How did this happen? All your planning schedules seemed up-to-date, and there were no indications of delays. Now each of the departments is blaming the others: “If only they had given me x on time…” “If only the packaging group had let me know when they first knew they were falling behind…” Now you will have to hassle the different departments to get the parts out as quickly as possible, like you did with the last program. But you thought the problem had been solved—the company made it clear that late parts and missed target dates would not be tolerated. In fact, severe penalties were out-lined. What happened?

The Problem-Solving Treadmill

The above scenario is typical for many people caught on a problem-solving treadmill. The “Fixes that Fail” archetype provides a starting point to help you get off the treadmill by identifying “quick fixes” that may be doing more harm than good (see “Fixes that Fail: Oiling the Squeaky Wheel — Again and Again…” November 1990). The central theme of this archetype is that almost any decision carries long-term and short-term consequences, and the two are often diametrically opposed.

In the case of the product launch, the fix that was meant to keep everyone on target actually made things worse. Penalizing those who missed deadlines created a dynamic where no one dared reveal that they were running late. If no one was “discovered” before a critical deadline (like prototype test), then everyone would be discovered at the same time, and no one person or team could be singled out. After that crisis was addressed, schedules would be stressed even more and penalties for failure would be increased…again. The result: programs are continually run with inaccurate information, creating rework and further hurting the schedule.

Getting off the problem-solving treadmill starts with becoming aware of how one is operating in such a structure. What follows is a seven-step process for mapping out the systemic consequences of quick fixes and for identifying high leverage actions.

1. Start with the Problem Symptom (and only the symptom)

Oftentimes we confuse “problem solutions” with problem symptoms. We are so used to responding to certain types of problems that we begin to see the lack of our solutions as being the problem. Problem solution statements like “The problem is….we need a bigger sales force,” or “The problem is…we don’t have the latest order processing system,” can lead you right back on the problem-solving treadmill.

It is important to spend some time up-front defining the problem symptom. This will force you to understand the problem as separate from any actions that you have taken, are taking, or plan on taking. Try turning problem solution statements such as “lack of sales training” into problem symptom phrases like “falling sales volume.”

2. Map Current Interventions

After you have clarified the problem, you can map out various past “solutions,” as well as current and planned actions. This is where you may include your favorite solutions such as sales training, marketing promotions, advertising campaigns, etc. In each case you want to draw out how the interventions will rectify the problem. For example, marketing promotions make it more attractive to buy now vs. later, which leads to higher sales (loop B1 in “Fixes for Falling Sales” diagram).

By following the discipline of clearly articulating how your actions affect the problem, you create an explicit map of your causal assumptions. The output of this mapping process can be used to show others how you understand the problem, and invite them to add to or modify the diagram from their point of view.

3. Map Unintended Consequences

One action can produce multiple consequences. People are usually good at recognizing the intended results, but not as good at identifying the unintended consequences. Use the causal diagram to map out potential side-effects of any actions you have taken to rectify the problem.

For example, one danger of repeatedly using marketing promotions to boost sales volume is that the products become less attractive when they are not accompanied by promotions. Over a period of time, product image erodes and sales decline. This exacerbates the sales volume problem, which then justifies the use of more marketing promotions (R2). This tendency of the system to reinforce the need to take the same actions again and again is at the heart of “Fixes that Fail.”

4. Identify Loops that Create Problem Symptoms

Treating symptoms can become a full-time job, since each set of fixes creates new symptoms that beg to be “solved.” To stop the treadmill, however, we must identify what is causing the problem in the first place. This search for the fundamental cause may lead to very different questions. Instead of looking for ways to solve a “falling sales problem,” for example, we should try to understand what factors directly affect sales (aside from the fixes we have already proposed).

Some root causes may include quality of customer service, number of new products, manufacturing lead times, or product quality. As you explore the root causes of falling sales volume, for example, you may discover that the number of new products has been declining in recent months. The next question to ask is: “How is the problem symptom connected to the number of new products (or any of the other potential root causes)?” You may find that in response to revenue pressure in the past, investments in new products were curtailed. The effects of that decision are now being seen in the reduced number of new products, which further aggravates the falling sales volume (R3 in “Shifting Emphasis to Marketing Promotions”).

