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Dec 6, 2019

In our 30th "Deming Lens" episode, host Tripp Babbitt shares his interpretation of wide-ranging aspects and implications of Dr. Deming's theory of management. This week he looks at the problems with goals, targets and quotas.

Show Notes

Deming Lens - Episode 30

The Problems with Goals, Targets and Quotas

System Capability

Arbitrary vs. Rational Goals, Targets and Quotas

Financial Targets




Tripp: [00:00:14] In episode 30 of the Deming lens, we'll take a look at the problems with goals, targets and quotas, including looking at system capability, arbitrary versus rational goals and financial targets.


Tripp: [00:00:32] Hi, I'm Tripp Babbitt, host of the Deming Lens, and this week I'm going to cover the problems with goals, targets and quotas. Now this goes back to my series that I just completed on Demings, Dr. Demings 14 points, which is point eleven, eliminate numerical goals, numerical quotas and embryo substitute leadership. And the reason I'm bringing it back up is because it's been very well publicized lately with a lot of things that are going on, especially around this time of the year with the delivering of packages and things of this sort. But I want to start with a story that I experienced when I was back in college. And a friend of mine came to me and said, hey, guy found a great summer job. We can go and work at RCA. Now, RCA was unionized and he knew somebody in the union and they were looking for extra workers for the summer. And this particular plant that we were gonna be workers at for RCA did vinyl records. And so are we. We signed up. We were paid a lot more than I would have made anywhere else because of the union types of salaries, which was an interesting experience in itself. Not for this. This podcast episode, though. So we went in, we were trained, but the job was fundamentally what I would have called easy to do. And basically what you did is you had a.


Tripp: [00:02:28] Next to a pile of vinyl stock, and you would take this vinyl stock and you would place it on this machine and your hands would go up and grab a couple handles and you would pull the press down on top of the vinyl stock and it would create a record. And that was the job in essence.


Tripp: [00:02:53] And obviously, you would lift it back up. You take the record out, you put it in place and you go on to the next one. Well, I had a quote. I don't remember what the quota was. This is quite a while ago, probably 40 years ago or more. And I remember doing it and I was putting it out. I knew I was working faster than everybody else because I could just see the volume of things that I was doing. And, you know, it wasn't anything I really had to do because once I put the press down, it was timed. So it would automatically go and press the record. Well, I did this for the first couple of days and I came and got paid attention to by management.


Tripp: [00:03:37] And they said, you are creating a lot of rework. You have defects in your vinyl records, and I was like, okay, I'll try and do better.


Tripp: [00:03:55] I didn't really know what to do better. So I went and I continued to do really what I was already doing. I was trying to pay attention, okay, what did I miss? Something. I watched other people. Is there something in them that I wasn't doing that they were doing? And I went through this process and. Lo and behold, they come back to me a couple of days later and they say, hey, your error rate is still twice as high as everyone else's. And I said, hey, look, you know, watch me do the job. And so they watched. And, you know, basically they had no clue it was that I was doing. So I continued to do it and they finally came back to me. After going back and forth, both basically time me, my error rate was still twice as high. I even slowed down. I mean, I thought, well, maybe I'm getting paid attention because I'm in the union. I'm going too fast or something to that effect. But they just basically said, no, you're your area rates twice as high as everyone else. We're sorry. We're gonna to let you go. So I was let go at that point. I was puzzled. I was it was kind of a demeaning experience. And what I found out later from my friend who had continued to work there was the machine that they had put me on, was responsible for a high error rate in the union, knew this, but they were never able to get it fixed to management.


Tripp: [00:05:26] I don't know whether it was a matter of funds or, you know, you could speculate as to what was going on. And so whoever wound up on that machine would have a higher error rate. Well, it sounds ridiculous, but this is kind of the whole thing around code is it's it wasn't a matter of I could certainly put out the volume, but the defects were there because the machine was broken. And, you know, you see a lot of this today. And so when we're looking at quotas and targets and goals and things of that sort. You know, I first think in terms of several things.


Tripp: [00:06:10] One is we'll cover each one of these is the what is the system system capable of doing? Talk a little bit about arbitrary versus rational goals, targets and quotas. And then the third thing I would talk about is the financial defense. Financial targets are outcomes and we use these as goals and things of that sort.


Tripp: [00:06:35] So let's start with the first one, which is system capability. And we looked at the machine that I was working on and it was capable spitting out quite a few, but it was also vinyl records, but it was also capable of creating high defects.


Tripp: [00:06:50] Now, any today I would have gone with that machine and I would have known what the defect rate was had been able to compare. I would have known not to blame the worker, but the main thing was the system. In this case, the machine and myself were not capable of meeting this quota of the number of things because of the high number of defects that I was producing. And so, you know, we see this and this is why I'm doing this particular Deming lenses in this episode is because right now we're in the Christmas season and people are buying gifts and a lot of them are being bought online. You hear these horror stories, not only of porch pirates, but you also hear about people throwing packages. You hear about wrecks that are happening because they're trying to work at breakneck speeds in order to deliver these packages. And so this is kind of the clue of system capability, even hiring more workers. Did they get trained? Who knows? But in essence, the system, the wheels begin to fall off in your in your organization when it's operating beyond its capability.


