A Model of Sustainable Organisation in a nutshell...

average life expectancy of a company in the S&P 500 has dropped from 75 (1937) to 15 years. John Hagel average life expectancy of companies in Europe is 12.5 years. Ellen de Rooij Why... ?

Everything is connected to everything else Leonardo Da Vinci

Everything forms a system: organisations that leave everything to chance eventually lose, everything... Alternatively they can operate with intent, consciously, systematically

MoSO explains how systems, quality and sustainability work in organisations

SYSTEMS THINKING Views organisations as whole systems, based on the work of Dr W. Edwards Deming. A System: each eld is related, so cannot be considered in isolation. A collaborative approach that delivers consistent high performance over the long term.

WHY IS SYSTEMS THINKING IMPORTANT? Structure is everything : Schwarz, 2005. Almost every organisation holds valuable knowledge not easily transmitted. Service relies on people, yet people are often neglected. Leveraging knowledge and collaboration requires creation, articulation and sustained alignment of shared values, requiring a focus on building relationships and structures that nurture co-operation. Leaders need to value the knowledge, education, experience and creativity of their people, but accurate measurement of qualities and contribution is elusive. The value is the difference in what people can do and what they will do; employees are volunteers and only commit when they feel a mutual bond of combined intent. PRINCIPLES Systems thinking is a science based on nature and human nature. A multitude of disciplines use systems principles. Most of us derive satisfaction from doing a good job in an enjoyable environment. Customers expect efcient, easy to use, joined-up service, all the parts working together. To improve results we need to understand how things function as a whole. 'Improvements without attention to wider systems result in worse performance.

COLLABORATE INTO ONENESS We need to learn to understand relationships & connectedness, handle the complexity of holistic thinking and link in to broader purpose and higher level goals and values. Systems Thinking is about achieving wholeness / oneness in all senses. THE HEART OF DEMING MANAGEMENT People: ensure joy and fullment in work, learning for everyone. People are born with potential for intrinsic motivation... organisational norms reverse this. External pressures, rewards and punishment destroy intrinsic motivation.

BENEFITS AND CONCEPTS We gain understanding by considering an area in terms of its behaviour as a system, or a subsystem of a larger system. If you dont understand systems as systems, you are constantly surprised and effectively unable to manage them.

Systems have properties that are not properties of their components. To effect change you have to understand a system as a system, not a collection of parts. Systems Thinking aims to avoid optimising one component to the detriment of the whole. In doing so it considers the relationship with a wider world / bigger picture. It advocates considering different perspectives. Traditional approaches are reductionist a narrow focus loses the big picture. The aim is to gain systemic understanding and determine appropriate action.

THE ISSUES Systems thinking can handle complexity to deliver better processes, products, services. Senior managers and guru's usually do not know their job. Management believe all they have to do is set near impossible stretch targets. They have no interest in whether they are attainable. Quality is born and nurtured in the boardroom, by leaders and pioneers. Scientic method + statistics, with emphasis on theory (proven explanations of observed events), gives us a way to nd practical ways to solve problems. Deming focused on improving the quality of life of everyone in the world of work. Veried knowledge, based on evidence via scientic inquiry, is the key to sustainability...

7 COMPONENTS OF CRITICAL THINKING

1. Truth seeking. 2. Open mindedness. 3. Analytic. 4. Systematic. 5. Inquisitive. 6. Cognitive maturity. 7. Critical-thinking self-condence.
Also see: Seven components of critical thinking http://www.myprgenie.com/view-publication/seven-components-of-critical-thinking

Ted talks critical thinking http://www.youtube.com/watch?v=LeaAHv4UTI8

Dr Ackoff http://www.youtube.com/watch?v=OqEeIG8aPPk

CASE STUDY TOYOTA A pioneer and world leader in manufacturing excellence, quality and nancial performance. The largest vehicle manufacturer in the world with approximately 300,000 employees. Only 4 levels of management worldwide. 2000-2010, problems appeared - product quality and safety problems, then it turned in two successive annual losses; the rst for sixty years... Shoichiro Toyoda, chastised top managers and promised the company would return to basics. ISSUES A sharp decline in Toyotas inventory-turnover ratio, resulting in excessive inventory growth and diminished nancial performance. PreviouslyToyota achieved 56 stock turns! Toyotas expansion into an increasingly dispersed global network made it difcult to ll orders for the manufacturers increasing variety of models in a reasonable lead-time . Loss of skilled Toyota trained people + inability to ll the gaps with suitable replacements. Producing to customer order, pursued for decades, requires patient effort on the shop oor to increase the mix and decrease lead times. Toyota replaced its problem-solving techniques with quick compromises, workarounds. Compromising long-standing fundamentals such as owing work continuously in lot sizes of one and addressing any abnormality with an immediate solution Stop and Take Action. Toyotas management culture at its height was process-driven, not results-driven: Toyota eschewed the nancial markets demand to produce higher results each quarter. A proper process will generate results sufcient to sustain on-going activities. It improved the capability of the process, not demanding people meet ever higher targets.

Managers lost the habit of thought that previously caused the company to act like a living system: Toyota adopted nance-oriented mechanistic thinking. It forgot the idea that a company can improve overall performance by subtracting parts. Toyota began to embrace a virtual world of nance, not a real world of people in cooperative relationships. Finance and growth-led goals / arbitrary 'targets' do not work. START IN THE RIGHT PLACE Leadership requires clarity of intent and constancy of purpose, without it organisations will: Be misled by numbers. Not leverage benets via removing complexity; good people are beaten by bad systems Generate unnecessary work, dubious output, overproduction of information, delay or avoid

decisions - which demotivates. Not have time / knowledge to improve the organisation, you may not keep it viable.

