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Mike Micklewright

Quality Insider

Quotality!

Definition: The insane business practice that assumes productivity will be maximized by instilling production quotas into the business system

Published: Wednesday, March 10, 2010 - 10:00

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.

Discuss

About The Author

Mike Micklewright’s picture

Mike Micklewright

Mike Micklewright has been teaching and facilitating quality and lean principles worldwide for more than 25 years. He specializes in creating lean and continuous improvement cultures, and has implemented continuous improvement systems and facilitated kaizen/Six Sigma events in hundreds of organizations in the aerospace, automotive, entertainment, manufacturing, food, healthcare, and warehousing industries. Micklewright is the U.S. director and senior consultant for Kaizen Institute. He has an engineering degree from the University of Illinois, and he is ASQ-certified as a Six Sigma Black Belt, quality auditor, quality engineer, manager of quality/operational excellence, and supply chain analyst.

Micklewright hosts a video training series by Kaizen Institute on integrating lean and quality management systems in order to reduce waste.

Comments

Quotas

Leadership is the appropriate use of relationships and different tools to align organizations, help people grow, and drive results. Quotas can be appropriately used to ensure pricing structure and other items reflect practices. They aren't only used for browbeating or enabling laziness. Both quotas and objectives can be positive when used within the context of proper leadership. There is always more than one way to get things done. Commit and lead after you make good choices and your odds of success are greater. You can't look at tools as bad or wrong without some context of how they are used.
I think both objectives and quotas are tools, when appropriately used, that make sense and help with alignment and improvement. I use them, and yes, I am a certified ASQ BB. I also understand tools and concepts can be misused without proper leadership.

Second part of 11

We have quotas. My folks dont pay much attention to them. Too many delays and components that aren't ready for them to get their machine going. When they have no delays the quotas are easily met.

Deming's point was more about the "Substitute with Leadership" part. However, it is ludicrous to think that production measurement and comparison should be ignored. Instead, use the data to lead and share with folks. "This is what we have sold to our customer." "This is where we are." Measure and fix the process.

Here are the comments you asked for

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.
Of course my company uses production targets. They can be called quotas I guess. Each operation has a target for average production units per shift, day, etc. Of course we need to manage this because we have committed product to customers in a contract, therefore we need to monitor and measure and do what is needed to ensure we deliver what is promised on time. But, it is not a quota in a sense that the operator makes more on the days they exceed the target and less on the days they don't. There is one incentive rate for the month based on productivity that impacts pay.

Do you think the use of production quotas is prevalent in U.S. businesses today?
I assume it is prevalent to the extent that businesses are focused on how much product they are making in order to ensure customer satisfaction. And their efficiency and internal prodcution cost is highly dependent on it. So of course they should have some version of a quota in place to make all aware of how important productivity is. It should be right up there with safety and quality. For the sake of the customer as well as the organization. Especially in places where employees think it is OK to "slack off" as you described above.

Are we in this together? Or are quality professionals trying to create and widen a divide that should not even exist?

PLease reconsider

Maybe Demming was wrong. And maybe quality system professionals continuing to bash management isn't getting them anywhere.

Point #1 - Where is the outcry that ISO 9001 depends on effectiveness and efficiency of processes - by definition a numbers game? Are you willing to say that ISO got it wrong? Or does it make a better story and serve your interest to continue to play the us against them card - quality professionals against management?

Point #2 - Interesting union environment in that company you referred to - who could blame them for needing quotas when the attitude of the workers is that is they have a bad day or a good day then it's OK to slack off. I have seen this. You describe a condition that is hard to change from either side. But I know without a doubt that those employees have and will continue to resist changes and improvements. And those that blame management are not correct. Both sides had a role in letting it get this way over many years. But you can bet management is the only one who has tried to change it and the union workers have fought every step. So go ahead and keep bashing management. I think you are exploiting the us versus them mentality. And why not? It worked on me. I reacted.

Quotality

Good job, Mike.
The only good news for US competitiveness is that China is infected with the same disease. In my years over there I found that Point 11 was violated everywhere.