Evolving Excellence

WaPo Continues To Ignore the Facts

Less than two months ago we told you about how the Washington Post is skewed way off base on American manufacturing.  This week I missed another WaPo farce, but luckily our friend Don Boudreaux at Cafe Hayek noticed it and responded.  First a brief quote (sorry, all I can stomach) from the WaPo article.

Just as the ghost dance of the Sioux failed to bring back the buffalo, so the declining dollar and the high price of gas have failed to bring back American manufacturing.  Will America ever get its manufacturing back?

Gag.  What's really scary is that people read, and some even believe, that drivel.  Coincidentally we've also talked about how there is a very significant migration of companies back to the U.S., not to mention all the foreign companies building new plants in North America.  But Don does a great job discounting this latest WaPo piece, via a letter he sent to the paper.

Harold Meyerson insists yet again that America has lost its manufacturing, alleging also that investors are abandoning the U.S in favor of "nations with far cheaper workforces" ("Obama's Factory Factor," August 21).  Mr. Meyerson predictably singles out China as one such nation.

Facts utterly contradict Mr. Meyerson's fantasies.  First, U.S. manufacturing revenues (adjusted for inflation) reached their all-time high in 2006. 2006 was also a peak year for inflation-adjusted manufacturing profits in the U.S. and for inflation-adjusted U.S. manufacturing exports.  And the U.S. accounts for the largest share of the globe's manufacturing output; Americans today produce 2.5 times more manufactured goods than do the Chinese. [See here.]

Second, in 2007 the flow of per capita foreign direct investment into the U.S. was up 13 percent from 2006, to $675. In China, it was up 14 percent - to $55.  [I derived these these figures from here, here, and here; I got population figures from the CIA World Factbook .]

Harold Meyerson is a perfect example of the Beatles' "Nowhere Man":
"He's as blind as he can be / Just sees what he wants to see."

Sincerely,
Donald J. Boudreaux

And that data was before the dollar's decline and rising fuel costs began to incent those companies that chased supposed cheap labor to return home.  What's almost funny is that I bet there's a room full of WaPo execs trying to figure out why their circulation numbers are declining.  Gee, I wonder why...

An Unfortunate Rhyme

Here we go again... another reporter thinking herself clever for rhyming "mean" with "lean."  Mark over at the Lean Blog has commented on this several times.  Sometimes the article actually makes reference to something obliquely "mean," but in this case it does not.  It is simply a rhyme.  One that conveys the exact opposite of what lean manufacturing is really about.

This particular article has some other interesting tidbits.

"Because product manufacturing speed ultimately sets the price, our goal wasn’t only to develop the product but also to develop a process that maintained quality at the necessary price point," said Pacon Manufacturing Vice President Mike Scaduto.

No, the market sets the price.  Manufacturing speed can set the cost, but generally even that isn't a true cost.  I'm betting they're using traditional absorption costing, therefore the more product they can crank through a piece of capital equipment, the better.  Whether the product has an order or not.  And that product presumably has to absorb a percentage of overhead costs, whose absorption ratios were probably set several months earlier, based on guesstimates to begin with.  Check out the Lean Accounting Summit in Las Vegas next month if you want to learn more about how silly this type of accounting is.  And how dangerously erroneous.

The rest of the article is basically an advertisement for pneumatic conveying equipment, and there are some examples of how the equipment can increase flexibility, reduce floorspace, and the like.

Perhaps lean.  Not mean.

Bailing Out Pathetic Leadership

If you don't have the capability to lead, the vision to look more than six months down the road, and the guts to make tough decisions... it must be someone else's fault, right?  That's presumably the opinion of the Detroit Three as the get read to ask for what is effectively a bailout by the government.  No, let's clarify that: a bailout by you and I, the taxpayers.

