Joined: 15 May 2007 Posts: 774 Location: Baton Rouge, LA
Posted: Sat May 24, 2008 8:24 am Post subject: Costly Fallacies II - Does Anyone Really Care About A Profit
Fallacy Two: There needs to be specific rules and procedures for every part of the business.
Dr. Deming often asked, “Does anyone really care about a profit?” Clearly every business may state they do, but judging by their actions the message is not so clear. I find this most clearly evident when interacting with employees of companies large and small.
Often, each department [each person, in very small companies] focuses on maximizing the things they feel they will be rated on, with little regard for the profitability of the company. This is symptomatic of a lack of leadership and I find, a struggling company.
A clear symptom is an excess of very specific rules and procedures. In such companies, rules and procedures are normally plentiful and spelled out in detail. I find the normal result, rules are employed to solidify a position rather than to serve the client. The consequences are all sorts of ridiculous behavior, where common sense should prevail but “The procedure” wins instead. I will not bore you with examples as I believe everyone has experienced this.
This is not to say a company needs no rules. Rather effort might be better spent recruiting thinking people, treating them as such, and DEMONSTRATING proper behavior by leadership. In such an environment rules are guideline, simply tools for serving the client; people actually think. The company opens at 8:00 AM, but a client who needs service at 7:55 AM is greeted and welcomed in. The warranty is one-year, but an obvious problem is still corrected at thirteen months.
Procedures are seen as the currently best known way of doing things. They can [and should be] constantly improved, not seen as the only way things can be done. With proper identification of the aim and properly skilled individuals, very few procedures will be needed at all.
I feel the purpose of business is continuing, ethical, profit and the means to profit is continuing client satisfaction. Not that difficult a concept; How many rules and procedures are really needed? Does anyone really care about a profit?
Joined: 04 Sep 2007 Posts: 47 Location: Grand Rapids, MI, USA
Posted: Sat May 24, 2008 10:24 am Post subject: Re: Costly Fallacies II - Does Anyone Really Care About A Pr
louis wrote:
Fallacy Two: There needs to be specific rules and procedures for every part of the business.
Dr. Deming often asked, “Does anyone really care about a profit?” Clearly every business may state they do, but judging by their actions the message is not so clear. I find this most clearly evident when interacting with employees of companies large and small.
Often, each department [each person, in very small companies] focuses on maximizing the things they feel they will be rated on, with little regard for the profitability of the company. This is symptomatic of a lack of leadership and I find, a struggling company.
A clear symptom is an excess of very specific rules and procedures. In such companies, rules and procedures are normally plentiful and spelled out in detail. I find the normal result, rules are employed to solidify a position rather than to serve the client. The consequences are all sorts of ridiculous behavior, where common sense should prevail but “The procedure” wins instead. I will not bore you with examples as I believe everyone has experienced this.
This is not to say a company needs no rules. Rather effort might be better spent recruiting thinking people, treating them as such, and DEMONSTRATING proper behavior by leadership. In such an environment rules are guideline, simply tools for serving the client; people actually think. The company opens at 8:00 AM, but a client who needs service at 7:55 AM is greeted and welcomed in. The warranty is one-year, but an obvious problem is still corrected at thirteen months.
Procedures are seen as the currently best known way of doing things. They can [and should be] constantly improved, not seen as the only way things can be done. With proper identification of the aim and properly skilled individuals, very few procedures will be needed at all.
I feel the purpose of business is continuing, ethical, profit and the means to profit is continuing client satisfaction. Not that difficult a concept; How many rules and procedures are really needed? Does anyone really care about a profit?
Louis:
What I see constantly is a massive effort to increase sales while profits are ignored. Very few shop owners seem to grasp that "sales don't matter" if the profits stink.
As far as procedures, systems, checklists and so on go, we have tons of them...something I am known for. But this is something that is also vastly misunderstood. The system does not exist for the sake of the system. Different personalities must be taken into account. Some employees cannot successfully air up a tire without a written checklist (extreme and silly example, but you get the idea). Such a person can be a valuable asset....he/she just needs to be managed differently than most. Others can perform the most complex procedure in an excellent manner without following any written guidelines.
The systems we create are tools which may be used as needed to accomplish an end result. If the results are excellent, the employee can totally ignore the system.
In general, I find that most shops have a severe lack of systems available to the employees which significantly affects quality, customer satisfaction and profits.
Good post, Louis...great points!
_________________ Tom Ham
AutomotiveManagementNetwork.com - Hams Management Systems
Joined: 17 May 2008 Posts: 6 Location: Lansing, IL, USA
Posted: Sat May 24, 2008 9:29 pm Post subject:
I think Tom and Louis both have good points. Systems are needed so that people know what they are supposed to do, but the systems should never contradict the mission of the business, customer satisfaction and profitability. They should be as simple as possible and should enable employees to think for themselves within certain guidelines. We currently have no policies and procedures manual or employee handbook. Something I'm currently working on.
