(note: A maquiladora is a company under Mexican law with Mexican and foreign partners, set up to manufacture in Mexico, but administrated through the foreign partners. It allows the foreign company to avoid taxes while ensuring the Mexicans a profit. Also Note: The four stages of teams quoted here, from the Team Handbook by Peter Scholtes, was first developed by Bruce Tuckman.)
Get the Book Based on the Article here… or visit our Publishing Page.
Formed in 1988, Edco Food Products, Inc., purchased fermented peppers and pickles in Mexico. But as big companies bought out smaller ones, the market population fell, and Edco was losing customers. To create a reliable source of product, in 1993 the owner joined with two shareholders from Mexico to form RES Food Products International, Inc., a materials owner and importer of goods and services provided by maquiladora operation, and RES Internacional SA, a maquiladora that produces and packages fermented peppers and pickles (see Exhibit 1). A maquiladora is a company under Mexican law with Mexican and foreign partners, set up to manufacture in Mexico, but administrated through the foreign partners. It allows the foreign company to avoid taxes while ensuring the Mexicans a profit. But with no unifying vision, Edco and the RES organizations confronted operational losses and mounting debt. Dubious data, suspicions of dishonesty, in-fighting at all levels, conflicting managerial agendas, and fundamental differences between American and Mexican accounting and law made it very difficult to balance the books. Frustrated with the state of the operation, the owner considered semiretirement, but he was not sure his son was ready to take over the business.
To remedy the situation, Edco’s owner hired a quality-improvement consultant to assess his company’s personnel and management operations and recommend a program for improvement. Accompanied by the owner and his son, the consultant visited RES International to conduct private interviews with key operations personnel. A few days later, major changes were proposed: The owner would remove himself from the organization’s day-to-day operations and allow local managers to make decisions and start a long-term process of education and training to create a lean production system.
Introducing a Focus on Systems Thinking
Context is everything in systems thinking. To avoid the pitfalls encountered by quality consultants in other maquiladoras, it was essential to review some history for crucial context.
The after-effects of colonialism still linger in Mexico, where Spanish colonization was particularly cruel, and relations with the United States have been checkered. According to the Uruguayan journalist Eduardo Galeano (1997), until very recently, Latin America existed “at the service of others’ needs, as a source of reserve of oil and iron, of copper and meat, of fruit and coffee, the raw materials and foods destined for rich countries which profit more from consuming them than Latin America does from producing them.” Thus, respect had to be earned, and any hint of superiority abandoned. What used to be called a common touch was needed,
as pride of workmanship, the cornerstone of a workfloor-focused transformation, is a universal human quality. It was equally important to embrace the untapped potential of the local workers and to recognize that, in contrast to the highly individualistic work ethic prevalent among Americans, they have more of a group ethic. Language had to be plain and clear, but not condescending.
If the system was broken—and it was—it was essential not to blame the people working in it. Contradicting the long-held belief that workers are lazy, irresponsible, or stupid, W. Edwards Deming described all workers, including those caught in a system that does not cultivate pride of workmanship, as “willing workers.” These workers want and need leaders. When managers blame workers instead of focusing on the system that managers are responsible for, they abdicate their responsibility to lead. To transform the way a company is managed and to bring it into harmony, resources need to be focused away from support functions, like the executive offices, and on to where the work is actually done. That is where context lives. Spreadsheets have never made or sold a single product, or provided a service. Until the parts of an organization work toward a shared aim, they remain unrelated and not a system. Managers’ job is to create and build a shared aim, on the foundation of serving customers and bringing pride and joy to the work floor. In so doing, they cannot ignore the human dimension.
Getting Down to Business Where the Action Is
One of the 390 maquiladoras that employ more than 165,000 people in Mexico, RES Internacional manufactures fermented peppers and other related products for export to RES, Inc. in the United States and for domestic sales. The plant is in Saucillo in the state of Chihuahua, which borders the United States and is the largest state in Mexico. Deeply religious, the people of Chihuahua are also proud and tenacious, as symbolized by its best-known citizen, Jose ? Doroteo Arango Arambula, also known as Pancho Villa, hero of the Mexican Revolution. Leading Mexico in the production of nuts, cattle, and apples, Chihuahua has workable roads and seven border crossings. It is also notorious for its drug wars. In 2009 in the city of Juarez alone, 2,400 people were murdered, many of them beheaded. This has had a profound effect on the life of ordinary people. Luckily, Saucillo is more than 245 miles from Juarez.
Between March 2008 and June 2010, Edco’s consultant visited the plant nine times. To build the structure needed for the company’s transformation, upper management was trained in supervisory skills first, and then they began to train the supervisors. By January 2011, all supervisors will have completed a 20-class training program based on one developed in the late 1940s by Homer Sarasohn at the Training Within Industry branch of the U.S. War Office as part of the postwar rebuilding of Japan. Once the supervisors are fully trained, they and a co-trainer will train the value-adding willing workers and the rest of the workforce. Written standards also will be installed as part of a Deming-style continuing improvement process.
Early Sessions Create a Shared Learning Experience
During the consultant’s first trip, in March 2008, he introduced a new way of thinking to the Mexican staff. To build rapport and create a shared learning experience that could be examined collectively—key to successful adult education—he had the managers play some deceivingly simple games, such as Deming’s Red Bead Game (see http://www.redbead.com/ for an explanation of the Red Bead Game). This activity makes clear the existence of variation in nature and, thereby, in all work processes, and leads upper management to understand how much of what is commonly called managing—trying to solve problems that can only be solved by changing the overall system—is ineffective. The game also makes abundantly clear that blaming, yelling, cajoling, threatening, bribing, rewarding, reviewing, and begging workers have no lasting effect. Workers can perform only as well as the system designed for them allows; it is natural law.
