Problem Solving Paradigms

cost calculation

There is a story about an executive team of a certain U.S. automotive company that is very revealing about their problem solving paradigms, related in the book Misbehaving: The Making of Behavioral Economics by Richard Thaler. The author who is an economist and professor was invited to do some consulting for General Motors. As a result of overproduction, top management at GM needed to clear out the excess inventory of automobiles. Thaler learned that the CEO Roger Smith had called a meeting with his executives, someone had suggested offering 2.9% financing. This promotion was very successful. However, the behavioral economist observed some troubling leadership behaviors.

Regarding the process to arrive at the promotional financing of 2.9%, this was decided more or less by gut feel, and “The whole process took less than an hour.” It sounds a lot like solution-jumping, the bane of many would-be practical problem solvers. When Thaler asked the executives, “Who would evaluate the solution?” in order to learn what had worked, how and why the promotion was successful, he was met with a round of “Not me,” responses. This is a sure sign of “let sleeping dragons lie” or the paradigm that good results are what matter, rather than good results derived only from good process and not just chance.

Based on his observations Thaler was asked to give his recommendations to the GM leadership team. They were:

“First, figure out why the promotion had worked so well. Second, make a plan for the future, especially since they should expect that Ford and Chrysler were likely to copy GM’s successful promotion.”

These recommendations to top management were rejected. Instead, Thaler learned that GM had,

“ […] resolved to better plan its production and avoid excess summer inventory. This would eliminate the need to evaluate the promotion and plan for the future, since there would be no more end-of-model-year sales.”

In effect, GM had spent hundreds of millions of dollars on a promotion and didn’t bother to learn from it. This is funny in the way that sad stories can be funny, years after the pain has dulled. We all know what happened to GM as a result of their reckless overproduction and refusal to apply a learning-based problem solving approach. Senior management anecdotes like these give us insight into the culture tinged with hubris, their overestimation of future performance, and the too easy satisfaction that the management agenda could move on once the immediate problem had been solved.

How a leadership team approaches problem solving says a great deal about their culture, their adaptability and likeliness for the firm to remain a going concern in the following years. What are the differences in paradigms between how lean organizations and traditional organizations view problems? The differences are many, but let’s just say that the following problem solving paradigms can be deadly and need to be replaced with their opposite at every opportunity.

Dislike of deep reflection. This is often confused for energy and decisiveness. Viewing problems as things to be dealt with quickly, valuing speed of decision-making and gut-feel selection of countermeasures, leaders give strong signals to their teams to pick a path and get on with it. Overstuffed management agendas, punishing the messenger who brings bad news, and the need by leaders to maintain a facade of invulnerability all lead to a lack of ability to reflect deeply on an issue.

Short attention span. This takes the form of a refusal to turn the PDCA cycle at least one more time on the same problem, after apparent problem resolution. Leaders may have other and/or more urgent problems nagging at them, or may simply want to move onto shinier, happier topics. This is delusional as long as problems aren’t addressed systemically at the root level, as these problems with untouched roots will eventually grow back like so many weeds.

False sense of urgency. The phrase “sense of urgency” is bandied about so much in the corporate context that it can lose its meaning. If we were told that our spaceship with its limited supply of oxygen had a leak, we would spring into action with urgency. How far away is the nearest rescue ship? What is the rate of leakage? How many hours of oxygen remains, with the current crew? What can we do to reduce our rate of consumption? Where is the leak? Hinting that some people may need to exit through airlocks into cold vacuum may create urgency but will also raise heart rates and panic the brain. If the truth is that there is plenty of oxygen, people look for ways to avoid responsibility, telling themselves that the back up air recyclers surely won’t break again next time. Simply put, urgency not anchored in a blunt but compassionate grasp of the facts, is false.

Superficial cause analysis. This suggests a limited interest being held or holding others accountable. It may take the form of blame assignment, rather than system-and-process-level understanding of cause and effect. It is also often a symptom of the fact that the leadership is focusing on solving the wrong problem, such as GM’s short-term issue how to sell excess cars rather than the long-term problem of overproduction. Dislike of reflection, false urgency and short attention span only hurt an organization’s ability to delve into the causes.

Fat wallet. This is seen mainly in wealthy companies with staff and budgets to throw at problems. As in the case of GM, “problem solving” by the executives took the form of select a certain amount of money and throw it at the problem. This approach never works in the long-term. Beaten back by the fat wallet, the excess inventory problem made a strategic retreat, but came roaring back and ultimately defeated GM.

