Wandering From Crisis to Crisis

Does your organization seem to wander from crisis to crisis?

Does it often seem as if you are playing “Whack A Mole” with the problems in your organization?

If so, here is what is causing it: In improving one necessary condition you or your staff are allowing other necessary conditions to be damaged.

Let me start by explaining what is meant by the term “necessary condition.”

One of the core concepts of TOC is that a system only reaches its goal when all of its necessary conditions are met.

You can think of necessary conditions as the requirements for the success of your organization: What you simply must have in order to reach your goal.

If you are managing a dry cleaning business, one of your necessary conditions is “We are in compliance with local environmental laws.” That is, you can’t just dump your dry-cleaning chemicals in the nearest stream or down the toilet and expect to have a successful business in the long run. (Note that this assertion, like all assertions, rests on other assumptions. Here, I am assuming that the dry cleaning business is located in a city where there is environmental monitoring and laws against dumping harmful chemicals into the envirnonment. If one or both of these assumptions is wrong, then what I have claimed to be a necessary condition for success may in fact not be necessary at all.)

Every organization that I have encountered has many necessary conditions for its success. For example, “We bring value to our owners.”, “We have a highly satisfied workforce.”, “We operate in a cost-effective manner.”, “We are effective in responding to competitors.”, etc.

Sadly, not every organization I have encountered has done the hard work required to identify its necessary conditions for success and how they are related (in terms of cause-and-effect) to the goal of the organization.

Not doing this is dangerous to the health of the organization. Here is why.

An organization that has not yet reached its goal has one or more necessary conditions that are not met, or at least, are not fully met.

When the people in that organization recognize that that necessary condition is not being met it is very likely that they will try to take some kind of action to cause it to be met. More succinctly, they will try to “fix the problem.”

This is all well and good. It is good that the people in the organization have recognized that something important to the success of the business is not being achieved and that they are taking action.

However, what they must do in order to really improve the organization is to improve the satisfaction of that necessary condition WITHOUT DAMAGING ANY OTHERS.

Said differently, if you improve one necessary condition while damaging another all you have done is to trade one problem for another. And in so doing your organization will appear to wander from crisis to crisis.

Let me give an example.

Let’s say that the organization in question has recognized that one of its necessary conditions for success is “We provide excellent customer service.” It is also recognized that they aren’t actually achieving this condition. In fact, customer complaints have been going up and up over the last year and now management is determined to fix the problem once and for all.

In an attempt to fix the problem the management team determines that the problem is “Not enough sales staff on the floor.” and so they increase floor sales staff headcount significantly.

While this may have the desired effect of improving customer service it also increases operating expense. And in many organizations payroll is far and away the dominant operating expense.

If the increased customer service results in sufficiently increased and profitable sales then this may be exactly the right action to take.

On the other hand, what if the problem wasn’t really caused by too few sales staff on the floor, but rather, by a lack of proper sales training?

In that situation, the organization has not improved. Operating expense has gone up while customer satisfaction (and, presumably, profitable sales) has not.

This example is, of course, a very simple one. In reality the situation is not usually so clear-cut.

But that brings me to the point of this post. Why are such decisions not clear-cut? What can we really do to be better able to improve one necessary condition without compromising any others?

At first blush it might seem as if this is a thorny problem where nothing can really be done. I don’t think that is the case at all. In fact, I see the situation as one where so much can be done that it’s hard to know where to start.

So let me keep it simple and offer just three suggestions.

First, do the hard work to define the goal of your organization and then from it derive your set of necessary conditions and how they are related (in terms of cause and effect) to each other and ultimately to your organization’s goal.

I recommend doing this in a tree-structured manner (building what is called a “future reality tree” in the language of TOC). If you have not done this before feel free to contact me and I’ll help you get started.

Second, when you and your staff have determined your necessary conditions, publish your work in a highly visible manner. You really want every member of your staff to know what conditions they should be working to achieve. And, if they disagree with some of the conditions, you really want to know that too.