The managers also were taught how the following natural laws affect the workplace:
- •Entropy—Without common purpose, energy gets wasted on unnecessary and chaotic things.
- •Inertia—Fundamentally, everything resists change.
- •Momentum—How things change depends on how hard you push, and in what direction.
- •Reciprocity—Everything has a price; how much are you willing to pay? (Or, what goes around comes around.)
Discussions were held to encourage managers to explore concrete, practical examples from their personal experience that clearly demonstrated the effect of these laws on the job. They learned that if they use too little force in trying to change momentum, nothing changes; too much, and the excess force leads to unwanted side effects; and if it is applied in no particular direction, the resulting change is chaotic. To be effective, the managers needed to learn to read momentum to know how much force had to be applied and where. They also discussed how habit is the human dimension of these laws.
Despite Key Assets, a Dysfunctional Focus
Key assets needed to apply a systemic approach were already in place. Local management included someone who had taken courses on Deming while in college and did not condescend to the front-line workers. The company also had demonstrated a concern for its workers above and beyond what is normally encountered. For example, it offered English classes to any workers who wished and loan programs to help workers purchase housing, which helped keep them in Mexico. Most important, there was a pool of some 100 willing workers. Nonetheless, the company was focused more on dysfunction than on its function. The management culture, cobbled together in the early years of the company, was flat, confused, and fully dependent on the owner. His management style, complicated by tense relations with his son, was to micromanage from thousands of miles away.
Such entrepreneurial structures may work at first, when there are only a few people involved and knowledge is in the hands of the owner, but the company had grown. The lack of appropriate organizational structure had become a serious barrier to growth. The company culture was plagued by confusion and fear, and relations among employees had deteriorated to the point that disturbing accusations were being made in chat rooms and in the local newspaper. To complicate things, the BlackBerry had become the tool of choice for communication, and people were bombarding each other with accusations and counter-accusations.
To make sense of a complicated and potentially explosive situation, the consultant began a root-cause analysis and created a fishbone chart to illustrate the disharmony. His study revealed that the organization’s structures and functions had built up far too much momentum and become too complex—a sign of breakdown in structure and harmony—to be sketched out in a simple flow chart. Fundamental organizing principles were a jumble: unity of command did not exist, and span of control was wide at the top, narrow at the bottom, and nonexistent for the son, but he had been given a wide span of responsibility. Shooting from the hip ruled the day, there was little consideration given to homogenous assignment, responsibilities were unclear, and people tripped over each other or backed away from taking responsibility. The only delegation that occurred was to place blame. For the work of a unit to proceed smoothly, coworker functions must not unnecessarily overlap, and all individuals must know exactly what their duties and responsibilities are. This was not the case.
Workers focused on pleasing the owner through reports while covering up mistakes, not on adding value to the product. From a Deming perspective, there was no appreciation of systems thinking, no thought of how employees could best acquire necessary knowledge. There was also consistent confusion of special cause variation—which comes from outside the system and makes up only 4 percent of all variation—and common-cause variation, which can be eliminated only by improving the system, which is the job of management.
As the situation was broken down into smaller, more easily understood issues, the root of the problem revealed itself: an outgrown organizational structure. Its workers were good people, but they had been forced into bad behavior by a micromanaged, jerry-rigged structure that tried to operate as an entrepreneurial organization well after it had grown to more than 100 employees.
Given the chaos, the breakdown in social behavior, the emphasis on playing the blame game, and the fierce, sometimes public disagreements between father and son, the situation was explosive. Careful planning was needed to ensure that the right steps were taken, with the right amount of force. A matrix was developed to help in reading momentum and developing responses (see Exhibit 2 on next page).
The matrix is used to help read momentum when confronted with a tricky problem. According to Newton’s law of momentum, momentum can only be changed if acted on from the outside by an equal force, in a chosen direction. Too little energy in response, and there is no change; too much, and there are side effects; and in no particular direction, and the change is chaotic. One studies the chart to see where in the matrix to place what needs to be changed; the matrix provides some guidance on how to react. The y-axis represents the amount of time the momentum has been in place, and the x-axis represents the amount of potential energy or force invested.
Since the owner wanted to know whether his son could lead and whether he could trust local management in a situation that had been going on for a long time with a lot of invested energy, swift and dramatic action had to take place. Otherwise, those working in the company would have difficulty believing that long-term change was real. The only way to truly know whether the son could handle responsibility was to delegate some to him. Therefore, the owner agreed to delegate day-to-day control to his son for a while, with the aim of cultivating local management to assume full responsibility.
Practical Teachings Build a Foundation for Systems-Based Thinking
The classes that followed the owner’s announcement of his decision to hand off authority to his son
Exhibit 2. Matrix for Reading Momentum and Developing a Response to It
focused first on a new way of managing, one aimed not merely at the short term, but also at long-term survival. They began with an introduction to the Deming philosophy (1994, 2000), including the four pillars of Deming’s System of Profound Knowledge: an appreciation for systems; an understanding of variation to avoid wasting time, effort, and resources; a theory of knowledge to discern facts from opinions; and human psychology. Participants were exposed for the first time to the Deming/Shewhart cycle of plan, do, study, act (PDSA) and were challenged to see how the laws of nature affect the workplace.
Participants also were encouraged to seek valuable information by looking at their organization from the outside in rather than the inside out. And they were introduced to the Toyota Way principle: that what really matters is what takes place on the work floor, the only place where value for customers can be added. They learned about the value stream: how non-value-adding processes must be seen as support or as muda, the Japanese term for potential waste, including management, that should be minimized or eliminated in order to refocus resources on adding value.
