How (35 page)

The Japanese came along and stood those concepts on their ear. They realized that quality defects were in fact inefficiencies, and by shifting the idea of quality from the back of the line to the front, they could create a process that manufactured high-quality products far more efficiently and economically. They did this initially by decentralizing the responsibility for quality from the top of the production pyramid, like auto assemblers Toyota and Mitsubishi, to their subassemblers, and then took the savings they accrued and invested in close collaborations with these subassemblers to improve quality in the production lines. Suddenly, they were able to deliver a high-quality product quickly at far less cost, giving the rest of the world a very loud wake-up call. They started winning, with quality as a key differentiator.
¹

Global business raced to catch up. Ford Motor Company proclaimed quality “Job #1.”
²
Titans like General Electric embraced the process reengineering concepts of Total Quality Management (TQM) and six sigma to drastically reshape the focus of their corporate cultures.
³
Quality was no longer a vertical silo, the responsibility of some deputized quality assurance/quality control (QA/QC) person at the end of the line; it became the responsibility of every employee at every level of every task. Power shifted from the top of the hierarchy down to its base; anyone, at any stage of the process, could stop the line if they found quality compromised. By
designing in
quality at every stage of a business process, enterprises of all types were able to wring inefficiencies from their systems and greatly improve productivity.

The quality movement freed Western businesses from the tyranny of the production triangle and overcame the inverse relationship of cost/quality/time. Suddenly, a company could deliver all three: fast, cheap,
and
good. The best companies today do this every day because that is what it now takes to compete and to win. A Dell computer is not just cheaper; it is just as good as the expensive ones that IBM used to make. Southwest Airlines flies the same routes, under the same regulatory constraints and the same cost pressures as the majors, but found a better way to navigate through a difficult market. Southwest turns around planes faster, makes them perform more reliably, and delivers a high-quality service at a low price.

How did business do it? How did it take this aesthetic, quality, and turn it into a measurable process? First, it sat back and tried to gain some systematic understanding. What are the factors that influence quality? It developed deep knowledge around the forces and dynamics that correlate and cause quality to happen or not happen, and it developed a language in which to frame these thoughts. Armed with that understanding, it began to design, measure, and manage quality as a business process. It broke down the walls surrounding the QA/QC department at the end of the line and pumped the flow of quality throughout the system. In so doing, business took this immeasurable, amorphous thing, quality, and began quantifying it to infinitesimal, six sigma, levels. It gave awards for quality, built international awareness for the accomplishment, and monetized it. Consumers paid more attention to reliability statistics and a company’s reputation for quality. More information about the long-term performance of products became readily available in the marketplace and the marketplace reacted accordingly. Companies started winning or losing on quality. The amazing economic growth since that time can be largely laid on the back of this revolution in the HOWS of WHAT of industry.

The closed-loop business approach to quality—based on quantifiable metrics, real-time information, and continual vigilance, which provide organizations a complete grasp on the people, processes, and information that impact manufacturing, sales, and other elements of their business—can be applied equally systematically to the HOWS of human conduct. To thrive in the world to come, we must approach the way interpersonal HOWS work in our organizations in the same way as we did quality. We need to find more ways of building strong synapses between people, getting everyone aligned on a common TRIP, create the environments in which more Waves can start, and develop approaches that transmit these values throughout our group endeavors. To do that, we need to understand systematically the way groups work. We need to understand
culture
.

There are almost as many different types of organizational cultures as there are groups of people working together; although many seem similar, each has its unique flavor. Anytime people come together to accomplish something larger than themselves, a culture grows. A corporate board has a culture, a business unit has a culture, and every team has its culture. Talking about culture, though—what it is made of, how it forms, how it influences group performance, and how it can be changed—has historically been another amorphous thing, and the province of the few who sit at the top of the organizational chart and worry about such things.

In a world of HOW, however, these issues are no longer hidden and no longer the province of the elite few. Everyone must learn to innovate in HOW; not the how of process, but HOW we do what we do. More and more of us work in teams, more and more of us get opportunities to lead and to start Waves, and more and more of us can influence the culture of the group every day. The powerful forces at loose in the networked world have made the understanding of these issues of critical importance to anyone who wants to thrive today. So in this part, we try to shed some light on what makes groups go. To truly succeed, everyone must open up the way we think about the people we work with to include questions of governance and culture.

CHAPTER
10

Doing Culture

I came to see, in my time at IBM,
that culture isn’t just one aspect
of the game; it is the game.

—Lou Gerstner, former Chairman of the Board and CEO, IBM

T
he General Electric Aircraft Engine Assembly plant in Durham, North Carolina, produces some of the most powerful and technically complex aircraft engines in the world. Seen from the outside, there is little remarkable about this plant. Two hangar-sized buildings dominate 500 unlandscaped acres of the rolling North Carolina countryside, each with more than three acres of floor space and multistory ceilings. Before GE moved here, it was a steam-generator plant, and the corrugated metal walls and concrete floors betray little about this twenty-first-century enterprise. There are no offices, no recreation centers, and no fancy lunchrooms. Every year, more than 400 of the largest engines in the world roll out the door. These engines power large commercial aircraft, like the Boeing 777 and the Airbus A320, including the engines that keep Air Force One aloft. Each engine GE/Durham makes weighs 8.5 tons or more and has more than 10,000 parts.
¹
Each part must be assembled to the most exacting specifications. Nuts as light as an ounce must be tightened to a specific tightness using a torque wrench. Gaskets three feet in diameter can be no more than half the width of a human hair out of round or they will malfunction, causing potential disaster. Each time one of these engines flies, hundreds of people rely on its perfection to arrive at their destination safely.

