Wednesday, January 6, 2010

Interpreting W. Edwards Deming's 14 Points (Methods for Management of Quality and Productivity)

This synopsis captures the "tone" of "Quality & Productivity" talk.

Dr. Deming sent a fax after reading this saying, "Well Done. I thank you and appreciate it much." - Dr. W. E. Deming. (NO RED INK!) So you can read in confidence.
"Fabulous." - Tony Robbins. "I enjoyed it, very much." - Bob Pittman

From: QUALITY DIGEST/June 1994
Long after Deming's death, his 14 points will continue to transform U.S. industry.

Interpreting Deming's 14 Points
by Zuma Dogg

[Editor's note (From "Quality Digest," Not ZD's): W. Edwards Deming died December 20, 1993. The following article analyzing his famous 14 points was written before his death. Fortunately, Deming had the opportunity to review this analysis.]

His name is W. Edwards Deming, the American who taught the Japanese about quality.

Back in the late 1940's and early 1950's, Japan was in an economic crisis. They had just lost the war and it was time to rebuild. They took Deming's methods for management and productivity and put them to use in industry. The rest of this economic miracle is history. They listened when no one else would.

How can WE bring our industry and our nation "out of the crisis"? Let's review Deming's 14 points of transformation:

1. Create constancy of purpose toward improvement of product and service, with the aim to become competitive and stay in business, and to provide jobs.

Pretty complex point. What does it mean?

Think long-term. Set the course today to be in business tomorrow. "Doing your best" is not good enough. Everyone is already "doing their best". First, you must know what to do, THEN do your best. Know what business you are in, THEN commit to constant improvement of quality. Innovate continuously.

Take the vacuum tube industry, for example. Once the transistor was invented, the vacuum tube quickly became obsolete. Could workers "do their best" to produce a better tube? Of course not.

Those who fail to improve constantly and innovate will eventually find themselves out of business. To improve, you must predict customers' needs. Customers rarely point out the need for improvement. The electronics industry didn't ask for the transistor. Someone who was committed to improvement predicted that the innovation would be accepted.

2. Adopt the new philosophy. We are in a new economic age. Western management must awaken to the challenge, must learn their responsibilities and take on leadership for change.

What characterizes this "new economic age"? Rapid change, turbulent environment, constant technological breakthroughs. Consumers demand instant gratification. Technology changes so quickly that we don't even have time to catch up with the changes. By the time a new product hits the market, a new innovation occurs before you can get the old ones off the shelf.

It has become much tougher to predict and forecast in this turbulent environment. Today, predicting the future means shaping and controlling the future and adapting to what you cannot control.

3. Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the products in the first place.

The United States builds the product first, then inspects for defects later. By then, it's too late! You've already spent the time, effort and money on production. Catch the defect after the fact, and you have to send it back to be fixed or scrap the whole thing. It's usually a lot tougher to repair a product than it is to build it right in the first place. Meanwhile, you've spent twice the time, effort and money.

We spend too much time defining what IS and ISN'T acceptable, then checking to see if and why the parameters were met. We chase out tails around, never exactly sure, always adjusting and readjusting; doing more harm than good.

SEEK PROFOUND KNOWLEDGE OF THE PROCESS. Understand what variations (defects) are inherent to the process (common causes) and work to control those variations. Improve the system. If a variation occurs outside the range of common cause, you have a "special cause". Only special causes should generate effort to uncover the reason variation occurred.

4. End the practice of awarding business on the basis of price tag. Instead, minimize total cost. Move toward a single supplier for any one item on a long-term relationship of loyalty and trust.

The bottom-line price tag doesn't always tell the whole story. Some one in my area started a local painting business. When he first started his business, he purchased the cheapest paint so he could make more profit.

Turns out he needed to double the amount of coats to get the job done. Therefore, he used twice as much paint, and it cost him twice the time and effort.

In addition, the paint cracked sooner than other paints. He lost the repeat business, as the dissatisfied customers spread the word to neighbors of the bad experience with his company. What advantages come from moving toward a single supplier?

* Customer and supplier work together to create a system of optimization for mutual gain and satisfaction. (Work with each other instead of against each other.)

* Customer and supplier can work toward long-term (constant) improvement of quality of design and service. (They can adapt to each others' changing needs.)

* Lower and lower costs occur by constantly improving quality and efficiency. (It's cheaper and more efficient if a supplier gets a higher volume of a customer's business. Both benefit.)

If you have five suppliers for one part, that's five times the amount of headaches that can occur. (Five times the ordering, five times the accounting procedures, five times the effort. This results in reduced efficiency.

