Two Obstacles to Continuous Improvement

Transcript

Way of the Quality Warrior Podcast

Episode 019

“Two Obstacles to Continuous Improvement”

I do training and consulting and, recently, I was hired to teach problem solving to a group of professionals at a manufacturing plant. These people solve problems every day, but the plant's leadership's problem was that problems keep recurring. Problems are not staying solved.

In this episode of The Way of the Quality Warrior podcast, I will share what I think are the two fundamental reasons for this situation.

Welcome to the 19th episode of the Way of the Quality Warrior podcast. The Way of the Quality Warrior podcast is about understanding quality as a function, so that you can achieve quality as a feature. Quality as a function is really about perceiving the situation as it truly is, seeing what others don't or can't, without the tools and methods of quality and thus driving appropriate action. Quality as a function is not about bureaucracy. It's not about generating paperwork or the search for non-compliances. It is about doing things and seeing things better.

I'm your host Keith Fong. I'm a continuous improvement coach and trainer. I started my career as a product design engineer and then transitioned into continuous improvement. I'm a practitioner, teacher, and coach of structured problem solving and problem prevention, using statistical quality tools and methods such as Six Sigma, Shainin Red X, and Robust Engineering.

This episode is titled "Two Obstacles to Continuous Improvement." We are first going to talk about problem definition, then we're going to look at each of the two factors or obstacles to continuous improvement.

There are a couple of questions that come to mind that we need to answer in problem solving. First, why aren't problems staying solved? Why do they keep recurring?

To start off, we probably need to define what a problem is, and the definition that I use is a problem is the difference between ideality and reality. Another way to phrase that, which is not quite so highfalutin, is to say a problem is the difference between what you want and what you get.

However, there are some weaknesses in the “what you want versus what you get” as a problem. Because when you think about “what do you want?”, what do people want when they're solving problems?

And this is where we have the first issue: "Ideal" means we're getting close to perfect, but what you want may not actually be perfect. That's where you have problems that are not getting solved. They're getting anesthetized. You're not actually running down what is causing this problem? What do I have to understand that is creating this terrible situation?

Instead, you're looking at what can I do to make the pain go away? Perhaps the pain is people yelling at you because too many parts are getting scrapped, or maybe you're not getting things shipped on time, or maybe patients are going into distress, but the idea is problem-solving is just make what people are yelling about go away. And you could say it's a strategy. This is the “pain relief strategy” approach to problem-solving, and we have names for this. You know, we talk about applying Band-Aids®, we talk about the baling wire and bubblegum fixes. Of course, there's other ways that you don't even fix it at all, but you say, "We swept it under the rug." Sometimes we say, "We don't want to provoke the problem, so we'll let sleeping dogs lie."

But we have to go back to the question, "Why aren't problems getting solved? Why are we just anesthetizing them?"

The first obvious culprit is skills. People don't know how to solve problems. They don't know, like, the steps in a problem solution and that's a little difficult to believe because how do you become an adult without solving problems? In fact, how do you have a job if you don't solve problems? Problem-solving is part and parcel of almost everyone's work. There are things that aren't the way they need to be and you have to fix them.

We do have problem solving. Everybody solves problems. Yes, there are people who aren't as skilled at problem solving, but that doesn't really explain why they aren't actually solving the problem.

And I think the first real culprit, the first true obstacle, is a lack of imagination. The people trying to solve the problem do not know what ideal looks like. However, they do know what the status quo looks like. They know what the situation was before people started yelling at them. Most problem solving, such as it is, is to return to the status quo.

Now, the status quo could be…perhaps you're a manufacturing plant and you say well a 5% scrap rate is what we're budgeted for so you're just trying to get back to a 5% scrap rate. However, what is ideal? Ideal is that you are not creating scrap because scrap comes straight out of profit and profit is sustainability. You cannot just say, "Oh, this is fine because it's not so terrible."

All great advances are impossible until someone does them. And let me give you an example: So when I was a young engineer, you know, in the 1980s, I was a co-op student in the automotive industry, and I remember reading an article about the engines that were coming out of like Hondas and Toyotas versus the engines that were coming out of American-made cars. I had one work term where I was in competitive analysis and I went and visited the General Motors Warren Tech Center in Warren, Michigan, and they had a whole building where they had competitor vehicles.

