I Shiver When I Hear “Skin in the Game”

by Donald Kennedy

The realized outcome is not always in line with the intent

I forget how many decades ago it became popular to talk about motivating people or organizations by letting them have ‘skin in the game.’ As with many high level principles, it is easy to present the idea in a way that appears to make a lot of sense. The basic concept is that a person will try harder to achieve a goal if they get to share the benefits of success and, likewise, suffer personally when the result fails to meet expectations. Because it sounds good, the policy is often adopted in negotiations with individuals as well as in contractual negotiations. But as with all things dealing with human behaviors, the realized outcomes are not always in line with the intent.

What if you own a hockey team

If you own a professional hockey team, you want to win games. Games are won by scoring more goals than the opposing team. One policy that would give players skin in the game would be to pay them $50,000 for every goal. A 50 goal scorer could make $2.5 million dollars. The unintended consequence of such a move might motivate a player to become what is sometimes called a “garbage man,” a player that parks themselves in front of the net waiting for a puck to come along to shoot into the net. This also means the player is not ready to go on defense if the opponents get possession. When all the players want to score as many goals as possible, as motivated by the financial benefit of doing so, no one is left to play defense. Since the overarching goal is to win games, the lack of a strong defense will result in a lot of goals scored against your team, and probably a failure to achieve the real desired outcome of wins.

The average CEO spends around 3 years in that job. I recall a few decades ago, a CEO in a tower near my home mentioned how his salary was $500k a year, whereas his friends at similar companies were making double his pay. During this time, the investment community looked at their professional management teams and decided (to use a term that simplifies the complex process) that by basing CEO pay on share performance, the CEOs would have skin in the game and therefore be better motivated to assure solid financial performance for the firm. Awarding stock options became a very common practice in CEO remuneration. The CEO is thus rewarded when the share price rises higher than some specified value. This is seen as giving them the desired skin in the game. The current successor of the CEO I mentioned above currently makes a bit more in salary than the predecessor, but the profits from personal stock options exceed $10 million a year. Shareholders sometimes say that this benefits them more than $10 million so the CEO pay is worth it, but yet again there are complications with outcomes. 

With the increase in incentives for CEOs came a shift in what corporations do with their profits. Fifty years ago, the profits were normally distributed as dividends. Since 1997 however, more profits have been spent on share buybacks than dividends. Buying stocks creates a short term boost to share prices allowing anyone with stock options to preferentially benefit over the common shareholder. CEOs are also incentivized to look at the short-term performance (a 3 year tenure) and may forgo long term benefits (maintenance budget cuts, for example) in favor of short term gain.

My Personal Experience with Construction Companies

Not too long ago, I worked for a construction company that engaged in a $100 million project. The organization that hired us insisted on payment terms that gave us skin in the game. This owner established high and low financial targets on a cost reimbursable contract - giving us, the contractor, the opportunity to benefit significantly from saving money and penalized us for exceeding the targets. Given the information provided, it appeared we had the potential to make more than we could have under a typical lump sum tendering process. The dangling of the incentives and the threat of awarding to another contractor, plus the need for us to have any work to keep the lights on motivated us to sign the deal. As the project progressed, many new

situations developed that greatly hindered our ability to stay on budget. One example is the discovery of underground infrastructure, known to the owner at the time of signing, including some municipal sewer lines and utility corridors. The owner’s argument against allowing us some slack on the targets was that these were in the public record and therefore should have been considered in our base price. As the project progressed, it was clear that the owner had seen an opportunity to pass the risk on budget to the contractor by urging them (us) to have skin in the game.

The management world is full of examples of systems set up with good intentions that ultimately lead to the rewarding of behaviors that actually work against the intent. Many of my ASEM conference papers include examples of this. Management is complex and takes work to develop winning strategies.

About the Author

Dr. Donald Kennedy, Ph.D.,P.Eng.,IntPE,CPEM,FASEM is a regular contributor to the ASEM Practice Periodical. He has celebrated more than 1 year in the manufacturing business following a lengthy, but turbulent, career in heavy industrial operations and construction.

By Joshua J. Plenert, PE, MS, MBA

Introduction

In the annals of history, certain tales stand out as powerful symbols of insight into human cognition and decision-making processes.  One such enigmatic story is that of Abraham Wald's Missing Bullet Holes.  This captivating account serves as a testament to the prevalence of groupthink—a phenomenon that has been widely studied and often wreaks havoc on rational decision-making within various organizational contexts.  From an organizational psychology perspective, exploring the intricacies of this story and its relationship with groupthink provides a unique opportunity to delve into the intricacies of human perception and cognitive biases.  Furthermore, by understanding the neuroscience behind groupthink, we can uncover strategies to mitigate its detrimental effects and foster more effective and innovative decision-making processes.

