As a reliability engineer and MBA, I concluded early in my career that managing reliability in a manufacturing plant is approximately 80 percent engineering and 20 percent business management. Boy, was I wrong. With experience over time, my views have changed – dramatically. I think it’s about 20 percent engineering, 30 percent business management and 50 percent social psychology. Sure, a plant is an electromechanical thing (engineering) that’s built to create shareholder value (business management). But it’s run by groups of people – the social psychological piece of the pie. In fact, I may be grossly underestimating the people side of the equation.

As a consultant, I hear it again and again – “we can’t get the people part figured out.” Let’s explore some common mistakes we make managing our people.

Figure 1. The Journey to the 'New Business as Usual'

What Gets Rewarded Gets Done

Early in my career, I taught a course on contamination control for hydraulic systems to an angry group of mechanics. I didn’t understand why they were angry. It’s pretty simple: If you control contaminants in a hydraulic system, pumps last longer, seals last longer and valves don’t jam or fail near as often. It wasn’t until a break that a master mechanic enlightened me that the guys weren’t directing their anger at me, nor did they disagree with the technical message I was delivering. The problem was that I was talking about taking away their boats, cabins, vacations, etc. It hit me like a load of bricks; for many mechanics, overtime represents a good chunk of their total pay.

For overtime to occur, something’s got to break. We’ve been extrinsically rewarding failure with overtime for decades. If we don’t replace the overtime pay opportunity with a reliability-based opportunity that’s the equivalent or better, we’re not looking after the WIFMs (what’s in it for me) of our people. In fact, we’re reinforcing the behaviors that lead to failure. Moreover, if a mechanic comes in on overtime and fixes a machine in the middle of the night, we intrinsically reward him by lavishing praise on him for getting us back up and running. When was the last time you plant managers lavished praise on a team member for changing a filter, performing an inspection, completing a laser alignment, etc.?

We’ve heard that what gets measured gets done. In truth, it’s what gets rewarded that gets done.

Here are some other common reward mistakes:

  1. Operators get an unscheduled break when the manufacturing process fails.
  2. Production managers receive a bonus for hitting production goals, even if it creates inventory for which there’s no demand.
  3. Equipment design and procurement teams receive a bonus and recognition for getting functional, fast and cheap, even when it increases the life-cycle cost of ownership.
  4. Purchasing teams are rewarded for cutting costs, even if it results in large transitional costs (e.g. changing lube suppliers) or reduced material quality (e.g. increased dimensional variability in bottles).
  5. Sales teams are rewarded for selling product even if it produces a loss due to manufacturability problems (e.g. packaging solutions that require plenty of manual intervention).

There are many other examples. The key is to create reward systems that drive the right kinds of behaviors. These systems must include the extrinsic drivers (money, benefits, etc.) and intrinsic drivers (recognition and “atta-boys”, feeling like a part of a team, etc.). I also believe they should be based on a balanced scorecard of individual, team and organization goals. Above all, they must drive behaviors that promote reliability and value creation for the firm.

Who’s Watching the Bottom Line?

Large organizations are grouped into functional subsets by necessity. Unfortunately, these groups interpret the mission based upon their context of the world and drive forward based upon this interpretation, creating functional action plans, key performance indicators, reward systems, etc. Let’s use physics to illustrate the point. Think of a functional group in the organization as a vector, a force that has direction and magnitude. If a different functional group interprets the mission in such a way that sends them on a vector that has the same magnitude but is 180 degrees opposite to the first group, the physical resultant is nullified. This happens all the time. In many cases, it’s worse than just negating the efforts of another function.

In some cases, the vectors collide to destroy value. For example, the sales organization makes commitments to deliver a product that has no chance of being profitable because the manufacturing lot size is too small, or the process of creating or packaging the product can’t be automated, etc. Design engineers and equipment specialists build and install plant equipment that’s cheap up front but has high life-cycle costs. There are many other examples along the value stream of the organization. Now there’s an important concept – value stream.

Organizations are created to create value. Our most fundamental performance metric, return on net assets (RONA)/return on capital employed (ROCE), is a value-based metric. Stock analysts call it a measure of “management effectiveness”. It, more than any other KPI, determines whether or not people want to buy or sell your stock. It is also the basis for economic value added (EVA) calculations, which drive executive bonuses, stock options, etc.

If maximizing value is so important, why then do most functional groups in the organization focus their efforts on revenue maximization or cost minimization. Who’s watching the bottom line? Sure, revenue and costs are a part of the value equation, but increasing revenue or decreasing costs can – and often does – destroy value. I think it’s because value is so difficult to measure, particularly at the functional level, where the functional group only contributes a part of the value equation. However, if we don’t get our functional teams working for (not against) each other, we stand little chance of creating lasting value. The winners figure out how to minimize the silo effect.

A New ‘Business as Usual’

Using physics metaphorically again, organizations experience “psychological inertia.” A body at rest remains at rest. To create movement, we must increase propelling force or decrease impedance. In other words, people – and particularly groups of people – resist change.

As a consulting reliability engineer, I observe practices. If I see a bad practice and ask why it’s done that way, the most common response is, “It’s how we’ve always done it.” Likewise, when I observe a good practice and ask the same question, I get the same response: “It’s how we’ve always done it.” It’s business as usual.

The key to successfully changing an organization is to replace the old, failed “business as usual” with a new “business as usual” that works to achieve the goal. The problem, typically, is our approach. In the book “Learning to Fly” by Chris Collison and Geoff Parcell, the authors clearly illustrate why change usually fails. Organizations undergo a predictable change process. They have a current practice, the current business as usual, a state which Collison and Parcell call “unconscious incompetence” (see Figure 1). We’re lousy, but unaware; ignorance is bliss. A manager reads an article, speaks to a colleague, attends a seminar or in some other way discovers that there’s a better way – “conscious incompetence.” Now we have a gap that needs to be closed. So a “program” is put in place to close the gap. This new business process, which has the organization in a state of conscious competence, takes much energy for the organization and is very uncomfortable. Remember, psychological inertia.

Frequently, the change agent who put the “program” in place to start with bails out and moves on to the next big thing. Without relentless leadership support, the organization, which is resisting the change, will predictably drift back to its old practice, back to its comfort zone. To succeed, we must achieve a state of “unconscious competence”, where doing it right is second nature. This requires a combination of mechanical support mechanisms like procedures and training, enforcement of the new practices, and plenty of encouragement and coddling.

Don’t underestimate the importance of this concept. Most new initiatives fail because we fail to recognize the impact of psychological inertia. Making matters worse, if we fail to execute a business process change initiative, the next time we try it, the organization collectively responds that “we tried that and it didn’t work here”, making it harder to implement the second time around (think TPM, lean manufacturing, etc.).

It Is All About the People

In this column, I’ve touched on three important social psychological aspects of reliability management. There are many more. E-mail me if you’d like to discuss these factors specifically as they relate to your organization. Also, ping me if you want to see more on the social psychology of reliability management. It’s a fascinating subject.

In the immortal words of Kurt Vonnegut, “If only it weren’t for the people, the (expletive removed) people … always getting tangled up with the machinery. If it weren’t for them, Earth would be an engineer’s paradise.” It is all about the people.