_________________ Jason Brennan
CEO
Fine Tune, Inc.
Lansing, IL, USA
Joined: 15 May 2007 Posts: 774 Location: Baton Rouge, LA
Posted: Mon May 26, 2008 11:38 am Post subject: Re: Costly Fallacies II - Does Anyone Really Care About A Pr
Hi Tom,
Tom Ham wrote:
What I see constantly is a massive effort to increase sales while profits are ignored. Very few shop owners seem to grasp that "sales don't matter" if the profits stink.
That can happen, I see that most often in number-oriented [obsessed] shops, particularly where sales incentives are used. Removing the numerical goals [points ten and eleven] and instituting leadership [point seven] helps a great deal. Leadership guides staff towards the aim [continuing, ethical, profit?] and increased sales are the natural outcome. If sales were to be seen as the goal, rather than understood as an outcome, disaster may not be far behind.
Tom Ham wrote:
As far as procedures, systems, checklists and so on go, we have tons of them...something I am known for. But this is something that is also vastly misunderstood. The system does not exist for the sake of the system. Different personalities must be taken into account. Some employees cannot successfully air up a tire without a written checklist (extreme and silly example, but you get the idea). Such a person can be a valuable asset....he/she just needs to be managed differently than most. Others can perform the most complex procedure in an excellent manner without following any written guidelines.
There will always be variation in people. Some deal very well with chaos, most do not. Even those that do well in spite of confusion might do much better without the burden. I find, best is to remove the chaos so that it is easier to do the job right than to do it wrong. Procedures for most effectively dealing with chaos are non-value added steps. Better may be to remove the chaos.
The problem I see with checklist is they are rarely followed, with much consistency and in a simple system are largely unnecessary. Better I find, is to redesign the job so that those doing it do so with ease and errors are difficult to make. For instance making it easier to do right [as desired] than to do wrong.
With procedures and checklist, managements job tend to shift from making jobs simple to enforcing the rules. My experience is that people do not do well working in such and environment and management tends to see workers not following procedure as the problem. Often the approach is to increase supervision, vastly increasing cost.
Tom Ham wrote:
The systems we create are tools which may be used as needed to accomplish an end result. If the results are excellent, the employee can totally ignore the system.
An American company wished to produce printed circuit boards with less than 1/10,000 defects. They very specifically defined the procedure for doing so. They also provided many tools that allowed skilled workers a better chance. Those that did best were rewarded those that did less well were largely driven out. They did not reach their goal and eventually bought a new machine [$60M] to try to reach the goal.
The old machine went to a Japanese subsidiary. They began experimenting with solder temperature and content. The redesigned the board to make it easier to solder. They worked with suppliers to provide components that fit better, making them easier to solder. They produce more parts with around 1/100,000 defects.
I have found adding tools to deal with problems is less effective than removing problems.
Tom Ham wrote:
In general, I find that most shops have a severe lack of systems available to the employees which significantly affects quality, customer satisfaction and profits.
I think there are an over abundance of systems in every business, they are simply ineffective. Most business create systems to deal with problems, few work to remove problems.
Tom Ham wrote:
Good post, Louis...great points!
Thanks Tom, I truly appreciate your contributions to our site.
Joined: 15 May 2007 Posts: 774 Location: Baton Rouge, LA
Posted: Mon May 26, 2008 11:44 am Post subject:
jbrenn77 wrote:
I think Tom and Louis both have good points. Systems are needed so that people know what they are supposed to do, but the systems should never contradict the mission of the business, customer satisfaction and profitability. They should be as simple as possible and should enable employees to think for themselves within certain guidelines. We currently have no policies and procedures manual or employee handbook. Something I'm currently working on.
Hi Jason,
I also like keeping things as simple as possible and feel it is the duty of leadership to allow everyone to know how their job fits the mission [aim.] I find procedures to deal with problems are less effective than removal of problems. I feel sales growth and employee retention are natural outcomes of such a process. Thanks Jason, I very much appreciate your insight.
Joined: 15 May 2007 Posts: 30 Location: Bluefield, WV
Posted: Mon May 26, 2008 2:02 pm Post subject: Re: Costly Fallacies II - Does Anyone Really Care About A Pr
louis wrote:
Hi Tom,
Tom Ham wrote:
What I see constantly is a massive effort to increase sales while profits are ignored. Very few shop owners seem to grasp that "sales don't matter" if the profits stink.
