The Biggest Constraint: A Ghostly Tale of Quality Management
- October 31, 2013
By Kip Hanson
Ever since that big investment firm acquired us last year, Spacely's Space Sprockets has been struggling. I can't blame the investors. They provided an infusion of much needed cash, brought in a pair of high-tech, multi-axis machining centres, and agreed to replace our aging ERP system. At their request, we'd even brought in an efficiency expert to help us implement Six Sigma best practices.
Spacely should have been a lean, mean manufacturing machine by now, but we were barely breaking even. Shipments to our customers were way behind, and quality was going in the tank. Mr. Spacely was furious. "Fix it by the end of the quarter, Jetson, or you're FIRED!"
I wouldn't be the only one to feel the corporate axe, either. We needed help. My friend Dave heads up the quality department at Cogswell Cogs and I knew he'd had similar problems last year, so I called him up. "How about a drink after work?"
You bet," he said. "Meet me at Moe's?"
We agreed on six o'clock and I hung up the phone. Sure, Dave works for the competition, but I've known him since college. He'd never steer me wrong. Besides, maybe he could get me a job at Cogswell when this was all over. I'd heard they were hiring assemblers.
Spacely wanted to go over the figures just as I was headed out the door, so I was twenty minutes late. Dave was waiting in the corner. "Hey, buddy!" he said. "It's been a long time. So what's going on over at Spacely?"
After I explained the problem, he reached in his wallet and pushed a business card across the table. "This might seem a little weird, but you should contact these guys. They bring in retired executives as quality coaches. It really helped us out."
I read the card. Dave must be cracking up. "Edward Deming? But he's..."
"Trust me, George," Dave said. "Just call the number."
One week later, I was sitting in the conference room across from three men in business suits. I knew their faces from photographs but I'd never expected to see them—at least, not in this life.
"I've read some of your books," I began. "The Goal, Out of the Crisis." It was all quite uncomfortable.
Just then, the final consultant rushed through the door—retired G.E. president Jack Welch. "Sorry I'm late," he said. "We had a golf outing for all the execs and I eagled the 18th hole. Won fifty bucks!" The man's practically a billionaire and he's grinning like an idiot over a little pocket change. "Say, who are these guys?"
I introduced Welch to the other consultants: Shigeo Shingo. Eliyahu Goldratt. Edward Deming. Cold handshakes were exchanged. Welch squinted across the table. "Umm...hate to be rude, but aren't you guys dead?"
Shingo looked embarrassed. Goldratt folded his hands and counted the ceiling tiles. Deming just scowled. "You'll be there soon enough, shorty," he said. "In fact, we've got a place all ready for you, right across the hall from Henry Ford."
Welch's face turned red. "Listen, professor. I don't have to..."
I raised my hand to interrupt. "Are you guys going to help me, or not?"
Deming turned to me. "Of course we are. Let me guess. Deliveries are down, quality's poor, morale sucks?"
How did he know all that? I nodded my head.
He pointed at the wall. "You can start by taking down all that junk. It's pure propaganda."
Three months earlier, I'd bought some motivational posters. They were all over the shop. Performance Drives Success. The Future is Built Today, that sort of thing. Mr. Spacely thought they were great. "So? I got a good deal."
"You did read Out of the Crisis, yes? Do you remember the 14 Points?" It wasn't a question. "Point 10 states: 'Eliminate slogans, exhortations, and targets for the work force.' What else have you done to 'motivate' your employees?"
"Well, last year we instituted a bonus plan. Production workers get 10% for every quarter they make quota. The purchasing people get a $500 spiff for every new cost reduction. And we were always backlogged in inspection, so we set a time standard..."
"No, no, and no!" Deming fired off points like rifle shots. "Point 11: Eliminate work standards on the production floor. Point 4: End the practice of awarding business based on price. Point 3: Cease dependence on inspection to achieve quality." He stopped for breath. "Tell me—what happens if your workers fail to meet their targets?"
I admitted there'd been some layoffs. Failing to meet quotas was only part of the reason. "Corporate said we had to reduce headcount."
