The ECCO System
Cybernetic Principles for Effective Control in Complex Organizations
The ECCO System: Framework for Research
It is time to recap what has been said so far. The manufacturing environment has changed since the turn of the century. It has become more technologically sophisticated, so that more specialized knowledge is required, and that knowledge is likely to exists in the mid- to lower echelons of applied technology positions in all functional areas. Workers are more educated, and most applied technology requires the development of some sophisticated, if highly job-specific, understanding on the part of employees. Consumer demands and competition have increased the level of complexity of products, raised expectations about quality and reliability, and increased price and value competition. Product lifecycle times have become shorter, and to capture market volume, more rapid design-to-market cycles are required.
These changes have had a number of disruptive effects on manufacturing companies. Profit margins, and therefore development budgets and leeway for errors, have tightened. The requirements for increased co-ordination and communication among a variety of departments as well as with customers and suppliers, has increased. Interdependencies and tradeoffs in design, manufacturability and cost of parts must be managed closely for profitability and scheduling, and the resulting product must fit customer needs in a variety or respects to be salable. This communication involves minimally the shortening and cost control of the development to production cycle and the reduction of errors, defects, and misunderstandings among employees, suppliers and customers. In short, companies require more efficient and effective methods of reliably achieving their goals in order to survive.
Bureaucratic hierarchies in the form of the Weber/Taylor system deal well with large, simple problems, those with many parts which need to be co-ordinated, but not much non-linear interdependence among the parts. They deal far less efficiently with complex systems, whose parts are richly interdependent and interconnected, and characterized by trade-off and mutual constraint. More regulation, in a bureaucratic hierarchy, generally means more restriction on the activities of parts, or more levels of hierarchy, or both. In the case of the complex system with time and resource constraints, this only makes system performance worse.
Cybernetics offers a theoretical foundation for this increased effectiveness of goal achievement in complex systems. The principles have been sketched out in the previous chapter. A system which has such characteristics might be designated an ECCO system: a system adequate for the Effective Control of Complex Organization. In order to investigate whether such a system is actually present in an identified "Total Quality" organization, these principles must be re-interpreted specifically for their application in an industrial setting.
If these activities are present, the need for hierarchy should diminish, since many regulatory activities are now distributed through the system. It is reasonable to expect that ECCO systems will be relatively "flatter" than a comparable Weber/Taylor system. It is also likely that the hierarchical levels which remains will be a time-scale based hierarchy which resembles "natural"1 rather than bureaucratic hierarchy.
A review of the literature on modern manufacturing practices will show that aspects of each of these principles are embodied in current management wisdom. However, as has been shown, many companies adopt the practices without benefit of a theoretical framework and the results have been predictably mixed. The claim advanced by this work, implicitly, is that for maximal effectiveness and success--true Total Quality Management--the entire set of ECCO system principles and practices herein advanced must be adopted in an integrated fashion. It is not considered enough for only pieces of these to be present. Pieces, and appropriate rhetoric, are present in a variety of organizations which are failing at total quality efforts.
To provide evidence for this claim, it is necessary to examine the principles as manifested in the literature to see how they are incorporated in industry. Once their manifested forms have been identified, it will be necessary to investigate whether they are all present and integrated into the operations of independently identified successful "quality" organizations. This approach will form the basis for the field research.
It should be noted explicitly that these principles are not sufficient in and of themselves to ensure success. A company must employ sufficient talent, have selected an appropriate market, have adequate capital, and have access to supporting technology in order to compete successfully in the world market. However, the claim advanced here is that if the cybernetic framework is absent, success will be limited severely; and if the framework is used, better use will be made of available resources, and better, more cost-effective results will be obtained.
Evidence: The Principles Applied
To elicit the information about whether ECCO system principles were incorporated in the identified successful quality organizations, it was necessary to develop a series of questions to guide this research. Because of the variety of manifestations of the principles, and the fact that principles such as "closed feedback loops" would be found in a variety of departments and operations, it was not possible to develop a straightforward checklist. Instead, a set of guiding questions was developed (see appendix 1) which was designed to elicit and record relevant information in an open-ended fashion. The Guiding Questions format ensured that the relevant information was collected. Once collected, the information was reviewed and analyzed for the presence of practices and policies which showed evidence of ECCO system principles, and the absence of practices and policies which would demonstrate that old bureaucratic mechanisms specifically antithetical to ECCO system principles were absent.
