Quality, Involvement, Flow

Dr. Domenico Lepore is an organizational scientist whose focus is on systemic manage- ment. He developed the Decalogue™ management methodology, together with Oded Cohen, world- renowned expert in the Theory of Constraints. The Decalogue provides a method for whole system transformation, from conventional, silo thinking to a systemic vision and practice. Domenico and Oded coauthored the book Deming-and-Goldratt: The Decalogue, published in the United States in 1999 by Dr. Goldratt’s publisher, North River Press. This was the first book on the Theory of Constraints to be published by North River Press that was not authored by Dr. Goldratt himself. Domenico’s background is in experimental physics and he has developed an original insight into the design of organizations as networks of projects. He has led successful implementations of the Decalogue in dozens of organizations for almost two decades and unique applications of Theory of Constraints to highly complex business environments. Dr. Angela Montgomery has been partner of Domenico Lepore since cofounding their first Decalogue company in Milan, Italy in 1996. She has contributed over the years to the develop- ment, dissemination, and communication of the Decalogue methodology. Since moving to North America, she has developed a special interest in working with the Thinking Processes from the Theory of Constraints to bring systemic thinking for positive change to organizations. Angela has a PhD from London University in literature and science and has always been interested in crossing cultural boundaries. She blogs regu- larly for Intelligent Management and is author of the business novel The Human Constraint set in New York during the years of financial crisis. This book illustrates the power of a systemic approach and how it can point the way toward a sustainable future. Dr. Giovanni Siepe has a background in theo- retical physics. His research work on General Relativity has been cited internationally. He began working as a researcher in the microelectronics industry and he has developed patents in the field of power integrated circuits. He continued his career as a manager in the plastics/material industry, where he developed sig- nificant experience in international marketing. Over the last 12 years, Giovanni has worked at the advancement and dissemination of the Decalogue methodology, first leading the creation and development of algorithms and software (in liaison with the University of Salerno) for the management of complex systems, and later improving its integration with the use of Statistical Methods for managing organizational interdependencies.

1. Navigating the New Complexity...................................................1

1.1 Dividing Things Up Is No Longer the Answer..................................2

1.2 Useful Lessons from Science: From Parts to Whole...........................3

1.3 The Organization: A Whole That Is Much More Than the

Sum of Its Parts...................................................................................4

1.4 New Leadership...................................................................................5

1.5 What Is a Leader?................................................................................6

1.6 Leadership and Knowledge................................................................6

1.7 Leadership and Selflessness................................................................7

1.8 Quality, Involvement, Flow.................................................................8

1.9 Leadership Thinking: Framing the Change as a Conflict..................9

2. Why Are We Stuck? The Inherent Conflict of Organizations.....11

2.1 What’s Wrong with a Hierarchy?.......................................................12

2.2 The Silo Sickness...............................................................................12

2.3 The Inherent Conflict in Any Organization.....................................14

2.4 Finding a Solution to the Hierarchy Conflict....................................17

2.5 A New Kind of Organization: Coordination Instead of

Functional Reporting.........................................................................19

2.6 The Challenge of the Solution to the Hierarchy Conflict................20

3. Where Does the Knowledge to Move Forward Come From?

The Giant Contributions of Dr. Deming and Dr. Goldratt..........23

3.1 Quality and Involvement through Deming......................................25

3.2 Flow and the Theory of Constraints.................................................27

4. What Is an Organization? The Fundamental Constituents.........31

4.1 A Closer Look at the Four Essential Constituents of

an Organization.................................................................................32

4.2 New Awareness about Interactions..................................................34

4.3 Stakeholders and Corporate Social Responsibility...........................35

4.4 A New Organizational Design..........................................................35

5. How Can We Blend the Deming and Goldratt Principles

in a Practical Way?......................................................................37

5.1 How a Deming and Goldratt Methodology Emerged......................38

5.2 Understanding the Organization as a System: Flowcharting

the Processes.....................................................................................43