 

The Saga of the Missing Bullet Holes

During World War II, a challenge perplexed statisticians and military analysts: how to minimize aircraft losses due to enemy fire.  The solution seemed straightforward at first glance—analyze the bullet holes on returning aircraft and reinforce the areas that were most heavily hit.  However, Abraham Wald, a brilliant mathematician, took a different approach that would ultimately unveil a fundamental flaw in human reasoning.

Wald recognized that the data collected only represented the aircraft that survived their missions.  The aircraft that were shot down were not included in the analysis, as they were unable to return for inspection.  Consequently, Wald proposed an unconventional perspective—rather than reinforcing the areas with the most bullet holes; one should reinforce the areas with the fewest.  His rationale was rooted in the principle that the planes returning with holes in certain regions had managed to survive, suggesting that those areas were less critical to the aircraft's functionality.

 

Groupthink: The Hidden Catalyst

Wald's counterintuitive insight illustrates a critical aspect of groupthink—a psychological phenomenon in which cohesive and like-minded groups prioritize consensus and harmony over critical evaluation and dissent.  In the case of the missing bullet holes, the original approach to reinforce areas with the most damage could be likened to groupthink.  The analysts had developed a collective assumption that the surviving aircraft represented the entirety of the population, inadvertently overlooking the significance of the absent data.

Groupthink often stems from a desire for social conformity and a fear of disrupting group cohesion.  This can hinder diverse perspectives and innovative thinking, leading to flawed decision-making processes.  From an organizational psychology perspective, the tale of the missing bullet holes serves as a poignant reminder of the importance of fostering an environment that encourages open dialogue, dissent, and critical evaluation.

 

Neuroscience Insights:

Unraveling the Brain's Role in Groupthink

Neuroscience has provided valuable insights into the mechanisms underlying groupthink.  The brain's architecture predisposes individuals to seek social acceptance and affiliation.  The anterior cingulate cortex, for instance, is responsible for processing social information and plays a crucial role in monitoring errors and conflicts.  In the context of groupthink, this brain region may inadvertently suppress dissenting opinions to maintain social harmony, leading to the uncritical acceptance of flawed ideas.

Moreover, the brain's reward system reinforces conformity and social validation.  When individuals conform to the group's opinions, they experience a sense of reward, triggering the release of dopamine.  This neurological reward mechanism can deter individuals from expressing opposing viewpoints, further exacerbating groupthink.

 

Mitigating Groupthink

To combat the pernicious effects of group think and encourage more effective decision-making, organizations can adopt several strategies rooted in organizational psychology and neuroscience:

Promote Psychological Safety: Establish an environment where team members feel safe expressing dissenting opinions without fear of retribution.  When individuals perceive that their contributions are valued and respected, they are more likely to voice alternative viewpoints.

Encourage Diversity: Cultivate diverse teams composed of individuals with varying backgrounds, perspectives, and expertise.  Diversity enhances cognitive flexibility and reduces the risk of homogenous thinking patterns that contribute to groupthink.

Designated Devil's Advocate: Assign the role of a "devil's advocate" in team discussions to systematically challenge prevailing opinions.  This approach can stimulate critical thinking and encourage the exploration of alternative solutions.

 Conclusion

The story of Abraham Wald's Missing Bullet Holes is a testament to the enduring power of human cognition and the insidious influence of groupthink.  Through an organizational psychology lens, we have dissected the intricate relationship between this historical anecdote and the phenomenon of groupthink, shedding light on the pitfalls of consensus-driven decision-making.  By integrating insights from neuroscience, we have unraveled the brain's role in perpetuating groupthink and identified strategies to counteract its detrimental effects.

As we navigate the complex landscape of organizational decision-making, we must remain vigilant against the allure of groupthink.  By fostering an environment that embraces diverse perspectives, encourages dissent, and leverages the neuroscientific underpinnings of cognitive biases, we can pave the way for more innovative, informed, and effective choices, ensuring that the missing bullet holes of the past do not become the blind spots of our future.

 

About the Author

Joshua Plenert is highly passionate about the continuous improvement of organizations in the AEC industry.  He has held multiple technical, leadership, and consulting roles for over two decades in the AEC industry.  He holds a master’s degree in Structural Engineering and an MBA.  He has taught engineering, business management, and construction management courses at multiple universities, and he is the author of the groundbreaking new book, How We Go: Culture-Centric Leadership, High-Functioning Enterprise. 

 

 

by Donald Kennedy

Value, Like Good Wine, is Subjective

*Today’s piece is inspired by a sentence I read in Fakes, Frauds, and Flimflammery by Andreas Schroeder (1999).