Closed, shortened feedback loops (Principle 1)
Any control mechanism in a system subject to disturbance must have closed feedback loops, with the regulator or error detection and correction mechanism as close to the feedback source as possible to ensure effective and efficient control of important functions and outputs. In a "Total Quality" industrial organization, these functions are the relationships among departments and operations which exert constraints over one another, or depend on one another's output for the quality of their own operations. The manufacturing corporation system does not end (functionally) at the corporate borders. External suppliers and customers are integral parts of the system dynamics of the company. Thus feedback and procurement loops with customers and suppliers respectively are critical to continued system operations. The principle of short, direct feedback further indicates that external customers and suppliers ought to be looped into the design and production planning processes directly, as well as into the more obvious marketing and procurement processes. Further, these contacts ought to happen directly between customers or suppliers and the internal design/production teams, rather than being mediated through the official interfaces of customer service and purchasing departments.
Another critical aspect of closed, short feedback loops is that every factor considered important for quality in products and processes ought to be measured routinely, and monitored by employees closest to the process. These people should be authorized to respond to and correct errors. A classic example of this principle is where statistical process control is conducted on the assembly line or production floor by line employees rather than quality assurance personnel. These line employees should have the authority to shut down the line to correct quality problems. In general, the short feedback loop principle requires the distribution of authority for action to the lowest possible level employees, consistent with their knowledge and operational functions.
Improving capabilities of first-line regulators (Principle 2)
This principle supports the preceding principle of short feedback loops, and the following principle of the heterarchy of first line regulators. A first-line regulator may be defined, for our purposes, as follows: Any employee at any level who participates directly in an operation or process, exclusive of supervision, is a first-line regulator with respect to that operation or process. involves increasing the workers' relevant variety through training which is specifically related to job (operations) requirements, equipment and production techniques, and to the monitoring, analysis, and evaluation of feedback on the job processes. (It should also extend to the skills required to co-operate with other operational personnel in other departments and at other skill levels in problem-solving and design of products and processes.) This training, combined with the authority to remedy local quality problems, and the ability to monitor the effect of these remedies, will improve the regulatory capacity of the first-line regulators.
Heterarchy of first-line regulators_(Principle 3)
This is the primary device for problem solving and design of products and processes. The dynamic process to be designed or improved may cross departmental lines and may involve personnel from different levels in the company. It may also include suppliers and/or customers. Since the function of the heterarchy is to "model" the process under consideration, it must contain representatives from all departments, sectors or operations which are involved with (or which constrain) aspects of the process. Direct face-to-face contact among the participants and relative autonomy from departmental authority (characteristic of the project matrix or independent project team organization) ought to be the rule. The heterarchy ought to have the authority to make decisions within its mandate, substantially independent of higher management or outside directions. Heterarchies of this type will include work groups who have independent authority over internal aspects of their job practices; ad hoc or problem-oriented cross-functional teams; concurrent/simultaneous engineering teams; and standing cross- or inter-functional teams, provided they meet the above criteria for membership.
Analysis and correction of process (Principle 4)
The ability to reconfigure and adjust processes is critical to obtaining desired outcomes. Evidence of this principle will be found in the process-oriented analysis of Deming-style Statistical Process Control and Taguchi methods, applied in both manufacturing and staff/support areas of the company. It will also include any methods which foster root-cause analysis and redesign of process as opposed to having employees "pay more attention", and "make fewer mistakes." Also unacceptable will be the practice of adding additional processes on top of existing processes to correct defects or errors.
The role of management (Principle 5)
As noted above, there are reasons which support the continued existence of some form of hierarchy in large, complex organizations, although they do not serve the "governor" role, nor the traditional "span of control" supervisory function. Rather, the relationship between management and operational employees can be seen as parallel to that of Ashby's "designer" to "designed" regulatory mechanism, the latter being a set of adaptive systems. The role of management is then twofold. First, it must set the overall goals for the organization, and ensure that the goals are deployed appropriately throughout the organizational functions and departments. Second, it must ensure that the organization is internally aligned, so that progress toward the system goals can be unhindered. It must do so in at least the following ways.
Alignment: Incentives, evaluations, and rewards (Principle 5a)
This principle requires that attention be given to the immediate environment in which people work, correcting circumstances which influence their day-to-day decision-making in directions inimical to system goals, or which support undesirable behaviors. Also observed should be changes in the criteria for and evaluation of all employees for promotions and raises. The new criteria should discourage old department-centered thinking and political ways of behaving which both fit and maintained the bureaucratic structure, and encourage behaviors in support of the Total Quality transformation. The latter should reward such things as co-operation across departments and functions in support of overall company goals, as well as behaviors in line with new managerial roles of coach and delegator, and new employee roles of active participant in the production and management of quality.