The supports pushed by General Motors Corp., Ford Motor Co. and Chrysler LLC would represent the biggest intervention of this kind by the government in the auto sector since Washington's bailout of the former Chrysler Corp. in 1979-80. But the differences between the Chrysler rescue and the latest proposal are substantial, starting with the scale. This time, all three of the unionized Detroit auto makers plan to work together to secure direct loans from the government, giving the federal government a massive new role as a major lender for three of the 11 global auto makers building cars in the U.S.

To be fair, the last one didn't turn out so bad, even though the premise was still wrong in my opinion.

The Chrysler rescue, which ultimately returned a profit to the Treasury, involved just one company and $1.5 billion in government guaranteed loans, or about $3.7 billion in today's dollars.

But let's also take note of a key phrase in the original quote: "...three of the 11 global auto makers..."  Somehow the Detroit Three (GM, Ford, Chrysler for those of you unfamiliar with this shift from the term "Big Three" which technically includes Toyota) consider themselves different from everyone else.

The auto industry, crippled by high fuel prices and consumer trends away from SUVs, bristles at calling the program a bailout similar to the Chrysler deal.  Still, in 1979, much like today, Detroit was reeling from skyrocketing oil prices, competition from foreign auto makers and a souring economy, said Robert J. Barbera, chief economist at the research and trading firm Investment Technology Group.

No, the entire auto industry is not crippled.  The Detroit Three are crippled.  Although sales have slowed for the likes of Toyota, Honda, and Nissan, years ago they began the shift toward smaller and more fuel efficient vehicles, including massive investment in new technologies such as the Prius hybrid.

This time, Detroit is making the case that the loans will help advance the country's energy-saving goals by offsetting some of the estimated $100 billion it will cost Detroit to comply with tougher fuel-economy standards enacted as part of the energy bill.  The loans would allow the auto makers to borrow money to retool for more-efficient vehicles at significantly lower interest rates -- likely between 4% and 5% -- than if they got the loans on the open market.

So let's see... the U.S. government will be subsidizing business costs for the Detroit Three, while foreign auto companies have to foot the bill themselves.  I bet the supporters of this bailout include some of the same jokers that complain that foreign governments are subsidizing costs for their domestic companies, making it more difficult for U.S. companies to compete.  Anyone want to look around for some black pots and kettles?

I want the Detroit Three to succeed.  Really I do.  But rewarding a stunning lack of leadership vision removes the accountability that helps create excellent leadership.  Similarly tough times have a way of stimulating excellent leaders to find innovative pathways out of the maelstrom.

The Window is Closing

Many may not realize it, but recent times have been good for American manufacturing.  A plethora of reasons have made domestic manufacturing a good deal... if CEOs could get past the myopia of "outsourcing is good."  Rising fuel costs make supply chain costs more expensive, political turmoil overseas heighten the risk, and a weak dollar has created at least temporary inherent cost advantages.

Some companies have flown in the face of popular perception and have stuck with their domestic factories.  The smart ones among them have also taken the time to improve internally to become more competitive.  Other companies did flee overseas, and they are now trying to figure out where to go next in order to chase supposed low costs.  Some of them are finally waking up to the fallacy of that strategy, often driven by traditional accounting voodoo, and are returning back to the U.S... where they find they are suddenly competing with the companies that stuck it out and improved.  As we said before, Too Bad, So Sad.  Sorry, sympathy runs shallow.

The cost advantage, or parity, window may be closing.  Some recent articles are beginning to discuss the possibility that the dollar's long slide is over.  If that's the case, the future will require domestic companies to be even more productive as the currency exchange begins to shift.

The dollar's bounce in recent weeks has investors wondering whether this is the beginning of the end of its extended slide.

It's about time, like it or not.

Such a turning point would be one of only a handful over the past 30 years. Since the late 1970s, the dollar has experienced long, deep, multiyear trends, veering from superstrong to feeble and back. These currency cycles have tended to last from five to seven years in each direction.

By that standard, the dollar's decline, now more than six years old, is looking long in the tooth. The dollar touched its recent peak versus the euro in late 2001, and against a broader group of currencies in early 2002.