5.3 Variation and Its Importance for Managing Organizations as

Systems..............................................................................................45

5.4 Variation and Complexity.................................................................45

5.5 Prediction versus Forecast.................................................................47

5.6 Adding the Constraint to the Organization Viewed as a System.......48

5.7 The Need for a Constraint................................................................49

5.8 Protecting the Constraint: The “Buffer”............................................54

5.9 Managing Variation and Constraint(s)..............................................55

5.10 The New Organization: Rolling Out the Solution of

the “Choked” System.........................................................................57

6. Why Projects Can Become the Backbone of

the New Organization.................................................................61

6.1 How People Come to Work Together: Process and Project............61

6.2 Systemic Project Management...........................................................62

6.3 The Critical Chain Approach to Project Management......................63

6.4 What Does a Systemic Project Manager Do?....................................64

6.5 Quality, Involvement, and Flow through Project Management.......65

6.6 The Constraint and Project Management.........................................68

6.7 What Does This Mean for a Leader? Toward the

Organizational Design of a Network of Projects.............................70

6.8 A New Organizational Design Calls for a New Leadership.............71

7. Making the Change Operational: The Network of Projects.......73

7.1 What Is a Network and How Do Networks Behave?.......................74

7.2 Complex Networks and Real Organizations....................................75

7.3 Connecting “Organizations as Complex Networks” with

the Decalogue Methodology.............................................................76

7.4 Networks, Organizations, and Variation...........................................78

7.5 Optimizing Resources through the Organization as a Network

of Projects..........................................................................................79

7.6 A New Kind of Hierarchy.................................................................81

7.7 The Cognitive Challenge...................................................................82

7.8 Career Paths and the Systemic Organization...................................83

7.9 Achieving So Much More..................................................................84

8. Ten Steps for Designing, Measuring, Managing,

and Improving the System..........................................................85

8.1 Scope and Purpose of the Decalogue Methodology.......................85

8.2 Optimizing the System......................................................................86

8.3 What to Change, What to Change to, and How to Make

the Change Happen..........................................................................87

8.4 The Decalogue in Three Fundamental Phases................................88

8.5 The 10 Steps of the Decalogue.........................................................90

9. Why Do We Get Stuck on the Path of Transformation?

The Inherent Conflict of Change................................................99

9.1 Change and Consciousness...............................................................99

9.2 The Constancy of Change...............................................................100

9.3 Looking at the Conflict Cloud of Change....................................... 101

9.4 Change and Leadership...................................................................103

9.5 Core Conflicts..................................................................................104

9.6 Levels of Resistance to Change.......................................................105

10. The New Intelligence: Intelligent Emotions and How to

Foster a New Systemic Intelligence..........................................109

10.1 Systemic Thinking to Inform Decisions and Minimize Risk.......109

10.2 The Cognitive Constraint: Relearning to Think........................... 110

10.3 The Cognitive Shift....................................................................... 111

10.4 The Tools We All Need................................................................. 112

10.5 Shifting Beyond the Hierarchical Mindset................................... 114

10.6 The Pattern for Change with the Thinking Process Tools.......... 114

10.7 Building the Core Conflict Cloud................................................. 115

10.8 Finding the Breakthrough Solution with “Injections”..................120

10.9 The Future Reality Tree................................................................121

10.10 A Real-life Example from Core Conflict to Future Reality Tree...... 121

10.11 Creating the Continuum from Systemic Strategy to Action.........130

10.12 Gathering and Deploying Knowledge to Reach the Goal........... 131

10.13 How to Cause the Change—Obstacles Along the Road to Change..............................................................................................132

10.14 Making the Change Happen with the Transition Tree................133

10.15 To Summarize: The Cycle of the Thinking Process Tools

in the Decalogue...........................................................................135

10.16 Understanding, Knowledge, and Science in a Conscious

Organization..................................................................................136

11. New Intelligence—New Leadership—New Economics.............139

11.1 Role of the Leader...........................................................................139

11.2 New Leadership Methods and Tools.............................................. 141

11.3 Leading with Critical Chain............................................................. 142

11.4 Leading with the Thinking Process Tools and Intelligent

Emotions.......................................................................................... 142

