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Published: May 25, 2010
 / Summer 2010 / Issue 59

 
 

Seeing Your Company as a System

Interestingly, according to Johnson, the one noteworthy exception to this dysfunctional approach to financial management has been Toyota. He argues that Toyota’s performance, unrivaled for close to 50 years — up until about 2000 — could be attributed in part to accounting and financial practices that were consistent with the company’s systemic approach to management. But that changed, wrote Johnson in the February 2010 issue of The Systems Thinker, when Toyota’s top managers “turned away from the thinking that had implicitly anchored its operations to the concrete reality of natural systems in the real world.”

There’s no question that Johnson’s perspective on many issues is controversial. (See “What Are the Measures That Matter?” by Art Kleiner, s+b, First Quarter 2002, for the story of Johnson’s feud with “balanced scorecard” developer Robert Kaplan.) But his work shows how financial practices can be profitably redesigned with an eye toward participation, increased day-by-day awareness, and shared information, rather than mechanistic control.

All the works mentioned in this guide have been linked to higher performance. Yet their focus on the expertise of ordinary employees remains a hard sell in many companies, because it requires an enormous long-term commitment to training and to local control and knowledge sharing.

Moreover, employee-centered systems organizations need to develop trust — between supervisors and employees and among employees who have to work together to understand and improve the system. Making this work takes skillful management. Indeed, many quality improvement efforts in the U.S. failed because they absorbed rigid process guidelines but failed to build in flexibility.

But it can be done; by now, thousands of managers in dozens of companies have accomplished it. These resources provide a path for others to follow. 

Reprint No. 10210

Author Profile:

  • Andrea Gabor is the author of several books, including The Capitalist Philosophers: The Geniuses of Modern Business — Their Lives, Times, and Ideas (Three Rivers Press, 2002). She is the Bloomberg Professor of Business Journalism at Baruch College at the City University of New York.
 
 
 
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Systems Thinking Resources
Works mentioned in this review.

  1. Russell L. Ackoff, Re-creating the Corporation: A Design of Organizations for the 21st Century (Oxford University Press, 1999), 348 pages
  2. Peter M. Senge, The Fifth Discipline: The Art and Practice of the Learning Organization (Doubleday/Currency, 1990), 432 pages
  3. Michael Hammer, Dorothy Leonard, and Thomas Davenport, “Why Don’t We Know More about Knowledge?” MIT Sloan Management Review, July 15, 2004
  4. Karl E. Weick and Kathleen M. Sutcliffe, Managing the Unexpected: Resilient Performance in an Age of Uncertainty (Jossey-Bass, 2007), 206 pages
  5. Mike Rother, Toyota Kata: Managing People for Improvement, Adaptiveness, and Superior Results (McGraw-Hill, 2010), 326 pages
  6. John Shook, Managing to Learn: Using the A3 Management Process to Solve Problems, Gain Agreement, Mentor, and Lead (Lean Enterprise Institute, 2008), 138 pages
  7. W. Edwards Deming, The New Economics for Industry, Government, Education (MIT Press, 1993), 252 pages
  8. NBC News white paper, “If Japan Can...Why Can't We?” first broadcast June 24, 1980, by the National Broadcasting Company. Produced by Clare Crawford-Mason and reported by Lloyd Dobyns
  9. H. Thomas Johnson, Profit beyond Measure: Extraordinary Results through Attention to Work and People (with Anders Bröms; Free Press, 2000), 272 pages; Relevance Regained: From Top-down Control to Bottom-up Empowerment (Free Press, 1992), 240 pages; “A Systemic Path to Lean Management,” The Systems Thinker, March 2009; “Toyota’s Current Crisis:The Price of Focusing on Growth, Not Quality," The Systems Thinker, February 2010, www.thesystemsthinker.com