Yes, long cycles.  So if this is the turning point, what does the future hold?

"The biggest question I get is, 'Has the dollar embarked on a seven-year uptrend?'" said Parker King, head of currency investing at Putnam Investments.  Some of his clients have started to prepare for that eventuality, he said, by changing their level of exposure to the dollar's movement.

The recent runup of the dollar has been rather extraordinary, but it follows a historic pattern.

The dollar's latest gains - it is up 8% versus the euro and 5% against the Japanese yen since [just] mid-July.

The record shows that major changes in the dollar's direction take time to unfold and rarely are smooth.  In each case, the dollar reached a point of extreme weakness or strength before heading in the other direction.  The current slide seems to follow that pattern.  Experts say it is about 30% too cheap based on economic fundamentals.

It's a cycle and has happened before, so smart executives have presumably been planning for this.  Have you?  Isnt' that what you're paid to do? 

Toyota: Pioneer of Momentum

Is marketing spending directly correlated to top line and bottom line growth?  Is there an alternative way to grow?  A recent article in Knowledge@Wharton discusses various growth styles and creates a hypothesis based on the concept of "momentum"... nothing really new, but once again repackaged.  Presumably there will be a nice definition of "momentum" and how to achieve it... we'll see...

Momentum. Most businesses get it at some point -- the impres­sion that everything they undertake succeeds effortlessly, as if they're being carried along by a tailwind that increases their efficiency and propels them on to exceptional growth.

Some hold on to it. Most don't. Slowly, imperceptibly, the tailwind turns around and the momentum disappears, without anyone quite realizing what has happened. The company is still growing, but not as strongly as before, not as efficiently. Everyone's maxing out, but it seems like there's molasses in the works. Sound familiar?

Perhaps.  But let's dive into the author's study.

The insight came when we realized that if momentum was powering a firm's success, then its relative marketing spend should be decreasing. Contrary to conventional "spend money to make money" wisdom, our hunch was that firms with momentum achieved superior growth while spending a relatively smaller percentage of their revenue on marketing than those pursuing the traditional "push hard" methods. To test our hypothesis, we investigated the effect of marketing investments on the long-term growth of large, established firms.

Interesting analysis.  Decoupling marketing spend from growth should yield other growth factors, and perhaps that elusive "momentum."

We divided the firms into three groups according to how their marketing behavior could be described: Pushers, Plodders, and Pioneers.

The Pushers were those companies that pushed their businesses hard in the traditional way, seeking to drive sales through aggressive increases in relative marketing spend. Then there were the Plodders. These were the firms grouped around the middle of our sample -- fully half of those in the study. Their marketing-to-sales ratio remained more or less constant for 20 years.  Finally, there was the remaining quarter -- those firms that were, either boldly or foolhardily, heading in the opposite direction from the Pushers, and decreasing their relative marketing spend. In other words, the Pioneers cut their relative marketing spend by seven points when compared to the competition.

What did they learn?

The Plodders underperformed the stock market by 28 percent, achieving only 72% of the Dow Jones Index average growth. Pushers managed, on average, to create shareholder value exactly in line with the evolution of the Dow Jones Index, thus demonstrating the soundness of the conventional faith in the power of active marketing spend to contribute to increasing shareholder value.

What conventional analysis probably would not have predicted was the performance of the Pioneers. Despite having decreased their advertising-to-sales ratio, these momentum-powered companies created shareholder value 80% above the Dow Jones Index over the 20-year period. Eighty percent!

Since the Plodders are probably already near death, lets compare the Pushers and Pioneers a bit further.

Over the 20-year period, using the Pushers' performance as a reference, the Pioneers' revenue growth was 93% better -- almost twice as high. If we compare the profitability growth of these two groups, we can see that the Pioneers also did much better, with average earnings growth 58% superior to that of the Pushers. A 58% advantage in earnings growth is very impressive, but it is noticeably smaller than the difference in revenue growth.

What are the characteristics of these Pioneers?