5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.

We set standards, run through the process and analyze the results. As long as we fall within the range of "what has been deemed acceptable," we did our job. If the output isn't falling within the specified range, management will "demand improvement." They'll say: "Do a better job!" "Less Defects!" Or, "Do a better job inspecting for defects."

How many people have been fired from jobs for unsatisfactory results only to have the problem persist with the new employee? Deming says, "Don't blame the individual, fix the system for them." Improving quality and productivity only comes by IMPROVING THE SYSTEM.

The customer of worker almost never tells you anything is wrong. Chances are, they don't know themselves. Management must strive to predict and uncover the need for improvement. Don't blame the individual, fix the system for the individual.

Some other examples of improving the system: The telephone is an improvement of the telegraph. The fuel injector is an improvement of the carburetor.

How does improving the system help decrease costs? If florists can predict how many roses will be needed next Valentine's Day, they can have the proper amount of inventory on hand, so as to fill every order; but not have excessive leftovers to spoil.

Continuous improvement is a cycle: Recognize the opportunity, test the theory to achieve the opportunity, observe test results, act on the opportunity.

6. Institute training on the job.

U.S. Management (and Government) is VERY BUSY. They don't have time for these kinds of details. Managers view training as an expense because they view employees as a commodity -- not an asset. When new employees show up for work on the first day, how many times does a coworker show them what to do?

Management wants the job done right. They institute the rules, regulations and procedures. Each time one employee teaches the next, more is lost in the translation. Mistakes are passes down the line. What gets left out? One person should be responsible for teaching everyone the same skill.

7. Institute leadership. The aim of leadership should be to help people and machines and gadgets to do a better job. Leadership of management is in need of overhaul, as well as leadership of production workers.

Deming on leadership: "What is a leader? As I use the term here, the job of a leaser is to accomplish the transformation of his organization. How may he accomplish transformation?

First, he has a theory, a vision of his organization as it would be if transformed. He understands why the transformation would bring gains to his organization and to all the people that his organization deals with.

Second, he is a practical man. He has a plan, not too difficult. A leader must guide his organization through the stages of transformation. But what is in his head is not enough. He must convince and change enough people in power to make it happen. He possesses persuasive power. He understands people." [ZD: Sorry Deming kept saying "he", ladies. He was born in 1900 and probably meant "he" as in "MANkind."]

8. Drive out fear, so that everyone may work effectively for the company.

Fear is a cause of un-measurable waste and loss. Someone who is fearful takes whatever action necessary to remove the source of fear. These actions do not reflect the company's best interest. Fear robs people of pride and joy in their work and kills all forms of intrinsic motivation. It prevents people from thinking for themselves. They instead concentrate on removing the source of fear (getting the fear "off their back").

For example, a factory worker must build 100 widgets by week's end. His boss tells him, "If you don't finish all these widgets, you're fired!" So, of course the worker gets then done, and they're shipped off to the customer. (Twenty-five are defective, but the employee still hit the quota and has his job.)

Managers who rely on fear believe those working under them are not capable, and this becomes a self-fulfilling prophecy. Management must create a work environment where workers can take pride and joy in their work. Don't blame the individual -- fix the system for them.

9. Break down barriers between departments. People in research, design, sales and production must work as a team to foresee problems of production and in use that may be encountered with the product or service.

Have departments work together at all production stages. Everyone must share knowledge in a cooperative (not competitive) effort. In the United States, departments work independently of each other. In Japan, departments work interdependently at all production stages. It doesn't do any good to design a flawless product the sales department can't sell ot the production department can't produce. [ZD: Massive City Hall applications here.]

For example, an automotive design team makes a minor adjustment in the design of their 1995 model. This change would require the production department to make a major overhaul in their process that is not possible. So the design must be sent back and reworked. Meanwhile, production is delayed and time is spent reworking the project. Had both departments cooperated and involved each other from the start of the process, this inefficiency could have been presented.

10. Eliminate slogans, exhortations and targets for the work force asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and this lie beyond the power of the work force.

Management likes to hang up a lot of posters with such exhortations as "Zero defects!", "Safety is YOUR responsibility!", or "Our goal is to please the customer at all times!" These slogans seem harmless enough, until they backfire.

How about the company demanding "zero defects", not realizing that a 12-to-15 percent margin of error (defects) is a built-in function of the system, no matter how hard the worker tries. Deming tells of a poster he saw claiming, "Safety is YOUR responsibility", next to a set of factory stairs that had no railing and steps that needed repairing.

