THE DEMING SYSTEM OF PROFOUND KNOWLEDGE

The prevailing style of management must undergo transformation. A system can not understand itself. The
transformation requires a view from outside. The aim of this chapter is to provide an outside view-a lens-that I call
a system of profound knowledge. It provides a map of theory by which to understand the organizations that we
work in.
The first step is transformation of the individual. This transformation is discontinuous. It comes from
understanding of the system of profound knowledge. The individual, transformed, will perceive new meaning to
his life, to events, to numbers, to interactions between people.
Once the individual understands the system of profound knowledge, he will apply its principles in every kind of
relationship with other people. He will have a basis for judgment of his own decisions and for transformation of the
organizations that he belongs to. The individual, once transformed, will: - Set an example - Be a good listener, but
will not compromise - Continually teach other people - Help people to pull away from their current practice and
beliefs and move into the new philosophy without a feeling of guilt about the past
The layout of profound knowledge appears here in four parts, all related to each other: - Appreciation for a
system - Knowledge about variation - Theory of knowledge - Psychology
One need not be eminent in any part nor in all four parts in order to understand it and to apply it. The 14 points
for management (Out of the Crisis, Ch. 2) in industry, education, and government follow naturally as application of
this outside knowledge, for transformation from the present style of Western management to one of optimization.
The various segments of the system of profound knowledge proposed here can not be separated. They interact
with each other. Thus, knowledge of psychology is incomplete without knowledge of variation.
A manager of people needs to understand that all people are different. This is not ranking people. He needs to
understand that the performance of anyone is governed largely by the system that he works in, the responsibility
of management. A psychologist that possesses even a crude understanding of variation as will be learned in the
experiment with the Red Beads (Ch. 7) could no longer participate in refinement of a plan for ranking people.
Further illustrations of entwinement of psychology and use of the theory of variation (statistical theory) are
boundless. For example, the number of defective items that an inspector finds depends on the size of the work
load presented to him (documented by Harold F. Dodge in the Bell Telephone Laboratories around 1926). An
inspector, careful not to penalize anybody unjustly, may pass an item that is just outside the borderline (Out of the
Crisis, p. 266). The inspector in the illustration on page 265 of the same book, to save the jobs of 300 people,
held the proportion of defective items below 10 per cent. She was in fear for their jobs.
A teacher, not wishing to penalize anyone unjustly, will pass a pupil that is barely below the requirement for a
passing grade.
Fear invites wrong figures. Bearers of bad news fare badly. To keep his job, anyone may present to his boss only
good news.
A committee appointed by the President of a company will report what the President wishes to hear. Would they
dare report otherwise?
An individual may inadvertently seek to cast a halo about himself. He may report to an interviewer in a study of
readership that he reads the New York Times, when actually this morning he bought and read a tabloid.
Statistical calculations and predictions based on warped figures may lead to confusion, frustration, and wrong
decisions.
Accounting-based measures of performance drive employees to achieve targets of sales, revenue, and costs, by
manipulation of processes, and by flattery or delusive promises to cajole a customer into purchase of what he
does not need (adapted from the book by H. Thomas Johnson, Relevance Regained, The Free Press, 1992).
A leader of transformation, and managers involved, need to learn the psychology of individuals, the psychology of
a group, the psychology of society, and the psychology of change.
Some understanding of variation, including appreciation of a stable system, and some understanding of special
causes and common causes of variation, are essential for management of a system, including management of
people (Chs. 6, 7, 8, 9, 10).
 Understanding Variation
The first half of the session covered the highlights of the material from last time. The examples from Don
Wheeler's book "Understanding Variation" continued to provide the group with interesting insights as to the value
of using control charts to understand variation. Stories about real life reactions to variations in results reminded us
just how often behavior is driven by "2 point comparisons". We were also reminded of experiences where large
percentage changes in small portions of the total picture will drive analysts to ask, "What's happening?", though
the process was actually in control. Small percentage changes get overlooked, on the other hand, though they are
the ones really falling out of normal control limits.
_Mistake One:_ Interpreting noise as if it were a signal. _Mistake Two:_ Failing to detect a signal when it is
present.
The Control Chart approach provides a tool for minimizing the chance of experiencing these two mistakes. 人机料
法
Using Control Charts in our work and lives:
In the later part of the session, we invited those who had done their homework from last time to share the data
they had gathered and charted. There were observations taken in both the workplace and in non-work settings.
Some general observations that were discussed:
- The act of measurement in itself brings about a higher sense of awareness of the process being observed. This
awareness often brings about new insights about the process and a deeper level of understanding.
- One must be cautious about "explaining" a major variation that occurs _inside_ the control limits for the sake of
eliminating that point from the data. There is the potential for assigning "meaning" to such points. Shewhart's
teachings warn that such behavior may not be economic. It takes discipline to stay focused on what falls outside
the limits.
- Much in the same vein as above, it's difficult to resist the tendency to jump to conclusions about what a process
is doing, or to "predict" what the causes of variation are, based on personal experience with the process being
measured. While that experience is valuable -- Dr. Deming referred to the value of "deep process knowledge" --
one should have faith in the control chart to provide pointers to what the most important things to work on are;
those that will bear the largest savings and reductions in system complexity.
- Use of the statistical method _combined_ with knowledge of the process makes one's confidence in prediction
much higher.
The scribe's other duties got the best of him this month, so we only have a very brief note on the session... Our
thanks to Steve, John and Lucille Jurgens, though, for providing us with their experience and insights over these
past two meetings.
/s/ Dan Robertson
The Center for Quality and Productivity improvement University of Wisconsin 610 Walnut Street (608) 263-2520
Madison, WI 53705 Fax (608) 263-1425
The Center for Quality and Productivity improvement (CQPI) was established at the University of Wisconsin-
Madison in 1985. Among other things CQPI publishes reports. These reports are available through their office;
please call or write for an order form which has an annotated bibliography of all their reports. A selected list of
reports which I feel would most interest quality management professional follows.
Report 5: My First Trip to Japan. Peter Scholtes, February 1986
Report 6: Total Quality Leadership vs. Management by Control. Brian L. Joiner and Peter R. Scholtes, February
1988.
To survive in increasingly tough markets, top management in American companies will have to their desire to
"control" their employees, and instead learn what it means to provide Total Quality Leadership.
Report 13: Doing More With Less in the Public Sector: A Progress Report from Madison, Wisconsin. William G.
Hunter, Jan O'Neill and Carol Wallen, June 1986.
The new quality improvement ideas can help public officials combat the effects of decreasing budgets just as
they help private business increase productivity Quality Progress, July 1987, pp. 19-26.
Report 14: Drastic Changes for Western Management. W. Edwards Deming, June 1986.
This report is a compact summary of the most important points that Dr. W. Edwards Deming has been making
about changes that must be made by American business if they are to be competitive.
Report 15: How to Apply Japanese Company-Wide Quality Control in Other Countries. Kaoru Ishikawa,
November 1986.
This report highlights the experiences of Kaoru Ishikawa a, a leader in Japan's QC movement, who has spent the
last 20 years visiting countries all over the world to give lectures and guidance on QC implementation. Quality
Progress, September 1989, V. 22, No. 9, pp. 70-74
Report 17: Eliminating Complexity from Work: Improving Productivity by Enhancing Quality. F. Timothy Fuller, July
1986.
Increasing quality does not increase cost; in fact, it is poor quality that increase "complexity," which in turn
increases costs and decrease productivity. National Productivity Review, Autumn, 1985.
Report 18: The World Class Quality Company, William A. Golomski, December 1986.
Through a long history of consulting with companies around the world, William Golomski has found some themes
common to companies capable of achieving world class quality.
Report 25: The Scientific Context of Quality Improvement. George Box and Soren Bisgaard
Quality Progress, March 1988, pp. 37-41
Report 46: Do Interactions Matter? George Box
Quality Engineering 1990, V. 2, No. 4, pp. 497-502
Report 48: Good Quality Costs Less? How Come? George Box, March 1990.
It is sometimes supposed that the manufacture of high quality goods must be expensive. The reasons why this
need not be so and why quality should cost less are discussed. Quality Engineering 1990-91, V. 3, No. 1, pp. 85-
90.
Report 59: Teaching Quality Improvement by Quality Improvement in teaching. Ian Hau, February 1991.
Report 74: Quality Improvement-The New Industrial Revolution. George Box, October 1991.
Beginning from Bacon's famous aphorism that "Knowledge Itself is Power", the underlying philosophy of modern
quality improvement is seen as the mobilization of presently available knowledge and knowledge gathering.
International Statistical Review, V. 61, no. 1, pp. 3-19.
Report 84: How to Get Lucky. George Box, June 1982.
Some principle for success in quality improvement projects discussed, in particular, how to encourage the
discovery of useful phenomena not initially being sought. Quality Engineering, V. 5, No. 3, pp. 517-524.
Report 97: Bringing Total Quality Improvement into the College Classroom. Lee Hansen, March 1993.
Report 105: Total Quality Management and D*A*T* Model. Joe Van Matre.
Please send me any feedback on what reports you found useful,suggestions on how to make this list more
useful... to John Hunter, Mail Stop102-268, 2200 Wilson Blvd, Arlington VA 22201. E-mail
john.hunter@tqm.permanet.org. Or leave a message for John Hunter on the TQM BBS, 301-585-1164.
[This file is available as a bulletin in the Washington Deming Study Group area on the TQM BSS and as a file
available for download. Filename: ARTCLES.ZIP.]
By: John Hillkirk Journal: USA Today Date: Unknown pps: 1 of 1 OUTLINE: Deming is the quality guru
They do well to listen
Deming's way is about quality, putting an end to waste and inspections
Deming was ignored in US, but Japan listened
Managers are to blame, not the workers
Manufacturing, is straightforward, but Deming's methods work in services as well
Deming will tell Pentagon's purchasing managers buy products based on quality not price.
OVERVIEW:
Campbell Soup, P.I.E. trucking and Ford Motor Co. "We have one quality guru here," "that's Dr. Deming".
"They'd do well to listen," say Mary Walton of the Deming management method.
 Deming's way is all about quality and putting an end to waste, and there's no shortage of waste at the Pentagon."
Deming was ignored in the United States. But the war- battered Japanese took a deep interest in his statistical
methods, which eliminate inspection and make quality everybody's job.
Deming didn't catch on here until 1981, after NBC aired a documentary titled "If Japan Can, Why Can't We?"
Deming was invited to Ford, by Don Peterson - he ripped apart Ford's quality effort. His number one concern:
Ford relied on inspections rather than building products right the first time.
Mr. Baker of Ford stated "He has so much to offer". It's so awful that this country didn't tap into him years ago.
What Deming teaches is that managers, not workers, are responsible for 80% of the defects in products or a
service. The workers aren't bad; the system is bad.
In manufacturing, this is relatively straight forward. If a car bumper is defective, you trace the problem to stations
on an assembly line. Then you put controls in place to make sure it doesn't happen again. But Deming's methods
work in service companies, too.
Deming will tell the Pentagon's purchasing managers to buy products based on quality, not just cost, and to whip
their suppliers into shape. Says Walton's "For then to follow Deming would be a revolution but I can't imagine that
they'll go for it".
CONCLUSIONS:
In this short article, I found that this had a lot to say. That there is only one quality guru. That's Dr. Deming. Not
much time left. Manufacturing and service's alike should listen to the man and take his message seriously. The
quality was is to end waste and inspections. Make/do it right the first time and put controls in place to prevent
errors from happening again. Its not the workers that is bad; its the system that is bad. Deming talked with the
Pentagon's purchasing manager's "buy products based on quality, not price."
Prepared by: AZCM Wm. P. Bennett 11 May 1992
The following obituary on Dr. W. Edwards Deming appears on page C9 of the 21 December 1993 edition of
_The_Washington_Post_.]
W. Edwards Deming Dies; His Lecture on Quality Control Fueled Japan's Rise
By Claudia Levy Washington Post Staff Writer
W. Edwards Deming, 93, the quality control guru who was instrumental in steering Japan from post-World War II
industrial recovery toward world economic power, died of cancer Dec. 20 at his home in Washington.
Dr. Deming, who was virtually unknown to the American general public, was a major public figure in Japan, where
he had been held in awe for more than 40 years. He had first visited Japan in 1947, but he made his great mark in
1950 when he gave a landmark series of lectures to leading industrialists on the gospel of "quality control." His
advice helped them raise their country from the ashes of World War II to enormous industrial power.
Japan's manufacturers were eager to learn about American business techniques. But Dr. Deming urged them to
eschew inefficient American methods and create new systems that focused on the consumer. He told them, in
short, that they could do better than Americans.
Eighty percent of Japan's top business and industry leaders, or about 230 officials, managed to attend the eight
day-long lectures.
Dr. Deming convinced the Japanese that focusing on quality, and producing goods that didn't break or wear out,
could make them a force in world markets. At the time, "Made in Japan" was synonymous with cheap products
and inferior construction. The country was locked in poverty created by the devastation of World War II, and
economic planners thought it would be a miracle if the pre-war standard of living could be restored.
Within months of his lecture series, Japanese companies began instituting the statistical consultant's ideas and
eliminating waste that had helped suppress industrial growth. While energy consumption dropped, quality rose,
and Japan's economic strength increased dramatically.
"I told them that Japanese industry could develop in a short time," Dr. Deming told an interviewer in 1980. "I told
them that they could invade the markets of the world and have manufacturers screaming for protection in five
years. I was, in 1950, the only man in Japan who believed that."
He told them that it was always cheaper to do the job right the first time than to let defects enter the production
line.
"Quality is not something you install like a new carpet or set of bookshelves," he would say. "You implant it.
Quality is something you work at. It is a learning process."
"We needed his authority," one Japanese industrialist said. "He fascinated the Japanese people."
In later years, when Dr. Deming returned to Japan, he was always welcomed back by extensive television
coverage and bowing dignitaries. "He is considered like a god," the director of the U.S. office of the Japan
Productivity Center told Washington Post staff writer John Burgess in 1988.
Since 1951, Japan has yearly awarded prestigious "Deming Prizes" to companies that excel in management and
production. Another mark of the esteem in which he is held in Japan can be seen in the main lobby of the Toyota
headquarters building in Tokyo. Three portraits dominate the lobby, one of the company's founder, the second of
its current board chairman and the third, and largest, of Dr. Deming.
In the United States, the tall, craggy quality control specialist worked out of a basement office in his home near
Westmoreland Circle in Northwest Washington. He had been a longtime professor of statistics at New York
University and also had taught math, engineering and physics earlier in his career. He also had been a
Washington civil servant. He was a specialist in statistical quality control, the careful monitoring and analysis of all
aspects of production.
He lectured businesses and other organizations about identifying weak points and eliminating defects. He urged
manufacturers to involve workers in decision-making. In recent years, his teachings have been more readily
embraced by American industrialists anxious to compete with the Japanese. Some, including automakers, have
reported improvements in productivity.
One outgrowth of his Japanese lectures was the creation of so-called quality circles, committees of workers
trained to analyze and solve quality problems. Widely adopted in Japan since the 1950s, quality circles first
appeared in this country at Lockheed Missile and Space Co. in 1974. A decade later, there were thought to be
more than 3,000 such circles at U.S. compa-
nies, including 90 percent of the Fortune 500 corporations.
He advised cooperation over competition, both with employees and subcontractors. Rather than switching from
supplier to supplier to get the best price, he counseled, a company should settle on one supplier and build a long-
term relationship. But for years, American industrialists thought Dr. Deming's ideas would prove too hard to
institute, saying that management and workers differ in many ways from those in Japan.
Dr. Deming remained largely a prophet without honor in his own land until 1980. It was a year in which the per
capita gross national product in the United States, once first in the world, had fallen to seventh place, and the
Japanese had come to dominate consumer goods markets.
That summer, NBC News broadcast a special report, featuring Dr. Deming and others, called "If Japan Can . . .
Why Can't We?" It helped generate new interest in the manufacturing techniques of Japan. NBC received
thousands of requests for videotapes and transcripts. American companies anxious about foreign competitors
began to seek Dr. Deming's advice. He become a consultant at Fortune 500 companies, including Ford and
General Motors.
Dr. Deming was born in Iowa and raised in Wyoming. He was an elec-
trical engineering graduate of the University of Wyoming and received a doctorate, in mathematics and physics,
from Yale University.
He came to Washington in 1927 to do research for the Agriculture Department on the physical properties of
compressed gases. By 1936, he was in charge of courses in mathematics and statistics at the Agriculture
Department's graduate school. He joined the Census Bureau in 1939 as head mathematician and statistician and
began lecturing about quality control. His work during World War II focused on teaching American engineers and
technicians to use statistics to improve the quality of war materiel. It was essentially the same course he de-
livered to post-war Japan. He joined the NYU faculty in 1945.
He was a member of the International Statistical Institute and the National Academy of Engineering. He was
elected to the Science and Technology and the Automotive halls of fame. His books included "Out of Crisis" and
"The New Economics."
Dr. Deming's first wife, Agnes Deming, died in 1930, and their adopted daughter, Dorothy Deming Baker, died in
1984. His second wife, Lola Deming, a researcher at the National Bureau of Standards, died in 1986. Survivors
include two daughters from his second marriage, Diana Deming of Los Angeles and Linda Ratcliff of Potomac;
seven grandchildren; and three great-grandchildren.
FUNDAMENTALS OF DEMING MANAGEMENT THEORY AND PRACTICE
"Adopt and Institute Leadership" Dr. Deming's point #7,
Three key aspects of leadership that require knowledge of psychology are personality, values, and beliefs.
Participants in this one-day workshop explored each of these three issues through a combination of group
exercises, lecture and discussion lead by Harold Haller. The following presents a glimpse of the rich content and
process of this day's activity.
Each person must be encouraged to exercise her uniquely individual gifts to accomplish the aim. A leader has to
adapt his personality to help the people he leads. Understanding personalities is an important skill for leaders.
With an understanding of personality, individuals can improve communication. The Myers Briggs Type Indicator
(MBTI) is a widely used pencil and paper inventory of an individual's personality preferences. Haller encouraged
leaders to use MBTI to improve self knowledge and interpersonal communications among their team members.
A few tips for recognizing personality preferences:
1. Establish whether the subject's preference is an E (Extrovert) or an I (Introvert). This refers to how people
process information. Pose a question to a subject where there is no quick answer. The extrovert will often begin
discussing the question while the introvert will think about it before answering.
2. Try to establish whether the subject likes or ever needs closure relative to issues. Consider proposing a future
meeting between you and the subject. The J (Judging) will want the details but the P (Perceiving) will be
comfortable keeping the plans flexible.
3. To understand whether a person is a Sensing type (S) or an Intuitive (N) type, get into a discussion with them
about a problem. S's will want to identify the details fairly quickly, N's will begin by avoiding the details and
instead, look at the "big picture" first.
4. To determine if a person's preference is Thinking (T) or Feeling (F), bring up a situation about a decision that
may be announced in the future. Ask what is liked or disliked about this decision. T's will like the logic and order of
planning before they consider the impact. F's will start by discussing the impact of the decision on people and
then examine the logical aspects of the decision.
Examining Beliefs
Haller defined beliefs as "Things believed or accepted as true; especially a particular tenet or body of tenets,
accepted by a group of persons."
Most people don't question their beliefs. Leaders need to help their people identify and clarify what they believe.
Beliefs determine what can be done.
Some examples of personal and organizational beliefs:
Do we believe that people want to do good work or do we believe people don't really care about work?
Do we believe that it is more important to look good or is it more important to do the right thing?
Do we believe all people can learn and grow?
Values were defined as "Principles, standards, or qualities considered worthwhile, desirable or highly regarded.
The things that are important."
"Organizations need to define and publish their values. The definition of these values starts with Senior
Management. A common set of organizational values helps individuals operate whenever policies are not explicit
and specific procedures are absent. Shared values enhance communication.
When values are in conflict active listening is a needed element in communication. Leaders recognize that
people in an organization need nurturing and support in order to effect long-term change.
____________________________________________________________
Harold S. Haller, Ph.D. President, Harold S. Haller & Co.
Dr. Haller studied with Dr. W. Edwards Deming from 1981 to 1993, and frequently assisted Dr. Deming with his
famous four-Day seminars. For 20 years, Dr. Haller has brought the real world into the classroom as an adjunct
professor and lecturer. As a consultant to more than 50 companies since 1967, Dr. Haller has concentrated on
quality and productivity improvements in management, marketing, production, and R&D.
____________________________________________________________
Role of a Manager of People from W. Edwards Deming's Seminar Notes, 13 August, 1990.
1. A manager and his people understand the meaning of a system, and how the work of his group may support
these aims.
2. A manager works in cooperation with preceding and with following stages toward optimization of the efforts of
all stages.
3. He understands that all people are different from each other and tries to create for everybody interest,
challenge and joy in work. Improvement and innovation are his aim.
4. He acts as a role model and in an unceasing learner.
5. He is coach an counsel, not a judge.
6. He understands a stable system including what to do about mistakes and failures of people and how to help
them. 7. He has 3 sources of power. l) Forma] 2) Knowledge 3) Personality
8. He will study results with the aim to improve his work.
9. Another aim is to learn who if anybody is outside the system, and in need of special help.
10. He creates trust (This takes time. Give your word and follow up on it.)
11. He does not expect perfection.
12. He listens and learns without passing judgment.
13. He understands the benefits of cooperation and the losses from competition between people and between
groups.
[This article is] by Cindy Graham
Note: This article is offered for download from the TQM BBS with permission from _Improve_, the newsletter of
the INDY Quality, Productivity and Involvement Council. The newsletter is copyrighted. Therefore, further
dissemination of this article is forbidden without explicit permission from IQPIC.
Contact:
IQPIC 9035 Pinecreek Court Indianapolis IN 46256 Phone: 317-845-4393 Fax: 317-845-9254 E-mail:
iqpic@indy.net
[The following is quoted from the December 1993 edition of _Public_Sector_Quality_Report_, p. 5.]
"Quality Quotes" W. Edwards Deming 1900-1993 "Everybody here has a customer. And if he doesn't know who it
is and what constitutes the needs of the customer...then he does not understand his job."
"Your study of the consumer--what he finds right and what he finds wrong--and your innovation are all bound up
together. It will affect design and redesign of your product or service."
"Inspection with the aim of finding the bad ones and throwing them out is too late, ineffective, costly. Quality
comes not from inspection but from improvement of the process."
"Price has no meaning without a measure of the quality being purchased."
"People are entitled to joy in their work and a sense of ownership."
"Purchasing should be a team effort, and one of the most important people on the team should be the chosen
supplier--if you have a choice-- picked on the basis of his record of improvement...
"Putting out fires is not improvement. Finding a point out of control, finding the special cause and removing it, is
only putting the process back to where it was in the first place. It is not improvement of the process. You are in a
hotel. You hear someone yell fire. He runs for the fire extinguisher and pulls the alarm to call the fire department.
We all get out. Extinguishing the fire does not improve the hotel. That is not improvement of quality. That is putting
out fires."
"There is no excuse to offer for putting people on a job that they know not how to do. Most so-called 'goofing off'--
somebody seems to be lazy, doesn't seem to care--that person is almost always in the wrong job, or has very
poor management."
"Education in simple but powerful statistical techniques is required of all people in management..."
"People work in the system. Management creates the system."