First some background

Throughout history, economies revolved around establishing the economic value of goods and services. Money was invented to establish a proxy for value, to eliminate the need for bartering in terms of exchanging products between parties. Without money, there would be no buyer or seller, as each person would be exchanging something for something else, being both a buyer and a seller simultaneously. Money solved the problem of how to buy a loaf of bread when all you have to exchange is a cow. In a totally rational, transparent and free market system using currency to represent value, one could conclude that it would be impossible to engage in a profitable endeavor considering everything should be worth the same to everyone.

Value is in the eye

But thankfully, value truly is in the eye of the beholder. A person in a small house with three sofas will put a lower value in the third sofa than a person with a large house with zero sofas. I have an interesting example of value being very difficult to predict in many situations. During an ASEM conference, I stopped in at the St. Louis Art Museum. I was surprised to see so many paintings by Modigliani and how the museum seemed to be making a big deal of it. I knew Modigliani from Art History class, but he was not one of my favorites. Therefore I was shocked to see that 3 of the top 30 highest prices ever paid for a painting by this artist. Someone valued one of his works at $170 million.

The Story of "Emyr de Hory"

Elmyr de Hory lived from 1906 to 1976. He spent much of World War II in prisoner of war camps. Upon his release, he attempted to make a career as an expressionist artist who had studied with some of the more popular artists in Paris. The shaky economic conditions of a war torn Europe proved to offer few customers willing to see value in his creations. De Hory slowly turned to reproducing works and passing them as originals. De Hory did not make very much money forging masterpieces, but unsuspecting art dealers got rich trading in his work. De Hory was good enough that one expert specializing in Raoul Dufy paintings became so familiar with De Hory’s hand that he began rejecting the authentic paintings as fakes.

De Hory was eventually exposed for producing forged works. One dealer, Joseph Faulkner traded many of the forgeries and tracked down a victim who paid a considerable sum for a Modigliani that proved to be a fake. Faulkner offered a full refund to the customer. Some people would value a forgery as worthless and feel cheated. However, this customer did not see it that way. Their rationale was that they had ten years of enjoyment proudly displaying this painting to guests. Some words did not make the painting look any different. The value he placed on the painting somewhat increased by learning the true story behind his possession. The customer simply requested Faulkner certify on the back of the painting that it was an authentic de Hory forgery, which Faulkner readily agreed to do so.

Quick Conclusion

The value of something can be difficult to predict. Finding the difference in value between parties drives the economy.

About the Author

After spending decades in heavy industrial construction, long time contributor Dr. Donald Kennedy, CPEM FASEM continues to work in manufacturing for the foreseeable future.

by Donald Kennedy, Ph.D., P.Eng., IntPE, CPEM, FASEM

Sunk Cost

We have probably all heard about the sunk cost fallacy. To recap and refresh memories, the common understanding is that proper economic evaluations look at the return of money to be spent and to not get hung up on the past.

My Professional Experience with Sunk Cost

Some companies I have worked for will look at a few billion dollars they invested in something and use that to justify spending a few more hundred million to keep that business line going.  They view the hundred million dollars as the investment to make the billion not be a failure. Of course, the proper way to analyze the situation is to look at what return you will get for investing that hundred million. If you cannot get $20 million a year in return, it might not be worth doing. The billion is spent and gone and should not be worked into the decision making of future cash flows.

My Personal Experience with Sunk Cost

Searching for the term “sunk cost” I did not find the flip side, however. I encounter that fallacy enough times as well. Around 2000, I bought a dishwasher for around $400. It repeatedly gave problems after the warranty ran out and I even rigged a bent nail into the door latch to make it work at all. After a few seals, vents and springs broke and motors seized,meaning the cost to repair was more than the cost of a new one. I bought a different brand for $800 that had a door latch that looked more robust. 

It worked well for a number of years and I was happy with my purchase. Then it stopped working with an error message on the panel. Searching the internet, I discovered a fix that involved taking out of its cubby, tipping it 45 degrees, and putting it back. There would be a puddle on the floor to clean up, but it worked for a while. After a few years, the rate of having to tip it became frequent and then it would not work at all. I spent $250 on a repair call and it worked for a short while. Then I spent $350 on another repair and it worked for a while. At this point the repair person definitely narrowed down the root issue and it would cost $250 to do that repair and the machine should work fine for years. 

Now if I followed the sunk cost fallacy, I could say that if I spend another $250 that will bring the total spent on repairs to $850 which is more than a new machine. However, I reasoned that I will spend $250 and save having to buy a new machine. I went with the final repair and it has worked well for 2 years with no signs of problems.

So What?

