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THE ESSENTIAL DEMING
Leadership Principles from the Father of Quality
By W. Edwards Deming, Joyce Nilsson Orsini
The McGraw-Hill Companies, Inc.Copyright © 2013The W. Edwards Deming Institute
All rights reserved.
The World Is Being Ruined by Best Efforts
(Best Efforts Without Guidance Lead to Failure)
People sometimes find themselves in a situation where things don't go right. The best employees find ways to "correct" the problem. I put the word correct in quotes because often the corrections wind up making things worse. Not because of mal-intent or lack of follow-through. If the problem is caused by the way the process is designed (a management responsibility), the tweaking done by the employee may alter the system in such a way that future products or services are even worse. The correction addresses the wrong problem and winds up doing more harm than good. It's counter-intuitive to believe that your best workers, doing their best, could make things worse. Best efforts won't cut it; better management of the system is needed.
This chapter contains articles that Deming wrote between 1978 and 1992, trying to help management take responsibility for actively managing. He recognized that many of the bad practices were so ingrained that they would take decades to be rid of. He also realized that many executives had no idea how much trouble they were in. He likened the situation in America to that in Japan in the late 1940s.
At the end of the chapter are articles specifically on problems with the merit pay system, competition and monopolies, and quality control (QC)-Circles.
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Deming wrote this note to himself to capture his thought that the United States is in a state of crisis, much as Japan had been after World War II. But unlike the Japanese, the United States doesn't know they're in a crisis.
The Invisible Crisis
Japan was in a crisis. The crisis was visible, the country blown to bits, destroyed by fire. Our country is in a worse crisis because it is invisible. Japanese top management asked me in 1950 to come to help. Japan soon became an economic power. The secret:
Management of a system, cooperation between components, not competition. Management of people.
We suffer from evil styles of management, such as ranking people, divisions, plants (creating competition between people), management by results, failure to understand cooperation in a system in which everybody wins.
Transformation is required: not mere change. Transformation requires Profound Knowledge.
From a note written April 4, 1992.
* * *
Fourteen years earlier, in a letter to the dean of a university, Deming discusses the many road-blocks that stand in the way of improvement of American industry. He talks about the joint efforts of the production-worker and management in Japan and the mistaken notion that the Japanese copy from others. If they are copying, how did they get so far ahead?, he wondered.
Poor performance in American companies lies, at least in part, in the failure of American management to keep abreast of modern methods of management and innovation, Deming believed. Relations between the American production-worker and American management "presents a sad spectacle" he states in this communication.
Irrational Explanations and Excuses
A road-block stands in the way of improved productivity in American industry, so badly needed in view of America's unfavorable balance of trade. The road-block is the irrational explanations and excuses offered by most Americans, including unfortunately most leaders of industry, for the success of the Japanese, and for the competitive position of their products. It would be better to face up to the facts, and try to understand better the reasons for the miracle of Japanese efficiency and quality. The miracle of economic growth in Japan has been the envy and a model for other industrial economies.
Most Americans, from top management on down to the rank and file, even as consumers, have a badly distorted image of Japanese industry. It seems incredible to Americans that the Japanese could out-smart Americans, not by low wages, not by longer hours, but by sheer efficiency and brilliant innovation. Accusation that Japanese firms dump their products on American shores below cost, through subsidy or preferential treatment by the Japanese government, and accusation of other so-called unfair techniques by Japanese industry, are mostly unfounded. There is also prevalent amongst Americans the idea that importation of Japanese products lowers our standard of living by taking jobs away from Americans, when the fact is that without Japanese products the standard of living of most Americans, especially those of lower income, would today be considerably lower than it is.
Everyone knows that the economy of the United States has not maintained leadership in productivity that the world requires for balance of commerce. There are doubtless many reasons for this poor performance, but one of them surely lies in the failure of American management to keep abreast of modern methods of management. Innovation in America has not kept up with the Japanese. Relations between the American production-worker and American management presents a sad spectacle.
By contrast, in Japan, the contribution of the production-worker and the contribution of management are a joint effort. All people work together toward the same end, even though the motivation may in some part be selfish. The greater the productivity, the better the economic lot of everybody. This is a simple principle and it is learned in Japan at an early age.
There is, in addition, the supposition in the minds of most Americans that Japanese manufacturers exist by copying the techniques and products of other countries. The Japanese are clever and can indeed, copy.
Whose trains did the Japanese copy? And where did they get the idea that trains should run on time within 15 seconds? (I do not mean 15 minutes.) Whose TV did Sony copy? Whose cameras? I hold in my hand a Casio hand-calculator, weight two ounces, one-quarter inch thick, with a digital clock that keeps time within two seconds per month. Could American manufacturers make it? Yes. Then why don't they? The Japanese beat them to it.