They had a drivable vehicle and then they had a second vehicle that they had torn down to the individual subsystems like your steering rack, your engine, the seats. General Motors was looking at the competitors’ vehicles and seeing how they were doing versus General Motors, and this this has been going on with all car companies forever.

One of the things that was discovered with the engines was the Japanese engines, all of the pistons, the diameter of the pistons, were the same, and all the diameters of the cylinders in the engine block were the same. However, for the American engines, the diameters varied. So what you would have to do is you would have pistons of different diameters. You would take those and you would measure the cylinder and then you would find, oh, okay here's some pistons that are match, you know, have a certain amount of clearance. These match that cylinder diameter. So you had to match piston to cylinder.

What happens when you're matching pistons to cylinders though is you might have a lack of the right size pistons to go into certain cylinders because there's all different sizes. Maybe they had a big run of big cylinders, large diameter cylinders, but you didn't have a lot of large diameter pistons. Where does that put you? Well, you got to make your engine, so you're going to assemble the engine with the pistons you have. Maybe not the pistons you should be doing.

But looking at the Japanese engines, they were all the same size pistons, they were all the same size cylinders. And according to, of course, American manufacturers, that was impossible until they saw that the Japanese were doing it. How do we make our pistons and our cylinders the same diameters consistently? And eventually, they got to that point. They knew where they were going, but they had to be shown what was possible because they had decided that it was impossible.

If you think about phones, when Apple introduced the iPhone in 2007, it did not have a mechanical keyboard. The most popular cell phone at the time was the Research in Motion BlackBerry®, or they would call it CrackBerry because it was so addictive, because it had its little mechanical keyboard and you would do your texting through that.

But once Apple created these virtual keyboards—that can be made any kind of keyboard. We have not only keyboards of letters and numbers, but we have keyboards of emojis. You cannot do that on a mechanical keyboard. But Research in Motion resisted this. Their main strength was the security of their communication. But where is Research in Motion today? No one owns a BlackBerry anymore, if they even are in service.

One more example of this might be, you know, in manufacturing the idea of one piece flow versus batch production. The ideal case is you make each thing to demand. If you're running a restaurant, it doesn't make sense to say make a plate of food for which you do not yet have a customer. Yet, in manufacturing we have no problem making thousands of things for which there is no customer right now. And the idea of one piece flow is you make to demand, you don't make extra. Batch production on the other hand... It seems like it's the low-cost way to produce things until you add in the cost of storing that, managing it. If you make any bad parts, you've made a lot of bad parts, it becomes a very costly way of making things. However, accounting doesn't necessarily see it that way but it is really, really terrible.

All great advances are impossible until someone does them. Very few people are going to come up with a new thing. It's impossible until somebody can imagine it and then when that person makes it happen, suddenly everybody sees it is possible and the game has changed. Status quo, which is what we generally working to, is often merely adequate performance. It's good enough to get by.

I once worked on a project where they were budgeted to have 20% scrap. Think about that: One part in five would be thrown away at the production stage, 20% of your capacity is just wasted. But that was the process plan because they said “Well, you know, making all of them good it's just impossible, right?” They had too much variation in their process.

When you have that kind of situation you need to have things like inspection—a lot of inspection. So if you have it built into your process or into your business case that we're going to, you know, we're not going to make all of them good, then you have to have a lot of inspection to sort out the bad ones. And, if you find bad ones, generally you have to pay for them to get fixed or if they're not thrown away. So let's say you can fix it. Well, now you have the extra cost of rework. Rework and inspection are never perfect.

The bad ones can escape to the wild, right, they get to the customers, and then you have two situations. You have warranty issues. People say, "Hey, this isn't working the way I expected it to." And you have customer complaints. So if you're in a service industry, you know, again, if you're in food service or healthcare, your customers will be complaining: "Hey, I'm not being treated correctly.” “I'm not being treated well.” And that adds to cost because you have to deal with these complaints.

