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In my opinion, the largest cost and quality driver in America
today is management mindset. Note that value is largely a relation
between cost and quality, hence management mindset largely determines
value.
I have observed for years that if I wished to find the major cost drivers of a given NASA project, I would find them where serious constraints existed. I have also observed that most serious constraints within NASA projects arise from decisions made by management (Dean, 1993f). Deming has observed that if there is problem with quality, then the odds are it is a problem with the system, as opposed to the individual, and that management controls the system (Deming, 1993).
I offer these often repeated observations as evidence to support my hypothesis that management mindset is the largest value driver within America today.
Brimson, J. A. (1992) does a good job of describing many costs which arise because of management mindset.
Implications from this theory follow readily. If we desire to increase the value of an enterprise or project, we must change the value in a positive direction. To accomplish this we must increase quality and decrease cost. Since quality and cost are systemic in nature and since management controls the system, to increase enterprise or project value requires that we change the current mindset of management. Senge (1992) places the current mindset in perspective and addresses a powerful tool for implementing this change.
Along the line of changing management mindset, Rayport and Sviokla (1994) provides valuable insights into managing the change from business in the marketplace to business in the marketspace. Goldratt (1992) is must reading for mindset about cost accounting. Stacey (1992) uses nonlinear dynamics to suggest that the current management mindset, which seeks organizational equilibrium, hastens organizational demise. He suggests that, instead, managers must learn to manage bounded uncertainty, driven by creativity and innovation, which leads away from stable equilibria. Ilinitch, D'Aveni and Lewin (1996) introduces a two issue bundle of papers which address managing in hypercompetitive environments.
There is a perception that to manage something one must be able to measure it. The Japanese use Hoshin Kanri to measure, as well as align, the enterprise. I am not aware of a western counterpart to this process that has not been adapted from the Hoshin.
For years, management has been based upon the concept of controlling (Newman, Summer, and Warren, 1972). But control is a form of constraint and costs are usually associated with constraints. To improve competitive advantage, we wish to reduce costs, so it would seem logical that management mindset should change from controlling to something else. But what? My best shot follows.
I claim that the new mindset should become empowerment. Most Americans, including proponents of TQM, define empowerment as letting the employee do their job with minimal constraint from management. I claim that empowerment includes at least two additional dimensions. The first of these is training the employee so that they know how to do their job. Deming made this important point many times. Sullivan (1986) notes that training, as a component of the human side of quality, was a major milepost in the Japanese kaizen of quality. The second of the additional dimensions is removing obstacles from the path of the employees so that they can do their job. Again, Deming has has pointed out many times that most quality failures are largely a fault of the system, not the individual, and that managment controls the system. It is thus the job of management to remove the obstacles within the system so that the employee can do their job.
To synopsize these thoughts, I claim that the job of management is to give power to the employee, i.e. to empower the employee. To empower the employee means to let them do their job, to train them to do their job, and to remove all obstacles which prevent them from doing their job. If, as a manager, you are not doing these three things, your organization is not realizing full competitive advantage.
With the above thoughts in mind, if I were going to measure the wellness of an American organization today, I would use a Dilbert metric. I have seen and heard of several, but the one I prefer is to show 10 random Dilbert cartoons to random members of the organization. Each person rates each cartoon on a scale of 0 through 10. A score of 0 means that the cartoon is totally relevant within this organization. A score of 10 means that the cartoon is not at all relevant within this organization. Add the score for each person interviewed and then average over all interviewed. The closer to 100, the higher the wellness of the organization. In other words, the more your organization resembles the Dilbert cartoons, the less it's competitive advantage. How "well" is your organization?
I believe that there is a second qualitative metric which provides very positive guidance to competitive advantage within an organization. Management should ensure that their employees are as high in the satisfaction of Maslow's basic human needs as possible.
My observation is, that while all employees have these same needs, in reality, American management deals with an employee at a Maslow level commensurate with that employee's relative level within the organization. Thus, the common worker is dealt with at level 2, while the big boss is dealt with at level 5. Dugger (1989) notes that
An enabling myth teaches the top dogs and the underdogs that they deserve their respective positions.
I, thus, suggest that this scaling of Maslow's needs is a part of the enabling myth of a large percentage of American organizations and hence represents a management mindset which is highly detrimental to competitive advantage. My projection of Sullivan (1986) on various time scales of Japanese quality development indicates that Japanese management may have been dealing with most Japanese employees at level 5 as early as the 1960's. Morita, et.al. (1986) provides evidence that this approach existed during the 1940s and 1950s.
In his excellent study on international culture, Hofstede (1991) points out that the viewpoint I have expressed above applies to masculine cultures with weak uncertainty avoidance, which include the USA, the UK, Australia, New Zealand, India, the Philippines, Canada, and Ireland. He suggests that other needs should be included to have the above apply to many other cultures. He suggests the possible inclusion of respect, harmony, face, and duty as needs of other cultures. Based upon his findings I feel I must modify my second qualitative metric to: Management should ensure that their employees are as high as possible in the satisfaction of basic human needs within the local culture. Mazlow's findings need to be modified to coincide with the local culture.
In terms of competitive advantage, a very important form of management is project management. Kerzner (1989) summarizes current project management mindset, based upon controlling, very well. An expanded view of project management is that the job of project management is to genopersist the genopersistation of the product. The "goodness" of project management is measured by the qualities associated with the life cycle actions (conceptualize, evaluate, market, design, prototype, test, produce, deploy, operate, support, evolve, retire, and manage) upon the product. Cost, quality, and activity duration are commonly used crosscutting qualities (quality characteristics) of the genopersistation of the product. The bundles of these qualities are called conceptualizability, evaluability, marketability, designability, prototypeability, testability, produceability, deployability, operability, supportability, evolveability, retireability, and manageability. They measure how well the project conceptualizes the product, evaluates the product, markets the product, designs the product, prototypes the product, tests the product, produces the product, deploys the product, operates the product, supports the product, evolves the product, retires the product, and manages the product.
In terms of competitive advantage, engineering management is a very important form of management. It usually incorporates project management, but deals with the enterprise as well. Monden (1993) and Morita, et.al (1986) are must reading in this area.
Activity based costing is the natural way to measure the cost of the activities of conceptualization, evaluation, marketing, design, prototypeing, testing, production, deployment, operation, support, evolution, retirement, and management, as implemented within the organization. Note that the activities associated with scheduling, made visible by the application of PERT, form a natural activity based cost structure. For many years now, project management has practiced activity based management by managing the activities shown on a PERT diagram.
In order for the product to be competitive, the project must design for value. But it must go even further, it must genopersist for value.
Activity Based Management
Cost Management
Engineering Management
Hoshin Kanri
Management by Objective
Project Management
Seven Management Tools![[New]](images/new.gif)
Target Costing
Total Quality Management
Management Bibliography
The Dilbert Zone
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