BENEFITS: A CHAIN REACTION Improve quality > less delays, waste, admin cost, overall cost = improve productivity, capture market, stay in business, provide jobs! Received wisdom is that high quality implies you can't have high output. Cutting costs: complexity / waste removed unsystematically reappears in the future. If time is less occupied by corrective actions and repair there is time to innovate. Without quality systems an organisation will not deliver on a sustainable basis. It may succeed, even spectacularly for a while, but not long term...

Also see: The Toyota Way http://en.wikipedia.org/wiki/The_Toyota_Way WL Gore www.en.wikipedia.org/wiki/W._L._Gore_and_Associates John Lewis Partnership http://en.wikipedia.org/wiki/Greenbee Systems tools and chaos theory http://managementhelp.org/systems/index.htm John Seddon systems thinking for service organisations http://www.systemsthinking.co.uk/5-5.asp

SYSTEMS THINKING IMPLEMENTATION DEMING'S 14 POINTS 1. Create constancy of purpose toward improvement of product and service. 2. Adopt the new philosophy, leaders must learn leadership for change. 3. Eliminate inspection, build quality into the product / service from the outset. 4. Stop awarding business on the basis of price. Instead, minimise total cost. Move towards a single supplier for any one item, and a long-term relationship of loyalty and trust. 5. Improve the systems of production and service constantly, improve quality and productivity and you decrease costs. 6. Institute training on the job. 7. Institute leadership: to help people, machines and gadgets do a better job. 8. Drive out fear, so everyone can work effectively. 9. Break down barriers. Organisations must work as a team, to foresee problems of production and usage that may be encountered with the product or service. 10. Eliminate slogans, exhortations and targets asking for zero defects and new levels of productivity, they create adversarial relationships. 11.a. Eliminate work quotas. Substitute with leadership. b. Eliminate management by objective, numbers and numerical goals. Substitute with leadership. 12.a. Remove barriers that rob the worker of pride. The responsibility of supervisors must be changed from numbers to quality. b. Remove barriers that rob people of their pride of workmanship - abolish merit rating and management by objective. 13. Institute a program of education and self-improvement. 14. Put everybody to work to accomplish constant transformation. 7 THEMES FOR ENDURING SUCCESS 1. Only the customer can dene Quality. 2. Properly understanding the customer will lead to innovation. 3. Management for Quality: a focus on methods that produce outcomes to satisfy customers. 4. Chain Reaction: Improved quality = costs decrease + productivity improves + prices decrease + market increases + create jobs and more jobs + stay In business. 5. Plan-Do-Study-Act (PDSA) is a learning and innovation process based on scientic method. Systems thinking uses feedback that continually adapts with customer needs, enabling other people to optimise the system. Financial engineering / control, appraisal systems, extrinsic motivation (incentives), measuring only outputs not throughputs and short term divisive initiatives will sub-optimise performance of a system. 6. Understanding variation is essential, requiring measurement to: - decide if the system / process is stable enough to act based on the measurements. - distinguish exceptional events from chance variation. - show if a change is an improvement. 7. Leadership inspires and engages people in ongoing change.

TRANSFORMATION OF MANAGEMENT Transformation starts with leaders. Conventionally managed organisations produce unintended side effects and die. The way organisations are run is ineffective long term, requiring radical transformation.

THE SYSTEM OF PROFOUND KNOWLEDGE (SoPK) - essential knowledge for managers Appreciation for a system: performance comes from parts working together. Knowledge about variation: proper measurement + use of statistics. Theory of knowledge: conscious domain knowledge about the business / organisation. Psychology: understanding peoples needs - and why they behave as they do.

7 DEADLY DISEASES 1. Lack of constancy of purpose. 2. Emphasis on short-term prots (or costs). 3. Evaluation by performance, merit rating, or annual reviews. 4. 5. 6. 7. Mobility of management. Running an organisation on visible gures alone. Excessive medical costs. Excessive costs of warranty, fuelled by lawyers who work for contingency fees.

LESSER OBSTACLES 1. Neglecting long-range planning. 2. Relying on technology to solve problems. 3. Seeking examples to follow rather than developing solutions. 4. Excuses, such as "our problems are different", our situation is different' etc. 5. Obsolescence in school that management skill is taught in classes. 6. Reliance on quality via departments rather than by management, supervisors and workers. 7. Workforces are only responsible for 15% of mistakes - the system (designed by management) is responsible for 85% of unintended consequences. 8. Relying on quality inspection rather than improving product quality. PICTURES OF HELP IN CONSIDERING HUMAN ORGANISATION Systems diagrams dene a system http://www.mindtools.com/pages/article/newTMC_04.htm Process maps - how a focus area ts within a system http://www.bizmanualz.com/blog/what-is-a-process-map.html Causal loop diagrams - how different factors impact upon each other http://en.wikipedia.org/wiki/Causal_loop_diagram

SUSTAINABILITY FUNDAMENTALS Put the customer rst. Quality is job number 1. Devolution of leadership. Avoid the forces of destruction. Good enough never is never enough in the search for the competitive edge. Keep the culture agile and achieve constant renewal. Maximise enterprise capabilities.

THE SILENT KILLERS Customer neglect. Unclear strategy and/or conicting priorities obscuring the customer's interest. An ineffective management team. Command and control style management system. Hierarchy and poor vertical communication. Division of purpose and poor co-ordination across functions. Insufcient leadership skills, top to bottom. 'Distance' between the boardroom and ground oor.