Tripp: [00:08:14] Now, it might work. Okay. In the short term. So in other words, I could work, you know, 100 hour weeks for maybe a couple weeks before I start to wear out as a human.


Tripp: [00:08:27] And but but working at some of these speeds, you start to see the people throw the packages onto the porch. You see them operate just to be able to meet whatever quota is that they're trained to to do. And this goes for pickers. This goes for fix repair. This goes for every type of industry, really, that I could think of as when a system is working beyond its capability, that that you start to see defects of some sort. And in this case, it might be, like I said, accidents, throwing packages and things of that sort. And bigger incentives to make these things happen, to meet these unrealistic quotas actually make the system. Worse. So the question becomes, how do we need to work on the system and we'll get back to this when we start talking about financial targets and third segment. Well. That's all I really have to say about that.


Tripp: [00:09:28] Now, the second part I want to cover is the arbitrary, the arbitrary versus rational goals, targets and quotas and rash. By rational, I mean that they are things that are tied to a rational goal would be, hey, if we don't get our defects down to 1 percent, we're gonna go out of business. That's that's a rational thing if it's true. You know, we can't compete if we're at 5 percent and everybody else is at 2 percent or 1 percent.


Tripp: [00:10:01] So we have to have certain goals, targets or quotas based upon keeping, you know, staying in business. So what's differentiate between an arbitrary versus a rational goal, target or quota? So arbitrary just means I come up with a number. It's it's what you see a lot of times in strategic planning processes. Oh, next year we're going to grow by 15 percent and off everybody goes. And they tried to meet this arbitrary goal. And oftentimes these things are tied to things like management by objectives. We still see that. I still see it. It's unbelievable. I still see management by objectives in every company. And it's this very Taylor istick. This is Frederick Taylor back in the early nineteen hundreds where, you know, you're given your target and your goal, your objective. And you go out and you meet it and you get typically it's tied to some reward and that that too is tied to Frederick Taylor scientific management. The MBO concept itself came from Peter Drucker and actually when Deming Dr. Deming started railing against it. It was Dr. Drucker that came back and said, basically, that isn't the way I intended for management by objectives the work, but the whole concept regardless. The whole concept is based off of I have objectives. We break down though, the whole pieces. So in other words, if I'm going to go 15 percent increase in sales, what's your responsibility for the Northeast sales region and what is your responsibility for the western region and so forth? And so they're given these arbitrary goals based on it.


Tripp: [00:12:02] And if everybody meets their goal, supposedly everything gets better. Well, oftentimes you find the system that you work in is not the sum of its parts. It it's beyond. That's exponential. What you get the synergistic effect of being able to operate within a system is missing. And so we try to add up these parts, we break them or in this case, we're taking the 15 percent goal in sales and breaking it out by region. OK. You're going to do 10 percent. You're going to do 20 percent, because that's what we believe. These are arbitrary numbers. What we don't know is what the system's capable of. And this kind of leads us really all I have to say about that.


Tripp: [00:12:48] But is the financial targets that are associated with this. So the financial targets typically are, ah, arbitrary. But they're also outcomes, their outcomes of what we create. So it's a scorecard. And, you know, I, of course, hear about the balance scorecard and all those types of things balancing these things. It's to me, it doesn't make a lot of sense. But from a financial target standpoint being an outcome, the question becomes and it's Dr. Demings famous question, that is my favorite phrase, which is by what method? How are you going to achieve these financial targets? How are you going about getting a 15 percent increase in sales? How are you going to have less defects out of a particular manufacturing operation? And these are the things that are missed in when we're looking at numerical goals, quotas and things like weight management by objectives. So I'm hoping that by virtue of you listening, they should go and take a look at your world own organization. Look take a look at some of the goals that you set out. Are they tailoring stickin in nature? Have you taken a piece and then broken it out and then said, Oh, if everybody hits this now, you can go back and listen to Paul Marshall O'Bama companies. We talked about this to suit to a certain extent, which in the context of performance appraisals. But if everybody's hitting their performance appraisal numbers and the company is still going out of business, there is a problem. It's it's the system that needs to be work on. That needs to be improved. And we start to start asking the questions if we've got targets out there, whether they're financial or whatever, are they arbitrary? Are they rational tart targets? You know, and arbitrary. Still, somebody else is going to say, because I get this all the time when I'm talking to companies, there's always somebody in the organization.


Tripp: [00:15:03] I'll say, well, you know, Mike's not arbitrary because it was given to me by my manager. Well, that isn't what I mean. It's arbitrary by nature of the number itself. And do do you have a method to achieve it that you believe will work? And I think this is where people really miss out, is being able to find methods that will achieve the types of things, the types of increases that they're looking for. And it might be an innovation. It might be through failures, which is part of innovation. And you listen to the Doug Hall episodes where we talk about this to great extent about failing in order to get better and finding better methods. And really, the companies with the best methods are the ones that are going to be who wins the competitive battle that is out there between organizations. So so go out. Take a look at your goals, your numerical quotas, take a look at the embryo system if you have it. And I guess a lot of large companies have it. Amazing. But anyway, ask the question, do we have a method to achieve this? And if we don't, maybe we should be looking like looking at that as an organization.


Tripp: [00:16:28] Thank you for listening to the Deming Institute podcast. Stay updated on the latest blogs, podcasts, programs and other activities at Deming dot org.