Sep 8 2012

A look at Inslee’s ‘lean management’ claim – The Seattle Times

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A look at Inslee’s ‘lean management’ claimThe Seattle TimesA look at Inslee’s ‘lean management’ claim | Truth Needle.

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Gabby Douglas - Constancy of purpose

Sep 7 2012

Deming’s point 1 of 14: Create constancy of purpose…

Deming’s full statement is as follows:

“Create constancy of purpose toward improvement of product and service, with the aim to become competitive, stay in business and to provide jobs.”

We can breaks this down into several components:

  1. You should always be improving what your customers are paying you for, whether goods or services.
  2. You do this in order to:
    • Compete, presumably against anyone worldwide.
    • Stay in business, presumably forever.
    • Provide jobs.

The most surprising piece is the mention of providing jobs as a goal. It is a goal for society at large, but a company creates jobs when it has to, and does not make it a goal. What Deming is really after, however, is not job creation but retention. As he elaborates on this point, he is saying that, instead of worrying exclusively about quarterly profits, companies should have a longer term strategy involving innovation, investments in research and education, and constant improvement in products or services – as well as internal processes – and that no employees should lose their jobs for contributing to improvements.

Most of his readers in the 1980s would have readily agreed on the need for a strategy, but would at best have paid lip service to the need to retain people. 30 years later, the management of most American companies is even less committed to its work force, and practices like rank-and-yank make firings routine, even in the absence of economic need. The few companies that have implemented the Human Resources part of Lean can claim to follow Deming on this point.

Although he does not say it in so many words, it is clear from what he says in other parts of the book, is that “making profits every quarter” is not an appropriate purpose, whatever constancy you pursue it with. Your purpose should be in terms of goods or services provided to a population of customers, with profits a by-product of doing this well.

How do you create constancy of purpose? As a necessary condition, it seems that a purpose would have to be articulated and communicated to all stakeholders, and serve as an overarching hoshin for the organization. This is what today’s Mission Statements are supposed to do.

Some of them don’t live up to this expectation. GM’s mission statement, for example, is as follows:

“G.M. is a multinational corporation engaged in socially responsible operations, worldwide. It is dedicated to provide products and services of such quality that our customers will receive superior value while our employees and business partners will share in our success and our stock-holders will receive a sustained superior return on their investment.”

From it, you would not guess that the company makes cars and trucks. The statement reads like keywords strung together. The only specific thing it says is that the company exists to make money for stock-holders. Ford’s is equally cagey:

“Ford Motor Company is focused on creating a strong business that builds great products that contribute to a better world.”

A cheese maker could say the same.

Schlumberger, on the other hand, describes itself as follows:

“The world’s leading oilfield services company supplying technology, information solutions and integrated project management that optimize reservoir performance for customers working in the oil and gas industry.”

Neither a cheese maker nor a car company could say that. From that one sentence, we know which market the company serves and what it provides. To managers inside the company, it provides a clear direction on what to pursue and what to stay away from.

This is a company founded in 1926 with over $39B in sales in 2011. 25 years ago, it could not have made such a clear statement of purpose, because it had diversified into unrelated areas: besides providing oilfield services, it was making household meters for electricity, water and gas, smart cards, and semiconductor chips. It has since then sold off all these businesses and refocused on the activity for which it had been founded.

Google’s mission statement is also clear and specific:

“Google’s mission is to organize the world‘s information and make it universally accessible and useful.”

Companies diversify to hedge against the instability or cyclicality of their original businesses. A consequence of diversification it that it shifts management’s focus away from products and services. Mission statements then can express no other constant purpose than making money at all times, which Deming brands a deadly disease in Chapter 3 of Out of the Crisis.

Managers believe they can combine unrelated businesses, because they think of management as a generic skill, portable from oilfield services to semiconductors, from sugary water to computers, or from dessert toppings to floor wax. There are individual success stories, like Carlos Ghosn going from tires to cars, or Alan Mulally from airplanes to cars, but it is  a different challenge for a company to take over another in a different business, and failures are common. If a company operates by Deming’s 1st point, it has a purpose that can be stated in a mission statement in terms of products and services. Conglomerates clearly don’t, but then, neither do Korean Chaebols or Japanese Keiretsus, and such structures still include some of the world’s best known companies, like GE, Hyundai, or Mitsubishi.

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Sep 6 2012

Delhi Academic Bashes Indian Version of Lean – Forbes India

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Forbes India – A Lean Production System is Bad for Workers

Skirmishes between workers and the management at Honda, Maruti Suzuki and Pricol factories have led to the loss of hundreds of jobs and many lives.

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Sep 6 2012

Journalist Confuses Activity and Growth

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In yet another examples of journalistic innumeracy, this article confuses a quantity, manufacturing activity, with its variation, growth.

The title “Manufacturing growth is down for third straight month,” leads you to believe it says that growth is lower but activity is still growing.

