Performance Evaluations – How Is This Still A Thing?

In 2014 I presented a paper at the Deming Research Summit on the topic of “Understanding and Application of Deming’s System of Profound Knowledge in Healthcare.”

In 2015 I presented a paper on the topic of “Understanding and Misunderstanding Variation in Healthcare.”

This year I’d like to write and present on this topic: “Performance Evaluations – How Is This Still a Thing?”

I’ve outlined my proposal below.  I would be interested to know if anyone would be interested to participate in this effort.  You can respond by commenting on this blog, or sending me an e-mail at steck001@gmail.com.

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Performance Evaluations: How Is This Still A Thing?

Proposed research paper for 2016 Deming Research Summit

Dr. Deming saw the annual performance evaluation as one of the systems that would need to be addressed by Western management if they wanted to survive and thrive.

Here are some quotes from his 1986 book Out Of The Crisis:
Chapter 2, Principles For Transformation of Western Management
“12a. Remove barriers that rob the hourly worker of his right to pride of workmanship. The responsibility of supervisors must be changed from sheer numbers to quality.
b. Remove barriers that rob people in management and in engineering of their right to pride of workmanship. This means, inter alia, abolishment of the annual or merit rating and of management by objective.”

Chapter 3, Diseases and Obstacles

“Many companies in America have systems by which everyone in management or in research receives from his superiors a rating every year. Some government agencies have a similar system. Management by objective leads to the same evil. Management by the numbers likewise. Management by fear would be a better name, someone in Germany suggested. The effect is devastating:

“It nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, nourishes rivalry and politics.   It leaves people bitter, crushed, bruised, battered, desolate, despondent, dejected, feeling inferior, some even depressed, unfit for work for weeks after receipt of rating, unable to comprehend why they are inferior. It is unfair, as it ascribes to the people in a group differences that may be caused totally by the system that they work in. Basically, what is wrong is that the performance appraisal or merit rating focuses on the end product, at the end of the stream, not on leadership to help people. This is a way to avoid the problems of people. A manager becomes, in effect, manager of defects. The idea of a merit rating is alluring. The sound of the words captivates the imagination: pay for what you get; get what you pay for; motivate people to do their best, for their own good. The effect is exactly the opposite of what the words promise. Everyone propels himself forward, or tries to, for his own good, on his own life preserver. The organization is the loser. Merit rating rewards people that do well in the system. It does not reward attempts to improve the system. Don’t rock the boat. If anyone in top management asks a plant manager what he hopes to accomplish next year, the answer will be an echo of the policy (numerical goal) of the company. (James K. Bakken, Ford Motor Company.) Moreover, a merit rating is meaningless as a predictor of performance, except for someone that falls outside the limits of differences attributable to the system that the people work in. Traditional appraisal systems increase the variability of performance of people. The trouble lies in the implied preciseness of rating schemes. What happens is this. Somebody is rated below average, takes a look at people that are rated above average; naturally wonders why the difference exists. He tries to emulate people above average. The result is impairment of performance.”

 

Here are some quotes from his 1993 book The New Economics:
Chapter 2, The Heavy Losses
“Differences there will always be between any two people, any two salesmen, etc. The question is, what do the differences mean? Maybe nothing. Some knowledge edge about variation (statistical theory) is required to answer these questions. Ranking is a farce. Apparent performance is actually attributable mostly to the system that the individual works in, not to the individual himself. A simple equation will help to understand the futility of attempts to rank people. Let x be the contribution of some individual, (yx) the effect of the system on his performance. Then suppose that we have some number for his apparent performance, such as eight mistakes during the year, or sales of $8,0(x),000.

Then x+(yx)=8

“We need x. Unfortunately, there are two unknowns and only one equation. Johnny in the sixth grade knows that no one can solve this equation for x. Yet people that use the merit system think that they are solving it for x. They ignore the other term (yx), which is predominant. There is another factor to take into account, the Pygmalion effect. Rated high at the start, anyone stays high. Rated low at the start, he stays low. Ranking creates competition between people, salesmen, men, teams, divisions. It demoralizes employees. Ranking comes from failure to understand variation from common causes. (See Out of the Crisis, p. 310.) The Red Beads (Ch. 7) will teach us some of the difficulties and errors in ranking people. The so-called merit system introduces conflict between tween people. Emphasis goes to achievement of rank, merit, not on the work. The merit system destroys cooperation. We continue this theme in Chapter 6.”

