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HOW DO YOU EXPLAIN THAT?The most frequently asked questions about Tor Dahl & Associates' performance improvement theory and process.The most frequently asked questions
Introduction by Tor DahlFor the last twenty years, I have practiced the role of trying to answer any question that was posed to me by clients or students. When I had the opportunity to present to a group of managers for the City of St. Paul in Minnesota I stated, perhaps hazardously, that I had been a victim of the common belief that public employees were somehow less productive than private sector employees, but that our interviews had not indicated that such was the case. The question was asked why such a perception existed. A couple of things came to mind in thinking about it: Dr. Curt Nicolin, a successful industrialist in Sweden, had performed a study on dentists in Sweden that showed that by any measure (patients treated, fillings made, etc.), privately practicing dentists were about 100% more productive than government employed dentists. People who are paid piece rates are about 40% more productive than those who are paid salary, and government workers are almost exclusively salaried employees. This is not what I said, however. I said that people in the private sector had told me so. This was true and they accepted it. Then they asked, why would private sector employees think that they are more productive than civil servants? I remembered a study that stated that 700,000 new corporations are formed in the U.S. every year, and that less than 20% of these are still around after five years. I remembered another study that said that the 500 biggest industrial companies in the U.S. (The Fortune 500) had eliminated a million jobs during the last decade. I answered, because a company can die in the private sector. You are 'immortal' as a city, and that could have a negative effect on performance. These were subjective judgments, and the generalizations could well be questioned. But if I had been challenged, I would have provided references that would have buttressed my opinion, while clearly stating that it was only my opinion. In fact, I am convinced that there are public servants who are far more productive than most, if not all, their private sector equivalents, and that one could find oneself on thin ice very soon if one did not allow for that possibility. Subjective questions/responses probably do not have universally correct answers. They represent the sum total of your experience, reading, perceptions and observations. I have read a prodigious amount of information on productivity, much of it overlapping, and much of it contradictory. I am far more trusting of the insights I have gleaned from the interviews the people who shared their hard earned experience with me than I am of the body of academic work in the field. Yet it is the latter that carries the weight of persuasion in a critical audience that does not consist of academicians. In the latter audience, you will always find people who know of another study that arrives at the opposite conclusion of the one you may refer to, and I guess I find myself by nature skeptical, an academician as well as a practitioner, but with the predilection for favoring experience...others and mine. THE MOST FREQUENTLY ASKED QUESTIONS1. Why do you put such an emphasis on productivity? Life is not only work. Should we not also look to free time or relaxation as legitimate parts of our lives?Certainly. Productivity has to do with adding value. Adding value comes from a life well lived, and that includes participation in all activities that carry an inherent utility or value, or sense of satisfaction. From that perspective, spending time with family or friends, or time for self development or relaxation may be just as important as spending time on more conventional work activities. Economists have a rule that says that you maximize satisfaction when the last minute spent on any activity has the same utility or value to you. This is based on an assumption that the more time you spend on anything, the less you value the last minute spent on the activity. That may not be entirely true, but it holds for most of the activities human beings can engage in. If the last unit of time spent on any one activity carries the same value to you, then you couldn't possibly improve your distribution of time by reallocating it. If you are really serious about maximizing your satisfaction, or your income, you will have to think through how much each one of your activities contributes to that goal, and then allocate your time first to the goal that yields the highest return. When you have worked enough on that so that the further work is not adding more than the first unit of time on the next activity, then you have reached a point where you shift activities and do something else. And so it goes, until you have a spectrum of lifetime activities that all yield the same high value, either in the form of satisfaction, or if you look at it from an income viewpoint, remuneration for your efforts. Besides, there is an American saying that says that, all work and no play makes Jack a dull boy. 2. Doesn't productivity improvement eliminate jobs?This is probably the oldest myth in productivity. In fact, the only thing that can guarantee a person a job is that he/she is productive enough so that they add at least as much value as they receive in terms of pay. What usually happens when a company increases its productivity is this: first, the company is able to produce more goods and services than they were able to do before with the same amount of manpower, capital and equipment. That means that they can sell more products or services, particularly because it is now possible to lower prices, because the overhead is allocated across more units. Lower prices increases demand, and eventually that will lead to the hiring of more people rather than to the firing of people. The best example of the refutation of this argument is that the American economy has been able to create jobs at the same time as productivity has increased in an unprecedented fashion for many years after World War II. If the argument were true that productivity will eliminate jobs, then countries with declining productivity and low productivity should have full employment, and that just is not the case. Improving productivity is a game where everyone wins. It is the single most important factor in increasing income per man, woman and child in the country, and increasing tax revenues while the proportion of the total income that goes to taxes can remain the same or even go down. It is also the only guarantor that we will be able to meet our heavy future pension obligations with a great number of retirees, and the refinancing of our infrastructure without having to take that out of consumption or earnings after taxes. 