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Sep 26, 2014

Don't Dread The SMED

Dreading Change

By Colin D. Baird

The time has come for improvements to your business, but you’re dreading them.  I know, as  CEO you don’t like variation-especially since it represents change away from your original thinking, but improving how you look at it may help you grow your business without adding more labor costs.

Lots of smart people have been studying and measuring the wrong things in America.

One night, a friend, and several professionals with MBA, CPA, and CFO proudly displayed on their business cards are helping you look at your company’s financials. You are looking closely for the obvious diseases so you can reduce the malignant maladies that are most acutely apparent. When you get to labor costs, prima facie evidence of a spreading illness catches your eyes. You stop moving down the page, and begin collaborating.

On the horizon, will our already escalating labor costs continue to grow at the same rate? You stop to think. Where are our opportunities to keep labor costs down in a meaningful, productive way without the need for more layoffs, and command and control in our employee’s lives? 

Your friend, a retired Japanese engineer-certainly not the person you normally call on for help with your business suggests, “Reducing variation may be key to achieving your objectives.”

Let me explain, he says.

Variation affects wages, profits, employee engagement, and the need for continuous improvement. “Let’s look at your problems in manufacturing.”  He then proceeds to tell you something you can’t forget.

“Don’t dread the SMED,” he says.

“Today’s complex machinery is very capable of doing what you want it to, but it’s also inefficient. It is common for set-up times on a single piece of machinery to exceed 2 1/2 hours…When I worked in Japan, using Dr. Deming’s Plan, Do, Check, Act model, our teams reduced set up times from hours to just single minutes … Single Minute Exchange of Dies, or SMED, enabled us to produce more goods at much lower costs.”  He laughed and said, “We beat the Americans to the punch using American ingenuity and Japanese creativity to help us improve… Americans tried to force employees to work harder, we just worked smarter.”

“From my calculations, continuous improvement efforts can shave at least 139 minutes per machine off your current set-up times. Your current average is not visible on your income statement, but its outcome sure is.” “Don’t DREAD the SMED!” he said.

For more ways SMED is helping other stakeholders, visit

Dreaded Interruptions

If a machinist needs to travel, customers have to wait.  This is dead loss in terms of labor expense for stakeholders, and customers. It wasn't the machinist's intent to travel, but circumstances beyond his control required it.  This change in your machinist’s plans-variation as we know it,  just drove your labor costs up, but the cause behind why his plans changed were not visible anywhere on your income statement.

Your Dreaded Production System

Your machinist isn't responsible for the physical layout of the shop, the distances traveled, where parts travel, or the quality and speed of equipment. He's not responsible for how and when equipment is maintained, when it will break, the effectiveness of lubricants used to machine parts, nor the purchase of lifts and rails that move parts faster and safer.  His job is to machine parts; your job is to remove his production barriers, and continuously and forever improve the system that prevents him from doing his job well.

Dreading How Far Employees and Parts Travel

People, parts, and equipment travel.  Travel is time that can be applied to your customer’s products. Travel is not what the customer is paying you for, and not what your employees want to do; building a quality part is. Travel is pure waste. Improve your facilities layout, cut walking distances down, and you decrease the time it takes your customer to get his part. Along with it, your money accumulates faster. Your new income will be on the financial statement for everyone to see, but your colleagues won’t know where it came from.

A Dreadful Conclusion

“Executive Management's traditional solution for solving many American production problems has been typical of the disease plaguing American leadership: use layoffs to reduce labor costs, while ignoring the bigger picture of variation that drives costs up.  With only one in three employees actively engaged at work, it's obvious, blaming your employees just isn't the answer.” 

“Variation- such as going from 2 ½ hours to just 11 minutes in machine changeover times isn’t visible using financial analysis. But the benefits from continuous improvement will always appear on your income statement… It turns out, we engineers understand a bit about variation,” “Don’t DREAD the SMED,” my new Japanese Sensei proclaims.


Removing America's Corporate Cancer

Removing America's Corporate Cancer


By Colin D. Baird


One of the more controversial recommendations-historically speaking, was for American leadership to remove and abolish the merit rating system. Thirty years ago, Dr. W. Edwards Deming described pay for performance systems as a fast spreading disease already "leaving people bitter, crushed, bruised, battered, desolate, despondent, and unable to comprehend why they are inferior. The basic fault of the annual appraisal is that it penalizes people for normal variation of a system." -Dr. W. Edwards Deming, The Essentials Of Deming


The merit rating system sounds appealing though. ""Increase employee's pay-they'll work harder,"  "give them more benefits-they'll produce more goods and services," but just what have we learned from our current method for rewarding hard working employees today? Working harder does not mean working smarter, or more efficiently, nor does it eliminate the most common cause of loss in any business- that is, variation.