What was improving the efficiency of their marketing investments? This is not simply a case of great marketing, although marketing excellence is a key part of the mix. These firms achieved greater efficiency with their marketing because they found a different path to growth: They exploited the momentum effect. They created specific conditions that ignited an exceptional organic growth that feeds on itself: momentum growth.

Good.  I thought I was going to have to thrash the article for assuming that marketing efficiency was the end-all of business growth.  Instead the authors take traditional marketing to task in a way that's analogous to how inventory can cover up production sins.

Too often, companies invest more in marketing to compensate for something: an inferior product, a poor pipeline of new products, deterioration of growth prospects, or a general lack of creativity.

Firms with such a limited vision compensate for their less-than-spectacular offers by pushing them on an unconvinced market using heavy-handed marketing resources. Even more compensation is required when, to fund this expensive marketing, they are forced to cut costs on the very activities that could improve the attractiveness of their offer: operations and R&D. This kind of behavior eats up resources and destroys firms from the inside out. They are momentum-deficient firms. 

So let's tackle... "momentum."

The Pioneers show there is an alternative. These momentum-powered firms don't have to push so hard because they have built up a momentum that improves their efficiency. Rather than just better-than-average growth, they deliver exceptional growth. Their growth is exceptional on two counts: It is both higher and more efficient.

Ok, but I still don't know what "momentum" really is, in a quantifiable, actionable way.  The article then provides two case studies: Wal-Mart and... Toyota.  Hey, why not.  Toyota can be used as a positive case study for just about anything.

When asked in May 2007 about the prospect of Toyota becoming the world's number-one car manufacturer, company president Katsuaki Watanabe refused to take even a minute to gloat about beating his competitors. "Rather than think about other companies," he said, "I feel that we must do our utmost to satisfy customers around the world. There is plenty left for us to do." This simple statement, reflecting an unswerving customer focus, demonstrates why companies like Toyota are able to develop a detailed and subtly nuanced understanding of customers -- and why they are able to deliver better results.

True, but what is "momentum?"

It also shows that there is much more to Toyota's success than Kaizen and lean production. That is just the base: its excellence and efficiency at extracting value from its business. It is Toyota's ability to create new, original, and compelling value in the first place that drives its growth. Its secret is its ability to connect totally with customers' sense of self, to create products that are more than mere goods but complete, perfect, and compelling presentations of value.

Great business practices, but what is "momentum?"

American car manufacturers are among the best illustrations of the limitations of the Pusher's strategy. They have given everything a try in terms of efficiency drives, but although they are now leaner, they are no fitter. They sought to drive top-line growth through expensive advertising as well as sales promotions to generate volume, along with deep discounts to move inventories of finished goods. These expensive tactics were needed to compensate for the failure of their products to really connect with customers.

Toyota, on the other hand, has become the world's largest and most profitable car manufacturer, riding a fantastic wave of momentum. Its success is based on a number of factors, but underlying its achievement is a deep understanding of its customers. First, Toyota proved that it could consistently deliver reliable, impeccably engineered automobiles. Once this crucial plateau had been achieved, it went on to innovate its range with cars that were somehow more than mere vehicles.

Good analysis of the auto wars, but what the heck is "momentum"?  The article concludes:

The Pioneers achieved revenue growth 93% greater than the Pushers. That is the sort of growth that gets companies noticed, that drives exceptional increases in value for all stakeholders.  How did they do it? By creating the conditions that are needed for the momentum effect to take place.

I guess I better go forth and create "momentum"... whatever that is.

Four More Hours of Lean

Tim Ferriss, author of one of my favorite books, bestselling The Four Hour Workweek, is really starting to dive into the lean manufacturing world.  Perhaps because the productivity aspects of lean dovetail perfectly with the concepts he promotes in his book.  Only a couple weeks ago we told you how he was thinking about push vs. pull processes.  Now lean becomes part of his recent post on results-oriented productivity improvements.