3. Doesn't productivity improvement mean that we will all be working harder?No, it doesn't. Only about 1/5 of productivity improvement comes from working harder. The remaining 4/5 comes from eliminating waste; having the appropriate person doing the job; getting rid of what should be done, but not by you; and getting rid of what should be done by nobody. For that reason, productivity improvement does not, in most instances, impose a hardship on people. Quite the opposite. We have found that roughly 2/3 of people's stress and dissatisfaction is associated with nonproductive behaviors. If you go in and teach people stress management, what you will be doing is primarily teaching them to be happy with nonproductive behaviors. That's not doing them a great favor. It is far better to teach them how to get rid of the nonproductive behaviors. Then they will get rid of most of the stress and dissatisfaction, and at the same time, add more value so they can also be paid more. 4. Isn't it true that productivity improvement only benefits employers? Doesn't it constitute an exploitation of labor when productivity is increased?Over time it can be shown that what people are paid is roughly equal to the value they have created. The correlation here is approximately .9. This means that the more value you create, the more you can and eventually will be paid. If somebody weren't paid enough compared to the value that he/she created, that person would be likely to leave the job and find something that paid a fair wage. In a competitive society, it would not be possible to underpay people for long because they will seek employment elsewhere. If, for reasons of a strong union, or perhaps a situation where somebody has monopoly on a certain type of labor, somebody has been paid quite a bit more than what he/she creates in value, that situation cannot last. Sooner or later the employer will go out of business and there wouldn't be any jobs available for people at that rate. An example would be the wages that were paid to steelworkers in the United States from the 1960's to the early 1980's. Higher wages made the U.S. steel producers uncompetitive with foreign producers, and a large number of steelworkers lost their jobs. A counter example to that was the United Auto Workers' Union whose members tied their wages to increases in productivity. In 1988, there were more unionized autoworkers than ever before in history. 5. You are telling us about these five principles that all free resources, but you are mentioning one delegation that may mean that we will have to hire other people. That means it will cost money. How can that free resources?Think about a hierarchy where you had three people that report to you. Say that you saved 30% of your time by delegating 10% to each of your three people. They themselves save 30% of their time, so they can take 10% of what you have delegated to them and still have 20% left over for other things. Now, when you take this all the way down to the bottom, you will find that there will be an increase of personnel, perhaps, but it will be an increase at the lowest levels, so the time that has been freed in the upper rank is far more valuable than the time that you have been adding to the lower ranks. Hence, on the whole, delegation also produces a freeing of resources. 6.What if I have nobody to delegate to?That argument is only acceptable if you are Robinson Crusoe on a desert island before Friday arrives. This world is full of people. They may be high school students that can work after school. There may be machinery that can take over jobs that are routine, or that you can program, and then free yourself for other tasks. There are people that you may be able to talk into doing something for you even if you don't have direct authority over them. This really depends upon your own imagination and how well you understand that other people can be influenced as well as coerced. I once worked with a group of physicians that spent a very significant amount of time on paperwork every day. I looked at the paperwork and realized it didn't require a medical education to do it, so I suggested, Why not hire somebody to come in after school, perhaps a bright high school student with some business education to do it? They acted on my suggestion, and as a result, they were able to handle many more patients than they had in the past. Sometimes delegation opportunities are right under your nose. A teacher may use peer group teaching, which is a way of putting the best students to work helping the less bright and able students. It may mean bringing in students from older age groupings to help with lower grades. Contracting out may also be a way of delegating, particularly if that can be done cheaper and better than doing it in house. All of these solutions point to the value of always looking for the ideal task performers and not trying to do everything yourself. 