Friday, July 22, 2016

Life is What You're Doin'

“Research and Development are what you are doing when you don’t know what you are doing.”
Source Unknown

For 27 years I worked for the U.S. Navy’s ship research and development laboratory. The times when I was enjoying my job the most, I didn’t know what I was doing. The first time a strange new idea is tested in the real world, you can only hope that you designed an experiment that won’t cause too much damage to the facilities.

High ranking bureaucrats as well as the system lords of the Navy Yard and Pentagon fervently hope that research and development can be reduced to a set of instructions that if followed correctly will produce technical breakthroughs on a predictable basis. Every few years they attempt to implement one of these management fads. Usually, they pick the wrong system. Then they misapply it. After a few years, it will be discarded for the next management craze.

As one senior manager was fighting the last battle of his professional life, the one that ultimately led to his forced retirement, this wily old crocodile managed to implement ISO 9000 at our laboratory. Of course the entire story was more complex than one old man’s dream to control the way things were done in his empire from the grave, but as a result we were forced to develop process descriptions, check lists, new mandatory reports, auditing processes, and a host of other documents and requirements that added to the cost of our administrative burden.

ISO 9000 is a European quality control system that seems to work best in large factories that produce a limited number of products. For example, if you own 1,000 automatic screw machines that can be configured to produce a variety of screws and bolts, it really takes only one set of instructions and a rather simple set of checklists to make certain things are done the right way. The cost and complexity of auditing such a system is likewise relatively simple and inexpensive compared to the value of the output.

However, even in a midsized plant that produces semi-custom fabrications for a variety of industries, say vibratory feeders, the differences between machine designs, acceptable tolerances, materials, and even manufacturing processes can lead to massively complex and expensive documentation required to maintain ISO 9000 certification. The cost is simply not worth the benefit.

There is another problem with ISO 9000. It is process oriented, not results oriented. If one of your employees produces a truckload of defective parts, but has faithfully and correctly followed the documented procedures and filled out the required paperwork, he doesn’t have a problem. You have a problem. Now imagine what kind of excuses for failure ISO 9000 would offer recalcitrant government bureaucrats.

Needless to say, this system proved itself to be a large waste of time and money that really didn’t add any noticeable value to our products. After a few years, it joined quality circles, TQM, and TQL in the dustbin of forgotten management fads.

“Life is what you are doing when you don’t know what you are doing.”

Sorry, but I can’t reduce life, even something as simple as your personal financial life to as set of instructions that guarantee a predictable result. I can ask some questions and make a few suggestions that might help you design your own experiments, but neither you nor I can predict the outcome of the series of experiments we call life. Think about it. Did you marry the first person you dated?

While I am not dismissing the importance of sound practices, such as budgeting, don’t focus on the process to the exclusion of the results. Unlike dating, examining the results of your financial behavior is really pretty easy. I recommend that everyone at every stage of life do this simple inspection every month. I do it myself. Once a month calculate your net worth. Add up all your bank accounts, retirement accounts, the money in the cigar box hidden under the bed, and the equity in your home. Then add up all your debts, credit card debt, the balance on the car loan, and the amount required to pay off your house loan. OK twist my arm, I will let you include the value of your car as an asset, but please don’t include the value of furniture, electronics, and used clothing until they are sold. Subtract your debts from your assets. The result of this calculation is your net worth. Is the number getting larger? That is a good thing. Keep on doing what you are doing. Is the number getting smaller, or going more negative? That is a bad thing. Dig into the details. Discover the problem and change your behavior.

In one of the old classics, “Your Money of Your Life” by Joe Dominquez, the author even recommends graphing your net worth over the years until you reach your goal. I don’t think that is a bad idea, especially at the beginning of a drive to become debt free. Visual aids that show your progress can be inspiring. Maybe I should try that for weight loss? What if the graph shows that my weight is increasing with my consumption of beer and cheese crackers? Hmmm.

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