Recommended Books on the Deming Philosophy

Deming, W.E. (1993). The New Economics for Industry, Government, and Education. Cambridge: Massachusetts
Institute of Technology

Deming, W.E. (1986). Out of the Crisis. Cambridge: Massachusetts Institute of Technology.

Mann, N.R. (1987). The Keys to Excellence: The Story of the Deming Philosophy, Los Angeles: PresiwickBooks.

Neave, H.R. (1990). The Deming Dimension. Knoxville: SPC Press.

Scherkenbach, W.W. (1986). The Deming Route To Quality and Productivity: Roadmaps and Roadblocks.
Washington: CEEPRESS.

Scherkenbach, W.W. (1991). Deming's Road to Continual Improvement. Knoxville: SPC Press.

Walton, M. (1990). Deming Management at Work. New York: G.P. Putnam's Sons.

Walton, M. (1986). The Deming Management Method. New York: Dodd, Mead.

Other Recommended Books

Barker, J.A. (1986). Discovering the Future - The Business of Paradigms.

Dobbyns, L., Mason, C.C. (1991). Quality or Else. Boston: Houghton Mifflin Company.

Gabor, A. (1990). The Man Who Discovered Quality. New York: Random House.

Imai, M. (1986). Kaizen: The Key to Japan's Competitive Success. New York: Random House Business Division.

Ishikawa, K. (1985). What is Total Quality Control? The Japanese Way. Englewood Cliffs: Prentice-Hall.

Johnson, H.T. (1992). Relevance Regained, From Top-Down Control To Bottom-Up Empowerment. New York:
The Free Press.

Kohn, A. (1993). Punished By Rewards. Boston: Hoghton Mifflin Company.

Kohn, A. (1990). No Contest - The Case Against Competition.

Land, G., Jarman, B. (1992). Break Point and Beyond, Mastering the Future - Today. Harper Business.

McConnell, J. (1988). Safer than a Known Way. Dee Why, Australia: Delaware Books.

Moen, R., Nolan, T.W., Provost, L.P. (1991). Improving Quality Through Planned Experimentation. New York:
Mcgraw-Hill.

Reich, R.B. (1991). The Work of Nations. New York: Vintage Books.

Ouchi, W. (1984). The M-Form Society - How American Teamwork Can Recapture the Competitive Edge.

Senge, P.M. (1990). The Fifth Discipline. The Art and Practice of The Learning Organization. New York:
Doubleday.

Tichy, N.M., Devanna, M.A. (1990). The Transformational Leader. New York: John Wiley and Sons.

Wall, R., Solum, R., Sobol, M. (1992). Visionary Leader. Rocklin: Prima Publishing.

Wheatley, M. (1993). Leadership and the New Science. San Francisco: Berrett-Koehler Publishers.

Handbooks

GOAL/QPC. (1988). The Memory Jogger. GOAL/QPC, Methuen, MA, (508) 685-3900

GOAL/QPC. (1989). The Memory Jogger Plus+. GOAL/QPC, Methuen, MA, (508) 685-3900

Scholtes, P.R. (1989). The Team Handbook. Joiner Associates, Inc. Madison, WI, (608) 238-8134.

January 1994

Washington Deming Study Group

[SysOp note: this file is available for download from the TQM BBS (301-585-1164). Filename: DEMREAD.ZIP.]
Deming Scholars MBA Program
"The School of Business at Fordham University started fresh with a great idea, namely, to bring about
transformation that is vital for American business, government and education.
--- W. Edwards Deming May 1992
Fordham's Graduate School of Business Administration is proud to offer a unique MBA program featuring Dr. W.
Edwards Deming's System of Profound Knowledge.
The Deming Scholars MBA Program aims to build a foundation for leadership in the new economic age of global
interdependence and turbulent change. It provides a small group of highly motivated scholars with a unique
opportunity to broaden and deepen their understanding of Dr. Deming's teachings and to build leadership skills
within the framework of an outstanding, fully-accredited MBA program.
The program's director and board of advisors are internationally recognized experts in Dr. Deming's management
theory. Dr. Deming served as senior advisor to the program until his death in December 1993.
The Plan Do-Study-Act (PDSA) learning cycle is the cornerstone for the delivery of the program. Subject matter is
delivered in five integrated learning cycles. Five eight-week sessions of classroom lectures and study are linked
by seven-week internships at participating companies or employer sponsors. All courses are taught from a quality
perspective. Graduates receive an MBA degree in Management Systems.
CURRICULUM
The Deming Scholars MBA Program integrates Fordham's MBA business curriculum with Dr. Deming's teachings
and practical business experience to develop the individual to help lead an organization through the required
transformation. Subject matter falls into three broad categories: Deming's management philosophy, leadership
and business.
 Deming's Management Philosophy
Students receive expert instruction in the System of Profound Knowledge articulated by Dr. Deming. This
knowledge system consists of four interactive parts:
Appreciation for a system: Organizations are interactive systems and must be managed as systems.
Management's role is to strive toward optimization of the enterprise as a whole.
Theory of variation: Variation is always present. The key is not in measuring it, but in understanding what is
causing it; not to judge or blame individuals, but to improve the system.
Theory of knowledge: Management's job is prediction. Prediction is based on knowledge. Knowledge is built on
theory. Experience without theory teaches nothing.
Psychology: Knowledge of individual and group psychology is needed to nurture and preserve innate desires of
people to learn, to create, to contribute and to take pride in work.
Leadership
Development of leaders who are prepared to help guide their companies through the needed transformation is the
essential purpose of the Deming Scholars MBA Program.
Students learn and practice collaborative skills and strive for proficiency as facilitators of change. Specific topics
include presentation skills, team facilitation, verbal and written communication and theories of leadership and
organizational change.
Business
Students receive intensive instruction in an array of MBA "core" and elective subjects including: business law,
business policy and strategy, corporate finance, financial accounting, financial environment, information systems,
marketing management, managerial accounting and principles of modern finance. Standard subject matter is
integrated with new material on the System of Profound Knowledge and leadership.
FIVE CYCLES OF LEARNING
CYCLE 1
Introduce the System of Profound Knowledge; review evolving theories ad challenges of management,
economics, political and social systems and organizational and individual behavior; examine challenges of the
new economic age. (Internship)

CYCLE 2
Deepen understanding of System of Profound Knowledge and its application to key business systems and the
organization as a whole; develop basic understanding of the organization and its role in the economic, social and
political system. Introduce core MBA business material. (Internship)
CYCLE 3
Develop understanding of measurement, its purpose, limitations and application to management systems. Extend
and deepen understanding of core business material, knowledge of variation and theory of knowledge.
(Internship)
CYCLE 4
Develop strategies for leadership of transformation through understanding of organizational learning and
optimization of a system. Develop appreciation for the integration of functional business specialties and the
System of Profound Knowledge. (Internship)
CYCLE 5
Deepen understanding of cultural formation and change and optimization of the enterprise. Synthesize business
knowledge, System of Profound Knowledge and leadership knowledge and skills. (Internship)
The Internships
Internships provide students with an opportunity to test theory, learn by doing, experience leadership and practice
teamwork.
Each student spends a total of twenty-four weeks on site with a participating company or sponsoring employer.
Faculty and sponsoring executives work together to guide the students through their learning experience. A
symposium involving faculty, sponsors, and students is held at the end of the program.
Other Program features
- Students attend a four-day seminar on the Deming System of Profound Knowledge.
- Internships, as well as individual and group projects, provide opportunities to apply theory and develop skills.
- Course material is integrated to present multi-disciplinary viewpoints.
- Prominent executives from companies under going transformation and recognized scholars present lectures and
interact with students.
- Regular study group sessions of students, educators, and executives foster understanding of principles.
- Study groups prepare research papers for distribution to interested audiences.
The Deming Scholars MBA Program is offered by Fordham's Management Systems Area in cooperation with the
Center for Advanced Management Studies.
About Fordham University Graduate School of Business Administration:
The Fordham Graduate School of Business Administration, established in 1969, embodies the University's Jesuit
tradition and a long-standing faculty commitment to the quality management approach. This combination has
fostered an atmosphere of cooperation, interaction and involvement that promotes interdisciplinary activity and
achievement.
At Fordham, students are able to study for the MBA in the midst of one of the world's great commercial, financial
and communications centers--New York City. Located within the Lincoln Center complex in midtown Manhattan,
the School offers students a flexible, state-of-the-art curriculum combined with the cultural and professional
resources of New York.
Deming Scholars MBA Program Advisory Board
Joyce Orsini, Ph.D. Fordham University Program Director (212) 636-6219
Nida Backaitis, Ph.D. Consultant
Edward M. Baker, Ph.D. Consultant
Barbara B. Lawton, Ph.D. University of Colorado
Marta Mooney, Ph.D. Fordham University
Gipsie Ranney, Ph.D. Consultant
Michael Tveite, Ph.D. Consultant
W. Edwards Deming, Ph.D.* Senior Program Advisor
The Deming Scholars MBA Program at FORDHAM UNIVERSITY Graduate School of Business Administration
Center for Advanced Management Studies 113 West 60th Street New York, NY 10023 (212) 636 6219 FAX (212)
765-5573
* Deceased, 1993 ---------------------------------------------------------------------------- ----------------------------------------
For Companies: A Partnership That Works
Fordham's Graduate School of Business is responding to the demands of executives for a new brand of
leaders...leaders equipped to spearhead your company's transformation to new age management. To educate
these leaders of tomorrow, we have created the Deming Scholars Program, an intensive, full-time, limited
enrollment MBA program.
But developing talent to compete in the real world requires cooperation...a partnership between business and
academia. We need companies to provide internships for students enrolled in this innovative new program. Do
any of the following apply to your organization?
- Interested in facilitating your business transformation?
- Interested in developing in-house expertise in quality management?
- Interested in reducing dependency on external consulting services?
- Interested in discovering what's involved in leading organizations that depend on "knowledge" as their primary
productive resource?
- Interested in helping to improve graduate management education and helping motivated students learn?
The Deming Scholars MBA Program
This enriched MBA program, begun in 1992, presents the management teaching of world renowned management
thinker Dr. W. Edwards Deming within the framework of Fordham's fully accredited MBA program. Dr. Deming
worked with Fordham faculty to develop this innovative new program--the only MBA program in the world which
Deming recommended. Enrollment is limited to 25 students.
As described in the accompanying description, coverage includes conventional MBA topics such as accounting,
economics, finance, information systems and marketing. But it goes on to present the teaching of Dr. Deming's
System of Profound Knowledge: systems theory, theory of variation, learning and knowledge theory and theory of
individual and organizational behavior. The combined coverage helps students develop the practical knowledge
and skills needed to successfully lead today's knowledge-centered organization.
The Internship Component
Internships that create opportunities for students to test and refine their understanding of concepts learned in
class are vital program elements. Students spend the first 12 weeks of the program attending classes at
Fordham's Lincoln Center campus. The following three weeks are spent working as interns at participating
companies. This first learning "cycle" is followed by three more, each involving eight weeks of classroom study
followed by seven weeks on site as interns. A final eight-week classroom session concludes the 18-month
program.
A Choice of Arrangements
Companies can participate in two ways. They may choose to sponsor an Executive "Intern", where the student is
a regular employee of the sponsoring company. Or, they may choose the "Standard Internship", where they select
a student who has independently enrolled in the program.
The Executive Internship
This method provides firms with a cost effective means of developing in-house quality management expertise and
reducing dependency on external consultants.
To create an Executive Internship, the firm recommends one or more talented, highly motivated employees to
participate in the Deming Scholars MBA Program. Applications are reviewed and approved by Fordham
administrators in accordance with preset selection criteria. Students spend internship periods with sponsoring
firms. By the time they graduate, they have received the best available grounding in knowledge and skills needed
to help their companies lock in competitive advantage.
For acceptance into the program, applicants must satisfy admission criteria stipulated by Fordham's Graduate
School of Business. Requirements include an undergraduate degree from an accredited college. Several years of
work experience is preferred. In addition, suitable candidates for the Deming Program will be high-energy self-
starters with recognized leadership, cognitive and communication skills; a fierce desire to learn; an ability to
cooperate with others and a commitment to helping their companies compete successfully in today's turbulent
economic climate.
The Standard Internship
Companies can also participate in the Deming Scholars MBA program by providing internships for students who
enrolled in the program independently.
Participating companies interview potential candidates and select a student who best satisfies their needs. The
sponsoring firm gains over the course of the internship as the student's knowledge of quality management and
leadership skills broaden and deepen. In addition, the company has the "inside track" on recruiting and hiring this
highly qualified individual upon graduation.
The Role of Interns
Students enrolled in the Deming Scholars MBA Program have two overriding responsibilities-- to gain knowledge
and to develop their leadership skills. As interns, they are expected to learn to apply systems thinking and
methods to help the enterprise achieve its business objectives. Initially, their responsibilities to the program and
sponsors revolve around listening, observing, learning and communicating. Later in the program, these
responsibilities expand to include analyzing and coaching.
Specific Tasks
Decisions about how interns spend their time is made jointly by the sponsoring company, Fordham faculty and the
intern. Early in the program, a company representative and Fordham's Intern Coordinator will discuss possible
internship assignments. The aim: to maximize both the learning experience for the student and his or her
contribution to the company. In keeping with the Plan-Do-Study Act (PDSA) learning cycle, agreements are
flexible and can be modified at any time during the course of study.
Work Hours
During internship periods, interns work at sponsoring companies full time with an occasional Friday kept free to
allow time for interns to meet with Fordham faculty to review and debrief learning and to prepare for the weeks
ahead.
Compensation
Executive Interns work out their own financial arrangements with sponsoring organizations. Sponsors of Standard
Interns are expected to provide interns with a modest stipend to help defray extra expenses associated with the
internship.
Bringing the Best Together
The Deming Scholars Program leads the way for the evolution of MBA programs over the next decade. The
program owes its forward thinking to the involvement of one of America's most progressive management
thinkers--W. Edwards Deming. Its faculty, students and corporate sponsors all add their own brand of commitment
and expertise to the mix...and the result is a refreshing blend of competence and achievement. We welcome
inquiries from all types of companies: large and small, service and manufacturing.
Interested in being on the leading edge of management education?
Contact: Joyce Orsini, Ph.D., Program Director Deming Scholars MBA Program Fordham University Graduate
School of Business Administration 113 West 60th Street New York, New York 10023 Phone: 212-636-6219 Fax:
212-765-5573 e-mail: nmurray@mary.fordham.edu

