Three Sigma Systems

Obama wants to rework G. W. Bush’s “No Child Left Behind”, which was itself a monument to stupidity. According to the NYT, Obama says that he will,

“…replace the law’s pass-fail school grading system with one that would measure individual students’ academic growth and judge schools based not on test scores alone but also on indicators like pupil attendance, graduation rates and learning climate.”

Because, said Education Secretary Arne Duncan,

“We’ve got to get accountability right this time,. For the mass of schools, we want to get rid of prescriptive interventions. We’ll leave it up to them to figure out how to make progress.”

So Obama’s “new plan” is no plan at all. It is just another way to measure outcomes being produced by unknown processes run by an anarchic cadre of do-it-yourselfers. With stupidity incarnate, the best idea Obama can up with is to try and change educational outcomes, not by working on the system and processes that produce those outcomes, but by hitting students and teachers with bigger hammers.

As a lifelong educator who spent more than a few years running a small public high school in the basement of a church and buying teaching materials using a portion of my meager salary, it seems to me that even a simpleton should be able to understand that, rather than hammering students, teachers and yes, even administrators, to produce more desirable educational outcomes by doing whatever it takes, we must work on the system and processes that produce those outcomes!

For starters, here’s what Obama’s new standards should look like. Read more…

Dick, a member of the Deming DEN List forum, forwarded me an article by Barbara Tuchman written around 1980, entitled “The Decline of Quality“.  Tuchman is the author of “The Guns of August”,  which I regard as one of the greatest books of the 20th Century, so I read the article with great enthusiasm. In her opening she says that she planned to take a holiday in Patagoniato hide from the blowback that would inevitably occur upon publication. From my standpoint, Patagonia wouldn’t have been far enough!

At the root of the problem is her adoption of the idea that quality is an inherent characteristic. This is of course, Platonic nonsense. Quality is in the eye of the beholder in a given time and circumstance. She speaks from the position of an elite that scorns peasants and lesser beings as incapable of recognizing “inherent” quality.

She does touch on the idea of “intention” as a necessary precondition for realizing the creation of quality, but then she races off into the self-contained elitist world. She cites great books as more worthy of study than the television viewing assigned by the school teacher, yet Shakespeare was a producer of the soap operas of his day. A punster of unrivaled skill, he wrote immensely clever trash for his peasant audiences.

We should not be surprised if the cleverness of some television writers, producers, and performers, survives the ages as future classics. If the human race manages to survive the folly of its own making, the Internet will undoubtedly become the medium by which authors and artists, no longer beholding to moneyed gatekeepers and solicitous contemporaries, produce tomorrow’s “classics”.

I do agree with her that the ubiquity of poor quality has increased, but it does not come from our egalitarian tolerance of the mediocrity of those with lesser tastes, lazy dispositions, and peasant genes. The source of decline comes from the subordination of all intentions (aims) to our quasi-religious worship of the profit motive. When quality, by any measure, is systematically subordinated to profit, those characteristics we value in product and service, whatever they might be, must suffer, because the dictates of profit always take precedence.

All things being equal, consumers of all classes will opt for quality (what they value) as they define it, but when constrained by what is available, by economic circumstance, and by deceptive practices, they can only do what is possible. And if the evidence of their senses tells them that the quality of a person is measured solely by profit, in spite of all other measures of quality, they will subordinate their very being to actions that they believe will maximize profit — at the cost of qualities such a honor, loyalty, membership, responsibility, creativity, and diligent endeavor.

Today, this is what we teach in our schools — to profit in tests, in grades, in money, in life — by any means. The “idea” that human interaction is driven by the “profit motive” is not only false, it is doing irreparable harm. As Deming said, “economists have led us down the wrong path”.

