The latest BLS productivity report released in September shows a decrease of 1.8% in productivity for the non-farm business sector.  After 5 quarters of increasing productivity, it is not surprising to see a dip.  I would expect productivity to be flat or slightly down for several more quarters.  While this severe recession has tested the government’s ability to produce these kinds of macro measures, I do think that this reflects reality.

During a severe downturn, most businesses are in a race to resize their capacity in line with demand.  As the view of demand grows more pessimistic, companies begin to anticipate the drop and get “ahead of the game” on capacity reductions.  As demand bottoms, a large productivity improvement is expected in the macro economic numbers.  While companies did reduce some non-value adding activities, most of these improvements are purely from sizing with no upside buffer of people capacity. Most did not improve the way that they operate and some merely reduced service levels hoping that customer defections would be minimal.

With most reports calling for a slow recovery, it is more important than ever for companies to drive real efficiency gains.  This means truly changing the way that they operate.  The biggest obstacle appears to be the perception that cuts have gone as deep as they can.  My view is that most companies have areas where they have cut too far but others where substantial opportunity remains.  The big challenge is ferreting out each and addressing them appropriately.

There is debate about the impacts of off-shoring on the macro productivity numbers, but the fact remains that the US must drive significant real productivity improvements to compete with increasing capabilities in other countries labor markets.  More on this topic to come….

A recent Wall Street Journal article by Alan Murray has posed the question about the end of management, with a silly subtitle we will get to shortly.  The article is part of a book called The Guide to Management.  The part of the article which is interesting is the discussion of the advent of professional management which created low unit costs but created other problems as well.  I plan on investigating the work of British economist Ronald Coase which is cited in the article.  It is also refreshing that there are no crazy statements about Web 2.0 driving the new organization.  It will not.  While the technology is helpful, the primary challenges have more to do with the people part.  He makes this point directly in the article.  I also wonder if the book addresses other corporate topics such as managing to short term street expectations and the actual and perceived incentives of middle level managers in a big company.  He references these but there is not detail.  This is the type of topic that I would expect in a handbook.  Overall, I think that the broad points represent some really good journalism.  He unfortunately added a subtitle which mentions that managers should act more like VCs.  It is a bit of odd overstretching to suggest that the answer to bureaucracy is found in VC investing philosophy, especially given the recent investing record of the VC industry.  This is the kind of thing that a person who has never managed in a big company would observe.

I am preparing several posts that will be part of a broader white paper which are in this broad topic area of efficiency and productivity.  In the first, I will discuss the notion that startups are more efficient than big companies.  In some respects the answer is yes and in others the answer is no.  We just have to be more precise about how we define efficiency.  I will then address how organizations evolve, more specifically addressing the absent notion of capacity management and of perceived risk.

Yes, most organizations would be well served by identifying all the people checking other peoples work as all or part of their job.  Big organizations are just full of checking and any process where work products wind through various teams is sure to have lots of it.  It is easy to miss though because traditional process approaches focus too much on conference rooms and unneeded complexity for the task at hand.  When looking at efficiency, you really want to get out in the field and at desks observing actual work.  I like the “checker” term because it is easy to describe and when you are actively looking for it, you will not miss it.

For me, checking includes document reviews, approvals, and other types of oversight that very often gets out of hand.  The other aspect of checking is that it tends to be triggered by quality issues that were tough to resolve so checking was added just to survive.  I have often found cases where checking was still occurring when the underlying quality issue had been resolved years before.  Organizations are often reluctant to eliminate these activities and senior managers often unknowingly contribute to this.  The more distressing situation is the one where severe quality issues persist and must be addressed to eliminate the checking.  These checking steps are a canary in the coal mine for deeper quality problems.