The old statistician slapped the table. "Point 8: Drive out fear. Point 12: Remove barriers that rob the hourly worker of his right to pride of workmanship."
I wasn't sure how to respond. "Okay, but the efficiency expert we hired said people need targets. And the investors wanted a better ROI on the new equipment."
Shigeo Shingo raised his hand to speak. "ROI is dependent on far more than production quotas, Mr. Jetson. What are your setup times like?"
I knew where this was going. "Not bad, I guess. Most of our jobs take a few hours at most. The problem today is that our customers want smaller orders delivered more frequently, so we've had to increase our finished goods inventory."
"Other companies measure setup times in minutes. What are you doing to improve?" said Shingo. "Quick changeover is the clear path to profitability and improved cash flow."
"Corporate thought it was more important to get a new software system. We had to kill the quick-change tooling initiative."
Shingo nodded sagely. "And now that you are squeezing the workers for greater production in less time, your quality suffers. Not only have you done nothing to reduce the waste of setup time, you have also increased the waste of overproduction, bloated inventory, and the making of defective products."
I couldn't agree with what he was saying. "We are a very Lean company. There is little waste. Everyone here is focused on our profitability."
Deming snorted. "How many people did you fire to reach your definition of Lean?"
Before I could answer, Welch jumped in. "What's wrong with firing people? If your employees aren't cutting the mustard, they have to go. That's one of the reasons GE became the most valuable company in the world."
Shingo smiled. "Perhaps, Mr. Welch. But at what cost? Before leaving the company that you managed so well, you released thousands of workers while increasing executive compensation to unheard of levels."
Welch blustered. "What of it? I did what must be done."
"Of course you did. But you have also created an environment of corporate greed, one whose sole focus is on profitability. What of the workers, Mr. Welch?"
"Okay, fine. What's the answer to problem workers, then?"
Shingo continued. "To quote my friend Mr. Deming: 'The worker is not the problem. The problem is at the top, with management. Everyone in the organization must understand the damage and loss caused by a team that seeks to become a selfish, independent, profit centre.'"
Goldratt cleared his throat. "I think you are being unfair, Shigeo. Jack Welch's work with Six Sigma and the DMAIC method was admirable. Without it, the business world would not be what it is today. And greed has existed since humanity first began commerce." He turned to me. "I think we have wandered off course. Mr. Jetson, how can I help you?"
Finally. Of all the quality management champions before me, Eliyahu Goldratt and his Theory of Constraints was the one I'd studied most. "I followed your advice. We've worked hard to eliminate the production floor constraints, the bottlenecks. We've embraced your model of drum-buffer-rope. But in spite of all that, and notwithstanding the other opinions I've heard today," here I looked around the table, "we're still no closer to the output we need. What can we do?"
Goldratt sat in thought for several minutes. "Lean manufacturing, Six Sigma, the Theory of Constraints. These are important concepts that share a common goal—to reduce waste and process variability in the workplace. Implemented properly, they have the power to transform one's business. But too often, companies fail to realize that paradigm shifts such as these must derive from the production floor. They cannot come from the boardroom."
Deming leaned forward. "You have the tools and the knowledge to transform your company, Mr. Jetson, but I have to agree with Eliyahu and Shingo—the problem here is management. Stop chasing bottlenecks in the shop and look in the mirror. You are the constraint."
Even Welch seemed convinced. "I hate to admit it, but all those layoffs...we lost an awful lot of knowledge. Sure, it helped the bottom line, but I have to wonder where the company would be today if we'd coached and trained those people, actually listened to them, rather than making decisions based on the numbers."
Several hours later, I walked the consultants to the door. "Thank you all for coming. It's been very helpful."
Deming slapped Welch on the back. "Let's go get a beer, Jack. You're buying."
Watching them leave, I knew there was a lot of work in front of us, and much to figure out. But for the first time in months, I was hopeful we could turn the ship around. Just then I heard Spacely. "Jetson!" he yelled. "Where are those figures?" I called Jane to let her know I'd be late, then headed up to his office. We had some things to discuss.