Software expenditures at companies often fall to the sunk cost fallacy. The implementation of a system may run into the tens of millions. To get additional functionality once it is up and running may cost another $300,000. I saw managers say that $30 million is enough and cancel all further modifications. Or a company builds a $1 Billion facility that does not perform as planned. The fixes run into tens of millions to tweak, similar to my dishwasher. Instead of looking at the investment to fix, in the case of the employer I worked at, the management said $1 Billion was enough and they did not want to be continually tied to that investment and be budgeting for solutions to performance issues. They decided to liquidate the facility and take a one time hit.

It is counterintuitive to think that large investment decisions can be tied to the emotions and egos of the people making the calls. But management would be easy if there were no people involved, wouldn’t it?

PS: At the time of writing, his dishwasher is functioning within spec.!

About the Author

Dr. Donald Kennedy, Ph.D., P.Eng., IntPE, CPEM, FASEM is a long time contributor to the Practice Periodical. After spending a few decades in the world of heavy industrial construction and operations, Dr. Kennedy finds himself celebrating a one year work anniversary in the world of ERP driven operations and assembly line style manufacturing.

By Phillip Power

Risk assessments are a common requirement in many industries today. But what’s not common is an understanding of who owns risk assessments, when they are needed, and how to perform them. In this brief article, I hope to help answer some of these questions and provide useful insights along the way.

So, You Need a Risk Assessment?

Risk assessments are rarely done proactively; even proactive risk assessments are usually being done to satisfy a regulatory requirement, such as ISO 9001 or 21CFR. They can spring from just about anywhere:  process failures, customer complaints, audit findings- you name it. Companies oftentimes underestimate how frequently risk assessments need to be completed and, because of that, struggle when they start rolling in. I propose a few useful recommendations to roles and responsibilities to help with this adjustment later on. 

Who Owns the Risk Assessment?

All too often, a risk assessment begins with an argument on who should own it. If you ask Quality, it should be Operations, because they are familiar with the processes. If you ask Operations, it should be Quality because they are the group reminding everyone it’s a regulatory requirement. Who usually ends up winning out is the party that writes the procedure on risk management; since it’s a rare day someone from Operations volunteers to write a Quality procedure, to the victor go the spoils. But is this effective management? In my opinion, just as it is true that everyone owns quality, with Quality a bit more than everyone else, so too with risk assessments. Quality is responsible for ensuring they are completed (it is a requirement after all) but that does not absolve them from taking part in them. Risk assessments must be a multi-disciplinary approach where people from various departments include their perspective and expertise. By design, not everyone within a company shares the same vested interests. A risk to one person may seem insignificant to another, but it is only by combining a spectrum of knowledge and experience that you begin to assess the full risk.

Does a Risk Assessment Need a Leader?

While risk assessments can belong to any department, I don’t necessarily think anyone should lead one. It takes a strong leader to manage a risk assessment team, preferably one with a solid understanding of risk analysis and decision making. Not every member of the team will understand how the assessment comes together. For example, the difference between a severity rating of 3 and 5 can be the difference between wearing gloves or a hazmat suit. Developing people from within each department to lead risk assessments should be a priority of every company that is required to have a risk management system. Companies can create their own training materials, but I think the most economical solution is to provide the resources for select employees to study the Engineering Management Handbook and take the CPEM exam. This will give the employees an industry-recognized credential in return for their willingness to take on the additional responsibility, as well as giving them the tools they need to professionals in risk management.

Who to Pick for The Team?

Most people don’t associate risk assessments with teamwork but it’s a critical factor in determining how well and how quickly a risk assessment can be completed. Risk assessment teams are often groups of people who are not in the same team to begin with and haven’t had time to develop the same kind of relationship as they would with people whom they regularly work with. People may be unfamiliar with each other’s personalities and management styles. On top of all of that, everyone is being asked to provide their input and come to a consensus on somewhat subjective tasks. This is one of the reasons a strong leader is imperative. The leader’s role is not to determine the risk so much as to steer discussion and be a moderator when things get heated. If you haven’t been on a risk assessment team, you might be surprised at how passionately some people defend their opinions. There is not enough time in a risk assessment to go through the five stages of team development so the leader is often left with a poorly formed team stuck in the storming phase. Input should be weighed in proportion to the expertise of the team member providing it; oftentimes, the leader is not the subject matter expert.

What Risk Assessment Tool Should I Use?