5. Find Connections between Both Sets of Loops

Oftentimes, “fixes” and fundamental causes are linked together in ways that further reinforce the continued use of the fixes. Identifying the links can highlight the many ways fixes can get entrenched in a company’s routine.

Shifting Emphasis to Marketing Promotions

As product attractiveness relies more on promotions, the emphasis on promotions increases. This leads to more promotions (R4) and lower investments in new product development (R5), which will further exacerbate the falling sales volume (R3).

In our marketing example, as the product attractiveness depends more on promotions, emphasis on promotions will increase, leading to more promotions (R4). Investments in new product development, on the other hand, will be reduced as the company shifts its attention to marketing (RS). The resulting diagram looks similar to a “Shifting the Burden” archetype, as the company grows more dependent on marketing promotions to push sales. (A “Fixes that Fail” structure usually carries the seeds of a “Shifting the Burden”).

6. Identify High Leverage Interventions

Identifying high-leverage interventions usually means cutting or adding links in the causal maps. These actions represent structural interventions that will alter the policies that affect how people make decisions and take action.

Cutting the links from “revenue pressure” and “emphasis on marketing promotions” to “investments in new product development,” for example, decouples investment decisions from other responses to falling sales volume. On the other hand, adding a link between “erosion of product image” and “investments in new product development” can channel important market information that can be used to enhance the product’s appeal.

7. Map Potential Side Effects

For every contemplated intervention, try to identify side-effects that may be undesirable (using steps 3-4 above). By mapping them in advance, you can better prepare to respond or perhaps design around them altogether.

Summary

The preceding seven steps are meant as guidelines (not a rigid set of rules) for systematically mapping out the multiple consequences of actions. The resulting diagrams can help clarify the critical issues and provide a common, shared understanding of the problem in order to design more effective and long-lasting solutions.

The post Using “Fixes That Fail” to Get Off the Problem-Solving Treadmill appeared first on The Systems Thinker.

Using the Archetype Family Tree

The Systems Archetype Family Tree is based on two principles: that the systems archetypes are related strategically to each other, and that many situations can be described by progressing through several archetypes as they are linked on the tree (see “The Archetype Family Tree”). The tool is intended to help you use the relationships between archetypes to figure out how to begin looking at a new situation, and to gain increasing understanding of a problem as you work through the tree.

For example, suppose you were one of the proprietors of that lawn care company. You would start at the top of the chart, thinking about the nature of your situation. Is the phenomenon you want to understand something that used to be growing, whose growth you would like to reinstate, or something that is growing too quickly and you are worried about where it might lead? Then wind your way through the statements on the reinforcing (left-hand) trunk of the tree to see if they apply to your situation.

In this particular case, growth was not an issue; they had a debt problem to consider. If you, like the lawn care company owners, are trying to fix a chronic problem that persists despite your efforts to fix it, you want to work through the balancing (right-hand) trunk. Again, follow the chain of logical relationships, continuing to identify elements of your story.

For example, the lawn care proprietors’ fix” was to borrow whenever their cash flow was low (BI in “A Diagnostic Journey through the Archetype Family Tree”). As they serviced their mounting debt, however, the fix came back to haunt them in a “Fixes that Fail” structure (R2).

A Diganostic Journey Through The Archetype Family Tree

Working through the family tree reveals that what began as a simple balancing process(borrowing to meet cash needs) becoming a “Shifting the Burden” structure, in which the real leverage is to tighten financial control.

The lawn care proprietors sensed they were trapped in a “Shifting the Burden” process because they were not addressing the more fundamental issue of weak financial controls (B3). The borrowing fix was making matters worse by reinforcing a “loose” spending mentality (R4). Having diagnosed the situation, they could take effective action by focusing more attention on the root causes of their problems — low income and high spending — by tightening their budget and investing in better financial management tools.