Human beings have difficulty dealing with uncertainty. They prefer to feel in control and will, at times, even believe things that are not true to maintain that feeling. Life and business are uncertain, however, and just as when navigating a boat down a fast-moving river, most of what matters is beneath the surface. Maps and charts help, but one can never fully trust them, so one keeps a sharp eye on the surface of the water, looking for ripples that may hide rocks or other obstacles. A destination is needed, a vision, so a course can be set effectively. To remain alert, one needs to be well rested. But like too many businesses, RES did the opposite, with workers buried in reports, arguing in the offices, never looking directly at the work flow, and then making up for internal inefficiencies by working long hours, sacrificing home for work life, and mistaking self-imposed stress for a dedicated work ethic.
Confidence had to be earned; otherwise, what was being taught would only be practiced when the owner was watching, and change would not be sustainable. Upper management had to learn the skills that they would eventually hand over to the supervisors and willing workers. Only afterward could they learn what they would need to do to function as managers in a systems thinking–based company. The aim was to shift the focus away from dysfunction and to the organization’s actual function.
As Tolstoy wrote, “Happy families are all alike; every unhappy family is unhappy in its own way.” And so it is with companies. Those that are well run tend to be more similar than different. The consultant previously had had success in helping organizations improve their effectiveness with a system he developed to eliminate waste and focus on the essential operations. Borrowing liberally from Japanese kaizen thinking, especially as detailed in Jeffrey Liker’s books (2004; Liker & Meier, 2007) on Toyota, and the Deming/Shewhart cycle, his Real Production SystemTM was tailored into a Spanishlanguage RES Production System.
Its principles are:
- •Use common-sense, low-cost tools and measures, mostly paper-based (for example, drawings, checklists, and other techniques that do not cost a lot of money).
- •Look for solutions on the work floor where real work is done, by real people using tangible objects.
- •Aim to eliminate waste, especially wasted effort. (Waste is anything that does not add value to the final product.)
- •Make it simple. If a problem seems insurmountable, break it down into small steps.
- •Every major problem is the result of many small ones.
- •Encourage dialogue. Everyone touched by a process needs to have a seat at the table. Create temporary solutions to stop the bleeding, but keep working on it until you weed out the root problem.
- •Test in small ways before implementing. What seems to make sense in our minds does not always translate to the work floor. Untested ideas are only opinions.
- •Paper it—that is, if the new procedure solves a problem or improves a process, write down the new method and make it the new standard operating procedure.
The system’s most important tool, SimplyLookingTM, challenged workers to solve problems by going to where the work is actually done and “simply looking” in order to thoroughly understand the situation. It is the missing element in many management systems, the elephant missing from the room. Tools from the classic lean toolbox originally from Japan were taught as well. They included the eight wastes (overproduction, waiting time, internal transport, overprocessing, excess inventory, motion, defects, and unused creativity), the five Ss (organization, neatness, standardization, cleanliness, and discipline, each of which in Japanese begins with the letter S), kanban (visual cues to induce an action), and poke yoke (mistake proofing).
By the end of the consultant’s second visit, managers were challenged to practice what had been presented. For the first event, they were to choose areas to simply look at on their own. They chose three: the manufacturing line that fills gallon jars with sliced peppers or pickles, forklift usage, and the office. Split into teams, they were to enlist the help of supervisors and workers in discussing what they had seen and to use flow charts, fishbone charts, and traffic diagrams to map their observations.
Victory on the Gallon Line—and Beyond
The team members mapped a rudimentary flow chart of the gallon line and discussed results with the line supervisor. The subject of speeding up the line, which the managers favored, was brought up. One might ask, Why not speed up, since output needed to be increased? But the team’s observation of the work floor led to another conclusion. One of the managers on the team noticed an employee working frantically. In a radical break with company tradition, instead of barking an order, she asked what the employee was doing. She explained that to keep up with the filling machine, she had to work frantically to catch the spillovers and get them back into the jar.
Fully engaged, the managers noticed that there were sliced pickles everywhere: in the machine, on the machine, and around it. Management’s proposed solution—to speed up—would only have made matters worse. The consultant asked the team of managers to think about takt time—that is, optimizing the overall speed of the system as opposed to just its parts. This led to the idea of slowing down the conveyor and filling machine so the employees could keep up.
In keeping with the PDSA cycle, a control chart was prepared. It showed that the system was in control but way out of specification. Since it was stable, it could be improved, so a test of matching the speed to the worker was done. With the slower pace, not only were willing workers able to fill the jars more accurately, but far less product was wasted as well, eliminating the need to stop every few hours to un-jam pickle or pepper clogged equipment. Counter-intuitively, by moderating the takt time, the rate of output increased, along with the accuracy of measure.
By eliminating more than one pound of overfill per jar, the company rescued $130,000 per year in hidden losses and freed up 240 staff-hours per week for other work. Control charts were done to test whether the solution was stable. The result: the company now gets 12.2 cases from each 100 kilograms of product processed, versus only 10.57 cases before.
The results were so dramatic that transformation subsequently flowed. Workers at all levels came to understand the fundamental principle that someone from every function touched by a process needs to have a voice in discussions to improve that process. Barriers were gone. The owner realized the value of investing in the process of improvement after that, and the employees clearly saw that improving operations would not cost them their jobs but would make their jobs more rewarding and provide new opportunities.
Workers at all levels came to understand the fundamental principle that someone from every function touched by a process needs to have a voice in discussions to improve that process.
The SimplyLookingTM technique was of great help in examining the office and forklift use as well. By justifying the need for a second scanner, it helped eliminate four hours per week of waiting time for each office worker who needed to use the office scanner. In addition, four boxes of equipment that had not been used in over a year were removed, and the office was redesigned. The walls of the manager’s office and the cubicles were removed to create an open office in which the manager faces the desks of the office workers, breaking down physical and mental barriers between them. By observing how the forklifts were used and creating a traffic flow chart and timeline, employees were able to optimize the use of the equipment, eliminating $10,000 a year in maintenance costs, and to create a better flow of product—all in the first day of practical application.
