Unintended consequences and perverse incentives are as old as social organization. [See Wikipedia's unintended consequences page for an interesting and informative list.] Many of them could be avoided by asking a few simple questions ahead of time.

1. Can this metric be manipulated without improving the underlying business?

If so, employees are inventivized to take the short cut.

Example: PM schedule compliance

As commonly measured, PM schedule compliance allows dates to be moved or schedules to be adjusted or old work orders to be completed out in order to bring the numbers up.

2. Can this metric be improved through undesirable or unintended behaviors?

If so, then the benefits of improving the metric will be offset in ways probably not measured.

Example: MTTR

MTTR encourages maintenance employees to store and hide extra supplies or take short cuts in workmanship to get jobs done faster.

3. Can this metric be improved by sacrificing long-term productive capability?

If so, then short-term results will turn into long-term decline.

Example: earnings per share

If earnings per share is growing at five times the rate of revenue or more, watch out!

Are these metrics, therefore, invalid?

Not necessarily. But consider selectively sharing the information or de-emphasizing them in benchmarking efforts in order to mitigate the risks, MTTR in particular is especially useful for planning purposes, but not for incentive schemes.

King Leonidas

Quoted in chapter 4 of The Science of Success:

Laws control the lesser man. Right conduct controls the greater one.

—Chinese proverb

Similar to the generic job description for a maintenance engineer, here is a template for a reliability engineer (or manager) paraphrased from Making Common Sense Common Practice: Models for Manufacturing Excellence. In MBM terms, these would be the responsibilities and expectations for the role of reliability engineer.

• Loss Accounting [Use existing databases to perform Pareto analysis and follow up to improve results. Since everything can't be done at once, this item is the foundation for prioritizing all others.]
• Root Cause Failure Analysis (RCFA) [Perform and/or facilitate RCFA and prospective solutions based on RCFA.]
• Managing the Results of Condition Monitoring Functions [Ensure quality data is being collected and that condition-monitoring technology is applied and used in an integrated way.]
• Overhaul/Shutdown Support [Review equipment condition to ensure the right work, and only the right work, is performed. Commission equipment during startup using applicable technologies.]
• Proactive Support [Working with all other departments to ensure good practices in design, purchasing, maintenance, stores, and operation.]
• Facilitator/Communicator [Deal with gray areas where responsibilities are shared by two or more groups. Find and implement solutions while avoiding finger-pointing.]

From Kepner-Tregoe:

Beyond Training: How to re-order the brain to achieve remarkable result

From Management Craft:

Meaning: The “wolf” of control in trendy sheep’s clothing? #leadership [It isn't clear from the title, but the link is contrarian advice NOT to try to make work meaningful for subordinates. H/T Rooted in Prosperity]

From Wikipedia:

Reliability engineering

Burn-in

Human reliability [See also: Human Factors Analysis and Classification System]

From VitalSmarts:

How to Eliminate Sarcasm [Unlike much of the web, many of the comments demonstrate great integrity and humility. Apparently this newsletter has attracted a quality following.]

From Rooted in Prosperity:

Ann Zerkle: What’s the Market Solution? ["There ought to be a law?" Maybe that isn't always the best way to get what you want.]

From Machinery Lubrication:

When is It Hot Enough for a Synthetic? [Despite the title, this article is a perfect example of the importance of "Asking the Right Question." Rather than "an answer," it provides "the right questions."]

My notes on chapter 6 of The Science of Success by Charles Koch:

Quotes

•  ”The market determines who shall [have what property and who shall do what work]. None of these decisions is made once and for all; they are revocable every day. The selective process never stops.”—Ludwig von Mises [Wikipedia]
• “In the market economy, every owner is continuously obliged to justify, through service, his right to retain control of the resources he claims. Otherwise, consumers peacefully transfer the ownership and control into more capable, more productive, more serviceable hands.”—Paul Poirot
• “Markets maximize benefits [when they are] supported by externally enforced property right rules that prohibit taking without giving in return.”—Vernon Smith [Wikipedia]