Finally, when people seek to make changes to improve the organization, ensure that they know how to do so without damaging the satisfaction of any other necessary conditions. An invaluable tool for doing this is the evaporating cloud (a.k.a. the dilemma diagram, a.k.a. the conflict resolution diagram) as is the “negative branch reservation” (NBR) in the TOC Thinking Process toolbox.

 

Exponential Change

The qualitative difference between the Red Curve and the Green Curve is that the Red Curve shows ongoing, exponential improvement. The Green Curve shows continuous improvement towards some limit value.

I suspect that many folks do not realize the degree to which we are living in an exponential (and highly non-linear) world. My brother-in-law recently sent my wife a link to a video on You Tube that illustrates this point far better than I can.

The Red Curve is real folks. But hey, as W. Edwards Deming is said to have said:

“It is not necessary to change. Survival is not mandatory.“

 

Taking IT Dashboards To The Next Level

Self-proclaimed “Geekdoctor” John Halamka has written about an IT dashboard his team has created to help forecast some of the costs associated with operating a data center. I had a quick look at it. It’s a nice web application. I left John a comment to see if it is open source. I expect many IT types could benefit from learning about it.

What I would urge John to do is to go a bit further. Identify the critical success factors for his department as a future reality tree and then provide a color-coding of each entity that shows the degree to which that entity is satisfied.

For example, assume that there is an entity that says “Our department is highly effective in meeting our cost targets.” To what degree is that entity valid? If it’s clearly valid based on observable data then color it solid green. On the other hand, if the entity is in dispute, color it yellow while you go look for data. If it’s clearly false, color it red.

When I can make the time I will craft an example of this. It won’t be a web app though. While I have a lot of experience in software engineering I just don’t have the time to knock something like this out right now.  I might also look at the tools from Flying Logic Software.  I think their tool may already provide something along these lines.

What would you have if you actually did this? I claim you’d have a useful tool for focusing on the issues that are blocking you from achieving your top level objectives. Then share it as a web app so that the entire organization can see not only what you see as logically necessary to succeed but also how well you are doing.

So where are the CIOs that have the courage to do something like this?

 

Is the Tipping Point Toast?

Almost certainly you have read Malcolm Gladwell’s “The Tipping Point.” And like me you might have found it convincing.

Here’s an interesting article from Fast Company that suggests that the Tipping Point may be toast.

 

Review of “Reaching The Goal” by Jack Vinson

Jack Vinson has published a review of John Rickett’s book “Reaching The Goal: How Managers Improve a Service Business Using Goldratt’s Theory of Constraints“.

In reading the review I think I will order a copy of John’s book. As my business is a service business it is certainly on-topic for me.

That being said I still have a significant reservation with much of what is recommended for improving organizations.

My reservation is that we are too focused on canned solutions: “Just do exactly this and you’ll get great results.”

I think we have to focus more on helping the many people who make up our organizations to learn to be more effective at recognizing and resolving the many issues that will come up in implementing any significant change.

In past articles I have written about the Towers Perrin study that suggests that 4 out of 5 employees is “disengaged” from their work. I think we should be focused on building organizations where most employees are fully engaged in their work. Teaching people to recognize and resolve the many conflicts they face on a daily basis is a necessary first step.

 

Follow up on “Selfish Altruism”

A few days ago I wrote a post asking why people might view “selfish altruism” as a contradiction in terms. I think this is an important topic. In this article I want to try to share a bit more of my thinking with you. I hope you will share your thinking with me — even if we disagree.

So why do most people seem to believe that selfish altruism is an oxymoron?

I think this is a result of the widespread belief that win-win is just happy talk. Something guys like Steven Covey espouse in order to sell books or something that the Pointy Haired Boss says to Dilbert.

I think I understand how reasonable people can come to this conclusion. There are a number of misconceptions about “Seeking Win-Win.” I thought I’d try to address a few of them in this post.

“You just can’t create win-win on demand.”

False. There are several procedures that you can use to create win-win solutions when we need them.