The single most important event in changing the company culture occurred on the next day, while the team members were looking for the eight wastes. The owner had devised a system of loading pickles and peppers in their brine in fiberglass tanks about 20 feet long and 8 feet wide, which were transferred to a flatbed and then pulled by tractor across the length of the brine yard to the side of the processing building. The employees would then put on waders, climb into the tanks, and fill the conveyor that led to the slicing machine. On the day of the observation, the temperature was close to 98 degrees. The consultant encouraged the owner to put on waders and jump into one of the tanks to experience first-hand the work that the employees did. Standing in brine; breathing in acid and salt in wet, hot waders; and scorching in the sun, the owner got the full impact of what he had been asking his workers to do every day. The tanks were mothballed and replaced with smaller steel bins that were designed to be lifted and poured by machine. Two years later, when the plant’s operations manager was asked what was the moment when he realized the owner was serious about change, he recalled the day the owner went into the tanks to net peppers in an effort to find a more effective way to operate.
That day was a revelation for the willing workers, as well. For the first time in their professional life an owner did their work, acknowledged a mistake, apologized openly for what he had put them through, and ditched the system for a better one, clearly demonstrating through action his resolve to remove obstacles that kept them from taking pride in their workmanship. It is no surprise that even in his absence, the work of improving goes on, and huge steps have been made in finding and eliminating waste from all areas of the facility.
Two years later, when the plant’s operations manager was asked what was the moment when he realized the owner was serious about change, he recalled the day the owner went into the tanks to net peppers in an effort to find a more effective way to operate.
For example, using the 5S process, workers organized work areas so that it would be obvious to anyone visiting the area the kind of work that is done there. Its purpose clarified, it is now a place where problems are uncovered rather than hidden, where pride of workmanship can flourish. For example, the problem of holding an excess of peppers in process inventory was cured with a simple kanban, the use of visual cues to initiate a process. Now when the operator sees he is down to only a few minutes’ worth of supply, he raises either a red or a green milk carton attached to a pipe on the ceiling of the loading dock by a rope, in plain view of the brine yard. When the brine-yard workers see the signal, they load up on either red or green peppers and deliver them. This simple solution saves thousands of dollars in wear and tear on the forklifts, which were not designed to run outside on gravel and used to circulate all day long, dropping product. It also leveraged underutilized human abilities, as it was the workers themselves who proposed the change after discussing the situation. There is also far less loss of product in transit, and far less degradation of product resulting from being held in less than optimal conditions while waiting to be processed. Each technique has led the workers and managers to think of new ones, creating a sense of control over their lives, enriching their work, building pride, improving production and its quality, and considerably enhancing the bottom line.
Turning Management Into a Team
Since the fire of change had been ignited and embraced by the willing workers and their direct supervisors, it was time for the managers to raise the bar for themselves. According to management consultant Peter Scholtes, teams go through stages as they develop: forming, storming, norming, and performing. As work progressed, the management team started storming. Using cause-and-effect and flow charts, the consultant hypothesized that the root cause was a systemic problem with communication by technology.
Management relied almost exclusively on the use of the BlackBerry, which facilitates instantaneous communication, but also instant gratification and interruption. Poorly written, unedited messages jammed into a screen the size of a cell phone are not an ideal form of communication. E-mails and text messages take the focus away from the work floor and value stream and, therefore, should be managed with great care.
Technology brings with it wonderful possibilities, but one needs to harmonize it with the people who will have to use it, and the company’s vision, mission, and objectives. E-mail and text messages were examined in detail, the waste of time and resources they created were graphed, and classes were held in which people acted out various communications to find better ways. All the managers received a business card–size sheet that clarified what form of communication was appropriate in a given situation (see Exhibit 3).
But there were other communications issues to confront. More talk took place behind backs than to people’s faces, and assumptions based on seemingly unimportant cultural stereotypes were obstacles to real communication. The consultant kept reminding the staff to “blame the system, not the people working in the system; 96 percent of the time you will be right.” With time, bad habits began to fall by the wayside, but one of the key players could not give up his antagonism, and he left the company.
The consultant worked with the managers and owner to help them learn new and more effective communication tools to prevent a relapse to old, ineffective ways. For example, he taught them:
- •that what we mean to say is not necessarily what people hear, so it is important to frame one’s words according to the listener’s point of view;
- •how to break down barriers between functional departments by having a representative of every functional group in the company meet for three to five minutes every day to share what they are working on that day;
- •and how to document and influence the flow of all projects by tracking them in a condensed visual format on a single sheet of paper, a tool created and championed by Toyota.
Once people felt safe to speak their minds without fear of retribution and the management team moved from storming to norming, open dialogue blossomed at the facility. Profitability has flourished as well, with the bottom-line profit increasing 484 percent since the beginning of the project in 2007.
Although great progress has been made, the transformation is not complete. The son was able to help prepare the local management to assume command but decided that the situation was not what he wanted. Local management is functioning well, but only when the supervisors are fully trained—and they have trained their willing workers—will management be able to delegate day-to-day responsibilities to those who actually do the day-to-day work. Only then can they concentrate on their real job of leading the company, facilitating change, and cultivating knowledge—both in the company and among
themselves—and enlist everyone’s help in continuously improving the system.
References
Deming, W. E. (1994). The new economics. Cambridge, MA: MIT Press.
Deming, W. E. (2000). Out of the crisis. Cambridge, MA: MIT Press.
Galeano, E. (1997). Open veins of Latin America: Five centuries of the pillage of a continent. New York: Monthly Review Press.
Liker, J. (2004). The Toyota way: 14 management principles from the world’s greatest manufacturer. New York: McGraw-Hill.
