By Larry Coté, Managing Director | Lean Advisors Inc.
Attention getting headlines!
Some recent articles hitting the news indicating there are quality and safety concerns with a major aircraft manufacturer. The good news is the concerns have motivated the industry to take a serious look at ‘why’ this is happening with the goal of fixing the problems.
One of the immediate potential root causes of current issues is the compensation model the company is using for their staff – both leadership and front line. It was discovered that management and staff receive bonuses based mainly on financial and DEI (diversity, equity and inclusion). So, the first question that pops into mind is, ‘what happened to Safety and Quality as a priority?’
As you read further, you find that a small portion of bonuses are in fact, allotted to operational and quality/safety.
Obviously, your impression is that financial and DEI are the most important goals of the company. And we know that if you reward someone and assess them on certain aspects of their performance, then they will gravitate their efforts and attention to those areas where they can meet those important goals and be recognized with a bonus – we are all driven to do a good job and perform well.
Communicating and driving consistent goals across a company is important. It is what should be done, except if the selected performance goals drive the wrong behaviours or replace emphasis on other important mandates of the job.
We have said for years, true success must include improvement in at least these three measures – Quality/Safety, Cost and Service/Speed. When a company first starts out, they must have those 3 elements to survive and succeed. The challenge, as a company moves forward, is to ensure that all three continue to be a priority and are continuously impacted positively and ‘simultaneously’.
The critical cautionary point is if you only reach one or two of the three critical measures, that’s a ‘red’ flag, and you must go back and assess where and how you failed in the other measures. If you don’t and judge your success on only one or two of the three measures, you will likely find that the missing measure(s) was somewhat sacrificed (impacted negatively) in order for the other(s) to succeed.
This ‘narrow success thinking’ can quickly become part of your culture and is driven throughout all levels. People receiving bonuses, plus shareholders if they are involved, are satisfied with the current direction, and are reinforced by the bonus they receive reaffirming they are doing the ‘right’ thing. It usually takes a crisis, or some critical negative failure, to motivate someone in a leadership role to realize ‘we are off course’ and have the strength to do something about it. In the example I have been reading, the management did seem to have done just that. The good news is, they appear to be quickly adjusting their thinking and establishing a new reward/measurement system to drive the behaviours they require for the future.
We are not picking on this industry – over the past few decades, we have seen leadership in organizations, both public and private, fall into the trap of not combining the 3 measures of service, cost, and quality, as one priority objective/mandate. And those that don’t, fail in the long run.
In conclusion, it is imperative to ensure that all 3 measures, are lumped together and are a major part of the strategy/direction and are tied it to the compensation strategy for all employees to promote the desired behaviours.
