/Low-Mix environments.

See on www.human-habits.com

A non-manufacturing example of decadent MBO is the French police under former president Sarkozy, which was tasked by the government to decrease the crime rate by 3%/year while increasing the proportion of solved cases. According to the French press, this was achieved by gaming the numbers. The journalists first latched on to a reported yearly decrease in identity theft, which seemed unlikely. They found that police stations routinely refused to register complaints about identity theft on the grounds that the victims were the banks and not the individuals whose identities were stolen. A retired officer also explained how crimes were systematically downgraded with, for example, an attempted break-in recorded as the less severe “vandalism.”

The fastest way the police had found to boost the rate of case solutions was to focus on violations detected through their own actions, such as undocumented aliens found through identity checks. The solution rate for such crimes is 100%, because they are simultaneously discovered and solved. The challenge is to generate just enough of such cases to boost the solution rate without increasing the overall crime rate… To achieve this result, packs of police officers stalked train stations in search of offenders, as reported both by cops who felt this was not what they had joined up to do, and innocent citizens who complained about being harassed for their ethnicity.

In organizations affected by this kind of gaming, members work to make numbers look good rather than fulfill their missions. It is a widely held belief that you get what you measure and that people will always work to improve their performance metrics, but this is not a simplistic view of human nature. This behavior does not come naturally. On their own, schoolteachers focus on educating children, not boosting test scores, and production operators on making parts they can take pride in. It takes heavy-handed management to turn conscientious professionals into metrics-obsessed gamers, in the form, for example, of daily meetings focused entirely on the numbers, backed up by matching human resource policies on retention, promotion, raises and bonuses.

But enough about police work. Let us return to Manufacturing, and list a few of the most common ways of gaming metrics in our environment:

1. Taking advantage of bad metrics. As discussed in The Staying Power of Bad Metrics, many metrics commonly used in manufacturing are poorly defined, providing gaming opportunities, such as outsourcing in order to increase sales per employee.
2. Stealing from the future. In sports, nothing is more dramatic than the game won by points scored in the last seconds of a game. The bell rings right after the ball spirals into the basket and the Cinderella team wins the championship. In business, the end of an accounting period is the end of a game, and, as it approaches, sales scrambles to close last-minute deals and manufacturing to ship a few more orders. This is what Eli Goldratt called the “hockey stick effect.” Of course, this is done by moving up activities that would otherwise have taken place a few days later, during the beginning of the next accounting period. As a consequence, the beginning of the period is almost quiescent. Not much is going on, but it will be made up at the end…
3. Redefining 100%. Many ratios, by definition, top out at 100%. A machine cannot run 25 hours/day, and a manufacturing process cannot produce more good parts than the total it makes. This is why ratios like equipment uptime and first-pass yield top out at 100%. Any result under 100%, however, invites questions on how it could be improved. A common way to fob off the questioners is to decree, for example, that a particular machine could not possibly be up more than 85% of the time, and redefine the scale so that 85% uptime is 100% performance. For production rates in manual operations, the ratio of an operator’s output to a work standard is often used instead of process times or piece rates. Such ratios have the advantage of being comparable across operations, and are not bounded in either direction. But their relevance depends on a work standard, and, when everybody in a shop performs at 140% of standard, chances are that the standards are engineered for this purpose.
4. Leveraging ambiguity. Terms like availability, cycle time, or value added are used with different meanings in different organizations, creating many opportunities to game the metrics. If the product’s market share in the first quarter went for 1% to 2%, it doubled, but, if it went back to 1% in the second quarter, it went down by 1%.
5. …

Why do people who, in other parts of their lives, may be model citizens, engage in such behaviors, ranging from spinning to cheating? One answer is that, with what MBO has degenerated into in many companies, management is co-opting metrics gamers into its ranks. It is not that gaming is human nature, but instead that you are actively weeding out those who don’t engage in it. Changing such habits in an organization is obviously not easy.

