***The following is a guest post for The Debt by Jim Knapton*** Businesses today are run by the numbers and managed by the results. Stock market indicators and monthly balance sheets largely determine top-level decisions. The outcomes, good or bad, affect not only those in the company but many outside the walls. And maybe that’s OK. After all, this is the Digital Age and it is wiser to be using data for high-powered decision-making than to be relying on hunches, or egos, as it was in the old days. But there is growing doubt if these indicators—we’ll call them R-data (for results)—are always correctly understood and interpreted. Are senior executives analyzing this stuff well enough before making decisions?
Not if you listen to Donald Wheeler in Understanding Variation: The Key to Managing Chaos.1 He argues that the process of digesting R-data has been widely neglected at all levels of our educational system. “Managers come out of their educational experience knowing how to add, subtract, multiply, and divide, yet they have little understanding of how to digest numbers to extract the knowledge that may be locked up inside the data.”
Wheeler calls this problem “numerical illiteracy.” His book goes a long way toward showing that Management by Results is possible if, and only if, enough R-data are used in context to draw correct interpretations. What he also argues is that other data, process-related, or P-data, exist to drive more accurate and faster decision making. After all, if insanity is expecting change to result from repeatedly doing the same thing, perhaps we need to query everything that’s available to know. Management by Knowing argues that not only are crucial data—both R and P—overlooked in decision-making processes today, they are too often unavailable. This is not helped by the Sears Tower Syndrome, my metaphorical image of world business, and consequent international behavior.
Imagine the Sears Tower, not the largest building in the world anymore but still tall. From the top you get the best views, global views, where executives appropriately set up shop. Up there the language of business is dollars, with R-criteria information the measure of success, failure, and ownership: profits, stocks, investments, dividends, shares, incomes, bonuses, futures, to name a few words of their lexicon. Meanwhile down at the bottom of the Sears Tower, the “factory” is jammed with the workforce—supervisors, work teams, mechanics, QC personnel, plant and floor managers, office staff, etc., as well as processing, machines, workstations, workflow supervision, inspection, storage areas, shipping centers, and distribution systems—with purposely limited views, often without windows.
Processing is organized down there with P-data, the language of things, with the focus on raw materials, manufacturing, and distributing: measuring, counting, storing, logging, shipping, and billing as P examples. And the information flow? R-data decisions come down rapidly from the top, while P-data, the results of processing, head slowly upwards, becoming synthesized through information gatherers, middle-management conduits who fit in between the two principal levels, filling the bulk of the space in between—buyers, sellers, marketing managers, designers, modelers, accountants, legal staff, secretaries, and so forth—all needed to fit into the slots of the business battle plan.
Notice that gravity facilitates executive management communication, as everybody hears their point of view clearly and quickly flowing down to them. On the other hand, gravity works against P-information, virtually never reaching the top unless it is rewritten by middle management into R-language. Even then it may not make it to the top because it is too often disregarded, perceived as valueless when it comes to running the show.
This, in a nutshell, is the overarching problem of today’s business world. Executives have little idea of what is going on down there in the trenches. Worse still, they generally do not care, unlike the old days when entrepreneurs, not Harvard MBAs, ruled the roost. Consequently, arrogance and ignorance of processing are far too often characteristic of business tycoons. That is why outsourcing is all too frequently perceived as profitable, because processing is where the wealth of the enterprise is created. And labor is so much cheaper overseas! Hence, globalization: the exponential increase of untold wealth and power for the rich, the virtual end of the road for the American labor force.
But all is not well at the top of the tower. There is obvious global “trouble in’t mill” as we see world business teetering on collapse. Whether it’s the US, UK, the EU, perhaps even China, we appear to be edging towards an unparalleled world economic downslide. Most responsible are R-professionals, international bankers and leaders of our major corporations. They cultivated, with the Federal Reserve’s blessing, the promise of easy credit (debt) to grease the wheels of commerce when easy profits began to elude them. So to us P-peons it is this small but hugely influential wealthy coterie—where the New World Order holds such ungodly sway—which appears to be letting us down the most, along of course with their stable-boy Washington, London, and Brussels politicians, who have grown dependent on the largesse of these benefactors. It is this chasm between the down-to-earth and respected knowledge of the nuts and bolts of correct processing at the bottom levels, and the lack of concern at the top to listen to any other language but money and greed, that breeds the contempt we feel for our controllers. We see them as analogous to the pigs of George Orwell’s masterpiece Animal Farm, leading the internal decay of our once-proud and honorable nations.2
And as this pervasive world monetary debt crisis worsens, the Sears Towers grow taller as businesses coalesce into even larger conglomerates with increasingly complex operations. Takeovers and mergers build bigger barriers between the pigs and the strength of the operation, the worker-horse Boxer, representing the working class, who was worn out from hard work and died in the end. (It’s amazing how perfectly Orwell envisioned the future.) There is, however, a way out.
Far too long our captains of industry have listened to the financial gobbledygook so glibly offered by economists, today’s high priests of finance, when they should instead be listening to the only business paradigm that counts: fulfilling the needs of customers. Whereas R-thinking presents the idea that our managers are in business for profits, P-thinking underscores that the chicken (customer) comes first. She represents life. The egg (profit) comes second. It represents sex. And since even the most devoutly religious economist recognizes life comes before sex, there can be no other way. Riddle solved, except for one tiny item: cash is running out and debt cannot take its place. People who do have jobs are making less, and those who don’t have jobs don’t have any money. Unless we solve our worsening unemployment problem, there will be no more eggs to hatch.3
R-thinking executives must come to realize that meeting customer needs (P-thinking) is the only reason for being in both business and politics. Profits and good governance are the outcome of doing that well. If only the controllers of our industrial enterprises and government institutions realized that their success comes from caring for the people’s well-being, not making themselves richer, we might all begin to enjoy a less forbidding future.
1. Donald J. Wheeler, Understanding Variation: The Key to Managing Chaos (1993–ISBN 9780945320357
2. George Orwell, Animal Farm (1945–ISBN 9780452284241)
3. http://thepersonalsecurity.com/archives/fool%E2%80%99s-gold-of-u-s-foreign-policy
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To know more about Jim Knapton’s new book, Changing Our World: Solutions for a Future, visit his website at http://www.ottolinepublishing.com/. You can send him mail at info@ottolinepublishing.com.
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