Where one of these sins exists others often proigate, bad practice and assumption go together. ENTERPRISE FITNESS ELEMENTS Systems thinking. Leadership team. Vision, values and mission, based upon quality and quality management. Policy deployment. Management systems and lean processes. Reliable work system. Human resource system. Supply chain synergy.

ENTERPRISE CAPABILITIES How capable is your organisation in the following? Co-ordination. Human competences. Commitment brought about by inspirational leadership. Innovation, continual improvement. Capacity and delivery system.

Capable management processes. Knowledge learning, transfer and management. An enterprise must have the capability to integrate and balance control, improvement and innovation in a coherent strategy - any one on its own is not a survival strategy.... survival is optional' : Deming

Also see: Theory of knowledge http://en.wikipedia.org/wiki/Theory_of_knowledge Models of scientic enquiry http://en.wikipedia.org/wiki/Models_of_scientic_inquiry The wisdom of Dr Deming http://www.youtube.com/watch?v=8jc5fDsgVw0 The humour of Dr Deming http://www.youtube.com/watch?v=mCkTy-RUNbw

1. 2. 3. 4. 5. 6. 7. 8.

CUSTOMERS Customers dene quality, it is whatever they think it is. Customer primacy in sustaining success should be beyond doubt. There are internal and external customers. The aim should be customer satisfaction at least, better delight, excitement, insistence. Exciting quality meets unspoken needs, customers may have difculty articulating them. Customer relationship management should be rstly about building trusting relationships, secondly about using IT. Too often companies destroy trust. Customers needs can be both spoken about and unspoken. Moments of Truth occur when the customer interacts with the organisation. Jan Carlsons classic book estimated the moment of truth is as short as fteen seconds.

MOMENTS OF TRUTH: JAN CARLZON, Scandinavian Airlines System (SAS) Organisational purpose should be dened in terms of the customer. Organisations must innovate. The system, processes and procedures should be organised to reect this. A central part of Carlzons strategy was on-going training program 'Putting People First'. Responsibility - delegated to the front line, allowing staff to take action in moments of truth. Highly customer-focused organisations are radically different. The organisation is top down and bottom up - much in common with autonomous working. Management is there to support the moments of truth.

MANAGEMENT'S ROLE 1. Supporting, mentoring, facilitating. 2. Coaching and counselling, not judging. 3. Creating trust. 4. Creating an environment that encourages freedom and innovation. 5. Listening and learning without passing judgement on those that they listen to. 6. Understanding that people are different from each other. 7. Trying to create interest, challenge and joy in work - for everybody. 8. Trying to optimise experience, education, skills, hopes, and abilities of everyone. 9. This is not ranking, but attempt to put everyone in position for development. Top Management may provide leadership, strategy, vision, clarity, showmanship, emphasis most of all it designs the overall system. It should do so consciously. The consumer is more important than raw material. It is usually easier to replace a supplier of raw material with another one than it is to nd a new consumer. A non-consumer, who has not yet tried your product, is still more important... he represents a possible additional user for your product. Prot in business comes from repeat customers that boast about your product and service, and that bring friends with them.: Deming Also see: http://en.wikipedia.org/wiki/Kano_model

YOUR OPERATIONS Your Operations: maps work to transform Customer Needs into satisfaction and delight. Optimal efciency and speed of response requires a seamless uninterrupted ow of work and information through the organisation. All work starts and nishes with the customer. Customers need to be satised to prosper. Customer Needs are what drive you in supplying your product, service or both. There will always be Suppliers on whom you have varying levels of dependency and sometimes Partners without whom you could not function successfully. DAILY WORK PROCESSES Daily Work Processes are unique; forming a ow, customer needs to customer satisfaction. Organisations design operations to achieve the best outcomes in reality, many work processes (systems) are totally back-to-front, based on false assumptions. Different departments or functions do their own thing, sometimes at the expense of other departments, irrespective or oblivious to the needs and expectations of customers. To be sustainable,Your Operations need to be performed with the minimum of waste, optimal efciency / speed of response - creating a seamless ow of work, and information. ENHANCED MOSO OPERATING SYSTEM Daily Work Processes construct a product or service, usually to earn money. The more value they add the better - making a difference comes into play. Non value adding processes must also be conducted: Finance, HR, staff positions, etc. Varying amounts of resources are consumed in Regulatory Activities. The Study element is fed from inputs from at least three areas: Voice of the Customer (VoC) Voice of the System (VoS) Voice of the People (VoP) The intent is for you to rst map Your Operations, then ask questions about its suitability for purpose, compatibility with culture / identity, and long term viability. Also see: Process mapping http://en.wikipedia.org/wiki/File:Proposed_Patient_Appointment_Procedure.png http://en.wikipedia.org/wiki/Business_process_mapping http://www.ehow.com/how_5155054_do-business-process-mapping.html http://www.ehow.com/how_5070753_make-process-map.html#page=0

PLAN DO STUDY ACT (PDSA) A cyclical, four stage process, for problem solving, experimenting, or design for achieving the best result. A rush to action is frustrating and costly. Careful planning is essential. A number of methods aid this process, including scientic method and engineering thinking. - Plan: Recognise an opportunity, plan a change. - Do: Test the change. Carry out a small-scale study. - Study: Review the test, analyse the results and identify what youve learned. - Act: Take action based on what you learned in the study stage. If the change did not work, go through the cycle again, with a different plan. If you were successful, incorporate what you learned from the test into wider changes. Use what you learned to plan new improvements, beginning the cycle again. PDSA is an engine for continual improvement.

