Theory of Knowledge
The following definition for “knowledge management” comes from Wikipedia:
“Knowledge Management (KM) comprises a range of practices used in an organization to identify, create, represent, distribute and enable adoption of insights and experiences. Such insights and experiences comprise knowledge, either embodied in individuals or embedded in organizational processes or practice”.
This definition refers to practices, insights and experiences as comprising knowledge. It is practices, insights and experiences that drive current applications which are not new and improved theories, but merely old practices by new names.
Knowledge comes from theory and not from practices, insights and experiences. New theory tested and verified to have utility not seen before, creates new knowledge. Einsteinian theory over Newtonian theory creates new knowledge that enables scientists to solve problems, that were previously unsolvable. In the same way Knowledge-based Leadership, as taught by Apt Leadership, and when applied, solves business performance issues that currently contribute to the world-wide economical challenges.
For instance, the notion of conformance to specifications came out of the industrial revolution. Many improvement strategies applied today are still based on that old theory. Taguchi (1960) went beyond the conformance to specification mindset with his theory that reducing variation reduces costs. His theory goes beyond specification limits, and today companies that embraced his theory in 1960 are still successfully in business, and continue to be world leaders in their field.
To compete and be successful in today’s environment an organization needs to continually create performance improvement. This cannot be accomplished without continually improving knowledge. Since knowledge comes from theory, successful organizations need to learn, test and acquire new theories.
THAT RESULTS IN POSITIVE PERFORMANCE IMPROVEMENT.
Theory of Variation
Every process and outcome in business and commerce is subject to variation. Variation in business and manufacturing processes affects performance in terms of quality and costs. An increase in process and outcomes variation will increase costs, and we know that everything in business, commerce and education is subject to variation. The job of leaders is therefore to reduce variation as much as possible in all aspects of the business. Such reduction in variation results in more in more uniformity, better quality and happier customers. Continual reduction of variation is part of continuous improvement, without which performance improvement strategies are academic.
This relationship between variation and cost was illustrated in 1960, by a Japanese Engineer, Genichi Taguchi. He delivered a paper that illustrated the relationship between variation and total cost. He proved how total cost to society increases as variation in goods and services increase. The mathematics of his proof are well documented, albeit somewhat complicated. Since then certain Japanese organizations embarked on a mission of reducing the variation in their manufactured products. This was one of the strategies that helped certain Japanese automobile manufacturers improve their quality and capture world markets, and today are leading the western competition.
The following model, based on Taguchi’s loss curve, describes how variation relates to costs.
In the Old View the assumption is that as long as everything is within the specification limits we have no losses. “The New View” by Taguchi shows that losses are distributed as per a loss curve that resembles a parabola. This is the well known “Taguchi Loss Curve”. The least loss is when the product or service is at the optimum value. For instance, a product or component at the optimum dimension will have the best fit and function for that specific design. As the product or service deviates from this optimum value greater and greater loss is incurred.
In the New View we see that although a product or service is within the specification limits, it still incurs significant loss. The amount of loss will be dependent on the steepness or flatness of the parabolic curve, which differs for different products, services, or characteristics. Therefore merely conformance to specifications, or even reduction in variation compared to specifications, is not a good continuous improvement strategy for performance improvement.
The following diagram illustrates the difference between traditional approaches and that of Apt Leadership:
There is no magic number as to how much variation should be reduced.
In the diagram to the left, it is obvious from the steepness of the loss curve that 6 Sigma quality is not good enough and further reduction in variation is necessary in order to have a competitive advantage.
Once variation has been reduced adequately on any product/service or characteristic, then we should focus our attention on the next product, service or characteristic requiring attention.
Psychology of People
Here we deal with the leadership skills and leadership theories that teach how to interact with, and improve the performance of people. What creates motivation in people? Many traditional efforts at performance improvement will not create improved performance if people are not motivated in the first place, and cannot take pride and joy in their work.
The question before us is what is motivational theory? If someone holds a gun to my head and demands my wallet, I would be forced to give up my wallet. Was I motivated to hand over my wallet? I think not. I was activated however because of the potential consequences of refusing to hand over my wallet. Motivational theory ordinarily teaches that a motivated person who takes an action does so because of the pleasure derived from that action. Taking motivation theory further, there is motivation and activation. Motivation comes from inside the individual and is related to what the person enjoys and wants to do. Activation comes from outside the individual. It is forced on the individual and is mostly unrelated to what the person likes or wants to do.
Motivation: Creating the environment that has people do what both leaders and they want to do.
You cannot motivate people directly. Creating an environment that supports and fosters motivation will result in increasing the motivation of people. In fact all people are motivated. The question is what motivates them? For some people one may not be able to know what motivates them, because they may have been exposed to experiences in their life that destroyed the motivation that all babies are born with, naturally some babies are born with more motivation than others. In the work environment the challenge is to assign work to people that they can take pride and joy in, and create an environment in which they can be motivated.