 

Purpose of the 2016 paper:

1) To review the arguments that Deming (and others such as Kohn, Scholtes, etc.) have made against the use of the annual evaluation system.
2) To understand the current state of this type of system in today’s organizations by interviewing people in a variety of roles in an organization.
3) Some key questions to explore:
– Are there organizations that do not have a performance evaluation system?
– What has been the experience in organizations that have attempted to dismantle performance evaluation systems?
– For organizations that have performance evaluation systems, what is the purpose? What do they expect the system to do? What actual systems do these systems drive?
– Some specific questions (same questions asked of top management, middle management, front line):
* What do people think the process is getting them?
* Is it pushing strategy?
* Is it promoting cooperation?
* is it pushing performance improvement?
– Other questions?

Ground rules for conducting the research and writing the paper:
1) The authors acknowledge individuals who contributed their time and provided input, but will not attribute quotes to individuals or to organizations.
2) Research will be conducted through phone and in-person interviews with people in various roles in the organization: top management, middle management, front line, human resources, organizational development, clinical, non-clinical, improvement (lean) team support areas.
3) Research will be conducted in organizations that provide healthcare as well as other industries.

Best Conference Ever! – Till Next Year (2015 Edition)

We just wrapped up the 6th Annual Lean Healthcare Transformation Summit in Dallas.  Based on my conversations with many who attended, it was one of the best conferences ever.  Of course I said that back in 2011, and then 2012 and 2013, and then 2014.

There were lots of great things about the Summit.  Most of the key take-aways were hit by Jim Womack in his closing keynote presentation which he titled “Moving On With Mended Management.”  I’ll try to summarize with a “top 10″ list:

10.  The title is based on John Toussaint’s latest book Management On The Mend, which was given to summit attendees.  Jim advised everyone to take Friday off, read the book on the flight home (it works below 10,000 feet), and form a plan on Monday.  This book contains ammunition for deniers, resisters and anchor draggers.

9. Jim described his efforts to find a doctor for his own healthcare needs (RFP for Jim’s eye).  One physician wanted to schedule the appointment and procedure at his (physician’s) convenience.  When Jim asked the 2nd physician about his outcome data, the physician said that he didn’t need it (or have it?)  He boasted that he was a “Harvard-trained” doctor.  “So am I!” claimed Jim (where he got his Ph.D.)  Dr. #3 was apparently the one who invented the procedure that Jim needed, but he did that 40 years ago and is now over 80 years old.  Jim pointed out that it was easier to get data to help his daughter buy a used car than it was for him to get data to choose a physician.

8. “You can treat a patient with drugs”, Jim said, “but drugs don’t get at the root cause.”  Jim admitted that he has been a “drug-pusher” in the lean world.  He told people they needed to do kaizens, then more kaizens, then more.  All these tools (add in A3, 5S and others) won’t do it.  What IS needed is a behavior change in management.  (But prescribing drugs is easier, so we tend to do that.)

7. Jim shared a useful resource to deal with the “anchor draggers” who say that lean thinking won’t work in healthcare.  Planet-Lean.com has some useful information for everyone, whether the application is healthcare or any other application.

6, As far as what is yet to be done in healthcare, Jim reminded us that the “authority of lean is your experimental findings.”  So, we need to keep experimenting.  There needs to be more experiments with the payers of healthcare.

5. We need more yokoten, which is more than “spread.”  You can spread anything, like fertilizer or bad ideas.  The people trying to spread need to understand what they are doing.  You can’t spread something you don’t understand.  Jim also advised against “industrial tourism.”  A visit for an hour or a day won’t do it and actually produces more harm.  Yokoten requires adaptation (one-size-fits-all only works with socks).

4. Modern management (Jim called it Sloan management) will continue to produce more MBAs who will produce more KPIs and this will only produce the “triple M” (more meaningless measures).  This will only delay progress and actually works against our efforts.  When bonuses are tied to results, people will find a way to get the numbers.