Liker, J., & Meier, D. (2007). Toyota culture. New York: McGraw-Hill.
Additional Resources
Kobayashi, K., Fisher, R., & Gapp, R. (2008). Business improvement strategy or useful tool? Analysis of the application of the 5S concept in Japan, the U.K. and the U.S. Total Quality Management & Business Excellence, 19, 245–262.
Patterson, K., Grenny, J., McMillan, R., & Switzler, A. (2007). Crucial conversations: Tools for talking when stakes are high. New York: McGraw-Hill.
Race, P. (2010). Making learning happen. Thousand Oaks, CA: Sage.
The Human Dimension of Change
By Dan Strongin and James Manning
Originally Published in the Journal of Global Business and Organizational Excellence • DOI: 10.1002/joe.20357 • November/December 2010
(note: A maquiladora is a company under Mexican law with Mexican and foreign partners, set up to manufacture in Mexico, but administrated through the foreign partners. It allows the foreign company to avoid taxes while ensuring the Mexicans a profit. Also Note: The four stages of teams quoted here, from the Team Handbook by Peter Scholtes, was first developed by Bruce Tuckman.)
Get the Book Based on the Article here… or visit our Publishing Page.
Formed in 1988, Edco Food Products, Inc., purchased fermented peppers and pickles in Mexico. But as big companies bought out smaller ones, the market population fell, and Edco was losing customers. To create a reliable source of product, in 1993 the owner joined with two shareholders from Mexico to form RES Food Products International, Inc., a materials owner and importer of goods and services provided by maquiladora operation, and RES Internacional SA, a maquiladora that produces and packages fermented peppers and pickles (see Exhibit 1). A maquiladora is a company under Mexican law with Mexican and foreign partners, set up to manufacture in Mexico, but administrated through the foreign partners. It allows the foreign company to avoid taxes while ensuring the Mexicans a profit. But with no unifying vision, Edco and the RES organizations confronted operational losses and mounting debt. Dubious data, suspicions of dishonesty, in-fighting at all levels, conflicting managerial agendas, and fundamental differences between American and Mexican accounting and law made it very difficult to balance the books. Frustrated with the state of the operation, the owner considered semiretirement, but he was not sure his son was ready to take over the business.
To remedy the situation, Edco’s owner hired a quality-improvement consultant to assess his company’s personnel and management operations and recommend a program for improvement. Accompanied by the owner and his son, the consultant visited RES International to conduct private interviews with key operations personnel. A few days later, major changes were proposed: The owner would remove himself from the organization’s day-to-day operations and allow local managers to make decisions and start a long-term process of education and training to create a lean production system.
Introducing a Focus on Systems Thinking
Context is everything in systems thinking. To avoid the pitfalls encountered by quality consultants in other maquiladoras, it was essential to review some history for crucial context.
The after-effects of colonialism still linger in Mexico, where Spanish colonization was particularly cruel, and relations with the United States have been checkered. According to the Uruguayan journalist Eduardo Galeano (1997), until very recently, Latin America existed “at the service of others’ needs, as a source of reserve of oil and iron, of copper and meat, of fruit and coffee, the raw materials and foods destined for rich countries which profit more from consuming them than Latin America does from producing them.” Thus, respect had to be earned, and any hint of superiority abandoned. What used to be called a common touch was needed,
as pride of workmanship, the cornerstone of a workfloor-focused transformation, is a universal human quality. It was equally important to embrace the untapped potential of the local workers and to recognize that, in contrast to the highly individualistic work ethic prevalent among Americans, they have more of a group ethic. Language had to be plain and clear, but not condescending.
If the system was broken—and it was—it was essential not to blame the people working in it. Contradicting the long-held belief that workers are lazy, irresponsible, or stupid, W. Edwards Deming described all workers, including those caught in a system that does not cultivate pride of workmanship, as “willing workers.” These workers want and need leaders. When managers blame workers instead of focusing on the system that managers are responsible for, they abdicate their responsibility to lead. To transform the way a company is managed and to bring it into harmony, resources need to be focused away from support functions, like the executive offices, and on to where the work is actually done. That is where context lives. Spreadsheets have never made or sold a single product, or provided a service. Until the parts of an organization work toward a shared aim, they remain unrelated and not a system. Managers’ job is to create and build a shared aim, on the foundation of serving customers and bringing pride and joy to the work floor. In so doing, they cannot ignore the human dimension.
Getting Down to Business Where the Action Is
One of the 390 maquiladoras that employ more than 165,000 people in Mexico, RES Internacional manufactures fermented peppers and other related products for export to RES, Inc. in the United States and for domestic sales. The plant is in Saucillo in the state of Chihuahua, which borders the United States and is the largest state in Mexico. Deeply religious, the people of Chihuahua are also proud and tenacious, as symbolized by its best-known citizen, Jose ? Doroteo Arango Arambula, also known as Pancho Villa, hero of the Mexican Revolution. Leading Mexico in the production of nuts, cattle, and apples, Chihuahua has workable roads and seven border crossings. It is also notorious for its drug wars. In 2009 in the city of Juarez alone, 2,400 people were murdered, many of them beheaded. This has had a profound effect on the life of ordinary people. Luckily, Saucillo is more than 245 miles from Juarez.
Between March 2008 and June 2010, Edco’s consultant visited the plant nine times. To build the structure needed for the company’s transformation, upper management was trained in supervisory skills first, and then they began to train the supervisors. By January 2011, all supervisors will have completed a 20-class training program based on one developed in the late 1940s by Homer Sarasohn at the Training Within Industry branch of the U.S. War Office as part of the postwar rebuilding of Japan. Once the supervisors are fully trained, they and a co-trainer will train the value-adding willing workers and the rest of the workforce. Written standards also will be installed as part of a Deming-style continuing improvement process.
