Re: Terez on Sloganeering

["Rip Stauffer" <rstauffer@mn.rr.com>]

John K Balor asked: Why is systems so important?  What does the world look 
like from a systems perspective and what does it look like from a 
non-systems perspective?  Does anybody have some good metaphors, analogies 
or examples that could clarify this?

A couple of simple examples for one reason a systems perspective may be 
vital to businesses:

Ed Baker, in "Scoring a Whole in One," relates the story of an automaker 
without a systems perspective. The engine was built by one division, the 
transmission by another. There were electronic control components in each 
assembly; the controller in the engine cost $100, the controller in the 
transmission cost $80. An engineer found that a $30 upgrade to the engine 
controller would eliminate the need for the transmission controller, 
resulting in a $50 per unit savings. At the time, this automaker was selling 
about a million units per year--total savings $50 million--but the automaker 
decided to forego the opportunity, because the engine division refused to 
take on the extra cost of the upgrade. Each division was organized as a 
separate profit center. Unbelievable suboptimization, but true.

I had a client several years ago that dealt in "global solutions," or 
large-scale technology projects. They were losing money and customers with 
every project, and had been for a couple of years, at a rate of loss of 
about $60m per year. We traced the primary leverage point to a point in time 
when the sales organization, under pressure to produce more sales and 
revenue, began compensating sales people based on the amount of the sale. 
When you get your commission check up front  you are more willing to sell 
whatever it takes, and tell clients whatever it takes, to close. Then they 
would "throw the job over the wall" to project managers who now had to try 
to figure out how to make it work (and make it work profitably). We were 
able to return them to profitablility by setting up a sales process where 
the project managers and engineers went on sales calls, and sales people 
were compensated on a profit after completion basis, rather than gross 
revenue.

No wonder Dr. Deming often said, "Who gives a damn about profit? Nobody! I 
see very little evidence that anyone cares about profit..."

I have a lot of other examples of organizations suboptimizing this way, as 
well as numerous examples from government and everyday life.

Best regards,

Rip Stauffer
Woodside Quality Solutions LLC
612-916-0197