When a person applies for a job, leaders need not only be careful that the person is qualified and is the right person for the job, but very important, that the job is what that person likes and wants to do. The right person in the wrong job is tantamount to an environment that is counter motivational. Naturally we can not always be correct when selecting and recruiting people, but we must be aware that employing people in jobs they dislike, will cause a situation where motivation can not be expected. A common cause of unmotivated personnel is applying activation to get people to do what the management want them to do, irrespective of whether they really want to, or like to do what is expected. A common mistake is to ignore motivation and rely on activation to get work done. The activation then has the effect of destroying any motivation that was, or could have been present. Motivation is a necessary ingredient for innovation and progress to take place. Performance improvement is very effective and long term when an environment for motivation is created.
Activation: Making people do things they otherwise would not do.
Bosses can easily activate people. Most of the leadership theories taught and practiced in Knowledge Management, Learning Organization, Lean Manufacturing, Six Sigma, Continuous Improvement, Total Quality Management, Change Management and Performance Management, do not create an environment that supports and fosters motivation, but rather relies on activation that is derived from Skinnerian psychology, as applied to animal training and behavior. Incentive pay, bonus pay, pay for performance, traditional performance appraisals, certain stock option plans, excessive pay for CEO’s driven by board members who dangle carrots, sticks and unachievable goals that have no methods for achievement, all lead to activation in people that ultimately cause negative performance. The reason is because money, used as an instrument of control, does not motivate people. In fact money is not a motivator, but is nothing more than an economic transaction where payment takes place for services rendered. The quality, productivity or cost effectiveness of the services rendered can not be improved by dangling more money in front of the person rendering the services. It is true that more money often results in a person willing to work longer hours (overtime), or performing work they otherwise would not do, but that is not related to performance improvement. In the diagram we see that reliance on activation causes the person to to quit contributing to performance improvement and just does the minimum that he can get away with; hence the transformation from a person to an ass.
RESULTING IN POSITIVE PERFORMANCE IMPROVEMENT.
Psychology of People also teaches that people are different from one another and what it is that makes them different. Leaders need to know how to manage these differences in order to optimize the business system and how to interpret these differences so that the appropriate strategy for performance improvement can be applied.
ITS CLIENTS KNOW HOW TO IDENTIFY AND APPLY SUCH STRATEGIES.
All processes, systems and people in an organization interact with one another to produce outcomes that may or may not result in performance improvement. If the interaction of systems, processes and people do not interact positively, then the resultant outcome will be negative, leading to negative organizational performance.
All parts of an organization, including the people in the organization, should interact positively to form one cohesive whole. Some parts may not perform optimally in terms of individual performance, but when combined with the other parts of the organization, they will contribute to performance improvement for the total organization. This aspect of creating positive interactions between all parts of the organization needs to be driven by leadership and should be planned and executed throughout all facets of leadership skills and leadership development, in order to create performance improvement. It affects all strategies that are employed in terms of:
- Financial performance
- Operational performance
- Design performance
- Personnel performance
- Marketing and sales performance
Organizations that embark on performance improvement without an understanding of how to create and lead systems and processes towards positive interactions, will eventually suffer from negative performance improvement.
The following are examples of negative interaction between parts of the organization that unintentionally lead to negative performance:
- The Ratio of policy applications declined by the underwriters need to be reduced by management edict, however sales must increase the number of policies sold. Note that the sales department has no capable system for determining which sales the underwriters,would approve, and therefore work in a vacuum, as do the underwriters.
- Manufacturing has a numerical goal for number units to produce, however the designs provided to manufacturing are un- producible and lead to rework that hampers production and profitability.
- Sales have sales quotas that force them to promise deliveries to the customers that the operations system is not capable of meeting.
- The mortgage broker is paid an incentive bonus that is based on the value of the mortgage loan he sells. So he is activated to sell high risk loans, many of which result in foreclosures.
Incentive pay, bonus pay, pay for performance, traditional performance appraisals, certain stock option plans, excessive pay for CEO’s driven by board members who dangle carrots, sticks and un-achievable goals that have no methods for achievement, all lead to negative interactions between systems, that ultimately cause negative performance. Many performance management processes and performance management models teach exactly those management strategies, and leadership theories that accomplish the opposite to what was intended.
PERFORMANCE MEASUREMENT STRATEGIES THAT LEAD TO
POSITIVE INTERACTION BETWEEN SYSTEMS AND PROCESSES
AND RESULT IN PERFORMANCE IMPROVEMENT.
BUSINESS OPERATING SYSTEMS SOFTWARE TOOLS HELP DOCUMENT AND DRIVE PERFORMANCE IMPROVEMENT THROUGHOUT ALL BUSINESS SYSTEMS IN THE ORGANIZATION.