But quality advocates have fallen on hard times. Even the much-hyped six sigma, brought to the attention of the corporate world by Motorola, and later successfully implemented by GE, has not done a whole lot to revive the movement. Skeptics abound, and with good reason.
One notable proponent of quality recently reported that quality improvement has fallen out of favor amongst senior leaders as a strategic issue, noting that many leaders have grown weary of the movement, and are rejecting many of it’s mantras. It seems that quality improvement has lost its luster…and is struggling very hard to regain it.
I believe there are many reasons why this has happened, but I would like to focus on two major ones:
- Governance models incorporating pay for performance drive short-term thinking and behaviors, which work against quality
- Rigid adherence to manufacturing logic is an inappropriate strategy for improving quality in the service sector, and even for services in the manufacturing sector
Reason #1: Pay for performance
Back in 1982 W. Edwards Deming stated “The pay and privilege of the captains of industry are now so closely linked to the quarterly dividend that they may find it personally unrewarding to do what is right for the company” (Deming; chapter 4, Out of The Crisis; MIT).
Has anything changed since then?
Twenty years later we witness the meltdown of Enron, the bankruptcy of WorldCom and the scandal at Tyco, all for the same reason...short-sighted greed. Leaders having your cake and trying to eat it too.
But the problem goes beyond these much publicized scandals. Many other sectors, including healthcare and government, have adopted the same short-sighted ‘pay for performance’ practices that have put their industrial and high-tech counterparts at such great risk.
The lesson is, if you want long-term performance, do not recruit, promote or reward based solely on ability to produce short-term results. Yet most of our governance models are based on short-term performance, which leads to dysfunctional behavior in organizations.
If you don’t believe me, simply witness the amount of initial interest in the reengineering movement…the promise held out was that if you take a blank sheet and quickly redesign your major business processes, you will blow away the old and come up with a dramatically more efficient and effective way of doing business.
Makes sense, doesn’t it?
With reengineering, quick and dramatic change was the order of the day…and the rewards would quickly follow. All of this resulted in more short term thinking, but this time results would be measurable, quick to show and above all, massive.
And if you kept feeding the reengineering beast, it might not bite you.
Reengineering then was hailed as a new way of life, the new paradigm for continuously improving organizational performance, on a massive rather than incremental scale.
Seventy percent of reengineering efforts failed, according to those who led the movement.
Why?
Mainly, they claim, because management used reengineering as a tool for downsizing…and after one round of such ‘reengineering’, guess how many people will voluntarily and passionately sign-up for the next round? So like all change programs that work against the interests of those it claims to work for, it will grind to a halt. And in many sectors it has done just that.
You see, the old way of thinking and acting takes much, much longer to blow away…and when the reengineering approach works to force change in the old paradigm, it instills fear and eventually struggles to survive. The old paradigm instead survives.
All of this is so obvious, yet ignored by managers who only manage for the short term and for the personal rewards that go with it.
Now I know the argument for ‘pay for performance’. It goes that if you don’t reward these managers, often and in large chunks, you will lose them, supposedly to the competition. Think that last comment through…if these managers are incapable of building long-term success and prosperity for their organizations, while managing the short-term, then why not let the competition have them? They could do so much damage…they could be your greatest competitive advantage!
Think of the present models of pay for performance as being likened to feeding fish to a performing seal…the seal becomes conditioned to short term behavior. If it performs a specific trick, according to a given command, at a certain point in time, it gets fed. If not, it goes hungry. Simple Pavlovian, stimulus and response, conditioning logic…but is it one that we want to apply to people, especially our leaders? I think not. Yet why do we do it?
Reward people for building an organizations capacity to prosper and outlive other organizations, to reinvent itself, in a humane way, when it needs to (and not every other week), and to survive in the short-term. But don’t hold it out as a way to ‘motivate’ others. If you do, you will end up with a performing seal. (By the way, the older seals eventually learn ways to outsmart their trainers).
Instead, find out what a prime motivators of human behavior are, beyond money and perks, especially the intrinsic ones. Most studies have shown that money is far down the list for most people when asked what motivates them. It just so happens that it is extrinsic, tangible and convenient, and because of that it gets more attention. As alternatives, how about pride in work? How about making a real and lasting difference in people's lives? How about creating joy, prosperity and peace for others? Now that's worth rewarding! But, of course it takes real leadership to create a culture that does that.