It’s not often that I agree with Charles Krauthammer, but in his recent opinion piece, “Toyota and the price of modernity“, he is on the right track when he says,

The question is: How do you distinguish the idiosyncratic failure from the systemic — for example, the single lemon that came off the auto assembly line versus an intrinsic problem inherent in that model’s engineering? How do you separate one patient’s physiology producing a drug side effect versus an intrinsic problem with a drug that makes it unacceptably dangerous?

Perfection is not an option. The question that any manufacturer must ask is if the causes of a problem observed are “assignable” or “common”. If something assignable is going on, for example, a bad batch of gas pedals, they can “fix” the problem and move on. But if the problem is systematic — if for example, the design process discounts safety issues in favor of volume production — the system must be changed as a whole or similar problems will keep reoccurring in various ways.

One method that can help determine if a problem cause is “assignable” or “common” is to chart the events over time and look to see if they fall outside of 3-sigma limits (assignable) or inside those limits (common). This will not provide a certain answer, but it can provide a good indication of the nature of the problem’s cause and how to best address it.

In the case of Toyota, the incidence of sudden acceleration is almost certainly outside 3-sigma. In other words, it is very rare. Toyota has attempted to assign the source of the problem and fix it — dangerous floor mats and bad batches of accelerator assemblies. But in his testimony before the U.S. congress, the leader of Toyota, Aiko Toyoda, takes the position that the problem is common (i.e. systemic) in his company. He says his company became focused on volume at the expense of safety and quality. This is a very interesting twist for a Japanese company that is expert in the use of SPC (Statistical Process Control.)

It is almost certain that Toyoda has internal company data that indicate systematic problems to which we are not privy. Perfection is never an option. But I suspect that the recent problems that have garnered so much attention, are most likely not systemic in nature. The reason Toyoda addresses them as systemic is because  American audiences, who have no understanding of the nature of variability, have seized upon a very rare but dramatic event, and erroneously extrapolated from that rare event the conclusion that Toyota products are unsafe and that Toyota is a negligent company. Aiko Toyoda cannot hope nor dare to teach American audiences about the nature of variation. His only option in the face of American hysteria, is to take full responsibility and hopefully move forward.

Are systemic changes needed at Toyota? Toyota is one of the few companies that has the knowledge and methodology necessary to answer that question. But if systemic changes are not indicated, making such changes will likely do more harm than good. In other words, shaking up the whole company as a response to assignable causes may hurt the company, its members, and the consumer in unpredictable ways.

Krauthammer does a pretty good job of pointing out how American audiences consistently confuse common and assignable cause and, one way or another, make decisions that do more harm than good.

Americans habitually confuse common cause with assignable causes, and as a consequence they are constantly looking for, and finding, someone to blame (assign) for their troubles. In America, finding bad guys is pretty easy because we have a system the reliably and predictably produces bad guys — crooks, cons, greedy actors, corrupt politicians, Republicans, Democrats, preachers, atheists, Socialists, Capitalists, and my next door neighbor, Fred.

Once you begin to understand the nature of variation, the cause of the problems that plague us the most, become pretty obvious. Generally speaking, they are COMMON. This tells us that we need to stop looking for bad guys and start working to improve or maybe even transform, our system.

NPR ran a story today entitled “Catching Hospital Workers Dirty-Handed” in which they report:

“According to the CDC, health care-associated infections kill about 100,000 Americans a year, at a cost of billions of dollars.”

One solution being evaluated is the use of hi-tech wireless technology to spy on the hand-washing practices of individual doctors, nurses, and other caregivers.

The solutions we come up with depend on how we frame our questions. For example, in the NPR story they report that “The standard protocol in hospitals is for doctors and nurses to wash their hands on the way in to see a patient, and on the way out. But that doesn’t always happen — they get busy; they forget.”

If we frame the question in terms of who’s to blame…

• Workers who forget to wash
• Workers who are too busy to wash
• Workers who are too stupid to wash
• Workers who are hydrophobic
• Workers who want to spread death and disease

We end up with the answer that inspecting and policing workers is the best solution. Of course, when we institute a system for inspecting and policing people,  we also create a system of inspectors and enforcers against defectives and criminals.