First he tackles one of my favorite topics for a good rant: the ability of mis-placed automation to hide waste.

The first rule of any [technology used in a] business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.

The underlying process needs to be made efficient, perhaps via the implementation of lean tools, before technology and automation is used to further improve productivity.  Note that I did NOT say that automation is evil!  I am saying it needs to be applied after the underlying process is optimized.  Tim then quotes directly from his book, applying that principle to people:

Principle number one: refine rules and processes before adding people. Using people to leverage a refined process multiplies production; using people as a solution to a poor process multiplies problems.

Which is also why people are worth far more than the hourly "cost" of a pair of hands.  Their knowledge, creativity, and experience can multiply the value of underlying efficiency.  The opposite is also true, as he conveys using the potential blackhole of email:

This applies as much to excessive CC’ing people on personal e-mail as it does to large-scale operations.

Which then takes him into the wonderful world of lean.

If the processes are wasteful (inefficient), performance will decrease when you attempt to scale. The more people involved, the more severe the decrease. If the processes–including prioritization and workflow optimization–are lean (efficient), performance will increase. Combined with other people following the same lean processes, performance can increase in an exponential vs. linear fashion.

And to augment the apparent confluence of Tim and I thinking exactly the same way, he then takes on the paradigm change I wrote about only last Friday: the evolving workweek and focusing on results.

Most important, just as with Best Buy, where 24-year old Cali Ressler started the ROWE (Results-Only Work Environment) experiment, huge changes can be initiated from the bottom up. It just takes some lateral thinking and a willingness to test small.

There is a great photo of a whiteboard at a tech company in Silicon Valley, where engineers are using some of his concepts with regards to email, communication... and work.  On the photo you'll see a reference to a core lean concept: "Maximize single tasking".

Tim's post concludes with some tools, and case studies, on implementing 4HWW concepts in the corporate environment.  Well worth the read, as is his book.

Poka Yoke "Disasater"

If your entire business is built around writing, your reputation is built on the supposed quality of that writing and reporting that it was based on, wouldn't you think that you'd take great pains to ensure the public face of that writing and reporting was perfect?  Apparently not at CNN.  The typo on the right was the lead story, right smack on the home page.  Noontime on Sunday.

Yes, I guess you could say it was a "disasater." Ok, it was a Sunday and perhaps the staff was limited, or the proofreader was out for a mocha machiado, but this simply should not happen.

And if it does happen, it should not remain that way for over an hour.  When I noticed the "updated 13 minutes ago" I was stunned, and decided to keep an eye on the story.  It took an hour before the typo was corrected.

A website like CNN probably gets hundreds of thousands of visits per hour.  What happened to CNN's reputation during that time?

The key, and the lesson for all of us, is that critical systems need to be poka yoked... mistake-proofed.  Some method or device needs to be in place to prevent an error from happening in the first place.  Oftentimes those devices are incredibly simple and inexpensive, and are created after analyzing the root cause of problems and the process that created them.  Can you say "spell check?"  Of course CNN probably uses customized software... and regular readers know what our opinion is of software!

If, for whatever reason, a poka yoke cannot be used, critical systems need a way for problems to be identified very, very quickly.  Is CNN.com the home page for the thousands of CNN employees?  Do they know who to contact if a problem is discovered?  How about the general public?

And once a problem is identified, there needs to be a method to quickly contain and then correct the problem.  Make another story the lead until the typo is corrected.  But don't let it damage your reputation for over an hour.

That's a disaster.

Another Perspective on Change

Change change change.  How often do we hear that these days?  From a lean perspective we're focused on continuous improvement... another form of change.

But is change truly necessary?  Zen Habits had an interesting post a few days ago that calls it into question.  I don't necessarily agree, but it's an interesting perspective.

Seriously — almost every political and religious group, every opinionated person, every publication with an opinion, has said at one time or another what they think is wrong with this world.