Variation occurs anytime we deviate away from an optimum target. Dr. Genichi Taguchi, a Japanese engineer and statistician developed the Taguchi loss function theory. Dr. Deming praised Taguchi for making clear there is minimum loss at the optimum target, and an ever-increasing loss with departure either direction away from the optimum target. The causes behind, and economic impact from variation is real. Because the causes of variation drive a substantial portion of the losses businesses endure, the merit rating system does nothing to address the real causes behind losses in human productivity, yet claims it does.


Consider a situation that occurred between Ford and Mazda. Both were building transmissions for a Ford product using identical specifications. Ford was receiving failing transmissions back from numerous angry customers-all transmissions built by Ford employees. Ford however was not experiencing the same results from transmissions built by Mazda employees.


A root cause analysis found far more variances with Ford transmissions than with Mazda. Ford's variation away from the optimal target was still well within their engineer’s specs, but outside the near perfect conditions Mazda was achieving.  Mazda was constantly reducing variation by consistently improving the methods, materials, and machinery to constantly try to get closer to the optimum target. Ford’s production system, while stable, built transmissions within their own specs, but managers did little to reduce variation, and felt no need to continually improve the process to try hit the target.


Mazda employees achieved these objectives by working with management when conditions took them away from their nominal target. Management constantly removed any barriers that would have prevented employees from building to these optimal targets. Leadership did not remove people as they so often do in an under performing company, they removed barriers -there's a big difference.


As it turned out, Mazda built higher quality transmissions less expensively, had fewer defects, and built much closer to the ideal conditions called for in Ford's specifications. Because of Taguchi and Deming's ongoing work and collaboration with Japanese industry on issues relating directly to statistical quality and process control, Mazda knew their costs would be less by building to higher standards because the costs of poor quality: re-work, customer dissatisfaction, and returns, only drives costs up, not down.


It was not Ford employee's poor craftsmanship, nor was it Mazda employee's superior work that caused the wide variation-for they both were doing what management told them to do. Ford's management team believed building within the specified parameters meant outcomes would be acceptable to customers. Mazda leaders believed in Taguchi’s theory that always building at the optimum target was best for the customer, and also the least expensive approach for the manufacturer. Less variation means higher quality, a better fit, fewer customer returns, less costs to build, and happier workers who are able to continually refine and improve their own their skills.


The resulting impact to Ford’s production line workers and the culture on the other hand was demoralizing. Besides the collateral damage from layoffs, no employee appreciates the constant scorn in the press about their company’s own poor workmanship. The resulting secondary impact of the merit rating system: Man’s self esteem and dignity goes down. An employee’s right to remain a highly skilled craftsman is taken away from him when production-not quality, is the company’s primary aim. As we learn however from Taguchi, the cost of poor quality is actually far greater than the cost of superior quality since variation is less when we operate closer to the ideal target conditions. The merit rating system does nothing to help employees achieve this.


Rather than use statistics to determine where causes of variation actually comes from, most executives in America instead still rely on income and balance sheets as short term indicators to see whether the business's profitability has materially changed from one quarter to the next. When stock price or income statement improvement doesn't occur rapidly enough, it results in rapid fire change, aka employee terminations. 


As these terminations carry forward throughout the business, productivity then falls farther away from the ideal target. This results from ongoing production demand, but decreased production capacity. Cash flows then plummet as on time delivery declines. This continues to create chaos as more variation creeps in. Once this materializes, the business goes into free fall. The merit rating system does nothing to address these problems, rather it assigns the blame and cause of ordinary variation to employees, teams, and even Chief Executives- further demoralizing the individuals, and the overall organization's culture while constantly driving up variation.


If you look at the data, you'll see Deming was correct. The merit rating system is leaving many talented people hanging their heads in disbelief after they leave the bosses office following an ‘average’ performance review. The system contributes very little to increasing employee happiness, and because of variation, merit rating systems do nothing to increase productivity. According to Towers Watson, only 1 in 3 employees feel truly engaged. This leaves people wondering why they can’t enjoy their job. It also leaves people looking for the exit sign when they come to work.  According to the Bureau of Labor and Statistics, Americans ages 18-44 between 1978 and 2008, averaged holding 11 different jobs.


Compensation expert Mercer Consulting just released their 2013-2014 annual compensation survey. The survey-covering a wide swath of employers employing 15 million employees- demonstrates the merit rating system is working on average quite well. For middle meddlers, average Joe’s will see compensation adjustments of 2.8%. For those aspiring actors above the company mean it is 4.8%, and for those non comporting with the commander, it's next to nothing.  What is it like to be a talented graduate with a masters degree from America’s best colleges only to be told your average?