Early Sessions Create a Shared Learning Experience
During the consultant’s first trip, in March 2008, he introduced a new way of thinking to the Mexican staff. To build rapport and create a shared learning experience that could be examined collectively—key to successful adult education—he had the managers play some deceivingly simple games, such as Deming’s Red Bead Game (see http://www.redbead.com/ for an explanation of the Red Bead Game). This activity makes clear the existence of variation in nature and, thereby, in all work processes, and leads upper management to understand how much of what is commonly called managing—trying to solve problems that can only be solved by changing the overall system—is ineffective. The game also makes abundantly clear that blaming, yelling, cajoling, threatening, bribing, rewarding, reviewing, and begging workers have no lasting effect. Workers can perform only as well as the system designed for them allows; it is natural law.
The managers also were taught how the following natural laws affect the workplace:
Discussions were held to encourage managers to explore concrete, practical examples from their personal experience that clearly demonstrated the effect of these laws on the job. They learned that if they use too little force in trying to change momentum, nothing changes; too much, and the excess force leads to unwanted side effects; and if it is applied in no particular direction, the resulting change is chaotic. To be effective, the managers needed to learn to read momentum to know how much force had to be applied and where. They also discussed how habit is the human dimension of these laws.
Despite Key Assets, a Dysfunctional Focus
Key assets needed to apply a systemic approach were already in place. Local management included someone who had taken courses on Deming while in college and did not condescend to the front-line workers. The company also had demonstrated a concern for its workers above and beyond what is normally encountered. For example, it offered English classes to any workers who wished and loan programs to help workers purchase housing, which helped keep them in Mexico. Most important, there was a pool of some 100 willing workers. Nonetheless, the company was focused more on dysfunction than on its function. The management culture, cobbled together in the early years of the company, was flat, confused, and fully dependent on the owner. His management style, complicated by tense relations with his son, was to micromanage from thousands of miles away.
Such entrepreneurial structures may work at first, when there are only a few people involved and knowledge is in the hands of the owner, but the company had grown. The lack of appropriate organizational structure had become a serious barrier to growth. The company culture was plagued by confusion and fear, and relations among employees had deteriorated to the point that disturbing accusations were being made in chat rooms and in the local newspaper. To complicate things, the BlackBerry had become the tool of choice for communication, and people were bombarding each other with accusations and counter-accusations.
To make sense of a complicated and potentially explosive situation, the consultant began a root-cause analysis and created a fishbone chart to illustrate the disharmony. His study revealed that the organization’s structures and functions had built up far too much momentum and become too complex—a sign of breakdown in structure and harmony—to be sketched out in a simple flow chart. Fundamental organizing principles were a jumble: unity of command did not exist, and span of control was wide at the top, narrow at the bottom, and nonexistent for the son, but he had been given a wide span of responsibility. Shooting from the hip ruled the day, there was little consideration given to homogenous assignment, responsibilities were unclear, and people tripped over each other or backed away from taking responsibility. The only delegation that occurred was to place blame. For the work of a unit to proceed smoothly, coworker functions must not unnecessarily overlap, and all individuals must know exactly what their duties and responsibilities are. This was not the case.
Workers focused on pleasing the owner through reports while covering up mistakes, not on adding value to the product. From a Deming perspective, there was no appreciation of systems thinking, no thought of how employees could best acquire necessary knowledge. There was also consistent confusion of special cause variation—which comes from outside the system and makes up only 4 percent of all variation—and common-cause variation, which can be eliminated only by improving the system, which is the job of management.
As the situation was broken down into smaller, more easily understood issues, the root of the problem revealed itself: an outgrown organizational structure. Its workers were good people, but they had been forced into bad behavior by a micromanaged, jerry-rigged structure that tried to operate as an entrepreneurial organization well after it had grown to more than 100 employees.
Given the chaos, the breakdown in social behavior, the emphasis on playing the blame game, and the fierce, sometimes public disagreements between father and son, the situation was explosive. Careful planning was needed to ensure that the right steps were taken, with the right amount of force. A matrix was developed to help in reading momentum and developing responses (see Exhibit 2 on next page).
The matrix is used to help read momentum when confronted with a tricky problem. According to Newton’s law of momentum, momentum can only be changed if acted on from the outside by an equal force, in a chosen direction. Too little energy in response, and there is no change; too much, and there are side effects; and in no particular direction, and the change is chaotic. One studies the chart to see where in the matrix to place what needs to be changed; the matrix provides some guidance on how to react. The y-axis represents the amount of time the momentum has been in place, and the x-axis represents the amount of potential energy or force invested.
Since the owner wanted to know whether his son could lead and whether he could trust local management in a situation that had been going on for a long time with a lot of invested energy, swift and dramatic action had to take place. Otherwise, those working in the company would have difficulty believing that long-term change was real. The only way to truly know whether the son could handle responsibility was to delegate some to him. Therefore, the owner agreed to delegate day-to-day control to his son for a while, with the aim of cultivating local management to assume full responsibility.
Practical Teachings Build a Foundation for Systems-Based Thinking
The classes that followed the owner’s announcement of his decision to hand off authority to his son
Exhibit 2. Matrix for Reading Momentum and Developing a Response to It
focused first on a new way of managing, one aimed not merely at the short term, but also at long-term survival. They began with an introduction to the Deming philosophy (1994, 2000), including the four pillars of Deming’s System of Profound Knowledge: an appreciation for systems; an understanding of variation to avoid wasting time, effort, and resources; a theory of knowledge to discern facts from opinions; and human psychology. Participants were exposed for the first time to the Deming/Shewhart cycle of plan, do, study, act (PDSA) and were challenged to see how the laws of nature affect the workplace.