There's something that happens often as a producer or a supplier of a service. You can become insensitive to what the customers are feeling where you say, "Oh, well, there's 5% of them are bad." But if you're one of the customers who gets that 5% bad, the customer is really a victim because what do they see? 100% of what they got was bad. Yet, you're on the supplier side, you're on the producer side. 95% of the people are getting what they expected and only 5%. But that's not right. That's not right because the people who get hurt aren't going to forget.

What was going on with the professionals I was sent to train? This was a manufacturing plant, the processes had been in place a long time, and everyone seemed to believe that the processes they were given were okay. You know, my product design engineering experience makes me very skeptical of that. Because if the process is OK, then the operators have to be fixed. They need to provide more training, more oversight. But in fact, the processes weren't okay.

The team that I was coaching or training, they didn't really have a clear vision of what ideal was. They didn't see each part has to have a very clear path. Every step of the way has to be highly specified. It has to be clear what is good and what is bad, what's coming in, what's going out, and they really didn't have that. They were caught in the trap of the status quo.

Most of their problem-solving was really driving to get back to not having too many bad parts. What would be ideal? For the physical things, it's the right part, at the right time, in the right quantity to make products that perform perfectly.

The people I was training were in a manufacturing plant, but not everybody was actually working in production. That said, for services you have basically the same situation. You have the right information at the right time, in the right quantity, in the right database, so that you can make information or communicate the information necessary to make decisions correctly and clearly. There is a need to have this one-piece flow of information with direct and unambiguous connections, whether we're talking about parts or whether we're talking about information, and it's got to be where you want it, when you want it, or when you need it.

The second true culprit for problems not getting solved is a lack of alignment. So what's alignment? Alignment is when "What is good for the company is good for the employee and vice versa." Essentially, this is driven by the reward and recognition system.

There's a saying that water finds its level. So whenever there's an imbalance, if water is like on the top of a hill, it's to flow down because it's not level. But if you pour it into a cup, it levels, right? You don't ever have a cup where the water is sloped, unless your cup is tipped over. Water finds its level. Wherever there's an imbalance, that is the reward and recognition system. Whatever you're rewarding, whatever you're giving attention to, whatever you're celebrating, that is what's going to happen.

Especially in modern corporations, there's the idea of the primacy of the shareholder, and that executive compensation is about aligning to the shareholders where the executives are given many shares and the value of those shares is the large part of their compensation. And the first person to really popularize this to executives was Jack Welch at GE. GE, when he became the CEO, was an amazing American corporation. I mean, its stature was incredible. By the time he left in 2000, he had nicknames like Neutron Jack, you know, he would shut facilities down and ship them overseas. In fact, I think he might've said that ideally they would put their factories on barges and they would just move them around because in his eye, people were a cost. They're a commodity.

Although I would argue that many executives don't see themselves as commodities as one being the same as the other. So, Jack Welch managed somehow to have every consecutive quarter had increasing profitability. After he left and during the time of Immelt, his successor, you know, the Securities and Exchange Commission identified that there had been deceptive practices at GE in their financial reporting. So Jack Welch basically turned GE into a unregulated bank and he could move money around and all the while he's making, you know, hundred million dollar deals almost every month and yet the value of the company was just being taken away so that he could pump up the stock value.

Now, Jack Welch was chair of GE for about 20 years, and we can look at GE 20 years after he left, and what do we see? It's been broken into pieces, and basically you have GE Aviation, right? Somehow that survived. The greatness of that has survived all of the cost-cutting and what-not that was done, but it's not just being broken into pieces. It's not the great American corporation that it was when he started.

And, of course, this is early 2024 and we have Boeing as an example of what can happen when the shareholder is the principal focus of an organization. So, of course, Boeing with its storied history. After Boeing purchased McDonnell Douglas and then McDonnell Douglas executives started to run Boeing, what we see is that the strengths of Boeing were rapidly shed. They sold off a number of principal components of the company to get money quickly and to now, with these former parts that are now suppliers, these former companies that used to be a part of Boeing and are now suppliers, such as Spirit Aerospace in Kansas, which makes all of the fuselages for Boeing's 737. They're no longer part of Boeing and now the executives of Boeing are saying, "How can we squeeze our suppliers so that we can lower our costs?"