Now think about this. That NPR report also says that, “Studies show that only about 40 percent of health care workers in the U.S. wash their hands as often as they should.”

No need for control charts here! Sixty percent non-sanitizers is a big, big, signal telling us that the problem is not one of individual performance. We are not dealing with outliers! If we understand the nature of a system and variation, we know immediately that we have a system that predictably and reliably produces 60% non-sanitized hands! We might be able to inspect out a small fraction of non-sanitized hands, at great expense, but we are foolish to expect a system that produces 60% non-sanitized hands to do what it does not do.

I'm sure you can come up with something better than this!

What if we frame the question differently? What if we ask, “By what means can we best assure that healthcare workers’ hands are free of disease bearing agents as those workers move from patient to patient?

Can we design a worker-sanitizing system that minimizes worker decision-making requirements regarding whether to sanitize or not to sanitize?

If we could accomplish this, wouldn’t  everybody win?

In today’s NY Times business section:

TOKYO — …Toyota’s problems mounted in North America with the announcement of a halt to sales and manufacturing of the bulk of its cars.

As a sailor, I find many parallels between the enterprise of sailing small boats on big oceans and the business of doing business. In making our way at sea the crew, which is comprised all who are aboard, share a set of aims and a system for realizing those aims—their boat, their methods, and their ability to work together. Seamanship represents the whole of their theory, skill, and methods for voyaging.

In sailing, heaving to  is a way of slowing a sail boat’s forward progress, fixing the helm and foresail position so that the boat doesn’t have to be actively steered.

When I teach others to sail, I teach that even though crossing oceans under sail is a most practical endeavor, the dictates of well-formed theory is the key to survival. This is called seamanship. What seems expedient in moments of adversity must always meet some test of a broader understanding of the titanic forces that are beyond a crew’s control. When theory and practice are challenged at a fundamental level—when the best course of action cannot be determined with reasonable certainty—-the crew must, if at all possible, heave-to.

The idea of heaving-to does not come easily to our ambitious animal spirits. In situations of adversity we are prone to reaction rather than reflection. But actions taken on the basis of faulty understanding are more apt to make things worse, which prompts more action, which makes things worse, and so on. As Dr. W. E. Deming explained, if we start reacting to individual data points when it is our system itself that is producing unwanted variation (lack of predictability) then we are “off to the Milky Way”.

Toyota, the Japanese automaker, calls their seamanship, “The Toyota Way” and that body of theory is now being put to the test. Superficially, they have a problem with a sticking gas pedal on their popular Camrys and Corollas and superficially the problem and solution are all too familiar: Do a recall. Engineer a solution. Fix the gas pedals. But it appears that Toyota sees the problem in a broader light. The crew regard the gas pedal problem as a symptom of a larger challenge to their system. That larger challenge includes the titanic economic forces that are raging in the world today that have loosed a chaos of increasing unpredictability and undermined their assumptions that have become too tidy.

“By chasing numbers, they (Toyota) were becoming seriously outstretched,” said Masahiro Fukuda, manager of research at Fourin, a global automotive research company based in Nagoya, Japan. “Many of us weren’t surprised over the big recalls; we were more surprised that it took Toyota so long.”

“Toyota’s president, Akio Toyoda, has himself berated the company for excessive confidence, which he said had set the company up for a painful fall in the global economic crisis.”

“But Mr. Fukuda said he saw Toyota’s decision to suspend sales as a typical Toyota move. “At a Toyota factory line, when something goes wrong, they stop the whole line.” he said. “Now Toyota is doing the same thing, at the company level. That’s the Toyota way.”

Is Toyota’s shutdown merely a damage control tactic or does it reflect genuine seamanship? By shutting down their manufacturing and sales operations, it appears that Toyota is putting their money where their mouth is.

GDP Up!

October 29th, CNN-Money lead article: “Economy finally back in gear: Government says GDP grew 3.5% in third quarter, ending a year-long string of declines and coming in better than forecasts“.