Experimenting

Experimentation is key to using the archetypes most effectively. It is probably most useful to look at a particular situation or problem through the lens of several different archetypes, moving through the “tree” as needed. You may find yourself combining archetypes, adding loops and links to adapt them more completely to your story. By the time you have gleaned what you can from them, the loops may be five or six generations removed from the original archetype with which you began.

Michael Goodman is vice president of Innovation Associates (Framingham, MA). Art Kleiner has a long-standing background writing about business, environment, and systemic issues. This material will appear, in a different form, in the Fifth Discipline Fieldbook (Doubleday, forthcoming Spring 1994) .

The post Using the Archetype Family Tree as a Diagnostic Tool appeared first on The Systems Thinker.

At the heart of the controversy over the sale of used CDs is the decision by the nation’s fourth-largest record chain, Wherehouse Entertainment Inc., to carry half-priced used CDs alongside new ones. While this practice is not illegal, the record companies contend that reselling cuts into the sales of new CDs, diminishes their value, and deprives recording artists of royalties. The issue is further complicated by the fact that Wherehouse has always been viewed as an industry innovator, opening the possibility that other large chains may start to carry used CDs to remain competitive.

Ironically, the actions of some record companies have actually contributed to the rise in used CD sales. For example, when Wherehouse offered its customers a no-hassle return policy on CDs, Sony stopped accepting returns of open CDs from retailers. Instead, they offered a % credit. With many returned CDs on their hands, Wherehouse found it more profitable to resell them at a discounted price than to return them to the record company.

Promotions “Fix”

In a typical “Fixes that Fail” situation, a problem symptom cries out for resolution. A solution is implemented that alleviates the symptom, but relief is usually temporary and the symptom returns. Often, the problem is magnified because of accumulated effects of repeated application of the solution, or as a result of unintended consequences that unfold over a long period of time.

In the record industry example, the need to sell CDs leads to reliance on various promotions (B1 in “A Promotional Fix that Failed”). Such promotions increase the availability of CDs, which affects the sale of new CDs by adding to the used CD market (R2). The loss of sales from new CDs creates a profit squeeze which leads to sales pressure and further reliance on marketing techniques like CD promotions.

Companies such as Warner Music, Capitol-EMI, and MCA have responded to the threat of the used CD market by refusing to pay their cooperative advertising payments to Wherehouse and any retailer selling used CDs. But these actions will have little effect on the dynamics of the situation. While withholding advertising payments may deter some record stores from selling used CDs, the growing stock of used and cheaper CDs ensures that the secondary market will continue to grow.

A Promotional Fix That Failed

Pressure to increase sales results in promotions that offer a high number of CDs for a discounted price (81). As the industry’s use of these promotions increases, the amount of CDs on the market also rises (R2). This increase leads to the growth of the used CD market, and reduces new CD sales.

CD promotions were important in the early days, since CDs were significantly higher in price relative to records and cassette tapes. A promotion that offered eight CDs for a penny would bring in customers, who would then continue to buy CDs because of their higher sound quality. And, in fact, the promotions used for CDs in the mid-to-late 1980s were the same as the successful promotions used for records or cassette tapes in the late 1970s.

What the industry may have failed to do, however, is to evaluate the usefulness of the promotion over a longer time horizon. Since the market for used CDs appears to be growing, the industry needs to consider the longevity of the CD’s useful life relative to that of records and cassette tapes in their future plans. Record companies should accept the fact that saleable used CD’s will be around for a long time and figure out a way to live with them instead of fighting against this growing market.

The post The Problem with Promotions appeared first on The Systems Thinker.

Southwest Airlines—which has practiced servant-leadership for 33 years — is one company that has managed to thrive in the face of adversity. In 2001, the company was the only major airline to make a profit. It regularly ranks in the top 10 of the “100 Best Companies to Work for in America.” In a company that is 85 percent unionized, Southwest has been able to develop high loyalty among its people because it instilled the “soft stuff into its organizational processes from its inception.

