Additional Key Elements of Leadership: Theory of Knowledge and Psychology

The fourth component of leadership is Theory of Knowledge. Leaders need to understand how people learn.

Deming was fond of saying, “Experience by itself teaches you nothing. You must have a theory.  A statement devoid of rational prediction does not convey knowledge.” Learning requires comparison of results with the original prediction or theory.

Measurements or observations are the basis for prediction and theory. Control charts are analytical tools that help us understand the capability of our processes and what to expect in the future. If we are not satisfied with the nominal position or the amount of variation around the average, then we must change or improve the process. 

The lead article in a major U.S. newspaper recently reported on the results of the secondary school students. They were shocked to find that half were below average.  This is not news. It is reasonable to expect that about half will always be below average (or technically speaking, the median). The article went on to say that those schools that were below average three years in a row are suspect and put on probation. Statisticians know that they are probably victims of normal variation. A school would have to be below average for seven periods in a row to be considered outside the norm. The leadership of this particular educational system apparently did not understand this and may be making matters worse by pressure to “do better”.

Leaders lead. Everyone is learning so much so fast today that the leaders must never sit back and think they know enough. Leaders must learn at a faster pace than their employees and that is a challenge. You cannot lead what you do not understand; you cannot understand what you have not done.

The fifth component of leadership is Psychology. Generation gaps, attitudes, work habits, independence, are examples why the leaders of today need to have a working knowledge of psychology.

A manager must have some knowledge of psychology to better understand people to optimize their abilities. Management too often operates under the supposition that people are all alike. Deming said that in fact, they are quite different from each other, having different ways of learning and different values. In other words, there is variation between people as well as processes. There are some basic premises about the psychology of people that we need to understand:

·      Everyone is born with a natural inclination to learn and be innovative.

·      Everyone in the organization needs to understand the need for harmony and cooperation.

·      The most elusive edge in the new global competition is the galvanizing pride of excellence.

·      Workers must be treated with respect.

·      One inherits a right to enjoy his work.

·      Fear must be driven out of the workplace in order to empower employees at every level to work toward performance improvement.

To get everyone involved in the quest to improve productivity, we need:

-       Commitment by everyone

-       Ownership of the work and organization

-       Feedback, up, down, and across the organization.  Information keeps the sense of commitment and ownership alive.

Key Leadership Traits: Appreciation for a System and Knowledge of Variation

The second component of leadership is Appreciation for a System. We all work in a system and we need to make decisions with the benefit of the entire system in mind.

A manager’s role is to understand how the organization works as a system and to know when and how to optimize the system. Micro-management, improving one part of the organization at the expense of another, demanding results from people that the system is not capable of producing, and automating faulty processes are examples of mistakes managers make when they do not understand the system of work.

The organization must have a well-defined process to:

·      Recognize a system

·      Define it so others can recognize it

·      Analyze its behavior

·      Work with subordinates in improving the system

·      Measure the quality of the system

·      Develop improvements in the quality of the system

·      Measure the gains in quality, if any, and link these to customer delight

·      Take steps to guarantee holding the gains.

Product defects are rarely the fault of the worker; the process, established and controlled by management, is more likely to be at blame. Workers work in the system, management works on the system.

People are trying their best in the system they are given. They have an intrinsic desire to improve themselves. Deming really believed that people were doing their best and always concluded his four-day seminars by saying, “And now I leave you with five words, I have done my best.”

Only about 20% of all problems are caused by workers. They are responsible for only a trivial small part of the problems, management is responsible for 80% of the problems because they have the responsibility for changing and improving the processes. Deming in his later years stated that management was responsible for more like 94% of the problems.

Management is the major cause of:

·      Waste

·      Rework

·      Untold losses

Management must understand their system and how it works before they can make any recommendations for improvement.

The third component of Leadership is Knowledge of Variation. Nothing is exactly the same, for example if you bought a sack of nails, if examined under a microscope you would discover that there are minor differences between each nail.

Managers must have knowledge of variation, which exists in everything—systems, services, people, and nature. Understanding what a system can do, and what it cannot do, depends on having statistical data and knowing how the data was obtained. The past is helpful to us only if it helps in the future, if it predicts.  Management is prediction.

Deming gave lectures to top Japanese business leaders in the 1950s regarding the importance of management’s understanding of statistical methods, which helped them attain a significant role in world trade. There are no absolute truths, only data from measurement of observation. Deming used to use the example of our perception of the value of the speed of light to support this statement. What was considered to be the absolute speed was changed several times over the years as we developed new ways to measure it. He jokingly credited Galileo with saying that if the speed of light is not infinite, then it is awfully darned fast.

