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Alan Nicol

Quality Insider

The Ninth Waste and the Goose That Lays Golden Eggs

People are more than just ‘resources’

Published: Tuesday, May 19, 2015 - 16:23

Perhaps the biggest mistake business leaders make is to assume that people are resources like any other. The truth is that people are resources unlike any other. At the heart of many business disasters is the misunderstanding that people and man-hours are one and the same.

A close friend of mine is a regional program manager for a successful software business, and she is looking for an escape. The business is under new leadership and has been reorganized. Much of that reorganization was important and necessary because the old leadership had become ineffectual.

An unfortunate side effect of the overhaul is that many of the legacy program managers and sales personnel have been reassigned or removed. Business sales have fallen drastically, and the sales teams are being punished. My friend is surviving very well, for the moment, but she sees writing on the wall that isn’t good.

The root problem is that the current sales force consists almost entirely of new recruits, either freshly minted college graduates, or people new to the business, or both. They don’t know the business, the software they are selling, the existing or new customers’ businesses and challenges, and they don’t have the rapport, relationships, or the network of contacts that the previous sales force possessed.

Some things, very important and valuable things, are not inherent skills or easily learned processes. Some very valuable assets are found in experience and tenure.

Another friend is counting the days until the end of the second, third, and final business quarters of this year. Many of her colleagues have been offered early retirement packages, and some of them are accepting. In a few cases, she will be relieved that some personnel-based roadblocks to change and improvement will be removed. On the other hand, she is apprehensive of the burden and workload she will inherit when some of the only personnel who truly understand the business and processes suddenly disappear.

Business metrics such as revenue, productivity, profit margin, manufacturing efficiency, and so forth don’t really reflect what is most important for business success. The skills, knowledge, understanding, and ideas of our people are what truly make us successful.

Machines can replace people for moving materiel and performing certain repetitive tasks. Processes, when they are properly engineered, can make people more effective. Neither can replace the decision-making, idea-generating, or the improvement potential of effective and experienced people.

People mean more to a business than just productivity. Our personnel are our sources for process improvement, business growth, and innovation. The lean methodology, at least as practiced by some schools and users, recognizes this and identifies the missed potential of people’s ideas as the ninth waste.

If our personnel have ideas for how to improve our processes, products, sales and marketing, or any other aspect of our business, and we don’t capture or make use of those ideas, we waste that resource by missing the opportunity. If our personnel don’t have ideas to improve or don’t know how to identify improvement opportunities and propose beneficial changes, we have wasted their potential by not showing them how.

Our people are the proverbial goose that lays golden eggs. They are the true source of our profitability, productivity, and every other business metric. Every process improvement, every innovation, every time someone makes a sale or designs a solution based on his experience and acumen is a golden egg that contributes to our success.

When we forget that, we mistakenly make business decisions to swap or change people without realizing the full impact of losing the collective intelligence and acumen those people bring to the table. Such things are intangible, impossible to measure, difficult to identify, and therefore easy to overlook while poring over numbers and business metrics.

A team of engineers and designers contracted in India (just to choose a common example) will not immediately replace our expensive engineering teams here in the United States or Europe. This is not because they are uneducated or unskillful. It’s because they are unfamiliar. It will take years to re-create the communication channels, the business understanding and acumen, and the relationships with other business functions and customers. It will take years to rebuild best practices and develop the undocumented collective historical knowledge that helps us avoid already-experienced mistakes.

That period of relearning would be, and has been for some, extraordinarily costly. The effectiveness of the team during that period would be less than the prior team. The learning process, necessarily composed of mistakes and expensive lessons, will be exactly that—expensive. It is impossible to estimate that cost until it has been incurred. It is, therefore, easy to vastly underestimate.

An excellent example appeared in “Complaints Soar for Frontier Airlines; CEO Calls Situation ‘Profoundly Disappointing,’” a recent article by Mark Harden published in the Denver Business Journal. The article explains that Frontier Airlines received more customer complaints to the Department of Transportation (DOT) for the month of February, by nearly a factor of two, when compared to the next worst major U.S. carrier. Its number was 29 times that of the carrier with the least consumer complaints to the DOT. Frontier had been the worst carrier for consumer complaints for 2013 and 2014, but the February 2015 numbers were four times higher than the previous February.

David Seigel, Frontier’s CEO, explained in an article in Bloomberg that outsourcing call center jobs led to personnel departures and reduced productivity—and subsequently, to poorer performance for customers. He acknowledged that the decision to outsource the call centers “...took a problem that was already bad and... made that problem worse.”

Outsourcing isn’t always bad. A good reason to outsource is because a supplier can do something better than we can. Certainly that was the thinking behind the decision at Frontier Airlines. However, it also appears to support the observation that swapping one group of people for another does not occur as simply as swapping out capital machinery. Those people affect other people and processes and customers.

We can’t assume in our business decisions that one group of people is as effective as another group of people with a similar skill set. That holds true for a single individual, too.

If we identify our personnel with the proverbial goose that lays golden eggs, then we should absolutely groom that goose to maintain its overall health. We must be cautious, however, about plucking, trading, or butchering that goose without considering the impact to our wealth from the goose’s golden eggs.

Before you make decisions concerning your personnel, consider not the resource numbers and metrics, but instead the intangible knowledge, experience, and effectiveness that will need to be maintained or replaced. What will be the plan and the expense for that?

Look around at your organization’s culture. Are you doing the right things to enable your goose to lay the most golden eggs? Are you encouraging or discouraging ideas and improvements? Are your personnel enabled to do their best and put forth better ideas?

Don’t pluck or butcher the goose. Instead, focus on getting the most golden eggs.

First published April 24, 2015, on Product Design and Development.

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About The Author

Alan Nicol’s picture

Alan Nicol

Alan Nicol, the executive member of AlanNicolSolutions LLC, is an experienced business improvement and cultural change leader with a background in engineering and product development. His skills and experience include cultural change leadership, continuous improvement, business performance improvement, lean, Six Sigma, design for Six Sigma, product development, innovation methods, engineering design, systems engineering, engineering management, reliability engineering, value engineering, project and program management, system integration, total quality, and ISO 9001. He writes a blog, Business Wisdom Within.

Comments

Scott Adams agrees

One of my all-time favorite Dilbert comics addresses this very issue:

http://dilbert.com/strip/1995-09-22

Reminds me of Henry Mintzberg's comment about human resources

>> Quiet managers strengthen the cultural bonds between people, not by treating them as detachable "human resources" (probably the most offensive term ever coined in management, at least until "human capital" came along), but as respected members of a cohesive social system. When people are trusted, they do not have to be empowered.

Henry Mintzberg, "Managing Quietly," Leader to Leader, No. 12., Spring 1999.

See http://www.mintzberg.org/ for more info.