Reason #2: Manufacturing logic in service businesses
Healthcare is a prime example of how one industry managed to get quality wrong. In the late 1980’s, continuous quality improvement (CQI) was hailed as the savior of healthcare. And it didn’t seem to matter which country you lived in. The same movement took hold in Canada and the UK as in the United States. The reason for such fervor is obvious…who in their right minds would argue against ‘quality’ in human services?
But the movement struggled to find its place. Finger pointing (especially against healthcare professional and doctors) took the place of consensus building. The main problem seems to stem from the fact that the healthcare system adopted (adapted?) the CQI logic from the manufacturing sector.
To get a better grasp of this, picture the following:
In the manufacturing sector, typically the continuous improvement process was targeted at an organizations mission critical processes. For example in the automotive sector, organizations such as Toyota positioned CQI as their system of DAILY Management of their manufacturing processes.
The reason is simple.
In a high volume, repetitive (aka standardized) process, the gains to be made from taking a disciplined, fact-based approach to managing (aka controlling and improving) mission critical processes on a daily basis can be immense. Over a very short period of time, teams on the shop floor can actually see improvements in quality, cost and productivity using data, and management can quickly translate that into more customers, more market share, lower costs…you get the picture.
They could PROVE that they were IMPROVING in ways that mattered to the long-term success of the business.
Back to healthcare. When CQI was first introduced, the argument against DAILY management, of the likes that worked in manufacturing, were that curing illness, disease, and injury takes longer and has so many variables attached to it, many of which are outside the control or even the influence of the healthcare practitioner or organization, that a manufacturing approach simply wouldn’t work.
So, the CQI movement in many cases defaulted to finding non-clinical (aka non-mission critical) processes to work on, just to prove the point.
So, wait times, billing, registration processes (some hospitals even benchmarked against hotels), food services and countless other peripheral processes got attention. Some improvements were reported.
But the healthcare professionals/medical folks were not impressed, and avoided spending too much time on these activities. They knew that in many cases healthcare was as much an art as a science, and they rejected a purely data driven approach to improving healthcare. They also knew that the type of studies needed to scientifically PROVE the merit of new or IMPROVED healthcare processes and medical procedures were long cycle in nature, (people and diseases come in all shapes and sizes…what works for one today may not work for another tomorrow) and that a DAILY management approach was simply inconsistent with this belief.
What about other types off service businesses? On a broader scale, in services, there were other differences discovered in implementing CQI, most notably:
- Services are very often performed in the presence of the customer, and need to be customized as they are performed, based on the customer’s preferences. You get one chance ‘to do it right” in front of the customer. This is so much different than in manufacturing, where standardized processes are performed out of sight of the customer. Doing it right the second time will cost you more, but it’s unlikely the customer will ever know.
- In manufacturing, the product is a widget, the production of which can be defined, measured, controlled and improved. In pure service industries, no matter the setting, the product is a human performance, which is so much more difficult to define, measure, control and improve. Us humans like variety, which is the antithesis of the manufacturing logic.
Don’t get me wrong. It is possible to introduce many of the data driven quality improvement tools, including six sigma into services. But ONLY in areas where there is a highly repetitive, high transaction level, that does not require much, if any, individual customization.
Parting advice...
Pay for Performance
Deming was fond of saying “In god we trust…all others bring data’, but did you know he also said ‘Data will provide you with about three percent of what you really need to know’? What implications does this have for pay for performance systems…you are using valid and reliable data to measure and reward individual contributions to short and long term corporate performance, aren’t you?
If not, and I suspect that you aren’t, you should rethink your approach to paying for performance improvement…it’s probably based on a faulty premise concerning human behavior, the type that drove Enron, WorldCom, Tyco and others into the ground.
Manufacturing Logic in service industries
Many tools, other than the data driven ones, including ones for planning and creativity, are available, but seem to get very little attention. Help your people go beyond the data driven manufacturing logic and employ these other tools also, and you will unleash tremendous creativity…creating higher and higher levels of customer satisfaction.
Who knows, you may just turn out to be the next quality guru!
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