3. Jim talked about addressing a group of graduating physicians at Harvard Medical School.  He asked them, “what have you learned?”  One graduate said, “I learned how to become a workaround genius.”  That’s the current state.  Our system of education produces skills for workarounds.

2. Regarding a question about what to do with senior managers who don’t understand or are resistant, Jim pointed out that their behavior may be due to not understanding or due to fear.  People in management (nobody really) wants to look foolish.

1. Jim’s final thought for the 600+ who were convened for the Summit was this – “You don’t need luck.  But you do need perseverance.”

Thanks Jim!  We’ll persevere and tell everyone about our progress at the 7th Annual Healthcare Transformation Summit in Miami, FL, June 15-16, 2016;

T-Minus 3 Days Till the Annual Lean Healthcare Transformation Summit – Top Management Has a New Job: Side Management

Last year we created a video explaining the benefits of coming to the Annual Lean Healthcare Transformation Summit.  The experiment went pretty well, so we are doing it again.  Click on this image to watch the video.

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If you are not registered for the Summit, it’s too late now.  We have reached capacity.  That’s a new thing for us this year.  It’s a big deal.

I’ve been doing lots of reading (and re-reading) about the science behind “S-Curves”.  I recently blogged about paradigm shifts and S-Curves here, here and here.

One of the authors, Adrian Bejan, discovered a law of physics that explains the phenomenon of S-Curves.  It is call the Constructal Law.  In his book Design In Nature he defines this new law:

“For a finite-size flow system to persist in time (to live), its configuration must evolve in such a way that provides easier access to the currents that flow through it.”

In this book, Bejan writes:

“One of the most powerful insights born from the constructal law is that social systems are natural designs that emerge and evolve to facilitate the flow of the currents they represent on the landscape.  This evolution has a direction in time toward greater and greater access to move more mass (for example, people, goods, information) per unit of useful energy.

“To show that human organizations are governed by this principle of physics, we should find two features.  The patterns of their channels should have a vascular shape and structure as we observe in other point-to-area flow systems, and this patterns should evolve in time to provide greater flow access.

“This is what we find.  To see how, we have to introduce a cornerstone characteristic of natural design-hierarchy.  Although it has received a bad rap as a symbol of inequality, hierarchy is essential to good design.  Instead of providing advantages to one entity to the detriment of another, it arises naturally because it benefits the entire flow system.”

—–

The prevailing view of an organization is the hierarchy as shown below.  Peter Scholtes provided one explanation about the history of this structure in his book The Leaders Handbook.

hierarchy

Here’s the story as he tells it:

“On October 5, 1841, two Western  Railroad passenger trains collied head-on somewhere between Worcester, Massachusetts and Albany, New York, killing a conductor and a passenger and injuring seventeen passengers.  That disaster marked the beginning of a new management era.

“Prior to the early 1800s in the United States (and the early 1700s in Europe), business was much the same as it had been since the Middle Ages: operating as cottage industries, tradespeople made their wares one item at a time and sold them to their neighbors.  There was no “manager.”  The owners of the enterprises did the work themselves or coached apprentices and assistants who did the work alongside them.  In Europe, quality was assured by guilds and their marks of approval.

“Then came the development of coke as a fuel in England and the discovery of anthracite coal in Western Pennsylvania, both leading to the possibility of mass production and mass distribution.  The owner of a cottage shop could choose to hire engineers to build machines of mass production and by 1830 begin to use the burgeoning rail systems for mass production.  Or the shop owner could stay in the “cottage,” continuously worrying about competition from those on the rail system who had entered the new industrial age.

“It was the time of a great paradigm shift in managerial thinking, the equivalent of letting go of a managerial flat-earth perspective.  For the owners of businesses, these were truly traumatic times, requiring them to rethink the premises and practices of their work: How, they asked, will we run a large geographically dispersed organization?

“Other than the army and the church, there were few models for such a management practice in the 1800s.  The railroads were the first industry to come to grips with how to manage in the new era.  In the United States the Western Railroad was the first to extend itself beyond ordinary regional boundaries, the first with complex schedules and multiple trains on the same track.  it was also the first with a disastrous train wreck, a harbinger of tragedies to come.

