ARNOLD built a successful real estate company from scratch. After more than 30 years, his organization became the number one industry player making his six grandchildren, when they reach the age of 21 to be co-owners of more than 63 office buildings and hectares of landholdings in the southern part of the Philippines.
One afternoon, while pretending to light his cigarette with a $100 bill at the penthouse of his luxurious ten-story headquarters, he asked his two business advisers, Lloyd and Romeo, on how to improve their bottom line aside from the sale or lease of their properties. Almost in an instant, Lloyd recommends a reduction program targeting nonperforming workers.
"Let's review our performance appraisal system and kick those in the bottom 10 percent starting this year," he said with an air of confidence.
Romeo contradicted Lloyd's idea. "We can make our operations more profitable without going through the emotional process of terminating employment," Arnold asked with a quizzical look. "But how?" Romeo says they can make problem-solving as part of everyone's key performance indicators. He proceeds to explain his proposal using kaizen and lean thinking.
Lloyd opines that kaizen is not applicable in their industry. He prefers Six Sigma instead. I told him to Google "lean construction" for a complete understanding of kaizen problem-solving. On the issue of Six Sigma or its derivative like Lean Six Sigma, I cautioned them not to use statistics in problem-solving when simple math can do the trick.
Bharath Hariharan, a professor at Cornell, says statistics "works its magic on large, complex systems where too many things are going on, and which are near impossible to understand," like in predicting a person's chance from an X ethnicity of passing college.
However, "statistics won't provide you with a nice, clean story. It won't give you proof. It will always give you a measured "maybe," which is not very intellectually satisfying."
Domain dependence
What should Arnold do? Simple. Use common sense. Why make things complex when you can make things easy and practical? Dismissing a group of people when a company is profitable needs a tedious process and is subject to the labor department approval.
On the other hand, requiring the workers to do more than what's expected of them requires only a bit of tweaking the performance management policy. This puts Romeo's proposal better than Lloyd.
Arnold was a medical student in the 1970s but didn't complete the course when the allure of entrepreneurship got him. That's why he relies much on the acumen of his two deputies with contrasting professional backgrounds. Both completed their respective post-graduate studies. Lloyd specializes in strategic management in a local business school, while Romeo is an industrial engineer who completed his master's degree in Nagoya, Japan.
They've proven themselves as internal experts and with flying colors. That makes it difficult for Arnold to choose which advice to follow. Maybe, it's best for him to seek a third opinion with another management expert. The trouble is he doesn't want to spend money on an external expert.
This got me to think this could be another case of "domain dependence" which explains why some kaizen experts are poor in doing 5S good housekeeping in their homes.
Nassim Nicholas Taleb, a Lebanese American essayist, mathematical statistician, risk analyst and best-selling author describes "domain dependence" when we understand a certain concept in one context but fail to see it in another context. "The Black Swan" author says "some people can understand an idea in one domain, say, medicine, and fail to recognize it in another, say, socioeconomic life."
It's like doctors who become alcoholic or chain smokers.
So, how can a college undergraduate like Arnold understand all this? I should say by being domain independent. After hearing all the arguments of Lloyd and Romeo, there's nothing more convincing than using his own judgment as long as he becomes his own toughest critic.
Rey Elbo is a business consultant on human resources and total quality management. For feedback, chat with him on Facebook, LinkedIn, X (Twitter) or email elbonomics@gmail.com or via https://reyelbo.com
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