Additional rewards could include special recognition and/or monetary remunerations for outstanding co-operative group performance, and for other Total Quality efforts not previously recognized.
Alignment: Measuring systems (Principle 5b)
Evidence of congruence of measurement systems will include measuring specific results of processes designed to support system success, and their subsequent verification and validation, rather than relying on documentation that an existing process or procedure was followed. We should also see evidence that new measurement systems are being developed, installed and validated to fill newly identified needs, and to provide feedback on everything the company believes to be important to its success. One example of this might be a new cost accounting system or other new methods of evaluating potential product development. At the same time, we should see companies eliminating and turning away from measurements found to be misleading, or which do not support the TQM effort. These may include quality assurance product inspections and standard man/hour productivity measures.
Alignment: Company goals (Principle 5c)
This principle requires that the company explicitly identify strategic goals and communicate them throughout the corporation. In addition, all subgoals, from goals of standing departments and project teams down to the goals for individual employees, should be consonant with and directly supportive of the overall strategic goals of the company.
Alignment: Common language (Principle 5d)
This final principle suggests that a common vocabulary and, very likely, formal and informal communications protocols will be formulated so that personnel from different departments can communicate on common ground rather than from disparate, specialized vocabularies. For instance, in Concurrent Design of Products and Processes Nevins and Whitney propose a number of methods of analysis which can translate the powerful applied understandings of designers and manufacturing engineers about process cost and complexity into formal financial terms, so that rational choices may be made about investment in new designs and equipment. In this case, the common vocabulary is monetary, and focuses on true costs, and return on investment.
A variety of approaches to this commonality of language and communications protocols may be expected, from standard problem-solving protocols, to computer networking, to uniform evaluations. The critical factor here is that these communications protocols and language be embraced and used throughout the organization and be adequate with respect to representing critical aspects of all of the departments involved. An example of a common evaluation protocol which is often inadequate and misleading in representing aspects of critical functions is the traditional cost-accounting system, whose inadequacies have been discussed briefly in Chapter II. On the other hand, a new system of cost-accounting, developed and validated empirically, perhaps with the co-operation of representatives from engineering, manufacturing, purchasing and so forth, could qualify as a new common language for the purposes of this investigation.
The first step in the research process was to identify, by independent criteria, three or four companies which were leaders in Total Quality; which met ECCO system criteria for complexity; and whose management would allow their organization to be examined. Fortunately, the first and last requirements could be met in a fairly straightforward way since the advent of the new US award to recognize Total Quality organizations: The Baldrige Award.
In 1987, Congress passed Public Law 100-107, the Malcolm Baldrige National Quality Improvement Act, which provided for annual recognition of US based business and industry who were leaders in implementing Total Quality practices in their organizations. Three categories of organizations are currently recognized: Manufacturing, service and small business. The intent of the award was to "promote awareness of quality as an increasingly important element in competitiveness, understanding of the requirements for quality excellence, and sharing of information on successful strategies and on the benefits derived from implementation of these strategies."
Recipients of the award may use this fact in their advertising and promotion. They are also required to share information about their quality strategies with others in industry, since the intent of the award is to encourage and assist in the development of effective quality strategies throughout US business and industry in order to improve US economic competitiveness in world markets. Applicants are examined in seven key areas: Leadership, information and analysis, strategic quality planning, human resource utilization, quality assurance of products and services, quality results, and customer satisfaction.
The seven examination categories themselves remain unchanged from year to year. The subcategories in each change somewhat from year to year, reflecting the examiners' evolving understanding of the essentials of quality. The Malcolm Baldrige Award Board of Examiners (examiners, senior examiners and judges) is comprised of 150 recognized experts from a variety of business, professional and trade organizations, accrediting bodies, universities and government selected by a separate examination and qualification process. Prior to serving, they participate in an examination preparation course to familiarize them with examination criteria and procedures, and to ensure consistency in understanding and evaluation of applicants. Examiners are assigned to companies on the basis of the match between the nature of the company's business and the examiner's expertise.