The one I use most often was created by Eli Goldratt. It is the so-called “Evaporating Cloud” method. Bill Dettmer has written about it at length in his books on the TOC Thinking Process tools. And TOC For Education has taught hundreds of thousands of children to do it.

TRIZ is another way to generate win-win solutions. It’s more complex than the Cloud but arguably more powerful for certain kinds of problems.

Note that crafting win-win is (mentally) more demanding than simply compromising on something important to you or demanding that someone else give up something important to them.

“If what you said was really possible, everyone would already be doing it.”

Not necessarily. Here is why.

First, the procedures I mentioned above are not widely known. Most people have never heard of the Evaporating Cloud, Eli Goldratt, TOC or TRIZ.

Second, even if everyone knew of the procedures, most people are not practiced in them. Just as the ability to sight-read music doesn’t confer the ability to play the piano, neither does knowing the mechanics of the Evaporating Cloud confer the ability to craft win-win when you need it. You really have to sweat and struggle with it until you master it. And most of us don’t like sweating and struggling.

I think there may be a biological basis for this aversion to sweating and struggling. I believe we seek to conserve our limited resources. I believe that over the course of our evolution those people who did not conserve their resources “selected out” of the population. After all, you never know when you’re going to need a burst of energy to survive, so don’t waste what you have.

Here’s the bottom line. You won’t make the necessary investment unless you believe that sweating and struggling to learn how to craft win-win is going to serve you. And if you don’t make the investment then for you win-win will be just happy talk. A self-fulfilling prophecy.

“There is no such thing as a free lunch.”

Learning how to craft win-win when you really need it doesn’t give you a free pass in life. It won’t put you on easy street. You will still have problems.

However some things will be very different. You will have the freedom to choose to deal with your problems in a much more effective manner. You will recognize that you have many options instead of only a few or none at all.

You will still find yourself suffering at some points in your life. Let me give a personal example.

I once had a good friend who I met when I hired her into my small business. She demonstrated her competence and personal concern for the business very quickly. We soon developed a deep and abiding respect for each other.

A few years after I hired her I learned that she had been diagnosed with ovarian cancer. She died about two years later.

Of course her disease caused her to suffer. And those of us that loved her in one way or another also suffered and still suffer from time to time.

Having the ability to craft win-win didn’t grant me an exemption from this suffering. It did allow me to view suffering in a different way. And I ultimately came to see some value in that suffering.

So on the one hand I really had no choice in the matter — I was going to suffer. And yet, on the other hand, I had total freedom as to how I would understand and use that suffering.

I believe that suffering has (in some ways) served me. While I would much rather have my friend back that is not possible. So I did the best I could and found a different kind of value. And I know that that is what my friend would have wanted me to do.

“But other people won’t cooperate. They’ll just exploit you.”

I have not found this to be true. When you craft win-win, you’re bringing the other person a win too. People don’t usually cut their own wrists. They sometimes do, but it’s the exception and not the rule.

So what about the freaks? The psychopaths who still want to hurt or kill you even when you’re bringing them a real win?

The ability to craft win-win provides protection even when someone does something very bad to you. You might have to sweat and struggle, however.
When you crafting win-win over and over again (for a period of years) you become pretty good at finding novel ways to wriggle out of tight spots. Who knows, with work, maybe you could become the next “MacGyver” of the problem solving world.

I’ll end this too-long post here. As the old song goes “That’s my story and I’m sticking to it!”

 

Cost cutting nightmare …

Over at Focused Performance Frank Patrick has posted an article called “Cost Cutting Nightmare.” It also references Circuit City as I did a few days ago.

Frank provided a link to this article about Circuit City and their actions. While there are many good insights in the article the one that caught my eye was this one:

By breeding an environment that doesn’t reward the knowledge or loyalty of its staff, then “why would workers have the incentive to put in any extra effort?” asks Dean Baker, co-director of the Center for Economic and Policy Research in Washington.