Conservatives think that we’ve become a welfare state while many liberals think we’ve allowed too much corporate welfare. Others think that abortion is the problem, others think it’s declining morals, others think it’s infidels, and others say it’s infidelity. Other things that are wrong with this world, depending on the group: the media, young people, environmentalists, McDonald’s, criminals, gays, black people, white people, foreigners overrunning our country, bigots, radicals, the Establishment, poor people, corporations, lazy people, evil people, Fox News, the Internet … the list could go on and on, obviously.

Ok, and how does Leo deal with all that?

So what’s really wrong with the world, in my opinion?  Not a thing.

That takes some guts.  Why does he feel that way?

It seems to be a prevailing world-view that the world is messed up, that there are just a few things wrong with it, and if we could only get those things to change, the world would be great. If we could just educate people and get them to realize what’s wrong with this world, things could change. This type of view of the world — and like I said, I think it’s the prevailing view — stems from an ideal that many people have in their heads of what the world should be like.  Reality and this ideal are incompatible.

That’s how most people are, and I don’t think I can change that, nor would I want to. I thought it would be an interesting discussion, though, because I think this discrepancy between what people think the world should be and what the world really is can cause unhappiness.

When reality doesn’t meet ideals — and it rarely does — we become unhappy.

So instead of being dissatisfied and unhappy with the status quo, instead should we simply accept reality and be blissfully happy?

I’m not proposing that you, or anyone else, change your world-view. If you, or anyone else, is happy with that world-view, don’t change it.

But there is an alternative, and I’m not saying it’s better. It’s the world-view I try to have: instead of having an ideal, stop looking for perfection. Accept the world as it is, and love it for what it is. Accept people as they are, and love them.

Sounds difficult.

That’s not easy, even if it sounds trite and commonplace. If you haven’t tried it, I recommend you do, because 1) it won’t be easy; and 2) it could open your eyes to the pre-conceived ideals you didn’t realize you had.

What would be the result of this alternative world-view? Well, I think you’d be happier, if only because you didn’t see the world as a fundamentally flawed or evil place, and began to see the good in the world.

Does this mean that we should give up on trying to make positive changes in the world? Should we stop trying to make the world a better place? Nosireebob!

As I said at the beginning, I don't really buy the entire concept.  I believe you can also create happiness, and satisfaction, by improving the world.  But sometimes we do need to take a step back and make sure we're not creating change just for the sake of change.

 

Shifting Paradigms, Part 2

We evolve and paradigms change.  Yesterday we told you about the growing movement to change the workweek, but the nature of work isn't the only change.  I never thought I'd refer to an article by Peggy Noonan, but in a recent Wall Street Journal she opined about The End of Placeness.

The end of placeness is one of the features of the campaign. I do not like it. Pretend you are not a political sophisticate and regular watcher of the presidential race as it unfolds on all media platforms. Pretend, that is, that you are normal. OK, quick, close your eyes. Where is Barack Obama from? He's from Young. He's from the town of Smooth in the state of Well Educated. He's from TV. John McCain? He's from Military. He's from Vietnam Township in the Sunbelt state. Chicago? That's where Mr. Obama wound up. Modern but Midwestern: a perfect place to begin what might become a national career. Arizona? That's where Mr. McCain settled, a perfect place from which to launch a more or less conservative career in the 1980s.

This is a change from what we're used to.

Neither man has or gives a strong sense of place in the sense that American politicians almost always have, since Mr. Jefferson of Virginia, and Abe Lincoln of Illinois, and FDR of New York, and JFK of Massachusetts. Even Bill Clinton was from a town called Hope, in Arkansas, even if Hope was really Hot Springs. And in spite of his New England pedigree, George W. Bush was a Texan, as was, vividly, LBJ.

But they are still "from" something:

Mr. McCain of course was a Navy brat. He bounced around, as members of the families of our military must, and wound up for a time in the suburbs of Washington. Mr. Obama's mother was somewhat itinerant, in search of different climes. He was born in Hawaii, which Americans on the continent don't experience so much as a state as a destination, a place of physical beauty and singular culture. You go there to escape and enjoy. Then his great circling commenced: Indonesia, back to Hawaii, on to the western coast of America, then to the eastern coast, New York and Cambridge.

