Ackoff: 70% of Business Improvement Programs (TQM, Downsizing, Benchmarking) Decrease Performance

Improving a door seldom leads to improving a house.

In my previous blog I cited dr. Russel L. Ackoff on Systems Thinking. Russel Ackoff also researched the results of business improvement programs. He found that 70% of these programs actually increase costs instead of improve performance.

On 1st sight this seems a paradox. Being a serious, caring manager, and executing a business improvement program, this program results in a performance loss. Ackoff found that this is independent of the used methodology: TQM, Downsizing, BPR, Benchmarking, and Continuous Improvement all demonstrate this behavior.

The common cause of failure of such an improvement program is neglecting the system concept: These managers have applied an anti-systemic approach.

The properties of a system are:

  • A whole that consists of parts, each of which can affect its behavior or its properties.
  • Each part of the system when it affects the system is dependent for its effect on some other part. The parts are interdependent. No part of the system, or collection of parts of the system, has an independent affect on it.
  • A system is a whole that can not be divided into independent parts.

The neglected system property causing this unwanted behavior of performance loss is this: The whole system is more than the sum of the parts. The implication is that business improvement programs trying to optimize only 1 part of the system will usually fail.

System improvement can never be accomplished by managing improvement actions only, how well defined they are. The only way is to manage the interactions of the parts. Only this way improvement can be managed, and thus be expected. Otherwise, it will be management for failure.

Furthermore, besides managing interactions, the improvement should be focused on improvement of the system functions, not on fixing a defect of a part. This defect may well not play any role in the overall system behavior, where a 'defective' interaction will be a dominant issue.

Managing interactions is difficult, because it involves many organization parts and business functions. It needs courage and leadership to arrive at a sustained improvement process. It uses an abstract way of thinking, and asks you to focus on questions like:

  • Closes this the gap between our reference behavior, and the actual situation?
  • Is this the most effective step we can do?
  • Is this step future-proof?

And you, do you manage interactions instead of actions?

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