Assume, for example, that your goal is to be competitive by having a skilled work force, and that your analysis shows that it requires employees to stay for entire careers so that what they learn at the company stays in the company. You then apply a number of different methods to make it happen:

• Communications. You make sure that all employees know what you are doing.
• Career planning. You have human resources develop a plan with all employees so that each one knows what he or she can aspire to by staying with the company.
• Organized professional development. You organize formal training, on-the-job training, and continuous improvement to provide opportunities for employees to develop the skills they need to execute their plans.
• Job enrichment. You redesign the jobs themselves to make more effective use of each employee’s talents.

If employees appreciate their jobs and have long-term career perspectives within the company, few of them should quit or make excuses not to come to work today, and the results should be visible in lower employee turnover rates and absenteeism.

The metrics are there to validate the approaches taken to reach the goal, but the goal is not to improve the metrics. It is a subtle difference. If you have the flu, you have a fever, but your goal is to heal, not just to bring down the fever. Once you are healed, you fever will be gone, and the decrease in your temperature is therefore a relevant indicator of your healing process, but it is not the healing process. If bringing down the fever were the goal, you could “game” your temperature and bring it down without healing. This distinction existed in Drucker’s original writings about MBO, but got lost in implementation.

So, what can you do to prevent metrics gaming? Let us examine three strategies:

1. Review the metrics themselves. Use the requirements listed in my first post on this subject. You may not be able to completely game-proof your metrics, but at least you could make sure that they make sense for your business and are not trivially easy to game.
2. Decouple the metrics from immediate rewards. Piece rates used to be the most common form of payment for production work, but have almost entirely vanished in advanced manufacturing economies, and been replaced by hourly wages. Performance expectations are attached, but there is no direct link to the amount produced in a given hour of a given day. There are many reasons for this evolution:
   • The pace of work is often set by machines or by a moving line, rather than by the individual.
   • The best performance for the plant is not necessarily achieved by every individual maximizing output at all times.
   • More is expected of all individuals than just putting out work pieces, including training or participating in improvement activities.

   One consequence of this decoupling is that time studies are easier and more accurate than in a piece rate environment. The same logic applies in management: the more direct the link between metrics and individual evaluations, the more intense the gaming. Don’t make the metrics the key to promotions or to prizes representing a substantial part of a manager’s compensation. Use them only as indicators to inform discussions on plans and strategies.

3. Increase the measurement frequency. The longer the reporting period, the more opportunities it offers for gaming the metrics by stealing from the future, and the more pronounced the hockey stick effect. Conversely, you can reduce it by measuring more often, and eliminate it by monitoring continuously, as is done, for example by the electronic production monitors that keep a running tally of planned versus actual production in a line during a shift. Periods exist in accounting because of the limitations of data processing technology at the time the accounting methods were developed. In the days of J.P. Morgan, closing the books was a major effort that a company could only be do every so often. In 2012, there is no technical impediment to the “anytime close,” but the publication of periodic reports continues by force of habit. Metrics in the language of things as well as the language of money can be monitored continuously.
4. Have third parties calculate the metrics. In principle, counting chips should be done more accurately by agents with no stake in where they may fall. In practice, it is not only expensive but does not always produce the desired result. It is the approach used in Management Accounting. A plant’s accounting manager, or comptroller, is not chosen by the plant manager, he or she reports directly to corporate finance, and has no motivation to humor the plant manager. This is a double-edged sword because, with neutrality, comes a distance from the object of the measurement that may cause misunderstandings, and Management Accounting leaders like Robert Kaplan, Orrie Fiume, or Brian Maskell  have been struggling with the challenge of providing relevant, actionable information to managers for the past 30 years. Outside of Accounting, for metrics in the language of things, the closest you can come to having a 3rd party produce the measurements is to have a computer system do it, based on automatic data acquisition. There is no opportunity for gaming, but the issues of relevance are as acute as in Management Accounting.

Who else is shocked by a phrase like “Six Sigma, Kaizen, Lean, and other variations on continuous improvement…”?

Since when is Lean a variation on continuous improvement? Instead, continuous improvement is a component of Lean, which includes many features that are not continuous improvement.

Kaizen does not belong in a list in parallel with Lean. It literally means “improvement” and is used in Japan to mean continuous improvement. In other words, this entry in the list refers to the list itself.

Six Sigma is a method developed at Motorola in the US to solve process capability issues and is not continuous improvement.

Is it one more list patterned after Borges’s classification of animals?

See on blogs.hbr.org