Living under uncertainty is scary. We invest huge efforts to predict the future and prevent, whenever possible, the truly negative outcomes. Humans use superstitious beliefs to set clear expectations of the future and make sure it is not going to be too terrible. Others are using statistics to relax their fears and, at least, put them in perspective.
Being ‘in control’ means having good enough prediction of the future. Some definitions speak of ‘dominating’ the system, but this is more to say that no big deviations from the current status are expected due to who dominates the system.
In order to be in control we need a control mechanism. I suggest the following definition for a control mechanism:
A reactive mechanism to handle uncertainty by monitoring information that points to a threatening situation and taking corrective actions accordingly
Threatening situations are the cause of our fears. When we deduce the possibility of a threat we are able to look for signals that point that the threat is on. For instance, we fear from burglars breaking into our home. We put alarm systems to warn us when this happens. We also need to know what we do when the alarm is on – calling the police or local security provider.
Fears play a very big part in managing organizations. Managers fear from possible negative impacts on their organization and even more from the personal impact on them. The culture of organizations forces a seemingly rational approach that pushes for optimizing everything even in highly uncertain situations. Actually organizations use a different set of superstition, especially one that believes that people are always able to meet their commitment to an ambitious target. When they fail to do so – it is their own failure because they have demonstrated either their incompetence or their unwillingness to do whatever it takes. This kind of widespread behavior actually means ignoring uncertainly and this is a special brand of superstition.
Uncertainty should include, in my mind, not just the natural fluctuations of variables, but also the limitation of the human mind to absorb complexity and digesting huge amount of data. When Goldratt claimed that every system is based on inherent simplicity he pointed to the practical inability of human-beings to control truly complex human systems. Organizations simplify the complexity by maintaining excess capacity and buffers so most small disruptions would cause very little damage, if at all. The irony is that organizations try to hide the massive excess capacity and their buffers, because it clashes with the utopia of optimization. Personal hidden buffers protect the safety of the individual in the organization, and the need to hide the buffer is not too high price to pay. The individual, sometimes groups of employees, fight to be able to commit to targets that are achievable in a very high confidence level. Once the individual reaches the target he/she are careful not to achieve more, because that would worsen the chance to get comfortable targets in the future. It is my view that this is the core problem of the vast majority of the business organizations in the world. Kiran Kothekar has made similar arguments in the TOCICO conference in 2016.
Setting targets is a key common control mechanism. The two objectives controlled by this mechanism are to keep people under constant pressure to perform well and to keep good synchronization between the functions. Thus, the targets for Sales are translated to targets for Operations. The targets also serve the construction of the budget, which serves as a synchronization plan for the organization.
Does this control mechanism work?
It does work to a certain limited degree, but also causes serious negative effects. Most organizations have adequate stable delivery performance to their clients. So, when I go into a supermarket with a list of twenty items I usually go out with seventeen items from the original list plus one or two acceptable replacements.
Do I like the situation of not finding one or two of my priority items?
Well, do I have an alternative? The uncertainty of finding everything forces me to take certain steps, like buying more of some products I suspect might be missing next time. If someone would solve that problem it’d be of high value for me.
The key point is that most organizations do not behave in a chaotic way!!!
Most of the prior expectations do materialize in the relatively short-term and thus they are “in control”. However, there are still two problems with the current practice of maintaining adequate control:
- The performance is far from exploiting the true potential of the organization. Actually it is also far from the flawed optimization dream. Much better performance could have been achieved with different methods of control.
- While most expectations materialize, some are not. The constant fire-fighting with unexpected events raises the level of nervousness throughout the organization. It takes huge amount of management attention to bring the situation to an acceptable control, and eventually very few lessons have been learned.
TOC has been focused on the rules for planning and on the different rules for execution. The execution phase is part of the overall control – making sure the outcomes are close enough to the planned/expected objectives and targets.
The TOC wisdom has introduced the insights of looking for the weakest-link to dictate the potential limits of the planning, and then add visible buffers to protect the objectives from common and expected uncertainty. The TOC wisdom for the execution phase is to closely monitor the state of the buffers, and when the buffer consumption penetrates its last one-third part to treat the situation as threatening, invoking actions like expediting to fix the shaky situation. TOC has on-going objectives depending on the limits imposed by the constraint and monitoring the buffers is one of the logical ways to identify blockages. TOC offers a control mechanism that allows going for much more ambitious objectives, while still protect the performance from too high fluctuations.
However, the current TOC BOK does not do enough to face incidents and events that happen outside the planning and execution, many times originated outside of the organization.
An example: a new competitor offering new products or services that compete with the natural market of the organization.
Another example: A high level manager is publically accused of sexual harassment of an employee.
What control mechanism could cope with such external, yet meaningful, cases?
The two examples above point to two different categories of such threats:
- A threat that is recognized a-priori as a possibility. For instance, being aware that a new competitor might emerge with a new technology or offering.
- An unexpected threat. for instance, Someone behaves in an acceptable and unexpected way.
The first category of potential threats enables management to design the appropriate control mechanism that would be able to identify the rising threat as early as possible and prepare the procedures for handling the threat when it appears.
The second category is tough, because there is no clear control mechanism. Such surprising events break the illusion of being ‘in control’ and send a message that we might, even though not too often, lose the control we think we have. In my last post I dealt with the transition period, which is the time when the company is especially vulnerable and less in control. The generic advice was to ask the question “what could go wrong?” Answers to the question move some potential threats to the first category. The other advice was: “be on your toes!”
Eventually managers need to recognize that even unknown threats send us, many times, certain signals that point to the emerging threats. We cannot specifically prepare for these signals of threats we do not think of. So, who should be constantly looking for signals that something is happening, deduce the threat and what could still be done about it? Every army, preparing for a war where chaos takes over, has intelligence officers who actively look for both the expected and the unexpected. I think that normal companies need such a role as well.