So how do you find checking?  You have to go out in the field and observe real work getting done.  Pulling people into a conference room rarely reveals insights about these activities.  Getting out and having someone walk you through how they do their job can be very revealing.  I have developed a simple spreadsheet tool for recording the details of what people are doing along with descriptive notes that can be used later to evaluate the process in more detail.  Many of the graphic formats are just insufficient.  The Learn to See method is fine for high level summaries but does not efficiently represent this kind of detail (although the updated formats are much better).  Traditional flow charts do not adequately represent the real flow of work (for instance, that a certain decision and review loops happen ten times).  Any of these methods can work, I am just pointing out some short falls that I have seen in the real world.

I have seen many instances where entire teams were dedicated to checking the work of another team.  In other instances everyone is doing some of this.  I nearly always see this in back office and support processes though.

So in short,

1. Look for the checking explicitly
2. Observe the actual work (do not do this in a conference room with stickies!)
3. Find the root cause issue that led to the checking to begin with (and remember that it may not be there any more)

Most executives pride themselves on being connected to their business, no matter how large. They perform site visits to far flung operations with lots of small talk, hand shaking, and conference room meetings. It often looks like the practices decribed in this article and this one which is better.   In my experience, these activities can accomplish far more and can be one the most important executive management skills. The reason is that effective observation of the reality on the front line provides executives with confirmation of financial metrics and additional early warning indicators of issues.  It also supports more effective communications between layers of management. Even when everyone has the best of intentions, information reaching the top tends to be heavily filtered and at times reflects nothing of actual business realities.

I have begun teaching some consulting tools that I have used for many years to help executives be more effective at visiting businesses. A few people I know are very effective based on their unique business intuition. However, most can benefit from a more structured approach. Let’s start with a definition. Too many people immediately think of the old management by walking around metaphor which conjures images of superficial hallway discussion versus sitting with people as they do their jobs. As you might guess from this point, my notion of this practice is to pick some key front line roles and go spend time with folks actually doing the work. Going on sales calls is an obvious version of this, but should also be accompanied by more detailed account planning and strategy discussions as opposed to just showing the flag. Examples on the operations side of a business are often few and far between. It is following support people that you learn more about why that sale closed or did not close.  Spending more time with a few people really getting into detail is often far better spent than getting that powerpoint presentation in the conference room followed by the obligatory tour and hand shaking.  You can read the presentation on the flight in and the staff will appreciate the richer discussion as well.  I call my version day in the life sampling. Some day I will figure out a shorter and catchier term.

There are some real and perceived barriers to pursuing this. Often there are concerns about middle management being second guessed by senior management going straight to front line staff. I have also seen discomfort on the part of senior execs about revealing their lack of knowledge in some areas, particularly operations areas. While these reactions are revealing in terms of potential deeper issues, this process supports deeper understanding and better communications between layers of management.

I plan on posting some additional details and “how-to’s” in this area. I am also happy to discuss it in more detail if you contact me via the contacts page. Otherwise, stay posted for more details.

The federal government has just finished investigating a small sample of accidents and concluded that all were caused by driver error. While Toyota is not off the hook completely, it does vindicate the car maker to some degree. This situation now looks very similar to the claims of sudden acceleration surrounding Audi in the late 80s. The link to the WSJ article is here.  The exact findings are not clear from the current news accounts.  In other words, were all of the accidents sampled the result of driver error or just a few.  All of this does point to the mob behavior and rush to judge that often accompanies situations of this type.  It now appears that more than a few of the drivers who were “absolutely certain” they were depressing the brake were actually hitting the gas.  There was already some question about the highway incident where a trooper apparently had to pull in front of a Prius to get it slowed down.

So this brings us back to Toyota again.  They still failed miserably in managing this situation with the media and government.  More than a few people are also still convinced that quality has slipped at Toyota as they have grown rapidly.  I suspect that the sales impacts of this situation will begin to reduce.  There will likely be some longer term residual though where individuals might more seriously consider other cars where before they might have only considered the Toyota.  Only time will tell on this.

