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Tuesday, July 23, 2013

Review of Lectures 23-29

The first 22 lectures deal with the management functions of staffing, communicating and motivating. The remainder of the lectures deals with selected aspects of control. It is assumed that the student understands methods of cost and schedule control appropriate to the student’s organization. If not, references for self-study are provided in lecture 23. It is critical to understand how to apply the principles of control to different organization types because these principles must be tailored to the organization type and applying them inappropriately results in significant inefficiencies. It is also necessary to understand management accounting, which differs from standard financial accounting, in order to make sound decisions relating to costs of products or services. The three aspects of control discussed in lectures 23-28 relate to processes involved in the day to day work of any organization. These three are risk management, theory of constraints and process improvement.
Risk is the consequence of undesirable events on the work of an organization. Risk is inherent in every type of activity. The objective of risk management is to proactively identify risks and take actions that reduce the probability that an undesirable event occurs and/or reduce the consequence of the event should it occur. Lecture 24 describes a ten-step process for effective risk management and provides templates used in risk management. The primary templates are the risk summary grid, which is useful in the early stages of an activity for communicating risks to managers, customers and the team working the activity and the risk register, which is more useful in day to day management of risks once an activity is underway.
Lecture 25 is a brief overview of the theory of constraints. Understanding the theory of constraints is easier if we think of a process as the combination of supplier, input, process, output and customer, or what is termed SIPOC for the initials of each word. The inputs are transformed to outputs by the process. The activities or processes that any organization performs are a series of SIPOC steps with the outputs of one step being the inputs to the following step. Actual processes are usually complex networks of SIPOC steps but we can understand the theory by examining a simple series of steps. Then it is clear that the output of the overall process cannot occur at a rate any faster than the rate of the slowest step in the process. Applying the theory of constraints should be the first step in process improvement.
Often managers try to keep every worker busy all of the time thinking that is the most efficient way to manage an activity. This can violate the theory of constraints and lead to costly excess work in process and sometimes extra workers to facilitate work in process. It doesn’t matter if the process is a service process dealing with paperwork or a manufacturing process. Applying the theory of constraints minimizes work in process, cycle time and staff size. Some workers may not be busy at all times but this doesn’t lead to extra costs. Rather it creates time for workers to conduct process improvement and opportunities for cross training workers to do more than one step. The student is encouraged to read the referenced books by Eliyahu Goldratt.
Lecture 26 explains that statistical variation is present in the actual values of all parameters relating to an organization’s processes. Measuring this variation and understanding the resulting information is essential to effective management. Managers and workers must know the difference between common cause variation (the manager’s responsibility) and special cause variation (the worker’s responsibility). An activity, the “system” in process improvement language, must be stable, i.e. exhibit only common cause variation, before attempting to improve the process by reducing the variation and/or changing the mean value of a parameter. A system is brought into stability by fixing the special cause variation revealed by data measuring the variation. Control charts are a visual means of evaluating variation to determine common cause and special cause.
Effective process improvement is achieved via several different approaches. Total Quality Management and Six Sigma are two popular approaches proven to be effective. Implementing any effective process improvement approach requires that all or a subset of workers and managers receive comprehensive training in statistical process control. Only after such training should workers, or specially trained facilitators, be empowered to execute process improvement.
Lecture 27 provides guidelines for learning and using statistical methods. Learning to think statistically is discussed and approaches to learning this useful skill are outlined. This lecture also describes two of W. Edwards Deming’s famous experiments and one that I developed that help managers understand variation and how to manage in the presence of variation. The funnel experiment demonstrates dramatically the things that go wrong when inappropriate actions are taken in the presence of variation. The red bead experiment demonstrates how hard workers try to carry out manager’s directions, even when the goals a manager sets are obviously impossible due to the effects of variation. Watching a video of this experiment is an experience beneficial for all managers. It provides vivid demonstration of the “goodness of intent” of most workers and of the damage managers cause via arbitrary, and often unrealistic, slogans and exhortations. The productivity experiment teaches the value of reducing variation.
Lecture 28 concludes the discussion of variation and process improvement by giving some simple examples that illustrate the typical steps in a process improvement activity. Visual tools, including fish bone diagrams, flow charts, work flow diagrams, deployment charts and control charts are described. These examples teach enough of the methodology of statistical process control to enable the student to begin improving simple work processes. It is important for the student to undergo more thorough training before applying statistical methods to complex work processes. Complex processes can have subtleties that are not covered in the simple examples discussed in lecture 28.
Lecture 29 deals with leading the team, which is the main function of an organization’s manager. Developing an effective organization, as described in the first 28 lectures, can be viewed as necessary to free the manager from being so bogged down with problem solving related to personnel or processes that there is no time to lead the organization in achieving its strategic objectives. Key to leading the team is effective planning. Lecture 29 summarizes a planning process called Process Quality Management (PQM) that focuses on the fundamentals of planning. I and many others have found this process effective in helping the manager lead his organization in achieving strategic objectives. PQM facilitates the planning for achieving strategic objectives in a one or two day concentrated session.
There are no exercises for this review session as the last lecture is your most important exercise.
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