Preparing for Bad Times

Chairman Herb Kelleher’s motto for both Southwest employees and the airline as a whole is “Manage in good times to prepare for bad times.” To succeed in today’s marketplace, the company cross-trains employees and increases their skill base so that individuals at all levels can take personal responsibility for keeping the company marketable, maintaining high-trust relationships, and identifying effective options for dealing with transitions. In addition, Kelleher and other leaders inspire loyalty by communicating openly and truthfully with their staff, respecting the lifework balance, and fostering continuous learning. Southwest employees know that their voices matter and that they can implement new programs, make decisions, and help customers in times of need. A guiding principle is: If you use your best judgment to do what is right, your leaders will stand behind you.

Southwest Airlines — which has practiced servant-leadership for 33 years — is one company that has managed to thrive in the face of adversity.

Over the years, Southwest management has gone to extreme lengths to avoid layoffs. During the Gulf War, when fuel prices rose so much that the company lost money every time an airplane took off, Kelleher promised to do everything in his power not to address the challenge by laying people off. He, top leaders, and many employees took voluntary pay cuts to keep the company profitable. More recently, following September 11, Southwest was the only airline that did not lay off any workers or reduce its flight schedule.

One reason why the airline doesn’t lay people off has to do with its hiring practice: It looks for attitude before experience, technical expertise, talent, or intelligence. “We can train people to load a plane, take reservations, or serve passengers,” says Kelli Miller, Southwest Airlines marketing manager for Utah. “What we can’t train is good attitude or ‘heart-based’ decision-making.” The company also consistently provides coaching and growth opportunities for people and weeds out non-performers within the first six-month probationary period.

Company managers profoundly understand the negative impact that layoffs can have on employee morale, trust, productivity, corporate memory, and, eventually, bottom-line results. Because they understand that long-term profitability comes from capitalizing on employees’ wisdom and capability, Southwest sees massive layoffs as merely “quick fixes” that often fail in the long run (see “Layoffs That Fail”).

The “Warrior Spirit”

Because of the company’s commitment to its workforce, Southwest employees perform at heroic levels on a daily basis and volunteer to make huge personal sacrifices on behalf of the company in hard times. Says Miller, “This last year has been Southwest’s biggest trial. But preparation for 9-11 didn’t start the day the terrorists struck. It began 30 years ago when the Southwest ‘Warrior Spirit’ was born — the will among leaders and employees alike to fight, to do whatever it takes to make the airline successful.”

Examples of heroic service abound. For instance, in the airline’s early days, when Southwest’s bank repossessed one of its four planes, forcing it to cancel a fourth of its flights, employees got creative. “We figured that if we could turn our planes in 10 to 15 minutes rather than 45, we could still keep the same number of flights even with one less plane,” explains Miller. “This significantly more efficient turn-time set a record in the airline industry. Since then, employees acting as partners to solve difficult business challenges and achieve unheard of levels of productivity has become our tradition and trademark.”

Following September 11, the company’s top three leaders volunteered to work without pay through the end of the year. Immediately, employees sought to help Southwest recoup lost revenue and pledged $1.3 million in payroll deductions. As an article in The Wall Street Journal describes, “Southwest has managed to remain profitable while all others have suffered huge losses. Why? Because of low cost and a productive work force. At no time have those advantages been more striking than right now. And the really interesting thing is that Southwest employees appear to have understood that.”

Donna Conover, executive vice president of customer service, points out that the company has high expectations for each employee. “Just doing your job well does not make you a good employee. The attitude and spirit toward others complete the needs the company has of that employee. As leaders, if we allow lack of teamwork or low productivity, we are being unfair to the rest of the team.” Time and again, Southwest employees have more than held up their end of this new employee-employer contract.

A Shining Example

Through the deep mutual trust and sense of ownership that characterize their cultures, Southwest and other companies that embrace servant-leadership have achieved remarkable results that put them at the head of their industries. These achievements don’t happen by accident or through guesswork — they are the result of leaders who commit to serving their employees and, in turn, providing their customers with the best products and service in the marketplace. This is a formula for success in even the most challenging economic climate.

