Predictions You Can Count On --Dickeson
How did we use this rate? We then multiplied it by "standard" hours: predicted hours for pricing and loading and actual hours for post-mortem analysis. But there are Five Feuding Families in our printing process: a) people, b) machines, c) materials, d) environment and e) sequence. Small variations within, and among, these Five Families always cause non-linear variation in hourly outcome dollar values.
Standards are linear predictions, while actual hours are linear outcomes. Then we impose on these the Voice of the Customer, seeking linear demands of quality attributes and delivery schedules—budgets or goals—that we can only incompletely fulfill.
Managing is predicting. This we know. We must be able to predict the results that will follow from our actions in order to run a business. But now we know that we can do so only imprecisely because there's some master scale of rounding and interrelationships—input variance—that confounds precise attempts. We have to live in this imprecise, non-linear world. Somehow we must go with the flow and do the best we can. We can't predict with precision anymore so we "optimize" not "maximize."
With humans of variable skills, machines of a variety of capabilities in variable conditions of repair, materials in a range of conditions, environment shifting between humid and dry, hot and cold, dusty and clear, clean and dirty, and prior jobs requiring settings, undoing and re-doing. . .we cope. We perform in an ever-changing fractal world where slight changes in variability-scale or rounding have profound effects on outcome.
BHRs (Budgeted Hourly Rates) and production standards—Job Costs—are products of an old linear world that no longer exists and never really did. We did the best we could with what we had to work with at the time. It was our own version of reality because we believed in it. It became true because we said it was true, but in our hearts we knew it wasn't so.