Participants also were encouraged to seek valuable information by looking at their organization from the outside in rather than the inside out. And they were introduced to the Toyota Way principle: that what really matters is what takes place on the work floor, the only place where value for customers can be added. They learned about the value stream: how non-value-adding processes must be seen as support or as muda, the Japanese term for potential waste, including management, that should be minimized or eliminated in order to refocus resources on adding value.
Human beings have difficulty dealing with uncertainty. They prefer to feel in control and will, at times, even believe things that are not true to maintain that feeling. Life and business are uncertain, however, and just as when navigating a boat down a fast-moving river, most of what matters is beneath the surface. Maps and charts help, but one can never fully trust them, so one keeps a sharp eye on the surface of the water, looking for ripples that may hide rocks or other obstacles. A destination is needed, a vision, so a course can be set effectively. To remain alert, one needs to be well rested. But like too many businesses, RES did the opposite, with workers buried in reports, arguing in the offices, never looking directly at the work flow, and then making up for internal inefficiencies by working long hours, sacrificing home for work life, and mistaking self-imposed stress for a dedicated work ethic.
Confidence had to be earned; otherwise, what was being taught would only be practiced when the owner was watching, and change would not be sustainable. Upper management had to learn the skills that they would eventually hand over to the supervisors and willing workers. Only afterward could they learn what they would need to do to function as managers in a systems thinking–based company. The aim was to shift the focus away from dysfunction and to the organization’s actual function.
As Tolstoy wrote, “Happy families are all alike; every unhappy family is unhappy in its own way.” And so it is with companies. Those that are well run tend to be more similar than different. The consultant previously had had success in helping organizations improve their effectiveness with a system he developed to eliminate waste and focus on the essential operations. Borrowing liberally from Japanese kaizen thinking, especially as detailed in Jeffrey Liker’s books (2004; Liker & Meier, 2007) on Toyota, and the Deming/Shewhart cycle, his Real Production SystemTM was tailored into a Spanishlanguage RES Production System.
Its principles are:
The system’s most important tool, SimplyLookingTM, challenged workers to solve problems by going to where the work is actually done and “simply looking” in order to thoroughly understand the situation. It is the missing element in many management systems, the elephant missing from the room. Tools from the classic lean toolbox originally from Japan were taught as well. They included the eight wastes (overproduction, waiting time, internal transport, overprocessing, excess inventory, motion, defects, and unused creativity), the five Ss (organization, neatness, standardization, cleanliness, and discipline, each of which in Japanese begins with the letter S), kanban (visual cues to induce an action), and poke yoke (mistake proofing).
By the end of the consultant’s second visit, managers were challenged to practice what had been presented. For the first event, they were to choose areas to simply look at on their own. They chose three: the manufacturing line that fills gallon jars with sliced peppers or pickles, forklift usage, and the office. Split into teams, they were to enlist the help of supervisors and workers in discussing what they had seen and to use flow charts, fishbone charts, and traffic diagrams to map their observations.
Victory on the Gallon Line—and Beyond
The team members mapped a rudimentary flow chart of the gallon line and discussed results with the line supervisor. The subject of speeding up the line, which the managers favored, was brought up. One might ask, Why not speed up, since output needed to be increased? But the team’s observation of the work floor led to another conclusion. One of the managers on the team noticed an employee working frantically. In a radical break with company tradition, instead of barking an order, she asked what the employee was doing. She explained that to keep up with the filling machine, she had to work frantically to catch the spillovers and get them back into the jar.
Fully engaged, the managers noticed that there were sliced pickles everywhere: in the machine, on the machine, and around it. Management’s proposed solution—to speed up—would only have made matters worse. The consultant asked the team of managers to think about takt time—that is, optimizing the overall speed of the system as opposed to just its parts. This led to the idea of slowing down the conveyor and filling machine so the employees could keep up.
In keeping with the PDSA cycle, a control chart was prepared. It showed that the system was in control but way out of specification. Since it was stable, it could be improved, so a test of matching the speed to the worker was done. With the slower pace, not only were willing workers able to fill the jars more accurately, but far less product was wasted as well, eliminating the need to stop every few hours to un-jam pickle or pepper clogged equipment. Counter-intuitively, by moderating the takt time, the rate of output increased, along with the accuracy of measure.
By eliminating more than one pound of overfill per jar, the company rescued $130,000 per year in hidden losses and freed up 240 staff-hours per week for other work. Control charts were done to test whether the solution was stable. The result: the company now gets 12.2 cases from each 100 kilograms of product processed, versus only 10.57 cases before.
The results were so dramatic that transformation subsequently flowed. Workers at all levels came to understand the fundamental principle that someone from every function touched by a process needs to have a voice in discussions to improve that process. Barriers were gone. The owner realized the value of investing in the process of improvement after that, and the employees clearly saw that improving operations would not cost them their jobs but would make their jobs more rewarding and provide new opportunities.
Workers at all levels came to understand the fundamental principle that someone from every function touched by a process needs to have a voice in discussions to improve that process.
The SimplyLookingTM technique was of great help in examining the office and forklift use as well. By justifying the need for a second scanner, it helped eliminate four hours per week of waiting time for each office worker who needed to use the office scanner. In addition, four boxes of equipment that had not been used in over a year were removed, and the office was redesigned. The walls of the manager’s office and the cubicles were removed to create an open office in which the manager faces the desks of the office workers, breaking down physical and mental barriers between them. By observing how the forklifts were used and creating a traffic flow chart and timeline, employees were able to optimize the use of the equipment, eliminating $10,000 a year in maintenance costs, and to create a better flow of product—all in the first day of practical application.
