Tag Archives: management

Management miscellenia – Taiichi Ohno’s favourite word – understanding

Taichi Ohno counselled, never codify method, because it is the thinking that is the key. Ohno’s favorite word was understanding.

Like Socrates, who never wrote anything (Plato did). The moment you think the tool is the way, you may stop to think… Learning people to think, that is the way.

From an article by Jan Höglund. Great blog.

Management miscellania – Common misunderstanding # 1 – good – cheap – fast

Statement: you can’t have good quality, fast and cheap at the same time.

Only:
Good and fast, not cheap.
Good and cheap, not fast.
Cheap and fast, not good.

This is a common misunderstanding: it can be all 3.

Why?

The better your processes, the less waste you have.
The less waste you have, the faster you can produce.
The less waste you have, the higher quality you can produce.
The less waste you have, the less resources you need.

So this then leads to higher value per unit of cost/time.

If you want to improve, focus on value added activities / cost.
If you focus on cost, it invariably leads to worse quality by higher cost.

This is the reason why so many cost cutting operations go wrong…

Ray Dalio: Decision Rules – “Have we got this right?”

Admitted, I am not a big fan of the hedge fund industry and its remuneration. But what I found interesting is the way some of them work. A great article in The New Yorker about Ray Dalio’s Bridgewater Fund makes for a very interesting read – especially the part about the principle-based approach. Smarter thinking…

Some excerpts from the interview:

”Our greatest power is that we know that we don’t know and we are open to being wrong and learning.”

”I believe that the biggest problem that humanity faces is an ego sensitivity to finding out whether one is right or wrong and identifying what one’s strengths and weaknesses are.”

One rule of radical transparency is that Bridgewater employees refrain from saying behind a person’s back anything that they wouldn’t say to his face.

(On Meditation) “It’s just a mental exercise in which you are clearing your mind,” he said. “Creativity comes from open-mindedness and centeredness—seeing things in a nonemotionally charged way.”

“They (Bridgewater, VL) are consistently innovating—constantly soul-searching and asking, ‘Have we got this right?’”

To guide its investments, Bridgewater has put together hundreds of “decision rules.” 

“The duty of a leader, first and foremost, is to be transparent.”

“the intention is to make people better. . . . I have never seen a C.E.O. spend as much time developing his people as Ray.”

Dalio has published his principles on his company’s site, Bridgewater.

In a letter Dalio and his wife described their reasoning for their philanthropy and joining the Gates-Buffett giving pledge. Happiness does not increase after a certain level of wealth with more wealth, but through meaningful relationships and work. And by charitably giving making a positive impact on other people’s lives:

Tom Rollins: the economist’s argument against shareholder first-strategy

This article by Steven Pearlstein is a good synopsis of management based on shareholder value. He describes the history, ecosystem and proponents, its critics and possible future:

What I found most interesting was the intellectual argument from an economist’s point of view against shareholder first-strategy, as formulated by Tom Rollins:

“at the foundation of all microeconomics are voluntary trades or exchanges that create “surplus” for both buyer and seller that in most cases exceed their minimum expectations. The same logic, he argues, ought to apply to the transactions between a company and its employees, customers, and owners/shareholders.

The problem with a shareholder-first strategy, Rollins argues, is that it ignores this basic tenet of economics. It views any surplus earned by employees and customers as both unnecessary and costly. After all, if the market would allow the firm to hire employees for 10 percent less, or charge customers 10 percent more, then by not driving the hardest possible bargain with employees and customers, shareholder profit is not maximized.

But behavioral research into the importance of “reciprocity” in social relationships strongly suggests that if employees and customers believe they are not getting any surplus from a transaction, they are unlikely to want to continue to engage in additional transactions with the firm. Other studies show that having highly satisfied customers and highly engaged employees leads directly to higher profits. As Rollins sees it, if firms provide above-market returns—surplus—to customers and employees, then customers and employees are likely to reciprocate and provide surplus value to firms and their owners.”

Or as Nick Hanauer says about that train of thought in a recent article on Politico:

The thing about us businesspeople is that we love our customers rich and our employees poor.”

Not coincidentally, several large companies have done extremely well who succeeded at becoming “platforms” which create larger surpluses for customers, employees, suppliers and partners, and owners.

For example Google (compared to traditional advertising and market research companies) provides a larger surplus for companies who advertise and at the same time for users, making it easier to find things, people, places, documents etc. Their business model is more inclusive, thereby fostering a larger ecosystem.

PS A slightly longer version of Pearlstein’s article was published in a Brookings Institute paper: