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Quality Transformation With David Schwinn

Management

Helping the Most of Us

Curing a larger system so customers and organizations can thrive

Published: Monday, August 22, 2016 - 10:27

It’s hard these days to miss the passion of people who support Donald Trump or Bernie Sanders, the steadfastness of the Tea Party, the outrage of the Occupy Wall Street group, and the frustration of young people who have so given up on the system that they choose not to vote. Most grievous is the tragedy of folks who lost their homes and jobs in the 2008 recession and are still struggling to find their way back to a satisfactory life style. Trying to make sense of the underlying dynamics of the systems that created this situation prompted me to read Saving Capitalism, by Robert Reich (Penguin Random House, 2015). I found his observations, analyses, and recommendations to be thoughtful and powerful.

Reich explains two current worldviews as follows:
“For what seems like an interminable period of time, the central political debate in American politics (as well as in much of the rest of the capitalist world) has been over the seeming choice between the ‘free market’ and the ‘government.’ Those on the political right have argued for more market and less government, which normally means lower taxes and less public spending. Those on the political left have wanted more government and less market, which typically has meant higher taxes (at least on the wealthy) and more public services.

“This debate hides the larger reality: the necessary role of government in designing, organizing, and enforcing the market to begin with. It therefore obscures myriad choices facing legislators, administrators, and judges in carrying out this basic task, a task that never ceases because ongoing changes in market conditions, as well as innovations and technological advances, continuously require that new choices be made and old ones be reconsidered.”

As an engineer and a businessman, I was trained in the great efficiency of the “free market.” At the same time, however, I was told to avoid operating in a “free market” at all costs because it was too difficult. We were taught to differentiate ourselves in the marketplace as a way to avoid competition; life would then be easier.

Although the focus of what we learned in school was on differentiating our products and services in the marketplace, in practice, the largest businesses eased their burdens by not only differentiating products and services, but also by destroying or buying out their competition, and by taking advantage of their employees, suppliers, and communities. I think Reich and I both agree that we, as business people, at least in the largest businesses, have been unusually successful at achieving that ease of operation during the last 35 years or so. Remember the term “too big to fail?”

As large successful businesses, their leaders, and Wall Street have been slowly and steadfastly working to change the rules of the game to make their lives easier while publicly espousing the “free market,” their economic wealth and political influence over those rules have increased, as has their power over their customers, their workers, their small stockholders, and small business in general. Reich argues compellingly that one overall result is that while worker productivity in the United States has continued to steadily grow since 1948, real worker hourly compensation stopped growing in the late 1970s. Another result is that the richest 400 Americans have more wealth than the bottom 50 percent of Americans put together.

Reich goes on to explain, “Once the middle class exhausted all its methods of maintaining spending in the face of flat or declining wages—with wives and mothers surging into paid work in the 1970s and 1980s, everyone putting in longer hours in the 1990s, and households falling deeper in debt before 2008—the middle class as a whole was unable to spend more.” As spending declines, the economy declines, and everything begins to fall apart. As workers feel treated unfairly, they begin to cheat, stop contributing, and trust dies. That could and has led to societal unrest, chaos, and threats to democracy itself.

Reich, however, is optimistic about America’s response because we have been in this kind of situation before. During the 1830s, the late 1800s, the 1920s, and the 1970s, we were in similar situations. In those instances, we changed the rules and increased enforcement of the rules of this larger, political-economic system in order to help the majority achieve broad-based prosperity instead of merely those who already possessed most of the income and wealth. We have done it before. Through civic action, Reich believes we can do it again. I believe we must do it again.

Reich asks us to use our voices, our vigor, and our votes, both as individuals and within advocacy groups, to get back our economic and political control. He makes many specific recommendations, including:
• Getting money out of politics
• Banning gerrymandering
• Eliminating the revolving doors between government jobs, and those in Wall Street, lobbying organizations, and larger corporations
• Increasing enforcement of and changing, if necessary, our anti-trust laws
• Limiting intellectual property rights
• Increasing the contract rights of employees, franchisees, and contractors
• Stopping the use of buybacks, stock manipulation, and insider trading by CEOs and Wall Street
• Changing the bankruptcy law
• Increasing the minimum wage
• Increasing union support

When the whole movement of continual improvement that led to Six Sigma began, W. Edwards Deming listed 14 obligations for management to achieve transformation of systems. He also mentioned what he called diseases and obstacles to transformation that were beyond the control of any one manager within his organization, such as “emphasis on short-term profits.” Overcoming those diseases and obstacles requires large-system change, usually beyond the borders of a single organization.

Reich offers optimism and a way to overcome a seemingly overwhelming disease by helping us understand and change the larger systems in which our organizations exist. If we don’t get busy to try to change these larger systems and cure this disease, the well-being of customers and other people who support the survival of our organizations will continue to decline. Our larger job is to create a world that works for everyone, not just the very rich.

Because I so respect Reich’s ability to understand and explain very complex situations, I asked him to review this column before submitting it, to be sure that I had not misinterpreted him. I also asked him if there were other ways, besides those already in his book, that we could use to help solve this problem. He responded by suggesting that we could become members of Common Cause, a nonpartisan group dedicated to getting big money out of politics.

Let’s get busy. There’s much to do. As always, I treasure your thoughts and questions.

Discuss

About The Author

Quality Transformation With David Schwinn’s picture

Quality Transformation With David Schwinn

David Schwinn, an associate of PQ Systems, is a full-time professor of management at Lansing Community College and a part-time consultant in the college’s Small Business and Technology Development Center. He is also a consultant in systems and organizational development with InGenius and INTERACT Associates.

Schwinn worked at Ford’s corporate quality office and worked with W. Edwards Deming beginning in the early 1980s until Deming’s death.  Schwinn is a professional engineer with an MBA from Wright State University. You can reach him at support@pqsystems.com.  

 

Comments

Perspective on how to support the Middle Class

David writes a good perspective on the current US economic system. Robert Reich certainly has his own views of what causes the economic disparities as well as his preferred approach for lessening the burden on the middle class. My perspective takes a more proactive approach for those who are struggling in the middle class. Yes, the manufacturing jobs have gone elsewhere because other populations are willing to work for less to do the same jobs. Forcing salaries and prices up through Unions does not make sense to me. Consumers will simply continue to flock to WalMart where they can buy goods made in China, India, Thailand, etc. In a global society, we need to compete as individuals, not as governments. Decisions to buy are individual. If we could force people to buy American, then Unions might be an answer. Businesses cannot stay in business paying their US workers what they need to live under US life style expectations. US citizens need to discipline ourselves to learn the new skills that bring in higher wages. David is right - this is a system with checks and balances. Reich is suggesting some pretty serious tampering. 

Henry Ford was right

"Reich goes on to explain, “Once the middle class exhausted all its methods of maintaining spending in the face of flat or declining wages—with wives and mothers surging into paid work in the 1970s and 1980s, everyone putting in longer hours in the 1990s, and households falling deeper in debt before 2008—the middle class as a whole was unable to spend more.” As spending declines, the economy declines, and everything begins to fall apart. "

It is to be remembered that Henry Ford built the American economy by enabling the middle class to spend more.