7. Wouldn't all this focus on productivity take all the fun out of living and working?I'm convinced now that if one didn't take the trouble to plan the use of one's time, there might not be any time left over for fun and games. For years, we set aside the last week of August for mountain climbing and hiking with good friends. It was very difficult to do. We all had terribly busy schedules, but because of sticking to that one objective, we spent ten years together climbing in some of the most beautiful parts of the world, like the Canadian Rockies, the California Sierras, and the Alps in Switzerland. If one gets caught up in day-to-day work, there never seems to be time for vacations, or pleasant dinners, or for going off by one's self to just think for a while. Behind each one of these decisions would be the capability of having work done without oneself having to be there. That almost always requires advanced planning. People seem to think that it is only work that should be planned. I think the most pleasant things in life can be planned and enjoyed. One doesn't really know what one is missing until one becomes so hung up in day to day work because of a lack of planning that there is no time for anything else. Planning has the most powerful payoff of any principle for freeing resources. We know those fifteen minutes of planning saves about an hour of execution of any completed task. Wouldn't it be worthwhile then to spend the time it takes to plan so that you can secure the vacations, the holiday travels, the reading, and the celebrations that you richly deserve? 8. First you say we should free time, and then you say we should put it to use again. I don't see how that leads to any improved productivity. We still spend all our time working.The first part of the exercise freeing resources is done to eliminate waste. If you free 70% of your time and resources, that means that you get done what you need to get done or as much as you did before in 30% of the time. It is true that productivity has not increased one iota. That increase only comes when you take the 70% of the freed resources or time and put it to different or better use. Remember that 30% of our time now produces all of what you were doing before. You have only taken out 70% worth of waste. If you then can take the 70% and put it all to good use, by definition, your productivity must have gone up by 70%, perhaps even more. The reason is that you now have an opportunity to put the 70% of your time into high value activities. These activities may, on the average, yield more value than the 30% that you were left with initially. For that reason, productivity may go up even more than the amount of resources that you have freed. We are talking about time and resources as if they were synonymous. In most instances they truly are. About 76% of the economy in the U.S. consists of service industries. In service industries there is a labor-intensive component that is, most of the money is paid for hourly work. In those instances, the freeing and then better use of time is the predominant way of improving productivity. The principles can apply to anything that participates in the productive process. The elimination of waiting time, for example, does not just mean waiting time for people. It can mean waiting time for inventory items; waiting time for machinery; downtime for computers; waiting for buildings. In fact, the single most important achievement by the Japanese in overtaking and then passing the American in annual increase in productivity was the elimination of waiting time. Just in time production, the Kanban System, the fact that no machine or worker was idle, was conscious use of the principle of occupancy, or the elimination of waiting time. It's a very powerful principle and it will pay off very highly if it is applied intelligently. It is also a relatively easy thing to do. As a rule, all waiting time can be eliminated, and the reason is, of course, that it can always be substituted for something else. 9. Can you improve on efficiency without improving effectiveness?Certainly. You can be 100% efficient at doing something that nobody should be doing, and that means you are ineffective. Effectiveness is always outside of the company. Effectiveness always relates to a client how happy that client is with the service or product that you have provided him with, and how well you have been able to judge the client's needs and demands. Inside of the company, there are only cost centers. You may, through the reduction of waiting time, increase in occupancy, and improvement in efficiency; produce whatever you are producing much better than before. But if you are not able to satisfy clients, you won't have anything to sell. Effectiveness always comes first. If you are not effective, then occupancy and efficiency are irrelevant. It's been interesting to me to observe that the literature on productivity deals most with efficiency or occupancy, not on effectiveness. 10. What is self-reinforcing change?Self-reinforcing change literally makes you better off. In measuring people's sense of being better, there are three dimensions that stood out: first, whether they were most or less satisfied; secondly, whether they were more or less stressed; and third, whether they have gained autonomy or have taken on more dependence. It is the satisfaction/dissatisfaction dimension that is most important, because stress, or arousal, only accentuates whatever satisfaction or dissatisfaction that you feel. The autonomy/dependency dimension has to do with an individual's sense of freedom and discretion, and that almost always entails a preferred change as seen from the vantage point of the individual. With this in mind, if a change in the way somebody does his/her work increases job satisfaction, increases autonomy, and decreases stress, the change is likely to be self-reinforcing, and hence it's likely to last. The reason is that the situation now is better than it was before by the way the individual himself defines better, and nobody will rationally choose a situation where they were worse off then before, if they have a choice in the matter. 