by John Persico
Dr. George E. P. Box, noted statistician and quality expert famously said “All models are wrong, some are useful.” Dr. George Copa, one of my former advisors at the University of Minnesota always told me “Start with a model.” Consultants love models. Each model is a chance to demonstrate that we have a “new” theory and that our “new” theory is better than your old theory. My model is better than your model can mean thousands if not millions in new consulting fees.
Shooting Stars and Cash Cows
My partner and I have been consulting for a combined number of 50 years and during this period we have seen many models come and go. Often, they are shooting stars which are around for brief periods of time, never to be seen again. Sometimes, they linger on for many years before they flame out. Some examples are: The Boston Consulting Matrix, Re-engineering, The Learning Organization, Knowledge Management, The Blake and Mouton Grid, McKinsey Seven S model and One Minute Management. Other models are more successful and are eventually morphed into the fabric of the business. Successful models are able to convert theory into practice and add real value to an organization. Socio-Technical Systems, TQM, Lean Manufacturing, Six Sigma, SWOT Analysis, Benchmarking and the Balanced Scorecard are examples of models that have become standard procedures in many businesses. These models have proven their ability to lower costs, improve quality and increase customer satisfaction. When these models “fade” away it is because they have become “commoditized.” They become invisible because they are now part of our standard way of doing business.
Why new models are essential
New models are the catalyst for growth and development in all organizations. While perhaps ninety percent of all models are junk, at least ten percent are useful. Organizations ignore new models at their own peril. The difficulty for managers is that every consultant would like you to believe that their models are the useful ones. How to tell the fool’s gold from the real gold is a difficult question to answer for any leader. Adopt every model on the model highway and you risk losing focus and accomplishing nothing. Ignore every model on the highway and you risk obsolescence and irrelevancy. If only there were a metric for measuring the value of new models!
Can we look to customers and competitors for the answer?
Some would say that the true value of a model can only be determined by the customer. They would argue that customer satisfaction is the ultimate value measure of what is offered by an organization. The problem with this metric is that the customer is at the tail end of the process. The customer is not concerned with the process used to produce value. They are only concerned with the outcome. Customers can tell us what they want but not how they want it produced.
Competitors might be a better place to look for a metric to decide the value of a new model. One could argue that “if everybody is doing it” then it must make sense. Of course, a contrarian would argue that if everybody is doing it, then it is better to do something else. More problematic is the bandwagon effect. Everybody is doing TQM so we better say we are doing TQM. We don’t really understand what we are doing but since everybody is doing it, it must be good. One mistake a company makes is to uncritically accept any new model and just assume a “one size fits all” mentality. Organizations then adopt models with little understanding or insight into how or why the model works and more importantly, how it needs to be modified to fit their organization. These efforts are destined to fail. It is obvious that simply copying others is not the path to industry leadership.
What is the solution?
Customers are not a good guide to new models. Competitors are not a good guide to useful models. Consultants cannot be believed, what are managers to do? Please write your answer in here____________________________________. I will send the correct answer out next week just kidding.
Let’s take another tack to answering the question. What if we are looking in the wrong places? For instance, what if like diets, the real secret to a successful model lies more in our own commitment and less in the overall “goodness” of the model. Box said that some models are useful, what if all models are useful. It has been said that 80 percent of organizations that implemented TQM and Six Sigma had little or no success. The same statistics have been applied to CRM programs and a host of other organizational initiatives. When we look at diets, we find that they all offer different benefits but seldom do most people have the commitment and discipline to (1) Make a long-term commitment to implementation and (2) Really understand the principles behind the diet program. The same can be said for management commitment and implementation of most new change programs. Let us look at a typical example.
A typical effort to adopt a new model for an organization
Ms. CEO picks up a new book that everyone is raving about. Perhaps it is the Resilient Organization by Dr. Liisa Valikangas. This is a marvelous book describing how any organization can better position itself to increase its chances of success and survive crises. Ms. CEO does not have time to read the entire book, so she “skims” through the book. Much of the book describes a real culture change from the way business is done in her organization. There are some things she likes in the book, but many that she does not understand or think would fit her company. For instance, there is no time for experiential learning or option development in her organization. There are just too many fires to put out each day.