“The Massachusetts legislature launched an investigation into the causes of the train wreck and the directors of the Western Railroad appointed a committee headed by Major George W. Whistler to find a remedy.  Their recommendations had major immediate impact on the railroads, over the next decades, helped all of U.S. managerial practice.

“Part of the recommendations for the railroads was an organizational structure that looked like the “train wreck” chart (same as the organization al chart image above).  While the standard organizational chart may seem ageless, it was, in fact, adapted from the Prussian Army and introduced to American business practice as a way to prevent train wrecks!  In its time , it was revolutionary.  Its unique features:
* Central offices run by people called “managers” (a new term)
* Distinct functional divisions
* A “chain of command,” clear line of authority
* Clear lines of communication and reporting
* Clear descriptions of responsibility for each individual from top to bottom.

“Daniel McCallum, President of the Erie Railroad, later elaborated on the Western Railroad’s chart with his Six Principles of Administration:
1. A proper division of responsibilities.
2. Sufficient power conferred to enable the same to be fully carried out, that such responsibilities may be real in their character (that is, authority to be commensurate with responsibility).
3. The means of knowing whether such responsibilities are faithfully executed.
4. Great promptness in the report of all derelictions of duty, that evils may be at once corrected.
5. Such information, to be obtained through a system of daily reports and checks, that will not embarrass principal officers nor lessen their influence with their subordinates.
6. The adoption of a system, as a whole, which will not only enable the General Superintendent to detect errors immediately, but will also point out the delinquent.

Scholtes goes on to say:
“A fundamental premise of the “train-wreck” approach to management is that the primary cause of problems is “dereliction of duty.”  The purpose of the organizational chart is to sufficiently specify those duties so that management can quickly assign blame, should another accident occur.”

—-

So where does the idea of paradigm shifts, S-Curves and the constructal law physics help us to understand what the new role of hierarchy will be (if not “command and control” and “blame”)?

I think the new job of top management (and the hierarchy) is “side management” as illustrated in the diagram below.

Screen Shot 2015-05-31 at 9.29.54 PM

Management should not be in the role of “customer.”  That black line represents the work systems that the front line employees are involved in every day to provide value to the customer.  Management should exist to support this effort, to align the work of everyone to provide value to the customer.

Top managements new role is “side management”, and they are not the customer.

T-Minus 10 Days Till the Annual Lean Healthcare Transformation Summit – Backwards Brain

Last year we created a video explaining the benefits of coming to the Annual Lean Healthcare Transformation Summit.  The experiment went pretty well, so we are doing it again.  Click on this image to watch the video.

Screen Shot 2015-03-08 at 8.30.02 AM

This week I am making a short visit to one of our Healthcare Value Network member organizations to talk about the work we have been doing with our HVN Assessment Model.  This actually builds on what I’ve been blogging about the last several weeks:

T-Minus 38 Days – S Curves and Paradigm Shifts
T-Minus 31 Days – Healthcare is Moving From Industrial Age to Knowledge Age
T-Minus 24 Days – A Bridge To the New Paradigm

This week’s topic is about what fundamentally different about the prevailing paradigm of management (industrial view) and the next paradigm (ecological/knowledge view).  The fundamental difference seems to be the principles upon which each paradigm is based.  Here are some of the primary differences as I see them (in the 3 dimensions of align, enable and improve):

Principles of the prevailing style of management (derived from the industrial view of the world). Principles of enterprise excellence (derived from the ecological & knowledge-flow view of the world)

 Align

Focus on Hierarchy as the Customer – Do what is necessary to please your boss. View the organization as a traditional organizational chart where your customer is the person you report to. Create Value for the Customer – Focus all aspects of the organization on the activities that consistently create measurably better outcomes at the lowest cost, highest quality and are valued by the customer. In healthcare, the ultimate customer is the patient. Focus all efforts on adding value to the patient. Internal customer-supplier relationships need to be understood as stakeholders to be engaged.
Focus on the Short-Term – Hold people accountable for short-term (monthly, quarterly) results. Encourage the parts of the organization to do whatever it takes to achieve short-term results. Focus on the measures, the results. “If it can’t be measured, it can’t be managed.” Create Constancy of Purpose – Provide a simple unifying purpose, focusing and aligning all parts of the organization on achieving long-term goals.
Manage the Parts – Hold people accountable for their individual contributions. See the organization as “additive” (productive parts will produce a productive whole). Reward those how manage their individual productivity. Punish those who do not. Think Systemically – View the organization as a system. Think about how and why components work together across the organization and the impact of individual departments on the whole. “The most important outcomes are unknown and unknowable, yet they must be managed.”