There are several tools available for risk assessments; the key is selecting the right one. A mistake I have observed is to prescribe a single risk assessment form that everyone must follow. This inevitably makes the form an improper tool for most jobs, thereby discouraging its use and, consequently, the use of risk assessments altogether. If the people performing the risk assessment are nott trained well enough to select an appropriate risk assessment tool, don’t expect the risk assessments they complete to be of much help. The tool can be as simple as a gap analysis or as complex as a failure mode effects analysis (FMEA), depending on the nature of what is being assessed. Once the appropriate risk assessment tool is selected, walk everyone on the team through how it works and what input is expected of them. This is often the most frustrating part of risk assessments:  getting consensus. At the end of the day, you can only put in a single number or category for a risk. How probable is it that a failure will occur again on a scale of 1-5? Should the failure occur, how severe are the consequences on a scale of 1-5? These are highly subjective questions, even when the scale is well defined, and everyone’s perspective will be different. Healthy debate is encouraged but it’s important that no one person dominates the discussion. Everyone must feel comfortable sharing their opinion and disagreeing with the consensus. One suggestion to help with this is to have everyone write down their assessments at the beginning of the exercise without anyone discussing them openly. Then each person shares their risk numbers or categories with the team one at a time. This helps prevent a strong personality from biasing input.

Am I Done Yet?

Once the team has come to a consensus on the ratings and categories, a process that can take several meetings, it’s the job of the leader to polish up the assessment and submit it to the appropriate location, typically controlled and attached to an investigation. It’s important that, wherever the risk assessment ends up being stored, it is linked and accessible. It is not uncommon for multiple risk assessments to be completed for the same risk because no one could find the previous assessment- sometimes there is no one left who even knows it exists. As the risk assessment leader for your department, you will be grateful if this was done for you by others and others will thank you when you do it for them!

About the Author

Phillip Power, CPEM is a Pharmaceutical Technical Specialist for Zoetis, the world’s leading animal health company. In this role, Phillip manages investigations and CAPAs, operational improvement projects, and risk assessments to ensure the market has access to the highest quality medicines for companion animals and livestock. He earned his B.Sc. in Chemical Engineering and his M.E. in Engineering Management from the University of Nebraska- Lincoln. Phillip lives in Lincoln, Nebraska, with his wife and two sons.

[This post by: Woodrow W. Winchester, III, PhD, CPEM, ASEM’s Diversity, Equity, and Inclusion (DE/I) Director]

February is National Black History Month.  Orchestrated by historian Carter G. Woodson, National Black History Month (Black History Month) is an annual celebration of achievements by Black Americans and an opportunity to recognize the central role of Blacks in U.S. history.  Not only is it a time to celebrate and commemorate the past; but, for me, Black History Month represents a call to action to imagine and build, though a Black-centric lens, a more inclusive, equitable, and just society for all.  From righting infrastructural wrongs such as Baltimore’s Highway to Nowhere to addressing facial recognition bias to tackling racism and biases embedded in medical technologies, the urgency of this call for us, as engineering leaders, is growing.  It is critical that engineers think and act inclusively and equitably.  And, as I detail in the newly launched ASEM Engineering Handbook, 3^rd Edition, “this way of being for the engineer is core to advancing a technological future that is considerate to the full diversity of humanity.”  

The theme for Black History Month this year is “Black Resistance”; elucidating how “African Americans have resisted historic and ongoing oppression—in many forms—from America’s earliest days into the 21st century.”  And, as illustrated in the beforementioned examples, these many forms include oppression enabled by and through engineered systems (see Algorithms of Oppression by Safiya Noble).  Thankfully, the works and efforts of a new generation of Black changemaking engineers such as Drs. Tahira Reid Smith,  K. Renee Horton, Yvette E. Pearson, Logan D. A. Williams, Jessica Rush Leeker, and James Holly, Jr. exemplify how Black Americans are not only confronting and dismantling “engineered oppression” but blazing new pathways in catalyzing and conceiving more inclusive, equitable and just approaches to technological design, deployment, and management.  The future is truly bright and ASEM is stepping up.

From (1) our flagship webinar series that explored DE/I in technical management and technological development contexts (of particular relevance to Black History Month, be sure to check out both the Black in Robotics and the Race Matters in Engineering and Technology webinars) to (2) the inclusion of a chapter in the Engineering Management Handbook, 3^rd Edition on DE/I in Technological Development and Technical Management, to (3) the creation of a new Directorship to lead DE/I efforts and initiatives, ASEM is bolstering its commitment to advocating and amplifying anti-oppressive voices and perspectives in engineering.  While work is happening, more is needed.  Please join us.  A roundtable is being proposed for IAC 2023 to define a DE/I roadmap for ASEM.  To participate or for additional information and/or questions about ASEM’s DE/I efforts, please contact me, Woodrow W. Winchester, III, at woodrow.winchesteriii@utexas.edu. 

As James Baldwin states in his New York Times essay, As Much Truth As One Can Bear, “not everything that is faced can be changed, but nothing can be changed until it is faced.”

