 At this point, some congratulations are in order. You have passed through a review of how people got things done, including even the basics of the science of performance. This included the major challenges raised by the industrial revolution and reactions of leadership to the associated difficulties. It also included a more challenging subject to labor union reaction to the path pursued by privileged leadership and the uncomfortable balance that exists between the two general approaches. As a final shot, you have come to see the costs associated with the direction taken by our leaders and the performance challenge that threatens to disrupt privilege in business leadership. Still more important for this work? You have come to recognize yourself as the owner of both the government and the economy. It is you who can choose to do something different than what leaders have chosen to do on their own. You have the authority of ownership. Our task in this lesson is sharpening your understanding through this story of organizational engineering, another foray into performance. It began in 1983. I was working for the Army in their supply system and found out that their purchase and property management system cost was about $15 for each trackable item purchased and tracked as property. They spent over $50 if something was purchased by small contract. The immediate challenge was expending that $15 to buy a $3 wrench or $6 stapler. I suggested a simplified and far less expensive tracking system for less costly items. After cutting through the bureaucratic nonsense, I received an apologetic response. Those who evaluated it could see the benefit, but could not implement it because all those interested parties involved in finance and tracking could not come together to do it without being directed by much higher authority. I became a management researcher and discovered first that this was not an isolated problem. The inability to make even minor changes in Army administrative systems was difficult at best, and also that this was not a unique problem in Army management. It seemed general throughout industry. By 1990, I had a different, less expensive way to address the structure and operation of management systems, and it would increase their effectiveness. It used the same sort of changes that performance management had accomplished in the production environment. By 1993, I had a training system ready and formed OE Incorporated as a means to harvest the benefit of being presented. The answer was silence. There was no response, no expression of interest. There would be no presentation because, well, there was no response. The material was good engineering. I started publishing articles in professional industrial engineering journals starting in 1995, but there was no traction there either. They accepted the articles and they were published as good engineering. It was just that nothing seemed to be happening. In 2005, I had gathered sufficient material for OE Incorporated to self-publish a textbook, Techniques of Management Engineering with offer to schools that graduated industrial engineering and MBAs. No response there either. I really should have expected that if business leaders weren't interested in hiring people with knowledge and skills in this area. It made little sense to present it to students. I continued publishing application articles in those journals and eventually ended up speaking in a national convention of performance professionals, but there was no acceptance. Then in 2009, I applied what I developed to an unstructured group. The medical industry is an operating entity. The clouds parted so I could finally see the light. It showed that I had been addressing the wrong audience entirely. Business leadership had no real incentive to improve their systems. It could interfere with their running things. Of course, they didn't respond to my development efforts. As you can see, we are coming up to modern times to the environment in which this course of study was prepared. I needed to serve people like you and me, the ones who owned and were the customers of our economy and government. We are that party and interest who has authority to implement changes that benefit us. Our engineering technique is called a transform. If you have a problem, you cannot seem to resolve by the techniques available. You look for where a light problem has been solved, usually by another approach, and address similarities and differences to the solution that has already been found. The challenge I had been running into, not just the efficiency and effectiveness of the organization's management system, was that I could not resolve it by what we were doing. It was my failure to even address the real party and interest, the owners and customers of organizations. The transform was there. The problem to solve was that the real party and interest, then the source of all authority, were not in a position to see to their own needs and wants through the government and economy they owned. If I could solve that problem, it also presents a direction to resolve the management challenge. The need was for redefining, as bringing people together to be effective owner. Those things that serve common needs and wants are the drivers for coming to agreement. It is human values that provide the basis for trust relations that can bring people together in effective unity. When we are addressing human relations, especially those that do something, we find value in the engineering black box. We have looked at two aspects of this potent tool, analysis and communication, approach it in light of scientific management. As Frank Gilbreth provided the working mason with a platform of position as materials to build a wall, I provide the black box as a working tool to cut through the confusion and chaos that is part of our modern culture. It is a tool that allows each of us to keep focus on what we are doing. We have opportunity for a new understanding. It is that this black box tool also addresses relationships, potential areas for agreement in terms of how much people value their interactions with business entities. Where we have consistencies in value, we have potentials for agreement on what the business activities are to deliver to us. The time has come to address a third aspect of the black box, the nature of the performance relationship. Performance is not what our economy does, it is how it provides to us those goods and services that we the people value. The performance cycle