Like Shewhart, Deming identified two ways to improve work processes; resolving “special” causes of variation and reducing “common” causes variation. Managers must know the difference. Special causes of variation appear on a control chart as a point lying outside the calculated control limits or as other non-random patterns.  A manager should ask, “Is the process performing in a dependable, predictable way over time, with no evidence of assignable causes of variation?” If the answer is no, the process is not stable, that is, there are sources of variation that are not part of the process. These are called special causes of variation, which must be identified and resolved before the process can become stable. The elimination of special causes is often the responsibility of someone working directly with the operation. Common causes, or problems with the overall system, are the responsibility of management. Common causes of variation are those inherent in a system. 

Management’s efforts to reduce variation must be unceasing and must be consistently communicated to the workers.

Qualities of an Exceptional Leader

Leadership has five components--Roles and Responsibilities, Appreciation for a System, Knowledge of Variation, Theory of Knowledge, and Psychology.

History will remember Walter Shewhart, not just for originating the control chart, but for understanding and teaching a management philosophy that stressed leadership and customer satisfaction long before those terms were buzzwords. The highest executives in any company must be personally involved in efforts to improve performance. 

Experience has taught us that it is not sufficient for the top executives to permit quality or performance-improvement efforts within their organization; they must be personally involved and, in fact, be driving the entire activity.  One day I was explaining the House of Quality to a co-worker on why Six Sigma is a different vehicle than its predecessors.  I said that Six Sigma differs in that it is truly driven by the chief executive and the board of directors.  It has always been wishful thinking to have the top executives involved in the other vehicles but, in reality, they gave lip service and deployed or delegated the responsibility downward in the organization in most cases.  She responded, “Oh, you mean this vehicle has a different driver.”  Her metaphor is very accurate.

What is the role of leadership?  The aim of leadership should be to help people, machines, and gadgets do a better job.  Effective leadership sets direction, improves performance (taking focused action), and produces results.  Leadership accepts that people want to do a good job and be proud of their work.  The role, then, is not to motivate and inspect but to remove roadblocks that will permit the people to do better work and provide direction for the organization.

The leader’s job is to:

·      Find out who is in need of special help and see that they get it

·      Coach and counsel

·      Understand variation

·      Remove obstacles

·      Focus on customer

·      Develop and get buy-in on the aim of the company (constancy of purpose)

·      Improve the system

·      Create an atmosphere of trust

·      Know the job, how it fits the overall product

·      Forgive a mistake.

Quality education and philosophy begins at the top of the organization.  Expect and insist upon proud craftsman-like performance. Zero Defects is not a motivational slogan, it is a management performance standard.

Managers’ attitudes reverberate through the organization and those with no interest in total quality control should be weeded out. And, why should they have an interest in total quality control? The Japanese have only one word for both control and management ,which is a lesson for us. I have used these words interchangeably in this paper. I also view quality and performance improvement as interchangeable terms. 

Deming quotes Julian Huxley, “A practical man is one who practices the errors of his forefathers” and that is no longer acceptable.  Change is upon us; it is not optional. Technology, quality, cycle time, cost, delivery means from producer to consumer, leadership, and customer expectations are changing at an ever-increasing pace. We cannot stand still. 

Quality control should not be practiced simply because it is fashionable.  Its purpose is to rationalize industry, establish technology, and enable companies to develop the ability to secure good profits and beat international competition. Quality control must be continued throughout the life of a company. Get every department involved in a commitment to total quality. Communication must be extensively transmitted to all employees to sow the seeds of participative management.

Setting the Direction of the Business

In order for all employees to contribute to their maximum ability, the direction of the company must be clearly defined, communicated, and accepted by all.

Jim Collins in his book, Good to Great, described a useful concept to make sure the organization stays focused on what is important. In this concept key employees are assembled and asked to brainstorm, discuss, and reach agreement on three questions.

The facilitator starts the event by drawing a circle on a flip chart or white board with “What are you passionate about?” written in the middle. The group then brainstorms their thoughts about what they are passionate about in their work and in the organization. The facilitator records these thoughts around the perimeter of the circle. When the ideas are exhausted, the facilitator leads the group to summarize their thoughts into one succinct phrase and records it in the middle of t he circle. It is important that discussion is continued until true consensus is reached. The final version should not be dictated nor should it be a meaningless compromise.