To return to our opening question, “Does the soft stuff really work when challenges are tough and complex and the future of a company is on the line?” What we have repeatedly learned from clients who have practiced servant-leadership over several decades is that the strength of organizations comes from their people. You can’t micromanage people one day and expect them to think and act like owners the next. It takes a long time to grow business savvy at every level of a company. If you don’t begin early to invest in developing people, building mutual trust and respect, and engaging meaningful collaboration at all levels, you will not be able to leverage your employees’ potential when a major crisis hits. Servant-leadership offers a way for leaders to bring out the best in others by offering the best of themselves.

Ann McGee-Cooper, Ed. D., is coauthor of The Essentials of Servant-Leadership: Principles in Practice (Pegasus Communications, 2001) and founder of a team of futurists focusing on servant-leadership, creative solutions, and the politics of change. She has served on the Culture Committee of Southwest Airlines for the past dozen years.

Gary Looper is a Partner at Ann McGee-Cooper & Associates; Team Leader of the 10-organization Servant-Leadership Learning Community; and coauthor of The Essentials of Servant-Leadership.

The post Southwest Airlines: Does the “Soft Stuff” Work with Tough Problems? appeared first on The Systems Thinker.

Anticipating System Behavior

School districts are made up of many components, including district staff, individual schools, teachers and administrators within those schools, parent councils, and students. The sheer number and variety of these actors make it difficult to see their interdependence and to notice how an action in one part of the system affects the others. Add to this complexity policies originating from agencies outside the district, such as state education departments and the U. S. Department of Education, and the task of assessing how best to direct resources to meet students’ needs becomes almost hopelessly confusing.

Systems thinking and system dynamics tools, including casual loop diagrams, stocks and flows, and computer simulation, can shed light on the interrelationships among components and, perhaps more important, illustrate how outcomes may result from feedback loops rather than from simple, linear chains of cause and effect. These tools also make explicit the delays that often occur between a change in one component of a system and its effect on others. The interplay of feedback and delays can produce unanticipated system behavior, as shown by the mandating of smaller class sizes in California. When the legislature passed the new law, schools had to increase the number of classes they offered at each grade level to accommodate the same number of students. To do so, they needed to hire more teachers. Because becoming a teacher through traditional means requires at least four years of pre-service training, the number of teachers available fell short of meeting the needs of all schools. Suburban districts with greater resources filled their spots by recruiting teachers from urban districts, leaving those schools woefully understaffed. Proponents of the new law had failed to anticipate this unfortunate outcome of the change in class size.

By showing the potential behavior over time of multiple scenarios based on specific inputs, computer modeling offers policymakers and administrators the ability to visualize the long-term effects of specific decisions before those decisions are implemented. We can also use models to identify unexpected interactions between system components; ask “what if questions about changes in system parameters; run no-cost experiments that compress time and space; and reflect on, expose, test, and improve the mental models upon which we rely to make decisions about difficult problems. Thus, computer modeling could allow school-system leaders to make more effective decisions by building their understanding of long-term consequences of resource decisions in a complex environment.

Evaluating Professional Development Programs

To illustrate how a district can use computer modeling to analyze its options, I have created a simulation that explores the impact of professional development programs for teachers. Many school districts have responded to the call for better educational performance by implementing a standards-based curriculum. They offer professional development workshops to increase teachers’ ability to communicate this new curriculum to their students. The workshops are often formatted as multi-week summer programs.

Research has shown that teachers can learn to communicate the new curriculum through professional development training, so the question for a district is not whether summer workshops can build capacity, but whether they can do so for a critical mass of teachers in a reasonable time period. What factors play a role in this issue? Which workshops are most effective? What are the costs associated with this form of professional development? These questions are amenable to modeling because we can determine quantitative values for most of the important variables — such as the number of teachers in training and the turnover rate of teachers — and reasonable estimates for the qualitative variables — such as the effectiveness of the workshops and the relationship between the length of the workshop and the willingness of teachers to enroll in it.

I followed these steps to build the model:

1. Define the teacher stocks. All the teachers in the district fall into three stocks: Those who are not familiar with the standards; those who are attending a workshop to learn about the standards; and those who are familiar with the standards.