Failure of Americans to understand that the Japanese have also superior ability in innovation and that they have developed superior management and channels of trade is one of the barriers to better efficiency in American production, and to innovation in America. It would be far better for the leaders of industry in America to admit that most (not all) Japanese products are better and more dependable than the competitive American product, and that Japanese production is in general more efficient than American production.
The mail service in Japan is enviable: a letter that I posted to myself on the street at 7:25 p.m., just for a test, was waiting for me at my hotel at 10 o'clock that same evening. Obviously the Japanese postal system did not copy ours. Japanese homes have been 99 per cent electrified from a year or two after the close of the war.
I make the above assertions on the basis of work with Japanese industry that dates from 1950, 14 trips so far, a 15th to occur in October 1978, and with even longer experience with a cross-section of American industry. I may remind you that, according to Japanese testimony, it was the statistical control of quality that brought about the revolution in quality and efficiency of production in Japan, which began in 1950. These methods affect all aspects of production, from raw material to finished product, plus consumer research and re-design of product, and design of new products. One feature, especially applicable to production, is techniques by which to distinguish between (a) special causes of variation of quality and economic loss, which the worker himself can correct on statistical signal, and (b) faults of the system, which only management can correct. Statistical methods thus assist management and production-worker in Japan to pull together.
The boost in morale, and in production as well, of the production-worker in America, if he were to perceive a genuine attempt on the part of management to improve the system and to hold the production-worker responsible only for what the production-worker is responsible for and can govern, and not for handicaps placed on him by the system, would be hard to over-estimate. It has not been tried, I believe, outside Japan.
As an example, most people are not aware that the basic reason for recalls for a defective part in an automobile is chargeable to management, not to sloppy workmanship. The fault is in design, not workmanship. Design is the function of management, not of the production-worker.
There were other new principles of administration that Japanese management learned from an American in 1950. Results were obvious within six months in some companies. Within 15 years Japanese quality and efficient productivity had upset the monetary system of the world.
These principles, imported from America, used and refined in Japan, are at hand for anybody to learn and to use, including Americans.
Another unfortunate drag on American management is American schools of business that lead students to suppose that a manager need not know anything. There is in most American schools of business a loss of respect for the fundamentals of knowledge such as economics, history, theory of law, psychology, mathematics, statistical methods. Substitution of the computer for fundamentals will take its toll on American production.
From a Memorandum to the Dean of the School of Business Administration, The American University, August 23, 1978.
* * *
In this excerpt Deming puts the blame for poor performance squarely on the shoulders of top management. What is needed cannot be delegated, and cannot be done by the workforce, who are already doing their best.
Everyone Is Already Doing His Best
The wealth of a nation depends on its people, management, and government, more than on its natural resources. The problem is where to find good management. It would be a mistake to export American management to a friendly country.
A long road lies ahead of American industry—10 to 25 years—to regain a stable state of competitive position. Many changes are required. The quarterly dividend, and brief tenure in management positions, have defeated the competitive position and the standard of living that Americans have heretofore supposed could only move to still higher levels.
Paper profits, the yardstick by which stockholders and Boards of Directors often measure performance of top management, make no contribution to material living for people anywhere, nor do they improve the competitive position of a company or of American industry.
Paper profits do not make bread: improvement of quality and productivity do. They make a contribution to better material living for all people, here and everywhere.
It is not enough for everyone to do his best. Everyone is already doing his best. Efforts, to be effective, must go in the right direction.
It is not enough that top management commit themselves for life to quality and productivity. They must know what it is that they are committed to – i.e., what they must do. These obligations can not be delegated. Mere approval is not enough, nor New Year's resolutions.
Only top management can bring about the changes required. Failure of top management to act on any one of the 14 points listed [in Chapter 4] will impair efforts on the other 13.
From "Obligations of Management in the New Economic Age," The Institute of Management Sciences in Osaka, July 24, 1989.
* * *
Deming points out some of the deficiencies and fallacies of suggestions that are generally put forth for bringing about improvement. He believed that every one of them ducks the responsibility of management. He makes the point that hard work and best efforts by themselves will not produce quality, that knowledge is required.
The Usual Suggestions Fall Short
Where are we? How are we doing? Let us think about the U.S., or about all North America, not just about our own selves, nor just about our company, nor about our own community. How is the U.S. doing in respect to balance of trade? The answer is that we are not doing well.
North America has contributed much to new knowledge and to applications of knowledge. The U.S., by efficient product and natural resources, beginning around 1920 and for decades, put manufactured products in the hands of millions of people the world over that could not otherwise have had them. Our quality was good enough to create appetite for our goods and services.
