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There are no simple solutions to complex problems. In an enterprise, problems are interdependent; their solutions should be, too. Interdependent problems are systems of problems and their solutions must form a system. A system of solutions is a plan and all plans are complicated, almost never simple.

The reason why most management cure-alls and quick fixes fail is their neglect of the whole system and just focusing on one part of the system. These fixes part the whole system, treating it as an aggregation of independent parts. These manipulations typically fail because the performance of a system is not the equal to the sum of the performances of its essential parts taken separately, but the products of their interactions. For that reason, improvement of the essential parts of a system taken separately often does not improve and may reduce the performance of the whole. Another common deficiency is the failure of some quick fixes to take into account a social system’s developmental responsibilities to its stakeholders and the larger systems of which it is a part.

Let’s have a closer look at some of these fixes.

Downsizing

Downsizing fails more often than it succeeds. Within a short period of time after is implementation, costs tend to rise and serious morale problems usually emerge. Since many enterprise focus on shareholder value, the enthusiastic response of stock analysts often convinces the C-suite that they have made the right decision. I would argue, downsizing treats symptoms not the disease, thereby attacking effects, not causes. How come enterprises can lay off more than 10,000 employees and never realized in the months before the actual event that they employed more people than they need?

Enterprises are social organizations that are responsible for creating productive employment. Downsizing is a clear failure of living up to that promise. The principal source of excess personnel are bureaucratic monopolies within the firm. There are no economic indicators of the performance of bureaucratic monopolies. Neither the value of of their outputs nor their costs are generally known. Because their importance is judged by the size of their monopolies, they tend to grow as much as the subsidizer will allow. When it becomes apparent that a company is not as effective financially and competitively as it should be and is overemploying, downsizing is usually the first way out. But once it takes place, the bureaucratic monopolies continue to make work out of fear and grow as much as the system permits. And the vicious cycle continues.

And internal market economy is the most effective way is the most effective way of preventing or eliminating internal bureaucracies. An internal unit that has to compete against external resources must stay lean; it must eliminate or minimize excess personnel if it is to keep costs down to compete effectively.

Total Quality Management/Six Sigma

“Quality” as applied to products or services has come to be accepted as meaning “meeting or exceeding the expectations of customers.” “Total” quality should apply to all those who are affected by what an organization does: all its stakeholders. The objective of any system needs to focus on a quality organization, not only on quality products and services.

Enterprises can gain huge competitive advantages by focusing more on quality of work life and less on quality of products or services. Most employees/stakeholders regard Total Quality Management and Six Sigma as another path to exploit them, squeezing more out of them. On the other hand, when organizations strive to to improve the quality of work life, stakeholders will find new and innovative ways showing their appreciation. Quantity and quality of output will improve, even more when they are partners in quality improvement programs. Implementing quality improvement programs should be done from the bottom up, not directed by executives. It empowers all stakeholders and provides a feeling of ownership.

The biggest problem with Total Quality Management and Six Sigma is the failure to distinguish between efficiency and effectiveness. Meaning, it does not incorporate ethical or aesthetic evaluations of the products and services whose quality it attempts to improve .

Last but not least, continuous improvement involves relatively small incremental changes made close together in time. This precludes creative quantum leaps. Creative acts produce discontinuities, qualitative changes. Creative but discontinuous improvements are usually worth much more than a string of small but continuous improvements. More often than not, creativity is often discouraged in organizations because it so frequently is destabilizing and disruptive. Creative discontinuities are required to take the lead; continuous improvement is at best a way of getting closer to the leader. One cannot pass a leader by imitation.

In our next installment, we’ll talk about leadership and how to transform it.

Previous installations can be found here: Part 1, Part 2, Part 3, Part 4, Part 5, Part 6 and Part 7, Part 8, Part 9, Part 10.