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Production Capacity

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The ants know it. Why don't we?

A new study in the journal Behavioral Ecology and Sociobiology finds that in ant colonies, a large number of worker ants are idle at any given time. (No, I don't subscribe to this journal -- I just heard about it on the radio.) These ants aren't just lazy slackers, though. As one of the researchers explains it,

. . . in order to make sure that the right number of workers are allocated to all the particular jobs that have to be done, it's beneficial if the colony has some excess workers -- essentially, extra workers, more than the number that they need to get the work completed because it just makes that process run more smoothly -- of actually figuring out who has to do what.

Sounds to me that the ant world has figured out Little's Law -- that the cycle time to get essential ant business done increases exponentially when labor utilization crosses a certain threshold. Maintaining slack in the system enables the colony to be more effective when work has to get done (like collecting food for grasshoppers).

Most companies realize that Little's Law applies to machines and manufacturing processes, but it's often ignored when considering the workload on people. In a misguided quest for increased "efficiency," we overload people with work, eliminating their slack time -- and thereby cross the utilization threshold beyond which response time plummets. We even do this to ourselves: we pack our calendars with meetings, projects, and tasks, guaranteeing that the inevitable glitch in our systems (a meeting that runs long, a software snag, an unexpected problem with a customer, etc.) will create a cascade of failures in our ability to meet deadlines and deliver on time.

A terrific article in Strategy + Business tells the story of St. John’s Regional Health Center, where the operating rooms were at 100 percent capacity. Emergency cases would lead to postponing long-scheduled surgeries, forcing doctors to wait several hours to perform their cases (sometimes as late as 2 a.m.) and requiring staff members to work unplanned overtime. The hospital was constantly behind.

The solution? Leave one operating room unused so that it would be available for unplanned, emergency cases. That room provided the slack the system needed for the hospital to run smoothly. The authors explain:

On the surface, St. John’s lacked operating rooms. But what it actually lacked was the ability to accommodate emergencies. Because planned procedures were taking up all the rooms, unplanned surgeries required a continual rearranging of the schedule. . . .Once a room was set aside specifically for unscheduled cases, all the other operating rooms could be packed well and proceed unencumbered by surprises. The empty room thus added much-needed slack to the system. Soon after implementing this plan, the hospital was able to accommodate 5.1 percent more surgical cases overall, the number of surgeries performed after 3 p.m. fell by 45 percent, and revenue increased.

What's happening in your product development team, your credit department, your finance group? Do you have enough extra workers -- or more to the point, do they have enough slack in their workdays -- to accommodate new demands, respond to emergencies, or answer customer questions in a timely fashion? Or are you running the team with so few people, or have overloaded them with so many initiatives that there's no slack in their schedules?

Can you run your organization as intelligently as an ant?

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Little's Law, redux

In reference to my April newsletter, about the perils of a multi-tasking environment that forces teams to constantly switch activities among multiple projects, a client wrote:

I am a little surprised you didn’t refer to Pull and WIP control more overtly as part of the solution. I know it is production language, but it should work in admin and is a great way to match input/output rates and to keep resources dedicated until a job is done. Also the queues can then be used as indicators of true capacity (vs coordination) opportunities.

I anchored my argument against this kind of multitasking in Little's Law, which demonstrates that the more items in a queue of work (particularly manufacturing or service), the longer the cycle time for that work becomes.

My client is exactly right, however. A push system, where work is foisted upon a department from the outside, by its very nature will lead to overloading a system and exploding lead times. A pull system, where work is taken from a pile of projects by the people doing the work when they're ready for it, ensures that the department matches inputs and outputs for maximum efficiency.

Interestingly, this approach is rare. There's a tendency in the office environment to treat "production" capacity as infinite. Partly this tendency is due to people's willingness to work late into the night or on weekends. Partly this tendency is due to the difficulty of calculating how much time a particular project will take. Inherent in knowledge work is the inability to take a project to completion in a smooth, uninterrupted flow.

Because there are so many interruptions, and because these projects tend to be multi-stage affairs, there's a powerful argument to use more visual management tools and lean/agile development methods. Both will help clarify and make workloads visible, and help to better match capacity to business opportunities. And that results in shorter lead times, happier customers, and less-stressed employees.




Are you providing leadership or support?

I’ve been talking to many companies recently that are committed to improving their processes. Or at least they say they are. What I usually see is a company that wants improvement, but management isn’t necessarily willing to make the commitment to the changes necessary for real, sustainable improvement. Case in point: one firm I know has embarked on a project to speed up product development. Although the company dominates its category, there are far too many dropped balls, rework, and missed deadlines for it to continue thriving in its market.