Readers of this blog already know that I regard the stock market as a misleading leading indicator. Is GDP a better predictor?

Two lynchpins to understanding the work of Dr. W. E. Deming are the nature of “measurement” and “optimization” of a system. The efficacy of measurement depends on what we choose to measure and why. The concept of optimization counsels us to remain steadfastly committed toward our aims, based in our values, and cautions us against reliance on any single measure.

What does GDP really mean and is maximizing GDP a desirable thing?

GDP is widely used as a summary statistic said to be indicative of the overall well-being of a nation’s economy.

First off, here’s what GDP looks like to most economists:

It is translated into english as:

GDP = private consumption + gross investment + government spending + (exports - imports)

So what does it mean?

Read more…

Would of, could of, should of…..

If I had jumped into the stock market and bet on the DOW last March, my investing friends say that I would have made a tidy sum.

As I understand it, even though unemployment continues to increase and housing prices continue to decline, in the few short months since the world economy nearly collapsed, the stock market, a leading indicator, is now promising a recovery. Apparently the DOW has been rapidly buoyed up by the stock prices of companies that specialize in financial trading. (Hey aren’t those the guys that got us into this mess in the first place?).

I suppose it makes sense. Those companies are the ones that have been given access to vast sums of taxpayer dollars at 0% interest and an implicit government guarantee that the taxpayers will bail them out again if they blow one of those too-complex-to-understand bets. With a sweetheart deal like that, who wouldn’t play some long-shots with lots of upside?

So now I am wondering if I should ante up a chunk of money to get into the game. Hey, I’m only human. My broker says yes, but the fine print still says the past is no predictor of future performance. But hey, people who are in the market are getting get richer as I write this!

Even though past performance does not predict future performance, I found this cool historical composite chart on the Internet and it got me to thinking.

The black line is the DOW circa 1928. 381 was the high and 128 was the Great Crash, which was followed a few short months later by a nice little “happy days are here again” rebound. The rest is, as they say, history. The red line is the DOW circa 2008. 14000 was the high and 7000 was our very own “great crash”. I guess 10000 is Happy Days all over again. Or is it?

Anyone want to help me out with an informed prediction?.

Happy days are here again, right?

In my post, “Forward Thinking about Leadership” I proposed a set of questions that come to mind when we begin thinking about leadership as part of a system rather than as a set of personality attributes assignable to individuals. Here are some thoughts about possible answers to the first question. (I would very much like to hear other people’s thoughts on this subject as well.)

If we were actually capable of independent action, there would be no need for leadership. I would do my thing, and you would do yours. Life would be a random walk of every-man-for-himself. But in the course of our lives, we are never independent actors. We are inexorably woven into a set of collaborative relations consisting of family, friends, workplace, community, nation, and world.

As an extreme-case mind experiment, try to imagine an action you have taken or might take that is in some way, not systematically interconnected with the actions of others.

In 2004 I crossed several thousand miles of ocean as a solo sailor. At first blush, it seems that this qualifies as independent action. Not really. My course was set for some distant safe harbor, built and inhabited by others. My boat and all the tools on my boat were the embodiment of designs envisioned and realized by others. The  navigation charts I used and books I read were ongoing conversations with others. Even my brief periods of sleep were punctuated by dreams populated with imagined others.

My solo sailing venture entailed a system of action in which I served as both leader and follower. In leading, I made decisions about where and when to go. As a follower, I was led by the designers of  my boat, equipment, charts and guides, and the wisdom of the many others who had shaped my knowledge and understanding of seafaring. I was never alone. I was always leading and following. My seemingly self-aimed actions were led by the system of tools and knowledge that I had acquired from others in the course of a lifetime of sailing.

One conclusion to be drawn from this example is that leading and following are always present in every human enterprise. You simply can’t escape it.