Inward focus. Thinking of cost to the organization rather than value to the customer, we select countermeasures that appear to make the numbers in the short-term without considering their long-term impact. Struggles with defects by Toyota and Takata, as well as the recent revelations by VW are just further example of this type of behavior. Even the best companies fall into this trap. When in doubt, do the right thing in the eyes of the customer.

One big fix. Due to many of the paradigms above, leaders tend to favor one big solution rather than many small solutions that add up to more effective problem resolution. Reversing enough of the unproductive problem solving paradigms above naturally leads the only being able to try many small countermeasures. However, actively hiding the fat wallet and taking the home run solution off the table early in the problem solving process has many salutary effects and can be a good first step.

An executive is by definition someone with the power and responsibility to put plans and policies into effect. Among executives, great value and emphasis is placed on “getting things done” as well as “being decisive” and “getting results”. Unfortunately, even incompetent executives can fulfill the strict definition of their role by making decisions, getting things done and achieving short-term results. Luck, the impact of predecessor’s efforts and the fat wallet can go a long way towards making an executive look good. Good and thorough planning is too often hugely undervalued. The overarching lean management paradigm for problem solving is that good results come from good processes, that learning from action is as important as the action itself, and that slow and thorough planning is superior to quick decision making in all but emergency triage situations.

Those are my twenty cents on the topic, at any rate.

1 Comment

  1. Owen Berkeley-Hill

    October 19, 2015 - 5:48 am

    It was 25 years ago that academia, through the MIT study and the resulting book, The Machine That Changed The World, introduced us to the term Lean. Twenty five years is a long time, time enough for us to have go to grips with this important body of knowledge. However, when I read discussions about Lean, I cannot help feeling that our understanding of Lean seems to have become distorted and severely stunted. I blame academia because after the initial excitement the B-schools got bored with Lean and moved on to other “plat-du-jours” designed to scare any passing, ignorant CEO into spending money on what was the current fad. The vacuum was filled by so-called experts who could not resist the temptation to add their own “masala” and so today we have no consensus on what exactly Lean is. But don’t take my word for it. Try getting some form of consensus in any of the many Lean groups in LinkedIn or even in Lean.org.

    Am I being harsh on the B-schools? Well, there are around 8000 – 9000 of these institutions around the world: the ones who are not part of a cruel scam because the MBA is the “must have” if you want an unfair leg up the corporate ladder. It is difficult to estimate the numbers of MBAs they produce each year, but I guess this is in the millions. How many of these future leaders have a visceral knowledge of Lean? I would guess at almost none. A few brave institutions (Cardiff, Lancaster) offer an MSc in the subject but the MSc is like the mark of Cain forever branding the recipient as a “specialist”, not someone who could enter the mainstream of leadership.

    I say our understanding of Lean is distorted and stunted because we see it as one of a long line of improvement methodologies and not, perhaps, the most important advance in our knowledge of how a good leader should think, behave and act. It is easy to take a swipe at GM’s Roger Smith but how many CEOs today think Lean, let alone act or behave in a Lean way: 99.99994% or 0.00006%? I suspect it is the latter. As a result, we seem to have learnt nothing from the 2008 financial meltdown and we have enough examples of CEOs who are unfortunate to be caught in the glare of the media spotlight to play the Horatio Nelson gambit: “I saw no ships”.

    Can we ask ourselves a few basic questions:
    Is Lean a body of knowledge which should be best left to specialist or is it the bedrock knowledge of anyone who is responsible for the work and wellbeing of others?

    Can an organisation today afford a leadership which is completely ignorant of Lean, and who then rely on an army of internal or external “experts” to correct matters when profits seem to be going south?

    Is the Lean education model busted because we have forgotten the Jesuit saying, “Give me the boy until he is seven and I will show you the man”? How successful (and courageous?) is the Lean movement in convincing a successful leader he needs to change the way he/she thinks when they are surrounded by the trappings of their success?

    Can future leaders be taught by the mainly academic route or should the MBA be a qualification which split into roughly 10% classroom, 20% coaching and 70% experiential learning? Ask yourself whether you’d trust a doctor or an airline pilot who had been taught the same way as an MBA?

    Back to the drawing board?