is external to the operation of the business. The performance cycle is interrelation with those who are outside the business. Our new vision is an extension of what Taylor did a hundred years ago. He concentrated on what would work in practice. He concentrated on doing what would be so good at accomplishing a valued result that even those resisting that change would accept the cost and make the investment. We have already addressed this in the negative. We have stated the challenge of modern administrative management when it comes to performance. The customers are the ones that make ultimate decisions and they remain unconcerned with most of the decisions made by business leaders. Their focus is on whether the offered products are going to meet their wants and satisfy their needs. The basis for customer action is also known. It is the personal value that the potential customer expects to receive from purchasing what the producer is offering. If expectation is low, so is the likelihood of purchasing that product. If expectation is high, so is the likelihood of the sale. For personal empowerment, our focus has to be on the expectations of people, on the value they are likely to receive. If it is a general human value as an increased freedom, prosperity, or a general increase in trust-based interrelation with others, we have a potential for that sort of agreement that can support owner-directed actions. This is what we can build on. It is the purpose for that historical foundation we have so carefully drawn together in earlier lessons. Our U.S. government was intentionally created to serve we the people of the United States. We are the customer. We are the only party in interest when it comes to what our government is to be doing. Much of our potency is in being the ones who own our economy. We own its corporate entities. They are not separate people in the sense that they are to be served. We are the only party in interest in both government and economy. We are the ones who give it purpose. And we are the ones who value what it delivers to those outside itself. While the process of change still needs presentation, we at least have an identified purpose. And we are that purpose. Our purpose is not going to be determined by leadership, even as it is not set by leadership in the past. We have good witness of leaders being able to affect our purposes and to bring them to focus through their administrations and advertisements. But this only seems to work when it was within the basic envelope of humanity. We even have sporadic attempts by leaders to change the nature of humanity. The eugenics movement was a serious example where the aim was to improve on the humanity by speeding up the process of natural selection. On even the most primitive application of the black box logic, we see this in a different perspective. It was privileged leadership trying to change the customers to accept the value that leadership wanted to produce for them. We the people have examples of severe damage and waste from such efforts in the past. Using the black box, that waste comes into focus. The very concept involves us and them division of people with governing government people on the right side to overcome them on the wrong side. It is privileged deciding which peasants to support and overcoming the less desirable them. When leadership promotes dividing humanity against itself, then as in any civil war revolution, we will all be on the losing side. The potency of the tool is in being able to concentrate on both performance and on human-to-human relationships. I also need to address the rather surprising human capacity for leadership to promote actions as good for the people, even when it is so obviously not good for people as individuals. The isolation of people into supposedly independent units, concentrating on every difference between one person and another, has demonstrated a certain level of success for creating the illusion that the people or the corporate humanity are someone different than we are as individuals. And the presentation of privilege and leadership is right. They're to lead the people against each other for the good of humanity, for the good of the nation, for the good of the public, for the good of the world, or whatever seems most appropriate. We have now reached the point where we can build upon the basic black box, providing working tools that can use black box approach. These will expand what the tool can do for those who use it. One potent understanding is the pairing principle. It is that customer and product are always paired. If there is something produced that does not go to a customer who values it, it is waste. If a customer does not receive what the customer values, it is waste. We must always look for the pairing if we are to identify value relations. On a corporate level, we have the challenge of people being asked to pay for things that they do not receive and value. And it is always waste. It is valuable only when those who receive the product are the ones who value it enough to purchase it. This has been an ongoing challenge with public subsidies using non-customer dollars to pay for things the non-customers do not value. Privileged leadership sees this as a basis for their being privileged, using the resources of other people for what the leader values. It is good to be king. Delivery of output to non-customers is, in the black box vision, the definition of type 2 waste. It is a business expense that earns nothing for the business or the business owners. Performance improves by eliminating that waste. When it is eliminated, more of the value of the output will flow to those who are effective customers. And then we have the capacity to turn this around and identify the customers and products of any corporate human effort. This is generally termed customer and product analysis. This brings immediate focus on true human performance. The first application is to identify the source of corporate resources. Where do the incoming knowledge, volunteer time, or other resources come from? This is the source of the life of the corporate effort. If the effort runs out of resources, it ceases to function. You trace the incoming resources back to find the one or the group that makes a decision to provide what the corporate effort needs. This defines the customer of the corporate effort, the ones who have to decide to so value the corporate effort that they provide what it needs to continue. When we have identified the customer, you