(Today’s guest commentary is from our friend V.R., a management consultant who incidentally was a student of ours before the term “Hidden Pivot” had been coined.  Some may find his essay heavy going at times, but the reward for bearing with it, as your editor has found, is that you will have a better understanding of why complex systems, most particularly political and economic, fail.  Not all of them do, for sure, and V. elucidates the factors that can make the difference.  RA) 

Process Management appeals to companies that recognize its value.  Essentially, it is a scientific approach to managing because, like all science, it is based on empirical measurement.  As we have learned in life, there are many ways of measuring things, and the less concrete they are, the more we dither over them and risk bringing progress to a halt.  This is especially true of politics, where hyper-emotional debate very often obscures the underlying issues.  In the corporate world, the ability of a firm to sustain and grow its business is related to its ability to stay on course despite changes in personnel, market conditions and on stormy seas.  Carnegie Mellon institute is a leader in defining the software development process.  They created something called the Capability Maturity Model, or CMM, which uses a 0-5 scale to determine how well software companies use best practices to ensure the sustainable quality of their product or service. This ties directly to the sustainable efficiency of their profit-making efforts.  For example, a company rated “zero” uses ad hoc, shoot-from-the-hip means to accomplish things more than a level-5 company, and uses more subjective means of ‘measuring.’  This leads to less concrete operating methods, poor perceptions and an inconsistency of approaches.  Level-zero companies also waste effort developing their capabilities because they oversimplify the demands of success and learn that the hard way.  Then, they promptly forget what was learned when a new CEO arrives and wipes the slate clean; or, people quit and take the know-how with them. 

Look at the list of companies that were started in the last 50 years and see who’s left, and you have a good picture of who’s who in process management.  The short list would be, for example, the companies Warren Buffet invests in, because these companies, despite the changing nature of the complexities that confront them, can deal with change and sustain a pattern of success without the help of a super-star CEO, or of a workforce whose dedication is based on possible IPO success.  Once some of those companies reach the payoff level, the people in them move on to other enterprises, taking with them the DNA of what made the original company successful.  ISO 9000 is an international standard of process management with many dimensions, but having audited a company against such a standard, I find it surprising how low the operational standards are of some companies with good reputations.  Some of them fail when they deviate from the habits of that made them successful.  The electronics darling Lucent, an investment portfolio superstar of the 1990’s, sold its last operations to Alcatel within a decade.  One reason the company vanished was its inability to recognize the cost of complexity.  It’s one thing to add another gadget, system, process, protocol, rule or law, but another to manage a growing pile of them.  Constant re-evaluation – call it corporate soul-searching – must continually sort out what can be sustained from what must go. 

The DNA of Success

What separates the successful from the unsuccessful is having a foundation of systematic process and systemic awareness to operate from.  They form the concrete floor on which you can build businesses that will weather an economic tornado.  By defining and honing the elements of success, and by not losing the ‘memory’ of the process and of lessons learned, a business (or a government , or even a person, for that matter) can sustain a level of success that will always elude ad hoc management styles; companies run by superstars who are distant from the workforce; tiger-teams of MBAs assembled to address systemic problems that arise along the way; and companies that lose the DNA of success when their employees desert them. The lesser companies think they are operating ‘lean and mean’ by ignoring good process, but they’re really operating in knee-jerk fashion.  To quote an upper manager at a major software company, “I like a good crisis -- it gets your mind focused.” That in a nutshell is the strategy of ignoring the management of complexity, which in turn produces crisis after crisis.  By the way, that leading software giant rated a “zero” on the CMM model.  Having worked there myself, I can attest that the irritation over why their software worked so poorly went away on the realization that the product was a perfect portrait of their own internal processes:  disconnected, unaware of self, high on hype and low on consistency and awareness of the obvious inconsistencies.

Our government operates on the lowest level of process management, which is why sharp people like Brooke Burke who raised the flag in the 90’s on how the derivatives market is poised for a fall, get pushed aside by the likes of superstars like Greenspan and Co., and how the unmanaged complexity of systems not well understood endsA up blowing up into the debacles of the savings and loan meltdown of the early 90’s, the internet bubble of the late 90’s, the foreign policy failures leading to Iraq and Afghanistan, Globalization of Corporate capitalism, the shoddy loan bubble (aka ‘housing bubble’) and the predicted derivatives bubble which have all collectively brought the country’s economy, and the much vaunted ‘Global Capitalism’ to its knees.  Well, lets be clear on that last point, the capitalists were only on their knees long enough to borrow $700B and then resume their flagrant self serving ways by investing American money everywhere but America, and assigning the paying of their bonuses to the yet unborn depositors in their banks.  Slave owners finally found a way to reach into the future. On this new ‘capital crisis’ system, it’s the American taxpayers - past present and future - that will remain on their knees as long as ‘management’ excludes measurement, good process-formation and maintenance within “our” own government. 

