Words (and the syntax that puts them together) are the basic ingredients that we humans use to form our reality. The meaning we give to words defines the boundaries of our cognitive horizon, hence what we are able to conceive.

When we put words together we create a network, a system of semantic interdependencies; the only way to manage this network is to provide boundaries to the inevitable fluctuations of meaning that words carry.

This fluctuation is precisely the reason why texts (and images for that matter) have such a power over people’s ability to learn; they are the trigger that make the bringing forth of a world. When we read something, the highly non-linear combinations of semantic fluctuations of interconnected strings of words determine meanings that differ greatly among individuals.

Our value system, as well as our culture and experience, determine the cognitive outcome of our interaction with words and images.

This website aims at creating a framework for a viable interpretation of some of the founding elements that make economics and management a truly worthwhile, life enhancing, meaningful human endeavor. In order to do so, we have defined an initial list of words and “string of words”, i.e. books, that help define the conceptual territory on which we test our ambition to provide a solid bedrock of understanding of what economics and management should be.

These words and books (but also videos) will continuously expand as we progress in our understanding. They portray, indeed, a precise philosophical and scientific stance; we expect very different reactions from the readers, as is only fair.

The section “words of the system” provides an explanation of many of the words we use to tackle organizational issues; the section “systems of words” highlights some fundamental readings that inspire our activity.

| A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X| Y | Z |

A

Action

Something that changes reality.

When the plan for reaching an objective has been made, we must absolutely concentrate on the actions needed to make it happen.

A) An action generates effects. a

These effects can be positive or negative in relation to : 1. The goal of the plan

2. The goal of the system we are in and the functioning of the interdependent processes that work together to achieve the goal.

What we want is for the effects generated by the action to contribute towards achieving the goal of the plan and not to damage in any way the functioning of the system.

To make sure that the action is sufficient to generate the desired result we must make explicit the logic underlying it.

Example: if our objective is to know what is the productive capacity of our suppliers, the action “consult the list of suppliers” is sufficient to achieve our objective because (logic) “the list we have shows the productive capacity of each supplier.”

If in order to achieve our objective not one but a sequence of actions is necessary, then apart from the logic of the action we must also make explicit the logic of the sequence. This means stating why, once we have completed an action that generates a change in reality in the direction of the goal but that is not the goal itself, there is the need for a further action.

This cycle is repeated until the goal is achieved. (see Thinking Processes Tools: Transition Tree)

The action we want to take could generate negative effects for the system.

We verbalize the reasons why we think an action that is in itself good could damage the system. We examine these assumptions (see Assumption) and we see if it is possible to invalidate them in some way. If this is possible, we modify the action or the sequence of actions in a way that is in line with the solution found. (see Thinking Processes Tools: Conflict Cloud
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Action (-2)

B) For an action to happen it requires a set of conditions that makes the action possible.

The causes that often prevent these conditions from existing in organizations are connected with the people who have to carry out the actions. They are:

a) misalignment between authority and responsibility:

a person has the responsibility to complete an action but does not have enough authority: a rule of the system prevents them from carrying out the action. We must resolve the conflict (see conflict) between the action to be taken and the rule in such a way that we protect the two needs the system has:

•the need for control, as expressed by the rule •the need to improve and grow, expressed by the action (see Misalignment, see Thinking Processes Tools: Conflict Cloud

b) lack of clear instructions

Often when we transfer the knowledge necessary to carry out an action we rely on intuition. We explain “what” has to be done but not “why”. This generates confusion and prevents people from understanding the logic behind the actions they are asked to do.

The questions we have to answer when we give instructions are: -why are you asking me to do X? -when do I have to do X? -how do I know if I’ve completed a step successfully and I can go on to the next one? -what is the objective?

-why do I have to do X before Y? -how do I know when I’ve finished? -why do you say that X is the right thing to do? (see Thinking Processes Tools: Transition Tree)
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Action (-3)

c) resistance to change (see Resistance to Change): An action that is aimed at improving the system often requires change. Change usually generates resistance in the people involved.

The Theory of Constraints (see TOC) distinguishes six levels of resistance in people. For each of these levels we can use a logical tool (see Thinking Processes Tools ) which allows this resistance to be managed and overcome.

Standardize the actions

The processes which an organization is made up of consist of a series of actions that are repeated and which are subject to variation (see variation).

