The idea behind Six Sigma is that every process of a business should be executed with as few errors as possible – the target Six Sigma aims for is 3.4 errors in every 1 million attempts. Now, lots of companies follow silly management philosophies. But Six Sigma takes on religious overtones at G.E. because of its followers fervent belief that it is a universal belief, enforced in every facet of the corporate empire. Even, at one point, according to a (maybe apocryphal) well-told anecdote to comedy writing. Former GE chief executive Jack Welch is said to have once ordered the counting of the number of laughs each episode of NBC's sitcoms.

Funny because it's true.

A just issue brought up by the Hollywood unions this week regarding how the studios sort of forgot to include the actual talent in the profit-sharing when video content is purchased from iTunes (see Unions seek video iPod residuals).

Verrone said he and Connolly immediately realized that they, as well as Directors Guild of America, Screen Actors Guild and WGA East, need to "ensure that this new distribution system is covered by the appropriate formulas in our respective contracts."

WGAW continues to believe that the proper formula is the existing one covering pay television. That entitles writers to 1.2% of the entire producers' gross. DGA has an identical formula, while SAG gets 3.6% and the International Alliance of Theatrical Stage Employees (IATSE) gets 5.4%.

It's amazing that the legal snipers at ABC didn't notice the absence of residuals for the creatives before the contracts with Apple were signed. It's likely ABC wanted to see what would happen if they completely ignored it. Can you see some attorney smirking as he says, "What if they don't notice?"

As if.

Hollywood business is different than any other industry. Aside from the entertainment industry, I don't think employees who contribute to products or services get residuals when a product is used. Honestly, I'd love to get a check every time a user manual I wrote is copied. Not too long ago, a friend of mine who worked at a bank where I worked more than ten years ago said they were still using policies and procedures I wrote. Where are my residuals? While I think this approach to income is a little out of touch with the rest of the world, Hollywood does a lot of things right. If you want to know how to run a project, look at how movies are made. Plus writers, actors, and other creatives do get rewarded for their hard work–especially when a project is successful.

Now go to Detroit and look at what's happening to Delphi. Especially in the auto industry, unions have become their own worst enemy. A good roundup of Delphi's woes are summed up in this editorial.

DOMESTIC AUTOMAKERS have had to pay off the UAW for productivity improvements–more automation, flexible job rules and job cuts–which were needed to compete with foreign competitors. This invariably required putting more people on the private dole.

…

This kind of welfare was tolerable when the Big Three automakers dominated the market. But GM, which once claimed 50 percent of the American market, is clinging to about 26 percent today. Even during what is supposed to be an economic recovery, automakers and their suppliers are struggling; GM lost $1.6 billion in the third quarter alone. Ford lost $284 million overall in the third quarter, with its North American auto operations losing $1.3 billion. And both Ford and GM say they plan to cut more factories.

GENERAL MOTORS has a more perilous situation than Social Security. At least that federal program can claim three workers for every retiree. GM has more than three times as many retirees and dependents as it has workers. Delphi's Miller and the Bank of America warn that GM eventually could go bankrupt.

Go read the whole thing. It puts in perspective the out-of-control expectations of unions. Part of this is a cultural problem. Big business has been so demonized in books, movies, and in the press, it's nearly impossible to understand that a company the size of GM, for example, could have real financial problems. The workers see them as this infinite behemoth that will keep feeding them until they pass away during old age. At the same time, many of us in the non-union world have learned the hard way that you cannot count on companies for much more than a paycheck. Benefits are getting cut each year and any kind of retirement I had has been decimated by two layoffs. Retirement, healthcare, and other benefits traditionally provided by employers are actually beginning to strain companies. Unions can strike as much as they want, but eventually the numbers dictate the situation. Delphi filed bankruptcy because the money just isn't there. As for the high cost of healthcare, I'll save that for another article.

Is there a place in the twenty-first century for unions? Of course. However, their relevancy will be determined by how reasonable they will be when the employees are genuinely getting the shaft.

Thanks to The Daily Show, I have a show-piece of how not to create a flow chart. They pointed out this insane representation of the FEMA workflow taken directly from the FEMA Web site. If you don't believe it, click the graphic and see a screenshot of the Web site with the graphic in context. It will probably be taken down this week if anybody at FEMA with a brain is paying attention.

I can't say anything anymore than what was said on The Daily Show. However, with the recent negative focus on FEMA recently, stuff like this just gives ammunition to the comedians and the critics alike. FEMA is in the middle of a huge shake up and I think it's time to learn something from all of this.

Michael Brown is the ultimate scapegoat character in the Katrina story. I watched politicians in the hearings a couple of days ago just rip him up and down mercilessly. Then they pretty much gave Kathleen Blanco a pass on her indecision, conflict with Mayor "School Bus" Nagin, and orders to turn away the Red Cross and Salvation Army (see also Experts: Focus on terrorism delays FEMA response to Katrina (hat tip: Cafe Hayek).