_____________________________________________________________
**NOTE**
This article was posted on the TQM BBS for public download with the express permission of Joiner Associates
Incorporated. But the text is copyrighted and may not be reproduced without permission. For permission, further
information, or a list of other publications available from Joiner Associates, call or write:
Susan E. Reynard Senior Editor Joiner Associates Incorporated 3800 Regent Street Madison Wisconsin 53705
Telephone: 608-238-8234, extension 232 Fax: 608-238-2908
____________________________________________________________
THE KEY ROLE OF STATISTICIANS IN THE TRANSFORMATION OF NORTH AMERICAN INDUSTRY Brian L.
Joiner
This article was presented as the Youden Memorial Address at the ASA-ASQC Fall Technical Conference in
London, Ontario, October 25, 1984. It then appeared in The American Statistician, August 1985, Vol. 39, No. 3.
There is much to be done if North American industry is to survive in the new economic age. We statisticians have
a vital role to play in the transformation that is needed to make our industry competitive in the world economy. As
statisticians, we are faced with a major challenge--and a major opportunity--unlike anything we have ever
experienced before. This article describes this opportunity and seeks to interest others in joining forces to help our
industry meet its challenges. The discussion will move from the goal--improvements in quality and productivity--to
the nuts and bolts of how statisticians can prepare for a new role in industry.
We begin with a reminder that major improvements in quality and productivity are indeed necessary if our
industry is to regain a competitive position in world markets. The second point is also a reminder: statistics and
statisticians are important in generating these improvements. The third point is not yet so widely accepted: a new
managerial climate is necessary before these gains can be sustained. Fourth, and even less well known, is that
statisticians have a major role to play in creating this new climate. Finally, specific steps are recommended for
those who wish to prepare for a new role in helping to create the right managerial climate for achieving major
continuous improvements in quality and productivity.
The Need for Improvements in Quality and Productivity
Automobiles, cameras, stereos, color TVS, food processors, microwave ovens, athletic equipment, computer
chips, medical equipment, industrial robots, optical equipment, hand tools, electric motors--This is a portion of a
list developed by Stanford Professor Steven Wheelwright; it was communicated to me by Than Godfrey of AT&T
Bell Laboratories. What do these products have in common? They are attractive, complex products of high
technology, demanded in high volume--just the types of products for which a country would like to be a leader in
design and manufacture. But these are products in which the U.S. worldwide market dropped by 50% during the
1970s. And this list is just the tip of the iceberg. Japan and, increasingly, other countries are beating our socks off,
and they show no signs of letting up.
Statistics and Statisticians
Statistics and statisticians are already helping our industries make gains in quality and productivity. There are
many excellent, dedicated statisticians in industry today. Nevertheless, those of us who work in and with industry
know that our effectiveness is related to the managerial climate in which we work: we know we could accomplish
much, much more in a more favorable climate. This brings me to my major point: the need for a managerial
climate in which major gains in quality and productivity become the norm.
New Managerial Climate
Managerial climate is the secret to Japan's success--not robots, not tax policies, not cultural differences. But what
managerial climate is best, and why? An article in the Wall Street Journal (Calonius 1983), illustrates what the
"new climate" is all about. RCA built a TV plant in Memphis in 1966 but shut it down five years later after a series
of wildcat strikes, union-authorized strikes, apparent product sabotage, and layoffs that reduced the payroll from
4,200 workers to 1,600. Then Sharp of Japan moved in to salvage the plant and the reputation of the Memphis
work force. During the past four years, this Japanese-managed plant has rolled out a million color TVS and a
million microwave ovens. Productivity is high; defect levels are very low. Sharp accomplished this with American
workers, American components, and a serious recession--and without layoffs or loss of profitability. What is their
secret? It has three parts:
1. obsession with quality, 2. achieving a feeling among employees that they are one big family, and 3. identifying
and correcting problems by means of data, not opinion or emotion. These principles are best illustrated by a
triangle, which connotes integrity, wholeness, and a synergy among the parts (see Fig. 3.1).
An Obsession With Quality
Let me tell a story to illustrate what I mean by an obsession with quality. One company I work with acquired a
very large number of a part (434,000, to be exact) from a supplier before experiencing their first failure with it. It
was a "minor" part, costing only 11? They notified the supplier, and the supplier came to inspect the failed part
and the circumstances of the failure. The part proved to be defective, so the supplier changed their process. They
subsequently purchased more than 3,000,000 of these parts with only one more failure. Now I ask you, do you
think this supplier was under American or Japanese management? Another company experienced an 8.5% failure
rate with another part. The supplier of that part wanted to know why the company was complaining; the 8.5%
failure rate was better than the industry average. You guessed. That supplier was American managed!
Scientific Approach: Focus on Processes
The key to improved quality is improved processes. Quality is improved through improvement in process, not by
inspection. This recalls the 85/15 rule of Juran and Deming, which says that at least 85% of problems are system
problems and less than 15% are due to workers. (Deming now says that more than 94% of problems appear to be
system related.)
Processes make things work. Thousands of processes need improvement, including things not ordinarily thought
of as processes, such as the hiring and training of workers. We must study these processes and find out how to
improve them. The scientific approach, data-based decisions, and teamwork are key to improving all of these
processes. This emphasis on processes is one of the principal things Japanese managers have achieved, but
American managers typically have not.
All One Team
This is absolutely necessary. Lacking team spirit, employees can, through passive resistance, impede the best
efforts at quality improvement. With it, everyone seeks improvement, everyone gains from improvement, and
teamwork becomes pervasive.
Here is an example of how one American-managed company improved its productivity and at the same time
fostered the team spirit among its workers. This company employed 20 workers in a metal finishing area. These
workers, their managers, and technical support people set to work to improve productivity. As a result, the number
of workers required dropped first to 11 and then to seven. Now the usual response of American management
would be to lay off the "surplus" workers. This company, however, taught them new skills, moved them into new
jobs, and recognized their contributions to the company. What would have happened if they had been laid off
instead?
Another success story (Serrin 1983) is about a Warwick TV plant that moved from the Midwest to the Sun Belt to
be competitive. But that did not work either, and after a few years the plant was sold to Sanyo, a Japanese
company. Sanyo kept the same workforce and now turns out excellent TV sets at a high level of productivity. The
secret? A new managerial climate, with authoritarianism de-emphasized. A 12-year worker says, "We are a
family."
The triumph of Japanese management is being repeated all over North America. The companies are not perfect,
but they are highly successful. The February 2, 1984 issue of USA Today ("Japan's Goods Roll In") reported that
476 Japanese-owned companies now employ 82,900 American workers in the manufacture of everything from
balloons to automobiles. It can be done in North America. It is being done.
The triangle, which has quality, teamwork, and the scientific approach at its apices, summarizes the major
requirements of the new managerial climate needed for our industry to regain its competitive position in world
markets. You may recognize that this triangle is also a condensed form of Deming's "14 Points for Management."
Now I acknowledge that not everyone agrees with Deming. I must tell you, though, that after several years of
focused study and hard work in this area, I have become increasingly convinced that while Crosby, Juran, and
others have many good ideas, Deming goes much further in understanding the deep underlying problems facing
North American industry.
Some statisticians think Deming has gone too far and is too confrontational with top management. I will not argue
about the packaging of his message; it might be improved. But I believe the message itself is right on target, and I
ask you to suspend judgment on Deming and open your mind to the possibility that he may be right. Let us review
his "14 Points for Management," which apply to organizations of all types and all sizes--not only to entire
companies but to their parts:
1. Create constancy of purpose toward improvement of product and service. 2. Adopt the new philosophy; we are
in a new economic age. 3. Cease dependence on inspection to achieve quality. 4. End the practice of awarding
business on the basis of initial cost. 5. Improve constantly and forever every activity. 6. Institute training and
education on the job, including management. 7. Institute supervision. 8. Drive out fear. 9. Break down barriers
between departments. 10. Eliminate slogans and exhortations. 11. Eliminate work standards that prescribe
numerical quotas. 12. Remove barriers that rob workers of their right to pride of workmanship. 13. Institute a
vigorous program of education and retraining. 14. Put everybody in the company to work in teams to accomplish
the transformation. Some statisticians may say, "We can do well enough without the change in managerial
climate." I do not believe it. Let me cite an example. One manager I know got really turned on when he learned
about statistics. He studied processes and improved them. He used Pareto charts, control charts, and design of
experiments. He isolated the causes of problems and eliminated them. His workers thought he was super,
because he worked with them and helped them get rid of many of the hassles that had plagued them in their jobs.
Then he was relieved of his responsibility because his manager and other managers did not understand the
85/15 rule. When he pointed to problems outside his own area, the other managers felt he was pointing to them--
when in reality, he was pointing out the problems in the system.
You may encounter similar problems. Your work may often be stopped at departmental barriers. You may be
asked to work on problems that you know are not the most important and urgent problems of the company. Do
you work in a place where other employees, from top to bottom of your organization, actively seek your advice to
help them improve quality and productivity? You are useful to your organization now, but you could be much,
much more useful.
Role of Statisticians in Creating the New Managerial Climate I have briefly described the new managerial climate
and why it is important. I hope you agree with me that it is needed. The next question is, "Is there anything we
statisticians can do to help create the new climate?" The surprising answer is, "Yes." There are things that we
statisticians are among the best prepared to do. Deming told me that for three years before I believed him. He
said, "Nothing less is required than the transformation of the American style of management--and you
(statisticians) must show management how to create that climate."
I could not see it. I could not see why I or other statisticians should be involved in the creation of a new climate. I
could see why statisticians would benefit from the change--that part was relatively easy. But what did I know that
would help with the transformation of the American style of management? Only in the past year have I come to
understand what Deming meant, and I would like to share with you my new understanding of his message. I do
not expect to convince everyone to become involved in the transformation of management. That is not necessary.
But some of us do need to be involved.
It will not be easy. The transformation of management is not a role for which we have been well prepared. It is a
much broader and more ambitious role, requiring new skills that most of us have tended not to develop. Let us
look at a few aspects of the new management philosophy and note what contributions statisticians can make
toward their implementation.
Everyone Seeking Improvements in Quality and Productivity
Statisticians can help implement this by teaching managers how to focus on processes rather than on blaming
individuals. American managers do not normally think in terms of processes, especially not processes like
recruiting well-qualified employees, training first-line supervisors, and introducing new products. Teaching
managers how to study and improve such processes helps them understand why everyone else should also be
studying processes and seeking improvements. Many statisticians find it natural to think in terms of processes: we
know how to gather and interpret data from processes to help improve them.
Statisticians can also help speed up improvements, and the success of these efforts tends to build confidence
and esprit de corps. We tend to seek out causes, not jump to solutions. We ask, Why'? How do you know? more
times. As a result, projects to improve processes are usually completed much faster and with much better results
when statisticians are involved.
For example, in one company a production line often went down. Why? Study found that the ink jet labeling
machine failed frequently. Why? The major cause turned out to be fluctuating pressure in the air lines. The
machine failed whenever the pressure dropped below 66 psi. The study team recommended the purchase of local
compressors to supply uniform pressure. But they should have asked why one more time: they should have
asked why the pressure fluctuated, because it turned out that other machines also had problems when the
pressure dropped. Statisticians tend to persist longer in asking why and thus tend to help teams achieve better
results.
Trust of Management--Absence of Fear
Statisticians can help bring this about by demonstrating to managers that at least 85% of problems are related to
the system, not the worker. As we urge, and help, managers to improve processes throughout the company, they
come to understand the 85/15 rule. These process improvements in turn help convince workers that management
really cares about the organization and thus cares about their collective survival.
We can also eliminate the practice of making demands that are inconsistent with process capabilities. We can
help identify and eliminate inadequate materials or training. Workers will no longer take the brunt of the blame
when processes fail. Thus we may ultimately be able to convince management not to terminate workers when
productivity gains are made or lay them off when the economy dips downward. We may also be able to help
convince management and labor that gains in productivity lead to more jobs and greater job security, not to fewer
jobs and less security.
Eliminating Barriers Between Departments
Statisticians can help quantify current process capabilities. Only when these capabilities are truly known will
others be able to place realistic expectations on them. Unfortunately, management knows today that if they put
enough pressure on one point, that group will generally come through. They often interpret this to mean that
increased pressure is the best way to get results. They need to learn, however, how this pressure distorts the
system and interferes with overall quality and productivity
We can show how understanding processes helps provide ways for data-based communication of departmental
needs. We can help eliminate finger pointing and get down to the facts. "In God we trust. All others must bring
data." Or, "Facts often kill a good argument."
How Statisticians Can Prepare for this Challenge
Statisticians have three types of special knowledge. We are uniquely well qualified (a) to help figure out what
data to collect and how, (b) to interpret data in the face of variation, and (c) to coach others in the proper use of
the scientific approach.
The first and second types of knowledge, figuring out what data to collect and interpreting data in the face of
variation, are obvious. But the third point may be surprising. We often think that other people approach problem
solving and process improvement in the same way we do, even though most statistical consultants would admit
that one of the most valuable contributions they make to an investigation is the use of a logical, data-oriented
approach. As Cochran and Cox (1957) reminded us, perhaps the major contribution a statistician can make in the
planning stages of an investigation does not involve statistical theory at all, but simply forcing the investigator to
explain clearly why he is doing the study, why he chose the proposed method, and why he thinks the completed
study will answer the questions it was intended to answer. Although we statisticians do not usually think of our role
in this way, the role is a natural one, because we as a group are most likely to ask, Why? How do you know? How
will you know?
To be maximally useful in the transformation, however, we must further educate ourselves. We must learn the
new philosophy in depth. We must thoroughly understand the Quality-Teamwork-Scientific Approach triangle and
the teachings of Deming, Juran, and others. We must understand current American management style, its
strengths and weaknesses. Finally, we must prepare to venture far beyond our familiar statistical territory to learn
new skills--interpersonal skills, team-building skills, how to plan for change, and how organizations work.
In conclusion, here are a few specific recommendations for action:
Locate one or more partners who specialize in the new skills and who complement your strengths.
Educate yourself and others concerning what must be done and why. Listen to and study Deming, Juran, and
others. Attend both Deming's and Juran's seminars for management. (Editor's note: As you're reading this article,
thousands of people have now been educated by Dr. Joiner's own management seminars.)
Seek to change roles. Think bigger, more strategically --more like the president of the company or the chairman
of the board. Help get a team organized to work on a key project. Help obtain major, highly visible gains in quality
and productivity. Get higher and higher level managers on board with respect to understanding the new
philosophy. When enough of us have done these things, we will be in a position to make major contributions
toward the survival of North American industry.
Summary
1. Major changes in management are needed if we are to become and remain competitive with the Japanese.
2. Statisticians have a vital role to play in the creation of the new managerial climate.
3. Some of us need to expand our view of what we can contribute to our organizations.
4. We need to develop new skills and new ways of thinking about our roles.
5. Then we will be ready to achieve and sustain major gains in quality and productivity.
Acknowledgments
It is especially appropriate in this Youden Memorial Address to acknowledge my personal debt to W. J. Youden.
He was an early and important teacher and mentor when I first began statistical practice at the National Bureau of
Standards in 1963. By example and advice, he taught me a great deal about how to write, speak. and consult.
Other people who contributed directly and importantly to this paper include W. Edwards Deming, who is the
originator of most of the ideas expressed here; Laurie Joiner, who worked long and hard with me on the
expression of these ideas; Carol Steinhart, who was a major editorial collaborator; and a large number of
colleagues who gave me support and strong challenges on several earlier drafts.
References
Calonius, L.E. "Factory Magic," Wall Street Journal, April 29, 1983, p. 1.
Cochran, W. G., and Cox, G. M. Experimental Designs (2nd ed.), New York, NY: John Wiley, 1957.
"Japan's Goods Roll in: East comes to the West," USA Today, Feb. 2, 1984.
Serrin, W. "Japanese Clearly Doing Something Right in U.S. Plant," New York Times (reprinted in San Diego
Mercury News, Nov. 9, 1983).
About the Author
Brian L. Joiner is co-founder and CEO of Joiner Associates Incorporated. One of the original nine judges for the
Malcolm Baldrige National Quality Award, he has received numerous honors, including the W. Edwards Deming
Medal and the 1992 ASQC/William G. Hunter Award. He holds M.S. and Ph.D. degrees from Rutgers University.