Woodrow W. Winchester, III, PhD, CPEM

Some additional DE/I resources related to Black History Month

1. Black in Engineering Initiative
2. Black in Robotics
3. National Society of Black Engineers (NSBE)
4. US Black Engineer
5. Engineering While Black
6. Diversity in Engineering: Celebrating Black History Month With Ted Colbert
7. Hidden Curriculum: An Image Holder of Engineering
8. Do you See Me?  Hypervisible Invisibility #EngineeringWhileBlack
9. Diversity and STEM: Women, Minorities, and Persons with Disabilities
10. Online Ethics Center for Engineering and Science

[This post is by Don Kennedy]

There is a retail spot near my house where I watched many businesses come and go over the years. One business was, yet another, specialty burger place struggling to stay afloat. The owner had a fairly well-paying job on the side that was helping meet the expenses of this restaurant. Near the end, the owner told me that he was struggling to find more ways to cut costs. His vision was to squeeze a few extra dollars profit out of a small revenue number. Most everyone knows that increasing profit is the end goal but there is no clear formula to achieve that. 

Cutting costs seems like a sure thing, but how? Does lowering hourly salary for workers achieve better results, or aggravate turnover and the quality of the worker? Maybe increasing wages entices more productive workers and saves in recruitment or training costs. In the burger joint case, it seemed that the only way to get more income was to increase revenue. Raising prices might work or might reduce the number of customers. Lowering prices should increase numbers of units sold, but will it be enough to make up for the lower revenue per unit? Advertising should increase revenue, but again, will profits be enough to cover the ads? This owner did not have sufficiently deep pockets to find out.

The most recent tenant was a person who started out selling refinished furniture out of her garage. She was almost making enough profit to pay herself a minimum wage, $1600 per month. There is a common adage that one should go big or go home. The concept of economies of scale implies that boosting sales will result in savings in raw material bulk costs, reduce the impact of overhead costs per unit, and create organic growth through word of mouth. The artist realized that selling from one’s garage makes customer awareness very difficult. She correctly surmised that a storefront would attract customers simply from foot traffic. Setting up shop in this retail spot was effective at increasing sales. Two months into operations at the new location, sales and gross profits both doubled. Now that she was making $3200 per month, but then there was the new cost of $3000 rent and only $200 left to pay herself. I see a For Lease sign in the window of the spot once again.

Success in business is complex without any simple formulas to follow. Good concepts often fail due to a lack of understanding of the basic principles.

About Don Kennedy

Dr. Donald Kennedy, Ph.D., P.Eng., IntPE, CPEM, FASEM is a long time contributor to the Practice Periodical. After spending a few decades in the world of heavy industrial construction and operations, Dr. Kennedy finds himself approaching a one year work anniversary in the world of ERP driven operations and assembly line style manufacturing.

[This post is by James Brino, EIT, CAEM]

When I joined my current organization in August of 2021, and before I took over daily management of the engineering department, we did not have a goal setting program. There were informal goals discussed in yearly performance reviews, but there was not a formal process for our Engineers to develop, document, track, and report on their yearly goals (if they had set any at all). In December 2021, I rolled out an Engineering Goal Setting program at PIC Design for the 2022 calendar year, and at the conclusion of the 2022 program, we had a 90% goal start or partially completed rate, and a 78% full goal completion rate. 

The following article describes the method I took to develop, implement, and track the program, and helpful tips when developing a program for your organization. 

Start with your manager!

The first place to begin is with your manager, or the engineering department’s direct supervisor. Pitch the idea of implementing an engineering goal setting program with the goal of keeping your engineers accountable to the “big picture” goals or initiatives the company is looking forward to in the coming year.

Schedule a Kick-Off Meeting and Develop Materials 

The second step is to set a time and place where you can kick off the new program. I started with a 1-hour meeting where I introduced the program, but this upcoming year I have scheduled a 2-hour lunch-and-learn workshop, where we will review the goal program, workshop goals together for the 2023 year, and enjoy lunch. I know my team, and know food motivates, but do what you think is best for your audience. Giving away company swag is always a plus! 

Additionally, be prepared with materials to successfully launch your program. I developed a PowerPoint presentation (screenshot of the agenda below) that accomplished a few items; Defined what a goal is, the significance of goal setting, framework to developing goals (SMART method), how to track progress, and how to stay accountable. 

I also developed a handout that was instrumental in my team’s goal formation (screenshot of handout below). It was a fillable document that helps develop a SMART goal. This is also an effective way for the goal program administrator to collect the finished goals to start tracking progress towards completion. 

Develop goals 

Once you have kicked off the program, it’s now time for you and your team to draft, workshop and refine the goals. Whatever way you choose to aid your team in the development of the goals, it is important to focus their energy on attainable goals. Overly ambitious or unrealistic goals stifle progress and derail an engineer’s “kinetic energy”, not to say a stretch goal should be thrown out altogether though. A stretch goal is one where you would consider its completion a personal “stretch”, based on interests, resources, time constraints, etc. Finally, remember your own skillsets and available organization resources, and to stay consistent with your role. 

