Posts selected fromManagement Blog - Engineering Blog - Investing Blog and other blogs - The Purpose of an Organization
W. Edwards Deming described the purpose of an organization in New Economics, on page 51, as:
The aim proposed here for any organization is for everybody to gain – stockholders, employees, suppliers, customers, community, the environment – over the long term. continue reading: The Purpose of an Organization - Science and Engineering Macroeconomic Investment
 The United States has benefited tremendously from the decisions to fund the National Science Foundation (as well as other investments in science) for decades. Other countries have seen the wisdom in those investments and seem to be committing much more to those investments than the US lately. I think it is very wise of them and will serve the world well. But I fear the United States has already allowed itself to lose a great deal of the competitive advantage it built up in the middle of the last century.
In the last couple decades we have been able to coast on the lead we had. We could have many of the best minds come to our colleges and then keep them here once they graduated with advanced degrees. However, the lead we had is rapidly being eliminated. This does not mean the US will immediately be uncompetitive. But it will mean one of the great advantages we had will be greatly reduced.
The United States still has competitive advantages that will continue to serve us well in harnessing advanced technology for economic gain. But others have been making strategic decisions to gain some of those advantages for themselves. And the United States will almost certainly continue to see its scientific and engineering leadership in the world erode. And the economic consequences will be dramatic. continue reading: Science and Engineering Macroeconomic Investment - Design of Experiments in Advertising (2005)
It is great to see the application of Designed Experiments increasing. I am reminded of an article by my father, William G. Hunter, from 1975: 101 Ways to Design an Experiment, or Some Ideas About Teaching Design of Experiments. Examples of the topics of the designed experiments his students performed:
- taste of stewed chicken
- toys child chose to sleep with
- quality of ground malt for brewing beer
- distance football was kicked
- absorption characteristics of activated carbon used with municipal waste water
continue reading: Design of Experiments in Advertising (2005) - W. Edwards Deming’s Seven Deadly Diseases
Seven Deadly Diseases
- Lack of constancy of purpose
- Emphasis on short term profits (Overreaction to short term variation is harmful to long term success. With such focus on relatively unimportant short term results focus on constancy of purpose is next to impossible.)
- Evaluation of performance, merit rating or annual review (see: Performance Without Appraisal: What to do Instead of Performance Appraisals by Peter Scholtes).
- Mobility of top management (too much turnover causes numerous problems)
- Managing by use of visible figures, with little of no consideration of figures that are unknown or unknowable.
continue reading: W. Edwards Deming’s Seven Deadly Diseases - Jeff Bezos on Lean Thinking (2005)
I read a book recently about Toyota’s lean production methodology, which is very interesting
continue reading: Jeff Bezos on Lean Thinking (2005) - Estate Tax Repeal is a Very Bad Idea
The estate tax is the most capitalist tax that exists. Capitalism, which some seem to think is based on people inheriting assets from their relatives, is not. Capitalism is based on the concept that each person gets to receive rewards for their work.
Long before Adam Smith, noble rich passed on their wealth to their heirs. It was not Capitalist then and it is not Capitalist now.
You have to have some taxes to run the government. The income tax is a poor tool, as it is a direct disincentives to positive economic activity. The best tax is one that doesn’t take anything from someone who earned it. And that is exactly what the estate does, tax a portion of the millions someone is given.
The income tax, however, is the largest source of income and therefore it will not disappear. But if you are going to lower taxes, that is the tax you should lower not one on people being given millions of dollars. continue reading: Estate Tax Repeal is a Very Bad Idea - New Toyota CEO’s Views (2005)
Toyota has grown in the past few years, but [there’s a risk] that a belief that the current status is satisfactory creeps into the minds of employees. That’s what I’m worried about.
We should never be satisfied with the current status. In each division, function, or region, we still have numerous problems to cope with. We need to identify each one of those tasks or problems and fully recognize them and pursue the causes. This needs to be done by all the people working for Toyota.
continue reading: New Toyota CEO’s Views (2005) - Managing for Creativity
Much management knowledge is not put into practice. I do not agree “managers have known that learning and being challenged motivate workers more than money or fear of disciplinarian bosses.” Maybe good managers know this, but I would wager a vast majority of managers believe the opposite. continue reading: Managing for Creativity - Management is Prediction
I believe Deming’s thoughts about prediction are most effectively put into action using the PDSA cycle. Specifically, you must predict the results in the planning phase (prior to piloting improvements). I find that this is rarely done. I don’t think the form of that prediction is critical (narrative with loose numerical guesses, precise numerical prediction…). The critical issue is making the prediction, then comparing the results to that prediction and then figuring out how your original understanding can be improved based on the new data.
