Organisations with a merit and ranking system are like bicycles being pedaled backward.
In the 1950s, W. Edwards Deming, then a relatively unknown statistician, conducted seminars among Japanese companies as part of the American effort to rebuild that country’s post-war economy.
In these seminars, Deming reportedly used the process diagram shown below, to illustrate the systemic nature of a business’s processes.
The diagram showed how the various parties: suppliers, production, ‘quality control’ (inspection), consumers, research, and others, fed into each other and back in one grand system of production.
Despite the diagram’s deceptive simplicity, it was conveying a message that is both deep and shallow. It was a shallow message because everyone who knew anything about operations knew what it was showing. Yet the message was also very deep because the diagram confronted everyone by asking why they did not act as if they knew that.
Deming made the point that because these functions depended on each other in a systemic way, they must be managed together, as a single system. To manage these functions separately, as if they were not dependent on each other is a path to institutionalised dysfunction.
In our modern world of systems thinking, processes management, and post the chaotic period of the 1990s ‘re-engineering’, the reminder Deming wanted to deliver can feel anachronistic. Not only does the diagram look old, it feels old. It would not be surprising if a modern audience today reacted to this diagram with a: 'Duh'.
Duh indeed, because by this time we all should all know that. And yet it seems we don’t.
So what is the big deal about Deming’s diagram? While no one seriously questions its truth, many big companies – precisely the ones that really need to internalise this message – are still operating the business in a backward way.
We can illustrate the situation by imagining we were given a bicycle, and then shown how a bicycle should run, and yet we proceed to ride it backwards.
In organisations where a merit and ranking system pervades, where an employee’s ‘performance’ is annually ‘assessed’ by their supervisor, employees become forced to consider their supervisor as their most important customer. Employees have no option but to direct all their actions and energies to figuring out what numbers the supervisor is tracking and make sure they meet those numbers, to the subjugation of other considerations.
Supervisors themselves need to please their managers, and so treat their managers as their customer, always thinking: “how am I going to be ranked?” The situation goes on -- the managers need to please their vice presidents; the vice presidents need to please their executives; executives need to please the CEO; the CEO need to please the board. The board need to please the shareholders, often fund managers. Fund managers need to please their bosses, in a grand system of brown nosing.
Nowhere in all this is the poor paying customer, the source of the company’s income. No, that's not entirely true. The customer does sometimes pop up now and then, but only to the extent where they complain thereby represent a risk to the merit and ranking of employees, or where they give praise and enhance the merit and ranking of employees, or where they can be used to further please that most important of customers, the person higher up in the organisation.
This backward operation of the forward system cannot be undone without a transformation -- a deep, difficult, transformation that demands sustained struggle. Initiating this transformation, and even more important, sustaining such a transformation will require an unbelievable level of courage, focus, and determination. A constancy of purpose.
Organisations who are able to operate their forward systems in the right direction will eventually benefit. Once they do start moving forward, it will be easier and easier, kept in motion by a reformed cultural inertia, to operate the system, understand it, speed it up, improve it, and even accelerate it. They will have realised how far, FAR better it is to ride a bicycle forward.
