Showing posts with label study. Show all posts
Showing posts with label study. Show all posts

Sunday, January 22, 2012

PDCA Explained One More Time

NOTE:  This blog is moving!  Please read future posts at http://leadingtransformation.wordpress.com

Although it’s been around for decades, the PDCA (or Shewhart) Cycle continues to be one of the simplest – and most misunderstood – concepts in business. Introduced to the masses by W. Edwards Deming, many people don’t initially see the cycle as significantly different from the way they already work. After working with the cycle for many years, however, I have found that most organizations do not even come close to truly understanding or applying a PDCA mindset.

THE PDCA CYCLE
THE PDCA CYCLE

Americans generally follow a solutions thinking, rather than a PDCA approach that attempts to find the perfect solution and a “permanent" fix to a problem. The high level of complexity among interactions within processes and systems, however, along with the fact that the world is in constant change, makes it unrealistic to think that permanent solutions to problems can be developed. The best that one can expect when facing an issue is to address it under current conditions and, once addressed, continue to look for recurrence and further improvements.

Besides the time it takes to seek the perfect solution to a problem, solutions thinking can give a false sense of security that a situation is permanently resolved. As circumstances change, a "resolved" problem can reappear without warning and cause significant damage if the team has moved on and stopped looking for the condition to recur.

By contrast, the PDCA approach addresses problems as a potentially never-ending cycle. Instead of seeking the perfect solution, one or more countermeasures are developed and implemented quickly to stop the condition from continuing to cause damage. Since it is recognized that the countermeasure may not be a permanent fix or completely solve the problem, the team continues to monitor the process to determine the effectiveness of the change. Adjustments are often made to the countermeasures – and new ones developed – to assure the situation continues to improve.

As the process stabilizes, the team looks for ways to further reduce the likelihood of the problem recurring (by addressing other potential causes) or tackles another problem plaguing the process. Each adjustment leads to another fairly quick trip around the PDCA cycle that results in a more robust process and additional learning.

SO WHAT'S THE DIFFERENCE?

The major differences between PDCA and traditional thinking include:

Scientific Approach: A conscious effort to apply a scientific approach to improvement involves developing a hypothesis, testing the premise, formally evaluating whether or not the hypothesis was correct, and acting on the results. Although the traditional approach relies on some level of hypothesis testing, the check step makes it a more conscious effort within PDCA thinking that, when applied over-and-over again, results in developing a scientific thinking mindset throughout the organization;

Countermeasures: Within PDCA thinking, there is clear understanding that, although an action is an improvement, it is not necessarily a permanent solution;

Speed: Since the effort is not directed toward the perfect solution, improvements are made much more often and at a much quicker pace. PDCA is oriented toward a just do it mindset, where ideas are tested and implemented fairly quickly, even if the resulting improvement may be fairly small.

The quickest way to determine a group’s collective mindset is to observe how it addresses problems. If discussions tend to bog down as the team searches for permanent solutions, it is a safe bet that PDCA is not the norm. Also, ideas regularly “tested” and rejected in conference rooms rather than real situations is another sign of a solutions thinking mindset.


PDCA vs Solutions Thinking

The exhibit shows another difference between PDCA and solutions thinking. Ideas and improvements occur much more quickly with PDCA than with solutions thinking. Although each improvement is generally much smaller in scope than with solutions thinking, the rapid pace of improvements when applying PDCA results in far greater improvement of the process over time.

PDCA vs Solutions Thinking
Since processes tend to naturally deteriorate between improvement efforts, the longer the improvement cycle, the more deterioration that occurs. Because of this, the fewer number of improvement cycles, the slower overall pace of improvement that will occur over time.

THE LEARNING ORGANIZATION

Another advantage of PDCA thinking is the amount of learning that takes place about the process during each cycle. Because solutions thinking deploys fewer improvement cycles and focuses attention specifically on the problem at hand, less learning takes place about the overall process. The increased learning resulting from deploying PDCA throughout the organization further adds to the overall pace of improvement cycles.

Those who fail to recognize the true significance of PDCA often require a good deal of coaching, reflection, and experience with the cycle to truly understand why it is different and how it can benefit the organization. Without a certain level of transformation toward PDCA, however, the implementation of improvement methods like lean thinking or 6-sigma will be difficult, if not possible.

Wednesday, November 25, 2009

Sales Goals Revisited

A few weeks ago, I posted a column about the problems with goal-setting for individuals. Although I received comments from several people who agreed that the Western system of goal-setting and rewarding employees were destructive, I also received many responses from people who vehemently disagreed and felt that the process not only worked, but was necessary for success.

I'd like to revisit the subject and limit the discussion to goal-setting and reward systems for salespeople. The Stanford Graduate School of Business recently reported on a study conducted about the effectiveness of using sales quotas to motivate and reward salespeople (http://gsb.stanford.edu/news/research/Nair_sales.html). Based on an experiment at one Fortune 500 company, the researchers concluded that removing the sales quotas resulted in a 9% increase in overall revenues.

I'll agree that conducting an experiment at one company does not necessarily prove my point that setting goals is often destructive, but since the study involved salespeople - the largest group affected by goal-setting - the results merit further discussion.

When I posted the blog, I received several confidential comments from sales professionals who wrote that they disliked the system of quotas for a variety of reasons. They stated that quotas forced them to play games with the timing of orders in order to meet a target in a given period. They knew this was not in the best interests of the organization as a whole, but felt it was necessary to keep their jobs and/or achieve their bonuses.

I've never understood why we feel it is necessary to use money to motivate salespeople but don't use the same approach with accountants, receptionists, network engineers, and other positions within the company. Are salespeople lazy? Are they untrustworthy? Do we really feel that if we don't offer them carrots that they won't produce?

Gallery Furniture

Jim McIngvale is the founder of Gallery Furniture store in Houston, Texas. Many years ago, he called on W. Edwards Deming to help him improve his business. McIngvale often tells the story about Deming telling him to change his salespeople from commission-based pay to salary. After failing to convince Deming that it wouldn't work in the retail industry, he gave in and changed his pay practices and put his salespeople on salary. In The New Economics, Deming wrote about the results of the change. " . . . steady increase in sales. Older salesmen now help beginners. Salesmen no longer try to steal business from other salesmen. they now help each other . . . sales go up month by month. Moreover, profit per square foot of floor space advances even faster." McIngvale agrees.

Like so many elements in business, it goes back to effective leadership and hiring practices.

Unfortunately, I'm betting that the Stanford study will not lead to a wholesale change in Western business practices because if people don't feel there is a problem, they won't be looking for a solution or feel there is a need for change. My hope, however, is that more studies will be conducted on the subject and more examples of companies changing their practices will be publicized and, little by little, transformation will begin to occur.