So what is the part we call leading? Read more…

This past weekend, I happened upon a blog entry by Ron Pereira on his LSS Academy site, entitled Level 5 Leadership. The Level 5 reference is from a bestselling business book called “Good to Great“, by Jim Collins. Ron posed the following question:

“So, it seems the two primary characteristics of the Level 5 Leader are straight forward – be humble while holding fast to the path you feel is best for the organization no matter how difficult it may be. I’d like to turn it over to you, are in 100% agreement with this leadership style? Do you think Level 5 Leadership is essential for a company to succeed?”

Since Ron posed the question, I answered, if somewhat tactlessly, ”Complete nonsense! Such claptrap is worse than useless, it is harmful.”

(Read Ron’s original post and my comments here.)

Those who know me say that I have have a real knack for subtlety — NOT! When its comes to discussions of leadership, I am fed up with the disastrous nonsense that is routinely peddled as authoritative science in business literature. “Good to Great” is just another example of this sort of nonsense.

The distinctly American cult of personality has produced a nation in which great leadership and great followership have all but disappeared amdist an anarchy of petty, self-interested, rabble  With pseudo-science of this sort, it is no surprise that the U.S., supposedly the master of innovation and enterprise, is fast degenerating into a third rate economic power that is systematically substituting  money churning con-artistry for the hard work of creating great products and services that help to make peoples’ lives better. Read more…

Matthew Stewart has written a truth-telling expose in which he explains that the high priests of business management, the MBAs, consultants, and other shamans, have no clothes! In a monumental act of misdirection he, or maybe his editors, choose to title his book, ”The Management Myth: Why the experts keep getting it wrong“. The title of this blog entry would have been more apt.

The Management Myth

Let me begin by saying that this blog entry is not a review of Stewart’s book, mainly because I haven’t read it! But I have read and reread his article in the June 2006 issue of The Atlantic, entitled more succinctly, “The Management Myth“, and if that article, which you can read online, is representative of the book, then I can recommend the book without hesitation. If its book reviews you want, try Jill Lepore’s in the October 12 issue of the New Yorker, “Not so Fast” and Andrew O’Connell’s in the August 13th, 2009 Harvard Business Review, “Why Business Theories are a Waste of Time“.

Now, on to the matters at hand.

Read more…

W. E. Deming was clear in his 14-points that he was adamantly opposed to the use of performance appraisal systems and the use of deferential rewards and punishments given on the basis of goals and targets . But the use of these techniques remains ubiquitous in our business practices despite evidence of the fallacy of these methods that has recently come to public attention in the form of the globally disastrous outcomes produced by bonus systems in the the financial industry. Even Obama has stepped into this trap with his advocacy of pay for performance teacher appraisals.

Why does this approach persist in the face of the evidence that it produces disastrous outcomes and what is the alternative?

Motivation

I think the evidence against the use of performance appraisal and differential motivators is simply invisible to those who are hopelessly mired in  the assumptions promulgated by a theory of organizational and individual psychology. Try as people may, they cannot shake the common sense “logic” that the self-interested will of every individual participating in an organizational enterprise must be bent to the will of the organization by the administration of rewards and punishments, and that it is the principal job of management to do this bending, person by person, appraisal by appraisal.

The assumption behind this view is that we can understand what motivates individuals and act on the basis of that understanding to reliably produce predictable behavioral outcomes among individuals. If you think about this, it is exactly the same logic that an operator uses in controlling a piece of machinery.

In other words, “If” I understand the machine, read the dials, and push the right buttons, it will do pretty much what I want it to do.

Read more…

The values-based creation of value is a more useful aim than profit itself, though accomplishing the creation of values-based value will most likely profit both producers and consumers.

Money, as an abstract representation of value, is quite useful in an exchange economy, but when we begin to behave as if the value is in the money itself rather than in what the money represents in terms of product and service, our values come to be sacrificed on the alter of disembodied profit. From this comes the folk wisdom, “Money is root of all evil”.

