What is Intelligence, and why do we need it?

I believe that it is time to get back on topic in this blog, which is Intelligence in manufacturing and manufacturing systems in general. With that in mind I was looking thru my archives and came across something I once wrote as a positioning statement for an intelligence product – I guess it is not hard to figure out what company that was for? So here goes…

In one of my previous posts I tried to bring up the point that we need to consider metrics in the context of what they are needed for and how they are going to be used. I believe that is the best way to understand how to provide the right intelligence in a given scenario. But what is Intelligence? Well that is a very serious subject, but let’s take in the context of manufacturing and process improvement.

Intelligence implies the ability to comprehend; to understand and profit from experience. As such Intelligence is information valued for its timeliness and relevance rather than its detail or accuracy in contrast with "data" which typically refers to precise or particular information, or "fact".

In the context of manufacturing, Intelligence is a fundamental ingredient influencing the system’s level of performance in reaching its objectives. A manufacturing business system (humans included) is a system that learns during its existence. In other words, it learns, for each situation, which response permits it to reach its objectives. It continually acts and by acting reaches its objectives more often than pure chance would indicate. We can observe the following about Intelligence in manufacturing:

• It is an enabler for performance – Performance Management
• We need to act on it – Actionable Intelligence
• We need to learn from it – Continuous Improvement

Intelligent manufacturing is not a smarter way of producing things; it is a human centric approach where humans interact with the process be it automatic or manual, gathering the right information to take intelligence decisions based on actionable information. It is much more than visibility. Just having the information is of course helpful, but it needs to be taken one step farther. It needs to be provided in a way that people can intuitively capitalize on it using their knowledge and understanding to make effective decisions.

Henri Poincare once noted in a related topic that “Science is facts; just as houses are made of stones, so is science made of facts; but a pile of stones is not a house and a collection of facts is not necessarily science.”

What is an effective decision then? It is a decision that has an outcome that drives increased performance and continuous improvement. Intelligence is therefore not solely about metrics, KPIs or the ability to drill down into the data. In order to increase performance we need to quantify what is important. Hence intelligence is about quantifying what is important, or quantifying the unquantifiable.

Why are lay-offs so harmful?

Many thanks to Mark Graban that pointed me to a very interesting News Week article titled “Lay Off the Layoffs - Our over reliance on downsizing is killing workers, the economy - and even the bottom line”, by Dr. Jeffrey Pfeffer. The article speaks to the fact that lay-offs in fact do not save a company money, not in the long run nor in the short term. In fact it may have even more detrimental affects on a company than you may realize. The article states with reference to empirical evidence that

“…contrary to popular belief, companies that announce layoffs do not enjoy higher stock prices than peers—either immediately or over time.”

It is an interesting read for everybody, obviously for them that have been laid-off but also for the people doing the lay offs.

I think that the story behind the story is once again the topic of management and leadership. I strongly believe that in any situation it is always about people. That means that it is the people (managers) and their way of running a company that is the root-cause here. I have said before that you manage processes but you have to lead people. When you just manage people then they become an assets and when hard times are upon us, cutting costs by reducing your capital makes sense – right? Well no – isn’t that obvious - Apparently not?

“In the face of management actions that signal that companies don't value employees, virtually every human-resource consulting firm reports high levels of employee disengagement and distrust of management.”

“Layoffs are more like bloodletting, weakening the entire organism. That's because of the vicious cycle that typically unfolds. A company cuts people. Customer service, innovation, and productivity fall in the face of a smaller and demoralized workforce. The company loses more ground, does more layoffs, and the cycle continues.”

This reminds me of one of Dr. Demmings most commonly used quotes:

"Running a company on visible figures alone is one of the seven deadly diseases of management."

In this case it is financial metrics. It seems that in a recession most management executives are thinking of short term financial metrics rather than the long term health of their company? I am sure that these managers do not intend to do this and that they probably believe that they are doing the right thing. However it is this focus on managing rather than leading that is the problem. Managing the company’s business (The process) is more important than leading the people (organization). The end of the quarter's bottom line is more important than long term viability. Although this seem to be common practice, there is ample proof of companies that thrive by doing differently. Yes, by simply motivating and empowering their people. That is what makes them great companies, and also immensely profitable I may add

We are driven by this need to satisfy investors, whom I may add are also typically about short term gain. It seems that everything revolves around the need to make money now - the typical sales man approach, which is to pick up the closest shiniest pennies rather than to look ahead and possibly see a pot of gold on the horizon. Even if there is not one there at least you looked, and people appreciate that – do not underestimate what that means?

Death to the Performance Review!

I came across a blog post on the Lean Blog about “Professor Channels W. Edwards Deming and Writes "Get Rid of the Annual Review” that comments an article in the Wall Street Journal by Dr. Samual Culbert, a Professor at UCLA Anderson School of Management. The premise of the article is that 

“It [Performance Reviews] destroys morale, kills teamwork and hurts the bottom line. And that's just for starters.”

Amazing, finally somebody has successful articulated exactly how I feel and what I want to say after every performance review that I have ever experienced. I am sure many of us have experienced this inexplicable sense of anguish, desperation and “I am not good enough” that follow the days after a performance review. It doesn’t matter how many positive and how many “great”, “excels in”, and “could not do without you” comments you get. We always focus on that one “needs improvement” or “could do better” comment that is probably in there, as Prof. Culbert points out, to justify the pay increase (or not) that has nothing to do with your performance.

“It isn't, "How are we going to work together as a team?" It's, "How are you performing for me?" It's not our joint performance that's at issue. It's the employee's performance that's a problem.”

I believe that the practice of performance reviews is in fact a symptom of lacking leadership skills. In this modern age we love the new shiny tools, and the diet pill. There is no substitute to the social interaction and personal sacrifice that a leader needs to exert in order to create a winning team. Dr. Culbert points out, which is so much in line with my experiences - it brings a chill to my spine:

“Instead of energizing individuals, they are dispiriting and create cynicism. Instead of stimulating corporate effectiveness, they lead to just-in-case and cover-your-behind activities that reduce the amount of time that could be put to productive use. Instead of promoting directness, honesty and candor, they stimulate inauthentic conversations in which people cast self-interested pursuits as essential company activities.”

When lacking skill we naturally look for tools as a substitute. If you don’t know how to fix a car, then it certainly will not help to use the expensive wrench. The scary part here is that there are even software tools for this! You need to acquire these skills and expertise, which in the case of leadership requires both years of experience and some fundamental personal traits that not everybody has. 

As Dr. Culbert also points out we love to measure, yet measuring requires some kind of baseline.

 

“In almost every instance what's being "measured" has less to do with what an individual was focusing on in attempting to perform competently and more to do with a checklist expert's assumptions about what competent people do. This is why pleasing the boss so often becomes more important than doing a good job.”

We love quantifying for many reasons, but it does not work for everything, especially when it comes to leadership and team work. It is another example of “Quantifying the Unquantifiable”.The end results are much more destructive than they are helpful or performance enhancing. Mark Graban points out in his blog post that this is very much in line with the teachings of Dr. Demmings. Demming in fact pointed out: 

"Running a company on visible figures alone is one of the seven deadly diseases of management. "

I have had this blog post bottled up so long that just finally writing it feels good. Thank you for the inspiration Dr. Culbert, I am now officially a fan!