A LESSON LEARNED AND A LESSON FORGOTTEN Nearly a half-century ago, General MacArthur ordered
Homer Sarasohn to tell Japanese businessmen how things were done. The Japanese listened, but the U.S.
forgot. By Robert Chapman Wood
"WHAT THE JAPANESE learned about management after World War II, they learned from the Americans. And
the Americans forgot their own lessons."
There is a lot of truth in that statement. Only a few decades ago, the world, Japan included, looked to the U.S. for
management models. Now we look to the Japanese. How did this reversal of roles come about?
A good man to ask is the one who made the above statement, Homer M. Sarasohn. He was among the very first
who taught Japa- nese business people how the Americans did it, and he was in a strategic position to watch the
unfolding of the drama of U.S. industrial decline and Japanese industrial rise. Returning to the U.S., Sarasohn
built a successful career that included serving as director of engineering communications at IBM headquarters in
Armonk, N.Y. Sarasohn believes that his former employer has retained the elements that once made the U.S. the
envy of the industrial world. But our industry as a whole has lost it, he sadly fears.
Living in retirement at age 72, in Scottsdale, Ariz., Sarasohn recently gave FORBES his views on how it
happened that the Japanese learned from us while we forgot our own lessons. In a long interview, he not only told
us how it happened but gave his views on what we can do to recover what we lost. Here's the story.
In 1946 General Douglas MacArthur was commander of the U.S. Occupation forces in Japan. He urgently
wanted Japan to mass-produce radios so that the U.S. Occupation authorities could reach every Japanese village
quickly with its messages. Sarasohn, the son of a midwestern manufacturing representative, had worked as a
radio product development engineer at the old Crosley Corp. (long since absorbed into what is now Textron)
during World War II. He went on to work on radar as an engineer at MIT and Raytheon after the war, becoming
part of an exclusive fraternity of young engineers.
In 1946 Sarasohn received a telegram: "General MacArthur's headquarters has requested your services earliest
possible date." Brandishing the now-yellowing telegram, Sarasohn recalls thinking it was a joke. When a call from
an irate colonel convinced him it wasn't, he decamped for Tokyo. He was 29 years old.
MacArthur wanted Sarasohn to help the Japanese produce the radios and communications equipment dear to
the general's heart. Sarasohn found that while the Japanese knew a fair amount about electronics, they seemed
to know nothing of modern management or production techniques. Sarasohn recalls:
"They thought that quality meant making half of your prod- ucts okay and throwing out the other half. They
couldn't under- stand why they shouldn't make vacuum tubes in a shack with a dirt floor. [Air filled with dust
particles produced defects when dust landed on filaments.] I decided that I was going to be a dicta- tor." At age 29
he took a role in much of the electronics indus- try analogous to the role MacArthur himself took toward Japan as
a whole: a dictator who paradoxically demanded "democratic management." In four years, this democrat in
dictator's clothing may have accomplished more than any economic dictator in history.
Initially, Sarasohn spent much of his time finding materials the Japanese needed to get radio parts into
production. Soon a trickle of miserably unreliable radios was reaching Japan's villages. Sarasohn kept prodding
for improved productivity and better management.
In 1948, Sarasohn was joined in the Occupation forces' Civil Communications Section by Charles Protzman a
Western Electric engineer. They concluded the Japanese would never produce quality unless someone taught
them modern management, starting with the basics. So in 1949 the pair of young Americans proposed a course
for top Japanese managers.
And here's the rub: Most of the principles Sarasohn and Protzman taught in the course are principles that
Americans now think of as Japanese attributes. The Japanese quickly saw the sense of it. They liked the course
so well they were still repeating its teachings 25 years later in a standard course for people on the track to top
management.
Sarasohn and Protzman's pupils went on to become a Who's Who of Japan's electronics industry. They included
Matsushita Electric's Masaharu Matsushita; Mitsubishi Electric's Takeo Kato; Fujitsu's Hanzou Omi; Sumitomo
Electric's Bunzaemon Inoue; Akio Morita and Masaru Ibuka, the founders of what is now Sony Corp. This cadre of
leaders spread the principles throughout Japanese industry.
Matsushita Electric's Masaharu Matsushita recalls the course clearly:
"I believe this seminar was very useful to Japanese manufac- turers at that time. Mentioned on the first page of
this seminar's text was the title 'The Objective of the Enterprise,' under which the philosophy of corporate
management--the social mission of the enterprise--was clearly explained and this made a deep impression on the
participants of this seminar.
"The theories in the seminar may well be used today," Matsushita adds, "especially the concept about the social
mission of an enterprise as the objective of the enterprise."
The Occupation's Economics and Social Section objected to the seminar. "They said we might be too
successful," recalls Sarasohn. It was perhaps the understatement of the century. But both the ESS people and the
CCS engineers made 20-minute presen- tations before MacArthur. The ESS warned of the perils of Japa- nese
competition. Sarasohn insisted that it would ultimately be more practical to teach the defeated and starving nation
to be self-sufficient. After both sides had finished, says Sarasohn, MacArthur turned to him, snapped, "Go do it,"
and walked out of the room.
Sarasohn and Protzman were followers of scientific manage- ment in the tradition of Frederick W. Taylor. When
people today think of Taylor (if they think of him at all), they tend to think of dehumanizing time-motion studies, as
made famous in Charlie Chaplin's Modern Times and in Cheaper by the Dozen by Frank Gilbreth Jr. and
Ernestine Gilbreth Carey. This does an enormous disservice to Taylor and to the scientific management Sarasohn
and Protzman taught. What Taylor principally urged was what came to be known as the systems approach to
manufacturing: the idea that every part of a factory or a whole organization should be scientifically analyzed and
redesigned to achieve the most efficient output. Managers should look at every aspect of a manufacturing
operation as a piece of an integrated system, and should think through the consequences for the entire system of
fiddling with any of its parts. Unfortunately, as the power of the human relations movement grew in the 1950s and
1960s, this eminently sensible systems approach to running a business came to be considered insufficiently
sensitive to human needs and wants, too mechanical.
But when Sarasohn and Protzman began their course, U.S. management still thought along industrial
engineering lines. The M.B.A. was still a rarity. Many managers studied engineering and science in college, then
learned management on the job. Literally on the job. Typically, they did not start out as "managers" but did stints
in every part of their organization. U.S. managers generally knew what it was like to work a lathe or serve on an
assembly line. Business, like the army, was not a democracy, but managers tended to be up-from-the-ranks
types, chosen purely on merit rather than on educational qualifications.
Here, as Sarasohn presented it, was the gist of the message he imparted to his Japanese pupils:
 ?Every company needs a concise, complete statement of the purpose of the company's existence, one that
provides a well-defined target for the idealistic efforts of the em- ployees. ?Companies must put quality ahead of
profit, pursuing it rigorously with techniques such as statistical quality control. ?Every employee deserves the
same kind of respect follow managers receive, and good management is "democratic manage- ment." Lower-
level employees need to be listened to by their bosses. After MacArthur approved the course, Sarasohn and
Protzman quickly wrote a text. (A revised edition entitled CCS: Industrial Management is in the Harvard Business
School library.) They drew heavily on U.S. management texts, and stressed the basics. For example, they wrote:
"Even though you know these things [management principles], you are not applying them in a logical manner....
People at low levels who should be responsible and accountable are confused.... Any initiative and interest they
[workers] may have in trying to do a job is often destroyed by interference and meddling."
On the first page, a motto used at Newport News Shipbuilding was cited: "We shall build good ships here; at a
profit if we can, at a loss if we must, but always good ships."
"It was much to the participants' surprise," recalls Masaharu Matsushita, "to find such a basic policy on corporate
philosophy on the first day of the seminar, on the first page of the text. This point made an impression on all the
participants. The case study about clarification on the organizational concept for the management division as well
as the management theory based on the systematic analysis of business facts and data--all furnished us with
much information."
No question: The Japanese took the American message to heart, even as the Americans were forgetting it.
Sarasohn and Protzman wrote: "Every business enterprise should have as its very basic policy something of this
nature, [to aim] the entire resources and efforts of the company toward a well-defined target, a target that would
benefit society." Today, most Japanese companies have such a statement of basic policy. Like many of America's
best engineers at the time--and like many Japanese managers today--Sarasohn and Protzman saw no conflict
between "scientific" management that carefully measured and analyzed everything about a company, and
"democratic" management that fully respected employees. They disagreed with "human relations" experts, who
were starting to stigmatize practitioners of scientific management on the grounds that scientific manage- ment
focused on nuts and bolts whereas managers should care principally about people. Sarasohn and Protzman
presented to Japanese business leaders both scientific management and America's tradition of respect for the
common man.
The point was not lost on the Japanese: If you have articu- lated a worthwhile purpose and you constantly strive
to create the best manufacturing system--culture, in today's jar- gon--possible your human relations problems will
tend to take care of themselves.
Sarasohn and Protzman advocated "democratic management" within a traditional, hierarchical organization. That
meant that, while the boss was still the boss, he didn't so much bark orders as listen to the people who worked for
him. He was the voice of the organization, not its dictator. "A leader's main obligation is to secure the faith and
respect of those under him," wrote Protzman and Sarasohn.
How many U.S. managers today believe that, let alone prac- tice it?
The Japanese, humbled by their military defeat and acutely aware of their country's economic plight, were in a
learning and listening mood. They repudiated their feudalistic and militaris- tic ways and promised to lead new
lives. The course was "the light that illuminated everything," wrote one executive, Bunzaemon Inoue, who went on
to become technical director of Sumitomo Electric.
After the course was offered for the second time (in Osaka in 1950), the Occupation was near its end. But the
course did not die. Its old students spread the message, both through their own businesses and through word of
mouth. Later on, the CCS course became a standard in the training program associated with the Nikkeiren, the
Japan Federation of Employers' Associations.
Before returning home in 1950, Sarasohn established Japan's Electrical Testing Laboratory. He Introduced the
certification for electronic products that the U.S. government would criticize as a "nontariff barrier" 30 years later.
While certification in the U.S. focused largely on safety, Japan set continually in- creasing performance standards
for products. By the early 1980s, many American products weren't able to meet its demanding stan- dards.
 The man that is most responsible for bringing the Sarasohn-Protzman course to light and spreading its message
today is Kenneth Hopper, an industrial consultant associated with Management Advisory Associates in Bowling
Green, Ohio. Back in 1948, when Sarasohn was still working in Japan, Hopper went to work for Procter & Gamble
in Manchester, England as an industrial engineer.
"U.S. management was evolving in directions that would now be described as 'Japanese,'" Hopper recalls.
European companies, like most Japanese companies before World War II, kept people on well-defined tracks.
University graduates spent little time in factories. But at Procter & Gamble and many other U.S. companies,
engineers like Hopper spent years on the factory floor. Six months after becoming a design engineer, Hopper was
appointed as a foreman in maintenance.
U.S. firms were introducing wave after wave of improvements in technology and knowhow. Communication
between engineers and ordinary factory workers--evidence of what Sarasohn and Protzman would call
"democratic management"--made their successes possi- ble. The practical knowledge of ordinary workers
fertilized the expertise of the engineer, and the workers had quick access to engineers' knowledge. It was a
revelation to a young manager brought up in the class-conscious, ossified English system--as it would be to a
young manager brought up in U.S. manufacturing from the mid-1960s to the present.
In the 1960s, Hopper decided on an academic career. But he found that he had quite different ideas from the
academics about what made the U.S. system work. The practical people who had built the U.S. corporations
communicated poorly with the academic elite. Innovative business scholars showed little respect for how factories
were managed, preferring to write about marketing, financial techniques and "human relations."
Hopper got a one-year grant to study at Harvard Business School in 1965-66, but while there he couldn't find a
professor to sponsor his Ph.D. dissertation on the use of college graduates as foremen. So he went back to a
career as an industrial consul- tant but refused to give up on communicating what he now calls "classic American
management." In 1969 Hopper met former Mitsubishi Electric executive Takeo Kato. Kato led him to Frank A.
Polkinghorn, who had been Sarasohn and Protzman's immediate boss when they taught the CCS course. Hopper
has been collecting details of their achievements ever since.
The real irony, of course, is that Hopper believes that the U.S. excellence of the 1950s and the Japanese
excellence of the 1980s have closely related roots. And he has watched the decline of the American management
systems that produced "Yankee know-how" with anguish and dismay--in much the same way many serious
scholars watch the sickening decline of American educa- tional standards.
Hopper notes that Protzman, who wrote many of the sections of the CCS course that dealt with human relations,
had been a foreman at Western Electric's Hawthorne plant in the 1920s. At the time, the famed Hawthorne
experiments, which underlay the human relations movement in management and ultimately undermined scientific
management, were being conducted. At Hawthorne, scholars looked at how changes in the work environment
affected productivity, concluding that productivity would rise if managers concentrated on workers' needs. As
Cornell University professor of manufacturing L. Joseph Thomas puts it: "It became fashionable to think that
measuring a person's work devalued him. Rather, you should simply trust people to do the right thing." This was
the death of the systems, or industrial engineering, approach. And the birth of the human relations approach to
management.
Hopper spent a lot of time talking with Protzman. Protzman, who died in 1987, concluded the Hawthorne
experiments were meaningless. Protzman felt that good managers didn't need elite consultants to tell them how
to treat humans as humans and that scientific management-based systems were entirely consistent with humane
management.
"The people in the human relations movement set themselves up as a kind of high priesthood that would teach
how factories could be run better," says Hopper. "Suddenly it seemed that these people knew how factories
should be run better than the people who worked in them."
Japan went the other way. Its approach, descended from both Japanese tradition and Occupation teachings, had
no high priests, no specialized human relations experts. Instead, everyone was supposed to be as sensitive to
human relations as to finance or technology.
 Today Japanese management has developed far beyond what a handful of Americans taught a half-century ago,
adding exclusive- ly Japanese elements and refining what the Japanese learned.
In 1950 Sarasohn returned from Japan to find many changes at home. "Two things struck me immediately," he
recalls. "First, there was an attitude of self-satisfaction--we'd won a war, and there was nothing else to be done.
And second, there was already a great emphasis on achieving demonstrable success immediately on getting an
immediate return on the buck." As a Booz, Allen consultant Sarasohn worked for H.J. Heinz in Pittsburgh, and he
says: "They wanted me to upgrade their distribution system, at a time when their product manufacturing system
was not meeting its reasonable objectives."
Now as then, he says, "Few American managers show any sense of the long-term implications for their
companies and their customers of what they are doing in their business."
What would Sarasohn do today to make the country's factories more competitive? One thing he would not do is
try to play catch-up with the Japanese by copying them.
"This present-day fad of aping the Japanese style of manage- ment is absolutely destructive of our own future, "
he says. "We've got to recapture the enthusiasm, the pioneering spirit that made America a world leader."
There are no pat answers, but the key is to create more companies like IBM and Hewlett-Packard--more
companies, in brief, where the workers identify with the enterprise. "All my life I fought against becoming a
'company man,'" says Sarasohn. "And then I joined IBM [in 1957|. Under Tom Watson [both junior and senior], the
company showed respect for its workers, it was committed to honesty with its customers; and it saw itself as an
institution with social responsibilities. When I was visiting a branch office and saw that their attitude toward their
customers was perfunctory, I was quite shocked. Then I looked at myself and said, 'Hey, I've become a company
man.' "
Capturing their employees' imaginations--getting them to expend their energies for something less tangible than
a paycheck--is the greatest challenge managers face today. With help from a couple of young Americans more
than four decades ago, the Japanese have excelled at this challenge. Now it's America's turn again.
SURVEY REAFFIRMS THE VALIDITY OF DEMING'S 10TH POINT
Of his famous 14 points in Out of the Crisis, W. Edwards Deming's 10th point, "Eliminate slogans, exhortations,
and targets for the work force," was reaffirmed in a survey by Rath & Strong.
The Rath & Strong Personal Initiative Survey found that organizations that use slogans and vision statements
can't force their employees to take the personal initiative needed to effect change. According to the survey, these
activities might do just the opposite.
The survey found that although managers increasingly expect employees to take personal initiative, most
employees do not take the necessary actions beyond their job descriptions. Having the right organizational
climate might be the key to bridging the gap between expectations and behaviors.
After polling 186 senior executives from FORTUNE 500 manufacturing and service companies regarding which
activities foster superior performance results for an organization, the survey revealed that personal initiative, when
combined with a customer focus, has a positive influence on business success and sales growth rate.
Alan Frohman, a Rath & Strong senior associate, said, "These results are significant because they suggest that
although people are being expected to take personal initiative, most organizations haven't figured out how to
translate those expectations into positive behaviors. The right corporate climate can have a tremendous impact
on how comfortable people feel about taking action."
Although 79% of all respondents indicated that employees are increasingly expected to take initiatives to bring
about change, 40% of the respondents said most people in their companies do not believe that they can make a
personal contribution to the company's success.
Other survey results were:
-- Only 29% of employees at every level believe that their skills and intelligence are fully utilized. -- Half of the
respondents said their training programs encouraged people to think beyond their companies' traditional ways of
doing business. -- Fifty-two percent of the companies said they could greatly accelerate the needed changes if
more people would take personal initiative. -- Slightly more than 50% of the respondents said there is an active
effort to ensure that employees receive information on how their jobs affect customers. Tom Thomson, Rath &
Strong vice president, said, "These numbers indicate that organizations are still not seeing the full potential of
their own employees. But it also means that we should be optimistic--imagine the results companies can achieve
if they are able to tap into people's initiative. The trick lies in learning how to build a climate that encourages
initiative." He added that a climate survey can be a powerful tool for energizing people to take new responsibility
for the business' success.
The survey included five tips for managers to foster personal initiative:
1. Make sure the link between your organization's mission and your employees' jobs is clear. 2. Foster
communication between people with relevant problems and those who have the information to help create
solutions. 3. Ask your employees how the company can benefit more fully from their individual skills and talents.
4. Encourage people from different parts of the organization to discuss problems together. 5. Encourage
employees to maximize their personal growth and reward that growth. If you're interested in receiving a free copy
of "The Rath & Strong Personal Initiative Survey" report, contact Hannah Feldman, Rath & Strong, 92 Hayden
Ave., Lexington, MA 02173, 800-622-2025. (617) 861-1700. ext. 243.
Script for
Dr. Deming's Red Bead Exercise
Before beginning the exercise, set up a small table in the middle of the front of the room with the bead bowl and
paddle on it. Place conspicuously on the same table, on the side facing the audience, two candy bars. Earlier in
the day, draw two charts on flipchart paper that look like this:
[Chart 1:] Defects
Workers:
Day 1
Day 2
Day 3
TOTAL
1._____
2._____
3._____
4.____
TOTAL
GRAND TOTAL

