A backgrounder illuminating modern management techniques, including agile methods, business process management, continuous improvement cycles, and other methods employing iterative development sequences.
Our story could begin in ancient Egypt, with engineers trying to make it easier to transport hulking blocks of stone to the site of massive tombs, or with the Greeks rationalising the mobilisation of armies to fight the Persians, or the Romans systematising the construction of the roads connecting their empire. But the political economy of those societies differed in fundamental ways from the political economy we are concerned with today. In that sense, drawing historical parallels with management in pre-industrial societies might be entertaining, but is probably not very illuminating.
Instead we skip ahead to late 19th century America, and Frederick Winslow Taylor (1856-1915). Directly and indirectly, Taylor continues to exert an inordinate influence on the way business is conducted, and how organisations are managed in the developed world.
A descendant of an original Mayflower Pilgrim, Taylor came from a well-to-do Pennsylvania Quaker family and was raised to become a gentleman. He passed the Harvard entrance examination but apprenticed instead at the Enterprise Hydraulic Works in Philadelphia. After taking a mechanical engineering degree at the Stevens Institute of Technology he went to work at the Midvale Steel Company, part-owned by a Taylor family friend. It was here, between 1878 and 1889, that he started to work on time and motion studies to develop methods for improving productivity. His work was mostly about strict demarcation of job tasks, and precise instructions for the sequence and timing of rigidly repetitive tasks.
This kind of specialisation is commonly referred to as ‘division of labour’, and was not really a new idea. Chances are that Taylor had read Adam Smith’s proposition that by concentrating on separate parts of producing pins, workers could produce more and at a higher quality than if each worker performed the entire job from start to finish. Smith saw such a division of labour as beneficial all around, by raising output and profit as well as worker remuneration.
Taylor described his approach as ‘shop’ or ‘process’ management, only later adopting the ‘scientific management’ terminology commonly ascribed to him today, and used as the title of his 1911 book, Principles of Scientific Management.
It may also have been at Midvale that he conceived of the description ‘soldiering’ to describe what he thought was the default tendency of workers to perform at the minimum level of effort and productivity they believe acceptable to their employers. Taylor responded first by arguing that instead of paying a fixed wage for a job rôle, workers should be paid by performance, but did not address the tendency by employers to lower piece-rates when employees began performing too well. This relates inversely to Adam Smith’s proposition that the division of labour should lead to higher wages for workers. In reality, though, industrialists were not inclined to share their profits as equitably as Smith imagined.
Taylor became markedly opposed to unions and insistent on close supervisory intervention to direct and control workers in every aspect of their performance. It is uncertain how far from coercion his intentions were when he argued that management should ‘enforce’ standardised methods and worker ‘cooperation’, but it should be plain that ‘enforced cooperation’ is a tortured way of expressing support for the union-busting strong-arm industrial relations practice extant in the USA at the time.
Taylor left Midvale to become a pioneer management consultant, most notably for Bethlehem Steel, where he and Mausel White achieved international reputations for developing the ‘Taylor-White’ process for heat treating tungsten tool steel. Taylor also worked on developing modern management systems for Bethlehem, but after a couple of years he presented a six figure bill to the company for his services – a sum that was the equivalent of a seven figure amount in today’s dollars – after which his services were no longer required.
Officially retired in 1901, he spent considerable effort in promoting his ideas, and himself. In 1906 he was elected president of the American Society of Mechanical Engineers. In the same year he was awarded an honorary doctorate of science by the University of Pennsylvania. Subsequently he became a professor at Dartmouth College. In 1908 he assisted Harvard economics professor Edwin Gay to establish and become the first dean of the Harvard Business School, which was based on the concept that business principles could be derived from scientific principles and taught as method. In this way Taylor might be seen as at least a patron saint of the contemporary MBA.
Taylor contracted pneumonia in 1915 and died the day after his 59th birthday.
Then, as now, Taylor’s critics focused on his conception of workers as machines rather than human beings, and the absence of thought about how to motivate and reward people rather than to demand compliance with their own dehumanisation. More trenchant critics also allege that he deliberately falsified his scientific findings to suit his claims. These claims were seen by some as justification for monstrous methods to achieve productivity at unsustainable levels. True or not, these critiques carry over into contemporary BPM theories, which reduce human components in elaborate models, and statistical process flow analyses, to units of efficiency or waste, often without regard to other factors that should be important to organisations relying on service and customer satisfaction.
With the turmoil of two world wars, a Cold War, and the digital revolution obscuring that period in American history, it is difficult to assess how great Taylor’s influence on international industrial management really was in his day, and remains after his death.
