What to think when things do not add up…
Post by Bill Bellows, Deputy Director, The Deming Institute.
“The efforts of the various divisions in a company, each given a job, are not additive. Their efforts are interdependent.”
W. Edwards Deming, The New Economics
In the summer of 2005, I spoke at a conference which featured Jack Welch, the former CEO of General Electric, as the opening keynote speaker. Welch offered an assessment on the overall savings from continuous improvement projects across GE: “If I added up all the financial savings of the projects at GE it would have added up to the gross national product of the USA.” In other words, the savings from the hundreds, if not thousands, of application projects across GE, when added together, were colossal, and Jack Welch knew it. Yes, they could be added, but the sum appeared to be noticeably inflated. Something was missing in the calculations, perhaps interdependencies and resulting unintended consequences were overlooked. What’s one to do when addition does not work? In keeping with the opening quotation from Dr. Deming, we can turn to Donella Meadows, an environmental scientist for inspiration with her reference to the Sufi statement, “You think because you understand one you must understand two, because one and one makes two. But you must also understand and.”
As a prelude to an explanation of “and”, consider a favorite quotation from Tom Johnson in his book, Profit Beyond Measure, aptly sub-titled, “Extraordinary Results Through Attention to Work and People;” “How the world we perceive works depends on how we think. The world we perceive is a world we bring forth through our thinking.”
Regarding how we perceive the world, the impact of the difference between working together (the total is more than the sum of the parts), working apart (the total is less than the sum of the parts), and working separately (addition applies) can be examined mathematically by rephrasing the Sufi statement as a question; “What does 1 plus 1 equal?” For example, does 1 cup of water plus 1 cup of water equal 2 cups of water? Ditto for 1 apple plus another adding up to 2 apples? Yet, does the same apply to 2 co-workers each saving an hour in their tasks? Combined, would the organization save 2 hours? Or, would 2 workers each saving $100 save their organization $200 overall. Given the reality of systems, such an additive saving is nearly impossible.
The classic issue is whether or not the items being combined are interdependent or independent; that is, separate. In the case of water and apples, when accumulated, they are not dependent on each other. They do not work together, as teammates, to create a third apple nor a third cup of water, nor operate in such a way that water would be lost (other than by evaporation) or part of an apple would be lost. But, in an organization, our actions are always connected to others. We constantly receive from others and deliver to others. By comparison, can you imagine a co-worker who received nothing (data, reports, parts, etc.) from others (other than salary) and delivered nothing to others? That is, the worker was truly an island in the organization, isolated from the others?
When we shift our focus to work and people, we simultaneously shift our thinking from independent cups of water and apples to people and their interdependent tasks. If the two items being considered are people working together, the results can be more than the sum of the parts; more productive than two people working independently. This is termed positive synergy. On the flip side, we could also see negative synergy resulting; 1 + 1 being less than 2.
Opportunities for discovering a lack of additivity apply to both the economics of for-profit and not-for-profit organizations. Year after year, I have been ably served at blood collection centers by highly skilled phlebotomists, as well as many volunteers who contribute their time and passion to these life-saving agencies. One volunteer who stands out is Mary, a senior citizen who provided the refreshments after our donations, always with a warm smile, all the while providing us with a small sticker to add to our personal planners. Mary’s role included adding a date to each sticker to remind us of our next visit. With all the strength she could gather, she cut the 1-inch wide stickers, one at a time, from a large roll. As she tired, she needed both hands to force the handles of the sheers together. Once, I commented on the Herculean effort she expended to cut each sticker from the roll, much more effort to separate the stickers than I recalled from previous visits. Her matter-of-fact reply revealed an appreciation for her system. Quite simply, she offered, “Yes, somewhere someone is saving money by no longer buying a roll of stickers with [easy-to-tear] perforations.” “What do they care about my effort?”, she said, “I’m only a volunteer.”
Mary is not alone in experiencing an unintended (negative synergy) consequence of task-oriented organizations, where processes are divided into apparently separate, independent, tasks, examined for how best to reduce costs for each task, then reassembled into a “new and improved” process. I do not know the thinking behind the decision by the blood donation center to purchase rolls of unperforated stickers. However, I have witnessed other situations where a determined attempt to achieve overall savings by piecing together local savings, resulted in overall losses. These cases serve as a reminder of the ease with which a seductive path of “adding up the savings” can be followed. They also serve as a reminder of the possible outcome of this path by being aware of systems.
Through his seminars, lectures, videos, and books, Dr. Deming shared a vision of systems well-managed. In his last book, The New Economics, he reminded us that “a system is a network of interdependent components that work together to try to accomplish the aim of the system……The greater the interdependence between components, the greater will be the need for communication and cooperation between them.”