The plain fact is none of us consider ourselves average. While we are all left scratching our heads, and really wondering how this silliness improves people and the business itself, we continue to use merit rating systems as our primary motivators of people. No one wants to be ranked- whether it's employee against employee, department against department, or Chief Executive against Chief Executive.  People prefer working in environments where their contributions are routinely part of innovation and improvement, and where they can truly help one another improve each day.


The biggest cry in America is for more productivity to enable better ROI on stakeholder equity. Nothing changes without improvement, not even the law of averages; it's insanity repeating itself all over again. Overhauling our processes, and improving our people, is leadership's direct responsibility. The merit rating system has failed to achieve either objective and it’s time to throw it out.


Toyota-widely held as the best manufacturer in the world-uses both Deming and Taguchi statistical modeling and continuous process improvement activities to reduce variation and increase profitability. Toyota does not rely on a wide-scale merit rating system, nor does it reward its CEO with a compensation package that even comes close to the pay of American CEOs. On 18B in profits for 2013, Akio Toyoda, CEO of Toyota, earned compensation of only 2.3m. It’s estimated Mary Barra will receive approximately 14.4 million in 2014 to manage the mess at General Motors.


With more governmental oversight of executive compensation likely, and pay disparities continuing between the Chief Executive and his subordinates, the issue of how to reward our employees isn't going away, but we can rethink its impact. Improving the system by reducing variation will achieve better job growth, faster inventory turns, happier employees, and greater ROI's. Perhaps continued process improvement will get government out of the business of regulating executive pay, but only American ingenuity in leading can make it a reality.





WMD's Lessons From An American Caesar

EWMD's: Leadership Lessons From An American Caesar


By: Colin D. Baird


When Emperor Hiro Hito accepted America’s terms of surrender from General MacArthur in September of 1945, citizens of Japan knew they had lost a hard fought war. Over the next 35 years however, leaders in Japan slowly, quietly, and methodically waged a new war.  This non armed, non violent conflagration would continuously improve employee's lives, national productivity, and the quality of goods and services sold to markets around the world. The nation’s collective efforts would lead to dramatic changes in the balance of world power, and Japan's economic future.


Ironically, it was an American statistician, Dr. W. Edwards Deming – a MacArthur appointee, and a man whose ideas were rebuked by American leaders, - who would help Japan develop Economic Weapons of Mass Destruction, (EWMD) to win the new war. The collaboration and cooperation between Deming and Japanese industry unleashed a torrent of simultaneous quality and productivity improvements; improvements the United States still has few defenses from which to counter.


By 1980, Japan’s EWMD were annihilating America's economy, the tables had been turned, and hunters became the hunted. Unable to compete, American executives sought rules of engagement more favorable to their cause. Rather than reflect on, and make the significant changes Deming suggested were required to rebuild America’s own culture and methods of industrial processes to compete in a burgeoning global marketplace, American stakeholders demanded congress put tariffs on imported goods and services to keep high quality, low cost items out of the United States.


Tariffs didn’t work, nor did they improve American quality, productivity, ingenuity, or employee happiness. While consumers willingly paid more for Japanese imports, Japanese exporter's profits increased as consumers turned muscle cars into memorabilia replacing Ford, Chevy, and Chrysler with lesser known brands such as Toyota, Honda, and Nissan.  It was clear: America had lost the new war; continuous business process and cultural improvements were the new EWMD, and dominant factors in America’s inability to compete with our Far East friends.


So what is there for Chief Executive Officers to gain from this historical sequence of events?


Shortly after World War II ended, Japanese citizens lay prostrate to General MacArthur, and America.  Sixty five percent of the buildings in Hiroshima, Tokyo, and Nagasaki were destroyed by either conventional or nuclear weaponry. Citizens were “surviving” on 800 calories per day. No food, shelter nor prospects of industrialization lay in Japan’s distant future, yet somehow a Japanese newspaper, The Nippon Times suggested:  “If we, (The Japanese) allow the pain and humility to breed within us the dark thoughts of future revenge, our spirit will be warped and perverted into a morbidly base design…. But if we use this pain and this humiliation as a spur to self reflection and reform, and if we make this self reflection and reform the motive force for a great constructive effort, there is nothing to stop us from building, out of the ashes of our defeat, a magnificent new Japan free from the dross of the old which is now gone, a new Japan which will vindicate our pride by winning the respect of the world.”


The aim of the message was clear: let bygones be bygones, create homogeneity, strong self identity, and most of all an eagerness to benefit from learning from others.  


We must take our own unique steps to change the direction of our own culture, and our country.



  1. Steps that allow us time to reflect upon our own personal and industrial leadership failures in terms of production, culture, and most importantly: the true intrinsic value of American employee’s curiosity, ingenuity, and yearning for learning.


  1. Steps that as the Nippon Times suggested: make our own inferior leadership methods, our “dross of old which is now gone” for which we can “vindicate our pride by winning the respect of the world.” American leaders must be willing to reflect on their own past, yet determine to not repeat it in the future. When we do fail, we must hold ourselves and one another accountable, and then help each other improve.