Enable

Respect and Perpetuate the Hierarchy – People at the top of the organization with credentials, titles and degrees have the ideas and strategies, and the answers. People at the bottom follow direction and deploy the strategies. Lead With Humility – Seek input, listen to understand, be open to new ideas and the views of others.
Respect and Perpetuate the Hierarchy – People at the top of the organization with credentials, titles and degrees have the ideas and strategies, and the answers. People at the bottom follow direction and deploy the strategies. Respect Every Individual – Foster the continuous development of people to create an environment where individuals are actively engaged in improvements. Provide a safe environment – physically and emotionally.
Respect and Perpetuate the Hierarchy – People at the top of the organization with credentials, titles and degrees have the ideas and strategies, and the answers. People at the bottom follow direction and deploy the strategies. Learn Continuously – Education is not the same as learning.   Graduation is the starting point for continual understanding of the changing world.

Improve

Build in and Depend on Inspection – Assign individuals and departments the responsibility to inspect for quality, e.g. retrospective chart review. Batch problems for review by committees. Assure Quality at the Source – Stop, correct and eliminate defects and problems before moving to the next step, process, department or customer.
Management Plans and Employees Deploy – Plan the work, and then work the plan. If there are problems, focus on the individuals. Embrace Scientific Thinking – Go see what is going on and continuously experiment to learn, improve and achieve desired outcomes.   See everyone as a scientist continuously creating and sharing knowledge with others.
Focus on Productivity – Keep people and equipment busy. Measure and manage the productivity of the parts. The productivity of each of the parts will add up to a productive whole. Flow and Pull Value – Continuously challenge existing processes to create flow of value (as defined by the customer) that streamlines upstream and downstream connections.
Focus on the Individual – Focus on and evaluate the performance of the individual. Focus on competencies. Focus on Process – Focus problem-solving efforts on improving processes.
Meet the Standard – Comply with the requirements and specifications. Seek Perfection – Constantly look for ways to improve systems and processes to challenge the status quo. Note: this is not “expect perfection” or “demand perfection.”
Demand Explanations for Variances – Ask people to explain individual variances from targets and hold them accountable for improvement. Understand and Manage Variation – Study the output of processes and systems to take the correct action to improve future outcomes, and avoid the waste of tampering. Apply this knowledge to instances where there are no measureable results (events and behaviors).

The difference is not just in the way management acts, it is in the way they think.  It’s not entirely our fault.  What we have been taught, how we have been taught, and how we have been treated started early in our lives.  I trace it back to the first grade.

The problem is the way we think – how our brains and minds have become hardwired.

I came across this helpful video to explain this mind-body connection.  Click on the image below to watch this short video.

Screen Shot 2015-05-25 at 6.24.45 AM

Top management needs to learn about the new principles and rewire their brains and minds accordingly.

T-Minus 17 Days Till the Annual Lean Healthcare Transformation Summit – Saskatchewan HVN Member Update

Last year we created a video explaining the benefits of coming to the Annual Lean Healthcare Transformation Summit.  The experiment went pretty well, so we are doing it again.  Click on this image to watch the video.

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This past week had the good fortune of visiting our two Healthcare Value Network (HVN) member organizations in the province of Saskatchewan.  I took some videos which will become part of a “virtual gemba visit” to be shared with fellow HVN member organizations.

My visit started at Regina Qu’Appelle Health Region.  This link takes you to a great website that they shared with me.

Here are some posters that they shared with me:

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In the afternoon I visited the Saskatchewan Ministry of Health and saw how the lean-thinking concepts are being applied in their work as well as how they manage their Kaizen Promotion Office (KPO).

This shows the evolution of one of their visibility boards.

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Day two of my visit was in Saskatoon where I saw some of the work focusing on what started as a “14 Day Challenge” to address patient waits in the emergency room.  The current work is focused on 3 teams in “90-Days of Innovation” improvement efforts.  This link takes you to a great website summarizing this work.