Exactly. And this ties in with the article I wrote last week regarding the global workforce study done by Towers Perrin that found that only one in five workers around the world was fully engaged in his/her work. (”Engaged” in this context means having a strong emotional connection to the success of the organization and thus being willing to, for example, sometimes invest discretionary time in an effort to improve the performance of the organization.)

I think Circuit City CEO Philip Schoonover is probably a bright-enough guy. What I suspect he is missing is a practical means for checking a contemplated action for likely bad outcomes — or “negative branches” in TOC speak. I expect that there were many people in his organization that thought that his plan for massive layoffs would have negative ramifications on the business. But without a way to reconcile their concerns with his concerns the outcome was never in doubt: He’s the boss and he’s going to do what he thinks he must do.

Can an organization work itself into such a hole that layoffs are required? Yes, it can. An organization can get to the point where the number of problems facing it are so large and so severe that there is no other credible choice.

But are most such layoffs required? I don’t think so. Rather, I think most organizations work themselves into these situations by managing poorly for an extended period of time. I know this because I have done it myself in the past.

One of the ways in which organizations can manage poorly is by not building a model — even a simple one — of the factors that they must achieve in order to achieve organizational success.

Doing this will help to ensure that people within the organization have only a partial picture of what is required for organizational success. This will in turn make it much easier for people to argue for their preferred course of action while ignoring the ramifications that their preferred course of action while have on the other conditions necessary for organizational success.

In a previous post I showed a very simple example of one such model. Building such a model by yourself is enlightening. Building such a model in collaboration with your top people is how you begin to secure the future of your organization.

 

A first post on selfish altruism

Over at Running A Hospital Paul Levy has indicated that his theme this week seems to mostly involve “giving back” or “paying it forward.“

Right on, Paul. It’s a tough world out there and it doesn’t hurt to be reminded that not everyone is out only for themselves.

This brought to mind a topic that I want to blog about, but a detailed explanation will have to wait. So, the following is just a bit of a teaser.

I try to live my life as a “selfish altruist.” This is a term that I first heard expressed by Alan Barnard at a recent TOC For Education conference.

I suspect that selfish altruism is for many people an oxymoron, or a contradiction in terms. Rather like like “jumbo shrimp” or “current history.”

Is this true for you? Do you find selfish altruism to be a contradiction in terms?

If so, may I ask why? What is it that causes us to have no other option? To be forced, presumably, to be either selfish, or altruistic, but not both?

I’ll follow up in the next day or two with my take on this issue. But honestly, I’d really rather hear your thoughts.

Best,

John

 

Making intelligent use of SMART goals

Many organizations use the SMART acronym as a guide to determine whether a given goal is Specific, Measurable, Achievable, Relevant and Time-bound.

In his article “When SMART Goals Are Dumb,” blogger Brad Kolar points out a common failure mode for such goals.

In short, it’s relatively easy to define goals that measure whether someone is busy or not, or whether some specific milestone has been reached.

Is this important? Yes, it is, but ensuring that people are busy is not the same thing as ensuring organizational success. Achieving well-specified outcomes is groovy too, but those outcomes have to somehow contribute to the success of the organization.

If you’d like your SMART goals to work harder for you, why not build them into a strategic IO map for your organization? I showed a very simple example of such a tree in my last post.

Building such a map is a very good way to reason about whether achieving the goals you have set is actually likely to lead to better results for your organization. Such a map is also a great tool for communicating with others in your organization.

 

A first post on goals, critical success factors and necessary conditions

In the previous article, I promised to write about rule clashes. Before I can do that, I need to set the stage a bit.

Let’s start with an assumption. Your organization, of whatever kind it may be, has a goal.

For publicly traded companies, the goal is making money. Or, as it is expressed most often in Theory of Constraints, “To make more money, now and in the future.” If the organization is a privately held company, we need to ask the owners of the company why they created the company. The goal may still be to make money, but it could be something else. In that case, making money may become a necessary condition for organizational success, but the not the goal of the organization.