The dangers of multitasking received some attention on the heels of a report published by the British Institute of Psychiatry back in 2005.  In addition to finding that multitasking erodes productivity, it also found amusing impacts which it likened to smoking pot and taking 10 points off of an employees IQ.  The brief BBC account is here.  Since that time a variety of executive coaches have picked up on this and recently I received a note from Tony Robbins on this.  A few new thoughts are offered in this blog post that also raises the specter that multitasking is valued because people reportedly good at it have sold everyone else on their greatness.  Link is here.  One more blog I particularly like is here.

So why is this important beyond a helpful personal tip?  I see this over and over again, particularly in back office and support organizations which feature less structured work.  The issue is often associated with email overload.  Internal service providers perceive a service level requirement related to how quickly they reply to emails from their internal customers.  Microsoft has fed this with alerts that flash up when emails are received along with the ever present Blackberry, etc.  In this environment, I have seen individuals divert to email interrupts every 5 minutes.  It absolutely destroys productivity but staff often feel as if they have had great days and have served their internal customers.  The question is whether they actually accomplished anything.  Now just multiply this times 100 people.  Yes, this is real productivity.

Some of the academic studies suggest that around 2 hours per day is lost to poor multitasking.  From my personal observations, this seems reasonable and probably even low.  This represents a 25% opportunity on the productivity side.  For most companies, there will be no other single opportunity this large.  The problem is how to realize improvements.

If you run a back office or support organization, this topic is worth some commitment of time.  Just sending around a tip sheet recommending that people turn off email alerts will not do much on its own.  The technology is just an enabler of the bad business practice, not the cause.  It is likely that internal customer organizations and even your own management team are sending some very direct messages which reinforce poor productivity.  It is also likely that your goal setting and performance evaluation system is viewed by business managers as something inflicted by HR.  You get to the end of an evaluation period and managers ding people based on that memorable tiff with an internal customer despite the fact that all written goals were achieved.  More often than not, it requires going back to the drawing board in terms of customer priorities and measures.  Based on this, changes to roles and responsibilities are likely and may need organizational changes to best implement.

These are not easy changes, but make a huge impact.  These also tend to yield significant increases in employee engagement.  Just keep this in mind before you go off and spend millions on the latest technology program which attempts to generate a 5% improvement.

The increasing buzz around Lean makes me worry that it is headed for FOTM status (that is flavor of the month or maybe year)?  It looks eerily like the situation around Six Sigma about 5 years ago.  The increasing buzz about Lean seems to lack much understanding of how it might be used specifically in a business.  I also hear frequent statements about the pitfalls of Six Sigma.  While I may agree with many of these, the superficial buzz accompanied by criticism of the last fad makes me worry.  A few recent data points include,

• In a recent discussion, a CEO visibly flinched when I mentioned that Six Sigma had become counterproductive in some companies.  This really surprised me.
• I also heard from a operations recruiter that their recruiting practice is now 2/3 Lean – it was 2/3 Six Sigma only a few years ago.
• A Fortune 100 company looking for an operations improvement executive stated that only Lean experience was sought, no Six Sigma people would be considered (seems like a dogmatic backlash to the previously dogmatic Six Sigma approaches).

My fear is that the same absolute dogmatism that has been Six Sigma’s demise could easily befall the Lean world.  I still see way too many absolute statements, often about the evils of systems.  There are also far too many consultants focusing on classroom training versus field practice of these approaches.  And finally, there is no commonly held definition of Lean.  See my previous post on this topic.

For the Lean practitioners in the audience, I believe that there is an opportunity to make bigger impacts outside of the manufacturing floor.  Unfortunately, many have had difficulty expanding their capabilities into other parts of the company that lack the traditional visual queues of manufacturing.  It is these folks who you will hear criticizing everything else.

In my opinion, there have been valuable contributions made by many in the practice of operations improvement.  These include Lean, re-engineering, Six Sigma, TQM, and many others.  None of these is a panacea and caution is required when someone tells you otherwise.