This activity is repeated with the question, “What can you be the best in the world at?” in the center of a new circle. Here it is necessary to define what is your world; what is the world in which you compete. It can be defined in terms of geography, market, application, etc.; in other words your niche. This is important because usually there is only room for two companies to make money and one to eke by in any market so one must focus on being number one in your niche. Not to be overlooked is that with continuing improvement and innovation in transportation and communication, geographical niche boundaries are constantly expanding.

The activity is repeated for the third time with the question, “What drives your economic engine, or where do you make money that supports the organization”. Some people are uncomfortable talking about making money as a factor in determining the direction of the business but its importance is a fact of life! Obviously if you don’t make money, you won’t be in business long.

The facilitator now leads the discussion of what direction of the company satisfies all three questions. If the employees are passionate about the direction of the company, they can be the best in their niche at it, and they make money from it, success is on the horizon.

Listen for Total Communication

Shortly after one of the “big-box retailers” opened near my home, I asked one of the cashiers how she liked working for the company. She responded, “I love it!” I asked her why and she told me that management respects her. I then asked if her previous management, at a large competitor, did not respect her. She said, “They did not even know I existed.”

What a shame. How could this employee, or others like her, put their heart and soul into helping to make her company successful if they do not feel respected and important. It cost so little to respect people and the returns are so high.

I suspect one of the ways employees feel respected is if management shares information, asks for feedback, and listens to what the employees are saying. Many employees’ suggestions are very useful; every employee has a brain and they are closest to the work. For other ideas that cannot be utilized, it is important to provide to the individual feedback reasons why their idea cannot be implemented. The worst thing that you can do is to ignore the input.

It is key to make time to have honest dialogue with employees. This can take the form of one-on-one discussions by visiting the workplace on a regular basis or it can be with group meetings. In either case, we need to remember that communication has two equal parts, sending and receiving. This means spending at least half of the time listening.

In order to send the right information, you have to trust the employees. Trust them in order to share where the aim and direction of the organization is, the vision of what the desired state of the company will become in a few years, and the strategy involved in getting there. Just sharing the financial results of the last month or quarter is not likely to excite the employees, it is like looking at where you are going by looking in the rear-view mirror. Instead share progress being made on achieving the strategies and closing the gap from current state to desired state.

Listening and receiving input is a learned skill. You should practice active listening, ask open-ended questions, which will draw out ideas from the employees. Give them time to think through your questions and formulate responses. Absorb their answers, think about why they came to their conclusions, and engage in two-way dialogue. As we said above, provide feedback and show respect for their thoughts. Above all, don’t kill the messenger. Word will quickly spread throughout the organization if it is dangerous to speak openly to management.

Top management does not have a lock on brainpower in the organization. Work today is becoming so complex that we need to tap into each and every brain in the organization. It is rewarding to see what we can learn with good, honest dialogue.

Quality Pays Big Dividends

The quality improvement movement started in the United States during World War II as we converted manufacturing from civilian goods to war goods. Stanford University utilized the statistical leaders of the time to set up training on improving work processes by removing waste, rework, and redundancy. This movement moved to Japan in 1951 as they wanted to learn what they considered was our secret weapon that allowed us to produce tanks, ships, airplanes, and arms with the efficiency and effectiveness at the rate we did. They invited the American leader of the movement, Dr. W. Edwards Deming to come and teach them these statistical tools to improve work processes. They followed his teachings and their quality steadily improved. Meanwhile, we became complacent as the production capacity of the rest of the world was pretty much destroyed, we had little competition, and we put our emphasis on quantity over quality. We did not really wake up until 1980 when NBC aired a white paper titled, “If Japan Can, Why Can’t We?” It was about what Deming had accomplished in Japan and was now leading the effort in the US.

The revival of this quality improvement movement is now over thirty years old and the obvious question is, “Is this really worth the effort?” About fifteen years ago I did a study of literature search for results and I think it bears repeating.

Advantage Minnesota

·      ZYTEC-Tripled earnings between 1991 and 1995, increased revenues 62%, reduced manufacturing cycle time 64%

·      ADVANCED CIRCUITS-reduced product defects 505, reduced product returns 75%

·      BI PERFORMANCE SERVICES-Increased sales 15%, increased customer retention to 92%

·      CUSTOM RESEARCH-Doubled its business volume, increased productivity 20%

·      HONEYWELL SOLID STATE ELECTRONICS CENTER-Increased revenue per employee from $63K to $100K

·      HUTCHINSON TECHNOLOGY-Increased earnings 40%, increased revenues 12%

Minneapolis Star-Tribune, Harvey Mackay’s column, April 6, 1995

·      MOTOROLA-They spend millions on quality training, but it costs them nothing because of the savings they enjoy on returns, retooling, rebates, lawsuits, and customer satisfaction.