[Chart 2:] Defects

20 Ý // Ý 13 Ý 12 Ý 11 Ý 10 Ý 9 Ý D 8 Ý E 7 Ý F 6 Ý E 5 Ý C 4 Ý T 3 Ý S 2 Ý 1 Ý 1 2 3 4 1 2 3 4 1 2 3 4 þÄÄÄÄ|
ÄÄÄ|ÄÄÄ|ÄÄÄ|ÄÄÄ|ÄÄÄÄ|ÄÄÄ|ÄÄÄ|ÄÄÄ|ÄÄÄ|ÄÄÄ|ÄÄÄ|ÄÄÄÄÄþ TIME: Day 1 | Day 2 | Day 3 |
Also have prepared ahead of time a flip chart sheet with some banal slogan written on it in very large
lettersþsomething like þQuality in numero uno!þ or þLet's hear it for quality!þ Place this sheet so that it is
concealed but can be displayed quickly.
When you start the exercise, use a script that runs something like this:
Now I am going to invite you to join with me in Dr. Deming's Red Bead exercise. When Dr. Deming does his four-
day seminar, he introduces the Red Bead exercise on the third dayþwhen everyone else is exhausted and he's
still going strong. He invites the participants to relax and take a little recess, a little time for relaxation and
enjoyment. So... [changing r“les]
I am the general manager of the Great White Bead Enterpris- es. We make pure white beads, untouched by
human hands. We sell them to [organization in the seminar]þdon't ask me what they do with them. I have been
given a process to produce white beads designed by R Group. It is, therefore, perfect and will not be changed.
Now, to make these beads, I need some workers, and I'm going to ask for volunteers from the group here to help
me.
First I need people for whom there are no job require- mentsþno education requirements, no experience
requirementsþyou just have to be willing workers. So can I get four people to volunteer to be willing workers?
[If I don't get any volunteers, I warn them that I was once in the Army and I know how to volunteer people. If I still
don't get any, I pick out one and say, þWhy, thank you, George. Come on up.þ Then I continue with the others.]
Now I have two jobs with requirements: you have to know how to write numbers up to 20. Does anybody in this
organization meet that requirement? These jobs are for people who like to record other people's mistakes. What I
need is two inspectors. Please bring with you paper and a pencil.
Now I need someone who likes to tell other people what to doþthe Senior Inspector.
And finally, I need two people who can both write and add, may be even up to 100. These are my recorders.
[Assemble the nine volunteers so that the four workers are to the right of the table with beads (as you face the
audience), the two inspectors and the Senior Inspector are to the left, and the two recorders are standing at the
flipcharts prepared ahead of time (shown here on page 1) at the back. Try to keep the volunteers in a semi-circle
so that the audience can see what's going on.]
Workers, will you line up over here, please [to the right]? And recorder number one, will you please write down
their names on the chart where it says one to four? Thanks you.
Now I'm going to give you your training. Are you ready?
We make our white beads by dipping this paddle [demonstrate] into the beads in the bowl, letting the beads roll
over the paddle, and then withdrawing the paddle at exactly 47 degrees. If you do it right, you end up with all
white beads and all holes in the paddle filled. [Withdrawing the paddle] Now I have allowed some defects so that
you'll know what they look like. [Show the paddle with some red beads and some unfilled holes to the four willing
workers] After you have got your paddle filled, you show it to the two inspectors. They record their separate
findings on a slip of paper. Then the Senior Inspector compares the numbers shown to him by the two inspectors
and calls out in a loud voice the number of defects, then dismisses the worker who returns to the end of the line.
Meanwhile, the first recorder writes the number of defects in the first box, totalling the numbers as columns and
rows are completed, and the second inspec- tor plots the number of his chart. [Shows the recorders where the
numbers and dots should be put.] Now as you can see, we will do three days of work. Each worker will have one
turn per day.
Now this a quality company, but we also believe in high productivity, so there will be no talking! We discovered
long ago that allowing workers to chit-chat distracts them from hard work. Now we wouldn't want that, would we?
[Allow the workers to go through one turn. Badger them constant- ly. After the first one is finished, draw him aside
as if for a confidential chat and tell him, speaking loud enough to be heard by all, that the objective is no defects,
not the number he got. Keep reminding them to withdraw the paddle at exactly 47 degrees. Generally be
obnoxious, bossy, and condescending. After the first round:]
Wait, wait, stop. This isn't going at all well. I know what's wrong. We need a slogan. [Display the flip chart sheet
with the slogan on it] Nowþall say it after me...Quality is numero uno! [or whatever you have used] Now, are you
feeling inspired? Good! Let's begin day two!
[Continue haranguing the workers. Ask one after he has finished if he has a family. Ask another why she isn't any
good at beads...after all, she is a womanþanything you can think of to pressure the workers. It sometimes helps to
pick one out for punishment and keep picking on him or her. At the end of the second round (day 2):]
This is still isn't working. Hold it. I know. We don't have an awards program. Let's establish one right now. Let's
see who has the lowest defects in a single turn? George! Please come forward. On behalf of the Great White
Bead Enterprise, I want to publicly reward you for your exemplary work. [Give him a candy bar] Can we have a
round of applause for George? Now let's seeþwho has shown the greatest improvement....Sally! Come on right
up here, honey...isn't she cute?...Well, for your great improvement in your work, I want to publicly reward you on
behalf of the Great White Bead Enterprise. By the way, what are you doing after work? [Chuckle fatuously] Naw,
seriously, can we hear for this little lady? [Lead the applause]
OK, now let's get back to work. The last day! Let's see how much we can all approve.
[More badgering...remarks about how some people don't appreciate rewards, etc. At the end of day 3:]
Well, folks, since we are not producing pure white beads, [the organization] is not going to buy our product any
more, so I have to let you all go. [Fire each group individually]
[While one person does the calculations (shown below), the other processes the exercise by asking each
participant how he felt about what was going on. Ask how much control she had, how he might have improved the
process if he had been allowed. Ask if any of them have ever experienced anything like this (for exam- ple,
recording data that are never used). The point is that management had complete control of the process, the
workers had none. And yet management rewarded and punished them as if they were in control. Ask what effect
the slogan and the rewards had. Ask about the performance of the general manager. Ask if they have ever seen
any managers like him at NSA, etc., etc. be creative.]
While all this is going on, a partner is doing the calcula- tions using the following formulae: x = Total defects
divided by 12(number of trials) p = Totals defects divided by 600 (number of beads drawn) UCL = x + 3(the square
root of x(p-1)) LCL = x - 3(the square root of x(p-1))
þin which x is the average, p is the proportion, UCL is the upper control limit, and LCL is the lower control limit.
Once these figures are calculated, one of the instructors marks the values on the chart, explaining:
Now what we have constructed here is a run chart. You can see that when I join the dots [do it]. But we can turn it
into a control chart by showing the average and the upper and lower control limits. [Marks them on the chart].
Now what this shows is that the red bead process is in control [if it's out of control, see below]. If a process is in
control, it's ready to be improved. If it's out of statistical control, then it's either in the midst of change or it's being
impinged upon by something outside of the process itselfþso what we need to do is work on the larger
environment that the process is embedded in first, then, after the process is in control, work on improving it. In
other words, don't bother trying to improve a process that's not in statistical control.
Let me give you an example. It takes me about 40 minutes to drive to Fort Meade each day. There's common
variationþsome days it takes 37 minutes, some days 43. But one day it took me over 70 minutes. Now, should I
work on the process to try to improve that 70 minute defect? Should I check my tires or gas or review my driving
technique? No. The first thing I do is to find out why that outlier occurred. It turns out that was the day that Route
32 was all tied up. So should I change the kind of car I drive or check my tires or review my gas usage for that
cause? No. I get the process into controlþfree from the influences of external effectsþthen I can take on improving
it.
Now see these high and low peaks in the control chart? They're within the control limits. Notice how I (or my
partner) kept haranguing the workers over these scores. I rewarded George for this low score, and I scolded
Helen for this high score. And yet what I was rewarding and scolding was nothing more than random variation
over which the workers had no control whatever!
[If the process is out of control:]
Let's find out what caused these outliers. George, what happened here? [Find out what was going on. I have
always been able to explain all the outliers either by the fact that the process was changing (e.g., the workers lost
heart and stopped trying) or there was an outside influence (sometimes I get the players so upset that they start
shaking--then I'm the outside influence messing up the system). Then proceed with the remain- der of the
explanation shown above.
Any questions about the process or the statistics?
The final message is: we, the managers, own the process. If there are problems, the chances are pretty high that
it's up to us, not to the workers, to change things for the better.
Prepared by Tom Glenn, TQM BBS, 301-585-1164
Quality and the Required Style of Management The need for change W. Edwards Deming, Ph.D.
Better quality is necessary for the survival of industry in the Western World. American industry dominated the
world from 1920 through the two decades after World War II. Now it lies in a state of slumber. The rest of the
world waited in line after World War II to buy whatever North America could produce. Why? The rest of the
industrialized world lay in ruins. Everyone in the US expected the good times to continue. What happened? Why?
The answer is that the quality of most American products has been found wanting, not competitive. Emphasis in
the US is still on quantity, not on quality. Devaluation of the dollar against the yen is a disappointment, as anybody
could predict. Lower prices against the yen will not produce a market for goods that nobody wishes to buy. Most
American products are simply not salable at any price. Devaluation of the dollar is not the road to better business.
Better quality is. We are in a completely different position than we were in up till around 1960. What must we do?
Better quality for international trade is the answer, not restrictions to trade, nor self-pity, nor the beggar s cup. The
US has already installed more restrictions to trade than any other country, second only to France. Costs go down
and productivity goes up, as improvement of quality is accomplished by better management of design,
engineering, testing and by improvement of processes. Better quality at lower price has a chance to capture a
market. Cutting costs without improvement of quality is futile. Quality and innovation -- Quality is improved in three
ways: through innovation in design of a product or service, through innovation in processes, and through
improvement of existing processes. Hard work will not ensure quality. Best efforts will not ensure quality, and
neither will gadgets, computers or investment in machinery. A necessary ingredient for improvement of quality is
the application of profound knowledge. There is no substitute for knowledge. Knowledge we have in abundance.
We must learn to use it. Styles of management -- Wrong styles of management, with concomitant bad practices
have grown up and taken root in the western world. They become obvious under the theory that reduction in
variation improves a product. Theory of variation (statistical theory) helps to identify practices of management that
induce variation, high cost, and poor quality, with consequent loss of market. The same theory points to better
practices. I have for years noted appropriate practices for management; here I will list some of the faulty
management practices.
The wrong style of management
Management of failure (too late). It is better to work on the causes of failure. Failures are not causes; they come
from causes.
Tampering with a stable system. For example, track down anything that goes wrong with a product or service.
This policy does not improve the system. It is tampering, worsening the problem.
Compile a list or chart to show percentages right or percentages of product or service that went wrong last
month.
Annual appraisal of performance, the so-called merit system -- a destroyer of people.
Annual rating of divisions. (A manager of a division is rewarded on the basis of this rating.)
Campaign to reduce costs -- as if costs were causes.
Incentive pay, commissions and bonuses.
 Top management failing to understand their responsibility for quality, for innovation of product and processes and
for improvement of processes. Quality starts in the boardroom.
Short term planning and quick profit.
Churning money.
Competition without cooperation. Getting a bigger slice of the pie, but not making the pie bigger.
Doing business by price tag.
Short term contracts.
Management by objectives (MBO) or management by the numbers.
Investment in gadgets, computers, automation and new machinery without guidance of profound knowledge.
Posters and slogans for the workforce.
Work standards -- quotas. They double the cost of production, rob people of pride of workmanship and are a
barrier to improvement.
Deming s five principles
1. The central problem in lack of quality is the failure of management to understand variation. (Everything varies.
Statistics help us to predict how much it is going to vary.)
2. It is management s responsibility to know whether the problems are in the system or in the behavior of the
people.
3. Teamwork should be based on knowledge, design, redesign and redesign. Constant improvement is
management s responsibility. Most causes of low quality and productivity belong to the system.
4. Train people until they are in statistical control (until they are achieving as much as they can within the limits of
the system you are using).
5. It is management s responsibility to give detailed specifications.
Deming's fourteen points
1. Create constancy of purpose toward improvement of product and service with a plan to become competitive --
to stay in business and to provide jobs.
2. Adopt a new philosophy. We are in a new economic age. We can no longer live with commonly accepted levels
of delays, mistakes, defective materials and defective workmanship.
3. Cease dependence on mass inspection. Require instead, statistical evidence that quality is built in to eliminate
need for inspection on a mass basis.
4. End the practice of awarding business on the basis of price tag alone. Instead, depend on meaningful
measures of quality along with price.
5. Improve constantly and forever the system of production and service. It is management s job to work
continually on the system.
6. Institute a vigorous program of education and retraining.
7. Adopt and institute leadership. The responsibility of supervision must be changed from sheer numbers to
quality. Improvement of quality will automatically improve productivity.
8. Drive out fear so that everyone may work effectively for the company.
9. Break down barriers between departments. People in research, design, sales and production must work as a
team to foresee problems of production that may be encountered with various materials and specifications.
10. Eliminate numerical goals, posters and slogans for the workforce that ask for new levels of productivity
without providing new methods.
11. Eliminate work standards that prescribe numerical quotas.
12. Remove barriers that stand between the hourly worker and his right to pride of workmanship.
13. Encourage education and self improvement for everyone.
14. Create a structure in top management that will push every day on the above thirteen points.
W. Edwards Deming, Ph.D. pursued and promoted the use of sound management practices and the use of
statistics for seven decades. His speeches, writing, videotapes and impact of individuals who studied with him will
continue to have a profound influence on how leaders throughout the world organize and lead their organizations.
This article first appeared in the Association for Quality and Participation s Journal for Quality and Participation in
March, 1988. AQP s information center may be reached at 513-381-1959 or fax 513-381-0070.

Learning Objectives
The overall purpose of the course is to introduce the student to the variety of theory applicable to the design and
study of continuous quality improvement systems, with specific emphasis towards those systems based on the
teachings of W. Edwards Deming. The student should gain facility at understanding the link between theory and
application. The course is a "survey" course in that a wide list of topics will be covered, rather than a few topics in
great depth.
Here are the learning objectives for the course:
1. State how each of the 4 theory areas (statistics, cognitive psychology, organizational behavior, and systems
theory) is relevant to continuous improvement.
2. Identify and locate research sources (books and articles) relevant to a particular theory area.
3. Comprehend the language and terminology used in these different theory areas.
4. Demonstrate, using examples, the application of theory from the following topic areas (theory-to-application
link):
models of individual learning group design and dynamics leadership and power motivation and goals
organizational learning single and double loop learning organization change and development conceptual
pragmatism systems modeling chaos theory Shewhart's operation of control cognitive issues in data exploration
and problem solving 5. Using the areas listed above, enumerate relevant theory, given: (a) the application of one
of Deming's 14 points, or (b) a particular TQM implementation issue (application-to-theory link).
6. Demonstrate the ability to learn collaboratively in a variety of learning situations.
The student is expected to have background equivalent to an introductory "Quality Control" course. The following
are learning objectives it is expected the student has already achieved:
1. Identify inputs, outputs, customers, suppliers, resources, and environment for any system under different levels
of scope and complexity.
2. Give definitions of product and service quality from several perspectives and demonstrate the usefulness of
each definition.
3. Write operational definitions for any quality characteristic of interest.
4. Explain tendencies, patterns, and trends in data using the simple exploratory statistical tools (histograms,
paretos, run charts, etc.).
5. Explain the assumptions behind these simple exploratory tools, and the impact of these assumptions.
6. Specify and contrast the purpose, design, assumptions, and use of control limits versus design specification
limits.
7. Identify common and special causes using control charts.
8. Specify actions to be taken given control chart data.
9. Calculate the Taguchi loss function for a process.
10. Demonstrate the use of PDSA.
11. Specify the stages of team development.
12. Specify the elements of successful teams.
13. Demonstrate using examples the strategic importance of quality and continuous improvement.
14. Demonstrate using examples the importance of organizational culture and leadership on quality improvement.
15. Demonstrate using examples Deming's 14 points.
16. Demonstrate using examples quality function deployment. Statement of Process
Following are my expectations from students:
* Read appropriate material before class.
* Participate in all class discussions.
* Show respect for and acknowledge classmates and team members.
* Locate and read other external material (library, magazines, newspapers).
* Have an open mind; challenge assumptions.
* Ask questions.
* Help other classmates learn.
Here are my own expectations:
* Show students respect.
* Encourage students to learn outside of my lecturing.
* Demonstrate the relationships between theory and practice.
* Give feedback promptly and appropriately.
* Be fair in all dealings.
* Gather feedback information during course so as to improve.
* Have an open mind.
* Be prepared.
A variety of teaching methods will be used in the class. It is expected that the majority of learning will not come
"from me", but rather from class discussion, outside readings, and your own reflections. It is my belief that the
student must play an active role in their own education.
Timeline
The following is an initial topical plan. Changes may be made as needed. Required reading (note packet) is given
in plain text; optional readings are given in italics:
M 1-4 Course Intro; Deming background: Profound Knowledge
-- Anderson, J.C., Dooley, K.J., and S.A. Misterek, "The Role of Profound Knowledge in the Continual
Improvement of Quality," Human Systems Management, 1991, Vol. 10, pp. 243-259.
-- Anderson, J.C., Dooley, K., and M. Rungtusanatham, "Requisite Knowledge for Continuous Improvement:
Toward Improved Training and Education," Proceedings of the Continual Improvement Conference, Minneapolis,
1992.
-- Anderson, J., Rungtusanatham, M., and R. Schroeder, "Exploring the Theory of Quality Management
Underlying the Deming Management Method," Proceedings of the Continual Improvement Conference,
Minneapolis, 1992.
-- Deming, W.E., "A System of Profound Knowledge," Action Line, August 1990, pp. 20-26.
--Schultz, L., "The Rings of Management: The New Management Theory," Human Systems Management, Vol. 10,
1991, pp. 11-17.
--Tveite, M., "The Theory Behind the Fourteen Points: Management Focused on Improvement Instead of
Judgement," Process Management International, 1990.
W 1-6 Group dynamics, group design
-- Hackman, Richard, "The Design of Work Teams." In J.W. Lorsch (Ed.), Handbook of Organizational Behavior.
Englewood Cliffs, NJ: Prentice-Hall, 1987.
--Sundstrom, E., DeMeuse, K.P., and D. Futrell, "Work Teams," American Psychologist, Vol. 45, No. 2, February
1990, pp. 120-133.
M 1-11 teams in chaos exercise
--Bush, D., and K. Dooley, "Group as a Process: Teams, Variability, and Complexity," Proceedings of the Continual
Improvement Conference, Minneapolis, 1992.
W 1-13 teams in chaos exercise M 1-18 Holiday: Martin Luther King's Birthday W 1-20 Conceptual pragmatism
-- Anderson, J., Dooley, K., and X. Liu, "Knowledge for Process Improvement," Proceedings of the Continual
Improvement Conference, Minneapolis, 1991.
--Boyd, F., "The Philosophy of Lewis's 'Mind and World Order' and Its Influence on Deming's Theory of Profound
Knowledge," working paper, University of Miami.
--Lewis, C.I., Mind and World Order, Charles Scribner's Sons, 1929, excerpt Chapters 7-8, pp. 195-273.
--Strickland, B., "C.I. Lewis and Deming's Theory of Knowledge," Proceedings of the Continual Improvement
Conference, Minneapolis, 1992.
M 1-25 Chaos theory, quantum mechanics: Theory of variation
-- Jensen, R., "Classical Chaos," American Scientist, Vol. 75, 1987, pp. 168-184.
-- Mermin, N.D., "Is the Moon There When Nobody Looks? Reality and the Quantum Theory," Physics Today, April
1985, pp. 38-47.
--Crutchfield, J., Farmer, J., Packard, H., and R. Shaw, "Chaos," Scientific American, No. 255, December 1986,
pp. 46-57.
--Michaels, M., " A Dictionary of Chaos Terms", Chaos Network Newsletter, November 1990.
--Shimony, A., "Metaphysical Problems in the Foundations of Quantum Mechanics," International Philosophical
Quarterly, Vol. 8, 1978, pp. 2-17.
W 1-27 Shewhart's operation of control
-- Shewhart, W., Statistical Methods from Viewpoint of Quality Control, Graduate School Department of
Agriculture, Washington, 1939. PAGES 1-49.
M 2-1 Shewhart's operation of control
-- Shewhart, W., Statistical Methods from Viewpoint of Quality Control, Graduate School Department of
Agriculture, Washington, 1939. PAGES 80-119.
W 2-3 Cognitive issues in data presentation, interpretation, problem solving, creativity
-to be announced-
--Gasper, P., "Causation and Explanation," from The Philosophy of Science, ed. R. Boyd, P. Gasper, and J. Trout,
1991, MIT, pp. 289-297.
--van Fraassen, B., "The Pragmatics of Explanation," American Philosophical Quarterly, Vol. 14, 1977, pp. 143-
150.
M 2-8 Cognitive issues in data presentation, interpretation, problem solving, creativity
-- Dooley, K., "The Perceptual Truths of Edward deBono," review to be published in Chaos Network, 1993.
-- Flor, R., and K. Dooley, "Summary of deBono's 'Six Thinking Hats'," 1992.
W 2-10 Models of learning
-- Bush, D., and K. Dooley, "A Learning Process for Transformation to Continuous Improvement Management," to
appear in Human Systems Management, 1993.
-- Dooley, K., Bush, D., and T. Johnson, "Quantitative Models of Learning: Neural, Cognitive, and Organizational,"
Proceedings of the Chaos Network Conference, Santa Cruz, 1992.
--Estes, William K. "Toward a Statistical Theory of Learning." Psychological Review, 1950, 57, 94-107.
--Lippman, R.P., "An Introduction to Computing with Neural Nets," IEEE ASSP Magazine, April 1987, pp. 4-22.
--Rescorla, Robert A. and Allan R. Wagner. "A Theory of Pavlovian Conditioning: Variations in the Effectiveness of
Reinforcement and Nonreinforcement." In: A. Black and W.F. Prokasy (Eds.), Classical Conditioning II. New York:
Appleton-Century-Crofts, 1972.
M 2-15 Organizational learning
-- Huber, G.P., "Organizational Learning: The Contributing Processes and the Literatures," Organizational
Science, Vol. 2, No. 1, February 1991, pp. 88-115.
-- Zeleny, M., "Knowledge as a New Form of Capital: Part 1. Division and Reintegration of Knowledge," Human
Systems Management, Vol. 8, No. 1, 1989, pp. 45-58.
-- Zeleny, M., "Knowledge as a New Form of Capital: Part 2. Knowledge Based Management Systems," Human
Systems Management, Vol. 8, No. 2, 1989, pp. 129-143.
--Dixon, N., "Organizational Learning: A Review of the Literature with Implications for HRD Professionals," Human
Resource Development Quarterly, Vol. 3, No. 1, Spring 1992, pp. 29-49.
--Stata, Ray, "Organizational Learning--The Key to Management Innovation," Sloan Management Review, Spring,
1989, pp. 63-74.
W 2-17 Organizational learning
-- Argyris, C., "The Executive Mind and Double Loop Learning," Organizational Dynamics, Autumn 1982, pp. 5-22.
--Argyris, C., "Action Science and Intervention," J. of Applied Behavioral Science, Vol. 19, No. 2, 1983, pp. 115-
140.
--Argyris, C., "Teaching Smart People How to Learn," Harvard Business Review, Vol. 69, No. 3, 1991, pp. 99-109.
--Argyris, C., "Leadership, Learning, and Changing the Status Quo," .J of Organizational Dynamics, Vol. 4, No. 3,
Winter 1976, pp. 3-43.
--Schon, D., "Deutero-Learning in Organizations: Learning for Increased Effectiveness," J. of Organizational
Dynamics, Vol. 4, No. 1, Summer 1975, pp. 2-16.
M 2-22 Systems modeling
-- Ashby, R., "Analysis of the System to be Modeled," in The Process of Model-Building in the Behavioral
Sciences, Ohio State University Press, 1970, pp. 94-114.
-- Flor, R., "Book Review: Senge's 'The Fifth Discipline'," 1992.
-- Ackoff, R.L., "The Second Industrial Revolution," speech transcript, 1988.
--Checkland, P., "Soft Systems Methodology," Human Systems Management, Vol. 8, 1989, pp. 273-289.
--Schultz, L., and S. Loubert, "A System," Proceedings of the Continual Improvement Conference, Minneapolis,
1992.
--Senge, P., The Fifth Discipline, Doubleday: New York, 1990, excerpts from appendix 2: The Learning
Disciplines, pp. 373-390.