CONTINUAL IMPROVEMENT & INNOVATION ENGINE A mechanism for systematic renewal and improvement - data and information is reviewed, improvements planned and changes tested and analysed. The process is repeated until required improvements are obtained. Many organisations have processes but their use is not systematic. Embedding PDSA will signicantly enhance the organisation - driving improvement / innovation by thinking and acting in line with these principles is whats important. Everybody can and should want to do it. At the end of each cycle capture the lessons, learn what improvements can be made for next time. PDSA is repeated continually - there is no end point - hence 'Continual Improvement.'

WHEN TO USE PDSA 1. As a basis for continuous improvement. 2. When starting a new project. 3. When developing a new or improved design of a process, product or service. 4. When dening a repetitive work process. 5. When planning data collection and analysis to verify and prioritize problems or root causes. 6. When implementing any change. STRENGTHS OF PDSA 1. It tests changes on a small scale. Big learning pay-off at small expense. Allows for early and effective changes to the action plan. Improves staff buy-in.

2. Focus is on process improvement. 3. It allows testing of multiple changes through multiple cycles. 4. Proven changes can be extended and adapted.

5. PDSA links with other areas of MoSO. HISTORY & PHILOSOPHY Scientic Method, developed from the work of Francis Bacon (Novum Organum, 1620). Knowledge is built on 'theory', without theory there is no way to use information. Once a hypothesis is conrmed (or negated), executing the cycle again will extend the knowledge further, to bring us closer to the goal, usually a perfect operation and output. PDSA allows performance 'leaps' + 'Kaizen' (frequent small improvement). Experience can only be put to rational use by the application of analysis - management requires prediction, which must be based on a theory. Rational planning can be tested via appropriate metrics and statistical techniques. Analysis of the results should lead to action to improve the system. The fact that another organisation achieved results in a similar situation will not help you unless you understand how they did it and how that might be of help in your procedures: "to copy an example of success, without... the aid of a theory, may lead to disaster. The job of a manager is to put everybody on a team for improvement of some activity.

Also see: Plan, do, check, act http://en.wikipedia.org/wiki/PDCA Novum Organum http://en.wikipedia.org/wiki/Novum_Organum Continuous improvement lean by Bill Peterson http://www.youtube.com/watch?v=tfQiGDUBdD0

PEOPLE, CULTURE, LEADERSHIP & MANAGEMENT PEOPLE The customers for products or services are people. The vision is provided by people. People do the work and improve things. People have a need to be engaged, as does the organisation. Understand every aspect of the way people do, and dont, work together. People don't necessarily know themselves, never mind others.

CULTURE The way we do things round here look below the surface. collective programming of the mind which distinguishes one human group from another.

LEADERSHIP Leadership - the capacity to release collective consciousness, intelligence and insight, helping people nd their own answers. There are things you need to know to be credible but there are moments when you need to say I dont know if others are to confront difcult issues and learn how to overcome them. Leadership has responsibility for creating the vision and a culture which will sustain the organisation for the longer term. MANAGEMENT Managers must understand, take responsibility for, and ensure implementation of the daily work of the organisation. Quality cannot be delegated. Improved quality is not at the expense of productivity to meet customer requirements. Develop a system of management to ensure pride in achievement and joy in work. If you look after your people, your people will look after your customers. Managers need to develop correct understanding of data / info in a scientic context. Managers need to understand the wisdom of numbers. Managers should have commitment to ongoing continual improvement and innovation in design, product and process: a planned approach to improvement, innovation and learning. PEOPLE AND CHANGE... Organisations must evolve in response to their environments; if not they die. Organisation Development: "an effort, planned, organisation-wide and managed from the top, to increase organisation effectiveness and health through planned interventions in the organisation's processes, using behavioural-science knowledge". We need to be aware of changes in society, as we think about organisational change.

TODAY'S CHANGING VALUES 1. Man should be and is more independent and autonomous. 2. People have choices in work and leisure. 3. There is a need to meet higher order needs. 4. People will choose to meet their needs rather the organisations if they are in conict. 5. Organisations should arrange things so work is meaningful and stimulating. 6. The power of bosses is reduced. THE ROLE OF MANAGEMENT / AND OTHERS Leadership is doing the right things... Management is doing things right. The role of management is to lead people to understand the organisation as a system that links everyone to best serve customer needs. The goal is to continually nurture creative talents (including suppliers and partners) to understand, meet, and exceed customer expectations (present and future). By focusing on what people do and how they do it, managers will improve the systems capability to serve customers. To help each employee realise his or her potential, managements main job is to learn exactly what people do in their jobs and how what they do serves customers. Such learning is difcult, if not impossible, in organisations that manage by results, without regard for, or knowledge of, system capability. THE COMMON ERROR: MANAGEMENT BY GOALS / TARGETS If you have a stable system, then there is no use to specify a goal. You will get whatever the system will deliver. A goal beyond the capability of the system will not be reached. If you have no stable system, then there is no point in setting a goal. There is no way to know what the system will produce: it has no capability.: W Edwards Deming MANAGEMENT LEADERSHIP Dealing with the 'known'. Accepting the 'unknown'. Recognising risks. Creating culture. Having the courage to act. Respecting the skills of others.

A MANAGER OF PEOPLE Understands and conveys the aims of the system. Teaches people to understand how the work supports these aims. Helps people to see themselves as components in a team, to work in cooperation toward optimisation of efforts toward achievement of the aim. Understands all people are different and tries to create interest, challenge and joy in work.