It also may be helpful to break goals into “targets”, which are individual tasks or milestones to accomplish your overall goal. Use targets to break-up your goals into smaller “bite-sized” pieces. 

Set Tracking/Check-In Meetings

The worst thing that can happen is you and your team spend all this time developing goals and then they are forgotten about until the next yearly goal setting meeting! That is why it is important to have check-in/goal tracking meetings throughout the year. This also helps with keeping people accountable for the actions they said they would take. 

The frequency of these meetings all depends on your type of team and business. I would host these at the end of every quarter and seemed to be well received (First week in April, July, September, last week in December before the holidays). Having each member of the team share the progress they have made towards their goals aloud is important, so the team can keep each other accountable. 

Stay Accountable

Keep yourself and your team accountable, including timelines and deadlines! I have a calendar reminder set for the end of every month as a “personal self-review”, along with the quarterly check in with the full team, as described above. 

Keeping detailed notes on the status of the goals and making a game plan on what should be achieved between check-in’s is important. There are a few tools that can be used for tracking, including but not limited to written documents/notes, Excel templates, and productivity software such as ClickUp and OfficeVibe. 

I also encourage my team to print out their goals list and tape it on a wall near their desk, so they are reminded of their goals every day, not just on check-in days. 

Build a Network of Support and Reflect 

Goals should guide you, not be an end-all-be-all. Goals should also be fluid; just because you set a goal in January does not mean it should be the same in December. They should evolve, change, or be abandoned as business needs change or as other strategic items arise throughout the year. 

Do not be afraid of failing, asking for help, or for resources. If you do fail; laugh, look internally, diagnose the problem(s) and try again. Finally, build a network that will help and support your goals! Share accomplishments with your co-workers and engage management.

As I always tell my team every morning, “It’s a great day to have a great day, let’s crush it!” Every day as an Engineering Manager, strive to bring new and exciting methods and principles to your team. I would love to hear your stories on how you have developed your engineering goal setting program, or the methods you currently implore. Email me at jbrino@rbcbearings.com.

About James Brino

James Brino is currently the Engineering Supervisor – Applications, Product & Process Development at PIC Design, a division of RBC Bearings, located in Middlebury, CT. Before assuming responsibility of new product and process development, James was a Senior Applications Engineer at PIC Design/RBC Bearings. Additionally, James is an Adjunct Professor at the University of Hartford Barney School of Business, teaching in the Management, Marketing and Entrepreneurial department. He graduated from the University of Hartford (West Hartford, Connecticut USA) with his MBA in May 2022. James has a Bachelor of Science in Mechanical Engineering from the University of Hartford.

www.pic-design.com/
www.linkedin.com/in/jamesbrino/ 

[This post is by Mohamed Sedky, ASEM Professional Member]

When it comes to engineering management there are many practices and strategies that have been developed through the years and it all starts with an organization’s strategy, mission, vision, procedures, systems and more. In other words, the focus tends to come from the top down. In this article I will focus on another perspective which is the lower block in the organization, specifically how engineering managers can change a company’s behavior and achieve operational excellence from the ground up.

While you cannot instantly change a system that is already established within your company, you can focus on particular areas that are related to you, your own department for example, and drive positive change. 

Here are five steps I follow to achieve smaller scale, but impactful optimization:

Define Clear Objectives

Following your company’s mission and vision, you should define clearly what the objective of the project is. Is it to increase profit, save cost, enhance safety, or optimize operations? There are a lot of objectives that are somehow related to each other, but you need to understand what language your company speaks. Most companies are concerned about safety, reliability, and cost. You need to figure out which strategy you will follow depending on your company’s situation. Will you be focused on enhancing reliability at whatever it costs, or will you be more oriented towards cost optimization? Maybe your company suffers from a lot of safety incidents,  driving the need to focus on operating more safely. Determine what your management is talking about and it will make it easier for you later.

System Thinking

Start writing down all the processes and operations you do on a daily basis, reports you prepare, and actions you take. Ask yourself this: How does this department operate? How does it think? Start building small blocks of things you do and listing the stakeholders, suppliers, or other departments you deal with. Write it all down and then try to record how much time each process takes.   You should be careful about all the steps you do in order to have an integrated map of all processes.

Work Breakdown Structure

Start dividing your operations into categories. For example, put all the procurement operations together, collect all reports in one section, and after that you can work individually to break things down to see all related processes then analyze each work group who are involved. How long does it take? What are the obstacles we face? How can we improve this process?

Optimization

After you are done building your map including all the processes of your department, now you should figure out the gaps you have. This could be done by asking the following questions:

• What problem (outcome) are we trying to solve (improve)? 

• Why is that what we want? Is it specific?