W 2-24 Systems modeling

--Ashby, R., "General Systems Theory as a New Discipline," General Systems, Vol. 3, 1958, pp. 1-6.
--Ashby, R., "Cybernetics," in Recent Progress in PsychiatryIII, Fleming (ed.), London, 1958, pp. 94-117.
--Ashby, R., "Requisite Variety and its Implications for the Control of Complex Systems," Cybernetica, Vol. 1, No.
2, 1958, pp. 1-17.
M 3-1 Motivation, needs, goals, and fear
-- Johnson, D., Maruyama, G., Johnson, R., Nelson, D., and L. Skon, "Effects of Cooperative, Competitive, and
Individualistic Goal Structures on Achievement: A Meta Analysis," Psychological Bulletin, Vol. 89, 1981, pp. 47-62.
-- Scholtes, P., "An Elaboration on Deming's Teachings on Performance Appraisal," Joiner and Assoc., Madison
WI, 1987.
-- Carson, K., Cardy, R., and G. Dobbins, "Performance Appraisal as Effective Management or Deadly
Management Disease: Two Initial Empirical Investigations," Group and Organizational Studies, June 1991, pp.
143-159.
W 3-3 Models of leadership and power; empowerment
-- Hollander, E.P., and L. Offerman, "Power and Leadership in Organizations," American Psychologist, Vol. 45, No.
2, February 1990, pp. 179-189.
M 3-8 Organizational change and development
-- Broadhead, J., "The Post-Deming Diet," Training, February 1991, pp. 41-43.
-- Livingston, J., and C. Hart, "Florida Power Light's Quality Improvement Program," Harvard Business School
Case 9-688-043, 1987.
-- McLean, G., and S. Pakenham-Walsh, "An In-Process Model for Improving Quality Management Processes,"
Consultation, Vol. 6, No. 3, Fall 1987, pp. 158-174.
-- McLean, G., and J. Persico, "An Updated View of the Model for Implementing a Quality and Productivity
System: Total Quality Management Process (TQMP)," Journal of Managerial Psychology, Vol. 5, No. 1, 1990, pp.
23-32.
-- S. Sekine, "The Almighty God TQC," Tokyo Business Today, August 1986, pp. 40-45.
--Beer, M., Eisenstat, R., and B. Spector, "Why Change Programs Don't Produce Change," Harvard Business
Review, November-December 1990, pp. 158-166.
--Lewin, K., "Frontiers in Group Dynamics," Human Relations, Vol. 1, 1947, pp. 5-41.
--Schein, E.H., "Organizational Culture," American Psychologist, Vol. 45, No. 2, February 1990, pp. 109-119.
 W 3-10 Organizational change and development
-- Dooley, K., "Total Quality Management and Chaos Theory," presented to the American Psychological Society,
San Diego, 1992.
-- Nonaka, I., "Creating Organizational Order Out of Chaos: Self-Renewal in Japanese Firms," California
Management Review, Spring 1988, pp. 57-73.
--Freedman, D.H., "Is Management Still a Science," Harvard Business Review, November-December 1992, pp.
26-38.
--Goldstein, J., "A Far-from-Equilibrium Systems Approach to Resistance to Change," Organization Dynamics,
Vol. 17, No. 2, 1988, pp. 16-26.
--Leifer, R., "Understanding Organizational Transformation Using a Dissipative Structure Model," Human
Relations, Vol. 42, No. 10, 1989, pp. 899-916.
IEOR 5445--Topics in Management Science--The Theory Behind the Deming Management Method, Winter 1993
Quarterly Assignments
Homework 1 "Team building" is an essential part of most quality training programs, and is a typical starting point
for many industrial groups.
1. What are some of the guidelines/rules of thumb that can help determine the amount of team building a group
should go through? In other words, should the amount and type of material that a group is exposed to, and the
exercises they are facilitated through be customized, and if so, according to what criteria? (2 par. max)
2. Suppose that you were facilitating a product development team working on a new product of some technical
complexity. The team was going to be working together a lot over the next year, and was cross-functional in its
make-up. With respect to material specifically related to the group process and associated dynamics,
(a) outline a 3 hr. "first session" with the group (you can assume the group has already in place some specific
"technical" objectives)--include a statement noting the purpose of the session. (b) write a "summary" page which
would be used in your session which summarizes the basic issues in group design and group process (not more
than ten items of 1-2 sentences each). Homework 2
1. Hypothesize 10 "theories" that you learned via the "Teams in Chaos" exercise. They should be general
(applicable to organizations in general, not just groups of students making paper airplanes). For example, a
theory might be: "When customer requirements are made explicit, the production learning curve is accelerated."
2. When Western executives have visited Japan, or for that fact other Western companies, they have been
accused of "looking for the wrong things." For example, one lesson (supposedly) learned by these executives was
that workers could be "brought together" more via social activities, such as everyone singing a company song, or
doing exercises together. Such solutions tend to fall into the category of what Deming would call "instant
pudding".
Lewis says there is no learning without an a priori (pre-established theory). What do you think were these
executives' a priori? Why was this a priori potentially faulty?
3. Benchmarking is a much used approach in industry today -- an attempt to learn of practices and performance
from other companies. Specific to benchmarking of processes and practices (as opposed to numerical results),
put yourself in the shoes of C.I. Lewis and write an editorial to Quality Progress magazine (magazine aimed at
quality practitioners) expressing your opinions about benchmarking.
Homework #3
Related to the Shewhart text...
1. Write down (in common language) guidelines for the proper application of statistical control.
2. On page 43 of the book... "An inference based upon specified evidence E may be reasonable or valid upon the
basis of that evidence even after one has learned that the prediction is false." What are the practical implications
of this statement? In your opinion do organizations of today believe this statement (support your opinion)? What
differences might exist between organizations who believe and don't believe in this statement?
================================================ Do ONE of the following five:
3a. Find specific examples in the literature (or from work) which demonstrate poor application of SPC relative to
the guidelines put forth in question 1. Give data, analysis, and alternative solutions.
3b. Study an advanced SPC tool (you can find them written about in J. of Quality Technology or Technometrics for
instance) like cusum or EWMA charts and report on how its used, why and when its used, comparison to standard
Shewhart charts, etc.
3c. Specify how degree of belief (as specified by Shewhart) is taken into account in probabilistic reasoning (a
working knowledge of Bayesian statistics or AI reasoning is needed here...).
3d. The third chapter of Shewhart discusses how quality-related data should be presented. Use this to develop
guidelines for design and operation of a quality information system.
3e. Remember the logistics equations is: xn+1 = k xn (1-xn) for 0<k<=4, 0<x<1 and that for certain values of "k"
the system became chaotic. Between k=3.57 and k=4 simulate ten dynamic systems with 10 different values of k
and plot histograms of the resulting data (1000-2000 point histograms should suffice). What can be said about the
probability distributions of these systems?
Homework #4
1. Find five examples (from journals, articles, business reports, magazines, etc.) of graphics (pareto, run chart,
etc.) that demonstrate a range of "graphical effectiveness" as defined by the theories put forth by Tufte. Comment
(and potentially quantify) their effectiveness via his guidelines. Do any TWO of the following...
2a. Find a transcript of a persuasive speech, debate, or dialogue (for example, there's a dialogue that could be
used in Argyris' "Action Science and Intervention" ), or tape and transcribe a "real-life" dialogue (a problem solving
setting would be optimal). Analyze the discussion via deBono's six thinking hats, and comment on how effective or
ineffective the discussion was using the six hats as a perspective.
2b. What is group think? (Answer is not directly in any readings I've given you, but this is a well-known and
written-about phenomena.) How can it be avoided or overcome?
2c. What are humans' cognitive shortcomings in interpreting statistical data (e.g. law of small numbers, emphasis
of historical cases, etc.)? Summarize (one page suggested). Once again, answers are not directly supplied in
readings I've put together.
2d. Identify a decision making situation that has been written about, for example the shuttle disaster or Bay of
Pigs (or even the movie "China Syndrome" for example!). Specifically analyze the decision making from the
perspective of the theory that decision making is often biased (and hence ineffective) because of unstated
assumptions that the decision maker has a priori.
2e. Numerically demonstrate (in a step-by step fashion) how a back propagation neural network works. You can
use a very small net for demonstration purposes.
2f. Make up a simple task and demonstrate (using yourself or another subject) quantitatively the learning curve.
Homework #5
Do any two of the following:
1. Discuss ways in which a facilitator can move an individual from Argyris' model I to model II behavior.
2. What are the similarities and differences between individual learning and organizational learning?
3. Discuss how organizational structure influences organizational learning.
4. Discuss how technology can help, hinder organizational learning.
5. What is meant by the "experimenting organization" (go beyond Huber's discussion), and what are some
practical ways to achieve such?
6. Discuss the research findings on "vicarious learning" (go beyond Huber's discussion) and relate them to the
practice of benchmarking.
Homework #6
Now that you "know it all" you can put it all together. Write an essay (limited to 8 double-spaced pages, 12 point
font, excluding references, Tables, and/or Figures) on the topic "The Theory Behind the Deming Management
Method". You may use Deming's 14 points as a beginning structure if you wish.
....................................................................... (As of 9.26) New Chaos and Complexity Course Outline, Book List
at Home Page ....................................................................... Kevin Dooley U. Minnesota Industrial Eng.
kdooley@maroon.tc.umn.edu WWW site update June 26
_____________________________________________________________
**NOTE**
This article was posted on the TQM BBS for public download with the express permission of Joiner Associates
Incorporated. But the text is copyrighted and may not be reproduced without permission. For permission, further
information, or a list of other publications available from Joiner Associates, call or write:
Susan E. Reynard Senior Editor Joiner Associates Incorporated 3800 Regent Street Madison Wisconsin 53705
Telephone: 608-238-8234, extension 232 Fax: 608-238-2908
____________________________________________________________
TOTAL QUALITY LEADERSHIP VS. MANAGEMENT BY RESULTS Brian L. Joiner Peter R. Scholtes
I. Introduction
America faces a deeply troubling future.
We are in the midst of a transition to a world economy increasingly dominated by the Pacific Basin countries, a
turnaround in the economy from the red-hot inflation years of the late 1970s, and a revolution in technology that is
altering battle plans on nearly every front every day. America is struggling in a world where companies,
governments and organizations have to run fast and smart to stay alive.
Many American companies are in trouble--losing old customers and failing to find new ones. Yet many managers
can not comprehend what is happening or why it is taking place.
Manufacturers have been hurt badly by foreign competition that is producing higher quality goods at lower prices.
Many firms--both manufacturing and service companies such as airlines and banks--are facing chaotic market
conditions as a result of deregulation. State and local governments, already subject to cutbacks of federal funds,
struggle to make up revenues through higher taxes. State is pitted against state in fierce competition to attract
new jobs.
We believe that one major cause of these problems is the failure of American managers to realize that there is a
"new" way to manage their organizations--a way that yields much higher quality, higher productivity, more jobs
and better return on investment.
We call this system of management Total Quality Leadership.
Total Quality Leadership is a way of managing any organization--whether it be a Fortune 500 corporation, a
university or a family restaurant. Total Quality Leadership can create sustained growth from the chaos of today's
marketplace. With Total Quality Leadership practiced throughout the economy, America can regain its competitive
position in the world market.
All managers have a job to do to help their companies learn and implement the new approach. In this article, we
will describe the new approach to management which needs to be practiced by the entire organization. And then
we will give some details about what individual managers can do to help implement these changes. First we will
examine what we call "Management by Results," the most common form of management practiced in American
companies today.
II. Management By Results
American managers, for the most part, are a tough lot who have accomplished much. They have helped build the
strongest economy the world has known. And yet they are losing control. They have not used the full potential of
their organizations. They have failed in many respects to satisfy their customers. And so they are losing them.
Most American managers manage, at least in part, by Management by Results. In this style of management, the
emphasis is on the organizational chart and the key control points within that structure (Figure 5.1). Each
manager, beginning at the top, is given certain goals for the next year. They, in turn, set goals and impose
controls on each of their subordinates. A CEO, for example, may be given simply a profit objective. He or she will
then typically give each division head a profit objective. A division head then has to set goals or quotas for each
department head. In a manufacturing organization, for example, the sales department may be told to increase
sales by 10%, production to increase productivity by 5%, engineering to get products into production 10% faster,
purchasing to reduce costs by 5%, quality to decrease warranty costs by 20%, and so on. At the lower levels,
these goals become quotas or work standards.
Management by Results is simple, logical and consistent. It seems to have been quite successful. It is practiced
by nearly every major American corporation. It is widely taught in business schools. And it is attributed by many
for getting us to where we are today.
But there is an underside to Management by Results. Consider these examples:
* An electronics firm typically ships 30% of its production the last day of the month. Why? In order to meet the
monthly shipment quota. How? By expediting parts from around the country, by moving partially completed
instruments ahead of their place in line, and, occasionally, by letting quality standards slip. * Another firm
sometimes ships incomplete instruments. A service representative then flies around the country installing the
missing parts. The shipment quota for the month is met again. Profits, at least on paper, hold firm. * A chemical
plant reports it cannot efficiently run at the mandated inventory levels, so it keeps inventories higher until June 30
and December when inventories are measured. For those days, it depletes the inventories to an acceptable level,
perhaps losing two days production as a consequence * Many managers annually negotiate safe goals and
manage to exceed them, just barely. Some managers include on their list of negotiable goals, which were already
secretly accomplished prior to the negotiation. * Production which exceeds the standards is stored so it can be
pulled out and used another day. * A meter reader stops at a tavern at 2:00 rather than exceed his work standard.
* Problems are hidden from management, in hopes they will blow over or not be noticed. These are just a few of
examples of problems that occur with Management by Results. It has many shortcomings. Most occur because
the larger purpose and greater good of the work being done gets displaced by the controls themselves. The
workers, supervisors and the managers get caught up in organizational pretense where looking good
overshadows doing well.
Here are but a few of the many negative aspects of Management by Results:
* It is a system of controls. The rewarded accomplishments are therefore necessarily measurable and short term.
The near horizon gets attention and countable accomplishments get priority even though an organization's
survival may depend on the unmeasurable activities undertaken to accomplish long-term results. * Systems of
controls without a long-term, larger purpose will always set up conflict in an organization. The controls which
direct one unit's short-term gain will contradict the controls which direct the short-term gains of another unit. Sales
will make promises which production can't keep. Engineers will rush products into production before they are
ready. Purchasing will buy materials which the warehouse can't store and the people on the line can't use.
Planners and policy-makers plan programs which service personnel aren't equipped to provide. Each group
struggles to conform to its controls independently of other groups and sometimes at their expense. * When
measurable controls are unattainable or impractical, individuals and groups tend to fabricate conformance. They
"play the game" because not to do so would risk looking bad. The twice-per-year depletion of inventories is a
movie-set approach to conformance. Behind the appearance, there is no substance. But it looks like controls are
in effect. * This charade of conformance fosters guarded communications, minor--and even major--dishonesty.
The greater the stress on reaching unattainable goals, especially when someone's career is on the line, the more
likely it is that the figures will be juggled. * The inevitable contradictions between the controls of different
departments leads to finger pointing, blame games and an endless series of excuses like "if it weren't for them..."
* Related to the blame-it-on-them mentality is a cover-your-rear mentality: play it safe, don't trust anyone and
make sure that when the system breaks down, someone else is at the switch. In times of stress, circle the
wagons. Don't help others, especially if they're under fire. * Behind the worst shortcomings of Management by
Results is fear. Fear is the prime motivator in a Management by Results system. And the more rigid and
unrealistic the controls are, the deeper is the fear. * Management by Results encourages an organization to look
inward at its own structures rather than outward at the world in which the customer operates. Rather than delight
in providing a product or service that works and satisfies the customer, the sense of accomplishment comes from
meeting the controls. It becomes a self reinforcing cycle. A manager or supervisor has a goal imposed on him or
her. The manager works to meet that measure, however much distortion might occur at some other time or place
in the organization. Meeting the short term measurable goal is an indicator of the success of the individual and the
success of the system of controls. Thus, there is fostered a Titanic-like complaisance about the invulnerability of
the operation. When there finally is some awareness that the indicators of control may be focused on the wrong
measurements, it's too late. The ship is going down and "Nearer My God to Thee" is heard from the afterdeck. It
is interesting to note that Management by Results is widely used in the Soviet Union. Typical is this story:
Several years ago there was a surplus of large nails and a shortage of small ones. Why? Managers were held
accountable for the tons of nails produced. Later the control was changed to the number of nails produced. This
led to a shortage of large nails, since smaller nails gave higher counts.
III. Total Quality Leadership
Managers often say, "I agree, there are serious problems with Management by Results, but what is a better
alternative?"
The alternative, we believe, is Total Quality Leadership.
Simply put, Total Quality Leadership is an approach to management which focuses on giving top value to
customers by building excellence into every aspect of the organization. This is done by creating an environment
which allows and encourages everyone to contribute to the organization and by developing the skills which enable
them to scientifically study and constantly improve every process by which work is accomplished. In all
organizations there are processes by which things get done. There are processes of production, of sales and of
distribution. There are also processes to find out about customer needs and problems. There are processes that
couple market information with information on new technologies. These in turn generate ideas for new products
and services. Other processes create and test these new products and services and move them into routine
production. Still other processes study costs and value added throughout the organization. There are literally
thousands and thousands of processes, the overall health of which determines the future of the enterprise.
In Total Quality Leadership the emphasis is on studying these processes (Figure 5.2) and on executing them
better and better to provide customers with products and services of ever increasing value at ever lower costs.
The focus in Total Quality Leadership is on quality--the quality of every product and service and the quality of
every process--this emphasis on quality is shown at the apex of the triangle in Figure 5.3.
To achieve this higher quality, every process, beginning with the most important, is studied using the Scientific
Approach. Processes are described with flow charts, problems are identified, the root causes of problems are
determined through careful research and new fool-proofed systems are developed. Every process is brought
under statistical control and variations are further reduced, well beyond specifications.
The use of the Scientific Approach, as shown at the bottom left of the triangle in Figure 5.3, becomes pervasive.
In many cases, the most difficult aspect of Total Quality Leadership is to create an environment of All One Team.
If a company is to be truly excellent in every activity, everyone throughout the organization must work together to
improve processes and to execute them with energy and efficiency. It requires a fundamentally different view of