  1. Steps that will continuously teach the Deming principles of win-win, statistics, and root cause analysis to youth, undergraduate, post graduate students, and beyond. We must make these principles primary to methods of financial engineering; not vice versa as they are today.


  1. Steps and techniques of leadership that will use our new found knowledge to overhaul our current methods of improving people, and industrial productivity.


Today, the guns of employee disengagement are focused directly on stakeholders, and American leadership. These guns will be silenced if we wage war simultaneously on two fronts: our culture, and our business processes.  


The skies no longer have to rain down the disabling effects from the loss of man's intrinsic motivation and curiosity.  Instead, America’s seas can be calmed, and bear true commerce-where men cooperate, communicate, and collaborate on business improvements all the while serving one another rather than themselves. American employees can then begin to walk upright in their new found sunlight as their self esteem, and dignity are restored, and then nurtured on an ongoing basis. America can quietly be at peace, and our mission as leaders completed.


It’s time to radically transform leadership. It begins with Americans who are willing to stand up, eliminate arrogance, put aside egos, admit to failures, and once again, create their own unique EWMD’S. Our business culture contains the soldiers we can engage for our new found fight. Our children and our grandchildren will be the determiners as to whether we have succeeded, or failed.

Go, No Go? Key Decisions That Drive Culture

Go, No Go? Key Decisions That Drive Culture
Learning from failure, and removing the causes behind it, vastly contributes to both profitability, and culture. Employees engaged in these environments routinely contribute to identifying various business conditions that negatively impact it. Ignoring employees input can have fortuitous outcomes.


Profits come from improvements, and costs come from causes. Costs are clues to causes we need to investigate, and eliminate. If cause remains unabated, changing dynamics can destroy our ability to recover from cumulative effects of stress placed upon the system. Employees closest to where work occurs have valuable knowledge relating to these conditions.


What Does History Teach Us About What Not To Do?


When NASA requested okay to launch Space Shuttle Challenger from Solid Rocket Booster (SRB) manufacturer Morton Thiokol, there were clues from previous missions that O Ring failures were developing regularly. While the causes were not understood at the time, they continued to occur in certain climatic conditions.


Because of predicted cold weather, Morton recommended no launch. NASA, under increasing pressure to meet an aggressive production schedule, asked them to reconsider. Morton did so, and agreed launch was safe. Morton's leadership team ignored many voices of those with grave concerns about what they didn't know.


After each mission, SRB engineers disassembled, methodically removed parts of the rocket boosters, then looked for conditions not part of the system's intended design. Even with each successful touch down, evidence of failure was clear. After six previous missions, O Rings showed evidence of erosion eight times, and blow by four times. *1 Visual and Statistical Thinking Edward Tufte Page 44  (Blow by is a condition where heated gases blow by the O Ring seal and escape). Why the erosion, why the blow by? Neither was an intended outcome of the system, each incident was instead a clue of a cause needing



identification, that something was not functioning properly. However, these failures became acceptable to those in control who could have instead chosen not to ignore them. With each progressive and successful mission, NASA seemed less, and less concerned, over confident if you will.  Freezing weather in south Florida didn't seem to change their thinking either, even though the variable clearly fell outside the parameters contemplated by O Ring designers. 


As cold weather arrived at Kennedy Space Center (KSC), visible, and invisible changes at the molecular level occurred. Ice appeared on the launch pad, and as rubber seals inside fuel tanks got colder, they lost resiliency. A compressed O-ring at 75 degrees is five times more responsive in returning to its uncompressed shape than a cold O-ring at 30 degrees.  As heated gases caused the SRB tanks to expand, gases were escaping past the compressed seals. Nobody could stop what was about to take place.  Twelve clues indicated management should have.


On the morning of January 28th, 1986 at 11:39 Eastern Standard Time, at a velocity of 2900 feet per second, the words "Roger, go at throttle up", were the last five words heard from the seven team members. The dreams of many of us were lost. As a member of the program, this was very personal.


The effect of freezing weather on O Ring seals was not understood because the conditions had never been experienced during previous launches. NASA and Morton lacked knowledge, but made assumptions since the system had not failed at 53 degrees, it would not fail at 32. In fact, there were 8 previous clues the system was failing each time below 66 degrees, yet they remain largely unchecked, and led to catastrophe. Management failed to ask the key question, why.


What simple techniques can we use to improve?


(1) When the pressure is on, people look to what they think they know. In his book Conversational Capacity, friend and author Craig Weber suggests “Our minds jump to narrow, error-prone conclusions without our permission”. This isn't necessary. If teams can learn how to balance candor and curiosity, they can learn to treat advocacy and illustration of ideas as hypotheses rather than truths. This enables them to transform differing perspectives into rich sources of improvement. Had leadership teams at NASA and Morton learned more from one another, they could have made better decisions.