When we standardize these repeated actions by describing them with the Transition Tree (see Thinking Processes Tools, Transition tree) we can reduce the variation which affects these processes, thus stabilizing the system and improving its predictability (see Predictability, Stability).
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Assumption

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B

Buffer

A mechanism for protecting and controlling the performance of the system. The Theory of Constraints (see TOC) states that the performance of a system depends on

one single factor, called the constraint (see Constraint). a

The buffer protects and controls the whole system by acting on the constraint.

The unit of measurement of the buffer is time.

In different company environments (job production,standardized production, single project, multiple project) the buffer is positioned so as to guarantee that the constraint works to full capacity.

In a standardized production environment, the buffer is the amount of time with which the material is released “early” to allow the constraint to work. In Project Management it is the amount of time that we accumulate at the end of the project (see Project Buffer) before the established delivery date.

The length of the buffer is established on the basis of the interval of variation (see variation) of the in-control process that impacts the constraint. The greater the variation, the longer the buffer of time must be.
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Buffer Management

Control of the system through buffer management.

The “time bank” of the buffer empties out or fills up on the basis of whether the activities of the system are carried out late or early compared to the amount of time scheduled.

If all the activities are correctly managed, this oscillation will behave predictably within an interval of variation (see variation).

The smaller the oscillation of the buffer, the greater the probability of finishing the project or job on time.

This control mechanism is intrinsic to the system as it is built around the behaviour of the processes that the system is made up of. It is of fundamental importance to remember that we cannot predict the outcome of any managerial action if this action is not taken in an environment made up of stable processes (see Stability) . Consequently, if we want to obtain maximum benefit from buffer management we must make sure that:

- all the main processes that impact the constraint are stable - all the main processes that impact the constraint have an interval of variation that is manageable.
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C

Causality

A) Principle by which everything has a cause.

The Theory of Constraints (see TOC) states that only a small number of causes is at the root of a large number of effects.

By using the Thinking Processes Tools (see Thinking Processes Tools) we can identify the common cause of a group of undesirable effects we experience in our reality (see UDE).

This allows us to act directly on the cause and consequently remove the effects, rather than continuing to struggle in an attempt to eliminate the symptoms.

B) Cause-effect relation.

The Thinking Processes Tools allow us to interpret a situation by analysing the cause- effect relations which make up our reality.

There are two kinds of logic that underpin the Thinking Processes Tools: necessity and sufficiency. In most cases this kind of logic allows us to identify the kind of cause-effect relation that governs the reality we are examining.

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Client

Deming used to say that the client is the most important link in the chain. An organization that wants to be successful must be able to understand and satisfy its own clients.

Understanding clients

TOC allows us to maximize the performance of a system by identifying and managing its constraint. If we manage the constraint correctly, it will move outside the system. In other words, the market is unable to buy everything we are able to produce. We call this type of constraint ‘external’.

How can we drastically increase our capacity to make advantageous offers to the market?

What are the criteria people apply when buying a product? The value which they believe the purchase will provide them with. Buying a product takes the buyer from an undesirable situation to a desirable one. People’s perception of the value our product provides will increase enormously if we can show that it solves a problem for them. Therefore, if we identify the problems of our current and potential clients (their undesirable effects), we can find their root cause. TOC states that undesirable effects (UDEs) are not independent from each other; they are all connected and derive from the same “core problem”. An effective tool for quickly and systematically identifying the core problem given a series of UDEs is the Current Reality Tree (see Thinking Processes Tools: Current Reality Tree). Knowing the core problem of our potential clients means drastically increasing the chances of creating offers that will be accepted by the market.
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Client (-2)

In order to do this we must stratify the data that we have about our clients on the basis of the commonality of their undesirable effects. In this way we can derive the core problem that generates them (see Core Problem). If we manage to identify this cause and invalidate it, we will have found the direction to move in so we can present the client with an offer which is a solution to their problems.

The next step is: how can I get the client to appreciate my offer so much that they accept it? By creating an offer that no client would dream of refusing: an offer that is advantageous both for the seller and the buyer. (see Offer)
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Complexity

The expression of the number of elements in the system (see System) and their interdependencies (see Interdependence) which we have to consider and control simultaneously.

Understanding and managing the interdependencies among the elements of the organization.

If we look at an organization as a system, we must be able to:

a) understand the interdependencies: to do this we must use a Deployment Flowchart (see Deployment Flowchart), which allows us to map out the process flows and identify the various agents of the system involved.

b) Manage the system so as to maximise its performance: according to the Theory of Constraints (see TOC) the performance of a system depends on one limiting factor (see Constraint). It is therefore possible to manage the system by means of the constraint and control it using buffer management (see Buffer, Buffer Management). In order to be able to chose strategically where to place the constraint, the system has to be stable (see Stability).

