PRACTICE PAPER Management System Design for Sustainable Excellence: Framework, Practices and Considerations JOHN R. LATHAM UNIVERSITY OF NORTHERN COLORADO © 2012, ASQ Building on practice, action research, and theory, this paper presents a framework and approach for the INTRODUCTION design of management systems that create sustainable Successful leaders in the future will have to become value for multiple stakeholders. This positive approach architects of enduring organizations by design- to design builds on a foundation of Baldrige-based ing systems that create sustainable results for performance excellence concepts and principles and integrates aspects of systems theory, design thinking, multiple stakeholders. There are numerous system appreciative inquiry, and sustainability to design failures, such as the recent “meltdown” of the U.S. management systems that integrate the perspectives mortgage finance system (Zipkin 2009; Latham 2009). of economic, environmental, and social stakeholders. Over the last several decades, leaders have tried to The design framework, practices, and considerations improve organization performance using a variety of originally emerged from practice and action research models, tools, and techniques. While some of these and were refined at the Monfort Institute applications lab using action research methods enhanced with methods have proved useful, many attempts have met selected case study practices. The purpose of this paper with varying degrees of success. As Avital et al. (2006, is to provide new insights on the process and practices 537) point out, some organizations have experienced of management system design to help practitioners disappointing results using many of these approaches, design custom leadership and management systems, including activity-based costing (ABC), total qual- as well as provide new insights for academic research- ity management (TQM), earned value analysis, ers interested in advancing the theory of management by design. Examples and experiences are included to and balanced scorecard. In addition, in the last two illustrate key concepts related to the “art and science” decades there have been more than 1000 applicants of management system design. for the Baldrige award, yet fewer than 10 percent have Key words: Baldrige award, collaborative design, received the award. Part of the reason the other 90 criteria for performance excellence, design think- percent did not receive the award is due to the design ing, design principles, management system design, of their management systems. More than half of the managerial practices, managerial processes, positive points used to determine Baldrige award recipients deviance, stakeholders, stakeholder-centered design, are derived from an assessment of the organization’s sustainability, sustainable value, system integration, systematic approaches (management systems) in six systems theory, systems thinking categories including: leadership; strategic planning; customer focus; measurement, analysis, and knowl- edge management; workforce focus; and operations focus. The remaining points are derived from actual www.asq.org 7 Management System Design for Sustainable Excellence: Framework, Practices and Considerations results produced by these systems. Unfortunately, leverage points to create sustainable value for stake- many of these approaches to improvement were either holders. In addition, this approach incorporates design narrowly focused on “fixing” near-term problems in thinking and shifts the senior leader’s role from a the organization or were focused on individual com- focus on decision making and “operator” of the exist- ponents and opportunities for improvement (OFIs) ing system to that of “architect” of new organization without the benefit of a systems perspective or consid- systems and integrates design thinking throughout the eration of the needs of diverse stakeholders, or both. process (Boland et al. 2008). The framework is also However, organizations and management systems are informed by approaches used in product and service human created and consequently can be recreated. It design such as Moggridge (2007). Finally, the design may be time to take a design approach to improving framework incorporates sustainability concepts management systems; unfortunately, “the idea of including the needs and perspectives of diverse stake- applying design approaches to management is new holders (economic, societal, and environmental) and, as yet, largely undeveloped” (Dunne and Martin to create a sustainable stakeholder-centered design 2006, 512). (Elkington, Emerson, and Beloe 2006). The stakeholder-centered design framework, prac- The focus of this paper is on the collaborative tices, and considerations presented in this paper build design of management systems. Management systems on the foundation of the Malcolm Baldrige National are coherent combinations of managerial processes, Quality Award (MBNQA) Criteria for Performance practices, and activities to achieve a particular pur- Excellence (CPE) framework (NIST 2011). While pose or function within the organization such as the CPE provide a management systems framework, strategic planning. According to NIST (2011, 63), sys- nonprescriptive questions, core values, and concepts, tematic approaches “are well-ordered, are repeatable, along with a maturity model style scoring scale, they and use data and information so learning is possible. do not provide any advice or guidance on how to use In other words, approaches are systematic if they these components to design high-performing manage- build in the opportunity for evaluation, improvement, ment systems. This paper provides a framework for and sharing, thereby permitting a gain in maturity.” using these CPE components to design management The concept of management systems is not new systems. In addition, this framework integrates four and dates back to at least 500 BCE when the Chinese additional concepts including appreciative inquiry, philosopher Mo-Tze (a.k.a. Miscius) noted: systems thinking, design thinking, and sustainability into the approach to enhance the design of manage- “Whoever pursues a business in this world must ment systems that create sustainable value for key have a system. A business which has attained stakeholders. The design framework incorporates success without a system does not exist. From appreciative inquiry (AI) and intelligence in a positive ministers and generals down to the hundreds of approach to address the design challenges of systems craftsmen, every one of them has a system. The that serve multiple stakeholders. Instead of focusing craftsmen employ the ruler to make a square and on simply “fixing” problems, this approach to system the compass to make a circle. All of them, both design incorporates an appreciative approach using a skilled and unskilled, use this system. The skilled positive “lens.” may at times accomplish a circle and a square by This positive approach is also informed by systems their own dexterity. But with a system, even the theory and thinking to ensure the system design is unskilled may achieve the same result, though internally congruent and coordinated with the larger dexterity they have none. Hence, every craftsman internal and external systems such as incentive systems possesses a system as a model. Now, if we govern and scorecards, just to name a few. Systems theory is the empire, or a large state, without a system as integrated in the design process to facilitate the devel- a model, are we not even less intelligent than a opment of generative solutions that take advantage of common craftsman?” (Wu 1928, 226) 8 QMJ VOL. 19, NO. 2/© 2012, ASQ Management System Design for Sustainable Excellence: Framework, Practices and Considerations Figure 1 Design framework. 1. Purpose and requirements 2. Nature of the system 3. Theories and concepts Understand the purpose(s) of the Understand the “nature” of the system. Understand the empirical evidence system. Why do you need this system? related to this system. Identify the physical, knowledge, and What are the expected benets? creative components. Understand what works, what doesn’t Understand the multiple stakeholders work, and in what contexts. Identify the level of customization and their requirements for the system. (bespoke) needed. Understand the leading-edge ideas What key capabilities are needed? that could inform the design of the system. 8. Diagnosis 9. Design, develop, and deploy 4. Inspiring examples Understand the current system design. Understand how others have done it. Ideal Doable Detailed Identify the strengths (technical and design design design Review example conceptual designs human). during the rst round to clarify concepts and inspire creative thinking. Identify the opportunities for improvement (technical and human). Proto- Develop Reect Review detailed designs during the type deploy improve detailed design phase. 7. System integration 6. Design principles 5. Unique context Understand how the system “ts” within Identify the desired role model Understand the organization’s unique the other established managerial characteristics to embed into the design. context. systems. Choose from established design Identify the key internal and external Identify key inputs, outputs, and principles (e.g., balance). organiztional factors that impact the interconnections and relationships with desigin of the particular process. Identify new principles unique to your other internal and external systems. organization, strategy,