Messrs. Obama and McCain are not from a place, but from an experience.

It's a different world.  As someone who was born in Mississippi but only lived there for a year, then has also lived for relatively short periods of time in Texas, Peru, Kansas, Virginia, New York, Massachusetts, California, Utah, and now back in California... I understand.  When people ask "where are you from?" I don't know the answer.  I just say "everywhere and nowhere." Perhaps that's why one of my favorite quotes, from Winnie the Pooh of all bears, is:

Wherever I go, there I am!

That's as close as it gets for me.  I feel more at peace here in small-town coastal California, close to the surf and avocado orchards and vineyards, than I ever have.  I don't have deep physical roots, and I know I'm not alone.  But I have a wealth of experience.  The peculiarities of the South, the desire to explore from growing up overseas, the strength of dealing with Northeast winters, the formality of Boston, the love of the outdoors from Utah, the casual relaxation of the coastal West.

We're seeing the same when we create our teams and interview new associates.  More and more we are understanding the potential value of their experiences as opposed to the simple results they have created.

Shifting Paradigms, Part 1

Many organizations, mine included, are wrestling with a sudden, fuel cost induced, drive toward alternative work schedules.  The "4/10" seems to be the the most popular, where employees come to work four days instead of five but work longer in order to still create a 40 hour workweek.  Those of us in the manufacturing world have experienced a wide variety of work schedules tailored to supposedly keeping machines and production running as smoothly as possible.  This isn't the place to go into all the potential issues with such a focus on machines instead of real metrics, but you might want to check out the Lean Accounting Summit to learn more.  I've personally worked 5/40, 9/80, 4/10, 4-3-3-4, and even a rotating 6/7.

But why the focus on hours?  Who cares?  Shouldn't the focus be on creating value, not how many hours were spent tending a machine or sitting behind a desk?  A focus on hours is a management cop-out.  It's easy.  The employee can clock in and clock out or the supervisor can keep one eye on the employee and the other on the clock.  We then delude ourselves into thinking that somehow correlates with output, and perhaps even valuable output.

We know better.  We all have those phenomenal associates that create more value in ten minutes than the rest of the team does all week.  We also have, hopefully just for a little while longer, those employees that we wish would stay home sick.

I could make a similar argument with employers that are resistant toward flextime and remote work, but you get the picture.  Business Week just had a brief article along the same lines, titled Count Results, Not Hours.

Both decisions were born of a false set of assumptions that can be expressed in the formula: Time + Physical Presence = Results.

In an industrial economy, this formula made perfect sense. In an information economy, it crumbles. Most of us can communicate anything at any time from anywhere. Work has stopped being a place you go and started to become something you do. Work is happening at all hours, across all borders and time zones. The only question anyone really wants an answer to is: "Did you get it done?"

How do you manage that, especially in a customer-centric organization (aren't we all?)?

What does good customer service look like? Putting the focus on results and taking the focus off of time leads to innovative problem solving. Talk about outcomes instead of schedules. If you offer a compressed workweek, don't require your employees to ask your permission for what day they choose not to work. It may sound chaotic, but if you're focused on results instead of time, then people will figure out a way to make it work. It's also crucial to embrace your employees' different work styles. Judging people on how they use their time is counterproductive. Instead treat people like grown-ups who know what's best for themselves and for business. Stop assuming that if someone's body is in the building, you are getting something out of their mind. As a business leader, would you rather have someone do rock-star work in less time or mediocre work in more?

Bingo.  Work is changing, and leadership must change.  We must focus on value creation instead of time.  This requires a focus on clear quantifiable goals, ongoing communication vertically and horizontally, and accountability to value output.  Not time.  It's hard, but we aren't paid to sit on our butts keeping our eyes on the clock.  We're paid to lead and create value.