2. Establish the flow between stocks. Teachers who aren’t familiar with the standards can take a workshop to gain familiarity; teachers in the workshop may become familiar with the standards and move into the “familiar” stock or may not gain much from the workshop and return to the “unfamiliar” stock; and both “familiar” and “unfamiliar” teachers may leave the system each year.

3. Identify and assign values to the important system parameters and variables.

4. Incorporate funding components.

The model is based on the following assumptions:

• The number of teachers in the system remains constant at 10,000, and at the starting point, 10 percent of the teachers are already familiar with the standards-based curriculum. Workshops vary in length from one day to five weeks.
• Ten percent of the teachers leave and are replaced each year (with 10 percent of new teachers entering in the “familiar” stage), and the rate at which teachers leave the system is higher for teachers in the “unfamiliar” pool than in the “familiar” pool.
• In the baseline simulation, 1,000 teachers participate in the three-week workshop; this number can vary up or down by a factor of three.
• Fewer teachers participate in longer workshops, more in shorter ones. However, longer workshops are more effective. The initial success rate for teachers reaching the “familiar-with-standards” stage in a three-week workshop is 30 percent. This base rate increases linearly over time as more and more teachers (those for whom training was not effective the first time) retake the workshop.
• There are 25 teachers in each workshop. The cost of the workshop includes a stipend of $300/week/ teacher for each of 25 participating teachers and an additional cost of $2,500/week for the instructor, supplies, and space.

“Modeling Professional Development” illustrates the model’s basic features.

Analyzing Results

The simulation yields several non-intuitive results, the most important being that these workshops alone cannot adequately deal with the problem of building the necessary capacity in the teacher workforce. Even after 10 years of providing three-week workshops, only 52 percent of the teachers are skilled in presenting a standards-based curriculum — and this number includes teachers who were capable before they enrolled in the workshops. The results clearly show that the workshops do not produce a critical mass of teachers with the desired capabilities in a reasonable amount of time.

Another unexpected result of this analysis is that the five-week workshops result in the largest number of trained teachers over a 10-year period, even though the smallest number of teachers enrolls in them. Holding all else constant, approximately 5,200 teachers achieve the desired level of ability after participating in a five-week workshop, while only about 2,800 teachers reach this stage through one week workshops. The longer workshop is also the most cost-effective per teacher trained: $2,300 per teacher for a five-week workshop; $2,635 for a three-week workshop; and $3,100 for a one-week workshop.

We can generalize this kind of model to other areas of professional development, because the results are independent of the workshop content. Administrators have access to the quantitative data for their district (such as number of teachers in the system, distribution by length of service, teacher leaving rate, funding available for workshops) and can reasonably estimate values for the qualitative variables (such as percent of teachers who require specific professional development, workshop effectiveness, relationship of workshop length to teacher resistance and workshop effectiveness) from prior experience. Plugging these numbers into a computer simulation would give them a general tool for predicting the impact of a summer workshop on professional development in any content area.

Similar models could let stakeholders examine other questions, such as the impact of rationing workshop participation depending on teachers’ average time of service in the system.

Should administrators concentrate on those who will remain in the system longest, that is, younger teachers? Or is there value in offering training opportunities to experienced teachers, who can serve as opinion leaders in changing the system’s culture? This analysis could also be incorporated into an expanded model to include the use of mentors and school and web-based professional development. By exploring these variables as well, districts might come upon a formula for producing a multi-component professional development system with the capacity to bring a critical mass of teachers up to speed on new curriculum requirements in an acceptable time period.

As I hope I’ve shown here, computer modeling offers a valuable planning and decision-support tool for school districts. This approach permits “no-risk” analysis of competing policy choices and resource allocations and, while it does not offer definitive answers, it can help school-system leaders understand the impact of their decisions and guide them toward making better-informed allocations of scarce resources.

Daniel D. Burke, Ph. D., has a broad understanding of K-graduate educational systems. As deputy director for education, the CNA Corporation (CNAC), he leads the research and analysis activities of CNAC’s public education group. Before joining CNAC, Dan was a researcher in molecular biology and produced an extensive record of curriculum innovations. He also played an important role in the National Science Foundation’s K-12 education reform programs.

