Tuesday, July 14, 2009

Organizational IQ

Chris Argyris, the father of organization learning theory, once said (I paraphrase) that a learning organization is one that finds defects and fixes them. That's interesting.

How might we measure that?

When we measure intelligence in humans, we normally seek to find out how many questions a person can answer correctly within a certain time frame. In other words, intelligence is measured by how fast one can solve problems.

Such a measure may already exist in organizations as well. From the field of Total Productive Maintenance comes a measure of equipment availability.

A = mf / (mf + mr)

where A = the rate of availability, measured as a percentage;
mf = the mean time to equipment failure; and
mr = the mean time to repair.

For example, let's say that your equipment breaks down every six hours and, because you are understaffed in maintenance, it takes two hours for maintenance to restore equipment to production. Mathematically, mf = 360 minutes and mr = 120 minutes; thus,

A = 360/(360+120) = 360/480 = 3/4 = 75%.

Ignoring for the moment the mean time to failure, mf, we will focus on mr, the mean time to repair. One of the major goals of TPM is to decrease mr, because as mr decreases, A, availability, increases!

For example, let's say that you implement a process improvement that reduces your mean time to repair to 40 minutes! In this case mf = 360 minutes and mr = 40 minutes; thus,

A = 360/(360+40) = 360/400 = 9/10 = 90%.

If I am correct that the speed of learning is a marker of organizational intelligence, then we can reasonably generalize the notion of "equipment availability" beyond equipment failures to any type of process defect, so that:

Q = md / (md + mc)

where Q = the quality rate, measured as a percentage;
md = the mean time to a process failure or defect; and
mc = the mean time to the implementation of an effective countermeasure.

This means that an organization's quality rate is a reasonable measure of its organizational IQ!

This will be equally true of healthcare organizations (and any other type of service industry) as well as manufacturing.

Tom Jackson
Concord, California

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