Perhaps the most extreme expression of Taylorism in his own era came from Russian poet and futurist Aleksei Gastev, a veteran of the 1905 revolutionary uprising. He took ‘Taylorism’ to heart and promoted a vision of workers acting like machines. Gastev was encouraged by Lenin to establish the Central Institute of Labour in 1920. As its director he promoted and developed the spread of scientific management, branching into what he called ‘social engineering’. His conception of that approach was re-training people to act like machines. He used time and motion studies to model more ‘efficient’ motions used in industrial work processes. Bizarrely, part of the instruction methods he introduced included strapping workers’ arms to real machines that guided their movements repetitively for hours. Gastev reasoned that this would lead workers to internalise the movements as a ‘natural’ rhythm.
It is impossible to tell now whether Japanese industrial pioneers visiting the USA after WWI picked up on Taylorism and brought it back with them to speed the rapid growth of their industrial capacity, but it seems likely that Taylorism was known to industrialists in pre-war Japan. What is known with greater certainty, however, is that in 1950 the American statistician and efficiency expert William Edwards Deming left a deep impression on audiences of Japanese engineers and executives with speeches in which he advocated the use of carefully selected metrics and statistical analysis as drivers for continuous improvement in quality (fewer errors) and productivity (faster output). The Deming cycle of iterative, continuous improvement is today embedded in many management theories without even referencing Deming any more; popular textbook illustrations of the business process lifecycle, the project management lifecycle, and the software development lifecycle are prominent examples.
Deming was a self-effacing man who credited his theories to his mentor, the little-known physicist, engineer, and statistician William Shewhart, but it was Deming who became a byword in Japan decades before he was widely known in America.
In time the Deming method, adapted and developed by Japanese industrialists, came to be known as total quality management (TQM).
From BPR to BPM
Between the 1960s and 1970s unfolded what has come to be known as the ‘Japanese Miracle’, as base manufacturing capabilities developed from turning out cheap consumer goods to state of the art plants that mass produced high quality goods outcompeting Western manufacturers. This was particularly the case for motor vehicles.
In the later 1970s America, and the entire world, was jolted by a series of events that signalled the end of the post-war boom in ways not anticipated by any economic theory or plan: inflation without corresponding productivity growth, and the oil shock that made American gas guzzling automobiles highly uncompetitive in their own domestic market. These created wage pressures that couldn’t be offset against higher profits because they ran in parallel with a static or declining demand for domestic American manufactures, especially motor vehicles. Cheaper, more economical, and increasingly high quality Japanese cars became a symbol for this economic crisis.
In the early 1980s the US Congress launched an inquiry, sending American automotive executives to Japan to study how it was that Japanese competitors could perform so much more efficiently than American manufacturers.
There’s a great irony in contemplating the American executives coming away with the idea that they had learnt something new when observing Japanese methods, when really all they had done was to re-discover Taylorism and Deming, adapted to the unique dynamics of Japanese political economy. Those dynamics included small batch manufacturing constraints and relatively lower tariff protection than enjoyed by American manufacturers, leading to a greater emphasis on flexibility by increasing re-tooling turnaround times and multi-skilling workers, while also focusing constantly on waste minimisation and error reduction. How this was done in Japan relied heavily on cultural attitudes in which strict hierarchies and worker loyalty to their companies played a significant rôle. These were not dynamics that could be easily replicated in the USA, and it remains questionable whether American executives even recognised the part played by this cultural influence in Japan’s successes.
Nevertheless, the 1980s and ‘90s saw a wave of business process ‘re-engineering’ (BPR) initiatives to emulate Japanese efficiency. Fittingly it was another American engineer, turned BPR prophet, Michael Hammer (1948-2008), who epitomised this new wave of interest in organisational processes. Hammer made famous how Ford discovered that Mazda’s accounts payable section consisted of five people, while Ford’s employed 500, and how Ford ratcheted up its aim to reduce that workforce by 20% prior to observing Mazda’s process to shedding more than 300 jobs.
Hammer’s message in the 1990s was unambiguous: don’t just fiddle with incremental improvements. Destroy old processes wholesale. He did not, however, consider what the cost might be in terms of unemployment. It may have been true that Ford’s accounts payable process was antiquated and bloated. The efficiencies realised were probably past due, but the message that emerged as an example followed by others was not about efficiency so much as ‘downsizing’. The easiest way to trim costs from any organisation is to trim payroll by sacking people. And that is what BPR ‘initiatives’ became known for.
At first the efficiencies gained appeared almost miraculous and the entire world was abuzz with terminology like TQM, JIT, and Lean Six Sigma, as if these were magic spells that could guarantee endless productivity and profitability increases. But of course they could not and did not. Once the fat of inefficiency has been trimmed, that source of cost savings is exhausted, and if it was the sole source of an apparent increased profitability, no sustainable advantage had been gained.