To further illustrate, I look back to an experience I had with a rude salesperson. When I asked, "What about the sign over there that says, 'Customer satisfaction is our number one goal", he replied, "I don't know anything about that sign, my boss hung that up."

Management would like to think such exhortations take the responsibility off them and put it on the employee. However, there is no substitute for leadership. Defect elimination, a safe workplace, customer satisfaction, all start in the boardroom. [ZD: In this case, YOUR office, y'all.] It is management's responsibility to improve the system for the individual.

11a. Eliminate work standards (quotas) from the factory floor. Substitute leadership. 11b. Eliminate management by objective. Eliminate management by numbers, numeric goals. Substitute leadership.

Quotas and numerical goals are the leading cause of fear in the workplace. They rob individuals of intrinsic motivation and force them to work in a counterproductive manner.

For example, a research worker must fill out 15 surveys a night. Sometimes, this presents no problem. As a matter of fact, sometimes he finishes all 15 early and has time to roam around and do nothing. (Or even worse, bother other workers.)

Other times, it's close to quitting time on Friday, and the market research worker only has 12 surveys completed. How will they his the quota? It's easy. You call a friend (13), let someone through the screener who shouldn't have made it into the survey (14), and make one up entirely (15). (Have a nice weekend!) Either case (finishing early or not at all) hurts quality and efficiency.

If we remove quotas, how do we ensure the worker won't "slack off"? Again, there is no substitute for leadership. Eliminate fear, improve the system, create an environment where the worker can take pride and joy in their work. Employees are your organization's #1 asset. If you can't trust your workers, you are in for trouble.

12a. Remove barriers that rob people in management and in engineering of their right to pride and workmanship. This means, inter alia, abolishment of the annual or merit rating and of management by objective.

THIS IS THE TOUGHEST PILL FOR CORPORATE AMERICA TO SWALLOW. This point calls for eliminating ranking of individuals, grades, gold stars, incentive pay (bonus money) and commissions. Ranking and merit systems please the boss, not the customer. These forces create conflict, competition and humiliation. They rob the individual (and our nation) of intrinsic motivation, cooperation, dignity, self-esteem and joy of work.

If you rank workers, why help a new employee, or someone at the bottom who needs help? That low end MAKES YOU LOOK GOOD. Forget what's best for the company. It's a given that some people perform better than others. In ANY ranking system, you will ALWAYS have a top, middle and bottom. Ranking will not eliminate the middle and bottom, it will only demoralize the majority of individuals.

A grade is a permanent label, a branding. A grade tells children what is expected of them, the rest of their life. Students who get bad grades become demoralized, are viewed in a different light, experience fear and lose self-esteem. They become victims of self-fulfilling prophecy.

Again, there is no substitute for leadership. Fix the system for the individual.

What's wrong with a commission? It forces salespeople to sell customers the wrong items. When customers realize what happened, they will be upset and tell others of their bad experience. Some sales people won't even bother with a customer if the commission doesn't look big enough. If you get a $1000 bonus for selling 100 widgets a month. After widget 100, it's time to start "putting off" turning in new orders, and save them toward next month's totals. They can wait a few days.

13. Institute a vigorous program of education and self-improvement. Point 6 deals with training regarding "the skill and knowledge necessary to do the job." Point 13 addresses the need to encourage and provide resources so that people may develop. Just as we reinvest in other sources, we must reinvest in a company's most important asset -- it's people.

Management must make clear, in the beginning, their commitment to this concept. They must take time and make an effort to institute the continuous improvement concept into the system.

14. Put everybody in the company to work to accomplish the transformation. The transformation is everybody's job.

The transformation must start with top management, for they have the most leverage and influence. They are the leaders. Once the decision has been made, middle management, supervisors and workers must come on board. It takes training and removal of inhibitions (fear, competition, barriers and divisions). We must fully cooperate with each other to constantly improve the system. THINK HOLISTICALLY (systematically).

In order for the transformation to occur, management must see things in a new light. Don't be in the business of increasing profits. Be in the business of constantly delighting customers and workers. Then you will find your profits constantly increasing.

In conclusion, I would like to thank Dr. W. Edwards Deming, Ed Baker, Bill Scherkenbach, Kosaku Yoshida and Jim McIngvale for investing their time, effort and knowledge.

References: Deming, W. Edwards, Out of the Crisis, Massachusetts Institute of Technology, Center for Advanced Engineering Study (1982), Cambridge, Massachusetts.

Zuma Dogg 213-785-7272

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