the relationship between employees and the organization. In order for all employees to be committed to the
organization, the organization must be committed to its employees. This environment of total teamwork cannot be
developed under Management by Results.
Total Quality Leadership is not widely practiced in the United States, but it is not new, nor is it foreign. Its roots go
back to the early 1980s and its principal prophet is a Sioux City, Iowa, native named W. Edwards Deming. A
statistician by training, Deming formed many of his theories during World War II when he taught industries how to
use statistical controls to improve the quality of production.
But when the war ended, American industry turned its attention to meeting the huge demand for consumer
goods, without the pressure for efficiency or quality that guided it through the war years. And for almost 20 years
there was no foreign competition.
Across the Pacific, however--where "Made in Japan" meant junk--there were people willing to listen. Deming told
them to find out what their customers wanted, then to study and to improve their product design and production
techniques until the quality of the product was unsurpassed. He taught them the product was "still in the
development process when it was in the customer's hands."
His influence began with a dinner meeting in 1950 organized by the Japanese Union of Scientists and Engineers
with 45 leading industrialists at industry club in Tokyo.
He has since recalled that meeting. We will quote his recollections extensively since they are so central to his
thesis: "They thought they could not (compete) because they had such a terrible reputation for quality...I told
them, 'You can produce quality. You have a method for doing it. You've learned what quality is. You must carry out
consumer research, look toward the future and produce goods that will have a market years from now and still
stay in business...' "Incoming materials were terrible, off gauge and off color, nothing right. I urged them to work
with the vendors and to work on instrumentation. A lot of what I urged came naturally to the Japanese, though
they were not doing it. I said, 'You don't need to receive the junk that comes in. You can never produce quality
with that stuff. But with process controls that your engineers are learning about--consumer research, redesign of
products--you can. Don't just make it and try to sell it. But redesign it and then again bring the process under
control...with an ever-increasing quality. "I told them they would capture markets the world over within five years.
They beat that prediction. Within four years, buyers all over the world were screaming for Japanese products."
The rest, as they say, is history.
IV. Key Components of Total Quality Leadership
Here are some of the key components of Total Quality Leadership:
* It recognizes--as Dr. Joseph Juran has argued since the early 1950s--that at least 85 percent of the failures in
any organization are the fault of systems controlled by management. Fewer than 15 percent of the problems are
actually worker related. In Total Quality Leadership, the focus is thus on constantly and rigorously improving every
system. * It asserts that work is not haphazard. It can be and must be studied, analyzed and scientifically
dissected. * It insists that processes must be standardized and that standardized procedures must be followed.
Variation must be reduced in output and in the way things are done, yet the opportunity must be provided for
everyone to contribute to improving the processes and to eliminating problems. * It has a customer focus, an
obsession with quality. * It recognizes that there are both external customers and internal customers--other
employees who depend on your work to be able to perform their jobs properly. * It demands improved relations
with suppliers, a true working partnership, which in most cases will require a single supplier for each item. * It
emphasizes process improvement rather than individual accountability. * It requires that communication systems
be adapted to the needs of the work, not to the needs of the hierarchy. * It demands constancy of purpose
throughout the organization, persistence in accord with a clear and widely understood vision. It is an environment
which nurtures total commitment from all employees. Rewards go beyond simple benefits and salary to the belief
"we are family" and "we do good work." Total Quality Leadership is a management philosophy that starts with the
customer, not with the bottom line profit and loss statement.
It is very data oriented and calls for monitoring thousands of variables inside and outside the organization. These
numerical measures are used to guide the search for better performance, and are recognized as means rather
than ends, as guides to deeper truths, rather than items to be controlled.
In Total Quality Leadership there is freedom, yet there is control. There is the freedom to discover new markets,
to develop new systems, to gain greater mastery over the processes. And there is the control of a data based
approach to improvement.
Many managers have great trouble understanding why they should focus on improving the systems that serve
the customer rather than simply on profits. The Deming Chain Reaction in Figure 5.4 may help.
When quality is increased by improving processes (not by expanded inspection), the better quality will lead to
improved productivity. This leads to lower costs, which lead to lower prices. Better quality and lower prices mean
the company can expand its market, and can stay in business creating jobs and a greater return on investment.
Management by Results, on the other hand, tends to focus only on the end result--the return on investment; it is
like wagging the tail to keep a dog healthy.
It is a tough concept to comprehend and it takes a leap of faith to make the fundamental shift from Management
by Results to Total Quality Leadership. There is no easy way to make the change. It seems best to us to use a
gradual process of letting go from the old style while embracing the new. Mary Ann Gould, former president of
Janbridge Corp. and the leader of the Philadelphia Area Council for Excellence, thinks of it as a "revolution in
thought," and an "evolution in implementation."
Working partly in collaboration with Gould, and receiving considerable advice and counsel from Dr. Deming, we
have developed a general model for implementation. Our model is not static as we continue to learn by working
with a variety of organizations seeking to make the transformation.
Key elements of this model include:
* The education and re-education of managers. They must become leaders instead of bosses, coaches instead
of enforcers. They must focus on solving problems and constant improvement instead of blaming and controlling.
The quality-focused approach to leadership requires continuous feedback from the customer, and constant
communications and feedback within and between units of the organization. * The development and
communication of a clear vision of the organization's future. It is a vision which says: here is what we are, here is
what we do, here is where we're heading and here is what is important and unique about us * The formation and
development of true management teams. They are essential for leading the company in its normal business
functions and for leading the implementation of Deming's approaches so that Total Quality Leadership itself
becomes a "normal business function." Teams are essential for maintaining "constancy of purpose," for "breaking
down barriers" between departments, and for "driving out fear" among the managers themselves. * Targeted
implementation efforts and an overall strategy. A common mistake is for companies to try to involve too many
people too soon in the improvement efforts. It is easy to plant a big garden, but very hard to tend it, harvest it, and
make good use of the crops. Don't begin more improvement efforts than you can realistically support and
maintain. * Management-selected projects and project teams using the scientific approach to improve processes.
Usually the teams consist of a mixture of professional staff, managers, supervisors, and hourly employees who
use scientific methods to study and improve processes. * Developing or recruiting key resources, including a
senior statistician, a senior organization development specialist, and intermediate level resources who are trained
in both statistics and organizational development to coach project teams. They play a special role in the
transformation by providing help with the scientific investigation of processes and with facilitating the dramatic
changes in the organization, its management and its culture. * Leadership, participation and oversight by
managers, beginning at the top. This is an absolute essential. The most frequent cause of failure of any quality
improvement effort is the non-involvement or indifference of top and middle management. Passive support is not
enough. Total Quality Leadership must involve everyone. * Developing champions who will help the
transformation succeed even during rough periods. V. How to Get Started
For managers who want to contribute to the transformation to Total Quality Leadership, there is much to learn.
If you haven't already done so, we suggest you read the books of Deming, Juran, Ishikawa and the papers by
Tribus and Fuller listed below. Attend the four-day seminars by Deming and Juran. Visit Japanese managed
companies here and abroad. Expand your knowledge of statistics and organization development.
Remember, the best way to get others to change is for you yourself to change. Begin with your own work. What
can you do to improve the quality of your work and the satisfaction of your "customers?" Listen to your
"customers" and to those with whom you work. In whatever decisions you make in your job, begin replacing
educated guesswork with reliable data. Strive to eliminate blaming and replace it with problem-solving.
Begin to practice the new approach with others in your department. Work with people to break down barriers and
drive out fear. Help them study and improve the systems in which they work. Help them document the best known
practices and provide effective supervision so they are conscientiously followed. Then help everyone continue to
work and develop still better systems.
Deepen your understanding of Management by Results and come to recognize its limitations. Learn to see it in
all its different guises.
Look at your own company. What are the forces that make things work? What dominates your daily work life--
fear, or turf battles and constant pressure to meet quotas? Or is there cooperation and planning based on specific
facts? Do you feel like a cog in the wheel or like an integral and important part of the process? Does the bottom
line rule all? Or are the customer and quality of work the recognized goals of your company?
When you've done all this, you'll be in a better position to come up with some creative ways to think about how to
help your organization move from Management by Results to the new way--Total Quality Leadership.
VI. Acknowledgments
We are indebted to many people for the development of the ideas expressed in this paper. Chief among these
are Dr. W. Edwards Deming, Warren Gaskill, Laurel W. Joiner, Mary Ann Gould, F. Timothy Fuller, Myron Tribus,
Harry V. Roberts, R.D. Snee, Thomas J. Boardman, Conrad A. Fung, William C. Crane, and Eric Dmytrow.
VII. Bibliography
Deming, W. Edwards. "Quality, Productivity and Competitive Position." Cambridge, MA: Center for Advanced
Engineering Study, MIT. 1982.
Fuller, F. Timothy. "Eliminating Complexity from Work: Improving Productivity by Enhancing Quality." National
Productivity Review. Autumn. 1985.
Ishikawa, Kaoru. Guide to Quality Control. Tokyo: Asian Productivity Organization. 1976.
Ishikawa, Kaoru. What is Total Quality Control?: The Japanese Way. Englewood Cliffs, NJ: Prentice-Hall, Inc.
1985.
Joiner, Brian L. "The Key Role of Statisticians in the Transformation of North American Industry." The American
Statistician, August 1985, Vol. 39, No. 3.
Juran, Joseph M. Managerial Breakthrough. New York: McGraw Hill. 1964.
Tribus, Myron. Author of a series of excellent papers on Deming, quality and management which are available
upon request from The Center for Advanced Engineering Study, Massachusetts Institute of Technology, Room 9-
213, 105 Massachusetts Avenue, Cambridge, MA 02139. We recommend in particular: "Deming's Redefinition of
Management," "Productivity... Who is Responsible for Improving It?," "Managing to Survive in a Competitive
World," and "The Quality Imperative in the New Economic Era."
About the Authors
Brian L. Joiner is co-founder and CEO of Joiner Associates Incorporated. One of the original nine judges for the
Malcolm Baldrige National Quality Award, he has received numerous honors, including the W. Edwards Deming
Medal and the 1992 ASQC/William G. Hunter Award. He holds M.S. and Ph.D. degrees from Rutgers University.
Peter R. Scholtes is a senior research fellow with Joiner Associates Incorporated. He has become a recognized
authority on how to incorporate a quality philosophy into pay, reward, and feedback systems. He holds a master's
degree in education from Boston University, where he studied with Malcolm Knowles, and has completed
additional studies in the fields of management science, philosophy, and psychology.
Note: This file was downloaded from the Montgomery County (Maryland) Public Library electronic bulletin board
and is presented as received.
AUTHOR(s): Scholtes, Peter R. TITLE(s): Total quality or performance appraisal: choose one. (Special Focus:
Reward Systems)
Summary: Most advocates of total quality believe that total quality management (TQM) and performance
appraisal are incompatible. For them, company managers can choose to promote either of these two approaches
but not both. Since fundamental TQM requirements contradict the basic elements of performance appraisal, it
would be impossible to combine them. Thus, companies may have to reexamine their approaches to corporate
leadership.
National Productivity Review p349(15) Summer 1993 v12 n3
DESCRIPTORS: Total quality management_Analysis Employees, Rating of_Analysis Leadership_Analysis
FILM NUMBER: 72N3018
Many teachers of total quality, following the lead of W. Edwards Deming, suggest that TQM and performance
appraisal are incompatible. Indeed, Deming lists "evaluation of performance, merit rating and annual review" as
the third of his "Seven Deadly Diseases." Why can't TQM and performance appraisal co-exist? At the center of
the case against performance appraisal are the fundamental values and principles of TQM. TQM requires
customer-consciousness, systems-thinking, an understanding of variation, an appreciation of teamwork, a
mastery of improvement methods, and an understanding of the process of personal motivation and learning.
These very requirements of TQM are subverted by performance appraisal. TQM requires us to understand,
control, and improve processes for the benefit of the customer. Performance appraisal aims at controlling an
individual's behavior to the satisfaction of his or her manager. The two approaches represent a fundamental
choice for leaders: one or the other; not both. While TQM-bashing has recently become fashionable in U.S.
business periodicals, the total quality movement is alive and well. Companies like Harley Davidson, Motorola, and
Xerox--who understand TQM--aren't bashing total quality. And one doesn't hear of the demise of Japan's total
quality control efforts. What we are witnessing is the American appetite for fads. Those who never understood
quality in the first place and trivialized it in the second place are now declaring it dead. Total quality is a
compelling and simple approach to management. When intelligently applied, the basic principles of TQM will,
however, fundamentally change the way a conventional manager thinks about the nature of work and the purpose
of leadership. This fundamental change requires managers to relinquish the old set of premises--the old
paradigm--and struggle to understand, internalize and apply a new approach--what Brian Joiner of Joiner
Associates calls fourth-generation management. Deming says, "What is required is nothing less than the
transformation of Western management." Many managers have learned the rhetoric of total quality and adopted
programs to apply TQM to their companies. But relatively few have appreciated the profoundly different approach
it requires of those who must lead. "I believe most of what Deming teaches," is commonly heard from managers.
"I agree with ten or twelve of his fourteen points." While adherence to ten or twelve is better than none, these
managers fail to see that the fourteen points are an interdependent, integrated whole. If you pull out one row in
this tapestry, it unravels. When people reject any of Deming's teachings, it usually is point 12b: Remove barriers
that rob people in management and in engineering of their right to pride of workmanship. This means, inter alia,
abolishment of the annual or merit rating and of management by objective. Among Deming's Deadly Diseases is
listed: "...Evaluation of performance, merit rating or annual review." Why is performance appraisal, which often
leads to some type of merit pay increase or other reward, on Deming's list of things not to do? Why is this time-
honored American business practice seen as incompatible with total quality? And if businesses don't conduct
performance appraisals, what should they do instead? PRINCIPLES AT THE HEART OF QUALITY There are
principles at the heart of quality that establish a foundation for the new philosophy and, indirectly, the basis for
rejecting performance appraisal. These principles are extracted from the teachings of Deming and other
originators of total quality: Principle 1. The customers and their needs shape our organization and its work, not
vice versa. * We must know what business we are in and who our customers are. * We must know the needs and
concerns of our customers. We must understand what they experience when they apply our products and
services. * Our deep understanding of our customers guides the design of our products and services. Consequent
redesign and improvements are also responses to the customer. * The decisions and plans we make and the
improvements we introduce should be mostly defined by the benefits that will flow to our customers. Principle 2.
Quality products and services result from quality systems, processes, and methods. * The needs of the customers
must be understood in terms of the systems, processes, materials, machinery, and methods needed to
consistently deliver what customers need, how and when they need it. * We must build quality so reliably into the
system that inspection of the end product is unnecessary. * Exhortations, threats, pep talks, rewards, and
punishments are irrelevant to the production of quality goods and services. * More than 95 percent of our quality
problems are derived from the system. If every worker and manager did his or her best, we would eliminate only a
negligible proportion of the current quality problems. * Improvement efforts should focus on systems, processes,
and methods, not on individual workers. Those efforts that focus on improving the attentiveness, carefulness,
speed, etc., of individual workers--without changing the systems, processes, and methods--constitute a low-yield
strategy with negligible short-term results. * Leaders must understand their systems, processes and methods in
terms of capability and variation. Data gathered on the variation of systems and processes over time will help
leaders understand the characteristics of work performance in their organization. When managers don't
understand the variation inherent in their systems and processes, they make themselves vulnerable to some
serious problems: * They miss trends where there are trends. * They see trends where there are none. * They
attribute to employees--individually or collectively--problems that are inherent in the system and that will continue
regardless of which employees are doing the work. * They won't understand past performance or be able to
predict future performance. Principle 3. Quality is the all-consuming focus of the organization. * In the new
competitive era, competitive strategy is based on quality. As described above, this quality is defined by the
customer and built into the systems. * An organization's plans and decisions begin and end with quality. Every
aspect of the business is understood through its contribution to quality. Organizations seek to cut costs, increase
productivity, reduce prices, or increase market share. But if they do so without first building customer-defined
quality into their product/service designs and their systems, processes, and methods, they are pursuing short-
term gains instead of long-term survival and prosperity. This is, indeed, the story of the decline of many American
businesses. Quality must become the integrating strategy of the U.S. economy if it is to regain its ascendancy in
the world market. Principle 4. An organization achieves quality by mastering the methods of improvement. * It is
not enough to know how to improve. The prize will go to those who have learned to improve faster than their
competitors. * The needs for improvement are so widespread and continuous that everyone in the organization
should know the methodology of improvement and be involved in improvement efforts. * We must learn the
difference between improvement and change. We must also learn the difference between improvement and
replacement. We must learn to start with what we have and use logic and data to understand and improve it. *
True improvement will ultimately result only when the causes of problems, which usually come from deep within
the system, are identified and eliminated. For example, improving Chernobyl involves more than cleanup and
damage control at the site. It must involve dealing with policies, practices, and technology in the Russian nuclear
power system that caused the Chernobyl accident and could cause other disasters like it. When we are content
with culprits, we will never look for systemic causes and the problem will be likely to recur with a new culprit.
Principle 5. An organization pursuing quality directs and focuses its energies. * The leaders articulate and
communicate to the organization its clear and constant purpose, mission, values, and operating philosophy in
statements that tell everyone "who we are, what we do, how we do it" and "what legacy we leave to those who
follow." * The operations, tasks, and methods of everyday work are no longer seen as an art form. The single best
method for doing any repeated task is established as a standard. It is documented, taught to, and used by
