When we meet with executives, business owners and management teams for business consulting /$CHAIN weakest link_C[7].jpgrelated to Lean and Theory of Constraints implementations in order to establish a POOGI (process of on-going improvement), we frequently discover that these folks have been trying for some time to find and apply just the right KPIs to motivate their employees and achieve higher CHAIN weakest link_C.jpgprofits. However, almost as frequently, these managers and executives have discovered that they have, in the long run, been about as ineffective in making progress toward achieving stable and improving profits as “baseball managers trying to coach their team by looking at the scoreboard”—a phrase used by Peter Senge in his foreword to Profit Beyond Measure (H. Thomas Johnson and Anders Bröms).

 

Unfortunate, but true: “Those who manage by results focus on the bottom-line target and consider that achieving financial goals justifies inherently destructive practices,” Johnson and Bröms observe

 

Johnson and Bröms remind us that W. Edwards Demingsaw the same thing when he used to tell managers and executives: “if management set quantitative targets and makes people's jobs depend on meeting them, ‘they will likely meet the targets--even if they have to destroy the enterprise to do it.’”

 

A different path to enduring profitability

 

Profit Beyond Measurebrings to light a different path: “The alternative to managing by results... requires disciplined practices, sustained attention to how work is done, and nurturing every step of the work at every moment. Managing by means requires all managers in an organization to focus, as does nature, on minute particulars. Such attention to detail involves encouraging employees to cultivate their creative talents so that they may best serve a customer's specific needs. Management behavior manifests the belief... that the means are ends in the making. The job of managers who manage by means is to cultivate and nurture conditions that bond company talents and customer needs in a profitable union, not to drive work with destructive financial targets. Instead of a quest for relentless growth of quantitative targets that burns out companies before their time, managing by means... can enable a company to profit beyond measure for generation after generation.”

 

The authors have studied companies that have demonstrated sustained profitability over an extended period of time—decades, in fact. One of the firms mentioned in their excellent book has sustained a run of more than 65 years of operating without a loss.

 

Interestingly, even though I have been an adherent and practitioner of the Theory of Constraints for many years and have applied the Thinking Processes many times across an array of clients, it was this book, Profit Beyond Measure, that helped me to see just why the Thinking Processes are so powerful an aid to helping companies make more money.

 

On pages 40 and 41, it says:

“Instead of trying to control or regulate financial results by manipulating parts [of the organization] with quantitative measurements or scorecard targets, the task of management in a business organization [or a supply chain, for that matter] should be to nurture relationships and help people master natural-system principles. That nurturing is the essence of genuine learning, and helping people in an organization [or supply chain] discover and implement the principles that govern systems in nature is genuine leadership....

….

The surprising truth… is that changed thinking, not ‘problem-solving,’ answers [the] problems” of systems required to produce both variety and quality at low cost. [Emphasis added.]

“Changed thinking,” they say!

 

Indeed, we have found that the biggest obstacle to helping many companies dramatically improve their performance and profitability is what they think they know. That is, the biggest hurdle is getting them to change their thinkingabout how they organize their work and manage the flow of goods and services from customer-to-cash (and profit).

 

Thinking outside the “box”

 

Profit Beyond Measurefurther elucidates on this matter saying, “Popular wisdom urges problem solvers to ‘think out of the box’ or to ‘shift paradigms.’ Such phrases express an important truth. How we think does define constraints and boundaries—a ‘box’—that shapes the world we inhabit. To get outside this box requires evaluating the thinking that produced the constraints and boundaries that themselves generated problems. In other words, the solution to the problems often demands that we appraise the thinking that gave birth in the first place to the initial situation from which the problems arise.

 

When applying the Thinking Processes, we don’t even like to call the symptoms the system is displaying “problems,” since “problems” tend to stimulate a “problem-solving” response from managers and executives.

 

Instead, we encourage the company’s team to list “UDEs” or “un-desirable effects,” since most firefighting is focused, not on the real “problems” (i.e., the root problems), but on the effects that flow from these roots and that break out as “fires” here and there across the organization.

 

Also, in complete agreement with Theory of Constraints thought, Johnson and Bröms refer to the work of Gregory Bateson, who concludes that quantitative measure cannot determine where a system will fail. The failure is found in qualitative factors in the organizationand these cannot be measured using management KPIs. Here is the excerpt:

Gregory Bateson compared the consequences of imposing quantitative decisions on a qualitative system to placing tension on a chain. Quantitatively increasing the variable called tension predictably causes the chain to break. Where the chain will break, however, cannot be predicted. So it is when we impose quantitative demands on a natural system that operates according to patterned and qualitative relationships [as all human systems do]. In Bateson’s words, “every quantitative change we impose upon the system is in the end putting stress on the qualitative patterns whose breaking strains and whose evolutions and transformations we do not understand.”

 

The Thinking Processes are specifically designed to help managers and executives (and the whole team, really) unlock “tribal knowledge” and come to understand the “patterned and qualitative relationships” that cause the system to deliver—or fail to deliver—according to the customers’ expectations.

 

Well, enough of my rambling. Suffice it to say, I think you’d gain much from reading this book, if you haven’t already.

 

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Let me know your thoughts when you have a chance. You may leave your comments here, or feel free to contact us directly, if that’s your preference. Thanks.

 

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Johnson, H. Thomas, and Anders BroĢˆms. Profit Beyond Measure: Extraordinary Results through Attention to Work and People. New York: Free, 2000. Print.

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