Quotality!

Nearly 30 years ago, W. Edwards Deming gave us his 14 Points for Management regarding how Western management must change. His 11th point was actually two points:

11a) Eliminate work standards (quotas) on the factory floor. Substitute leadership.

11b) Eliminate management by objective. Eliminate management by numbers, numerical goals. Substitute leadership.

It’s been obvious to most people that U.S. management has completely ignored point 11b. Management by objective is thriving very well. Companies still have objectives such as, “reduce customer complaints.” Employees find ways to hide or cover up customer complaints to meet the objective and still obtain a really high score on their performance reviews. Six Sigma has proliferated the use of management by objectives by encouraging the establishment of goals such as training 100 Black Belts (even those who will never use it), completing 100 projects (even for simple improvements), and saving a million dollars per project (while still finding a way to lose money each year). Leadership has definitely not been substituted. In fact, why lead (coach, mentor) at all when management by objective is so prevalent?

But what about point 11a? Are quotas on the production floor (or for that matter, in retail, hospitals, engineering, or sales) still prevalent in U.S. businesses? I’m really asking you. I thought U.S. management had actually gotten a little better in this particular area compared to 30 years ago. But then I was still in high school 30 years ago, so I'm not sure. I have seen a few companies of late that operate by imposing production quotas on the production employees.

This article is about one such company.

First, I would like for you to comment on this article in response to either of these following questions:

• Does your company use quotas of any kind? If it does, describe them.
• Do you think the use of production quotas is prevalent in U.S. businesses today?

 

I’m in the process of teaching, throughout several months, 200 employees about lean principles, lean culture, and value-stream mapping. It’s a company that is very vertically integrated and all of the sites rely on production quotas to varying degrees. One of the main sites produces continuous material. The employees are held to production quotas based on square footage of material produced. 

Of course, when talking to the people about the effect of production quotas on work habits, the following typical comments are heard by anyone paying attention to the process and listening to the people:

• If you have a bad start to the day, due to one of many different possible factors outside of the operator’s control, such as being assigned to one of the poorer running machines, or using bad material, you might as well slack off the rest of the day because you will never hit the production quota for the day anyway.

• Or, the opposite could happen. You have a great production day and reach the daily production quota for the day after six hours of work. Cool! It’s time to slack off again and take it easy since there is no additional reward for achieving more than the expected quota. Besides, your fellow employees will get bent out of shape if you over-achieve. Some engineer or production supervisor might actually expect you to hit that number again.

• People fight over and politick to run the easy running machines. But the machines that are difficult to run and have an impossible-to-meet production quota, and which may also have an important customer tied to the production of parts from those machines, have operators assigned to meet those customer’s requirements. But the operator, angry because he drew the short straw and was assigned to operate the machine that no one wants to operate, could care less about meeting the customer’s requirements.

• On top of all of this quota talk, employees are evaluated on achieving the expected production numbers during the annual performance review, among other things. Many feel totally dejected and disappointed after receiving a bad review when they had little or no control over the situation.

 

The performance appraisal

The employees are then evaluated on their performance against the following criteria and weights (on a 1–5 scale, 5 being the most important), amongst others:

1)     Safety (5)

2)     Quantity (4)

3)     Quality (5)

4)     Team interaction (3.75)

Each employee is rated on a 1–5 scale. “Quantity” is based on a comparison of work output to the quota. The individual ratings are multiplied by the weights shown above. You would think that one would add up those multiplied factors to achieve the overall score. This isn't what happened. The overall score was an arbitrary, noncalculated number, which supposedly took into account all of the evaluations and weights appropriately. But it did not. It was primarily influenced by “Quantity” even though the weight of “Quantity” was supposed to be “4,” less than “5” weight for “Quality.” So, while the company appeared to stress quality over quantity, it did not in fact do so in practice. 

After one set of performance evaluations, many hourly employees received below or unsatisfactory performance results in their annual review based solely on quantity produced. It is a company policy that if any employee receives below (2) or an unsatisfactory (1) overall rating, they do not receive an increase and then they have to go through a 30-, 60-, and 90-day reevaluation review process. As was stated to me by a very reliable source within the organization, “you will never see any employee receive an outstanding (5) overall rating. If you do, it will always be reduced by human resources. Sometimes, even when an employee receives an “exceeds expectations (4) overall rating, it will be reduced. Management is led to rate everyone as they meet expectations (3) or below, because they think it drives improvement.”

At one point, nearly 60 percent of the manufacturing employees were on probation.

How sad. No wonder Deming encouraged us all to throw out our performance appraisals and quotas. Good thing we listened to him. Ha!

Deming’s principles have enduring permanent value. They are probably more important today than when he spoke of these principles back in the 1980s. The two business practices of quotas and performance appraisals continue to destroy employees overall and affect costs, productivity, and quality negatively. When are we going to wise up America? We can’t afford to keep managing our companies stupidly if we are going to remain competitive.

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