In the development, for example, of the 787, Boeing was going to do it in a fashion that had the suppliers owning a lot of the engineering of the subsystems, and yet the suppliers weren't capable of that. The Boeing 787 was several years late from its promised introduction date, and Boeing had to send its engineers to its suppliers to resolve so many of their design and manufacturing issues. Vertical integration is an antithesis to the idea of the primacy of the shareholder because your returns on investment are not as great.

But at the same time your resilience and the depth of your abilities is much greater. But Boeing has sacrificed that and we see it today the 737 max is a wounded product and, fortunately for Boeing, there's a duopoly with Airbus. Boeing's not going to lose many orders. On the other hand, again this is early 2024, Boeing is actually manufacturing only about 20 or 25 airframes a month of the 737, while Airbus is manufacturing about 50 of the Airbus A320 line. So they are producing twice as many airplanes and that means that they're getting paid basically twice as much money because they didn't do things like do stock buybacks. They have the money on hand. They have done the engineering.

At this moment Airbus is in a much, much stronger position and given all the problems that Boeing has on so many of its major programs that focus on the primacy of the shareholder of pumping stock price over the short term has really harmed Boeing's future.

There is a lot of pay and status for sustaining problems. An example of this is call centers. So if you have, say, a customer support call center, ideal is that there are no calls, that your customers don't need to call in because your product works. They don't have any confusion about how to use it. There's no issues with failing prematurely or anything. For the person running the call center, what they want to show is that they can handle a high volume of calls and that the calls are short. The alignment there is don't reduce the call volume, don't make your product better, just respond more quickly to the complaints. That's status quo thinking.

Another thing is when I worked in the automotive industry there were supposedly two paths that you could follow in your career, a technical path or a managerial path, and in reality there wasn't a technical path. You could go so much faster in terms of promotion if you became a supervisor and then a manager versus becoming a technical subject matter expert. To become a technical subject matter expert and get promoted, for practical purposes, you would need to jump companies. It's not something that they would say, "Oh, well, you know what? You've become so much stronger we’re going to make you some guru and we're going to pay you consistent with that. If you want to get a pay increase you probably need to go someplace else.

Alignment is actually the more difficult issue to address in problem solving. Lack of imagination is fairly easy to address, especially when your customers are showing the way. But even if they're not showing you how to do it better, you can introduce to the employees what ideal looks like. That's something that can be explained.

But alignment is in the hands of people who are controlling rewards and recognition. And if you're a problem-solving subject matter expert, you're probably not the person controlling rewards and recognition. That presence of a lack of alignment will crush problem-solving as a cultural change. If the people in control don't want better for the sake of the greater good, things won't get better, and often we get this misalignment or this lack of alignment because of the focus on single metrics.

I was talking about CEOs. If you're only being judged on share price, which is a lagging indicator that can be manipulated, then you're going to do things that are out of alignment with making a sustainable, durable, resilient business.

Another very common example of this is things like purchasing, where the focus is just on component price or component cost. Supplier capability and resilience and sustainability isn't that critical. Warranty costs? Well, purchasing doesn't care because they're not going to pay for warranty. But if they can take out 10 cents, they will take out 10 cents, and smart suppliers will not put themselves in a position where they can be victimized by a customer's purchasing department. One time I worked with a supplier that had a strict rule that no customer would be more than 10% of their business and as a consequence the engineering team where I worked was very frustrated because they had so little leverage on forcing the supplier to do things for them. Whereas on the other hand with some other suppliers, we were 50 or 60% of their business, it was fairly easy to force them to do things. That is just not a healthy situation and it puts the supplier into risk of being driven out of business.

The way to deal with that is to have multiple metrics that balance the short-term and  long-term outcomes for the company. If you have that, then you're very likely to not have the problems of the lack of alignment. Alignment is about how people are rewarded and recognized. That is how culture is created and propagated.

