Who's to Blame: Management or Labor?

The real battle for quality doesn’t lie in processes; it lies in thinking. The recent rift in the state of Wisconsin and other places caused in part by increasing government costs leads one to ask: "Who is responsible? Is it management or labor?"

Gov. Scott Walker’s actions in Wisconsin highlight the need for new thinking about the design and management of work. However, the management-labor strife doesn’t end in Wisconsin. It’s present in all businesses and has created an environment in the United States where we struggle to compete. When we need management and labor to work together in a global marketplace with emerging economies like China, there is no time for such silliness.

Although labor unions have often been fingered as the problem, we would not have needed labor unions in the first place had management treated workers better. Sure, unions have been corrupt in their history, but you can’t argue against the fact that management has been just as corrupt. Does anyone remember the recent banking crisis? It wasn’t a teller or a back-office worker who started that mess; it was management besieged with targets and incentives to grow the business.

Many say profit is the issue: Managers trying to make profit, and labor trying to take it away. Those in labor are seen as the bad guys, but the problem runs deeper than this. It’s not profit that is a problem but rather the destructive approach to profit that management takes.

W. Edwards Deming warned us about profit and the five deadly diseases of management that destroy it. They embody most of today’s troubles for managing businesses and government. Let’s walk through them and take inventory:

Lack of constancy of purpose. All systems must have an aim (purpose) toward improvement and to stay in business. The lack of purpose leads to short-term thinking.

Emphasis on short-term profit. Management’s focus on dividends leads to creative accounting rather than improvement, which suboptimizes the system.

Annual rating or evaluation of performance. Statistical knowledge helped Deming discover that the system, not the individual, drives the performance of the organization and that focusing on the individual was working on the wrong problem.

Mobility of management. Deming understood that management requires knowledge of the system. Getting knowledge requires time to learn and study the problems to understand the system. As he remarked, "People in management today know nothing about the problems of anybody else… they don’t even know their own."

Management by use of visible figures alone. A happy or unhappy customer is usually unknown and unknowable. Managing by using visible figures alone creates suboptimization in systems that are driven by unit costs and maximizing company stock.

Unfortunately, many organizations take aim from the inside out and top down. They put together mission and vision statements that "set direction" for the organization. However, a mission and vision devoid of understanding customer demand (and more important, customer purpose) sets a course that is fuzzy and unconnected for both employees and customers. Aim development needs a link to transactions between the front line and customers; having an aim connected here can lead to innovation through engaged front-line staff.

Deming talked about short-term thinking and managing by "visible figures" that leads to loss of profit in performance of organizations. Today’s environment has both businesses and government calling for balancing budgets and cutting costs. The management paradox is that this thinking will always increase costs.

Management will point to the visible gains in "figures" but miss those things that are important and not counted—like decaying infrastructure and roads with potholes that create costs for drivers. There is always loss of profit or value when the focus is on costs. Losing customers or not getting reelected to office are predictable results.

The most egregious management error is not understanding that 95 percent of the performance of any organization comes down to the system and not the individual (or group of individuals). This is something I call the 95/5 rule. Our systems are made up of elements that include technology, work design, management thinking, and organizational structure. Focusing on the system gives us opportunities for breakthrough method and performance. This is a management issue, not a labor issue. Management can change the system; workers cannot.

For Gov. Walker, whatever he can squeeze out of labor will not help him reach his shortfall. Calling out labor as the problem is trying to solve a management problem by blaming the worker. Walker would have better luck looking at technology spending, because all the technological expense that was supposed to reduce the need for workers has increased the need. Technology has locked in the waste of poor government design.

Government is in desperate need of different thinking about the design and management of work. Our problems in government and business require labor and management to work together in redesigning systems that are badly broken. But clearly, the change of thinking that is needed must begin with management.

This article first appeared in "Quality Digest Daily," an electronic publication from Quality Digest