Tries to optimise the family background, education, skills, hopes, and abilities of everyone. This is not ranking, but recognition of differences is required to develop everybody. Is an unceasing learner, they encourage study and provide seminars, courses for advancement of learning and encourage continued education. Is coach and counsel, not a judge. Understands a stable system and the interaction between people and the circumstances they work in... that the performance of anyone that can learn a skill will come to a stable state upon which further lessons will not bring improvement of performance. A manager knows that in this stable state it is distracting to tell the worker about a mistake.

Will study results with the aim to improve performance. Will try to discover who if anybody is outside the system, in need of help. This can be accomplished with simple calculations, if there are individual gures on production or on failures. Special help may be a simple rearrangement of work, or more complicated.

Anyone in need of special help is not in the bottom 5%: they are outside that distribution. Creates trust and an environment that encourages freedom and innovation. Does not expect perfection. Listens and learns without passing judgement on the person listened to. Will hold an informal, unhurried conversation with everyone at least once a year, merely to listen. The purpose is the development of understanding of his peoples aims, hopes, and fears. The meeting will be spontaneous, not planned. Understands the benets of cooperation and the losses from competition between people and groups.

MANAGEMENT POWER AND EFFECT Management has three sources of power: - Authority of ofce. - Knowledge. - Personality and persuasive power / tact. a successful manager does not rely on Authority of ofce. He who is lacking knowledge or personality unconsciously lls a void in his qualications. MANAGEMENT IS A PROCESS, IT REQUIRES: Articulating and implementing a consistent purpose for the organisation. Managing the organisation as a system. Managing data and information; and understanding variation. Providing a culture of learning. Helping people to contribute and achieve their potential.

THE CURRENT MARKET MODEL IS THE OPPOSITE OF DEMING'S PHILOSOPHY The objective is to maximise shareholder wealth.

Individuals are self-interested, practical / pragmatic (irrational) driven by short-term economic goals. Relationships are governed by contracts. Cost efciency determines contractual form and institutional structures.

MISCONCEPTIONS 1. We are all, in essence, Economic Man - yet underlying economic trade-off calculations is a judgement: short-term gains versus long-term gains to society. 2. Corporations exist to maximise shareholder value - economic decisions create social consequences, damaging your customer is the cardinal sin, an act of self harm. 3. Corporations require 'Heroic Leaders', but will they be around to pick up the pieces? 4. The effective organisation is lean and mean, so where is the loyalty / security covenant? 5. A rising tide of prosperity lifts all boats, evidence of increasing wage disparity and strongly growing inequalities over the last 20 years prove the contrary. Also see: What motivates people... really? http://www.youtube.com/watch?v=u6XAPnuFjJc Creating business culture http://www.youtube.com/watch?v=wzicXbnmllc Myers-Briggs personality typology http://www.youtube.com/watch?v=WQoOqQiVzwQ Myers-Briggs personality typology analysis http://www.personalitypage.com Warren Bennis democratic leadership http://en.wikipedia.org/wiki/Warren_Bennis

SOCIETAL INFLUENCES & LEARNING No organisation exists in a vacuum product life-cycles are often measured in months rather than years (decades for previous generations). Skills, individual and organisational, acquired over years can become redundant over night. Methods of working, including management methods, need to adapt to new realities in a way that combines constancy and responsiveness in balance. Rapid learning requires a revolution in thinking from Secrets to Sharing to Openness to learn and change; including learning from outside the present sector. Societal learning is network learning or learning from the network of companies, customers, suppliers, and others who are trying to improve the ways their companies function. Mutual learning is necessary - methods of organisational change and improvement are not a theory a company can simply learn and follow. Practices develop through trial and error. Also see: Social learning theory http://en.wikipedia.org/wiki/Social_learning_theory RSA Animate - Changing Education Paradigms http://www.youtube.com/watch?v=zDZFcDGpL4U Ted talks social learning theory http://www.youtube.com/watch?v=NIlwGYY0_AA

THE ENVIRONMENT Albert Einstein: "The environment is everything that isn't me." Nature manages 'chaos' via systemic feedback it innovates continually, in balance. Everything in nature operates to a plan, one that can innovate in response to its environment. Most of us are programmed to focus on maxima (sales, prots) and minima (costs, manpower); in doing so we miss optimising the system in an organic, sustainable way. Deming principles reect the internal environment and recognise dependency of an organisation on its external environment. The principles simplify complexity, so it becomes balanced, manageable and sustainable. Politically driven solutions fail to deal with root causes: they disempower, undermine support and lead to individuals and organisations nding ways of getting round the system instead of contributing to sustainable solutions, because they don't 'own' those solutions. Via appropriate and timely information, efciency and costs can be optimised. Good stewardship is leaving a better world for our children than the one we inherited...

PSYCHOLOGY AND ENVIRONMENT The discovery of truth is prevented more effectively not by the false appearance of things present and which mislead into error, not directly by weakness of the reasoning powers, but by preconceived opinion, by prejudice. : Arthur Schopenauer Mankind tends to think in paradigms / assumptions - 'Us and Them' / 'everyone thinks that'. Not so, such assumption is non-thinking, as is the tendency to label others. Usually labels are emotive; an indicator that there is more than rationality at play. Ones who question are often labelled... without questions how do we improve? New ideas are often framed as a problem instead of opportunities for improvement. Such environments sap the energy and the talent of those who are driven to learning and improvement, wasting the most important innovative resource: creativity / new thinking. THEORY X vs. THEORY Y: Professor McGregor Theory X, the traditional view of direction and control - predicated on the assumption that the average human being dislikes responsibility and will avoid work. Most of us prefer to be treated responsibly, in an organisation run along Theory Y lines. Theory Y assumes people are self motivated and prefer to exercise self control - they respond positively to responsibility. Many managers use Theory X for managing others, while saying they would respond more positively to positive treatment and Theory Y for themselves... Fair treatment: target-based planning and use of reviews and bonuses to underpin