(2) Problems develop and when they do, don't ignore them. Consider them opportunities to go see, and experience things for yourself. Data may be available, but the job site is where the greatest value is added. See Using Genchi Genbutsu as the Ultimate ERP and Management



(3) Develop a failure and root cause analysis strategy using the 5 why technique pioneered by Dr. W. Edwards Deming. This technique involves diving deeply into a problem with a recurring theme of asking why at least 5 times.


Continuously find the root causes of problems in your business, remove them, and gain market dominance while competitors manage their own crisis. Ignore them, and physics will catch up to you.



Organizations and executives seeking change hire Colin and his team to help learn what’s possible tomorrow using analytics and other lean tools to understand how their culture and operations are performing today. As a management consultant, speaker, and trust advisor, individuals and teams first learn what to measure, develop strategies for improvements, and then drive down operating expenses through flawless executive of Deming’s 14 Point Philosophy, and Principle of Lean Six Sigma Leadership.


LSI Consulting specializes in helping mid sized to Fortune 500 companies maximize growth and profitability by implementing the principles of Lean-Six Sigma, and Kaizen.


Colin can be reached at, or 661-332-0382. Visit for more details.



Deming's Kamikaze: Japan's Divine Wind

Deming's Kamikaze


By: Colin D. Baird

Surrendering to the Americans September 2nd 1945, shortly after the release of the atomic bomb at Hiroshima and Nagasaki,  Emperor Hirohito-long on tradition and on pride--was about to send more shockwaves throughout Japanese culture.   New Year's Day 1946, the Emperor renounced his divinity. 

General MacArthur- referred to as “the American Emperor”-- advocated Hirohito improve the nation without losing the identity that made the people and cultural heritage of Japan so rich, and so unique. Only abolition of Imperialism, demilitarization, and increased humility and cooperation could make it possible.

Hirohito  then spoke to the nation. "We have to reaffirm the principles embodied in the Charter [Japan's constitution prior to the Potsdam Declaration- the Allied’s unconditional terms for surrender], and proceed unflinchingly towards elimination of misguided practices of the past, and keeping in close touch with the desires of the people, we will construct a new Japan through thoroughly being pacific, the officials and the people alike, attaining rich culture, and advancing the standard of living of the people."

Hirohito continued, "The ties between Us [the Emperor] and Our people have always stood upon mutual trust and affection. They do not depend upon mere legends and myths. They are not predicated on the false conception that the Emperor is divine, and that the Japanese people are superior to other races and fated to rule the world."

America: Winning The Destructive Battle, Losing The Cultural War

The industrial leadership principles used during WWII gave American employees a useful purpose at work and  simultaneously increased productivity rates. The principles were developed by American statistician, Dr. W. Edwards Deming. After the Japanese surrender, Deming’s techniques were shelved in America, and collected dust. America had already begun returning to a style of leadership better suited for the destruction of property rather than the preservation of life and the restoration of the human condition.

Deming certainly helped America win the battle, but was about to help them lose the war...

Sixty five percent of the buildings in Tokyo, Nagasaki, and Hiroshima were destroyed. Japanese citizens used chop sticks to pick rice off the ground, and lived on 800 calories per day. Prospects for survival–let alone employment were bleak, and Japan’s industrial leadership needed assistance.  The Americans were there to help, and at the request of MacArthur and Japanese top management, Deming left for Japan.

 Deming, whose unique theories had once helped defeat Japan, was no longer their adversary; he would soon become their new economic Emperor. His improvement Kamikaze, [the Japanese word for Divine Wind] would reign terror throughout the American industrial complex.  It would extinguish Japanese command and control, and then sweep in the new industrial religion of Continuous Improvement. 

The winners from this Divine Providence? Japanese citizens and culture.  The losers?  American jobs, and executives whose leadership styles remain today anything but engaging.

With two in three employees disengaged from their jobs today, and a un-employment rate staggeringly high, a Deming like Kamikaze in America could be just the type of divinity we need to blow in to get our nation moving again. Isn't it time to surrender our leadership methods, or at least call for reinforcements?

Unlike Hirohito’s renunciation of his own  divinity, the divinity of the Deming principles remains pure heresy for American leadership. Unlike Hirohito who surrendered for the betterment of mankind, leaders in the states refuse to convert to Deming's principled approach to people, quality, and continuous process improvement.

America's next Emperors much be positive agents of change rather than destructively preaching their own purported divinity. Setting aside egos requires humility, and a constant commitment to improve our current methods of production and people. Both must go hand in hand for cultures to survive and prosper-lessons the industrialized Japanese learned long ago, but we refuse to.