For a decade after the War, North America was the only part of the world that could produce manufactured goods to full capacity. The rest of the industrial world lay in ruins from the War. They were our customers, willing buyers. Gold flowed into Fort Knox.
Everyone expected the good times to continue and to wax better and better. It is easy to manage a business in an expanding market, and to be hopeful. In contrast with expectations, we find, on looking back, that we have been on an economic decline for three decades. It is easy to date an earthquake, but not a decline.
What happened? It is hard to believe that anything is different now than in 1950. The change has been gradual, not visible week to week. We can only see the decline by looking back. A cat is unaware that dusk has settled upon the earth, but the cat in total darkness is as helpless as any of us.
Some industries are doing better than ever. There are more automobiles in the U.S. than ever before, and more travel by air. Do such figures mean decline or advance? An answer would have to take into account that in 1958 we had inter- city trains. There was a choice, air or train. Now, we have only limited train service, air or automobile; go by air or by automobile.
There was until a few years ago a favorable balance of trade in agricultural products—wheat, cotton, soybeans, to name a few—but no longer. Imports of agricultural products have overtaken exports, and as someone in one of my seminars pointed out, if we could put illicit drugs into the accounting, our deficit in agricultural products would show up worse than the published figures.
One of our best exports, one that brings in dollars, is materials for war. We could greatly expand this income but for moral reasons. American aircraft have about 70% of the world market, and bring in huge amounts of dollars. Another big earner of dollars is scrap metal. We can't use it, so we sell it. Close on to it is scrap cardboard and paper. Timber brings in dollars. Timber is important, renewable. Equipment for construction is an important export, so I understand. American movies, a service, bring in dollars. Banking and other services were at one time important, but no longer. The biggest U.S. bank is today far down the list of biggest banks in the world. Banking is now known mostly for losses on bad loans. (As an aside, quality in banking might be improved.)
We ship out, for dollars, iron ore, partially refined, aluminum, nickel, copper, coal, all nonrenewable. Scrap metal is nonrenewable.
Have we been living on fat? We have been wasting our natural resources, and worse, as we shall see, destroying our people. We need them.
Our problem is quality. Around 1958, Japanese goods started to flow in. The price was good, and the quality was good, not like the shoddy quality that came from Japan before the War and just after, cheap but worth the price. Preference for imported items—some at least—gradually climbed and became a threat to North American industry.
Were Americans caught napping? Are we still napping? Our problem is quality. Can't we make quality? Of course, and some American products are superior. We are thankful for them. Unfortunately, some good American products have little appeal beyond our borders, good paper clips, for example.
It will not suffice to have customers that are merely satisfied. A satisfied customer may switch. Why not? He might come out better for the switch.
What a company requires to get ahead is loyal customers, the customer that comes back, waits in line, and brings a friend with him.
What state of company is in the best position to improve quality? The answer is that a company that is doing well, future assured, is in excellent position to improve quality and service, thus to contribute to the economic condition of itself and of all of us, and has the greatest obligation to improve. A monopoly is in the best position to improve year by year, and has the greatest obligation.
A look at some of the usual suggestions for quality. There is widespread interest in quality. Suppose that we were to conduct next Tuesday a national referendum:
Are you in favor of quality? (Be honest in your answer.) Yes ___________ No __________
The results would show, I believe, an avalanche in favor of quality. Moreover, unfortunately, almost everybody has the answer on how to achieve it. Just read Letters to the Editor, speeches, books. It seems so simple. Here are some of the answers offered, all insufficient, some negative in results.
Make everybody accountable
M.B.O., management by objective, management by the numbers, actually tampering
M.B.R., management by results
Merit system (actually, destroyer of people)
Incentive pay. Pay for performance
Work standards (quotas, time standards)
They double the cost of production be they for manufacturing or for service (bank, telephone company)
They rob people of pride of workmanship, the emphasis being on numbers, not on quality
They are a barrier to improvement
Just in time
Zero defects. Zero defect days
Some remarks. The deficiencies and fallacies of the suggestions listed above will be obvious. Every one of them ducks the responsibility of management, requiring only skills, not knowledge about management.
Why do the above suggestions fall short? A little ingredient that I call profound knowledge is missing from all the above suggestions. There is no substitute for knowledge. Hard work and best efforts will by themselves not produce quality nor a market. We shall soon come to suggestions for the missing ingredient, profound knowledge.
Excerpted from THE ESSENTIAL DEMING by W. Edwards Deming. Copyright © 2013 by The W. Edwards Deming Institute. Excerpted by permission of The McGraw-Hill Companies, Inc..
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