Ensemble Partners

Any business organisation, its total infrastructure, the shareholders, employees, vendors, customers and the markets in which they operate constitute a system.  Leaders and managers need to appreciate that the performance of the individual parts or capabilities of a system does not equate to the global performance of the system.  Put another way, the sum of the local optima (or local efficiencies) does not produce the optimum for the whole system, or the best system-wide success.

The challenge facing organisations desiring continuous improvement in their results is that whilst most people have a very detailed view of their own department or silo, these departments are managed and measured to optimise their own performance, often at the expense of the organisation as a whole. People are far more concerned about looking up into the hierarchy of the organisational structure and subordinating to their chain of command rather than appreciating that the system delivering value to the customer cuts across functions and thus, appropriate subordination behaviour is of the whole system to the service of the customer. Appreciation of the whole system and how it delivers value to the customer is thus a prerequisite of transformation.

No two things are exactly alike and no process can deliver a product or service without some sort of difference.  This is due to the inherent variability in the world around us.  We talk about variation almost every day, often without even acknowledging its power on our lives.  The train was late, a meal was poor at a favourite restaurant, the electricity bill was higher than expected.  Within business, the study of variation has resulted in volumes of books and is the subject of thousands of presentations.

Variation can be broken down into two major categories: common or chance variation and special or assignable cause variation.  These two classifications of variation are often misdiagnosed and even more often wrongly remedied.

Special cause variation is the result of specific circumstances but it can also be identified if it can be resolved without affecting the remainder of the process or system. Examples of special cause variation are an accident on the highway, a hurricane in the Gulf of Mexico, or maybe an industrial action.  In a manufacturing process, it may present itself as the thickness of an incoming material, a broken tool, or a system crash.  The real risk is that we do not identify these differences for what they are - instead we distort the process and overreact to them. 

Common cause variation is small random change in the process that are characteristics of the system.  These characteristics affect all products or services that are an output of the system.  Deming long ago recognised that only management had the power to affect change over common cause variation.  This is because common cause variation is inherent to the design and implementation of business processes.  Workers cannot eliminate the common cause variation found in a business system by focusing on the daily activities of work process management. It must be the work of the management team to eliminate common cause variation. Transformation is thus not possible without knowledge of variation.

Knowledge is essential for creating value in an organisation. In this context an organisation is defined as the company and all its stakeholders.  Management without understanding inevitably leads to destruction of value.

Deming defined knowledge as rational predictions about relationships between separate phenomena.  A rational prediction is one that conforms to observations that have previously been made.  A theory must change when new observations refute previous theory. 

There is no substitute for knowledge in managing an organisation. For a manager to have profound knowledge of their organisation, they must understand how this knowledge is created.  It is built through cycles of theory, experience and then corroboration or revision. It is also sought from outside the organisation.  Organisations are continually looking to expand their knowledge capability – management, sharing, storing and re-use. Our knowledge management of organisations is one of the keys to long term viability - turning knowledge or data into potent information for effective management decision making. Transforming a system thus requires a means by which you know how you know what you know – the theory of knowledge.

We are naturally conditioned to view change with a plethora of responses, some emotional, some rational. Organisational change is viewed with deep suspicion, ambivalence; or great interest, depending on the perspective of the viewer and correlated to the perceived local effect that change will bring. People will universally resist a change that they do not fully comprehend. Systems thinking is the key. A profound knowledge of a system allows us the ability to initiate the change process with clarity, pace, judgement and common purpose. In seeing a system, people are more likely to be psychologically driven towards the positive goals rather than dragged towards perceived negative effects.

Agents of change must consider a myriad of psychological questions, not least in the areas of: measurement; how am I to be measured so that I may predictably succeed, reward; do the proposed changes provide the rewards I find acceptable, structure; how is my local landscape going to change and can I accept the revised structure.

Deming's drive was relentless. He wanted leaders and managers to grasp the idea that as agents of change, they needed to commit to understanding systems through rigorous investigation and profound understanding of the requirements. Only then could successful change be planned and executed, delivering maximum benefit to organisations and their stakeholders.

In following editions of Archimedia, these four elements will be expanded to provide you with some significant insight into the power of Deming's thinking and lead you to the understanding Deming sought to instil - why profound knowledge is so necessary when we look at the transformation of any system.