You Are Measuring the Wrong Thing: A Manager's Guide to Systems Thinking
The Question That Changes Everything
Imagine a critical project misses its deadline or a team fails to hit its quarterly target. For most managers, the instinct is to ask a simple, direct question: "Who is to blame?" This question, rooted in a century of traditional management practice, sends leaders on a hunt for individual culprits, leading to finger-pointing, defensive posturing, and ultimately, a missed opportunity to learn.
However, what if there were a different, more powerful question? What if, instead of asking who, we wondered what? "What in the system caused this outcome?" This simple change in language represents a profound shift in perspective, from a reductionist view of individuals to a holistic one of the organization. This is the essence of Systems Thinking, a management philosophy championed by the legendary quality guru W. Edwards Deming (Deloitte, 2014). Deming defined a system as "a network of interdependent components that work together to try to accomplish a common aim" (Deloitte, 2014; The Thriving Small Business, n.d.; Wikipedia, n.d.). The central tenet of his work is that an organization cannot be understood by analyzing its parts in isolation. To truly understand performance, one must focus on the interactions and interdependencies between those parts, because the success of the whole is a product of these relationships (Deloitte, 2014; Vorecol, n.d.; Ewen & Edwards, 2015).
Deming's 94/6 Rule: The Most Important Management Statistic You Have Never Heard Of
The most startling and transformative concept to emerge from Deming's work is his famous estimation, honed over decades of consulting with the world's largest companies. He posited that 94% of problems, failures, and opportunities for improvement within an organization stem from the system itself, for which management is responsible. A mere 6% can be attributed to special causes, including the individual worker (Deloitte, 2014; Nowack, 1993; Qualtrics, n.d.; Betterworks, n.d.). This is often summarized in Deming's powerful aphorism: "A bad system will beat a good person every time" (Deloitte, 2014; Vorecol, n.d.).
This principle places Systems Thinking in direct and irreconcilable opposition to traditional performance appraisal. Conventional methods are built on the foundational—and, according to Deming, deeply flawed—assumption that the individual is the primary author of their performance (Deloitte, 2014). This creates a "systemic blind spot," causing management to focus all its energy on the 6% (the person) while fundamentally ignoring the area with the most significant leverage for improvement: the 94% (the system) (Deloitte, 2014).
The consequences of this blind spot are severe. It leads to the misattribution of praise and blame, rewarding individuals who may have benefited from a favorable system and punishing those whom a dysfunctional one hampered. It systematically demotivates intrinsically motivated employees who are trying their best within a flawed structure, leading to disengagement and turnover. Most importantly, it prevents the organization from learning. By scapegoating individuals, management avoids the complex yet essential task of identifying and addressing the root causes of problems within its processes, policies, and culture, thereby ensuring that the same failures will inevitably recur (Deloitte, 2014).
The Unconscious Drift Toward Systems Thinking
While Deming's ideas may seem radical, the entire history of performance management can be viewed as a slow, painful, and often unconscious discovery of his principles. The evolution of management practice reflects a market-driven grappling with the limitations of individualism.
Consider the trajectory:
Forced Ranking represents the peak of reductionist thinking, treating employees as independent, competing units divorced from their environment (Deloitte, 2014).
The rise of 360-degree feedback was a step toward a systemic view, implicitly acknowledging that an employee's performance encompasses their interactions with supervisors, peers, and subordinates (Deloitte, 2014; Matter, n.d.).
Management by Objectives (MBOs) further developed this concept by formalizing the alignment principle, which links individual work to the overall aim of the larger system —a key Deming principle (Deloitte, 2014).
Finally, modern frameworks like Objectives and Key Results (OKRs), with their emphasis on transparency, cross-functional collaboration, and decoupling from individual reward, move even closer to a systemic approach by acknowledging that achieving ambitious goals is a collective effort influenced by many factors beyond individual will (Deloitte, 2014).
This historical trend is not accidental. It runs parallel to the rise of modern work methodologies that are inherently systems-based. The principles of Agile and the demands of digital transformation—which require breaking down silos, fostering rapid feedback loops, and taking a holistic view of the value stream—are direct applications of Deming's philosophy (Goleman, 2004; Asana, n.d.; GeeksforGeeks, n.d.). A traditional, siloed, individual-focused performance review is fundamentally incompatible with an Agile operating model; it creates friction, rewards the wrong behaviors, and undermines the collaborative culture required for agility to succeed. Therefore, adopting a systems-based performance model is not just a better HR practice; it is a necessary operational upgrade for any organization serious about navigating the complexities of the 21st century.
Conclusion: Becoming a Systems-First Leader
The implications of Deming's 94/6 rule are liberating for a manager. It means that the most frustrating performance problems are likely not due to a "people problem" but a "system problem." By shifting focus from judging individuals to improving the system, a leader can move from being a frustrated referee to an effective architect of success. This shift in perspective enables managers to identify the root causes of failure and unlock the full potential of their teams.
The first step is to stop asking "Who is to blame?" and start asking "What in the system needs to change?" This question opens the door to a more powerful and effective leadership style.
Shifting your focus from the 6% to the 94% is the single most powerful thing a leader can do. However, how do you diagnose your system? What tools can you use? The upcoming e-book “Beyond the Bell Curve” provides a comprehensive framework, including Deming's System of Profound Knowledge, to help you become a true systems-first leader. Get your copy to learn how to fix the system, not the person.
References
Asana. (n.d.). What is management by objectives (MBO)?.
Betterworks. (n.d.). The Benefits and Drawbacks of 360 Reviews.
Deloitte. 2014, March 5. Performance management is broken: Replace 'rank and yank' with coaching and development. Deloitte Insights.
Ewen, A. J., & Edwards, M. R. 2015. Evolution and devolution of 360° feedback. Industrial and Organizational Psychology.
GeeksforGeeks. (n.d.). Management by Objectives(MBO): Meaning, Objective, Features, Advantages, and Limitations.
Goleman, D. 2004, January. What Makes a Leader?. Harvard Business Review.
Matter. (n.d.). 360 Degree Feedback Advantages and Disadvantages.
Nowack, K. M. 1993, January. 360-Degree Feedback: The Whole Story. Envisia Learning.
Qualtrics. (n.d.). Advantages and disadvantages of 360 feedback.
The Thriving Small Business. (n.d.). Advantages and Disadvantages of 360° Feedback.
Vorecol. n.d.. The Evolution of 360-Degree Feedback: Historical Perspectives and Future Trends in Talent Management.
Wikipedia. (n.d.). 360-degree feedback.