• Where and what are the process(es)? 

• Where does the process happen?

• What are the steps, inputs, and outputs at each step? Where do they come from and where do they go? 

• How good is the process? 

• What work are people doing? What does it cost to run? How efficient and effective is it? 

• What’s most important now? How are we doing it today? Who’s doing it? What is measured? What does and doesn’t work? How is it managed? 

Action plan

Take only one work group to start with. For example: the procurement cycle. Don’t go too far with gaps that need a management decision or investment, just start with the gaps you can manage following these steps:

• Make the process visible 

• Break it down into steps

• Create work standards where it matters

• Ensure the layout & flow can be seen to all involved in the process 

• Use visual management

• Make targets clear at each step

• Define what supervisors do

• Enable the right behaviors

• Make it happen

Following the above-mentioned steps is very simple compared to how it may look in reality.  Great success will come when you only start with one gap to solve.  Remember the cycle of strategic management to follow. Situational analysis is very important to measure your current situation and assess the gaps before you can build your strategy, apply it, then measure how it is working. Never forget continuous improvement!

About Mohamed Sedky

Mohamed Sedky is a young Professional Engineer with more than 5 years’ experience in Oil and Gas. Mohamed’s passion for engineering management lead him to joining ASEM as a Professional Member, earning his Certified Professional in Engineering Management (CPEM) and a master’s in engineering management. Mohamed’s current work focuses on digitalization and optimization in maintenance engineering projects.

By Neil Thompson

There’s a lot of talk about quiet quitting these days. People who aren’t going above and beyond – quiet quitters. If you as an engineering manager find out that the reason the quiet quitters who report to you are quiet quitting is because they’re unmotivated, they don’t feel like their contributions are valued, or they dislike your leadership style, perhaps a different approach is in order.

I’m a firm believer in leading the way people want to be led. If you’re so hell bent on leading your way, and the people don’t like that style of leadership and are just following you because you’re the leader, you may find yourself leading a bunch of quiet quitters.

While there are different approaches to leadership, since people prefer to be led in different ways, there are certain traits that everyone can appreciate.

The Importance of Clarity

I worked as a research associate at a startup company. A lot of lab work. Do experiment. Write down what happened. Repeat. My first boss was a new leader. He had never had a direct report. For a year, I thought I was doing well… until my performance review. It was then when I learned that he was deeply disappointed in my performance. I didn’t show initiative, he said. I didn’t know that he wanted me to show initiative, though. He never even mentioned it until that performance review. He wasn’t clear in what he wanted. Needless to say, I wasn’t all that inclined to follow him after that. To be clear is to be easy to perceive, understand, or interpret. A performance review is not the place to be caught off guard. If my boss was clear from the start, I would have known that showing initiative by suggesting experiments to run was something he wanted. Being clear with others makes it more likely that they’ll follow you.

The Importance of Listening

I had a boss at another company. Similar work. Do experiment. Write down what happened. Repeat. This boss would often ask for my thoughts on how to do something. I’d offer my thoughts. Then we’d do everything the way he wanted to do them all along. This was a regular occurrence. Eventually, I was not motivated to offer ideas, and I certainly wasn’t interested in following him. My boss didn’t listen. To listen means to take notice of and act on what someone says. This boss rarely acted on anything I said. To be an effective leader, you have to be a listener. No one knows everything. No one always has the best idea. Listening means that you are open to the thoughts of others. Listening to others also makes it more likely that they’ll follow you.

The Importance of Thoughtfulness

The CEO of a company I worked for was a cantankerous brute. I have no idea how he became CEO. No personality whatsoever. I had to do project status updates in front of him and the rest of the executives. Snapping at other executives was a frequent occurrence for him. “Well, that was dumb” was something he’d often say to them in regards to a decision they had made. For those other executives, I figured they must have been making a lot of money to accept being spoken to like children. The CEO was not thoughtful. To be thoughtful is to think of others and modify one’s conduct as to avoid hurt to others. It certainly wouldn’t surprise me if, at some point, the other executives tuned the CEO out, stopped following him, and simply did enough to keep their jobs. If you’re a leader, be mindful with your words. You don’t want to elicit an unnecessarily negative reaction. Being thoughtful of others makes it more likely that they’ll follow you.

Conclusion

There are many ways to lead. However, there are traits that we all can appreciate in our leaders.

Essentially, as a leader, when you talk, be clear and thoughtful. When others talk, listen.

If you implement these traits into your leadership style, you make it more likely that people will gladly follow you and less likely they become quiet quitters.

About Neil Thompson

Neil Thompson is the founder of Teach the Geek. An engineer, he works with technical professionals so they can present more effectively, especially in front of non-technical audiences. Learn more about Teach the Geek at teachthegeek.com.