Managerial Crime Spree

Aiding this crime spree of apparent poor management is the same thing that keeps process management out of American companies and government.  The Chinese describe the word ‘crisis’ as ‘opportunity’ so we could say that the unmanaged complexity inherent in poorly managed systems actually creates the ripe opportunities which have made the owners of capital quite Chinese in nature.  This is pretty funny, considering how the plunderers used ‘real’ Chinese labor to keep American wages low by creating competition between American and Chinese workers, and reducing the competition between Capitalists and American workers for the profit of their labors.  An immigration policy that excludes the best and brightest Europeans from immigrating but gives millions of low wage workers a ‘get into America free’ card has the same result.  That’s why “we” let them in: to maintain pressure on our wages to keep costs to capitalists down.  To expand on this thought, a good crisis keeps the ‘system’ of plunder intact.  That helps explain why so many systems the United States had in place to measure our activity or maintain our gains were pushed aside by each succeeding bought-and-paid-for government ‘administration’.  Thus, the FDA approves Vioxx, which then kills 50,000, and then class action lawsuits spring up like topsy.  Indeed, the massive increase in government jobs over $100k says the plundering of America by government, but also by the corporations who “own” the politicians and the political process, will continue.  Keeping the election process wide open to big money ensures that this destructive and dysfunctional dynamic will only get worse.  Using Howard Hughes’ method of doing business – i.e., paying off both sides before the election -- makes getting one’s way a given. 

So complexity has a cost, and if its not managed properly, it will eventually cause the breakdown of systems unable to preserve their gains via sound, collective-process management.  The recent elections reminded us once again that substantive issues will always take a back seat to mudslinging by the corporate party’s two-headed proxy.  However elections turn out, we can rest assured of zero net gains in the overall capabilities which would make our country and economy strong.  Like the drug companies that elevate a simple human trait like ‘shyness’ into a disease with a slick name like “Social Anxiety Disorder,” and then make millions selling Prozac derivatives, there is too much money to be made for the owners and investors in ‘the new capitalism’ for anything like ‘order’ to grab a foothold; for if it were otherwise, the ability to gin-up another crisis to the level needed for an ‘investment’ from the public would be compromised.  Thus, as powerful as the means are to improve things, the guys pulling the strings and their political lackeys can rig the odds against a collective success, keeping us mired in a crisis-based world forever.  Amidst the complexity and calamity, the Kansas City shuffle remains the primary profit mechanism: you look this way, they go that way.

Japan, for Example

The largest case-in-point illustrating this ongoing conundrum is the rise and fall of the Japanese economy in the 1900’s.  The inventors of process management, two Americans named Demming and Juran, came to the fore in WWII, and their process management techniques contributed heavily to the amazing growth of American industrial capability which, arguably, won the war.  After the war, these specialists couldn’t find a job.  Post-war America no longer needed efficiency because they wiped out their industrial competition by making bombs instead.  Faced with the task of rebuilding a wrecked economy from the ground up, the Japanese found these two men irresistible.  They were brought to Japan, and their techniques were learned and refined until America was ‘surprised’ by Japan’s ability to make cars, stereos and every industrial product of higher and higher quality while simultaneously dropping the price till they had no competition.  Today, the world leader in process management is Toyota, not GM -- and TPS, or Toyota Process System, is what you learn in business school now.  Those methods are the standard.  The Japanese then took their gains and parlayed them into a real-estate bubble that popped and brought their economy to a standstill for 20 years.  And here’s a similar story from our own back yard:   For America, the spoils of war included Nazi Germany’s rocket scientists. Asked how they had developed those amazing V-rockets, there came the response: “We learned it all from the American physicist Robert Goddard, whom you ignored the whole time”.  These same scientists put America on the moon 25 years later.

Six Sigma Revolution

The means exist, the work force is are capable of learning how to apply them, and better companies are using them on a lower level to increase manufacturing yields.  Six Sigma was the latest spin on this science, created by Motorola and endorsed by Jack Welch of GE.   In the bigger picture, however, the ‘cost of complexity’ and the neglect of process management leads to downfall and crisis. But in a political economy  where these problems have become a lever for strangling capitalism, and for putting us deeper in debt, it makes for a grim picture.  We wind up weakening the polity when we trust the government to keep its distance from the capitalists it is in fact sleeping with.

Sadly, the capitalist’s most useful tool is American’s total acceptance of the irony of their situation.  This is not the generation that harnessed a muscular democratic process to rid itself of Nixon; rather, it is the generation that in the middle of financial crisis sits idly by as their paid-for President ‘lends’ their hard-earned dollars to pay bonuses to failed capitalists; sends their children and tax dollars to an undefined war while collecting a Nobel peace prize; allows congress to give itself a raise in the middle of a depression;  and fixes the health care crisis of millions who can’t afford it by forcing them to buy it anyway and pay a fine if they don’t.  Of course, these are all “corporate decisions.”

So who’s going to solve our crisis?  Certainly not those who engineer and profit from it.  Welcome to the false reality bubble.  Where are the signs of a collective uprising?  Don’t look for it on the Tele-Vice device, the number one tool of conditioning our thinking to be less resistant to the creation of crisis after crisis and solutions of further dilutions of truth.

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-- Posted Thursday, 11 November 2010 | Digg This Article