Understanding and managing the Interdependence among the cause-effect relations in the organization

The tools from the Theory of Constraints (see Thinking Processes Tools) guide us in the analysis and representation of the logical relations which are present within the organization and determine the way we work.

If we examine the behaviour of a system up close, we find that a high number of undesirable effects (see UDE), which are closely interconnected through cause- effect relations, can be traced back to a very small number of causes.

Through an analysis of our current reality and by identifying the core problem (see Core Problem) in the form of a conflict (see Conflict), we can discover the root of the undesirable effects we experience daily. We can therefore map out a solution which evaporates the core conflict and eliminates all the negative effects it generates.
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Complexity (-2)

Understanding and managing the interdependence among the elements of the mprovement project.

This kind of solution has to be broken down into a network of individual solutions and actions, whose interrelation leads not only to the elimination of the negative effects without creating new ones, but also to the realization of the desired positive effects. A plan of this kind has to be designed and developed systematically, checking that it corresponds satisfactorily with a constantly changing reality. This entails continuously processing and managing a considerable amount of information, which requires and generates complexity. The Thinking Processes Tools support us in this task (see Thinking Processes Tools: Conflict Cloud, see Project).

Understanding and managing the interdependence of the causes of process behaviour

The repetitive processes which make up our organization are all subject to variation (see variation). The causes of this variation are multiple and interdependent. We must therefore:

a) Identify the real causes than can explain the behaviour of our processes

b) interpret correctly the data we have

c) Make sure we have the data we really need to understand the behaviour of the processes

The tool that we need for this is the control chart (see Control Chart) and the approach used is the one developed by Shewart and Deming. (see Predictability, Stability,Quality,variation).
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Conflict

Form in which, according to the Theory of Constraints, it is always possible to represent a problem. The confkict is between two poeitions that correspond with the two different needs, both of which are legitimate and necessary in order to achieve a desired goal.

What limits us in solving problems and consequently jeopardises our chances of achieving our goals is the widespread attitude of looking for a compromise as a solution.

•Day to day conflicts: In some conflicts there is no acceptable compromise between the two positions and so usually we give up on satisfying one of the two needs. In cases where the two needs are those of two different individuals, one of the parties comes out better off than the other: this is a win-lose solution. The needs in question are both legitimate: therefore it is conceptually and ethically wrong to give up on one of them in favour of the other. Moreover, when we are faced with a conflict between two parties, a solution involving a compromise which is unacceptable for one of the two parties means that whoever is worse off will feel resentment, thus compromising communication.

•Core conflict: Each of the recurrent problems affecting an organization can be seen as a conflict between the undesirable effect (see UDE) people suffer from and its opposite, i.e. what they would like. The general conflict that comprises and typifies all the conflicts of this kind is the organization’s core conflict (see Core problem).
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Conflict (-2)

•Conflict between actions and the rules of the system : The misalignmenta(see Misalignment) between the responsibility a person has to complete an action and the authority given them can be formalized as a conflict between the action and the rule of the system that prevents the action from being completed. (see Action).

•Conflict between proposed solutions and keeping the current state of reality as it is: We can identify and overcome the negative implications that might result from a proposed solution by writing a conflict between two positions: the proposed solution and its opposite (don’t change). The tool created by Goldratt to formalize problems such as conflicts and solve them is the logical diagram called "conflict cloud” (see Thinking Processes Tools: Conflict Cloud).
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Constraint

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Constraint (-2)

• Authority Constraint People have the responsibility for activities but lack the authority to solve

difficulties and interruptions to the flow. (see Misalignment). •Market Constraint

The company produces more than it manages to sell (see Client, Offer) •Human Relations Constraint

Very often conflicts between individuals or departments prevent obstacles to the flow from being removed.

According to the Theory of Constraints, a problem can always be seen as a conflict (see Conflict) between two positions.

The reasons why we found ourselves in this conflict are always a set of assumptions (see Assumption) .

These assumptions are the limiting factor, i.e. the constraint of the situation we are in (see Thinking Processes Tools: Conflict Cloud -table 8, see Core Problem)
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Continuous learning

Scientific process of acquiring knowledge (see Knowledge) in a rigorous and cyclical manner.