look for what the corporate effort delivers to that customer that is so valuable to the customer that he or she will provide it. This is the product that the corporate effort has to deliver if it is to continue in existence. This defines the value relation as we have named it in our performance cycle. The basic science of performance, expenditures of time, effort, and other resources upon human efforts that are not part of the cycle are, by definition, waste. That waste can be eliminated without loss to either the corporate or customer participation in the performance cycle. And there you have active tools. Tools where the black box visual can communicate the value of proposed actions. It is a civilization design tool for human beings. The use of this tool will multiply what you can accomplish because it can bring people together for the purpose of personal benefit from eliminating waste. Consider the curious example of the public school, a place where children are gathered for the purpose of education. While this may be limited by future changes to its basic operation, it now points to a potency that is truly, in your face, identification of public waste. Who are the school's customers? You follow the incoming resources back to discover them. We clearly have the public as the source of capital resources, the building and equipment. We also have the public providing its operating resources, including dollars to pay for its operation. We further have the public as families, providing children and attendants for receipt of education. We then address product, whatever the customers both receive and value, sufficient to make the purchase decision. Capital resources come from the public, a public owner who is typically a corporate town, city, or county. What is it that is produced by operation of the school that gets delivered to these public decision makers? It is then we see, and it is visualization of black box operations, that we see that there is no product delivered for those decision makers to value. They are sent a bill for maintenance of public resources with expectation that it will be paid as the right thing to do. So let us move on to the operating income. This is dollars to pay teachers time and operation of the building and equipment. It again comes from the public resources, basically from dollars that occur like that as income from the public. Again, the town, city, or county is the customer that decides the resources the operation of the school will consume. For the appropriate product, we are to identify what the decision makers who fund the school both receive and so value that they commit those public funds. It is immediately obvious that the educational process does not produce and deliver anything to them for them to value. At best they get some management information which is not a product of education. So we step back and note that the resources are actually tax dollars and that the public pays for education through decisions by representative government. Then we have to define the product that the public taxpayer receives from the operation of that school. About this point, the frustration should settle in. There is nothing that the school delivers to the public that pays for it. The modern school even resists public disclosure of its educational effort. We can try even one more time realizing that not all the taxpayers are in a position to deal with the school as customers. We assume that the taxpayers are represented by the parents of active students. These are the taxpayers who actually send their young to school to get educated. And so we address the parents of students as customers and seeing them in light of representing the larger public of tax paying citizens who own the school and resource its ongoing operation. So what do these parents receive as customer representatives? What is it that they both receive from the operation of the school and so value that they would decide to fund its operation? They receive a grade card, a token of the progress of their child in the educational process. It is a measure of progress against a public standard and a general comparison with other's children of like maturity. Step away a bit. What is the value to the parent who receives a grade card? Is this some increase in what they have, some new value that they receive as the output from the educational process? What are you going to do about this? Are you going to throw out the black box approach because it does not support what we are doing? Of course, our resistance to change is going to rise up to redirect us to something else. The most obvious is to look at what the school is doing instead of what it is to deliver to its public customers. The educational purpose is now addressed as delivering value to the children, preparing them to be more effective as people. It is providing them the benefit of education. The potency of the black box approach is not so easily set aside. It deals with performance and performance is always of value. The students are not customers. They do not go to school to receive this value. Their parents send them. They do not pay taxes to fund the school operation. Their parents do. The students are clearly to be beneficiaries of the educational process, not customers. They do not have purchased decisions. Again, it tumbles to the parents. It's the child who passes through the public education process more valuable to the parents who pay for it. There you have it, the operation of corporate education in a public school has become a source of incredible public waste. The entire school could be eliminated without loss to the public. But that is not the end of the matter. We know that there is value in education. We just need to see it clearly. We know the system is misdirected from the analysis above. We need to redo our vision based on delivery of value. So we start again, this time putting the confusion inside the black box where it no longer distracts us from seeing value relations. Our foundation for performance is a value cycle with customers. Who is it who values the education of young children? It is the family that values the raising of the next generation. If there is to be value, it is the value recognized in the family whose children are the beneficiaries of an educational process. It is not a public value at all but a value in the education of each student as recognized and received by the child's parents. The value delivered to customers will not be an educated public. It