After an initial boom in BPR projects, the magic began to wear off as entire workforces had become hostile to such change programs, regarding them as threats to their livelihoods, and mechanisms for authoritarian control rather than productivity or quality improvement measures. More importantly, there were structural changes in Western economies that shifted the previous focus on productive industries to speculative ones, which thrived, for a time, on asset stripping and down-sizing, justified with the BPR terminology of efficiency, waste reduction, and quality management.
By the mid-1990s it became evident that the costs of manufacturing consumer goods in developed economies was simply too great to compete with cheaper sources of labour. Blue collar jobs were shed in the hundreds of thousands, and middle management, too, was made increasingly expendable. In that kind of political economy, process management became once again a point of conflict, reduced in the eyes of many as a tool for cheating workers out of decent pay and conditions, or as too hard to pursue in the face of workforce resistance.
At the same time, economic growth came to be increasingly driven by service industries, technology companies, and speculative investment strategies. It seemed as though manufacturing had simply been abandoned as not worth saving. Whole towns and cities that had been at the heart of America’s manufacturing capability, like Detroit, became ghost towns. In Australia, the dormitory suburbs surrounding Victorian and South Australian motor vehicle manufacturing plants face a similarly bleak future.
Was this a failure in process management? Perhaps. The conception of a Japanese model for attaining process efficiency that was brought back to the USA in the 1980s was an incomplete one, not fully understood, and never really adapted to local conditions. And American manufacturers never found a formula that would permit smaller runs of more efficient production at lower rates of return. This is nevertheless a formula that appears to have worked for the German ‘Mittelstand’ of smaller manufacturers that nevertheless have international market penetration and brand recognition.
Like manufacturing on the whole, BPR did not just disappear. Instead it re-emerged as a staple of the big consulting firms which were deriving increasing revenues from service-oriented businesses, including especially publicly funded consultancy. So the emphasis became on a softer, more gradual approach than the big-bang BPR revolution, with a mantra about continuous iterative changes, which were of course closely aligned with ensuring a continuous consulting revenue stream.
However, the big consultancy firms did not have it all their own way. The personalised computing revolution intervened, bringing rapid waves of exponentially more powerful and portable computing capabilities to even the smallest businesses, and offering opportunities to automate previously labour-intensive process management tasks. From the later 1990s to the present day, this computing power has driven renewed interest in promoting BPM by software vendors eager to embed themselves in client organisations as process solutions providers, the way the big consulting firms had before them.
The client organisations, too, have an interest in pursuing process improvements. Commercial firms are driven by competitive pressures and profit motive, while government and not for profits are motivated by cost reductions and service demands. Both kinds of organisations are also faced with increasingly obvious shortcomings of dated management techniques based on engineering-oriented, industrial manufacturing paradigms in increasingly service-oriented economies. My case study on the 2016 Australian online census project is a case in point.
A major hurdle faced by these organisations, including the consultancies and vendors, is a consequence of the shift in Western political economy since the ascendancy of Anglo-American globalisation agenda in the 1980s: a shift in the products of Western universities, particularly as it relates to the composition of the professions.
Unfortunately that shift has focused too heavily on profitability of courses offered, and the imperative of passing large numbers of students through the system. The effect has been too much emphasis on rote learning of rigid method, and not enough emphasis on critical analysis, the intellectual skills of being able to adapt and apply models to a wide variety of circumstances, and the capacity to recognise and manage qualitative factors rather than relying solely on quantitative rules.
Lessons to be learnt
What that means for professionals should be obvious: your success lies in not making the amateur mistakes so evident in the work of people relying solely on method. Your creative, intellectual input will be your advantage. So will be your capacity to empathise and work with the people whose jobs and livelihood your practices affect.
The lesson for employers is bifurcated. If your sole concern is cost accounting led downsizing, professional specialists in business process management, enterprise architecture, and other disciplines are always going to be convenient scapegoats. Bring them in. Sack staff. Let the specialist contracts lapse. Blame staff cuts on consultants who are no longer there.
If you want to do something a little more pro-active, it seems you’ll have to find your professional specialists in new ways. Recruitment companies are mostly clueless about the relative merits of this or that qualification, and tend to focus only on where someone has worked recently, not what they achieved, or the potential represented by a mix of skills and experience. And when you do find the right people, invest yourself a little in their advice. Without you acting as a champion for changes, you’ll always get less than you hoped for.
A note on the images: Tullio Crali was an Italian painter associated with the school of futurism, highlighting technology, industrial themes, and art deco design between the 1920s and 1940s. I thought his paintings were particularly appropriate to evoke an optimistic anticipation of a technological future before WWII changed that perspective.