The evaluation itself consists of several parts. The first determines the basic eligibility of the organization to compete. The second consists of the submission of a formal and detailed Application Report from the applicant organization concerning their policies, practices and results in the seven key examination areas. Third, if on the basis of the Application Report, the examiners feel the company may qualify for the award, a site visit of several days duration is scheduled. Examiners visit the organization, examine any business record and data they feel is pertinent, conduct scheduled and unscheduled interviews with personnel at all levels to determine whether the award criteria are really being met. This visit includes informal lunchtime visits with workers in the company cafeteria, and visits to plant and office spaces.
The Baldrige Award examination is dissimilar to most inspection or accreditation visits. The latter traditionally rest on examination of standardized documentation, and adherence to specific techniques, practices and timetables, in addition to showing that certain required offices and structures are present in the organization, and are formally accountable. The Baldrige evaluation looks for results, and at the adequacy and comprehensiveness of techniques, practices and structures to ensure that the results observed can be consistently and reliably produced and improved, rather than looking for particular techniques, practices and structures themselves. Thus, it is well equipped to distinguish between companies who merely have quality programs, and those which actually produce Total Quality results. Since companies are free to have a variety of approaches, receiving the award does not inherently require the existence of structures or practices have been designated as necessary for an ECCO system. (If the thesis here advanced is correct, however, it should not be surprising to see aspects of the ECCO system requirements emerging as part of the Baldrige criteria.)
The Baldrige Award companies in the manufacturing industry which were selected as research sites had to meet certain criteria. First, the companies were in markets where emerging technology has significant impact. Second, the companies had increasing and sophisticated competition worldwide. Third, they were succeeding significantly in competition against the Japanese in one or more markets. Finally, in each of these companies, design to market issues (which tend to drive complexity) were predominantly important. Three companies clearly met these criteria: 1988 winner Motorola Corporation; 1989 winner Xerox Business Products and Services; and 1990 winner IBM's Rochester Manufacturing Plant.
Since the Baldrige Award carries with it a mandate to share information about quality strategies, it was originally assumed that an interview process with a variety of people at a number of levels and departments within the company would be possible. However, due to the massive number of companies who want access to the information Baldrige Award companies have to share, this was not possible. Due to the widespread interest in U.S. business and industry in improving operations, the Baldrige Award companies have been inundated with requests for site visits and personal communications with involved personnel. The disruption of the Award-winners' operations were they to grant these requests proved unacceptable to them.
In its place, however, arose a solution which is at least adequate for the purposes of this research, and carried with it certain inherent advantages. Each of the Baldrige Award companies had developed one or more seminars to share their quality strategies and examination experiences with others in industry. These sessions typically last for a full day and include presentations by people from a number of levels and departments in the company. There is time before the presentation, on morning and afternoon breaks, and at lunch to ask more extensive questions of personnel. These briefings include extensive handouts: journal articles detailing aspects of quality practices; official publications by administrative, executive and educational arms of the company detailing their roles in and perspectives on the quality effort; and copies of briefing charts used in the presentation.
These briefings give the company's perspective of what they consider important and provide a "parallax" view, in contrast to the perspective of my questions in terms of the control infrastructure. Thus, it was possible to obtain even more information than if the individual interview technique alone had been used. A visit to Motorola Corporation was scheduled for May 16, to Xerox on June 4, and to IBM-Rochester on July 17.
The Guiding Questions (see appendix 1) were used to facilitate the qualitative data collection for later analysis. In addition, data were collected which would provide a "company profile" in order to assess the degree to which they met the ECCO system study selection criteria, and to provide a source for preliminary analysis of whether such things as size of company, education level of employees, or location had an impact on aspects of quality strategy. Particular items of interest included whether the education level of employees had an impact on the success of distribution of authority and responsibility to the lowest-ranking employees. Clearly, conclusions such as these cannot be drawn from such a small sample, but this research may provide indicators which can be used as the foundation for further study.
In addition to attendance at the formal briefings where extensive notes were recorded on the briefing chart copies, question and answer periods during the briefings were used to elicit clarification and additional information following the Guiding Questions format. Company personnel were interviewed as well, during breaks and lunch, to expand and verify the data collected and to fill in information which was not explicitly incorporated into the formal presentation. To fill out the picture, the briefing handouts along with articles from a variety of industry publications, books and other sources were utilized. Where information was taken from published sources, it has been so footnoted. All other information has been taken directly from the briefing or on-site conversations with company employees. Where possible, the sources are identified by name and job title. In the following chapter, these results and relevant observations are reported.
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