What was coined “Greater Taylorism” by Walter Kiechel in his 2012 book The Lords of Strategy has become such a normal part of doing business that we don’t notice its existence nor question the results. However, it always ends in tragedy for the companies captivated by its allure of assured success. Follow the plan and you will succeed.
How we approach strategy matters if we care about the people who make up the fabric of organizations. Born as a method for cost-efficient production by separating the doing (willing workers) from the thinking (expert engineers), during the 1960s and ’70s, Taylorism was deployed to the board room by the original strategy consultancies BCG and Bain & Company. The selling point was profit at a discount, and the method was standardized early on. The consultants would come in and do the analysis, create the implementation plan, and support its implementation. The aim was cost reduction by scale, and the outcome was short-term profits and long-term failure. The consultancy-driven strategy came alive when clever minds developed it into frameworks and products.
Later, a tipping point of global acceptance meant Super Taylorist strategies became the standard way of thinking and doing for C-suites for decades. Large organizations conformed and became disciples. Business schools taught it. The brightest young graduates were head-hunted and rewarded for it. One thing fuelled the next. A billion-dollar industry was born.
Meanwhile, in Japan, Toyota was developing a different approach to strategy, one based on technical learning on the gemba through trial and error–a process that aimed to serve all customers with a broad product line of high quality and at the right price. The economics underpinning their strategy was not economies of scale, which many early leaders had observed and rejected after visiting Ford’s River Rouge complex. Instead of scale economies based on batching, Toyota developed capital-light production featuring just-in-time and profit margin through jidoka.
Toyota’s success hasn’t stopped new generations of consultancy businesses selling and re-selling the tried and tested formula. For every executive buyer on the lookout for alibi activities, there is a consulting firm looking for its next client. Every manager needs a project that will keep the organization busy with “change” work that changes nothing, at least not for the customers nor the employees. They bring in the consultants with their ready-made program and lots of work to do for all involved. Such alibi activities are great for postponing the real job of finding and facing technical issues that are troubling the customer. This is, in essence, the age-old discussion: Strategy as learning, or strategy as planning and execution. So, what is the difference, and does it really matter?
How we approach strategy matters if we care about the people who make up the fabric of organizations. What was sarcastically coined AFP (Another “Fine” Program) at Harley Davidson are usually cost-cutting programs, transformation- or implementation-programs rolled out at the end of the extensive and expensive analysis of markets, competitors, products, and processes–carried out by expert consultants. But what if executives instead invested as much money developing the organization so its people make better products every day? Instead of looking for cost reduction to scale with Super Taylorism, we should instead improve profitability by worrying about quality, involving all the people all the time.
The “Promise” of Cost Reduction
Cost reduction by scale comes in many different dressings, but the process is always based on the following steps:
- Carry out extensive interviews.
- Re-state what the company already knows, as specific issues with generic solutions (optimization, operational excellence, cost reduction, complexity reduction, culling products, and the like).
- Suggest an implementation plan with an arbitrary timeline, such as 100 days, to accomplish the generic solution’s promise; usually with multiple consultants working full-time with client.
- When implemented, the argument goes, the company will have learned to do the work themselves (something that rarely happens, as adults don’t learn much unless they do the work themselves).
The aim is to achieve profitability and competitiveness by leveraging economies of scale. It is appealing, and the pitch is often supported by success stories of other famous clients. However, it more often results in depleted resources andBy worrying about and improving quality, we are also reducing both the cost of our misconceptions and the real cost of our products–by developing our people. impoverished competencies. When it goes sour because the real world is never as expected, the blame is dispersed elsewhere: People are resistant to change, there were unforeseen issues, changes in market conditions and customer demands, and so forth. Make no mistake, when the success stories of the consultancies fail (and it seems they always do in the end), Super Taylorism is to blame. One cannot separate the method from the outcome.
What is the Lean Alternative?
The lean way is to develop people by improving quality to improve revenue. By investigating quality, we discover our misconceptions and wrongful thinking. By addressing quality issues, we develop people, one problem at a time. The tools might look similar, but the approach is radically different. Instead of running through the 4Ds (Define and Decide through extensive analysis and grand planning, Drive the execution, and finally Deal with the unfortunate consequences,) we accept a different starting point, introduced in the book The Lean Strategy:
- Find the technical quality issues,
- Face the cost of our misconceptions,
- Frame the problem so that everyone can contribute, and,
- Form countermeasures and solutions from the ground up.
In the end, the outcome will be radically different.
Super Taylorism seeks ideas from the brightest sparks sitting among the upper-echelon of earners. Oversimplified, this means that only the ideas of the well-paid bosses matter. However, lean has taught us that all minds matter. Lean seeks equality, where all minds are created equal, and every contribution is valuable – not just the contributions of the elite few. Even if not all ideas are engaged, respect for people means we respect opinions, even if we don’t always agree. The collective learning and possibilities from many far outweigh the limited plans and executions from Taylorist gentry.
The Real Cost of Products
Consultants look for ways to reduce the cost-base by implementing best practices in the form of new methods or frameworks across the enterprise. These so-called best practices usually come in the form of layoffs, rigid processes, price pressure on suppliers, streamlining of product lines and so forth. Lean, on the other hand, looks at reducing the cost of misconceptions through a process of discovery and learning.
The underlying equations that illustrates the different approaches can be summed up as:
- Profit = Sales Price – Real Cost
- Real Cost = Base Cost + Cost of Misconceptions.
Where Super Taylorism wants to reduce the base cost through economies of scale, lean looks at the product and forces us to ask some pretty fundamental questions: Where are our misconceptions? How can we reduce the cost of our misconceptions by better understanding each customer to better serve their needs? What are the technical production and engineering challenges we are working on today, and what are the challenges we are not even aware of?
Super Taylorism applied to an organization’s core business has a drastic impact on the products or services delivered and leads to disastrous outcomes.Super Taylorism applied to an organization’s core business has a drastic impact on the products or services delivered and leads to disastrous outcomes. The Volkswagen fuel gate scandal, Enron, and the existential crisis of GE are a few well-known examples that come to mind. It can be challenging to differentiate the tools and methods, but if you are planning to spend millions on external resources, chances are you are involved with some form of Super Taylorism – the separation of thinking and doing throughout the organization.
The lean approach is different: stop doing the silly things to free up the necessary resources needed to do the real job. Develop people with a thorough understanding of customers, markets, competitors, and product-lines. Learning is personal but mostly happens in teams. Therefore, from team leaders and operators up to the executive suite, everyone should have a personal learning project that develops the individual, the team and the organization. Yes, it’s hard work, but this is also meaningful and real work, not soul-sapping alibi activities.
Super Taylorism or Lean?
The two roads appear similar, but don’t be fooled–there are significant differences. After all, consultants are very adept at the assimilation of new buzzwords, tools, and methods. However, the purpose of the activities is vastly different. As noted by Kiechel in his book, Super Taylorism pays relentless attention to the three Cs — Cost, Customers and Competitors… particularly costs, by extensive analysis, recommendation and, over time, degradation. Cost reduction (and thus profit, according to this argument) is achieved through cheaper materials, price pressure on suppliers, cheaper labour costs and rigid standardization of processes. Lean starts with quality. By looking at technical quality issues in the product and the processes, we develop better people to make better products for more customers, increasing revenues. The paradox is that by worrying about and improving quality, we are also reducing both the cost of our misconceptions and the real cost of our products–by developing our people. Which road do you choose?