However, management is unwilling to postpone any of the current development projects to free up the developers’ time—these new projects have terrific revenue potential. But to the developers, who are currently working 60 hours per week, this decision seems unreasonable. The developers are expected to carry their current—full—load of work, and still add on this major new responsibility.

This is where real leadership comes in. As Jamie Flinchbaugh says,

I go to many organizations that say, “We have management support. They’re 100% behind us.” The problem is, behind is behind. Leadership is out in front. Leading lean is an inside out transformation, and must begin with the leader’s own mindset and behavior.

In this case, leadership means making the difficult decision to forego some short-term revenue by postponing one (or more) of the new products in development in order to create the capacity for process improvement. Truly leading the improvement effort means making the organization-wide, financially challenging investments that will lay the foundation for future success. Leadership means hacking through the jungle with a machete, clearing a path for front-line staff, supervisors, and managers to follow.

What are you doing in your company? Are you leading or supporting the efforts of your team?




Let's treat our employees more like machines.

My friend Elizabeth has what seems to be an enviable job. She's the head of global product development for a cool consumer products company. You can see her company's logo all over the streets of New York and the trails of Yosemite. Elizabeth is running on empty. She says that feels like she's a farmer: she gets up at 4:30am just to get on top of her work. She has 18 direct reports, and spends so much time buried in the weeds of product development meetings (moss-colored buttons or spruce-colored buttons?) that she never has the luxury of thinking -- really thinking -- about the strategic direction of the company product. She rarely has time to mentor or guide her team, either: she's gone from weekly meetings to bi-weekly, and she cancels more often than not. Oh, and the executive team has requested a 15% increase in sales for 2012 -- which means more product SKUs and more development work.

Linda Duxbury, a business school professor at Carlton University, writes often about "corporate anorexia," which is the point at which the volume of work to be done simply outstrips the capacity of the people in the system to do it.

Corporate anorexia is an apt description of Elizabeth's circumstances. I mean, really: 18 direct reports? Her company simply doesn't have the human infrastructure it should have. Its growth has been built on the backs of people like Elizabeth getting up at 4:30am -- and that's just not sustainable.

Everyone knows that machines have a fixed production capacity: you can only get a finite number of widgets per hour out of it. Everyone knows that machines need downtime for maintenance, or they'll break down. Treat your machines with respect -- don't overload them, don't forget about supporting and maintaining them, or you'll have an expensive pile of scrap metal on your hands.

Companies often talk about how "people are their greatest asset." And yet, they often treat their people worse than their machines. They overload them. They don't provide the support they need. (18 direct reports?) They expect 24/7 response to email and voice mail.

I don't know about you, but if this is the alternative, I'd rather be treated like a machine.




Limits are good

Kurt is the COO of an innovative non-profit that marshals corporate resources to address problems in its greater municipal area -- education, pollution, transportation etc. Business is good for Kurt, and opportunities abound. He's been to Shanghai twice in the past year to coordinate with businesses there; he's leading an exciting new cyber-security initiative between government and industry; he's involved with an program to improve outreach to existing member corporations; and he's leading the charge to recruit new corporate members. There's only one problem: corporate membership is down. Attrition is high, because member companies feel that they don't get enough attention. In fact, it's only increased since the non-profit started pursuing some of its new programs. Which is sort of like saying that your bank does a great job of providing free wi-fi and donuts in the lobby, but it has an unfortunate tendency to lose track of your money.

You see this problem all the time. Companies can't execute on the simplest and most critical tasks, because they're trying to do everything. They pour resources into entering a new market but neglect their existing customers. They develop sexy new products but forget to update and improve their current products. Individuals do the same thing: they take on high-profile new projects but stop attending to their existing responsibilities. Reach > grasp.

Jeffrey Pfeffer, professor at Stanford University's business school, tells this story:

Gary Loveman, CEO of Harrah's Entertainment, is someone who gets this. Visiting Stanford one day, he told my class that when he entered the company as COO he reduced most executives' job scope, because he believes that people don't do very well processing complex agendas and that success mostly comes from effort focused on the most critical and achievable objectives.

Your most limited resource isn't money. It's time and mental focus. Not only are there a finite number of hours in a day, there's a finite amount of processing and decision-making power in a day. As an individual, that means that you've got to ruthlessly prioritize the areas in which to pour your attention. As a leader, that means that you must constrain the job scope of each person on your team, like Gary Loveman.

