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Saturday, December 3, 2011

Fixing the Government with Business Practices

A generation ago America was the leader in most measures of societal success. Today we rate low on education, wealth distribution, private property rights, democratic governance, social mobility, we even lag in patent applications and patents granted. We are hard pressed to find any positive criteria in which America still leads.

I often hear that we need to use business models to fix our government. This makes a great bumper sticker and government by bumper sticker is certainly a good idea. Let’s step through some business approaches for solving government problems.

The tool kit used to fix problems has been sharpened over centuries of continuing effort. Among the better tools used are failure analysis, root cause, “best practice”, statistical six sigma, and LEAN. This just touches some of the tools available. All of these approaches simply ask why in an overly complicated manner.

Let’s start with failure analysis as used by modern business. Start by finding someone to blame, preferentially someone without the power to argue, this is good CYA and well done enhances your career. Next you advocate for a promotion and pay raise so you have the authority to fix the problem. If you are really good now you can start to fix the problem, if you are not that good, hire someone who is as a subordinate.

Now for a working example using the 5 whys and root cause. The plane crashed. Why? Pilot error. If the pilot is dead you’re home free. Explain that with more engineers and a higher position you can build a safer plane that reduces pilot error. After your promotion and a short hiring frenzy, you ask why did the plane crash? The wing fell off. Why did the wing fall off? The spar separated. Why did the spar separate? A bolt failed in stress. Why did the bolt fail in stress? The bolt was counterfeit and did not meet the required physical properties. Why was a counterfeit bolt used? We have no method to validate purchased components. At this point another sacrificial lamb becomes available. You get the procurement manager dismissed and take over his department to ensure engineering quality compliance. Continue to ask why, and continue to take all opportunities that present themselves. Eventually you find the root cause and develop a process that ensures parts and assembly that is 99.999999% accurate. This is called a six nines program, never offer 100%, which would be an unacceptable career risk. Politicians are certainly expert at blaming innocent victims, which covers the first step. Our system of government is incapable of the “drilling down” to the root cause, the answers would be too uncomfortable and possibly too dull for good cable television. Ok, root cause analysis is out.

Next we will look at best practices. Why is America falling behind relative to our peer nations? First we blame someone, the politicians are professionals at this and I will not attempt to complete with them. Pick your personal favorite from the offerings available and we will move on.

Since this is a business exercise, turn the question around and ask why are other nations doing better? Now we can use “best practices” to find a solution. Politicians talk of “American Exceptionalism”, since we are the “best practice” this problem solving tool is unavailable. Any politician making a statement such as “France has a better (insert favorite social problem here) we need to study their methods” would be shredded by Fox news and tossed out of office the next election cycle. Too bad, “best practices” is a very successful tool used in all the leading companies. One of the methods for emulating the competitor’s advantage is to hire the manager of that business segment that is beating your butt. I was at a small company that developed a more efficient manufacturing method for drill bits. A competitor hired my entire department. We came with the “best practice” and ideas to improve it. Unfortunately, I cannot imagine American politicians hiring a Swedish bureaucrat. OK, “best practices” is out.

Let’s next turn to Six Sigma and LEAN. Six Sigma is a statistical approach and works best with large numbers, our government certainly has large numbers. LEAN is used locally to reduce waste and improve delivery of the department’s service. This could be used for a driver’s license bureau.

For Six Sigma you need a trained cadre of “black belts” and “green belts” to identify the process’s economic outputs and then remove any causes of defects and variability. This has great promise for governmental application since it starts by creating a new bureaucracy, there could even be a Presidential secretary of Six Sigma, sitting right next to the white house military Chief of Staff. Six Sigma only identifies problems, fixing problems falls on LEAN. Since Six Sigma points the finger with mathematical precision this will fit very well for politicians, maybe this is a successful business practice that can be used in government.

With Six Sigma entire departments can be wiped out as economic externalities. Since the Department of Education provides no economic profit it is wasted resources. The entire government can be disbanded with this logic. This looks promising.

If there is some government function you wish to retain then LEAN will be required to correct any identified process defects. LEAN is a quality management tool and has a long history, starting with Henry Ford, moving to Japan and Toyota and returning to America and then on to Europe. This is a highly refine and successful tool. I have personally used LEAN to accomplish phenomenal results, 1,000% increase in output with zero defects, all without increasing employee head count. You can look up the LEAN tools, such as the 6 s program and kanban, however the basis of LEAN success is called WIIFM (what’s in it for me). No one knows how to do a specific task better than the person doing that task. In economics this is called the “agent problem”. After an inefficacy or quality problem has been identified by six sigma, the LEAN professional assembles a team of the people responsible for the specific task. In manufacturing I would include the purchasing agent that buys the raw stock, the machinist that forms the finished product, the quality inspector that checks the product and the engineer that designed the product. I consulted for a short period with a company where senior management was using six sigma and lean to reduce headcount. I did one six sigma and two lean projects then recommended another consultant to replace me. The company continued to lose market share and money. WIIFM, the agent problem, doomed the company. Once the employees figured out that a successful project would mean losing their job, there were no more successful projects. In this case “what’s in it for me” is getting fired.

I have attended one online meeting with a national politician singing the praises of six sigma and LEAN to manage government. I was not part of the discussion and only listened. This politician’s objective is to reduce headcount, failure is inevitable.

We have examined failure analysis, “best practices”, and six sigma with LEAN for usage by our government. None will work. The basic problem is that the political system does not wish to be fixed. The political participants are very comfortable with the current process. Under the current system “what’s in it for me” for the politician are power, money and fame. What needs to be fixed?

It is possible to use these techniques in government. Singapore is a good example of a government using best practices, China uses root cause, Germany has competent leadership. You have to go where the data leads you, American politicians have this backwards, they start with the answer they wish, and then find data to fit.

How do we fix the American political system? Replace the clown parade with some competent and realistic leaders.

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