performance causes division, self interest and team destruction. Theory X: rules speak for themselves; communicating secrecy, lack of trust, lack of respect, lack of fairness - policies beget outcomes, not necessarily the ones expected. Driving out fear is essential, for this to happen the organisation has to change. If the change is to dynamic system-based organic growth, optimisation will be the outcome. For this to happen we need knowledge of process variation... KNOWLEDGE OF VARIATION AND ENVIRONMENT Waste represents cost. We locate this waste via the theories of Walter Shewhart relating to process variation to show how and where systems can be optimised. Setting numerical goals or targets outside the boundaries of the system's capabilities and expecting people who work in the system to reach those targets without any changes to the system will generally not produce sustainable improvement. : McKeon and Ramney management is prediction : Deming Systems Thinking aims at dispelling assumption to focus on basics. Is what we are doing having the effect we intended?, underlying this is observation, measurement, prediction. INTERNAL ENVIRONMENT Strategy, leadership and organisation combine to create an internal environment that shapes attitudes and creates predictable outcomes - a liberation of creativity and cooperation (or division and fear, which inhibits change and progress). Critical thinking is necessary - a politicised environment leads to striving being categorised as trouble-making, instead of an opportunity to identify solutions leading to efciency. Political environments replace discussion and negotiation with discord and division. This is deeper than continual improvement, it denes a culture, top-to-bottom, or better a bottom-to-top environment. Deming's approach can only be unleashed via holistic, long term and stable objectives. A rational, measurement-based approach, can develop organic stable systems. MoSO is about creating a self-sustaining mechanism which devolves responsibilities, empowers, and removes bureaucracy. 'Rational prediction' is based on theory and systemic modelling, as is all scientic knowledge, essential when dealing with any system. Deming's 9 principles of systemic organisation juxtapose politicised views: 1. 'Co-opetition' over competition. 2. Interdependence over compartmentalisation. 3. Interdependence over disparate self-interest. 4. Information intensity over energy intensity. 5. Transformational opportunity over the cost of change.

6. Human adjustment to the environment over attempts to engineer the climate. 7. Value-based change over the appointment of an individual to push sustainability (or quality). 8. To manage the unquantiable over managing what you measure. 9. That prot is a consequence of good management, not a goal in itself. The principles apply rst and foremost to the 'environmental limits' in our own minds; we need to recognise the limits of belief systems and question fundamental, cherished assumptions if we are to optimise outputs and implement continual, organic improvement... everyone has a blind spot, no one sees it, few are even aware of it. Also see: Theory X and theory Y http://en.wikipedia.org/wiki/Theory_X_and_theory_Y Paradigms http://en.wikipedia.org/wiki/Paradigm Deming on intrinsic motivation http://www.youtube.com/watch?v=67B1DZlDTF4 Understanding variation http://www.youtube.com/watch?v=-uzKXgZGkco

VOICE OF THE CUSTOMER (VoC) A dened Process used to systematically capture the voice of the customer. To fully understand customer needs and the customer environment.

VoC IS TYPICALLY USED IN TWO WAYS The data denes or describes customer needs and expectations, it can either be in the form of numbers or language or both - VoC denes what is wanted. An organisation may also have VoC processes to systematically capture and analyse customer data and drive improvements in products, services and processes. WHY DO WE NEED THE VOICE OF THE CUSTOMER? All work starts and nishes with the customer, the customer denes and determines quality. Ask, what is your job? - someone in a truly customer focused organisation will say whatever I can to satisfy the needs of my customers (clients, patients, etc.). Prof. Shoji Shiba makes a distinction between Product-Out (doing work according to the established process an internal focus) and Market-In (a focus on customer satisfaction). Product-Out is good, but not good enough you also need Market-In. To achieve this, you have to know who your customers are (internal and external), and their expectations now and in the future. How many of us have this information to hand? Listening to, and being able to interpret, the voice of the customer is essential for customer satisfaction - the best and only lasting means to organisational sustainability. CONSEQUENCES OF NOT LISTENING TO THE VoC Failure to listen systematically is being unknowingly indifferent to customer needs & expectations. This is due to a failure in organisational capability, lack of skills, poor or non-existent VoC processes. Customer facing staff often say their knowledge is not listened to by management. Management is often frustrated because inputs are not actionable or factual. Emotional language clouds issues - a consequence of not having the capability to listen to VoC. LANGUAGE SKILLS VoC places emphasis collecting, analysing, and understanding data. Not just numbers, also language data. Skilful collection and analysis requires knowledge of the tools & techniques of semantics. Listening and questioning skills are very important for VoC. Our language skills impact our capability to manage by facts.

Also see: http://www.mindtools.com/CommSkll/ActiveListening.htm VoC PROCESSES The aim is to gain a deeper understanding of issues / problems the customer has. Through deeper understanding, we can help customers be more successful in their job. A process changes ad-hoc activity into ways of working that can be systematically repeated and improved building essential skills + organisational capability. FOUR GENERIC PROCESSES 1. Customer Discussion / Interview. 2. Customer Visitation (VoC) Process. This is not sales-related. 3. Kano Method: differentiate between Must-be, One-dimensional, and Attractive customer requirements when dening what customers really need and are willing to pay for. 4. QFD: Quality Function Deployment, complex, typically used for translating the voice of the customer into high quality products. NB Customer Surveys Voice of the Customer data can be collected by questionnaire (survey) or by interview. Some organisations use an initial survey to highlight possible areas of concern, and then use interviews to get the underlying facts / data. Breakthrough Management - When Not to Listen to Your Customers.

