Mar 30, 2014

McKinsey proves that today's management culture has a long way to go

The first issue of the McKinsey Quarterly for 2014 was entitled, “Shaping the future of manufacturing.” Proof that management culture, however, is still rooted in the past, is made plain in the article “Bad to great: The path to scaling up excellence.” Not every article in this issue is backward: several are worth reading. But if this one got past the editor, McKinsey has problems.

In “Bad to great,” the authors ask what to do with problem employees. Who are bad employees?

·      Employees engaging in “destructive behavior -- selfishness, nastiness, fear, laziness, or dishonesty.”

·      Salespeople who are “tardy, unhelpful, uncooperative, discourteous to customers, or unproductive.”

·      Hourly workers like those who stole equipment worth a total of a million dollars every year from their employer.

·      Subordinates like the nurse who, when the doctor said, ‘Nurse, draw this man’s blood,’ she replied, ‘Why don’t you do it yourself?’”

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In a culture where management labels people "bad" without understanding why they behave as they do, improvement will never stick. It’s true that a few employees will resist change or engage in disruptive behavior. Some can be persuaded to at least give change a chance, and some will eventually be helped to find jobs elsewhere. They’re not bad people. They just can’t adopt the rules of a changed workplace culture.

This article’s authors are from Stanford: Huggy Rao is a professor of organizational behavior and human resources and Robert Sutton is a professor in management science and engineering. Their book, Scaling Up Excellence: Getting to More without Settling for Less, has been excerpted for the article. Maybe the excerpt is not representative of the whole book. To be fair, later in the excerpt, they do come up with some alternatives to firing “bad” people.

What bothers me is not that someone has written a wrongheaded article. It is that a consulting firm influencing the largest, most powerful, companies believes an article like this reflects “shaping the future of manufacturing.” If this is a product of McKinsey’s culture, even if some of its consultants understand lean at its best, lean thinking faces worse barriers than I realized. And if this represents the current thinking at Stanford, we are making little progress. Can’t say I’m surprised, but I am disappointed.

Mar 19, 2014

When management doesn't get it

Our last post identified a divide in a corporate culture between management and operational subcultures. I think that the failure to understand the importance of cultural differences is one of the reasons why lean initiatives fail. When lean champions come from operations and engineering, they have different criteria for success than executives do.

We have also talked about seven principles of change* identified by anthropologists that help explain cross-cultural change.

1. Consider your own psychology. Do you believe you have the only right way of seeing things? Is your attitude showing that you think management's beliefs are wrong? Or are they doing things right in the context of a different culture?

2. Beliefs direct behavior. In management's world, people need numbers and reports. Revenue, cost, profit, and growth. They feel no need to see your plant, value stream map, or throughput times.

3. Change must be seen from the point of view of those being asked to change. If the numbers look good, not only will they be rewarded financially, they will also bask in approval and admiration. Managers down the line get promoted. If the CEO gets raked over the coals when business is slipping, blame will be passed down to every level of the organization. If you want to change the way management believes things should be done, they can’t be sure what will happen to the numbers. When you start talking about members of management devoting time to learning and coming to the gemba, there’s nothing to motivate them.

4. Make no sweeping changes. Introducing a grand system of change can just be too much. This presents a dilemma for introducing change to top management because we know they need to grasp the nature of lean thinking as a system. That’s why pilot projects are such a good way to start.

5. A significant change produces emotional tension. Are traditional company leaders heartless, unemotional, inconsiderate people? They may have to present themselves that way to gain and maintain status in a by-the-numbers business culture. Any change will produces fears, uncertainty, and threats to self-esteem.

6. Change often produces stress and frustration. If managers secretly worry that they can’t succeed in a lean culture, what will they do? Even if it’s only unconsciously, they may obstruct progress. Behind-the-scenes coaching can help. And develop empathy.

7. Harm to people. Persistent and intense stress threatens physical or emotional health, heightening pressure to prevent change. Some people are more vulnerable than they seem, making it important for lean champions to consider emotions as well as the intellect.

Putting yourself in a manager's shoes is easier if you read management books and magazines, as well observe behavior. You can learn more about your industry. To get management's attention, you also need to understanding the quirks and idiosyncrasies of the management culture in your company. If your changes help managers look good and get beat up less often, they will feel safer and put up less resistance.