Nevertheless, Ms. CEO decides to buy the book for her entire senior management team. They also skim the book. None of them have time to read the entire book. Each of the team has a very different understanding of what Dr. Valikangas thinks needs to be done to become more adaptive. The process of developing a shared meaning and a deeper understanding of the book has been circumvented. However, since the CEO is really enamored of the book, her team decides to hire a consultant who has a five step process for developing a “resilient organization.” Dr. Change P. Expert has conducted numerous seminars on creating a resilient organization and is available locally to help organizations become more resilient. Under his tutelage, a champion for the effort is nominated. Training is given to selected senior management. Workshops on innovation and design are given to middle management and the organization experiences some valuable new insights on doing business and creating long-term value for its stakeholders.
However, in several months, business is back to how it has always been done. Most workers would say that nothing has really changed. The Resilient Organization is replaced on the bestselling list by the No Compromise Leadership book or How to Take Names and Kick Butt. This same scenario will take place in about eighty percent of the organizations that bother to read the book in the first place, thus fulfilling the Pareto Principle. Twenty percent of the companies that read the book will find real value in the book, while eighty percent will not. What is the difference?
Why some organizations succeed in implementing a new model
We can find several factors that distinguish organizations that successfully implement a new business model from those that do not. The major factors are as follows:
1. Values and management philosophy are fundamentally changed
Most problems in organizations are caused by the attitudes or beliefs of senior management. Have you ever heard of a company going out of business due to erroneous employee beliefs? Many of these “bad” attitudes stem from outmoded theories of behavior or of systems. MBO and Performance Management are two such outmoded systems that continue to have a compelling grip on the policies and procedures of many managers. Dr. Deming listed them among his “Seven Deadly Diseases” and his “14 Points” for a Successful Organization.
Any new model requires a new mode of thinking. Albert Einstein said: “The problems that exist in the world today cannot be solved by the level of thinking that created them.” When a new model emerges, it requires first and foremost that the thinking that went into the old model be changed. New attitudes need to replace entrenched belief systems. New values must replace outdated values. We can see examples of such changes by looking at how the value of diversity has replaced the value of homogeneity and the value of sustainability has begun to replace the old “throwaway” mentality. The value of female and minority roles in the workplace is now an established fact. We no longer hear questions of whether “The little woman can really handle it or not.”
Any manager or leader who clings to the old values when new values are mandated is no better than the “proverbial” dinosaurs who could not adapt to the changes in the climate. There is little doubt that the failure of most businesses is due to the inability of management to shift its thinking. Peter Drucker observed, “Most business failures are not the result of things being done poorly. Businesses fail most often because the assumptions on which the organization has been built and is being run no longer fit reality.”
2. Key system changes to support a new philosophy are implemented
Not later and not sooner, system changes need to take place to reinforce the new model. It is not a question of whether structure precedes strategy or strategy precedes structure (Chandler, 1962). The truth is that if you don’t build a new structure simultaneously along with the new attitudes and values, they will have no support or foundation. It is obvious (though more will be said later about this) that reward structures must be changed. But they are only a small part of the system changes that must take place. I would almost go so far as to say an organization will need to redo its entire policy and procedure manual. Just as most things in life are linked, so too are the policies and procedures and work standards linked to the old model in an organization.
The problem is that most of the organization’s functional structure is dependent upon the old system for stability and security. You can take one function in an organization after another and see how they mutually reinforce and strengthen each other. The overriding factor in most functional areas is not to institute change but to preserve the status quo. Thomas Sowell (American Economist) noted that “You will never understand bureaucracies until you understand that for bureaucrats procedure is everything and outcomes are nothing.” We see this as politics and turf battles but it is a defining characteristic of most functional areas. This overwhelming need to preserve and protect their domains becomes counterproductive when change is needed.
3. Reward and recognition systems are realigned
To repeat the obvious, what gets rewarded, gets done. It is equally true that what gets recognized gets done. If you tell someone to do or think one way but reward them for thinking another way, you simply court confusion and conflict. I once attended a seminar which was on customer service. Many of the people there talked about the conflicts they faced with trying to serve the customer but also to make quotas or goals that would enhance their earnings. At LA Fitness, the front desk clerks are expected to be polite and helpful to all entering customers, guests and visitors. However, LA Fitness also expects these same desk clerks to spend every available minute reducing accounts payable by calling people who have defaulted on a payment. It is very difficult for these desk clerks to be polite when they have a phone in one hand and a customer demanding attention standing in front of them. To complicate matters, the desk clerk earns a five dollar bonus whenever they are able to get a payment. The emphasis and recognition is on getting EFT’s cleared up and not on giving great service.