I think the tendency for money to become the object of worship, as opposed to value created, is not necessarily inherent in the technology of money. The problem occurs when we adopt a “science” of economics that posits amoral, objective, laws governing human behavior. This mechanistic model legitimizes amorality such that we judge others, not by the values they represent and the value they create, but by they summary data points consisting of net worth in financial terms. We create and cultivate a reality in which financial profit becomes a measure of fitness and therefore, goodness, to which all must aspire. The only crime in such a valueless world, is getting caught doing whatever it takes to maximize gain and other’s losses.

I think that we have bought into an ideological catch 22 in which cunning and deceptively ruthless action is good and “nice guys” always finish last. Surprisingly, in the long run the end game is not “winner takes all”, as we might expect. In the end game, everybody loses.

I woke up this morning and made my way out the front door to pick up the daily newspaper on my driveway. Near my front gate, an Orb spider was weaving a wonderfully symmetrical web across my path. I stopped for a while to watch it at work. After spinning a run, it would laboriously ascend to a perch on a thread of its own construction and then, in a series of acrobatic drops, sweep a new strand of silk along the arc of its emerging work of functional art. After a few minutes, I grabbed a stick and swept away the web that was blocking my path to the newspaper. The spider dropped, then swung away in the breeze. I proceeded along my way, confident in the knowledge that the spider would begin building its web anew, and hopeful that it would choose a new location that would no longer block my path to news of the day.

"Oh what a tangled web we weave." (Click to visit site with web construction video)

What causes the spider to weave its webs? Does it require some special motivation? Does the spider anticipate some future gain? Does it weave its web out of some fear of future dangers? These questions are silly. The spider weaves webs because spiders and their web-weaving physiology and behavior have come into being over the eons through a process of natural selection. Spiders weave webs because their webs have worked over the ages of spiders becoming spiders.

I have described human beings as first and foremost, enterprising creatures who swim upstream against the tides of entropy with aims and intentions that can be powerfully harnessed using aiming and the definition of mission. Our enterprising nature is why we weave our webs, not out of spider silk, but out of symbols that become woven into an ever-emerging web of knowledge. To be human is to laboriously expend energy to ascend from the unpredictable chaos of the world toward a more predictable, orderly, and valuable world of our own creation.

Read more…

Many of the businesses I have visited have produced what they call a “Mission Statement”. These are typically pledges of goodness that come to be displayed prominently on a wall plagues and Web pages. Most are assertions of commitment to customers, quality, and and service, and all are inevitably festooned with meaningless superlatives like “best”, “world class”, “highest”, and “most”.

When I ask managers, workers, and even customers, about the meaning, believability, and usefulness of these pretty words, most reply, with a wink and a nod, that they are basically window dressing and have little with the business of business. Basically on par with Hallmark greeting card sentimentality, the reality of the workaday world soon makes it clear to all, that their sentiments as no more than “wouldn’t be nice if…?”

As is so often the case, the failure to understand theory renders the most powerful of tools, into useless decoration. Worse yet, the job that needs to be done remains undone.

Read more…

In business, we become habituated to thinking that is too abbreviated. We fall into a mind-set that our enterprise is about financial profit and rivet our attention on doing whatever it takes to maximize the bottom line. Of  course, some enterprises really are about nothing more than the bottom line. For example, many but not all bank robbers are in the profit business and their enterprises reflect straightforward theory and to-the-point methodology: “Your money or your life”.

( Come to think of it, we put bank robbers in jail if we can catch them, don’t we?)

But most business ventures do not fall into the same category as bank robbery. In most cases, profits are incidental to the value a business creates in the form of product and service. If your business does this very well, you, your employees, and your customers will profit. If your business does this poorly, everyone loses.

To overcome the problems that result from habitual thinking, it is important that you carefully consider the nature of the business enterprise, or any enterprise for that matter. If you do this, you will force your mind to attend to the issues that really matter with regard to the long term success and sustainability of your enterprise.

Read more…