"We've tried desperately to rescue 250 people trapped in a Salvation Army facility. They've been trapped in there since the flood came in. Many are on dialysis machines," said Maj. George Hood, national communications secretary for the relief organization.

"Yesterday we rented big fan boats to pull them out and the National Guard would not let us enter the city," he said. The reason: a new plan to evacuate the embattled city grid by grid – and the Salvation Army's facility didn't fall in the right grid that day, Hood said in a telephone interview from Jackson, Miss.

The National Guard was operating under direction of the State of Louisiana–not FEMA.

Lesson one: Things are not fair. Prepare yourself for unfair treatment.

One thing about Michael Brown that bothered me greatly was his exaggerated resume. If you or I falsified our resumes, we'd be booted from any private company. That is grounds for dismissal. Period. That gives all of us a little insight into the fact that Michael Brown is not all he wants you to think he is. But just because he's not a quality person doesn't mean he's in league with Satan. However, since he is a scapegoat, all of his past indiscretions will surface.

Lesson two: In your professional life, do things better and cleaner than others. You don't want somebody finding professional indiscretions and using them against you when it hits the fan. Plus, you'll feel better about yourself.

Okay, we all expect the government to be bureaucratic, slow, and painful to work with. I've heard complaints from private, corporate donors that FEMA requires so much paperwork and processes to be followed, it's hard to give supplies to the relief effort through FEMA. Processes are good when they are used to keep everybody involved coordinated. They are not good when they exist strictly to exist.

Lesson three: Keep things simple. Streamlining processes saves time and money. Continually look for ways to improve processes and remove unnecessary obstacles.

Finally, as we look back at the graphic above, we can see clearly that FEMA's communication problems exist at every level. From the coordination of efforts to the public image they present. There is no excuse for that graphic to exist on their Web site. Plus, there seems to be a lot of he said, she said rhetoric between Brown and Blanco. I don't know how much of the actions taken were documented either in a database, memo form, or in a timeline document. Professional technical communicators exist to document things accurately. Apparently FEMA needs to hire some, at least to review and edit the Web site.

Lesson four: Take communication seriously. Hire professional writers to document processes, actions, and public communication. All of the process improvement in the world will do no good if it's not written down clearly and concisely. It's not about CYA as much as it's about recording the reality.

Among the charges leveled at Gates, Ballmer and crew: Job candidates have been turned off by Microsoft arrogance, and the company's extensive interview process works against hiring fresh thinkers.

The company is working to change its long-standing reputation for haughtiness in hiring, said Abilio Gonzalez, general manager in charge of recruiting. He said Microsoft is trying to convince job seekers that the world's biggest software company is a great place to work, "instead of assuming that everyone would want to work at Microsoft." Microsoft boasts that about 90 percent of those offered jobs these days accept them–a higher rate than in past years.

Over the weekend, I randomly pulled out an old favorite, Antitrust. While the movie can be hokey and melodramatic, it's fun and still captures some of the cultural truths of high-stakes competitive recruiting. When reading the ZDNet article, I was reminded of the fictional CEO's arrogance in Antitrust. This arrogance is a holdover from the self-important 90s where companies like Microsoft acquired startups as if they were bulk candy and some computer science college grads with no experience started jobs with six figures.

We are witnessing cultural scraps from the 90s where Gates and Ballmer are uncomfortably struggling with Microsoft's culture and its world-wide reputation. Some of the criticism has merit and some doesn't. Culture must be deliberate and managed like a project. That might be hard for Microsoft who is notorious for missing major deadlines. Its culture needs to be as nimble as the market itself, changing with the times, progressive, and positive. A company the size of Microsoft can't afford to operate with a reputation of arrogance, especially when it's not such a bad place to work. They are better than most companies I've worked for and can provide a pretty stable career path if you don't mind living in Redmond. As a Microsoft employee friend of mine once said: "It's great to work here, even if there is a little too much creepy Gates worship going on."

I have not read the book, but I've just added it to my list because I think this book says one thing, but is already taken out of context as the above linked Reuters article proves. The title of the article is "Forget the Experts; Consider the Crowd". When you dig into the article you find this out:

Four key elements should be in place for a crowd to function wisely.

First, the group must be diverse. Those whose members have various skills and intelligence levels tend to be smarter than groups of experts.

Second, a group should be decentralized, so that each participant has a channel to say what they think.

Third, the participants must be independent enough to avoid conforming to a supposed norm.

Finally, there needs to be a mechanism – a market, an aggregator of information, or an open-minded leader – to combine these diverse opinions into a single answer.