And it's helpful to know about behavioral psychology, which says there are consequences for behaviors. and those consequences either amplify or extinguish behavior, and there's three elements of that. The first is, is the consequence immediate or is it in the future? The second is, the consequence, is it positive or is it negative? And the third element is, is the consequence certain or uncertain?

Immediate and future I think that's pretty clear. Certain and uncertain that's pretty clear. The positive or negative elements a little bit funny because sometimes what you think is negative is actually positive, and an example of that might be publicity, right? When you say, "Oh, all publicity is good publicity because people will hear about you." Well, the same thing happens with people is... all attention is positive attention because people don't want to be ignored or neglected. Maybe you come and yell at somebody but you're paying attention to them. You have to be kind of careful about what is positive or negative.

There's a book called The Power of Positive Parenting by Dr. Glenn Latham. I read that when my children were small and he related the story in that book about going to visit a teacher and he walks into this room and it's just chaotic. It's a madhouse. So these are small children, maybe, I don't know second, third grade or something like that, and his thing is you always have to focus on desirable behaviors, and he's looking around this room and the kids are just going nuts. The only thing he sees is there's one kid sitting at his desk and he seems to have his homework open, Dr. Latham goes over there and he starts paying attention to that child, and then the other kids start to see that this child who is sitting at his desk is getting attention, and then slowly the other kids start sitting down. The whole class calms down and they get to focus on that. The teacher did not handle it. She had left the room and had left him in there alone with the kids, but that is what can happen.

We tend to focus on negative stuff, like the kids screaming and shouting and running around. Apply that to your workspace as you wish. But we have to focus on what do we want people to actually do. And social media and gaming companies have people dedicated to leveraging these concepts to addict you to their products, right? If you're on social media, it's all about giving you that immediate positive certain consequence, that dopamine hit, so that you stay there and do more and more. And immediate positive and certain, we see that, of course, in games. We see that on also in focus on shareholders is, what are we getting at this quarter? What profits can we save for this quarter? How much have we gone up for this quarter?

Future negative and uncertain are the consequences that have the lowest effect. That is what you drive to extinguish behavior. If you pick a low cost, low capability supplier who cannot deliver deliver on time. If you're purchasing, that's in the future. You've got the good price today, and it also goes towards what if we don't invest in our people? What if we don't train them? What if we don't train our supervisors? What if we don't implement those difficult practices, you know, management systems and do the hard work? The problems that that's going to create are in the future. We aren't necessarily driven to do anything about it.

It's time to recap.

So there are two obstacles to problem-solving success, in my view. First, problem-solving is not anesthesiology. Problem-solving is about developing both deeper knowledge and control over your processes. Your organization becomes better and smarter because those problems represent a gap and you close that gap.

So the first obstacle is the lack of imagination. The people trying to solve the problem can't imagine what ideal is. They can't work towards the ideal state. So they’re stuck in working towards status quo.

This is fairly easy to address, especially when competitors already show you what's possible, but even in cases where they don't, you can show people how ideal is and help guide them there.

The second obstacle is lack of alignment. What is good for the company and what is good for the employees in the company are not in agreement. This is the more difficult issue to address because this is really about the control and management of the reward and recognition processes of the company. Who's getting attention? Who's getting promoted? Who's getting bonuses? These things will tell you a lot about whether a company is healthy or not. Are firefighters the ones getting the attention and the recognition? Is somebody doing a good job in shipping products on time or delivering great customer service? Are they just, "You're supposed to do it." So they don't get any recognition.

This is not a reason to give up because you don't have control over the reward and recognition systems. But be aware there may be limits to the good that you can do in certain places.

Thanks for joining me.

If you'd like to get in touch with me, you can reach out on the podcast website, Way of the Quality Warrior or on LinkedIn. I certainly enjoy getting to know other Quality Warriors. All of the episodes and episode notes are at the website, again,Way of the Quality Warrior, and if you haven't already, please subscribe or follow on your favorite podcast player.

Finally, if your company is in need of help in solving specific urgent problems, developing problem solving and continuous improvement skills, or creating a strategy for building a quality army, please contact me through the website, Way of the Quality Warrior.