September 30, 2021
Henry Ford’s implementation of the world’s first production line sparked the mass production movement. Early adopters of that new movement, mostly in the US, all largely subscribed to one key philosophy, ‘keep the assembly line going, no matter what”. By doing so, the thinking went, you keep efficiency high and reduce the costs of having idle hands waiting for the line to start rolling again.
In order to ensure quality control in this system, companies employed QC inspectors who would patrol the line, inspecting products and pulling any deemed to be faulty; all the while keeping the line rolling. But that reliance on the QC inspectors created and enforced a form of institutional hierarchy. Only those people sufficiently empowered were allowed to pull products or, in the worst case scenario, stop the assembly line.
But then along came W. Edwards Deming, an American engineer and statistician who, as a result of his work developing sampling techniques used by the US Department of the Census, was sent to Japan at the request of the US Army to assist with the planning of the Japanese census in 1951.
During his travels Deming became deeply involved in the country’s reconstruction effort and helped to pioneer revolutionary production processes like ‘just-in-time manufacturing’.
Just-in-time manufacturing is still considered to be the pinnacle of good manufacturing practice. But for Deming, and others who were heavily influenced by his work, the key to revolutionising the production line was the philosophy that the responsibility for finding and fixing problems should be the responsibility of every employee, no matter what position they hold. In production lines inspired by Deming’s work, including Toyota, employees are encouraged (expected even) to stop the assembly line if they see a problem, no matter how small.
It seems almost counter-intuitive, but by giving ownership of, and responsibility for, a product’s quality to the people most involved in its creation, workers in Deming’s model are able to suggest changes, identify problems and become a direct part of the solution. By owning the quality control process and having a direct impact on the production line (in the case of Toyota that literally included access to a rope that could be pulled to halt the whole line), no one had to ask permission to take responsibility. As a result, problems didn’t snowball until they were so big that they were brought to senior management’s attention by middle managers. They were nipped in the bud.
Let’s pull this story back round to the recent thematic work by the FCA on culture and operational resilience.
Increasingly, the FCA is expecting firms to be able to show how they are putting in place practical measures to create a culture that promotes good governance and one that doesn’t break down as soon as a speedbump comes along the road, like having all your employees suddenly working from home.
From anecdotal evidence, this thematic work has been more difficult for firms to grapple with than the more purely operational improvements that the FCA has historically requested. Culture (and who is responsible for it) is a difficult thing to pin down. We think of it as something that grows organically, rather than something that’s imposed from the top down. Perhaps something that’s a bit wishy washy. And it’s probably not something that your compliance team is thinking about too heavily.
But if you take a (Nissan) leaf out of Deming’s book and introduce policies, procedures and practices that enforce the right for all staff to pull the cord and stop the production line when they see that something’s wrong then you start to create a culture of accountability. And, as a result, problems don’t grow to unmanageable proportions before they’re addressed by senior management simply because everyone else was too scared to raise it, or worse, simply thought that it wasn’t their job to do anything about.
So when thinking about how best to create operational resilience and a framework for good governance, think more like Toyota and make everyone responsible for the products and services that you’re pushing out of the door.
We’ve helped loads of firms to implement cultural and governance changes, so if you’d like help with this to enable you to meet the FCA’s expectations of you and your firm reach out to us here.
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