Learning will not only be about the specific case being examined, but also, over time, learning about your tendencies in prediction. continue reading: Management is Prediction - Fast Company Interview: Jeff Immelt
My guess would be that what lead to this quote is not a lack of understanding that managers need the same qualities today they needed 10 years ago but the compulsion to feed the media frenzy for some incredible new insight. It just isn’t sexy to say “we need the same leadership qualities we needed in the past.” Deming stressed the importance of these “new” qualities he states more than 50 years ago and I think most decent managers have know you need to “know why we’re doing them”
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Customer focus and innovation would also be at the top of the list of important issues and were 10 years ago and will be 20 years from now. What is important for management does not change much.
occasionally innovation is so dramatic it drastically changes the practice of management, two examples:
1) the use of information technology
2) the whole quality movement [Deming’s ideas, SPC, Toyota/Lean, Six Sigma… continue reading: Fast Company Interview: Jeff Immelt - Managing Fear
A good article on this topic is, Managing Fear by Gerald Suarez (who I worked with for several years). There are also 3 videos on this topic by Dr. Suarez, available from Management Wisdom, the producers of the Deming Library videos. I must admit I didn’t really understand the effects of fear and anxiety on performance until hearing Dr. Suarez speak on the topic many years ago. continue reading: Managing Fear - Could Toyota Fix GM
Yes, Toyota could fix GM. Even the right leaders and managers, within GM, could fix GM but it is a huge long term job and it would be harder to do it internally because you will have to do it while competing with Toyota. Also they have some difficult issues to deal with since their previous managers did not tihnk of the long term (20-50 years out from the decisions they were making in the 70s though 90s).
I wouldn’t buy GM if I were Toyota, though. Why bother. Just grow Toyota, it is working very well so far. It makes sense to buy if you need to grow quickly to gain critical mass, or you will lose the opportunity to grow early in a fast moving market. High tech companies (like Cisco and Intel) often do well buying other companies – but just as often high tech companies make more mistakes buying than is justified by the successes. continue reading: Could Toyota Fix GM - Millennium Development Goals
I agree it would be greatly beneficial if the method to reach those goals included a measurement system that provided good outcome and process measures (not just activity measures like spend so many billion dollars). And those measures were used to help determine what was working well and what was not. And then resources were focused where they had been effectively used and where they were not changes were made. The PDSA method should be used to test out potential good ideas on a small scale and then measure the success and invest in things that work and don’t invest in cases when results are bad. The failure to focus on results, and basing development efforts on all sorts of ill conceived considerations, is a large part of the reason many of the problems are as bad as they are now.
I think there is hope for progress in the attempts to improve the situation for people worldwide. However, it will not be easy. A great first step would be to hold accountable those leading the effort (the United Nations, individual countries [most especially the security council, etc.). If we could even get to the point where the progress was visible and failures were an embarrassment to those in power, then we will increase the odds of success. But I doubt failing to reach the outcome measures will be seen as a problem that must be addressed and fixed, instead of explained away. continue reading: Millennium Development Goals - Toyota as Homebuilder
many organizations don’t apply many concepts that have been proven effective for decades. So I hope Toyota gets into any business that continues to provide lousy value to the consumer (at least those where that consumer is me). I wish they would create their own credit card (they offer Toyota branded Visa and MasterCard credit cards now, in Japan), provide high speed internet service and run an airline.
Toyota is probably too smart to try and run an airline in the US (only Southwest seems to be able to that profitably).
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On the Toyota web site they list the following areas of non-automotive Toyota business: financial services, information and communications, marine and most surprisingly Biotechnology and Afforestation. Toyota states: “Biotechnology may seem far removed from the auto industry. It is, however, closely related to automaking in the context that they are both aiming to achieve a sustainable society, and their close relationship can be seen in the new Raum, launched in May 2003, which uses parts made from bioplastics.” continue reading: Toyota as Homebuilder - Targets Distorting the System
 I still remember Dr. Brian Joiner speaking about process improvement and the role of data well over a decade ago. He spoke of 3 ways to improve the figures: distort the data, distort the system and improve the system. Improving the system is the most difficult. continue reading: Targets Distorting the System
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