Wednesday, December 16, 2009

Leverage Points - Where to Intervene in an Organization or Other System

I have mentioned Donella Meadows and her list of places to intervene in a system before in this blog. Meadows worked out the original nine item list when she was at a meeting about the North American Free Trade Agreement (NAFTA) and the World Trade Organization. Later, she expanded the list to twelve points.

The list is very, very useful for business executives because it provides insight into where to intervene to improve an organization. The list does not tell how to intervene. I'm glad it doesn't. Keeps life interesting and me in business :-)

Without going into detail, or the science supporting the list, here is a version that has been slightly simplified and adapted to business:

Figure 4 shows the intervention points in order of increasing leverage. Of course, there are other considerations than the power of a leverage point. Weaker leverage points are often easier to apply, but the results are not as good as when using a stronger leverage point.

In her paper Donella Meadows points out that people do find the right kind of leverage fairly often, but tend to push the wrong way. The reason is that many systems, including business organizations, are so complex they become counter-intuitive.

My personal experience is that business organizations often fall back on setting numerical targets, simply because it is easy to do. Working out how to optimize buffers of Work-In-Process (WIP) or Design-In-Process (DIP) is more difficult, especially if no one in the organization has prior experience, or even know why it is important to do so.

On the other hand, managers today have access to all the information they need to get started on improving their organizations. It is not that difficult to get going: learn a bit of theory, practice it, learn a bit more, practice a bit more...

If you do that, there will be a benefit that may seem a bit unlikely at first: Management will be fun.

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