The post Making Better School Policy Decisions Using Computer Modeling appeared first on The Systems Thinker.

The “Fixes That Fail” Storyline

In this structure, a problem symptom gets bad enough that it captures our attention; for example, a slump in sales. We implement a quick fix (a slick marketing promotion) that makes the symptom go away (sales improve). However, that action triggers unintended consequences (diverts attention from aging product line) that make the original symptom reappear after some delay—often worse than before.

Some people know this dynamic from mismanaging their finances. Whenever they run short of cash, they use their credit cards to “solve” this shortfall. Unfortunately, the additional debt increases their monthly credit-card payments, causing them to run short of cash the next month. They again “fix” the problem by using their credit card to cover an even greater shortfall (because more dollars are going to pay the finance charges on the debt). Many juggle their debt among several credit cards by paying one card off with checks written on another. But with each round, the debt burden grows heavier and heavier, which may be why we currently have the highest consumer debt levels in history and record personal bankruptcies—all in a booming economy! This is the basic storyline of the “Fixes That Fail” archetype Let’s take a closer look at how and why this systemic structure behaves the way it does.

Of Heroes and Scapegoats

Many managers report that their organizations experience certain problems over and over again. Most seem to accept these challenges as a fact of life. Only a few see the cause as “hard-wired” into their businesses. However, from a systemic perspective, whenever patterns of behavior recur over time, they must be driven by structures that are designed into the way the system operates—intentionally or not. To better understand why we would create such structures, we need to take a closer look at the behavior of this archetype (see “The Hero-Scapegoat Cycle”).

THE HERO-SCAPEGOAT CYCLE

When a problem symptom becomes a crisis, we look for a hero to drive it back to acceptable levels using quick fixes. By the time the unintended consequences of those fixes cause the problem symptom to reach crisis level again, we’ve promoted the hero. We therefore scapegoat the new manager for failing to keep the problem under control.

Organizations usually have target levels against which they monitor performance; for example, inventory levels. If a problem symptom exceeds its desired level, such as excess inventory, we may notice this trend but not act on it right away, because we’re focused on other, more dire crises. When the symptom eventually reaches crisis proportions, we then shift our attention to that problem. At this point, because the situation has become so dire, we often look for someone who can “save the day” (e.g., slash inventory levels). Sure enough, we find a person who can drive the symptom down to the desired level in a hurry and then reward her with a promotion.

In the meantime, the delayed consequences of the hero’s actions (lack of product availability due to low inventories) begin to have an impact, and the problem symptom returns (higher inventory levels). When it again reaches the crisis level, we blame the person who is currently overseeing that function for failing to do his job, fire him, and look for our next hero. However, in this archetype, it may well be that the first hero is the person who put the current crisis in motion and that the scapegoat is the person who set the stage for a more lasting solution to take hold. But, because of delays in the system, these realities are often obscured.

Win Today, Lose Tomorrow

So, why do so many organizations fall into the “Fixes That Fail” trap? Why can’t people recognize the vicious cycle that keeps repeating the same patterns of events? One of the reasons is that the delays in the system mask the true nature of the cause-and-effect relationship. The narrow time frames that often drive decision-making in organizations also compound the problem.

For instance, our results are more likely to deteriorate over time if the delay for the unintended consequences to affect the system is long than if the delay were shorter. This is because, without the feedback supplied by the unintended consequences, the “improvements” actually appear to make things better in the short term (see “Fixes That Fail over Time”). And yet, when we view the situation from a longer time horizon, we find that today’s “desired” levels are far higher than yesterday’s “crisis” levels. From a longer perspective, we see that those short-term successes are part of a series of steps toward longterm failure. This pattern shows how companies can go bankrupt even as individuals are continually rewarded for doing a great job.

FIXES THAT FAIL OVER TTME

Over the short term, we applaud the progress we are making. And yet, when we view the situation from a longer time horizon, we find that the current “desired” levels are far higher than yesterday’s “crisis” levels used to be. Thus, those short-term successes are actually part of a series of steps toward long-term failure.

