Crashing With the Nose Up
JAMES R. CROW
The 5th Annual KM World 2001 Conference and Exposition -- Santa Clara Convention Center,
Santa Clara, California
October 30 - November 1, 2001
Lift
Thrust Drag
Gravity
Introduction Knowledge Management Requires
Very High levels of Trust and Internal Cooperation
The topics we will discuss undermine trust and teamwork within the organization
Trust and teamwork require an understanding of the organization as a system of interdependent components
Topics of Discussion Just as systems can be designed
to promote internal competition they can also be designed to promote internal cooperation and collaboration.
Trust is something that is built over time.
What do the following have in Common?
Profit and Loss OvertimeRejects ReworkCycle Time TurnoverAbsenteeism Accidents
Warranty Costs Cash Flow Market ShareWaste
What do the following have in Common? Pay for Performance Systems Rankings (People, Plants, Shifts) Reward and Recognition Programs Performance Appraisals Contests Quotas Management by Objectives Performance Management Systems
Management, in the belief that these programs drive performance, uses these programs to drive the company forward. What these programs actually do is create winners and losers, are counterproductive to teamwork, destroy trust, create fear, ignore the existence of a system, increase variation in a system and create an adversarial work environment that will make it difficult for any knowledge Management system to be effective.
The organization, driven by management to achieve higher levels of performance, may instead “Crash With the Nose Up.”
The System is a series of interdependent components that try to work together to achieve the aim of the System. W. Edwards Deming
Optimization is a process of orchestrating the efforts of all components toward achievement of the stated aim. Optimization is management’s job.
Sub-optimization is the result of doing things that ignore the existence of a system, and the interdependence of the components.
New Idea
Design Consumer And Research
Suppliers RedesignCustomers
A
B Value Adding Processes MarketsProduction, Assembly, Inspection, Distribution
C Industry
D Technology
The Organization as a System
We are all victim's of What We Know
Closely Held Beliefs
Affect Systems Design
Affects Individual and Group Behavior
Systems Drive Behavior
Performance Appraisal Our Expectations Reward exceptional performers Identify poor performers Determine pay rates Enhance the communication process Career planning Feedback on job performance Build Relationships Create documentation Motivate employees Solve most - if not all of your employee
relations problems.
“The performance appraisal process is a cart that is asked to carry too heavy a load.”
Peter Scholtes
How the Performance Appraisal results in sub-optimization of the system
Acts as a barrier the the communication processReinforces the boss/subordinate relationshipCounterproductive to “driving out fear”Helps to establish an internally competitive systemTakes away from the “focus” on the customerRequires tremendous time and resources to develop and administerIgnores the interdependence of the components within the systemTends to be subjective instead of an objective measure of performance
Measures most recent performancePeople similar to the appraiser tend to receive higher
appraisals
A study done at a large GE plant showed the performance appraisals had no positive impact on the organization.
Work Planning and Review
More frequent discussions of performance
No summary judgments or ratings Salary action discussions held
separately Mutual goal planning and problem-
solving A joint process with shared
responsibilities
One Year StudySignificant improvement in the following
Amount of assistance in improving performance
Degree to which manager was receptive to new ideas
Ability of manager to plan Extent to which manager
made use of employees abilities
Correct career development goals
Increase in number of performance discussions
Pay for Performance
Theory: Good performance should be rewarded, bad performance punished. Money is a motivator. Tying pay to performance is a way to enhance the performance of individuals
Reality: Money is not a motivator. Money is at best a satisfier.
What is outstanding performance?Quarter
Name 1 2 3 4 Total Rank
Ken 8 10 12 9 39 5
Barbara 6 4 11 7 28 1
Lenny 11 11 11 8 41 6
Noboru 8 11 8 11 38 4
Cathy 15 5 12 4 36 2
Steve 5 9 9 10 33 2
Defects per worker for the year
What is outstanding performance
55 Upper Control Limit = 51.79
50
45
40 Average 35.83
35
30
25
20
15 Lower Control Limit = 19.97
10 39 28 41 38 36 33
05 Ken Barbara Lenny Naboru Cathy Steve
Business Week, September 4, 1994 Eleven of thirteen school
districts drop pay for performance plans. This sounded like a good idea but any performance gains were more than off set by charges of unfair treatment and conflict between teachers.
Despite the evident popularity of this practice, the problems with individual merit pay are numerous and well documented. It has been shown to undermine teamwork, encourage employees to focus on the short term, and lead people to link compensation to political skills and ingratiating personalities rather than to performance. Indeed, these are among the reasons why W. Edwards Deming and other quality experts have argued strongly against using such schemes.
Jeffrey Pfeffer, “SIX DANGEROUS MYTHS ABOUT PAY,” Harvard Business Review, May-June 1998
Six Dangerous Myths About Pay
Labor rates and labor costs are the same thing You can lower your labor costs by cutting labor rates Labor costs constitute a significant proportion of total
costs Low labor costs are a potent and sustainable
competitive weapon Individual incentive pay improves performanceMost merit-pay systems share two attributes: they absorb vast
amounts of management time and make everybody unhappy. People work for money
The Role of Money
Money should enable you to hire and retain the workforce you need to run a successful organization.
Reward and Recognition Programs
Theory: People will work harder to receive recognition and be rewarded for their efforts.