But first, show them the money.


*Seven principles of cultural change

Principles one and two
Principle three
Principle four
Principles five, six, and seven

Mar 12, 2014

Senior management is an alien culture

“They just don’t get it.” That’s the most common complaint you hear from lean champions. “It has to start from the top” -- If senior management does not support and lead a lean change, just forget about any real achievement. Another apparent reason for giving up: “The corporate culture is bad and will never accept change.”

Here’s the news: there is no single monolithic corporate culture. Any culture has subcultures and management’s subculture is different from a plant or a functional manager’s. Because lean champions often come from the operational parts of the organization, its cultural norms surround them. They see improvement in terms of productivity, inventory reduction, plant size, downtime reduction, and cost.

What they may not recognize is that in the senior management subculture, those benefits don’t resonate. The management subculture evolved with different beliefs and values. Its goals come from owners and stockholders, and usually have dollar signs on them: profitability, growth, and share price. When lean champions speak in the language of operations rather than finance, management won’t hear them.

This divide in a corporate culture between management and operational subcultures causes conflict and interferes with communication. I think that the failure to understand this principle of social organization causes lean initiatives to fail. We must take the time to learn the languages, beliefs, status symbols, problems, and psychology of the culture we wish to influence or we doom ourselves to failure. And cultures and their subcultures in vary from organization to another. Examine yours before you try to persuade leaders of the benefits of lean.

Next time: Want change? Applying the seven principles to understanding your management’s culture.

Mar 4, 2014

Do bonuses work? Yes and no, according to new brain research

The debate over bonuses has raged for decades. Do bonuses improve performance or not? Dr. Deming emphatically argued against them, and work like Alfie Kohn’s has backed him up. However, other research has demonstrated that productivity improves when people get extra pay for working faster or better.

Is there an answer? It would be nice to have a scientific explanation of why the effectiveness of bonuses is so mixed.

New brain research suggests that bonuses can make some people more productive, but actually make other people’s performance worse, and the difference seems to be related to the neurotransmitter dopamine. Recently published work by Esther Aarts of the Donders Institute in Nijmegen  has demonstrated such a relationship.

As you would expect, levels of dopamine, which is believed to be related to pleasure and reward, vary from one person to the next. In her experiments, Aarts first measured dopamine levels in test subjects using a PET scanner. Then, asked to perform a difficult cognitive task, some subjects were offered a bonus of 15 cents for a right answer. The others were offered 1 cent.

You might guess that offering a reward that elevated dopamine levels would make people want to do a better job. In this study, people with lower dopamine levels did perform better work when they were getting the higher reward. In contrast, subjects with high levels of dopamine in the high pay group actually performed worse than those getting lower rewards. What’s going on here?

Aarts says:

“For people who usually have high levels of dopamine, the promise of a bonus causes a type of dopamine overdose… Our test subjects were asked to perform a task that required considerable concentration. An overdose of dopamine makes this difficult. People who usually have less dopamine are less likely to have an overdose of dopamine, and they therefore perform better after being promised a bonus.”

Does this help us know how to motivate people to work harder to implement lean? Unfortunately not. There’s no easy or ethical way to measure an employee’s brain dopamine level. If you could, dividing people into groups for more pay or less based on a chemical test would not stand up to a legal challenge. And basing compensation on a single study with an interesting explanation isn’t very scientific.

Aarts also pointed out that rewards might work differently for simple tasks than the tasks in the study that required concentration and focus. In a lean system, all employees think about the work they are doing and continually come up with ways to improve it -- all work requires concentration and focus.

Even if it’s not useful in making real world decisions about compensation systems, the research does remind us that people are different. Trying to find a silver bullet or a one-size-fits-all management policy is overly simplistic. There’s no substitute for getting to know employees, and if you offer incentives, you want to choose those that allow for differences in motivation. Could that be the reason why team incentives often work better than individual ones? Perhaps high-dopamine team members like the reward and elevate performance enough that low-dopamine members don’t pull average performance down. But that’s the opposite of stability, which is one of the keys to really making lean work.

Copyright @ 2005-2014 by Karen Wilhelm