Some days, it seems the WSJ is a treasure trove of tangentially Lean-related articles. Similar to “blog carnivals,” this is sort of a WSJ carnival for 11/30/09. Some of the themes include real “value” versus the perception of it, leadership and incentives, outsourcing versus vertical integration, and error-proofing.
I know this feature is of less value to those of you without WSJ subscriptions, but here goes:
With budgets tight, more companies are hiring third parties to come up with new ideas – WSJ.com
It's been trendy for decades (so it's not a passing fad) to blindly outsource manufacturing. Want to move everything to China for cheap labor? This WSJ article from today points out some possible pitfalls.
Seems nobody wants to build stuff anymore, it's not cool to make stuff (except for those getting back in via “vertical integration,” per this WSJ article from today). But what now about companies also looking to outsource innovation?
When should companies try to come up with new ideas themselves and when should they give the job to outside experts?
It's a question many companies are facing these days. As budgets tighten, businesses are outsourcing research and development and the creation of new products as a way to slash costs, speed development time and tap into top talent outside the company.
I guess we're getting closer to the executive ideal state — just have a website and let the bonus checks roll in!
How Entrepreneurs Can Win Over Potential Investors – WSJ.com
I really respect entrepreneurship, especially considering the role that new companies play in creating jobs. How does a new company establish credibility with investors? Call me old-fashioned, but you'd think it would be your products, your market and customers, and your personal characteristics (the idea that investors invest in people being a popular notion).
No, this WSJ article channels Billy Crystal's “Fernando” character by saying it's basically better to look good than to feel good to investors.
Location, location, location. The old adage also holds true here: Executives should secure the most desirable spot possible for their offices. Of course, not everyone can afford this, but there are ways to save. For instance, some entrepreneurs in our study arranged to meet in impressive surroundings—such as fancy hotels—or they rented shared offices in tony neighborhoods. Again, this serves a twofold purpose. Practically speaking, it's cheaper than getting very expensive digs. It also has valuable symbolic meaning. As one entrepreneur explained, “When we asked [our investors] why they had given us this chance, rather than some of our perhaps better-established competitors, they told us that they were so impressed that we were obviously a business of substance, because we had such a large, well-appointed office. They didn't know that we had a very, very small office, just in a large building.”
A fool and their money are soon parted, even if that fool's business card says “Venture Capital.” So much for creating value, let's just put up appearances. Blah.
To Keep the Finger Out of Finger Food, Inventors Seek a Better Bagel Cutter – WSJ.com
BRI = Bagel Related Injuries, a major cause of sliced fingers and cut hands. This article details how people don't know how to use knives properly and they especially don't know how to cut bagels. Lack of standardized work and lack of training, apparently?
I got much more comfortable in the kitchen (I love to cook) when I learned a bit of proper knife technique (and knife sharpening technique especially, as a dull knife is a dangerous knife).
This article talks about devices to help “error-proof” bagel cutting, including the “bagel guillotine.”
Get Rid of Executive Bonuses – WSJ.com
Management expert Henry Mintzberg says bluntly:
These days, it seems, there is no shortage of recommendations for fixing the way bonuses are paid to executives at big public companies.
Well, I have my own recommendation: Scrap the whole thing. Don't pay any bonuses. Nothing.
He says the process simply can't be fixed. Bonuses and the dysfunction created by them have dragged down the economy and caused more harm than good.
The failings of the current system—and the executives who live by it—are painfully obvious. Although these executives like to think of themselves as leaders, when it comes to their pay practices, many of them haven't been demonstrating leadership at all. Instead they've been acting like gamblers—except that the games they play are hopelessly rigged in their favor.
Mintzberg writes that even trying to tie incentives to the long-term is troublesome, because what measure do you use?
I love the idea that you use bonuses as a screening tool – Mintzberg writes that if the CEO candidate demands a bonus, you eliminate them from consideration. He writes:
I believe that if you do pay bonuses, you get the wrong person in that chair. At the worst, you get a self-centered narcissist. At the best, you get someone who is willing to be singled out from everyone else by virtue of the compensation plan. Is this any way to build community within an enterprise, even to foster the very sense of enterprise that is so fundamental to economic strength?
It will be interesting to see what kinds of comments that column draws (seven as of this writing, early Monday evening). What are your thoughts on that topic or the others from yesterday's Journal?
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A bonus is nothing more and nothing less than a single component of a compensation package, which may also include base salary, paid-time-off, various kinds of insurance benefits, possibly other nice perks, etc. And it's no secret, of course, that any form of compensation is open to potential manipulation if a manager or executive and/or her cronies are less-than-ethical in how they conduct business. But why single out and demonize the bonus?Because, let's face it, compensation – yes, even bonuses – is what you receive in return for your labor on behalf of the organization which employs you. Some labor is more valuable to the organization, some less so. There are measurements and judgments involved in figuring this out at all levels up and down the organization chart. It's pretty complex stuff, kind of like figuring out what the actual financial benefit of that last Kaizen event or Six Sigma project you completed REALLY was. How exact a science is that?If we eliminate bonuses from the compensation package we're still going to need some way of differentiating the value each individual contributes to the organization. Perhaps this can be accomplished via the salary mechanism, but this just implies a much wider range of salaries. And salaries present the disadvantage of being, typically, fixed for the duration of a year or so. Now of course we could make salaries variable, adjusting them periodically based on someone's perception and interpretation of the value contribution for each individual. But if we get to that stage I'm thinking that all we've really accomplished is simply engage in word play, creating a fixed and "variable" component for salary. Sounds like a bonus to me.No, the answer isn't to demonize the bonus. It's to create a more accurate and transparent way of measuring and valuing the contribution each individual makes to the organization and then rewarding her for that contribution. This is the real challenge which needs to be addressed and, unforunately, Mr. Mintzberg offers us no real guidance in this area.I've been in the executive search profession for about 20 years. And not one single new Lean Manager or Director, Operational Excellence VP or Chief Operating Officer I've ever recruited has neglected to ask me about my client's bonus plan for the new positions they were undertaking. Let him who has never expected or earned a bonus speak now, please. How about you?Adam Zak, http://LeanRecruiter.com
I'll go with Deming who I heard say (gruff, codgerly voice): "Sure, I believe in pay for performance: if you perform, we pay you, if you don't perform, we don't pay you".Individual, performance based bonuses promote the hiding of problems in one's area, the assignment of blame and gaming the system for personal gain. They are generally destructive to teamwork. This is the world of functional silos, defensiveness and fear. Measuring performance of individuals when there are varying degrees of difficulty in projects, environments, and issues at hand is, as Adam says, complex, and, I would assert, wasteful. Why bother to build a complex accounting system that is likely to work against you anyhow?I like the notion of simple gain sharing that cuts across the strata and functions of an organization. One example I've seen took the first 50% of the available pool and divided it equally among all employees with more than a year of service. The next 25% was weighted by service tenure, the next 25% weighted by pay grade. And if you aren't contributing, goodbye!If this is a bonus program, I'm for it. But pay for perfomance on specific local objectives risks hurting the system as a whole.It probably requires more in the way of effective strategy deployment, so everybody is working on stuff that makes sense, but that's a good thing in any case. And it acknowledges that the guy in the corporate office is only succeeding because of the good efforts of the guy at the lathe, the hospital orderly or any front line worker who is actually adding value, but is often (generally?) excluded from bonus programs.
Video of Mintzberg from the WSJ website talking about alternatives:LINK