Concepts

1. Property Rights. Must be clear and defined. Must be coupled with responsibility for the consequences of the use of the property so that owners reap all of the benefit of productive use and bear the full costs of what they destroy.
2. The Tragedy of the Commons. That which is “owned” by everyone is cared for by no one.
3. Division of Labor. Because humans vary in their talents, specialization and cooperation leads to greater production and satisfaction of human wants and needs.
4. Roles, Responsibilities, and Expectations. An ongoing dialogue involving the employee, supervisor, and other interested parties. Employees are responsible for ensuring they are accurate, effective, and current.
5. Roles. Not a job title. Description of position held and the functions performed by an individual.
6. Responsibilities. Define products, services, or processes for which we are responsible, along with level and nature of responsibility.
7. Expectations. Should be clear, specific, and measurable. Should be open-ended and challenging.
8. Principled Entrepreneurship. Even if you lack decision rights, you can still take action by seeking out and persuading those who do have the decision rights to implement ideas.
9. Decision Rights. Earned, not granted.
10. Shared Responsibility. Not an excuse for failing to take critical action.

Source Note and Links

1. Ludwig von Mises, Human Action. Regency Co., Chicago, Ill., 1963, p. 308. [Amazon]
2. Paul Poirot, “Ownership as a Social Function,” Toward Liberty, Vol. 2, Institute for Humane Studies, Menlo Park, Calif.,1971, p. 296.
3. Vernon Smith, “Some Economics and Politics of Globalization,” Speech given at North Carolina State University, Raleigh, N.C., March 2, 2005.
4. Garrett Hardin, “The Tragedy of the Commons,” Science, 1968, pp. 1243 – 1248.
5. Ludwig von Mises, Human Action. Regency Co., Chicago, Ill., 1963, p. 157. [Amazon]
6. No external source.

Common Symptoms and Related Mental Models

From a business troubleshooting summary:

“Establishing the Right Climate”

From another document showing what happens when a piece (knowledge processes) of the MBM framework goes missing:

The MBM Framework: Knowledge Processes

Applying MBM as a Supervisor: Decision Rights

In addition to answering these questions for yourself, how are you ensuring your direct reports are striving to get results with their own direct reports?

• RR&Es In Action 3/29/2011: RR&Es can be written and forgotten. Managers should consider reviewing them before meeting with employees to remind them what the top priorities are.
• Mises is Smiling 3/8/2011: There are thousands of unelected bureaucrats for every elected politician. It is naive to believe that you can change the government just by changing elected officials. Ludwig von Mises claimed that large institutions do not become bureaucratic as long as they continue to operate according to the profit motive.
• “Alignment”–Not Just For Tires Anymore 3/1/2011: Links to another Janice Fraser video from Stanford on alignment around core principles.
• Rules vs. Judgment: The Sequel 2/18/2011: Reviewed in previous Knowledge Processes notes.
• Football Entrepreneur 2/10/2011: [Pointless football discussion.]
• As In Government, So In Organizations 11/23/2010: [Rambling discussion. Nothing particularly of interest.]
• I’m Being Taxed HOW much?! 10/12/2010: Links to a tax burden calculator.
• MBM Readings 8/3/2010: Reviewed in previous Vision notes.
• Nesting 7/6/2010: If you pass on a project to a qualified successor and you see them about to make a dangerous mistake, what do you do? [Respectfully challenge, of course!]
• Responsibility, Accountability and Authority 4/12/2010: Links to Stanford video on aligning responsibilities, authorities, and accountabilities. If you have responsibility for something, you must have authority for seeing it done. If you have responsibility and authority, you must have accountability. The author challenges the proposition with a personal example, but without elaboration.
• Starvation in the Land of Plenty: how property rights saved America 7/3/2007: Describes the communistic system of early North American colonies and their movement toward private property. Early starvation was replaced by industrious hard work. [No one tells this story better than Thomas DiLorenzo in How Capitalism Saved America.]
• 1.3 Billion People Get de Jure Property Rights 3/21/2007: Rice production in one province of China shoots up when neighbors secretly agree to divide communal land and keep the production of their own plot. Plan spreads to other parts of China after success. China officially recognizes property rights.
• Sure you’re smart, but remember others can and should contribute 2/18/2007: Key quote: “If you’re going to make all the decisions, you may as well hire idiots… they’re cheaper.”
• Through the Eyes of a Child 11/2/2005: Without property rights, there is no incentive to work hard to acquire property.
• A Decision That’s Good and Wrong 7/21/2005: Author buys movie tickets in advance and pays extra to secure a seat, gets to the theatre, and it’s not even close. Claims it was a good decision (got peace of mind) even if it was the wrong decision.