It’s a big project, like eating an elephant.

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You can learn more about the work of these organizations and other HVN member organizations at the 6th Annual Lean Healthcare Transformation Summit.

T-Minus 24 Days Till the Annual Lean Healthcare Transformation Summit – A Bridge To The New Paradigm?

Last year we created a video explaining the benefits of coming to the Annual Lean Healthcare Transformation Summit.  The experiment went pretty well, so we are doing it again.  Click on this image to watch the video.

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Two blog posts ago, I described my current understanding of how paradigm shifts work.

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One blog post ago, I described my view of what that little red box “moving from industrial age to knowledge age” looks like for healthcare.

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As I reflected on this, it occurred to me that a bridge from the old paradigm has already been proposed.

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This diagram comes from Jake Raymer, President and Founder of the Institute For Enterprise Excellence and a co-author of the Shingo model.

People in the current paradigm (left-hand side of the chasm) find themselves trying to survive and improve using the prevailing style of management.  They are coming across problems that can’t be solved using a Newtonian, deterministic, reductionist, mechanical, command & control approach (characteristic of the industrial age view).

They hear about the promise of “lean” and learn as best as they can through the application of tools and methods.  Initial results are encouraging, but eventually are not sustained.  Efforts to rename the effort (often with new tools and methods) yields the same result.  It’s the “flavor of the month” (FOM) phenomenon.

Many get to the point of the little figure and find themselves at a decision point: 1) move forward (more tools or 2) turn back.

Some are bridging the gap because they begin to understand that what is needed is not just a new way of doing (tools and methods), but a whole new way of thinking (principles).  They also gain appreciation for the key vehicle that makes this happen – systems.

Screen Shot 2014-09-24 at 2.56.00 PM

 

This, I think, is a more complete view of the bridge that will get us from the current paradigm to the new (knowledge) paradigm.

There are lots of names for those “curves of improvement then decline” that have been tried in healthcare:
TQM (what some have mistakenly attributed to Dr. W. Edwards Deming)
CQI
Re-engineering
Six Sigma
Lean
Lean-Sigma

And now there is more recent one – high reliability organization (HRO).  There’s been a push to move in this direction from the Joint Commission on Accreditation for Healthcare Organizations (JCAHO).

There’s no substitute for knowledge, but most top management in healthcare does not seem to understand this truth.  They are always on the lookout for the next quick-fix.

I think HRO is the latest TLA (three letter acronym) for FOM (flavor of the month) – unless top management understands and uses the knowledge behind tools and methods.

T-Minus 31 Days Till The Annual Lean Healthcare Transformation Summit – From Industrial To Knowledge Age

Last year we created a video explaining the benefits of coming to the Annual Lean Healthcare Transformation Summit.  The experiment went pretty well, so we are doing it again.  Click on this image to watch the video.

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I’ve been reading (and re-reading) books and articles about paradigm shifts and the laws of nature that actually govern this phenomenon.  Here’s a short list:
The Structure of Scientific Revolutions, Thomas S. Kuhn (1962)
Chaos and the Evolving Ecological Universe, Sally Goerner (1994)
The Fourth Wave: Business in the 21st Century, Herman Bryant Maynard Jr. & Susan E. Mehrtens (1996)
Global Mind Change, Willis Harman (1998)
Design In Nature, Adrian Bejan and J. Peder Zane (2012)

So what?  Most of what I’ve read in the last 20-30 years is related to what I’ve experienced in the work world (most of it in healthcare).  What I have read and experienced seems to boil down to this:

We are living in an age which is undergoing a paradigm shift in thinking.

What we were taught, how we were taught and how we were treated (in school or at work) was based on the industrial view of the world.  I use the word “was”, but I should say “is”.  There is some evidence of change to a new way of thinking, but it is not (yet) a common view.  It is actually quite rare.

In my last blog post, I explained the “S Curves” of paradigm shifts.

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Here’s how I’ve been thinking about the paradigm shift in management and in healthcare:

I’m going to describe that little red box showing the paradigm shift from the industrial view to the knowledge age.  The timeline below is the starting point.  Current date (2015 as I write this) on the right, but where is the starting point?

