We posted an interview with W. Edwards Deming “”the man who transformed Japan into a formidable business competitor “on LinkedIn this week entitled “Management Today Does Not Know What its Job Is”.
Part of the problem is that managers “don’t have the required knowledge or abilities.” Let’s look at some of the necessary knowledge that has to do with how to optimize performance.
Imagine a company that is made up of 5 different production facilities that operate as if they were independent companies. without inter-depending. What is the combined profit? The profit of the whole organization is the simple sum of the profit of the single facilities. Nothing complicated here.
But what happens when these facilities in fact interdepend? Is it the same? We need some help from science here.
Some help from science
In the theory of systems, the global “performance” of any collection of entities that are NOT interconnected is simply the sum of the single performances. However, when the entities are interdependent, i.e. interconnected, then the global performance of these entities is NOT the sum of the single performances. The performance of the whole is not just the sum of the separate parts. It can be so much more.
As we said, if the facilities in our example are not independent and instead interact (interdepend) among each other, then the situation changes drastically. The interdependence is manifested in the exchange of products/services among the different facilities. This exchange generates a global performance that is affected by the variation and co-variation associated with the “exchange process”, and by the combined effect of the different “efforts” of the single facilities. Due to the highly non-linear nature of this process, the global performance of the system cannot, and will never be, the simple sum of the single performances.
How can performance optimization be done?
Since we do not know in advance the nature of the variation and co-variation we are dealing with, technically speaking we don’t have any “tool” that can predict the performance of the system. The combined effect of the different efforts can generate a performance that is even better than the sum of the single performances.
The solution to the “optimize performance” problem has various aspects, and they form the foundation of any attempt to manage an organization systemically. They consist in:
- Understanding the System
- Understanding the Variation that affects our processes
- Synchronizing the System
Let’s take a brief look at these:
1. Understanding the System
First we have to understand the system. What does that mean practically? It means we have to design the interdependencies. We do this by mapping out all the processes with the aid of Deployment Flowcharts.
2. Understanding the Variation that affects our processes
We need to understand the nature of the variation associated with any process we operate. We can do this by using Statistical Process Control, and we stabilize the processes and work toward the reduction of the associated variation through process improvement.
3. Synchronizing the System
Once the processes are stable, we can synchronize the system by subordinating each part of it to a well chosen constraint. In this way we focus the work of the organization towards a common goal instead of focusing on individual, “local” goals as this leads to sub-optimization.
Hold your horses
The result we obtain is similar to the sum of vectors. In order to give a visual example, what would be the effect of two horses that are pulling a load but are heading in different directions instead of the same direction? The individual effort is the same, but the combined effort is different, depending on the directions they head towards. The more they pull in the same direction (common goal), with minimum diversion (low variation) and in synch, the greater the combined result. The same could be said of teams.
We need to design our organizations systemically so there are no artificial barriers to make sure that optimal performance can happen.
For a complete methodology for systemic management, see The Decalogue Methodology.
Since 1999, we have been presenting a new model for a systemic organization in detail, both in terms of the thinking behind it and how to conduct operations. We work alongside CEOs and Executive Teams to support the shift towards more effective, systemic strategy and operations. Our books include ‘Deming and Goldratt: The Decalogue‘, ‘Sechel: Logic, Language and Tools to Manage Any Organization’, ‘The Human Constraint‘ and most recently, ‘Quality, Involvement and Flow: The Systemic Organization’ . We support our international clients through education, training and the Ess3ntial multi-project software using Critical Chain to schedule competencies and unlock the potential of human resources. Based on our proprietary Decalogue methodology.