11. Aren't these changes temporary? Isn't it true what is satisfying now may not be satisfying tomorrow?That is true. That's why it is important to look at the sources of one's satisfaction. True satisfaction comes from satisfying a human need, while temporary satisfaction comes from satisfying a human want. Even needs have different values to different individuals. The most basic needs for food, clothing and shelter bring relief when they are satisfied; but the highest needs such as the need for self actualization, growth and development can bring on ecstasy and serenity, and may never be fully met. So the more these changes reflect true human needs, the more likely they are to last, and the less likely they are to be temporary. 12. How about stress? Isn't that also temporary? Don't we get used to stress?Yes, we do. Some people learn to handle stress over time by using appropriate stress management techniques, or by avoiding unproductive behaviors, or simply being able to shift it from a dangerous type of stress, such as distress into a harmless type of stress, like excitement stress. We should be thankful that we have stress coming our way. The only state that I know of that is completely without stress is when you are dead. 13. I’m a student of Denison, and as far as I understand him, he explains that most productivity improvement comes about either through increases in education, increases in capital, or innovation. How does this fit with your approach?All productivity improvement comes through people. The process that we have discussed in the above is a process that identifies the need for capital equipment, if that is what will bring the highest yield; or increases in education, if that is what is needed; or that encourages people to think about their work in new ways, which of course is a definition of innovation. Denison writes about these issues from the macroeconomic perspective. He doesn't have access to people directly the way that we have. We are working with the very same concepts at the micro level, and that is why there doesn't seem to be a consonance between what Denison's work is all about and what we do. In fact, there is a very deep-seated consonance here. Many of the suggestions that are being made by participants in our projects involved the acquisition of new equipment, new routines, new structures, and new ways of doing the same job. We have also been able to show how experience alone, i.e., the passing of time, makes people more productive as years go by. In addition, we have been able to show that people's individual health has an impact on performance something that would not be easy to prove on the macro level. 14. In one of your papers, you show that smokers were more productive than nonsmokers. How do you explain that?The chance for this finding to come about through chance alone was less than 7%. In other databases, we have shown the same thing with a higher degree of significance. But correlations don't imply causality. In other words, we cannot say that smoking in itself causes people to be more productive. We can only say that smokers were associated with a higher level of productivity than nonsmokers in the study you refer to. A possible and perhaps more plausible reason is that nicotine is a stimulus that may cause people to be either more alert, or perhaps even more energetic. I don't really know. I have a feeling that any kind of stimulus, perhaps even more benign than nicotine, might have a similar effect, but this just hasn't been studied very well. We do have studies that indicate that caffeine increases athletic performance, and this could be another indication of the possibility that I referred to earlier. 15. In the lifestyle and health data that you have from our group, some of the findings seem to be contradictory to the findings that you have for your overall national database. Why is that?In any group, there can be deviations from the norm. This happens particularly when the group itself is either highly fit or highly unfit. When you have very little variation in the data, what variation you have can be spurious. In groups that show a great deal of variation in lifestyle scores, you will usually find that the relationships in that group tend to follow what we have found to be the case for a very much larger sample. The reason why we operate with the group data for the participants rather than outside data is that participants simply don't accept outside data as valid and representative of themselves. Even if the data show some rather perverse relationships, at least it is their relationships and it's accepted as such. I've found that the advantages outweigh the disadvantages when people get to work with their own data rather than data that does not relate to them at all. 16. Is there a limit to how productive people can be?We have found no such limit. In the world there are people who are less productive than what they are being paid, even at very low wages. And there are people who are thousands of percent more productive than others. Since part of productivity relates to what you accomplish through others, and since there is almost an unlimited number of others, there should not be a limit of productivity. More importantly, since productivity can also be improved by robotization, mechanization, or putting drudgery on computer, there seems to be very little that stops the human imagination from going very far in performance improvement. It has been said that most people in the world are willing to work for others, and the others are willing to let them. Hence, the mindset of dealing with resources varies from person to person, and from the insights that you have gleaned from observing others and studying performance improvement as a field. 