The special nature of GE/Durham does not reveal itself in its WHATS but rather in its HOWS, as a remarkable article in
Fast Company
magazine reported.
²
Over 200 people work at GE/Durham, a tiny part of a massive conglomerate, and nearly everyone, with the exception of a couple of dozen support personnel, is a Federal Aviation Administration (FAA)-rated technician. All work in teams of less than 20 techs whose only command from management is the date their engine is scheduled to ship. The team decides everything else, from the uncrating of the first part to the moment a team member hops on a forklift to deliver the completed engine to shipping. Each team selects one member to sit on each of nine councils to address issues such as human resources, materials, and training. Membership rotates regularly, and each council addresses a critical component of the principles that drive plant safety, quality, people, and processes.

There are a number of things conspicuously absent from the Durham plant. A time clock, for one. With the exception of a daily team meeting to allow the two shifts to synchronize activity, workers come and go as they like. There is no cleaning crew; everyone cleans up after themselves and the place is spotless. There is no tool lockup; if you can trust people to build an aircraft engine, you can trust them not to walk off with a torque wrench. There is only one boss at GE/Durham, the plant manager, and everyone reports to him. Or more accurately, they
don’t
report to him.

GE/Durham builds some of the most sophisticated machines on the planet in a high-trust, high-communication environment with no bosses but one. What does he or she do? Paula Sims, who led the plant four of its first six years of operation, says she focused on the big picture, growth and improvement. She also focused on something GE/Durham has in abundance: trust. She learned that lesson the hard way. “Not long after I started here,” she reported, “an employee came to me and said, ‘Paula, you realize you don’t need to follow up with us to make sure we’re doing what we agreed to do. If we say we’ll do something, we’ll do it.’ I sat back and thought, ‘Wow. That’s so simple. I’m sending the message that I don’t trust people because I always follow up.’ ”

This seemingly ungoverned culture has achieved some remarkable things in its relatively short life. Over the course of five years in the late 1990s, GE/Durham reduced the cost of airplane engine assembly by over 50 percent. The plant reduced quality defects over 75 percent. One in four engines ships with just a single flaw—usually cosmetic—like a scratch or a misaligned wire. The rest are
perfect
. In 1999, they added a new engine to their line, the CFM56, a workhorse at that time used in 40 percent of jets flying more than 100 passengers and in production at other GE assembly plants for years. Within nine weeks, they delivered their first engine, 12 to 13 percent cheaper than plants that had built it for years. This amazed Bob McEwan, then general manager of GE’s Evendale assembly operations, where they build the same engines. “Now, down in Durham, you don’t hear about process improvement,” he told
Fast Company
in the 1999 report. “They are constantly swinging away at it. . . . They have their washers all sorted into holders, like poker chips sorted into trays. You can easily get the washer you want. It’s things like that. They don’t ask anybody—they just go and do it. Down there, you can get more going in a week’s time than you can here in a year.” They have another leg up on their brethren as well. In 2002, Evendale released over 2,000 pounds of toxic chemicals into the air.
³
In Durham, they released 10 pounds. As of October 2005, they had gone eight years without a workers’ compensation claim. They work smart, they work clean, and they work safe.

With its incredible performance metrics, you might easily assume that what GE/Durham does have is a highly incentivizing employee ownership structure, or at least a profit-sharing arrangement that motivates them to cut costs and improve quality, but that’s another thing missing from the picture. There are just three pay grades at GE/Durham—tech-1, tech-2, and tech-3—and each is based on skill level and training. The only monetary incentive is to get better educated, which they call “multiskilling.” Multiskilling allows teams to build technical continuity, so that when one tech-3 is on vacation, another can still build a turbine without him. Moreover, no one is trying to graduate into middle management, because there is no middle management. The technicians themselves are responsible for all scheduling, ordering, process management, and deliverables. And they are inspired. “It matters,” said technician Bill Lane. “I’ve got a three-year-old daughter, and I figure that every plane we build engines for has someone with a three-year-old daughter riding on it.”

Within the massive bureaucracy that is GE, GE/Durham stands as an outpost of team-oriented, consensus-based self-governance, a culture unto itself, inspired by common values and common purpose. “Upstairs, you’ve got wrench turners,” said Bob McEwan of his Evendale plant. “In Durham, you’ve got people who think. I think what they’ve discovered in Durham is the value of the human being.”

THE SUM OF ALL HOWS

The success of GE/Durham lies in the unique way people there have chosen to relate to each other, to organize their endeavors, and to govern themselves—in short, their culture. Culture is a company’s DNA, the sum total of its history, values, aspirations, beliefs, and endeavors, the operating system, if you will, that defines and influences what occurs at the synapses between everyone working together in a group, large or small. Unlike an operating system, however, just inserting a piece of code—such as a compliance program or an innovation team—cannot change a culture; cultures are alive; they evolve and change over time. Organizational culture, then, is really more like an ecosystem, a highly sophisticated, interdependent cosmos of evolving organisms with a profusion of interrelationships. More simply defined, culture is the way things
really
work, the way decisions are
really
made, e-mails
really
composed, promotions
really
earned and meted out, and people
really
treated every day.

And it matters. Culture is a company’s unique character, its lifeblood. It lives in each company’s achievements, how its members have dealt with adversity, managed growth and contraction, made the hard choices, and celebrated their greatest victories. Much as some people say that character is one’s destiny, culture can be thought of as the destiny of an organization. The culture that grows around any given group of people is unique to them and can’t be copied. Others can perhaps duplicate your HOWS in general, but the specific texture and quality of what they total lives uniquely in the people who live by them.