Approval authority: Tragedy of the anti-commons
Reading something about lean in a service organization the other day, I recognized something that probably everyone who has ever dealt with a large bureaucracy has probably encountered. In the story (sorry, I can't find the link), they had a design approval process that required something like seven sign-offs. Each person had approval authority, but added little or no value to the process. The form went from out-basket to in-basket, where it might sit for as much as 2 weeks because someone was on vacation. This is the muda of overprocessing. The corrective action after a kaizen blitz (kaikaku) was to remove a few of the signers from the chain altogether, and to change some of the signers from approval authority to advice. For me, this only reinforces my theory that the real secret to lean is to identify and remove transaction costs.
Many of you familiar with environmental economics are probably familiar with the Tragedy of the Commons, for which the best known essay is Garrett Hardin's. The basic example is an ancient village in which all land is held in common (that is to say, not owned), but each farmer owns his own livestock. Even after the combined herd is grazing past sustainment, it is worth while to each farmer to introduce another cow to his own herd. Farmer A benefits by one cow, though the whole village may suffer by the combined loss of 1/10th of a cow from farmer B, another 1/10th from farmer C, ... and so on for the other farmers. The village is one cow better off (farmer A's), but 11/10ths of a cow worse off (the reduced weight of cows belonging to farmers B-L), and so there is a net loss for the village even thought there is a net benefit to A. Seeing this, B will repeat it, as will C, and so on until they ruin the land and destroy their prosperity. In fact, one of the problems in this scenario is that any farmer practicing conservation will end up being a net loser because he can't capture the gain from his action. The solution is to divide the land up among the farmers; each can ruin his own or manage it effectively as he sees fit. Conservationist farmers are able to capture the gains from their practices, and farmers who don't practice conservation either end up either copying the successful practices or going out of business and selling to the others.
The Tragedy of the Anticommons is the mirror image. The phrase was coined by Frank Michelman and popularized by Michael Heller in an article in the Harvard Law Review in 1998. In that article, he pointed out that there was no developed theory of the anticommons. James Buchanan and Jong Joon picked up the gauntlet in their JLE (2000) article Symmetric Tragedies: Commons and Anticommons. Whereas the Commons problem results in overuse of a resource, the Anticommons results in the underuse of a resource. In Heller's article, he focused on the lively business of street kiosks in Moscow, right in front of empty storefronts. The stores were empty because so many people have to sign off on the use of them.
But why do I believe that lean is uniquely capable of dealing with this? Underused resources are a red flag for lean practitioners. People waiting for work, or work waiting for people, reduces the speed of the operation. Furthermore, if you are trying to get approval to change an existing product, it must be because you recognize a problem with it. The longer you wait on approval to change the product, the more defective products you are producing. Another muda! Everyone recognizes the problem of approval authority delays, but they were considered necessary under the command and control management practices before lean. As I've said before, lean's primary means of reducing transaction costs is to push the decision-making down to the level where people have the necessary information. That necessarily means removing approval authorities, or better yet, placing emphasis on reducing the approval time and placing it where it belongs.
lean manufacturing
muda
transaction costs
tragedy of the commons
economics
Many of you familiar with environmental economics are probably familiar with the Tragedy of the Commons, for which the best known essay is Garrett Hardin's. The basic example is an ancient village in which all land is held in common (that is to say, not owned), but each farmer owns his own livestock. Even after the combined herd is grazing past sustainment, it is worth while to each farmer to introduce another cow to his own herd. Farmer A benefits by one cow, though the whole village may suffer by the combined loss of 1/10th of a cow from farmer B, another 1/10th from farmer C, ... and so on for the other farmers. The village is one cow better off (farmer A's), but 11/10ths of a cow worse off (the reduced weight of cows belonging to farmers B-L), and so there is a net loss for the village even thought there is a net benefit to A. Seeing this, B will repeat it, as will C, and so on until they ruin the land and destroy their prosperity. In fact, one of the problems in this scenario is that any farmer practicing conservation will end up being a net loser because he can't capture the gain from his action. The solution is to divide the land up among the farmers; each can ruin his own or manage it effectively as he sees fit. Conservationist farmers are able to capture the gains from their practices, and farmers who don't practice conservation either end up either copying the successful practices or going out of business and selling to the others.
The Tragedy of the Anticommons is the mirror image. The phrase was coined by Frank Michelman and popularized by Michael Heller in an article in the Harvard Law Review in 1998. In that article, he pointed out that there was no developed theory of the anticommons. James Buchanan and Jong Joon picked up the gauntlet in their JLE (2000) article Symmetric Tragedies: Commons and Anticommons. Whereas the Commons problem results in overuse of a resource, the Anticommons results in the underuse of a resource. In Heller's article, he focused on the lively business of street kiosks in Moscow, right in front of empty storefronts. The stores were empty because so many people have to sign off on the use of them.
But why do I believe that lean is uniquely capable of dealing with this? Underused resources are a red flag for lean practitioners. People waiting for work, or work waiting for people, reduces the speed of the operation. Furthermore, if you are trying to get approval to change an existing product, it must be because you recognize a problem with it. The longer you wait on approval to change the product, the more defective products you are producing. Another muda! Everyone recognizes the problem of approval authority delays, but they were considered necessary under the command and control management practices before lean. As I've said before, lean's primary means of reducing transaction costs is to push the decision-making down to the level where people have the necessary information. That necessarily means removing approval authorities, or better yet, placing emphasis on reducing the approval time and placing it where it belongs.
lean manufacturing
muda
transaction costs
tragedy of the commons
economics
Labels: decentralization, management
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