The postulates of a theory are neither true nor false. They are instead valid in explaining that area of phenomena which the theory addresses.

When we encounter a phenomenon that cannot be explained by the system of knowledge provided by our theory, we must formulate further postulates. These may increase the existing body of knowledge or mark the beginning of a new conceptual paradigm.

In general, we can say that when we formulate a theory we hypothesise a cause to explain an effect found in the area of reality under investigation.

In developing and applying a theory we predict that the same cause will give rise to other effects. We then carry out experiments and observations to verify whether or not the hypothesis is valid. We either validate the hypothesis or formulate a different one.

The same cycle applies to managerial actions. Management must be based on knowledge. Only if we are able to predict the result of our actions can we manage successfully. In order to predict, our way of managing must be knowledge-based.
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Continuous learning (-2)

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Control

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Control (-2)

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Control (-3)

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Control (-4)

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Control (-5)

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Control (-6)

Once we have mapped out the processes, we identify in the flow the key quality characteristics (see KQC) and the various points that have to be measured and monitored, chosen on the basis of two criteria:

Link with client-supplier relationship Point in which a yes/no choice is required (see Deployment Flow-chart).

We then gather data at these points to construct the control charts (see Control Chart ) that will allow us to monitor the behaviour of our processes and take action to improve their performance.

c) Control as a component of continuous learning

In general, in the continuous learning cycle (see Continuous learning) the control stage (3. , Check or Study) has the purpose of verifying the validity of the hypotheses made/actions taken. It can be broken down into two further stages: observation and analysis of results.

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Control chart

Control charts were created in the 1920s by Walter Shewhart to measure and reduce the variation (see Variation) of processes in a system.

At first glance, a control chart resembles a time series graph (for example a monthly sales graph). However, a time series graph only makes comparisons between single values. A control chart gives us information about the behaviour of the process that generates those single values.

A process can be in statistical control, i.e its behaviour is predictable (see Predictability) within an interval of variation, or it can be out of control. In this case, we cannot make any forecast about the results the process will produce in the future. How does the control chart make us understand the behaviour of a process? Compared to a time series graph, the control chart has three extra horizontal lines. The central line acts as a reference against which we identify trends; the two other lines are control limits or natural process limits. These limits are based on the concept of 3 sigma (sigma being a measurement of the spread of data around an average value).

The first control chart shows us a process that is in statistical control: none of the points lie above the upper limit or under the lower control limit.

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Control chart (-2)

This second chart shows a process that is not in statistical control. Two of the points lie above the upper control limit. Moreover, more than eight consecutive points (in this case nine) are on the same side of the central line.

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Co-operation

One of the fundamental concepts in Deming’s management philosophy is the need to shift from a competition-based economic model to a new paradigm founded on mutual co-operation (see also Win-Win).

Deming called for a transformation in western style management. This transformation means creating a work environment in which barriers between levels of hierarchy and functions are removed. A system is a network of interdependent components that work together to achieve an aim. Therefore, in order to optimise global performance, everyone in the company must move in the same direction. As long as individuals and separate functions continue to “to do their best” with the aim of optimising local results, we will witness an enormous waste of energy and resources to the detriment of the global aim of the system.

This is true not only for the company-system, but also for any large system, from clients and suppliers of the company right up to society as a whole. Up until today, the prevailing assumption in western culture is that competition is an intrinsically positive attitude. It provides advantages for all the parts of the economic system: companies, their employees and clients.

This concept necessarily entails the existence of a winner and a loser (Win-Lose), Deming replaced this idea with a vision based on the idea of a Win-Win approach: everyone working together as a system, and the aim of the system is the good of the system as a whole. This has the positive effect of creating benefits for all the components of the system.

In order to take this first, essential step towards transforming western-style management, we have to rethink the way companies currently reward their employees. Every form of incentive that aims at increasing the performance of individuals and functions leads to local optimisation. This jeopardises the global result and is the main obstacle that prevents organizations from changing.
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Core Problem

The common cause of a group of undesirable effects (see UDE). This idea is based on the assumption that a restricted number of causes is responsible for a large number of effects (see Complexity). Using one of the TOC tools, i.e. the conflict cloud, (see Thinking Processes Tools: Conflict Cloud -table 8d), given a list of UDEs we can identify the core problem that generates them.
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Critical Chain

The Critical Chain of a project is the longest sequence of dependent events taking into consideration the use of common resources.

This sequence determines the length of the project. It is the limiting factor (see Constraint) of the project.

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