will be a member of the family becoming more valuable to the family. The public involvement is indeed through representation by the parents of students. Our public is a collection of past, present and future parents. While the purpose is local to each parent, it is representative of a general human purpose, a human value. With this, you have just stepped into the vision that can change things. It is a vision that what will have value is what parents of students receive as to their individual child. And it will not be some comparison to public standards or other students. It will be what they value. We may still be a long way from coming together to institute a change but we are developing vision that can bring us together as a public. It is a public that can direct our leadership to assure that we receive what we value. The vision is empowering. The ability to present challenges we face and potentials for beneficial changes is empowering. As a final perspective, one that should serve you well, it is the teachers who reach out to parents working to involve them in the education of their children. Where our current system what isolates students in the classroom, it is people working in education who have that most human understanding that the benefit is in working with parents for what is commonly valued by people. People are not the problem. People are the solution to the problem. Arlene arrived at work to see the fruit of her suggestion. She had gone home as the one in charge of an office of personnel. There was a new sign announcing her group as a division of human resources. The personnelists in her office were being re-titled as human resource specialists. Improvement? Nothing else has changed. There is the same assignments authorities and responsibilities. On the performance side, we see no changes at all. The business is not going to sell any more product nor increase the value that gets delivered to customers. There is just the relatively minor cost of the change itself. What is the value of the human resource office? What does it produce and deliver to those outside itself that they can value? The office does not provide human resources. It provides guidance and a workable process for others to use to get people they need to function. The office neither manages nor supervises anyone except those who are part of the office. Management and supervision are by those who care for the workers as resources and who direct employees to their tasks. This office just provides some set of personal support services to the workers, workers that answer to other authorities. The office does see two compensating employees for their employment, but that is also of questionable value. It is taking on a responsibility for administration of pay, not for assuring the value relation with those employees. That is determined at the level of direct supervision, direct management where the value of the employee is seen in proper relation to what each accomplishes for the business. When it comes to managing what the human resource office accomplishes, it adds a whole new perspective. What must it accomplish to be a success? How are we to measure what it does to determine whether it is operating to good effect? It is then that the lack of basic purpose starts to emerge. It is the difference between success and failure in servicing employees. It is in charge of seeing to payroll, seeing to the workers get paid. If some worker stops performance, it's the HR office to stop payment. Of course, it is a supervisor's job to take action. This office is implementer. The black box provides us that most important observation that we have great difficulty finding who is to receive the product of the HR office's performance. Who is it that gets to value what it produces? This HR office does payroll. It is an arm of the organization that fulfills the business side of the employment contract. It has no authority to direct performance. It has no performance responsibility in terms of operating the business. Its payroll effort does not get things done if we're the organization. The HR function also includes services to other working groups, providing a way of working. This is a service. We find a challenge when we describe that service as what is delivered. Because the work is still being done by those in the other groups. The personnel group requires paperwork from its customers and uses what its customers provide to advertise for employees. It filters these to a few best candidates based on criteria by the HR office. The HR office is a service that allows employees and candidates based on criteria by the gaining groups and general guidance for employment in the business to support the employment decision. There is some partnering here, but it has little to do with the needs of the one who is serviced. It is the operation of the HR function that determines the productive result that the other supervisors receive. What is the difference between success and failure in this part of the HR function? Does it fail if an unsuitable employee is hired? The most immediate observation is that the function is running the personnel system. It is performing administration. It is doing what seems most effective for supporting the leadership effort in running their organization. This is never clearer than in the split between management and labor. Workers are hired under one employment process. Management people are hired under one employment process. It is like the basis for Taylor's original direction of scientific management, like seeing two skilled workers using different processes as the best way to do the work, assigned to them. His solution was to study the work and eliminate any wasteful efforts. We are obviously not with sufficient skills to address the solution or even evaluate the various directions for action. What is important here is the historical foundation and we can identify that there is significant improvement potential. As a support office rather than one running the organization our HR black box is valuable to the organization as it delivers what its customers value in their local performance efforts. The service is well defined as employees ready and willing to work in fulfillment of the customer needs. In service to employees it is elimination of common distractions. It is not really the employees who are served but the supervisors who set those employees to work on behalf of the business. As you can note, this goes a long way to providing a definition