As Hirohito said, “If the nation is firmly united in its resolve to face the present ordeal and to seek civilization consistently in peace, a bright future will undoubtedly be ours, not only for our country, but for the whole humanity… With more of this devotion should we now work towards love of mankind…We stand by the people and we wish always to share with them in their moments of joys and sorrows…  We trust that the people will rise to the occasion, and will strive courageously for the solution of their outstanding difficulties, and for the development of industry and culture.

An Emperor’s call to action?

“Acting upon a consciousness of aid and broad tolerance in their civic life, they [our citizens], will prove themselves worthy of their best tradition. By their supreme endeavors in that direction, they will be able to render their substantial contribution to the welfare and advancement of mankind…We expect Our people to join Us in all exertions looking to accomplishment of this great undertaking with an indomitable spirit.”

These inspirational words, ironically, were written by Americans occupying Japanese soil during the military occupation. They were translated into Japanese, and then given to the Emperor to create and inspire his country. This would unify them, and allow them to grow together as one nation.

There are eerie similarities between the effects of World War II, and today's American culture and business climate.  Hirohito's parting words remain haunting.  "The devastation of war inflicted upon our cities, the miseries of the destitute, the stagnation of trade, shortage of food, and the great and growing number of the unemployed are indeed heart-rending."

American leaders must begin to make every effort to alleviate our employee’s pain, while increasing their productivity. American employees and America as a whole stands to markedly gain from just such Divine Providence.

A Fresh Look At An Old Idea

Intrinsic Motivation: A Fresh Look At An Old Idea


By Colin D. Baird


How should American industry compete in the future? How should the CEO enhance the commitment of the American worker towards meeting their competitor’s output and quality rates? Is there a direct link between America’s poor maintenance of man’s intrinsic motivation, (perhaps what we would refer to today as employee engagement today), and a working culture not focused on continuous improvement?


Intrinsic motivation is the idea that man has certain traits. Maintain those traits through continuous improvement efforts, and he will give you 100%. Fail to maintain it, and you take away his dignity, self esteem, and cooperative nature.


Dr. W. Edwards Deming taught executives about intrinsic motivation during his numerous trips to Japan from 1952 through 1993. Deming tried teaching his theory to American executives, but his ideas went largely unnoticed. This was due to the unparalleled success American manufacturers were having selling cars from 1965 through 1973. The manufacturing system wasn’t in crisis, or so the Americans thought.


That all changed of course when Toyota became a household name in 1980. Caught flat footed, American executives sought tariffs against competitive products from abroad that threatened their own company’s existence based upon quality, and improvements in production techniques the Japanese had already benefited from.


The efficiency levels of companies like Toyota, the new Ford, and smaller companies like New Balance Tennis Shoes, has now forced American executives to reconsider the effectiveness from previous mass production results



Chief Executives who do not engage employees in personally improving the organization and individual, feel the debilitating effects of a poor employment culture as man’s desire to learn, and cooperative nature is stripped away over time. Productivity falls, quality suffers, and the demands to increase production drive operating expenses up as more labor is added to meet customer demand.


However, when employees become engaged in problem solving, improvements, and active learning, transformations can begin to take place.


Faced with off shoring and losing jobs vitally important to the community, executives at New Balance Tennis Shoes made a decision to improve her people, and company before even considering shipping jobs overseas. With poor lead times, executives felt it was critical to the company’s success to improve. With a value added time however to the customer’s goods of just over 23 minutes, they knew there was loss of efficiency; they just had to learn how to find it. Working closely with employees, and a consultant, over a 5 year period they reduced lead times from 8 days to 3 hours. These improvements were only made possible through continued efforts to improve man, process, machine, and business systems. Today New Balance has revenues of more than 1.5B, and proudly remains the only tennis shoe manufacturer left manufacturing in America.


While executives are highly engaged, the closer you get to where transformation of the raw materials into finished goods takes place, the more rapidly the engagement levels of the American workers falls off. This is exactly where CEO’s need the commitment of workers to improve the business the most.


Employees who add the greatest value can help you transform your business by reducing and eliminating waste in the system. You must engage and regularly train them to do so.


What can you do to begin to transform your business while increasing your employee’s cooperative nature, self esteem, and desire to increase their knowledge levels? Here are four steps to aid you in beginning your transformation.



  1. Drive out fear. If employees and managers are fearful of retaliation, employee’s contributions towards improvement won’t be known to you. Results: Driving out fear means greater chances for organizational learning.


  1. Engage employees in creating and developing standardized work environments. This should be used to level out production flow, and match up cycle times with customer’s demands. Results: Inventory levels fall, throughput rates go up.