United States General Accounting Office report, May 1991, “Management Practices, U.S. Companies Improve Performance Through Quality Efforts”-GAO review of the 20 companies that scored highest of 1998 and 1989 applicants for Malcolm Baldrige Award indicated nearly all achieved:

·      Better employee relations

·      Higher productivity

·      Greater customer satisfaction

·      Increased market share

·      Improved profitability

The details of the study are interesting. Financial performance was detailed in that 15 companies reported a total of 40 observations as measured by several ratios widely used in financial analysis. The ultimate impact of quality management practices is improved profitability.

·      34 improved

·      6 declined

American Quality Foundation and Ernst & Young, Joint study, 1992.

·      Higher performing organizations have 25% of their workforce performing in teams compared to 5% for poorer performing organizations.

·      Higher performing organizations had nearly 100% of their workforce formally trained in problem solving compared to less than 20% in poorer performing organizations

Business Week, October 18, 1993

·      The three publicly traded, whole company Baldrige winners outperformed the Standard & Poor’s 500 from the time of their winning through September 20, 1993 by 8.6 to 1.

·      The ten Award winners that analyze productivity enhancement as annual increase in revenue/employee, a median average annual compounded growth rate of 9.4% and a mean of 9.25% have been achieved.

Does Quality really get results? The answer is a resounding YES!

Follow-up or Fold-up

Ever get frustrated by sitting in agonizing meetings and nothing gets resolved? We all have and nothing is more discouraging. Solutions to problems cannot always be made during the meeting but an action plan leading to a solution can and should be developed before the meeting is adjourned. It is the responsibility of the person chairing the meeting to facilitate the development of the plan.

The plan itself can be quite simple. Usually between three and five actions can easily be defined to pursue. If more are recognized as important, some may be put into a “holding pen” until other more important actions are completed.

The action statement may be the definition of the problem as known at the time. This will undoubtedly change as progress is made and a better understanding of the real problem is revealed. The statement of importance is necessary because people naturally are more productive when they know the importance of their work. Defining how progress will be measured is key to know when the task is on the right path and also when the task is completed so the individual and/or team assigned to it can go forward to other actions.

The objective needs to be defined before the meeting is adjourned so that agreement is reached among interested parties of what is to be accomplished. Then, someone has to step up and take responsibility for achieving the results, to be the leader of the action. Finally, a targeted completion date needs to be determined so the activity does not drag out unnecessarily.

Action Plan

Item	Action	Why is this important?	How will we measure it?	Objective	Leader	Completion Date

Completing the action may take several forms. The solution to some problems is so obvious once the problem is identified; the leader only needs to “just do it”. Others may be likened to low-hanging fruit where minimal investigation or data gathering is necessary to find the best solution. Others may require more work and in that case, the seven-step problem solving process developed by Japanese academicians can be used.

Step 1.a is to define the problem. It is best to do this in pencil because what we think is the problem may not be the real problem when we dig deeper. 1.b is to collect data and portray it in chart form to prove that the problem is real. Step 2 is to examine the current situation from several points of view; typically different times, places, types, and symptoms. Again this data should be displayed in chart form. It is at this point that I usually have to rewrite my problem statement.

Step 3.a is to analyze all possible causes that can be identified in a brainstorming exercise and then form our hypothesis as to the leading cause. Step 3.b is to collect data to prove that our hypothesis is supported and we have identified to best cause to address.

Step 4 is usually the easiest step, act on the cause, because if we have done our homework correctly in the previous steps, the proper cause of action is now obvious. Step 5 is to collect data as in step 1.b and compare to prove that our action is producing favorable results. If not, we have to go back to resetting our hypothesis as to the root cause of the problem.

Step 6 is to standardize the changes to make sure they are implemented throughout the organization. Step 7 is to draw conclusions and analyze what was learned that could be applied elsewhere.

Next comes the most important activity of the action process and that is follow-up by management. We have gained nothing if the plan is allowed to languish and become forgotten. Periodic follow-up will keep attention on the actions and they can be completed and people allowed to move on to other activities. Human nature drives us to get results if we know our progress is being observed.

The prognosis is not good for organizations that allow problems to smolder and not get resolved. Developing an action plan and following up on progress can make our lives easier and work more satisfying.