The reward and recognition systems in most organizations are based on 19th and perhaps early 20th century models of motivation and excellence. While many new theories and models have emerged which contradict the old models, managers still cling to the ideas and beliefs that formed the foundation for these antiquated systems. Few if any organizations have really developed a model of behavior that fits the new knowledge worker much less the emerging need for imagination and innovation in the workplace.
4. Needed changes are not sacrificed to expediency:
I recently visited one company that was implementing a Lean Six Sigma program. To the Operations Manager, a major goal was lowering inventory. The high cost of operations allowed the Operations Manager to easily see the advantages of less inventory. The Sales Manager saw more customers and his reward system was different than the one the Operations Manager had. The Sales Manager saw the downside of not having enough inventory to satisfy his customers. Different performance expectations led to conflict and a different set of priorities. The Lean Six Sigma program was caught in the middle.
New models that are adopted by organizations often become quite different than the founder might have envisioned. I can remember many managers asking me if they really had to implement all of Dr. Deming’s points or could they simply select the ones that were easiest or that they agreed with the most. In some organizations, quality first was adopted as a goal for the first three weeks of the month and then forgotten the last week when production quotas needed to be met.
The adage that a manager or leader must walk the talk, suggests that the average worker attributes a great deal of validity and priority to what they see management doing. If management says one thing is a priority in work but shows that another thing is a priority in deed, the word soon looks like the myth. Good intentions are nothing without good actions. Senior management must take every opportunity to demonstrate a consistency between thought and action.
5. Training becomes systemic
A number of years ago, I revisited an organization that had invested a great deal of money in training Black Belts in SPC, managers in new leadership theories and workers in the Seven Basic QC tools. The organization had all the characteristics of a transformed company when I left it. Costs were being lowered, quality was up and customer deliveries were exceeding expectations. None of this was apparent when I had returned. The organization seemed to have reverted to its old self. I looked around for many of the “transformed leaders and managers” only to find that most had retired, left the company or been promoted elsewhere. The same was true for the workers and Black Belts. Gone, Gone With the Wind.
Turnover and attrition in most organizations mandates that new employees be brought up to speed on the key beliefs and values of the organization. New employees must have the tools and training to insure that they are able to perpetuate the present system and not allow it to wither away. A key solution is to insure that ideas and beliefs are passed on to new employees either through training or some form of experiential learning that goes beyond “on the job training.” In many organizations, workers receive little or no training before they are given their work assignments. When budgets are cut, training is cut. One of the most critical elements in an organization that determines the future of the organization is subject to the problem of short-term thinking. How many organizations have little or no training budget? In some, the budget exists but may be used at the discretion of managers for other priorities. Thus, the worker gets shortchanged in the process, but in reality, it is the organization that suffers the most.
6. The Law of Entropy is not allowed to prevail:
The Law of Entropy comes from Thermodynamic Principles and in plain English states that all systems tend to disorder or decay unless energy is put into the system to maintain it. This law explains why processes go out of control and why gardens get weeds and why our houses need to be cleaned periodically. We can forget this law and we soon see the “chaos” that emerges around us.
In a business, a new system or model must have energy put into it to establish it in the first place. It takes more energy to get the model off of the ground, but it still requires some amount of energy to keep it in the air. Discontinue the energy input and the model begins an inevitable spiral into decay and oblivion. Look around you and see the numerous examples of this theory. Here are a few:
■Your favorite restaurant that no longer serves the same quality of food.
■Your favorite resort center where you were once treated like a queen and now you are treated like a peasant.
■Your favorite dry cleaners which now burns your shirts.
■Your favorite vacation spot which is now an upscale condominium.
■Your favorite writer who now seems to churn out more junk than quality.
■Your best friend that you no longer see and can’t relate to when you do.
■Your marriage that you thought would last forever and now is on the rocks.
I have tried to make a case in this paper that the barriers to finding and adopting theories or models that offer value and advantage to an organization are often more likely to reside in the organization than in the model. This does not mean that all models are equally useful. Some models are more useful than others but many models are useless. For example, in the Art of the Deal, Donald Trump’s main advice was to “buy low and sell high.” This advice borders on the useless. In the next paper, I will try to describe some of the components of a “useful” model and what distinguishes such a model from a useless model.
I hope the value that you have received from this paper lies in examining your own role and culpability in adopting new ideas and models for your organization. No matter how good a model is, if your organization is guilty of the barriers identified, no amount of theory can make a difference. My mother often said that you cannot make a silk purse out of a sow’s ear. I have observed that most sows would not know what to do with a silk purse. Many organizations will never be able to adopt a new philosophy because they are simply clueless about the changes and commitment required for a new model or a new idea to be useful.