11.5 A New Economics........................................................................... 145

11.6 Flawed Economic Models............................................................... 147

11.7 A New Outlook on Value and Wealth............................................ 147

12. Essential Knowledge for Leaders and Managers

(So They Can Manage Systemically Without Being Experts in Everything)..........151

12.1 Where Can We Learn the Right Stuff?............................................ 151

12.1.1 The Problem with Business Schools Today......................... 152

12.1.2 The Business School Conflict............................................... 154

12.1.3 A New Systemic Learning Pattern for Complexity.............. 155

12.1.4 Mindset, Values, and Ethics.................................................. 156

12.1.5 A Word About Experience................................................... 157

12.2 Where Do We Start? A Systems View............................................. 158

12.2.1 Being Process Oriented........................................................ 158

12.2.2 Mapping the System with Flowcharts..................................160

12.2.3 Getting Started...................................................................... 162

12.2.4 Setting the Goal of the System.............................................166

12.3 The Two Major Keys to Management: Variation and Constraint.......167

12.3.1 Variation and Management Decisions.................................. 167

12.3.2 Understanding Variation.......................................................169

12.3.3 Variation and Processes........................................................ 170

12.3.4 Working with Variation......................................................... 171

12.3.5 Gathering Data...................................................................... 171

12.3.6 How to Make a Process Behavior Chart.............................. 175

12.3.7 Prediction and Forecast........................................................ 176

12.3.8 Stability and Quality............................................................. 176

12.3.9 Specification Limits and Behavior Limits.............................177

12.3.10 Variation and the Fallacies of Budgets and

Performance Assessment....................................................181

12.4 Synchronous Management: Choosing and Managing

the Constraint..................................................................................182

12.4.1 The Systemic Model and Performance.................................183

12.4.2 Unbalancing a System around the Constraint.....................184

12.4.3 Protecting and Controlling the System: Buffer

Management..........................................................................185

12.4.4 Subordinating to the Constraint: Buffers and Variation......186

12.4.5 Using Control Charts to Size the Buffer...............................189

12.4.6 The Buffer and Performance Indicators...............................190

12.5 Improving Flow Company-wide.....................................................190

12.5.1 Improving Flow through Systemic Project

Management (Critical Chain)................................................ 193

12.5.2 Why Projects Fail.................................................................. 194

12.5.3 The Problem of Milestones and Multitasking...................... 195

12.5.4 Interdependencies and Variation..........................................196

12.5.5 Measuring the Progress of the Project................................. 197

12.5.6 The Decalogue Approach: A Project is a System................198

12.6 Measuring Our Progress Toward the Goal the TOC Way.............202

12.6.1 Constraints, Dynamics, and Organizations..........................203

12.6.2 Indicators from the Theory of Constraints..........................204

12.6.3 A Brief Digression on Speed and Time...............................206

12.6.4 The Constraint and Cash Generation...................................207

12.6.5 Situation 1: Market Constraint..............................................208

12.6.6 Situation 2: Internal Constraint.............................................208

12.6.7 The P&Q Exercise.................................................................209

12.7 Interacting Systemically along the Chain with Customers and

Suppliers..........................................................................................213

12.7.1 Finding Agreements that Maximize Value for the

Whole Chain.........................................................................213

12.7.2 Marketing and Sales as Systemic Activities

(External Constraint)............................................................. 214

12.7.3 Win–Win Sales...................................................................... 216

12.8 Continuous Breakthrough, Innovation, and Personal

Development................................................................................... 218

12.8.1 Creating the Right Network of Conversations

through the Thinking Process Tools.................................... 219

12.8.2 Intelligent Emotions..............................................................220

12.8.3 Involving the Individual at Every Level in the

Organization.........................................................................221

12.8.4 Overview of the Essential Knowledge Pattern

for Leaders and Managers....................................................223