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I compare the timeline to something that most people would be familiar with – a football field.

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Current state is the right-hand “goal line”.  I will use the “hash marks” to put some history to what I am seeing in healthcare and management.

There is now much interest and activity about the use of lean thinking in healthcare.  There are a few organizations (like ThedaCare, Virginia Mason, Denver Health and a few others) who turn their odometer to “zero” to the early 2000’s.  That is roughly the “20 yard-line” using this time line.

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These organizations learned from other industries and from consultants that introduced them to a model of management based on the Toyota Production System (TPS).

A new organization (ThedaCare Center For Healthcare Value) was formed in 2008 and a meeting was co-sponsored with the Lean Enterprise Institute where 50 healthcare organizations from around the world came together in Boston to discuss what would help them to continue to learn and apply this management method.  That’s not even the 10 yard line.

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I will put some context to this timeline by describing the other “goal line”.  I will mark this as 1925.  I could probably go back further, but this seems to be a useful starting point.  Our timeline is at least 90 years long.

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1925 is approximately the year that Walter Shewhart invented the control chart.  What is the significance of that?  Shewhart (a statistician) was working at Bell Laboratories on the problem of improving telephones and the telephone system.  Efforts to improve telephones were actually making matters worse.  People did not know how to react to the variation they saw.  Shewhart discovered the difference between random variation and special cause variation.  The control chart gave the user the guidance to know when the variation was from the system (random) and that action was needed to study and improve the system.  The control chart also signaled special cause variation where it made sense to ask why those points were different.

W. Edwards Deming was a student of Shewhart’s who also worked at Bell Laboratories.  Deming learned these methods and applied them to various industries including transportation, agriculture and the U.S. Census.  These methods were also instrumental for the World War II production effort which allowed the United States and Allies to produce and distribute weapons and material with high reliability in an efficient manner.

Deming was a part of the post war recovery effort in Japan where he was helping with the census.  His reputation for helping companies to improve their products and services had become known by the Japanese Union of Scientist and Engineers who invited him to teach them these methods beginning around 1950.

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Deming brought new knowledge to the country of Japan.  He taught them to see their company (and country) as a system, and how to react appropriately to variation.  Their reputation for quality was poor prior to this time.  They changed that reputation within 4 years.  Japan has few natural resources and needs to import materials for production.  The methods that Deming (and others) taught them helped them to make the best use of their resources.  Their problem was quality and the ability to compete on the world market.

What did Japanese companies do with this new knowledge?  They used it, experimented with it, and developed management systems over many, many, many years, and the improvement never stopped.  A useful book that describes this time is The Birth of Lean.

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What was happening in the West during this time?  Our problem was not quality, it was quantity.  There was pent-up demand from the Depression and then from World War II.  The method of management in the US was focused on quantity.

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The “mythology of management” (Deming’s term) grew from the industrial paradigm.  We experienced an expanding market where success was nearly guaranteed regardless of the style of management.  The command and control view of the organization (hierarchy) became predominant, along with management by objectives, management by results, ranking and rating and focus on the individual (the performance evaluation).  This continues to be the prevailing style of management in the U.S. to this day.  It is embedded into our culture.  It informs our education system (the factory view, pouring information into the students grade by grade) and our government.

By the 1970s it became apparent that US auto-makers could not compete on the global market.  The same was true for the electronics industry.  On June 24, 1980 a program “If Japan can… Why can’t we? was broadcast by NBC News as part of the television show “NBC White Paper” and is credited with beginning the Quality Revolution and introducing the methods of W. Edwards Deming to American managers.  Here’s a short excerpt from that program:

Bill Conway (manager at Nashua Paper Company): Many of these programs on statistics have died in American companies because they didn’t get the top management support. Now, why top management does not believe that this is the way the Japanese have improved their industry over the last 30 years I don’t know.

Dr Deming: I think that people here expect miracles. American management thinks that they can just copy from Japan—but they don’t know what to copy!

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Demand for Dr. Deming to come to American companies exploded over night.  In response to the questions from desperate American managers, he wrote and published his 14 Principles for Western Management (14 Points).  He also described the 7 deadly diseases of Western Management and the obstacles that prevent Western management from learning and adopting the theory and methods that were embraced by Japanese companies after WW II.