17. You're talking about freeing resources, but it's perfectly possible to bring in resources from the outside. Shouldn't that be a separate principle?It could, but then you have to keep in mind that those resources have been freed from something else. So in the larger picture, those resources are also freed from an alternative use. The reason why those resources are attractable from the outside is that they will yield an equal or higher return in your company than anywhere else. If so, you must create the conditions for that high return before you can attract them. 18. You are saying that those allocations of resources that yield the highest returns are those that give you a monopoly advantage. But if you have a monopoly on something, you still may not be able to sell it. Would not such a monopoly advantage be irrelevant?It's obvious that you cannot capitalize on a monopoly advantage if it doesn't put you into a position to add value. You may be the only person in the world with a telephone say that you just invented it but if nobody else has it, it isn't easy to capitalize on the invention. A more practical example would be your carrying a certain item in a store for which there is very little demand, because the population base just isn't there to support it. It just means that you should not just pick your monopoly advantages just because they are monopoly advantages, but because they have a commercial or innate value in and of themselves. Then you are able to charge a higher price than what would have been the case if there were competition for that goods or service. Unless law regulates your monopoly, sooner or later there will be competition, so any monopoly advantage is only temporary, as even AT&T has experienced in the last few years. 19. In efficiency, you talk about the principle of maximum return, and the principle of minimal use of resources. Is there an easier way of stating these two principles?A process or an activity is efficient if no more resources are used than what is necessary and sufficient to get the job done. That means that one uses no more or no less than what is needed. In the ideal situation, we have what mathematicians call a saddle point. It is when the bottom of the cost curve touches the top of the yield curve, or satisfaction curve, Thus, efficiency can be at least defined precisely, in an ideal manner, but it is doubtful that we can ever obtain it in real life. We can always get closer, but perfectly efficient functioning is difficult to attain, if not impossible. Effectiveness is an even more difficult goal to accomplish. Effectiveness also encompasses the concept of quality, the concept of client satisfaction, and the concept of doing the right thing. The search for effectiveness has spawned a number of schools of thought, each one of which contributes to the understanding of effectiveness and performance improvement. 20. Is it true that improvements in quality always means reductions in costs?No. Only by defining quality in a certain way and by taking a process, which already is somewhat inefficient and ineffective, can you make that statement true. It is perfectly possible to visualize a process where quality has been improved at the same time that cost has gone up, just as well as it is possible to improve an increase in quality at the same time as cost is going down. Quality is usually defined as conformity with specifications. These specifications should be made from a client perspective, assuming that the client is competent enough to formulate and judge such a perspective. In the U.S. we have so many different rating processes and associations that judge the quality of products, that it is often clearly decided where on the quality spectrum your particular product or service is located. If so, there will be a market price attached to that level of quality, and that means that for you to improve profitability you must be able to reduce costs. 21. My productivity is fine. It's my boss and co-workers that need to improve. How can I make that come about?This is your chance to get those things pointed out in a safe manner. When you finish your performance improvement plans, you will check off those that will require outside help, and they will be kicked upstairs for management to deal with. If you have good suggestions on how to deal with those issues, I'm sure they will welcome them. 22. What if I save more than 100% of my time?First, it should be remembered that the percentages used in the table refer to a 40-hour week. If somebody actually worked an 80-hour week, it's certainly possible to save 100% of your time and still only have saved half the workweek. This is the most common reason why we got those very high estimates. Secondly, because people tend to work at only a fraction of their total capacity usually about 1/3 of their capacity if you improve by 100%, you are still only working at 2/3 of your capacity. The most obvious case would be a salesman whose revenues may go up as much as 200 or 300% if he/she focuses much better on what he/she should be doing. A third reason is the fact that people tend to spend their time in the 80/20 fashion. That is 20% of the revenues are accomplished in 80% of the time, and conversely, 80% of the revenues are accomplished in 20% of the time. So, if somebody shifts their activities around in such a way that instead of spending 20% of the time on very high value activities, if they increase that to say 40%, their result, or revenues, or however they count their output, may double. Finally, it may well be that people overestimate the amount of savings that they achieve. If so, the over estimates are likely to come from those things that are intensely disliked. For example, we once asked a number of physicians how they spent their time, and then we measured it precisely with instruments. Many of the physicians thought that they spent somewhere between 10 to 20% of their time on the telephone. We never found a physician who spent more than 5% of their time on the phone, yet it loomed so much in their minds that it got exaggerated much more beyond reality than the reality could sustain. If you want to ask Tor Dahl a question about our methodology, please send him an e-mail message. Copyright © 2003 Tor Dahl & Associates |