Reality: Programs have little if any impact on performance, and create a win/lose working environment.
Reward and Recognition Programs Sub-optimize the system in the following
ways: Costly and time consuming to develop and
administer Always more losers than winners Takes away from customer focus Selection process can cause conflict within the
group Any positive impact on performance is short-
lived.
Contests/Competitions/Rankings/Incentives Theory: Since our economy is based on competition and
we can see the benefits of competition all around us, we will benefit as an organization by making competition the way we do business internally also
Reality: Creates winners and losers, and there will always be more losers than winners
Ignores the existence of a system and the interdependence of the components within the system
Counterproductive to Teamwork, destroys teamwork Takes away from customer focus
“The question, then is, how do you produce internal commitment? One thing for sure is that the incentive programs executives have used - higher compensation, better career paths, employee of the month, recognition awards, simply do not work. On the contrary, in all my years as a change consultant, I have repeatedly witnessed how offering employees the “right” rewards creates dependency rather than empowerment. Inevitably, the power of such methods wears off with use, and all that has been created is more external commitment.”
Chris Argyris, Empowerment: The Emperor’s New Clothes, Harvard Business Review, May-June 1998
Quotas
Theory: To achieve increases in sales, production, quality, etc., we must set quotas. People will strive to achieve these quotas and our sales, productivity, quality will increase. Without a quota no one will sell/ produce anything.
Quotas
Reality: Quotas limit performance and contribute to sub-optimization of the system.
Sales tend to peak at the end of the month, quarter, year
Sales reps tend to limit their sales to the quota or only slightly above.
Sales reps sometimes hold orders as a “cushion”towards next months sales.
Creates winners and losers through competition between sales reps.
Management by Objectives/MBO
Under pressure from management to “hit the numbers” Bausch & Lomb’s executives got creative.
Hong Kong Allegedly inflated revenues by faking sales of Ray-Ban sunglasses to real customers. The glasses were allegedly then sold at cut-rate prices to gray-market dealers
Miami By accepting cash payments and third-party checks, a Miami warehouse may have indirectly helped launder drug money until mid 1990. Senior managers tolerated the lucrative trade, say former executives.
Contact Lenses Contact lens managers shipped products that doctors never ordered and forced distributors to take up to two years of unwanted inventory.
Blind Ambition, Business Week, October 23, 1995
If management by the numbers worked, the former Soviet Union would have been a success.
Commitment Control
Teamwork Competition
Win-Win Win-Lose
Open/Shared Secretive/Closed
Information
Working Together Working for Self
Trusting Suspicious
Trustworthy Untrustworthy
Collaboration Us VS. Them
Can There be too Much Competition
Competition Undermines Cooperation and Trust
Excessive Competition Undermines Quality Decision Making
Too Much Competition Promotes Anti-Social Behaviors
Competition Leads to Under-Investment in Training and Development
Bruce Kaufman, HR Atlanta April 1999
Moving From Competition to Cooperation
Rule One:
Stop doing things that result in sub-optimization of the system. Move from win-lose to win-win.
The objective must always be for the organization to win, not the component parts.
Move From Control to Development
Rule Two: Develop an Understanding of
Deming’s System of Profound Knowledge
The organization as a system Theory of Knowledge Knowledge of variation Psychology
A System of Profound Knowledge
Appreciation for a Knowledge about
System Variation
Theory of Understanding of
Knowledge Psychology
The Organization as a System
The System must have and Aim, without an Aim there is no System
The System must be Managed Management of the System Requires
Knowledge of the Various Components and how they interact
The Secret is cooperation of the components toward the achievement of the stated aim
Must move Thinking from Vertical to Horizontal
Knowledge of Variation
Common Cause (Random) Variation
Knowledge of Variation
Special Cause Variation
Two Mistakes
1. To react to an outcome as if it came from a special cause, when actually it came from a common cause of variation
2. To treat an outcome as if it came from a common cause of variation, when it actually came from a special cause
Theory of Knowledge
Management is Prediction Knowledge is built on Theory The use of data requires
Prediction Need for Operational Definitions Information is not Knowledge
Seven Rules for the Theory of Knowledge
1. Any plan requires prediction
2. There is no knowledge without theory
3. There is no prediction without knowledge
4. Experience teaches nothing without the aid of theory
5. Operational definitions put communicable meanings into a concept
6. A single counter example destroys a theory
7. There is no absolute value to anything
Psychology
Intrinsic Motivation Extrinsic Motivation Overjustification
Motivation
Motivating people
Creating a working environment that enables the intrinsic motivation within people to come out
Motivating Forces in a Work Environment Clearly defined goals Feedback Teamwork Challenge Competition
Dissatisfying Forces in a Work Environment
Not enough time Poor Communications Last minute changes Improper or lack of training Incomplete Information Poor planning Poor working conditions Lack of experienced personnel Defective or inadequate
equipment
The Role of Management
Look at your organization - Do you have dissatisfiers holding you back?
Look for ways to integrate the Motivating forces into your working environment.
Management must spend most of its time developing an understanding of systems and whole systems thinking. This includes an understanding of the interdependence of the components within the system and with larger systems.
Management must move its thinking from individuals to systems and processes. Develop people - manage processes.
The purpose of organizations is to enable common men to do uncommon things.
Management cannot rely on genius. Genius is in short supply and is unreliable.
Peter Drucker
Top Related