Dr Ishikawa: 'The customer is king but sometimes blind' (perhaps to other possibilities or future needs of your organisation)... Also see: Kano model http://en.wikipedia.org/wiki/Kano_model Quality function deployment http://en.wikipedia.org/wiki/Quality_function_deployment Professor Shoji Shiba http://en.wikipedia.org/wiki/Shoji_Shiba Professor Kaoru Ishikawa http://en.wikipedia.org/wiki/Kaoru_Ishikawa

VOICE OF THE PEOPLE (VoP) Voice of the People is critical in assessing the health and capability of any organisation. People generate aspects of products and services of critical value to customers. Failing to listen to VoP can lead misunderstanding how people interact with customers.

PEOPLE ARE THE KEY TO: Organisation. Customer Goals. Understanding customer needs. Process. Moments of Truth

Failing to listen to VoP can lead to misunderstanding how people interact with customers at critical moments of truth: Investing in people after leaders have nished running the organisation is wrong! People are at the heart of organisations; hire people who think outside norms and protect them. These benets can only be accrued if leaders apply methods for listening to VoP.

CAPTURING VoP Understand how people feel and perceive the organisation, its environment and processes. Structured and unstructured approaches can be used in any combination. There are protocols for how an organisation can listen to its people, all of which are built on the trust built up between the people in an organisation and its leaders. ACTING ON VoP Successful organisations derive value if they act on what they hear, communicate openly and honestly about issues raised and explain what they intend to do to address them. If nothing changes, it tarnishes the whole feedback mechanism. COMMUNICATE FINDINGS AND CONCLUSIONS Analyse, Plan and assign Ownership. Communicate what will happen next. Be Candid about constraints.

SHARE PROGRESS AND SUCCESSES Celebrate positive shifts Be Honest about Failures

CONCEPTS FOR EMPLOYING 'PEOPLE POWER' The wisdom of the crowd: Francis Galton http://en.wikipedia.org/wiki/The_Wisdom_of_Crowds Self determining teams: WL Gore - top 100 employer for over 15 years continuously in the USA. http://en.wikipedia.org/wiki/W._L._Gore_and_Associates Leadership: Shackleton http://people.whitman.edu/~weilercs/dialogiv_publications/Shackleton.pdf Special Air Service: 'Chinese Parliament'. http://www.telegraph.co.uk/news/uknews/defence/8472610/SAS-the-chosen-few-who-are-a-forcelike-no-other.html

VOICE OF THE SYSTEM (VoS) VoS uses a Process Behaviour Chart (a form of Control Chart) to characterise performance of a process / system over time. By interpreting the Chart, we can dene, with a high degree of certainty, the level of performance a process or system can achieve and determine how to improve performance. VoS can drive continual improvement, as opposed to only taking what is often inappropriate action when a target or expectation has not been met re-ghting. WHY USE THE VOICE OF THE SYSTEM? Most of us nd it difcult to digest numeric data and extract knowledge - the majority of us have not been taught how to use tools of arithmetic to understand data. Without a formal way of analysing data we are forced to use informal ways.

THE CONSEQUENCES OF NOT UNDERSTANDING DATA The know-how to interpret important data (Key Performance Indicators / KPIs) is vital. Failing to understand data and process variation can be disruptive. Attempts to manage by instinct or a table of gures fail to recognise natural variation in performance. Actions issued to managers to investigate often small variations in the normal behaviour of a process / system, result in a cascade of actions all the way to supervisory level. This takes people away from improvement, management generates fear and behaviours that encourage people to cover their arse, rather than working together. If this happens every month, week, or day; how can an organisation function effectively? PROCESS BEHAVIOUR CHART A Process Behaviour Chart is a Run Chart (or Time Series Chart) generated from a data table or spread sheet - with three lines plotted on the chart:

NB: UNPLs & LNPLs are NOT targets!

Being in control is not the same as being on target. An Average line (known as X bar for the mathematically minded), plus... Two lines equidistant of the Average - the Upper & Lower Natural Process Limits (UNPL & LNPL). These are calculated from the data points using a simple equation (not using Standard Deviation calculations there is a difference).

Also see: Control charts http://en.wikipedia.org/wiki/Control_chart Performance indicators http://en.wikipedia.org/wiki/Performance_indicator Root cause analysis http://www.youtube.com/watch?v=v7M1Gs951Jk

INNOVATION Improvement: Doing existing things better. Invention: Finding or creating a new thing. Innovation: Doing or using new things to change for the better...

ESSENTIAL FOR SURVIVAL Every organisation is under pressure to be efcient and do more with less. Without innovation customers or stakeholders drift away. Improvement is essential, but relatively unimportant.

DEMING GAVE 4 PRONGS OF QUALITY, STARTING WITH THE MOST IMPORTANT Innovation in product / service. Innovation in process. Improvement of existing product and service. Improvement of existing process

HOW TO INNOVATE A purposeful approach to Innovation follows a path: Create (idea generation). Judge and evaluate. Develop. Implement.

