Adam Smith and the division of labor

Adam Smith’s understanding of a process – in the sense of division of labor – can be read in his famous statement about how a pin is producted:

”One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head: to make the head requires two or three distinct operations: to put it on is a particular business, to whiten the pins is another … and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which in some manufactories are all performed by distinct hands, though in others the same man will sometime perform two or three of them.”

Books about process

For “business processes and procedures” amazon(dot)com returned 1,800 titles. “business process management” yielded 26,000 books. 

And “business processes” led to over 490,000 book titles.

Four hundred and ninety thousand. That’s a lot of books. Does this mean that Americans consider internal processes critical to the success of companies?

William Edwards Deming

William Edwards Deming (1900-1993) was an American statistician and physicist, as well as a pioneer in the field of quality management. In the 1940’s he developed the process-oriented perspective of business activities, which were later introduced into various tutorials on quality management.

However, for many years Deming’s discoveries received very little attention in the U.S. Not so in Japan. There his insights were of great interest to leading industry managers. Why? The explanation given is that in the U.S. a maximization of production volume was the primary focus of industry following the worldwide reduction of production capacity following WWII.

This was possible to do without problem in the un-damaged USA. War-torn Japan, however, had limited resources for production, which pulled the optimization of processes into the foreground.

Deming’s story is initially a comparison between the U.S. and Japan. Yet the reasons why Japan’s industries became so process-oriented surely provide insight as to how Germany became to be so process-focused as well.

Listen to the first 3.5 minutes of Steve Jobs:

Purpose of processes

Procedures, policies, guidelines, compliance, and other types of structure. In the end, however, most business cultures would agree that the purpose of processes and procedures is to structure how the work should be done, and allow for repeatability, consistency, and quality control.

Processes as a success factor: If asked which are the key success factors in any enterprise most Americans would name: market/customer orientation, innovation, speed, price, service. Seldom, if ever, would they cite internal business processes.

If American customers were asked which factors are key to them when choosing a product or service they would name, among others, value and service. Value is the relationship between quality and price. It would never occur to them to say the internal business processes of the company whose product or service they are purchasing (or workmanship).

In other words, although American companies have many processes and procedures, Americans are not inclined to believe that these will ensure success.

Process procedure

Process: Progress, advance; something going on; a natural phenomenon marked by gradual changes that lead toward a particular result; a series of actions or operations conducing to an end; the whole course of proceedings in a legal action. Middle English proces, from Anglo-French procés, from Latin processus.

Procedure: A particular way of accomplishing something or of acting; a series of steps followed in a regular definite order; a set of instructions for a computer that has a name by which it can be called into action; a traditional or established way of doing things. French procédure.

Process or procedure: Americans define a procedure simply as a subset of a process. A procedure describes how one executes a specific task within a process. Again, the what and the how are spelled out clearly. American procedures typically have the following elements: purpose and application, individual steps, parties responsible, and the documentation, so that the individual actions taken can be accessed at a later time.

Americans draw a clear line between a process and a procedure. A process describes broadly what an organization, group, small team or individual team member needs to do. A procedure describes not only a specific task within that overall process, but also how that task is to be executed.

An American procedure can be formulated broadly or narrowly. A broad formulation allows for some interpretation and creativity in executing a procedure. A narrow procedure description seeks to avoid interpretation. One should stick to the procedure strictly.

Processes provide clarity

Processes provide clarity. They allow employees to concentrate on core activities. They lead to cost reductions by identifying and eliminating unnecessary work steps. Thinking in terms of processes – how the work should be done – strengthens conscientious work and allows for quality control.

Well documented processes are critical for orienting new employees. Processes make transparent, make understandable, each and every segment of complex work methods. They are the basis for optimization, for reducing mistakes, for root cause analysis of systemic errors. All of these benefits lead to increased product quality. Work processes, however, must be understood and accepted by those doing the actual work.

In Germany it is critical that processes do not take on the character of laws, but instead remain guidelines. German workers expect a certain level of freedom in terms of how they perform their daily tasks. Processes should not become a kind of straightjacket.

Definition of processes

Ein Prozess ist ein Satz von in Wechselbeziehung oder Wechselwirkung stehenden Tätigkeiten, der Eingaben in Ergebnisse umwandelt. A process is a set of activities which are interrelated, interdependent, influence each other mutually, and turn inputs into results.

The Bavarian Ministry for Commerce defines a process as: „The sequence of all activities which are linked with each other and convert inputs – based on customer requirements, legal boundary conditions, market demands – into a desired outcome.“

Simply put, a process is a set of work steps, which are sequenced logically, that have a beginning and lead to a specific desired outcome.

Craftsmanship

America history is made up of waves of immigration, the earliest ones bringing with them and maintaining the deep European tradition of craftsmanship. That focus on how the work is done – imbedded in what later became processes and procedures – gave way, however, to Taylorism, mechanization, mass production, and eventually to the outsourcing of manufacturing to low-wage countries.

That tradition – the European medieval guilds – craftsmanship, caring about how the work is done – is being reintroduced to the United States via its current reindustrialization. German companies, for example, are not only increasing manufacturing capacity in the U.S., they are importing their methods for training skilled workers. European, more precisely, German craftsmanship is returning to America.

Importance of price: No business culture gladly admits that price is a critical success factor. The U.S. business and consumer sectors are both strongly influenced by price. Americans buy and sell more on price than on craftsmanship.

Scoring System

Superlative: Of, relating to, or constituting the degree of grammatical comparison that denotes an extreme or unsurpassed level or extent; surpassing all others, supreme; of very high quality, excellent; excessive, exaggerated. The superlative form of nice is nicest, bad is worst, of interesting is most interesting.

The American academic system – high school, university respectively – uses the following scoring: A excellent (high school), 4.0 (university); B good, 3.0; C satisfactory, 2.0; D pass, 1.0; F fail, no credit.

Grade inflation occurs when higher grades are assigned for work that would have received lower grades in the past. The American academic community has attempted time and again to address the problem of grade inflation, but have yet to establish workable standards.

German civil servants

German bureaucracy is equally confusing to many Germans as it is to foreigners. This is why most major services have open office hours with personal counselors. However, even one of these personal consultations can result in you accidentally setting up a road-block for yourself.

How could this happen? Usually because you asked for something that was not possible on their part, or at least perceived to be that way. You could be asking the impossible of them without even being aware of it, or you could be asking for something that apparently extends beyond their job description. The majority of German civil servants are really not that touchy, but not being able to get around one who is can be extremely difficult.

German civil servants tend to put the structure of their organization ahead of their own part. Their tasks were given to them for a reason, and it is not in the interest of the organization to let small issues spread to the attention of other departments if not necessary. After all, even the smallest component of a system is necessary to keep the whole from falling apart.

Providing information is always in the job description of these counselors, and they are happy to give it to anyone who takes consideration of their busy schedule by coming in advance. Coming well prepared is critical, also. In most cases they will take care of all of your needs to the fullest possible extent right there and then.