Here is one version of the 14 Points (from Out of the Crisis):
1. Create constancy of purpose toward improvement of product and service, with the aim to become competitive and to stay in business, and to provide jobs.
2. Adopt the new philosophy. We are in a new economic age. Western management must awaken to the challenge, must learn their responsibilities, and take on leadership for change.
3. Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place.
4. End the practice of awarding business on the basis of price tag. Instead, minimize total cost. Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust.
5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.
6. Institute training on the job.
7. Institute leadership. The aim of supervision should be to help people and machines and gadgets to do a better job. Supervision of management is in need of overhaul, as well as supervision of production workers.
8. Drive out fear, so that everyone may work effectively for the company.
9. Break down barriers between departments. People in research, design, sales, and production must work as a team, to foresee problems of production and in use that may be encountered with the product or service.
10. Eliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force.
11a. Eliminate work standards (quotas) on the factory floor. Substitute leadership.
b. Eliminate management by objective. Eliminate management by numbers, numerical goals. Substitute leadership.
12a. Remove barriers that rob the hourly worker of his right to pride of workmanship. The responsibility of supervisors must be changed from sheer numbers to quality.
b. Remove barriers that rob people in management and in engineering of their right to pride of workmanship. This means, inter alia, abolishment of the annual or merit rating and of management by objective.
13. Institute a vigorous program of education and self-improvement.
14. Put everybody in the company to work to accomplish the transformation. The transformation is everybody’s job.

These are principles for this new economic age, for the “knowledge paradigm”.

Deming also described the diseases which afflict Western management (the “mythology of management” as he described it):
1. Lack of constancy of purpose to plan product and service that will have a market and keep the company in business, and provide jobs.  Deming called this “the crippling disease”.
2. Emphasis on short-term profits: short-term thinking (just the opposite from constancy of purpose to stay in business), fed by fear of unfriendly takeover, and by push from bankers and owners for dividends.
3. Evaluation of performance, merit rating, or annual review.
4. Mobility of management; job hopping.
5. Management by use only of visible figures, with little or no consideration of figures that are unknown or unknowable.

Deming described two additional diseases that are unique to the United States:
6. Excessive medical costs.
7. Excessive costs of liability, swelled by lawyers that work on contingency fees.

In addition to the diseases, there are (in Deming’s words) “a whole parade of obstacles. Some obstacles are in fact candidates for front rank in effectiveness, along with the deadly diseases, though most of them are easier to cure than the deadly diseases.”

– Hope for instant pudding.
– The supposition that solving problems, automation, gadgets, and new machinery will transform industry.
– Search for examples.
– “Our problems are different.”
– Obsolescence in schools.
– Poor teaching of statistical methods in industry.
– Use of Military Standard 105D and other tables for acceptance.
– “Our quality control department takes care of all our problems of quality.”
– “Our troubles lie entirely in the work force.”
– False starts.
– “We installed quality control.”
– The unmanned computer.
– The supposition that it is only necessary to meet specifications.
– The fallacy of zero defects.
– Inadequate testing of prototypes.
– “Anyone that comes to try to help us must understand all about our business.”

Another important date on this timeline is 1987.

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This was when the word “lean” was used to describe the phenomenon that was being seen in the automotive industry.  Womack and Jones wrote about it in The Machine That Changed the World, describing what was becoming known as the Toyota Production System.

In 1993, Deming published his description of the knowledge behind the 14 Points – the system of profound knowledge.  The layout of profound knowledge appears here in four parts, all related to each other:
• Appreciation for a system
• Knowledge about variation
• Theory of knowledge
• Psychology

This is the knowledge that we need to understand and use for this new paradigm – the knowledge paradigm.

Healthcare in the U.S. has been raised on an expanding market, but those days are coming to an end.  More hospitals, more beds, more doctors, more nurses, is not the answer.

Healthcare seems to be trying to copy from other industries (and from each other), but (in the words of W. Edwards Deming) “they don’t know what to copy!”

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Perhaps healthcare needs a bridge to get from the prevailing style of management to the new paradigm?  That’s the topic of next week’s blog.