The following steps show ways of making innovation a way of life for an organisation: Step 1. Decide to do it. Step 2. Set up strategies, policies, plans appropriate to the organisation. Step 3. If improvement is already formalised, include innovation. Step 4. Give Permission. Step 5. Study opportunities for innovation. Step 6. Identify the most promising opportunities and assess them by trials. Step 7. Implement, but learn from what you are doing. Step 8. Make sure that innovation is an established part of your organisation. The order of steps 2, 3, and 4 may vary, or not even be applicable in some organisations. Also see: Creating a culture of innovation http://www.fastcodesign.com/1669657/how-do-you-create-a-culture-of-innovation

http://www.1000advices.com/guru/innovation_culture_sk.html

TRANSFORMATION Transformation is the journey with a view to sustainability, changing an organisations: Systems Policies Values

i.e. The way it does things to perform better and be more sustainable. The gap between Where we are today and Our vision of us as a sustainable organisation (the destination) represents the length of the journey and degree of difculty. BEGIN WITH THE END IN MIND IN AN INDEAL WORLD We are interested in specic organisational capabilities - things it does as a matter of course, not exception. Sustainable organisations need an inherent ability to continually improve and, when necessary, radically change, requiring an inherent capability to: Continually improve what it does. Get better at getting better. THE JOURNEY Personal transformation is a prerequisite to organisational transformation. SOME RECOGNISED TRANSFORMATION PROCESSES

Also see: http://en.wikipedia.org/wiki/Business_transformation SYSTEM OF PROFOUND KNOWLEDGE The thought processes we use to help us understand any organisation through four lenses which often interact, a useful way to view a problem and any proposed solutions... DEMING'S 4 'LENSES' Appreciation of a SYSTEM so all parts are working together Understanding of VARIATION and the mistakes made while attempting to improve results Theory of KNOWLEDGE how management can predict future outcomes Knowledge of PSYCHOLOGY motivation of employees to help optimise the overall organisation APPRECIATION OF A SYSTEM A system must have an aim; or you produce negative, ineffectual action, or collapse. A system is a network of interdependent components working together to a common aim. Lack of appreciation of a system leads to silo thinking and sub-optimisation of its elements. "My department has got to win" is not focussed on the customer and may cost business. Failing to recognise a system summons the law of unintended consequences. Appreciation of a system includes understanding relations of organisation and environment. A process diagram raises awareness of how our involvement and our department (or our project) contributes, interacts or inuences the achievement of the aims of the organisation. KNOWLEDGE OF VARIATION Knowledge of variation + measurement allows us to predict process outcomes. Any process can be recorded and plotted on a process behaviour chart. The charts show changes over time to help identify what affected the process. By analysing the data, average results and range results can be plotted - upper and lower control limits can be calculated. This is the voice of the process. Special causes - points recorded outside the process (control) limits. Normal causes - points recorded within the process (control) limits. USE OF CHARTS Extraordinary variation comes from special causes: localised in time or sequence. It is worth investigating and removing them, to make the process stable and predictable. A stable process shows results between process limits and can be predicted to an extent. The next individual point cannot be predicted, but the average and spread can. The spread stays within the limits. A stable process is subject only to common causes of variation. This can be compared with what the customer wants which may or may not be expressed as a specication.

If a different average or smaller spread of output is required, the process has to be subject to improvement or innovation. Tampering (adjusting a stable process) can increase variability. Lack of appreciation of the difference between special and common cause leads to incorrect action.

THEORY OF KNOWLEDGE Theory is necessary to apply reasoning, it must be tested for ability to predict / usefulness. The PDSA cycle is a short, focussed version of applied scientic method. Common sense" can be counter-intuitive, or alternatively counter-productive. Operational denitions reduce variation between people who have to use a concept. If a concept is important it is worth setting up an operational denition, e.g. a standard test method. If necessary, operational denitions can be improved using devices such as PDSA. EXAMPLES OF INTERACTIONS OF 'THE FOUR LENSES' Psychology System Failing: use the strengths / opportunities arising from interdependence of people. Variation: Fear generates wrong gures. Ranking people without understanding variation. Setting performance targets: requires understanding of the difference between average and extreme values. Theory of Knowledge: people learn in different ways.

Also see: System of profound knowledge http://deming.org/index.cfm?content=66 Control charts and variation http://www.youtube.com/watch?v=RYMIcEOh5M8 Deming http://en.wikipedia.org/wiki/W._Edwards_Deming Motivation http://www.youtube.com/watch? v=fk96YFtS6U0&playnext=1&list=PL8E522DD542C4CA69&feature=results_main Theory of knowledge and systems http://www.youtube.com/watch?v=1CQgCGXUXD0

VALUES Apply to all aspects of organisational conduct, relevant to individuals and organisations. Remain consistent over the long haul, even as markets, strategies and goals change. Provide guidance for individuals on what is good / desirable / ethical behaviour. Likely to vary, or at least be worded differently.

ORGANISATIONAL VALUES No organisation operates in a vacuum: social and natural environment = accountability. The need is disputed, Milton Friedman held that corporations are amoral = maximise prots Drucker: ultimate responsibility is above all not to harm. Everybody is a member of society. Rationale - strengthen corporate identity. compliance / limit legal liability, 'look good'? Common problem = disconnection between published values and actual practices...

SO, WHAT IS REQUIRED... ? The unequivocal support of top management, by both word and example. Involvement of stakeholders in their development Values explained in writing and orally, with periodic reinforcement. Things that are do-able - something employees can both understand and perform. Be monitored by top management, + routine study of compliance + improvement. Backed up by clearly stated consequences in the case of disobedience.

HOW TO DEVELOP CORE BELIEFS / VALUES Core values should be developed and articulated by the people rather than handed down. ORGANISATIONAL VALUES THAT SUPPORT MOSO Trust. Customers can count on us. Openness to learning. Transparency. Sharing success equally. Respect for the environment in which we live and work. Examples without theory invite mindless copying so act consciously, systematically, and with intent... Further stimulation: http://www.thecqi.org/moso

http://www.youtube.com/user/mosocqi1 http://deming.org/index.cfm?content=66