That can happen, I see that most often in number-oriented [obsessed] shops, particularly where sales incentives are used. Removing the numerical goals [points ten and eleven] and instituting leadership [point seven] helps a great deal. Leadership guides staff towards the aim [continuing, ethical, profit?] and increased sales are the natural outcome. If sales were to be seen as the goal, rather than understood as an outcome, disaster may not be far behind.
Tom Ham wrote:
As far as procedures, systems, checklists and so on go, we have tons of them...something I am known for. But this is something that is also vastly misunderstood. The system does not exist for the sake of the system. Different personalities must be taken into account. Some employees cannot successfully air up a tire without a written checklist (extreme and silly example, but you get the idea). Such a person can be a valuable asset....he/she just needs to be managed differently than most. Others can perform the most complex procedure in an excellent manner without following any written guidelines.
There will always be variation in people. Some deal very well with chaos, most do not. Even those that do well in spite of confusion might do much better without the burden. I find, best is to remove the chaos so that it is easier to do the job right than to do it wrong. Procedures for most effectively dealing with chaos are non-value added steps. Better may be to remove the chaos.
The problem I see with checklist is they are rarely followed, with much consistency and in a simple system are largely unnecessary. Better I find, is to redesign the job so that those doing it do so with ease and errors are difficult to make. For instance making it easier to do right [as desired] than to do wrong.
With procedures and checklist, managements job tend to shift from making jobs simple to enforcing the rules. My experience is that people do not do well working in such and environment and management tends to see workers not following procedure as the problem. Often the approach is to increase supervision, vastly increasing cost.
Tom Ham wrote:
The systems we create are tools which may be used as needed to accomplish an end result. If the results are excellent, the employee can totally ignore the system.
An American company wished to produce printed circuit boards with less than 1/10,000 defects. They very specifically defined the procedure for doing so. They also provided many tools that allowed skilled workers a better chance. Those that did best were rewarded those that did less well were largely driven out. They did not reach their goal and eventually bought a new machine [$60M] to try to reach the goal.
The old machine went to a Japanese subsidiary. They began experimenting with solder temperature and content. The redesigned the board to make it easier to solder. They worked with suppliers to provide components that fit better, making them easier to solder. They produce more parts with around 1/100,000 defects.
I have found adding tools to deal with problems is less effective than removing problems.
Tom Ham wrote:
In general, I find that most shops have a severe lack of systems available to the employees which significantly affects quality, customer satisfaction and profits.
I think there are an over abundance of systems in every business, they are simply ineffective. Most business create systems to deal with problems, few work to remove problems.
Tom Ham wrote:
Good post, Louis...great points!
Thanks Tom, I truly appreciate your contributions to our site.
Joined: 15 May 2007 Posts: 774 Location: Baton Rouge, LA
Posted: Mon May 26, 2008 7:18 pm Post subject:
Hi Eric,
Specific examples of application can be found in Practical Applications of Deming Theory in the Shop, but generally the process is studied, non-value added steps removed and streamlined. Often this is accomplished by removal of variation.
For instance, I can quite comfortably handle the service writer duties for five technicians in my shop. Largely this is due to reduction of variation, not specific procedures. For instance, every technician is well aware of our aim, continuing, ethical, profits. They are also well aware of the concepts we use to accomplish this, overall lowest cost. This means, if a technician encounters something unexpected during an oil change, they know what is to be accomplish and how. There is no need to stop, ask me nor refer to a procedure. They do what is in the best interest of the client.
This is further extended into our marketing. Clients that we attract will for the most part be seeking what we have to offer, overall lowest cost. The appointment system, way of billing, shop appearance, etc. all play a part and are all consistent in the message. Very little supervision is needed, greatly lowering cost. This savings can then be passed to the client, making us more desirable and preserving profitability [the aim.]
Posted: Mon May 26, 2008 7:38 pm Post subject: Re: Costly Fallacies II - Does Anyone Really Care About A Pr
Eric J. wrote:
How can you lower cost and make the job easier?
Many ways. Have each employee specialize in only a few areas, rather than have everybody be a general 'worker.' As you provide the specialized training and equipment each person will become better, more accurate and faster at their tasks. Then you can lower your prices to follow suit, and gain a larger market share.
Also you can trim down your number of supplietrs. Have each one specialize in a few areas to meet your needs better, rather than have each one be a 'general' supplier.
And so on it goes, continual improvement.
Notice how this is vastly different from typical American-style management theory, which elevates the element of competition as the most important ingredient to success. That line of thinking says to have each employee compete against each other, and the greater effort expended in competition is good for the company.
They also teach have all your suppliers compete against each other, and let the lowest price win.
To sum it up, cooperation wins over competition in many areas of business. Few, however, will accept that as true.
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