Seeking Alpha features a short article on Salesforce and VMware with respect to the unfolding competitive dynamics in the “cloud” space.  The author is suitably cynical about much of the hype and makes some interesting observations about the aspirations and limitations of these cloud pioneers.  There has been lots of hype around cloud, including some really inane statements from IBM on the matter.  The point in this article is that there are some deep pockets out there all maneuvering for the leadership position.  This is a worthy read.

This SAP upgrade by JP Morgan was a little surprising to me.  They must be assigning a lot of weight to the power of the global recovery.  There may be a short term bump here, but I am not seeing this as a longer term opportunity.  Here is a link to one of the announcements.

For some reason, the back office seems to never have productivity goals or at least not in the same way as the manufacturing side of the business.  I started thinking about this in the context of a series of articles this week fretting about whether US companies have achieved better productivity by actually working better or if they are just working people harder.  While many companies have cut deeply as part of the current downturn, most are just scratching the surface of true sustainable productivity improvements in their back office organizations.  I realize that many companies make a mess of things with productivity goals, but lets leave that topic for another day.  In my experience, the nature of back office work often leads to counterproductive incentives which in turn create deeper cultural barriers to improving productivity (and a tough economy makes it all even tougher).

How many times have you seen this scenario….   Your organization needs a new application to improve a processes and add a capability.  IT informs you that this requires a certain number of IT support staff.  You negotiate back and forth and eventually come to an agreement.  Next year IT asks for funding for several more staff because the business is asking for too many changes, etc, etc.  In my experience, these support staffing discussions only go one direction, up.  Have you ever seen a situation where IT came back to the business with news that they had improved their processes and could deliver equal or better service level with fewer staff with the excess being reassigned to other projects?  Probably never.

So why is this the case (and not to just pick on IT, just insert any other support org in there as well)?

1. Back office processes are much harder to measure, especially related to productivity.  Output is often not standardized and multiple responsibilities make it tough to sort out who is doing what
2. There is not a culture of measurement in the back office.  The folks in the plant want to measure everything.  People in the office do not see how you can measure their work and even look down on it.  While people are reluctant to say it, many in the office view these kinds of measures “below them.”
3. The back office frequently rewards firefighting.  Why would you be worried about productivity when your evaluation as a team lead or executive is shaped primarily by a few high profile firefighting / crisis management situations.  Your response is to make sure that there are more opportunities to fight fires and you in turn reward the ground floor staff doing the fire fighting (but sometimes under appreciate the ones doing fire prevention).
4. Huge amounts of time are spent justifying new increased staffing.  I have seen situations where support executives spend more time on resource justification than on running the business.  You end up with whole organizations which are focused on adding people at any cost.  This is not the kind of focus that most CEOs or shareholders would hope for.  Certainly there is some blame to be shared by the customer organizations, but I have never seen them really create these problems.  This thought process can become deeply embedded in the mind set of a support organization and become very difficult to change.
5. Last and certainly not least, much of back office productivity is driven by the management approach and capability of the team leads and middle level managers.  If they set goals low and allow people to basically work 4 hours a day you will have huge productivity issues.

I intentionally left off topics like systems issues because people tend to make too much of this issue.  While substantive technology gaps can create problems, most often these criticisms are just a convenient excuse for other issues.

Most support organizations would be well served by keeping a careful eye on top level productivity measures.  While measurement at the person level is tough, it is much easier at the organization level.  Far too many companies fail to monitor these as a key metric and then are faced with making larger decisions which have broad impacts on organizations.  I will begin to devote more time in this blog to incentive and team management practices, many of which can be shaped on practices which work in the plant.  I just see way too much reactive thinking and also lack of understanding about how real work gets accomplished in support teams.  Look for more on this…

And by the way, I think that the answer to the macro productivity question is 1/3 working smarter and 2/3 working harder.  Many organizations have been forced to cross train more broadly.  However, having managers and executives pitching in on the loading dock is good for optics, but not really so great in terms of longer term productivity.