  1. Once standardized work has been introduced, and variation has been reduced, begin the improvement process through regular training events to reduce waste, and inefficiencies in the system. Result: Fewer defects, higher quality products, and lower long term costs as the root causes of bottlenecks are continually identified, and removed at each opportunity. Employees are no longer the perceived causes of poor production rates which allows the emphasis for improvement to be focused on the real cause.


  1. Embrace and expose problems, they are your greatest opportunity for improvement. Once employees learn to accept problems as a new method for learning how to improve, the system can be restored to its current state, and studied in detail for a more efficient and ideal future state. Result: The transformation begins as employees then become engaged in active learning focused on increasing productivity rates, and removing waste, and bloat from the system.


Improving culture enhances quality, throughput rates, and most importantly, employee morale.


Taking action is the hard part.


Driving Fear From Ford

Driving The Fear Out Of Ford

Colin D. Baird

Frederick Taylor and Henry Ford have been dead for many years, but their legacy of command and control is not. American workers have been subjected to generations of fear built around the notion that managers, not employees, know best how to perform value added work for customers. Those actually closest to the value being added, know how waste affects their jobs, but have no control over the system designed by management to run the business.


CEO’s must come to grips that America’s employment culture is in a death spiral. Fear dominates the American landscape yet remains a preferred tool for CEOs to create motivation according to While only 10% of CEOs claimed to use fear as a motivator, execs ranked it as the #1 motivation tool of their own company’s CEOs. General employees and executives who also feel the wrath of fear, rank it dead last in terms of effective motivators.


Leaders must take action to eliminate fear, or it will continue to take many men’s souls away like the Black Plague did in the middle ages. History has a strange way of repeating herself. Nevertheless, it’s a useful tool to help understand human behavior when fear pervades a culture.


As symptoms of The Black Plague began to appear throughout Europe, fear caused mass hysteria. People did not know what to do, they had no control, no cures, no understanding of what was happening. The same signs have been clearly visible in America’s workforce for nearly 50 years, but few executives recognize its damaging long term societal affects.


Fear strips away a man’s natural desire to cooperate, to learn, and to feel dignified from knowing that his contributions matter. Fear denudes him of his self esteem, and drives away his intrinsic motivation and curiosity. While the Japanese learned this 60 years ago, and went to great length to drive fear out of their culture, American leaders still refuse to.


The good news is the Japanese influence is now moving its way east since Allan Mullaly began transforming the culture at Ford. He replaced fear with trust, command and control with collaboration, and focused employee attention on continuous improvements and one another. He transformed the organization with amazing efficiency during the worst financial crisis in automobile history. He is a classic American leadership success story. His story needs to be sung from the tallest mountains so other executives can follow in his footsteps.


Dr. W. Edwards Deming, the American profit, and statistician who first introduced the ideas about driving out fear, improving culture, and nurturing man’s intrinsic motivation, heavily influenced The Nation of Japan beginning in 1952 after being rebuked by American executives. Deming served Japanese industry for 42 years then got a chance again to drive his thinking home to Former Ford CEO Don Peterson in 1982.


Deming’s meeting with Ford came after Peterson witnessed the NBC News documentary, “If Japan can, why can’t we” and then hired Deming.  Peterson implemented some of the Deming principles, but never had the full faith of the Ford family to make it meaningful to the culture. Fortunately for America today, the Ford family had a reawakening before they hired Mullaly. Mullaly had learned the principles at Boeing. He began applying them when he took over the reigns at Ford in 2006. Mullaly made it happen, but Deming’s ideas to help guide him. 


Amazingly enough, Deming’s principles are still not required course work in American business schools. Perhaps the command and control style of leadership is still preferred by academia. While change is difficult however, it must take place for the betterment of our societal needs.


Experts like Robert Mauer Ph.D. suggest execs take small incremental steps to begin transforming their culture. As new good habits slowly replace the old bad ones, people begin to see and feel the difference. As momentum rolls on, you can continue to introduce small changes that make big differences.


These concepts can be applied to improving the lives of employees. It’s not easy, but it’s mandatory if we want to improve. Here are simple steps you can use to begin eliminating fear from your culture.



(1)   Go and See For Yourself-Often The Japanese use the concept of Genchi Genbutsu which means ‘going and seeing for yourself at the places where things happen and value gets added.” Collaboration can be used to replace command and control by spending increased amounts of time with employees at the worksite, seeking their ideas for improvement, then implementing those improvements.


(2)   Establish Trust In order for collaboration to begin, trust must first however be re-established, and then all parties can begin to comfortably tell their truth. This can’t happen from your executive offices. Spend more time with employees, not with your reports.


(3)   Don’t go undercover. Television seems to think you need to go undercover, but you shouldn’t. When you have driven fear out of your culture, employees will be happy to see you, and trust you have their back. Stay highly visible and communicate often with vision and clarity that can be sustainable as improvements begin.