for the successful operation of the HR function and it opens a door to valuation of its services for both cost and benefit. The immediate challenge for us is that this involves a certain level of teaming and teaming is not a value part of the administrative management. A human resource office is delegated authority over office resources and assigned responsibilities for offering operating fairly well defined support systems. Like most other such offices the assignment does work. It is unnecessarily expensive but it does function it is officially focused on its own operation even though the people who work in that office recognize the human value in partnering with supervisors to assure as far as proper operation of the office will allow that service customers get what they need. For immediate orientation it is that important observation that people are not the problem people are the solution to the problem. When it comes to administrative assignment to the office it includes maintaining and servicing that division between management and labor. It includes maintaining different services to serve different purposes. It helps the administrative leaders maintain the division between management and labor institutionalizing the us and them interaction between them. Why do we have business corporations? The first answer is that people create them. They serve someone's purpose. The first answer is that the business corporations are there as someone's way to support family. The second is that the corporation is created to operate to a productive purpose. A family owned corporation serves a family purpose and a family leader effectively owns and operates it. A productive corporation serves and it gathers and directs its resources to accomplish that productive purpose. There is no owner purpose in someone else running the larger corporate entity. There is an alarm ringing when we realize that corporate officers are deciding what owners are to receive as return on their ownership. That is very much like a government decision on what to tax people who own the nation. It is the exercise of authority over what belongs to other people. It is like hiring a driver for your car who then decides to visit his own family instead of yours but graciously offers to let you ride along. If you really own something, you can always direct how it is used. If you own the football and others decide not to let you play you can take your ball with you when you leave. That is the nature of ownership. Those with privilege deny this. Owners have a higher authority than they have and can make such decisions as seem right to them. It is the nature of privilege to insist that you need someone in charge, someone running things if anything good is to get done. And then there is the foreman. And he is not running things but is much better than the ones who do at getting things done. And then there are the customers and they do not answer to those privileged leaders at all. The answer is ownership. The ability of the real owners to exercise ownership. There is nothing that privilege can do about it. The only real way to avoid a catastrophic denial of leader authority is to keep the owners from ever coming together. So what is the purpose of corporate leadership? Where is the value? And there it is front and center. Salary, payment for providing oneself as an employee. It is payment for the direction of the leader's time, skill and effort to the requirements of the job. And then the anomaly. Corporate leadership does not have a job. They are the source of assignment and accept no authority in any other to assign to them. Their job seems to be doing the right things but there is no responsibility for results. It is basic feudalism with the time and effort of employees as a key resource being claimed by the rulers instead of the land of the feud. Now, if only they could get the customers to see how right this is. Reality can be a cruel master. Reality is especially hard on those who claim the benefits of rule based on exercise of privilege by the best people. There is the reality of the cost and benefit of privileged management. A small management system seems to operate well with each hour in management and administrative work supporting four to six hours of time completed, their customer cycle. The same large corporate management effort ends up supporting about half that much. Even the economy of size is overcome by having a different purpose claimed for employing workers. There is the reality of customer decisions determining the income of the business. Those customers commonly do not know or care about the management programs and policies of business leaders. They are unconcerned with whether the business leadership is or is not doing the right things. They make their decisions on the value of product to them and the price they have to pay value. The reality is that the organizations they lead have a purpose set by those who create and own each business. The reality is that leaders are hired for the same purpose as everyone else, but have chosen to serve their own purpose because they are the business leaders. The reality of performance purpose is that management is to bring the resources of the effort together to get a valued result where modern leaders want that done. They hire someone else to do it. The reality is a purpose split between management and labor that serves no purpose at all. The cost is real and there is little value that results from administrative management pursuit of alternative purposes. It provides a universal damage to the business. It reduces the value of business to owners and investors. It reduces the value of products to customers by artificially raising prices. It reduces the value of the business to employees by introducing division and conflict in place of teaming. Universal damage provides a direction for correction for people coming together based on any potential changes that will reduce the damages. Getting to the point of coming together requires something to accomplish, some value result that people can expect if they come together to make it happen. The same few tools we have addressed earlier provide us with knowledge to organize a management effort. We can address both the structure and operation in terms of teaming, of bringing the resources of the corporate business to a single performance focus. It is that same focus that brought workers together to what work groups could accomplish when they started to team under a foreman.