When we talk about organizations such as hospitals, schools, local government, then we again go to the owners of the system. This may be impractical, and so the Board of Directors of the organization typically assumes that it knows the goal, but hopefully does some work to check their assumptions with the public from time to time.

The bottom line is that the owners of the system determine what it is expected to produce for them.

Doing this sets the goal, but it doesn’t determine what is required to achieve it. Typically, there are very many things that are necessary in order to consistently achieve the goal.

In the jargon of the Theory of Constraints (TOC), we call these other things “necessary conditions.” Sometimes, other terms are used, such as “needs of the organization” or “critical success factors.”

The necessary conditions (”NCs”) typically form a hierarchy, as shown in the following figure:

At the top of the figure, we find the organization’s goal. In this case, the organization is a small, not-for-profit medical center.

The goal is given as “Cost-effective improvement of the overall health of the community.”

Is this a reasonable statement of the goal of such an organization? Is it also a very general statement of what the local citizens want from the organization? I think that it is (but let me know if you disagree.)

Now, how to reach the goal? In the figure, two other conditions are shown as absolutely necessary in order to reach the goal. Those conditions imply that the organization will “2. Prevent illness or injury affordably” and “3. Cure illness or injury in minimum time.”

You may or may not agree with these two entries (entities) as being logically sufficient to reach the goal. One of the benefits of producing a diagram like this is that it allows people to more easily recognize where they agree, where they disagree, or where they simply need some clarification.

We can always “dive deeper” when constructing a diagram like this one.

For example, entities 4, 5 and 6 are more detailed than 2 and 3, and entities 7, 8 and 9 are even more detailed than 4, 5 and 6.

So how deep should you dive when constructing such a tree? In my experience, people often dive too deep. As a rule of thumb, a useful map usually has perhaps 20 or 25 entities on it. More than that and you are (in my experience) getting a bit too detailed.

You don’t have to create a simple diagram on your first shot, however. You can take an Agile approach, to borrow a term from the software development world, and produce your diagram in multiple iterations.

If your first efforts become too complex, you can simplify them in subsequent iterations.

You don’t need fancy or expensive tools to produce such a diagram. In fact, you can use nothing more than PostIt Notes and a big sheet of paper. I used this approach for more than 15 years and it was perfectly fine.

On the other hand, if you want to use your computer, you can. Microsoft PowerPoint has a perfectly adequate drawing capability. The figure shown above happened to be produced with a different tool, but I still use PowerPoint frequently.

Finally, if you buy Bill Dettmer’s book, “The Logical Thinking Process — A Systems Approach to Complex Problem Solving”, you’ll find that it includes a free edition (which is perfectly usable, by the way) of a tool for drawing all kinds of TOC logic diagrams.

Let’s get back to the important aspects of this diagram.

What we are doing when we create such a diagram is speculating as to what is required to achieve our goal. As such, we may or may not identify all that is required to acheive our goal. We may also include things that, strictly speaking, are not needed.

Ultimately, it is “reality” that tells us whether we have done all that is needed to achieve our goal. (If we achieve the goal, then by definition, we satisfied all of the necessary conditions to achieving it!)

This speculation is important. In fact, I don’t think you can manage well unless you can speculate effectively, and effectively share your speculations with others. The work to produce such a diagram, done in a group, is some of the most useful work you can do if you really care about the success of your organization.

In closing, I want to touch on one last issue. When we start to talk about the “clash of rules”, having such a diagram will be indispensable.

You see, when people recognize that rules important to them are clashing in some way, they usually “resolve” the clash by compromising (sacrificing, damaging) the degree to which one or more of the organization’s necessary conditions are met.

As an organization’s necessary conditions are compromised, the performance of the organization declines. It’s problems mount, and it is less and less able to meet the needs of the many people it affects.

In order to reach the goal, the necessary conditions to reaching it cannot be compromised. This is possible, but it’s not a triviality either.

This post is longer than I would like, so I will end it here. As always, your observations and suggestions for improvement are welcome!

Best,

John Sambrook