The first sentence confirms this: “Manufacturing growth in August remained as it had been in the previous two months—sluggish.” Sluggish does not mean negative.

But the next paragraph tells you that manufacturing activity had actually been contracting, not growing: “ISM’s index used to measure manufacturing activity, was 49.6 in August, which is 0.2 percentage points below July and 0.1 percent lower than June. A reading of 50 or higher indicates growth is occurring.”

See on www.logisticsmgmt.com

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Sep 4 2012

Lean in Apparel Industry in India

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This article is about the implementation of Lean in the Indian apparel industry, but its featured picture hardly shows a Lean layout: operators seated at work stations with materials on conveyors.

See on www.fibre2fashion.com

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Deming 14 points

Sep 4 2012

Rereading Deming’s 14 points

The richest discussion in this blog to date, on Deming versus Drucker,  is all about point 11.b. from the list of 14 points that is the best known legacy of Deming’s 1986 book  Out of the Crisis. But what are his actual 14 points, and who are they intended for? Let us start with Deming’s own summary, from p. 23 of the book:

  1. Create constancy of purpose toward improvement of product and service, with the aim to become competitive, stay in business and to provide jobs.
  2. Adopt the new philosophy. We are in a new economic age. Western management must awaken to the challenge, must learn their responsibilities, and take on leadership for change.
  3. Cease dependence on inspection to achieve quality. Eliminate the need for massive inspection by building quality into the product in the first place.
  4. End the practice of awarding business on the basis of a price tag. Instead, minimize total cost. Move towards a single supplier for any one item, on a long-term relationship of loyalty and trust.
  5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.
  6. Institute training on the job.
  7. Institute leadership (see Point 12 and Ch. 8 of Out of the Crisis). The aim of supervision should be to help people and machines and gadgets do a better job. Supervision of management is in need of overhaul, as well as supervision of production workers.
  8. Drive out fear, so that everyone may work effectively for the company. (See Ch. 3 of Out of the Crisis)
  9. Break down barriers between departments. People in research, design, sales, and production must work as a team, in order to foresee problems of production and usage that may be encountered with the product or service.
  10. Eliminate slogans, exhortations, and targets for the work force asking for zero defects and 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.
  11. a. Eliminate work standards (quotas) on the factory floor. Substitute with leadership.
    b. Eliminate management by objective. Eliminate management by numbers and numerical goals. Instead substitute with leadership.
  12. a. Remove barriers that rob the hourly worker of his right to pride of workmanship. The responsibility of supervisors must be changed from sheer numbers to quality.
    b. Remove barriers that rob people in management and in engineering of their right to pride of workmanship. This means, inter alia, abolishment of the annual or merit rating and of management by objectives (See Ch. 3 of Out of the Crisis).
  13. Institute a vigorous program of education and self-improvement.
  14. Put everybody in the company to work to accomplish the transformation. The transformation is everybody’s job.

On the face of it, this is an odd mixture of actionable recommendations — like “a single supplier for any one item” — with generalities like “adopt the new philosophy,” and expressions like “a vigorous program” that don’t meet Deming’s own criteria for an operational definition (See Ch. 9 of Out of the Crisis). As a consequence, the summary is not sufficient to understand what Deming actually meant.

Deming elaborates on each point in the remainder of Ch. 2 but, contrary to what the reader might expect, the whole book is not organized around the 14 points. About 20 years after Deming, in  The Toyota Way, Liker also identified 14 principles, and then devoted a chapter to each, which gives the reader a sense of structure that is missing in Deming’s book.

On the other hand, what comes out of Deming’s book is a sense of urgency. He was in his eighties when he wrote it,  a celebrated figure in Japan but obscure in the US until 1980 when NBC aired its documentary If Japan Can… Why Can’t We?  In the early 1980s, industries like steel, cars, semiconductors, and consumer electronics in the US were facing formidable competition from Japan, but most American managers credited it to long working hours for low wages and unfair trade practices. The idea that there was anything to learn from Japan was a hard sell, and only a few, well-informed individuals like Deming knew that it was the case.

Deming obviously felt he had much to say to American management that was essential to future competitiveness, and little time to say it. He couldn’t afford to sugarcoat his message and didn’t have the leisure to organize it into a neat theory. His readers would just have to handle the truth and organize the parts themselves.

Deming is blunt and direct, and backs up his assertions with examples. He is often prophetic but, in hindsight from 2012, occasionally off the mark. He correctly predicted that Japan would achieve a standard of living on a par with the US and Western Europe, but he perceived the breakup of the AT&T monopoly as “wrecking our system of telephone communication” (p.152), which works pretty well for a wreck.

One criticism I have for all lists of 14 points, whether from Woodrow Wilson, Deming, or Liker, is that they are impossible to remember. They should have boiled their lists down to 7 or even 5 points. I will have more detailed comments on each point in forthcoming posts.

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