Kurt isn't to blame for the high attrition rate at his non-profit. It's his CEO's fault. He's a brilliant thinker who discovers opportunities all the time. . . and then dumps responsibility for executing them upon Kurt. Without the discipline to say no to some of them, or the willingness to match managerial resources to his agenda, the CEO is dooming the organization to a future of unrealized expectations, half-baked initiatives, and a declining membership.

Limits are real. Acknowledging them is not a sign of weakness or timidity. It's a sign of pragmatism that will help you get to where you want to go.



It's about throughput, not capacity.

For a long time now, I've advocated "living in your calendar" in order to, among other reasons, understand your production capacity. Mapping out your work on a calendar helps prevent you from taking on more commitments than you have the time to handle. I was wrong. (Sort of.)

I just finished reading Jim Benson and Tonianne DeMaria's book, Personal Kanban, in which they point out that capacity is irrelevant. It's about throughput. No one -- not your boss, not your customers, not your family -- cares about how much capacity (hours) you have each day to work. They care about how quickly that work gets done, whether it's preparing next year's budget or cleaning the garage.

What's the lead time? What's the cycle time? How long do I have to wait? These are the key questions they want answered. (Well, only engineers ask the first two questions. But everyone asks the last one.) And those are the key questions you should be asking yourself. Not, "How much time do I have to work this week?", but "How can I get this work done most quickly?"

To shamelessly steal an analogy from Personal Kanban, no one cares what the capacity of a freeway is. In fact, it's completely irrelevant to you how many cars can be packed into one stretch of asphalt. What's really important is how long it takes to move down the road and whether you'll make it home in time to watch reruns of "Webster." And as any urban planner or operations manager will tell you, once your system exceeds 65-70% of maximum utilization, you're guaranteed to reduce throughput and increase cycle time.

This is why living in the calendar can be dangerous. There's a tendency to look at empty space on the calendar as something to be filled up with some ostensibly productive work. After all, if you're not filling those minutes and hours, then clearly you're either a lazy slacker or you're just terribly inefficient. With unemployment at 9%, who wants to be accused of either?

But how fast would traffic move if every square foot of the freeway was occupied by cars? How fast will your work move if every moment of your day is occupied by some pre-planned task or meeting? It wouldn't move at all. Just look at the cars around you at rush hour -- or look at the crap that's been piled up on your desk and your inbox for a few weeks. That tells you all you need to know about throughput.

So, by all means live in your calendar. Use it to assess your production capacity. But remember that 100% utilization of that capacity is ultimately self-defeating. You need slack in the system, because throughput is what counts. Not capacity.



The problem with priorities.

Ron Ashkenas posted a thoughtful piece on the problem with priorities a few months ago. He tells a story of the head of a large hospital who asked his direct reports to make an index card for each of the projects they were working on.  One hundred fifty cards (!) later, it became apparent why so few of the projects were moving towards completion -- with so many projects drawing on the same resources of time and attention, nothing could get finished. Moreover, these senior managers were reluctant to formally drop any of the projects because they felt that all of them were important. But as the old saying goes, if everything is a priority, then nothing is. Something is either the priority or it's not.

This reminded me of something that Merlin Mann once wrote:

Making something a BIG RED TOP TOP BIG HIGHEST #1 PRIORITY changes nothing but text styling. If it were really important, it’d already be done. Period. Think about it.

Example. When my daughter falls down and screams, I don’t ask her to wait while I grab a list to determine which of seven notional levels of “priority” I should assign to her need for instantaneous care and affection. Everything stops, and she gets taken care of. Conversely – and this is really the important part – everything else in the universe can wait.

I've written before about the necessity of understanding your "production capacity." If you had infinite time and infinite resources (energy, money, focus), you wouldn't really need to worry about your production capacity. You'd just keep working and get everything done. You'd rescue your daughter and analyze last month's sales figures. No problem.

Unfortunately, you don't have infinite time and resources. (Or if you did, you wouldn't be working right now. You'd be on a yacht docked at your own private Caribbean island.) So you have to make choices. You have to choose your priority for the hour or day or week or year.

My wife has gradually been learning this lesson. Recently, she's been a bit better at saying no, and has been spending a bit more time on her "great work." Patient care comes first as always -- there's no letup in the number of procedures she's doing each day -- but she's shelved almost all of her academic work and a significant amount of her administrative work. Equally important, she's less stressed about the stuff that she's not doing.

Remember: either your project is the priority or it's not. Period.