Unknown and unknowable

30Apr09

Reading the business news this morning left me feeling a bit overwhelmed. I make no claim to be any smarter than the next person when it comes to economics, but I have spent my life working in and studying management. A lot of very good and very smart people are working feverishly on trying to turn the fortunes around in their companies. Numbers are being scrutinized looking for any operational savings or signs of hope on the revenue side.  As I leaned back in my chair, I glanced up at my bookshelf and saw my old copy of Out of the Crisis, by W. Edwards Deming. I was fortunate to be part of a group at General Motors that worked with Dr. Deming. I remember studying this huge book, chapter by chapter. I opened it back up and started reading the sections I had highlighted and found its relevancy hadn’t faded in the 20 plus years since I first read it. Indeed it seemed written for today.  A few thoughts of the good doctor ought to be thought through by every manager in every enterprise.

First, Dr. Deming states that the most important things cannot be measured.  I spent my early years in operations management, so I love metrics. Business is an exciting challenge for me and I love to know the score. However, Dr. Deming would argue that using the metrics we have in place is akin to managing looking in the rearview mirror. They may tell us how we did, but they have little value in predicting how we will do.  For that we must rely on what Dr. Deming called Profound Knowledge.  The numbers should help us understand the statistical nature of work and variability, but more importantly we need to appreciate the underlying systems in our businesses and how they impact the outcome. He also postulated that profound knowledge required managers to understand the theory of knowledge and its limits. Lastly, profound knowledge requires management to have knowledge of psychology and the concepts of human nature.

I have a sense that many, if not most, executives these days are dismissing the forces at work that they cannot measure. Micromanagement has come back into vogue. Many are even seeing this micromanagement as being heroic; they are saving the company!  I fear this extreme management of the now is missing the opportunity to use profound knowledge to lead their companies to the future. They may survive, but I have my doubts they will flourish.

Second, Dr. Deming raises it a level when he stated the most important things are unknown and unknowable. A simple example he used with us at GM is that we cannot know, therefore we cannot count, the number of customers who chose not to come into our showrooms. I see this most often these days with companies trying to implement the Toyota Production System. The efforts tend to morph into a new department of folks that move from location to location doing the parts of the Toyota Production System we can see and count. Methods like visual control (andon), just in time and kanban, continuous improvement projects (kaizen), and development of standardized work seem to be the primary tactics. They are all good and important. However, it is a system, and unless the methods in TPS that cannot be measured are implemented, they are doomed to failure. The concept I see most overlooked and therefore, least implemented, is nemawashi, or the foundational work that needs to be done so that those that do the work on a daily basis integrate the knowledge into their everyday mindset. Simply stated, its the people thing. Without it, TPS efforts end up being run by a small group of experts who descend on a work area, run some kaizen projects, organized the workplace, write some standardized work plans, and produce projected savings reports that are roundly applauded by management.  Meanwhile, the workers adopt a “this too shall pass” tolerance mentality, and things return mostly back to the old way not too many months out.

I feel great empathy for the managers of today’s businesses.  Numbers are everything in their world.  Stock analysts who learned the world of business in an MBA program and never stepped on the factory floor sit in judgment of these managers. Incentive and compensation programs are dependent upon today’s numbers. There is a lot of pressure to only deal with the known.  Being well informed on business metrics is taking precedence over acquiring profound knowledge.  Those that want to talk about human nature and engagement are being dismissed as too soft.  Soft? Maybe.  Right? Probably.

I am going to end this post with Dr. Deming’s own words.  They seem so very right to me at this moment:

“The first step is transformation of the individual. This transformation is discontinuous. It comes from understanding of the system of profound knowledge. The individual, transformed, will perceive new meaning to his life, to events, to numbers, to interactions between people. Once the individual understands the system of profound knowledge, he will apply its principles in every kind of relationship with other people. He will have a basis for judgment of his own decisions and for transformation of the organizations that he belongs to. The individual, once transformed, will:

• Set an example;
• Be a good listener, but will not compromise;
• Continually teach other people; and
• Help people to pull away from their current practices and beliefs and move into the new philosophy without a feeling of guilt about the past.”

Amen.

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