The best thing a wise crowd can do is to avoid the stupidity of a despot. It must also avoid the urge for a blind stampede — the stock market bubble, for example.

To harness the wisdom of groups, businesses should take into account diverse views without influencing or controlling opinions or trying to reach a consensus.

That's a lot of qualifications for an effective group. An Amazon review classified the book as academic, but important. That means the book is probably putting forward a theory with some evidence to back it up. However, this article already jumps to the conclusion that groups are smarter than individuals, which is something I don't believe. In fact, my experience has been–especially in the business world–groups stagnate creativity and prevent productivity. What Surowiecki is apparently saying that the group must be constructed in the proper environment.

Take a look at juries. They can be good or bad, depending on the mix of people. Their backgrounds, world-view, and sympathies directly affect which verdict they reach. Juries can be tainted by the media or even deliberate tampering. Surowiecki deserves a read; I'm certainly going to give him that. However, this group scenario can be easily ruined by incompetence. Unless the individual who puts the group together knows what he is doing, the group will be faulty from the start. The group organizer probably has to go through a committee who is not as scientifically constructed. I think there are too many variables for there to be real world applications.

In other words, the group must be managed by an expert. When all is said and done, shouldn't you just hire the right expert and skip the group to save time and money?

"They're proving that discounters won that battle" for toy customers, said Ken Harris, a consultant with Cannondale Associates. "It may have ramifications greater than just the toy industry," he added, noting that specialty retailers had managed to compete with Wal-Mart by offering greater selection or expertise in a particular category.

"All of the sudden a company like Wal-Mart that sells more than just toys beats them at their own game. That's a fairly resounding wake-up call for most retailers."

What I'm not reading is that Toys R Us was a poorly managed entity that sat on its laurels while its stores fell below even K-Mart standards for cleanliness and its surly employees virtually chased out customers. There was a Toys R Us in North Little Rock, AR, that was an example of how nasty a store can get. There was always merchandise strewn about the dingy tile. In the Chicago area, there was an equally depressing store in Aurora near Fox Valley Mall where we only shopped when we had to.

A good friend of mine was a store manager for Toys R Us in Colorado and he abruptly quit one day after having too much of the corporate management. I spoke to him today and he told me he wasn't surprised at all. In fact, he said they had many upper-management problems leading, to the demise of the Toys R Us store. He confirmed my suspicion that Toys R Us suffered the same kind of management crisis that K-Mart did.

This is as much of a critique of the reporting as it is the failure of Toys R Us management. When a company fails, the real blame lies with the management, not the competition. I suspect that Toys R Us sent out a press release specifically naming Target and Wal-Mart. Then Reuters and the AP create a template story that's copied on paper and on TV. The end result is that Toys R Us has positioned itself as a victim to competition when, in fact, they did it to themselves.

When an institution as old as Toys R Us fails, it's time for some real business reporting. I can think of some topics to research. How about their twenty-year-old ad campaign with the giraffe; wasn't that long in the tooth? How about the way the stores stocked items? From what I understand, Toys R Us didn't take advantage of some newer planogram technologies, resulting in hard planograms that left large gaps on the shelves for weeks when items ran out. What about management's decisions to compete directly with FAO Schwartz, who failed themselves?

I'll keep checking the news, but I bet the failure of Toys R Us is just another story to most of the press, resulting in superficial coverage. When that happens, nobody learns from past mistakes.

Steve Jobs is changing Apple's culture yet again. Many years ago, when he was heading Next, I thought he was too arrogant for his own good. However, a couple of recent examples demonstrate that he knows how to manage corporate culture. One good example is that when Disney started messing around with the creativity of Pixar, he took his business elsewhere (see this for details on the creative issues between Pixar and Disney). Another is the iMac itself. The iMac is a cool product (I have one), but the belief and pride by the company in their own products trickles down to the consumer and makes the product larger than life.

The NY Times has a small profile o­n the iPod and some new changes at Apple:

Since returning seven years ago to Apple, the computer maker he helped to establish in 1976, Mr. Jobs has created a fusion of fashion, brand, industrial design and computing. He has opened a chain of 78 retail stores to showcase Apple's consumer-oriented designs and to surround the company's computers with an array of digital consumer products. The stores themselves have become another billion-dollar business, a feat all the more impressive considering that one of Apple's chief competitors, Gateway, failed with a similar retail strategy during the same period.

As a result, Apple is acting less like a computer company and more like brand-brandishing, multinational companies such as Nike and Virgin. The iPod's success is also the clearest indication that Mr. Jobs, if he is to successfully revamp Apple, will ultimately win not by taking o­n PC rivals directly, but by changing the rules of the game.

This is a clear example of a successful company deliberately constructing a positive, successful culture.

Read the Times article (free subscription required).