Seddon e.a. 2007 System Thinking, Lean Production and Action Thinking

Two people who do not figure largely in the systems literature are Taiichi Ohno and W. Edwards Deming. This is odd, since Deming provided a telling theoretical explanation of the sub-optimization caused by conventional management and showed the practical means to manage an organization as a system. Ohno’s creation, the Toyota production system (TPS), is the most strikingly successful example of systems thinking applied to business organization.

‘Pull’ vs. ‘Push’: economies of flow vs. economies of scale

Learning and leadership

Toyota is the role model and the most highly developed example of the potency of systems thinking and action learning in its broadest sense. But why, if the TPS is so successful, is Toyota along with its circle of suppliers still almost the lone manufacturing example? Why doesn’t every manufacturer imitate it?

There are a number of answers to this question. If the idea of flow is conceptually simple, it is not simple-easy; it is the simplicity of pared-down complexity, and it has taken Toyota half a century to reach its current mastery. As we shall see in the cases that follow, systems thinking can produce dramatic results very quickly when applied to service organizations where little or nothing is physically ‘made’; but it first requires rethinking the most basic assumptions about the design and management of work, which is a challenge of the most fundamental order.

This profound challenge to the management model-in-use, leads to two related issues concerning leadership style and approaches to teaching and learning in organizations.

An organization organized around ‘pull’ and flow needs a very different kind of leadership from the traditional command-and-control where decision-making is distant from the work and based on abstracted measures, budgets and plans.

Leaders and managers often make the mistake of supposing that tools and techniques can deliver this profound shift in thinking; especially when, for example, consultants teach ‘lean’ as a collection of techniques—kanban, kaizen, TQM, Five S, Six Sigma.

At Toyota, Ohno preferred the term ‘limited’ to ‘lean’ because the TPS was about increasing capacity and responsiveness in the system and not about cost reduction. The difference is subtle but crucial, not least in convincing employees to participate wholeheartedly in the learning-action cycle without fear of being eliminated. Companies that use only the toolbox without embracing the underlying philosophy are unlikely to gain more than limited and temporary results. For many managers ‘lean’ has come to mean cost and job reduction programmes.

Case studies: lean and learning in service businesses

Using their traditional management (push, management by objectives) framework, managers were unable to ‘see’ what was wrong. To make it visible, they had to learn a new way of looking: they had to understand the organization as a system. A team of managers and staff undertook a learning and action process via the ‘check–plan–do’ steps below and revealed a number of counter-intuitive facts.

The learning and action loop — check-plan-do.

Derived from Deming (PDCA), a simple, standard three-step process called ‘check–plan–do’, is used generate feedback systemically and incorporate it into the organization:

‘Check’ asks: (HSD What?)
. What is the purpose of this system?
. Demand—what is the nature of customer demand on the system?
. Capability—what is the system predictably achieving against the demand?
. Flow—how does the work move through the system?
. System conditions—why does the system behave in the way it does?

‘Plan’ asks: (HSD So What?)
. What needs to change to improve performance against purpose?
. What action could be taken and what would be the consequences of taking it?
. What are the measures against which action should be taken (to ensure learning)?

‘Do’ says: (HSD Now What?)
. Take the planned action;
. And start again at check.

When the team plotted the end-to-end claim-to-settlement times on a capability
chart (a chart that shows what the organization is predictably achieving) they were
startled to discover (as is always the case) that under current conditions a claim
could equally well take 10 or 120 days, with an average of 60.

Managers could see instantly that, given that they accepted the theory behind the capability chart, there was no point in arguing about why some cases took so long, or praising people who closed cases in 10 or 12 days. The variation was in the system. Where did it come from? Here was another revelation. When the team, now wholly committed to discovering where the real problem lay, dug deeper, it found that by the time the paperwork reached the branches, it was riddled with ‘dirt’—errors that would stop claims moving forward ‘cleanly’.

IMHO hätte man genau so gut untersuchen können, was die Ausnahmen vom Problem (10-12d vs 60d) sind. Dieser weg wäre motivierender für die Mitarbeiter und hätte u.U. schneller zu einer Lösung geführt, weil man nur noch das im System verstärken muss, was Ansatzweise funktioniert. Die eigentliche Revolution liegt ja doch in der End-2-End Betrachtung des Systems aus Kundensicht, etwas, dass man mit zirkulären Fragen, gut untersuchen kann und keine Problemanalyse erfordert, sondern eine Erkundung des Zweckes des Systems (purpose)

- Zweck Erkundung, statt Problem Analyse
- Lösungssprache statt Problemsprache
- what is it good for?, statt 5 whys?
- wishbone statt fishbone

Discussion: lean and learning

Learning in a management-facing (push) system is generally about gaming the system, meeting targets and ‘doing the wrong thing righter’, to use Ackoff ’s term (Ackoff, 1999). He pointed out that doing the wrong thing righter does not constitute learning and that it is therefore ‘much better to do the right thing wrong than the wrong thing right, because when errors are corrected it makes doing the wrong things wronger, but the right things righter’. In a customer-facing (pull) system, feedback teaches people to do the right thing righter.

Conclusion: the challenges for leadership and learning

Leadership . . .

taking responsibility for the system requires real leadership and it is much easier to accept the centrally mandated model and play within its rules. Stepping out of line is likely to attract unwelcome attention. Thinking in systems terms requires authorities to put aside the targets and specifications obstructing improvement knowing that the eventual gains will put the targets in the shade.

Today’s public services are run on a quintessentially centralized, command-and control model. Because it reverses the information flow, a systems approach pulls the rug from under the traditional leadership model based on authority and hierarchy. If decisions are made on the basis of accumulated knowledge and learning, hierarchy and authority cannot have the final say. ‘The implication is that leaders need to make a fundamental decision: Do they want to be told they are always right, or do they want to lead organizations that actually perform well?’ (Pfeffer & Sutton, 2006).

. . . and (build-in) learning

Both the service examples discussed were previously non-learning systems; the activity measures used taught employees and managers nothing about customers, their needs or how to satisfy them. It taught them only how to meet arbitrary targets. By contrast, in the redesigned organizations, the learning is captured and accumulated in a continuing process. The beauty but also the difficulty of discussing learning in a systems context is that it is not a discrete and separate activity. Training in some of the techniques that enable mastery of the TPS is another matter; but the learning in the check–plan–do cycle is both integral to and implicit in it.

Both the TPS and the service examples are designed against demand and focus on improving capability by building human capital. The pay-off of intelligent organization and accumulated learning is the ability to do more with less: to provide better service at lower cost. The learning rate of such organizations automatically keeps pace with the changing environment.

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