There is opportunity for improvement in the executive suite today. Driving out fear, re-engages the CEO’s most valuable asset, the employee’s mind. Margins improve, inventory declines, and capacity expands as they did at Ford all the while improving the lives of those you serve.

An American Addiciton

America's Addiction

By Colin D. Baird

Okay, I admit it, I’m a recovering addict.  No, not like that, I was worse than that, I once was addicted to command and control. Like many other Americans and our government, I too was drawn away from creating a truly meaningful purpose for those who worked with, or for me. Instead, I was attracted by the alluring narcotic of serving myself, and fellow stakeholders while measuring success based largely on my collection of dead presidents on paper. What I was left with was little money, a marriage that needed work, and little to no soul from the experience of trying to control others. I was left pondering: how do I overhaul myself first, and then help American leaders avoid jumping into the same empty pool?

My family, along with the leadership principles of American statistician Dr. W. Edwards Deming, ultimately helped me improve my thinking. They convinced me that I was born with all the influence over my fellow man I would ever have, or need to have. In the eyes of my family and employees whose future interests I currently represented, it was what I did with this intrinsic influence that determined who I had become as a father, husband, and business person. Unfortunately, before my ability to favorably influence others could get better, it had to get worse so I first could reach my ultimate personal tipping point. That tipping point came recently one beautiful sunny Saturday afternoon.

On Father's Day my family and I had headed off to the beach. While we were all waiting at a stop light, standing on the curb was an obviously pregnant mother to be. She had a sign that read "homeless, mother of one with one on the way, everyone needs help once in a while, please help." I turned to my wife, and with my kids within earshot, needlessly made a snide remark about this young person's condition.  It's one that I will never forget, but one that need not be repeated here because of its complete and blatant disregard for my fellow man.

In a surreal moment, another homeless person was walking up the sidewalk towards the mother to be. My silent, but immediate reaction to myself was "oh great, here comes the father." As he proceeded closer to her he was fumbling around looking for change in his trench coat. With impeccable timing, he reached into the pocket containing all his worldly possessions, emptied them into her hand, then crossed quickly in front of my family’s car as he ran to the other side of the intersection. The expectant mom who would never see him again, graciously thanked him and accepted his gifts. As tears began to flow down my face from my sheer remorse from being such a jerk, my young son in the back seat said "you see dad, if I do something good and somebody else does something bad with my something good, it's on them, but if I don't do something good and I could have, it's on me."

This is the type of behavior we must cultivate, one where adults learn how to work with one another with the instincts of innocent children.  Innocent children, who have not yet gone into battle with one another, yet instinctively when given the chance, know how to treat one another with respect, dignity, and honor. We must then nurture and grow these intrinsic qualities further to help each individual develop and continuously improve throughout their entire career. Employees and leaders who see intrinsic motivation as their extrinsic reward, bring forth the tremendous contributions of man that everyone wants to give, but can’t in America because they are so routinely stifled by our current culture. These are contributions where the mind, heart, body, and soul all come together to reward stakeholders, the employees, and society.


Today, family and business ecosystems very much reflect one another in terms of how they behave, and function as an entire system.  Think about their similarity. This concept first appeared in James F. Moore's May/June 1993 Harvard Business Review article, titled "Predators and Prey: A New Ecology of Competition", and won the McKinsey Award for article of the year.


Moore defined "business ecosystem" as:


“An economic community supported by a foundation of interacting organizations and individuals—the organisms of the business world. The economic community produces goods and services of value to customers, who are themselves members of the ecosystem. The member organisms also include suppliers, lead producers, competitors, and other stakeholders. Over time, they coevolve their capabilities and roles, and tend to align themselves with the directions set by one or more central companies. Those companies holding leadership roles may change over time, but the function of ecosystem leader is valued by the community because it enables members to move toward shared visions to align their investments, and to find mutually supportive roles.”



With many of the leadership choices the Chief Executive makes today closely scrutinized by employees, family, friends, and the media, their decisions have a tremendous impact on current and future generations of employees, but their impact can also be used to improve society overall. While mothers and fathers must do their part by keeping the intrinsic motivation of their youth high today, CEO’s are ultimately responsible for raising it to an even higher level tomorrow. As executives increase intrinsic motivation, parents can envision worksites where their children can work in the future as ones of enjoyment rather than ones of abandonment. This new type of out of the box thinking by the CEO can be passed down generation to generation and from leadership team to leadership team. Joy in Work can be brought back to, and remain a uniquely American asset available to all employees, not just a select few.

This is the vision Dr. Deming once had for American leaders that they were largely unwilling to grant, and it’s the one the Japanese were very willing to furnish. This is the leadership transformation Deming knew America had to make sooner or later. Our existing employment culture and history itself has now proven cultural transformation is our future, one way or the other. It solely depends on what we do with it now.