What Alarm Bells?

Another problem associated with this archetype can occur even when we do make changes so that quick fixes are no longer needed. Now, this may sound like a good thing, but it all depends on how we do it. Unfortunately, many organizations solve the problem by adapting to the poorer performance level, which then becomes the new norm (or desired level).

For example, we may have had a desired first-run capability of 95 percent or better from our production line (that is, 95 percent of our motorcycles run the first time off the assembly line), but we often find ourselves operating at a crisis level of only 90 percent. Because our plans are based on the higher level, our ability to provide predictable performance drops.

In order to improve predictability, we lower our desired level to one we know we can achieve (90 percent), with plans to eventually bring our capability back up to 95 percent. The danger of such a move is that once we have factored the poorer performance into operating plans, it becomes less visible as an issue that needs attention. In other words, what once caused alarm bells to ring no longer rings any bells, because we have in effect disconnected them. Although we no longer reach the crisis level or require frequent fixes, we have embedded the poorer performance in our system, and we no longer notice it.

In this situation, we have fixed our problem by getting caught in a different archetypal structure called “Drifting Goals.” We end up “fixing” things by changing our criteria of what constitutes a crisis.

Finding Fixes That Last

Of course, the answer is not that we should never apply quick fixes. There are many circumstances for which we absolutely have to implement short-term solutions. The danger lies in failing to recognize that all quick fixes are merely stopgap measures that buy us time to get to the root causes of those problem symptoms.

One of the most important points to address about this archetype is the relationship between the delay for the unintended consequences to show up and the timing of organizational performance assessments. If you suspect that you may be caught in a “Fixes That Fail” dynamic, look for a repeating pattern of quick fixes, determine how often these fixes occur, and compare that to the frequency with which you typically review performance. If the review time horizon is about the same as or shorter than the time between fixes, then try lengthening the time frame so that it’s at least three or four times the delay period. This will help provide a more accurate picture of the actual “progress” being made.

Daniel H. Kim, Ph. D., is publisher of THE SYSTEMS THINKER and a member of the governing council of the Society for Organizational Learning.

The post Fixes that Fail: Why Faster is Slower appeared first on The Systems Thinker.

FAILING TO FIX HEALTHCARE EXPENSES

In response to rising healthcare expenses, many companies have increased employee co-pays for medications. Over the short run, that action reduces the companies’ medical costs (B1). But over the long run, employees may fail to refill their prescriptions, leading to more emergency-room visits and use of “rescue” drugs for patients with diabetes and asthma and boosting company medical expenses (R2).

But Pitney Bowes, the world’s leading provider of integrated mail and document management systems, services, and solutions, with 35,000 employees worldwide, wanted to explore ways to reduce healthcare costs even more. The company looked at the variables that caused medical expenses for individual employees to jump dramatically in one year and discovered that patients with asthma or diabetes who failed to refill prescriptions were most at risk.

These findings jibed with a report in the December 2003 issue of the New England Journal of Medicine that up to a fifth of people stopped taking necessary medications when co-pays went up. As a result, many of these patients ended up needing more expensive treatment down the road, in the form of emergency-room visits, doctors’ appointments, and so-called “rescue medicines” (R2).

Based on its research, in the fall of 2001, Pitney Bowes reduced employee co-pays for all asthma and diabetes prescriptions to 10 percent. The result: Use of the medications has gone up, overall expenses for employees with those chronic illnesses have fallen, and the company will save at least $1 million in healthcare costs in 2004.

Based on its analysis, Pitney Bowes doesn’t plan to reduce co-pays for other conditions. But this case does show the benefit of considering both the short- and long-term outcomes of policies to be sure that a proposed intervention doesn’t end up having the opposite effect—in this case, both on the quality of care for employees and the financial bottom line for the company—than intended.

Janice Molloy (janicem@pegasuscom.com) is content director at Pegasus Communications and managing editor of The Systems Thinker.

The post Remedying – or Redoubling – Healthcare Expenses appeared first on The Systems Thinker.