The single most important event in changing the company culture occurred on the next day, while the team members were looking for the eight wastes. The owner had devised a system of loading pickles and peppers in their brine in fiberglass tanks about 20 feet long and 8 feet wide, which were transferred to a flatbed and then pulled by tractor across the length of the brine yard to the side of the processing building. The employees would then put on waders, climb into the tanks, and fill the conveyor that led to the slicing machine. On the day of the observation, the temperature was close to 98 degrees. The consultant encouraged the owner to put on waders and jump into one of the tanks to experience first-hand the work that the employees did. Standing in brine; breathing in acid and salt in wet, hot waders; and scorching in the sun, the owner got the full impact of what he had been asking his workers to do every day. The tanks were mothballed and replaced with smaller steel bins that were designed to be lifted and poured by machine. Two years later, when the plant’s operations manager was asked what was the moment when he realized the owner was serious about change, he recalled the day the owner went into the tanks to net peppers in an effort to find a more effective way to operate.
That day was a revelation for the willing workers, as well. For the first time in their professional life an owner did their work, acknowledged a mistake, apologized openly for what he had put them through, and ditched the system for a better one, clearly demonstrating through action his resolve to remove obstacles that kept them from taking pride in their workmanship. It is no surprise that even in his absence, the work of improving goes on, and huge steps have been made in finding and eliminating waste from all areas of the facility.
Two years later, when the plant’s operations manager was asked what was the moment when he realized the owner was serious about change, he recalled the day the owner went into the tanks to net peppers in an effort to find a more effective way to operate.
For example, using the 5S process, workers organized work areas so that it would be obvious to anyone visiting the area the kind of work that is done there. Its purpose clarified, it is now a place where problems are uncovered rather than hidden, where pride of workmanship can flourish. For example, the problem of holding an excess of peppers in process inventory was cured with a simple kanban, the use of visual cues to initiate a process. Now when the operator sees he is down to only a few minutes’ worth of supply, he raises either a red or a green milk carton attached to a pipe on the ceiling of the loading dock by a rope, in plain view of the brine yard. When the brine-yard workers see the signal, they load up on either red or green peppers and deliver them. This simple solution saves thousands of dollars in wear and tear on the forklifts, which were not designed to run outside on gravel and used to circulate all day long, dropping product. It also leveraged underutilized human abilities, as it was the workers themselves who proposed the change after discussing the situation. There is also far less loss of product in transit, and far less degradation of product resulting from being held in less than optimal conditions while waiting to be processed. Each technique has led the workers and managers to think of new ones, creating a sense of control over their lives, enriching their work, building pride, improving production and its quality, and considerably enhancing the bottom line.
Turning Management Into a Team
Since the fire of change had been ignited and embraced by the willing workers and their direct supervisors, it was time for the managers to raise the bar for themselves. According to management consultant Peter Scholtes, teams go through stages as they develop: forming, storming, norming, and performing. As work progressed, the management team started storming. Using cause-and-effect and flow charts, the consultant hypothesized that the root cause was a systemic problem with communication by technology.
Management relied almost exclusively on the use of the BlackBerry, which facilitates instantaneous communication, but also instant gratification and interruption. Poorly written, unedited messages jammed into a screen the size of a cell phone are not an ideal form of communication. E-mails and text messages take the focus away from the work floor and value stream and, therefore, should be managed with great care.
Technology brings with it wonderful possibilities, but one needs to harmonize it with the people who will have to use it, and the company’s vision, mission, and objectives. E-mail and text messages were examined in detail, the waste of time and resources they created were graphed, and classes were held in which people acted out various communications to find better ways. All the managers received a business card–size sheet that clarified what form of communication was appropriate in a given situation (see Exhibit 3).
But there were other communications issues to confront. More talk took place behind backs than to people’s faces, and assumptions based on seemingly unimportant cultural stereotypes were obstacles to real communication. The consultant kept reminding the staff to “blame the system, not the people working in the system; 96 percent of the time you will be right.” With time, bad habits began to fall by the wayside, but one of the key players could not give up his antagonism, and he left the company.
The consultant worked with the managers and owner to help them learn new and more effective communication tools to prevent a relapse to old, ineffective ways. For example, he taught them:
Once people felt safe to speak their minds without fear of retribution and the management team moved from storming to norming, open dialogue blossomed at the facility. Profitability has flourished as well, with the bottom-line profit increasing 484 percent since the beginning of the project in 2007.
Although great progress has been made, the transformation is not complete. The son was able to help prepare the local management to assume command but decided that the situation was not what he wanted. Local management is functioning well, but only when the supervisors are fully trained—and they have trained their willing workers—will management be able to delegate day-to-day responsibilities to those who actually do the day-to-day work. Only then can they concentrate on their real job of leading the company, facilitating change, and cultivating knowledge—both in the company and among
themselves—and enlist everyone’s help in continuously improving the system.
References
Deming, W. E. (1994). The new economics. Cambridge, MA: MIT Press.
Deming, W. E. (2000). Out of the crisis. Cambridge, MA: MIT Press.
Galeano, E. (1997). Open veins of Latin America: Five centuries of the pillage of a continent. New York: Monthly Review Press.
Liker, J. (2004). The Toyota way: 14 management principles from the world’s greatest manufacturer. New York: McGraw-Hill.
Liker, J., & Meier, D. (2007). Toyota culture. New York: McGraw-Hill.
Additional Resources
Kobayashi, K., Fisher, R., & Gapp, R. (2008). Business improvement strategy or useful tool? Analysis of the application of the 5S concept in Japan, the U.K. and the U.S. Total Quality Management & Business Excellence, 19, 245–262.
Patterson, K., Grenny, J., McMillan, R., & Switzler, A. (2007). Crucial conversations: Tools for talking when stakes are high. New York: McGraw-Hill.
Race, P. (2010). Making learning happen. Thousand Oaks, CA: Sage.