everyone doing that work. Attempts to find a better method are pursued "off-line" from the daily work effort. * We
use data to identify the most critical business needs and improvement priorities. From all the worthwhile things to
do, we select only a few priorities and pursue them to completion. We seek deep solutions to a few things rather
than quick fixes to many. Principle 6. There is a new paradigm of leadership. Managers must reformulate what it
means to lead. * Leaders must have a customer's point of view. * Leaders must have a systems' point of view. *
Leaders must have a statistical point of view. * Leaders must have a worker's point of view. WHAT IS MEANT BY
PERFORMANCE APPRAISAL? What exactly is this management intervention that undermines total quality? It
has various names: performance appraisal, performance evaluation, performance management, and coaching
and counseling, among others. No matter what the name is, several characteristics are common to all such
programs: 1. The focus is on an individual's work. * Sometimes a team is evaluated instead of or along with the
individual. Team evaluation is not a significant improvement over individual evaluation. 2. There are expectations
or standards of performance. * The standards are usually explicit and specific, a form of performance contract for
which the employee is accountable. * Sometimes the standards are imposed on the employee, sometimes they
are negotiated, sometimes the standards are a combination of the two. Having the standards be negotiated does
not avoid the problems of performance appraisal. * Sometimes the measures are implicit--for example, the
employee's job description. 3. There are usually two sessions between the employee and the evaluator: one to
establish the standards and another to review performance. * The most common unit of reviewed performance is
one year (the annual review). * A six-month review is the next most common. * In sales-dominated jobs, the
period of performance is often as short as a month or a week. * Some organizations omit the standard-setting
conference. 4. The evaluator is usually the person who has line management authority over the one evaluated. *
Some organizations have peer review and some have a review of supervisors by subordinates. These do not
avoid the problems of performance evaluation. 5. The evaluation session usually results in some written
conclusion--some paper trail regarding the performance of the person reviewed. * Some organizations express a
specific or an overall rating with a numbered scale. * Some use gradations of rhetoric (from "exceeds standards"
to "needs help," for example). * Some organizations have forced ranking that requires managers to distribute the
rankings of employees to conform to some model, such as a bell-shaped distribution. 6. There are various
consequences of appraisal. * Some organizations attach merit pay or some other type of pay-for-performance
directly to the appraisal. (This includes commissions on sales.) * When appraisal affects salary it can indirectly
affect pension, if pension is affected by salary. * Many companies use appraisals as a basis for determining the
promotability of an employee. * Some companies use appraisals as a basis for layoffs. IBM, for example, has
used performance appraisals as a basis for eliminating 5 percent of its work force. The suggestion to eliminate
performance appraisal often provokes an almost visceral reaction. One manager responded to objections to
performance appraisal with, "Boy] You ask people to do a little work and they rise in rebellion]" In his mind, he
equated performance appraisal with hard work. For him, the only reason someone would resist performance
appraisal would be to avoid work. Below are some important distinctions to make when sorting out the questions
and resistance related to performance appraisal. The left-hand column represents values and methods consistent
with TQM. The right-hand column represents values and methods rooted in the old paradigm. Someone can
support ... * Giving direction to the work force. * Controlling processes. * Employees receiving systems/processes.
* Feedback based on the needs of customers and the key process indicators. * Feedback from parts of the
system that receive one's work (internal customers). * Feedback useful for improvement. * Supporting workers'
inherent motivation. while opposing * Directing individuals. * Controlling people. * Employees receiving judgment
on themselves. * Feedback based on personal characteristics not relevant to the work. * Feed-down from the next
layer up in the hierarchy. * Feedback used for ratings, rewards, and sanctions. * Motivating or de-motivating
workers. THE CASE AGAINST PERFORMANCE APPRAISAL Here, then, is what is wrong with performance
appraisal. In the era of total quality, performance appraisal supports obsolete values with dysfunctional methods.
Specifically, performance appraisal 1. Disregards and, in fact, undermines, teamwork. 2. Disregards the existence
of a system. It encourages individuals to squeeze or circumvent the system for personal gain rather than improve
it for collective gain. 3. Disregards variability in the system and, indeed, increases variability in the system. 4.
Uses a measurement system that is unreliable and inconsistent. 5. Encourages an approach to problem-solving
that is superficial and culprit-oriented. 6. Tends to establish an aggregate of safe goals--a ceiling of mediocrity--in
an organization. 7. Creates losers, cynics, and wasted human resources. 8. Seeks to provide a means to
administer multiple managerial functions (pay, promotion, feedback communications, direction-setting, etc.), yet it
is inadequate to accomplish any one of them. Let us briefly examine each item. 1. Performance appraisal
disregards and, in fact, undermines, teamwork. Many who seem to be solo performers are actually individual
contributors to a group effort, regardless of whether that group is a formally constituted team. When one
individual's contribution is evaluated, we must pretend that we can extract from the net outcome that specific
value contributed uniquely by that person and not attribute to him or her those contributions for which others
deserve credit or discredit. Some managers want to give recognition to each individual who participates on some
successful project team. But true teamwork usually has larger boundaries than this. Chances are each member of
that team could participate only by shifting some normal job duties onto others who aren't on the team. Who, then,
gets credit? Performance appraisal undermines teamwork when an employee must choose between attending to
his or her individual job standards--on which salary and promotability often depend--or attending to the needs of
the team. In such circumstances, the team's needs will suffer. In the spring of 1991, Gallery Furniture in Houston,
Texas, eliminated performance appraisal, quotas, and pay for performance (commissions and bonuses). All the
measures of business performance improved. But what surprised management most was the teamwork that
developed among the salespeople who previously saw each other as competitors. The old system stifled
cooperation and teamwork. 2. Performance appraisal disregards the existence of a system. It encourages
individuals to squeeze or circumvent the system for personal gain rather than improve it for collective gain. All of
us, in doing our jobs, work within a system that consists of * The organization's policies and procedures that guide
and constrain our work. * Budgets and staffing that provide capability to do work and constraints on what can be
done. * The methods for maintaining and communicating customer awareness and market knowledge. * Long-,
medium-, and short-term plans giving direction, focus, and priority to the organization. * The facilities, machinery,
and equipment we use and the capability and workability of these. * Maintenance methods and procedures. * The
materials and supplies provided for our use. * The established methods for doing various tasks and the training
provided in those methods. * The environment of the organization: the unwritten rules of the informal organization
that constitute the everyday workplace experience of the mass of employees (the organization's "culture"). * The
modes of communication, the accessibility of information, and the receptiveness to feedback and suggestions. *
Every step of work that precedes the point in which we--individually or as a group--get involved. * The designs of
products and services and the designing of the processes to develop and deliver these products and services.
Performance appraisal pretends that the reviewer can discern an individual's contribution apart from all those
influences contributed by the system over which no single manager or worker has control. The parts of the system
are interdependent: If I force results here and now, I will pay a price there or later. As Brian Joiner emphatically
asserts, there are only three ways to get better numbers: (1) improve the system, (2) distort the numbers, or (3)
distort the system. Improving systems is much too complex a matter to place on an individual's performance
standard. Systems improvement often requires a prolonged cross-functional effort involving many people and led
by top managers. Distorting the numbers, a form of creative accounting aimed at looking good rather than doing
well, is rampant in American business. Given a standard to reduce employee turnover, one vice president of
human resources simply changed the formula for calculating turnover. This change reduced the turnover ratio
while improving nothing. Distorting the system often occurs because performance appraisal encourages
individuals to squeeze or circumvent the system for their short-term individual gain, rather than improve it for
collective long-term gain. The sales force pulls out all stops to meet one quarter's sales quota and sales sag in the
following quarter. 3. Performance disregards variability in the system and, indeed, increases variability in the
system. All the elements of a system, such as those listed above, are subject to variation. Sometimes variation is
due to special causes. For the most part, these are unusual, infrequent events that are relatively easy to identify
and sometimes easy to eliminate. (For example, deliveries were late last Tuesday because the truck had a flat.)
This is known as special cause variation. Most variation, however, is due to multiple unidentifiable causes.
(Delivery is never at an exactly predictable time because of many varying factors: traffic, weather, sizes of orders,
etc.) This latter type of variation is called "common cause variation." The performance of each employee is
variable and each employee works within a variable system. Managers who don't understand variation and don't
know how to use statistical methods to plot variation will not see performance within the context of variation and
will tend to treat all unsatisfactory things as special causes attributable to individual workers. ("Those truck drivers
are always stopping for coffee] That's why deliveries can't be predicted.") Flight instructors in the Israeli Air Force
had learned from experience that reprimanding student pilots when their performance was poor almost always led
to improved performance. On the other hand, complimenting good performance led to deterioration of the
student's performance. A psychologist who studied this phenomenon for a year eventually discovered that both
students and instructors were inadvertently responding to variation. When performance is at the high point in a
system of common cause variation, performance cannot help but get worse. Similarly, performance at the low
point cannot help but get better. And when does a manager compliment or reprimand? The flight instructors'
reprimands for poor performance were the equivalent of superstition. Results are attributed to actions that, in fact,
have no influence on the outcome. ("Every time there is trouble, I do this and it works.") Having student pilots kiss
the fuselage on bad days would have worked as well as the reprimands. Moreover, unnecessary or misguided
management intervention will usually result in increased variation. 4. Performance appraisal uses a measurement
system that is unreliable and inconsistent. Experts in metrology will tell you that if the scales, calipers, and other
devices and tests that measure the key dimensions of products were as unstable as our instruments for
measuring employee performance, we would go out of business. There is inconsistency between the various
reviewers (different philosophies, different "calibrations"), and the same reviewer is inconsistent from one
employee to the next. A common source of measurement error is the subjective bias of the reviewer. We are not
objective in discerning our own subjectivity. Some research in performance evaluation indicates that those who
are physically attractive tend to get higher ratings. This is not true, however, for women in management positions,
who tend to be rated lower if they are attractive. When seminar participants are asked to identify which of several
factors account most for the difference between high-rated and low-rated employees, by far they most often cite
"evaluator prejudice." 5. Performance appraisal encourages an approach to problem-solving that is superficial and
culprit-oriented. There is a Japanese technique for problem-solving called "Ask 'Why?' Five times." For example,
if there is a puddle of oil on the shop floor, * Why is there oil on the floor? Because the machine is dripping oil. *
Why is the machine dripping oil? Because the gasket is leaking. * Why is the gasket leaking? Because it is made
of inferior material. * Why do we use gaskets of inferior material? Because the purchasing agent got a good deal
on them. * Why is it important for the purchasing agent to get a good deal on gaskets? Because his performance
is evaluated on how often he can get good deals on things. Conventional problem-solving would ask such
questions as: Whose area is this? Who is supposed to replace worn gaskets? We don't ask "why," we ask "who."
We don't look for causes in the system, we look for culprits in the work force. Performance appraisal is a "who-
based" approach to problem-solving. 6. Performance appraisal tends to establish an aggregate of safe goals--a
ceiling of mediocrity--in an organization. This is a corollary to the point made earlier regarding distorting the
system. If my appraisal affects my income and career goals, I will seek to be measured against standards that are
easy to meet or exceed, standards that are easily within the current capability of the systems within which I work. I
will pick goals that will not require me to distort the system, distort the numbers, or improve the system. I will
create the illusion of challenge around easy targets seldom perceived by the customers as improvement. Now
imagine everyone choosing easy targets. The net result is a year without challenge. The collective rhetoric
describes highly ambitious goals, but the company and its customers don't advance at all. Individual standards
risk the twin perils of distorting the system on the one hand or mediocrity on the other. The only legitimate
alternative--improving the system--will not result from so simplistic and superficial an approach as performance
evaluation. 7. Performance appraisal creates losers, cynics, and wasted human resources. Most of us believe we
deserve to be rated in the top 20 percent of our organization's performers. That means 80 percent of us are in for
a shock. How will people react to the news that they are not in the upper 20 percent? Or top one-third? Or not
even above average? Some will accept the news and feel bad about how inferior they are. Some will deny the
news and attribute their low rating to a screwed-up rating system. In either case--losers or cynics--what has the
company gained? Even those who get high ratings will suspect that they have benefited from a certain amount of
luck. Someone dealt a royal flush, however, doesn't question the legitimacy of the deal...or the game itself. Over
twenty years ago, researchers began discovering the Pygmalion Effect in management. In his landmark study
Pygmalion in Management, Dov Eden describes the effect of self-fulfilling prophecy in work situations. Managers'
expectations of subordinates can have a powerful effect on the quality and productivity of work. To what extent do
the expectations of a manager affect his or her evaluation of an employee? To what extent does this evaluation
communicate a manager's expectations to that employee and, thereby, shape the employee's future
performance? To what extent does his or her perception of a subordinate's performance affect the manager's
expectations and, thus, trigger the endless cycle of self-fulfilling prophecies? None of these questions has an
unequivocal answer, but we do know that positive expectations influence managers' perceptions and evaluations
of employee behavior positively, and the negative expectations have adverse effects. Managers engaged in
performance appraisal can get trapped in the endless negative spiral. 8. Performance appraisal seeks to provide
a means to administer multiple managerial functions, yet it is inadequate to accomplish any one of them. We don't
do anything unless we expect some benefit from it. If we ask managers to list the various ways performance
appraisal serves a useful purpose, the response would be a long list: * To determine pay. * To identify candidates
for promotion. * To give employees feedback. * To provide communications between supervisor and employee. *
To give direction and focus to employees. * To aid in career development. * To identify training needs. The sheer
magnitude of this list suggests that the typical four or five hours of conference time per year between supervisor
and subordinate is woefully inadequate to the task. If managers spent 400 hours, it would still be insufficient.
Performance appraisal is a fragile cart asked to bear too heavy a load. WHAT TO DO INSTEAD? There are two
alternatives to performance appraisal that managers don't like to hear: 1. Change the way you think. Until
managers let go of their obsession with the individual worker and understand the importance of systems and
processes, they will not enter the quality era. Without this change in mind-set, managers will continue to look for
alternatives that are no different from what they are trying to replace. 2. Just stop doing it. When you are doing
something that is demonstrably harmful, you can stop doing it without finding an alternative way to harm yourself.
Conventional managers are, in effect, beating their heads against the wall and asking, "If we stop beating our
heads against the wall, what will we beat our heads against?" One way to develop alternatives to performance
appraisal is by debundling. If performance appraisal is a fragile cart asked to carry too heavy a load, we can
remove each piece of baggage and build for each a separate vehicle designed specifically for that function. Here
are some steps to take in debundling: 1. Acknowledge each service and expected benefit as something important
for the organization to successfully accomplish. 2. Treat each as a separate function, disconnected from all the
others. 3. For each service and expected benefit, ask: What is the best way to successfully accomplish this? 4.
Set up separate systems and processes specifically designed to successfully accomplish that service or expected
benefit. 5. When identifying the services and expected benefits and designing these systems and processes,
keep in mind the principles at the heart of quality. An example of a debundled function: giving each employee
feedback on his or her performance. Why doesn't performance appraisal adequately provide an employee with
useful feedback? * Feedback is, by definition, something derived from one part of the system and given to an
antecedent part of the system. Performance appraisal is a feed-down activity that is hierarchical by nature, not
systemic. And the hierarchy is not ordinarily the best source of system-focused feedback. * Performance
appraisal, particularly when tied to income and promotability, engenders posing and pretense: easy targets,
creative accounting, and evaluation that reflects the preconceptions of the supervisor and the manipulations of the
person being evaluated. All of this works against the communication of data needed for improvement. A better
alternative is to have employees, alone or in natural work groups, * Identify a key work process. * Identify the
customer(s) of that process. * Learn what characteristics of the product or service--the output of the key process--
are most important to the customer. * Get feedback from the customer(s) on how well these characteristics are
met. * The next step is that managers must refrain from using this data to evaluate an employee and continue to
encourage each employee to develop feedback loops such as this for all the key tasks. The competition in the
world market has forced business to re-examine its methods of corporate leadership. We must institute
managerial practices that result in improved systems, processes, and methods that produce improved products
and services to customers. Performance appraisal is an unnecessary vestige of an out-of-date set of managerial
premises. It is irrelevant and detrimental. We can no longer afford it. Additional Resources Aguayo, Raphael. The
American who Taught the Japanese about Quality. Carol Publishing Group, 1990. Brassard, Michael. The Memory
Jogger Plus. Methuen, MA: GOAL/QPC, 1989 Deming, W. Edwards. Out of the Crisis. Cambridge, MA: MIT,
Center for Advanced Engineering Study, 1986. The classic. Eden, Dov. Pygmalion in Management. Lexington,
MA: Lexington Press, 1990. Gabor, Andrea. The Man Who Discovered Quality. NY: Times Books, 1990. Chapter
9: The Case for a Pass-fail Approach to Evaluating Individual Performance. Gibbs, Michael. An Economic
Approach to Process in Pay and Performance Appraisals. Harvard Business School, Working Paper 91-051,
1990. (Contact: Professor Michael Gibbs, Harvard Business School, Humphrey 2nd Floor, Soldiers Field, Boston,
MA 02163.) Gilbert, G. Ronald and Ardel Nelson. The Pacer Share Demonstration Project: Implications for
Organizational Management and Performance Evaluation. Public Personnel Management, Vol. 18, No. 2.
Summer 1989. Graves, Spencer B. Compensation Systems and Other Human Resources Policies to Promote
Quality and Productivity Improvement. International Productivity Journal, SGA Report 91-4, 13 July 1992. Haller,
Harold and Bradley J. Whittaker. Barriers to Change: Does the Performance Appraisal System Serve a Logical
Purpose? Cleveland, OH: Statistical Studies Incorporated, 1987. (Contact: SSI Management, Attn: Carol Halter,
24803 Detroit Road, Cleveland, OH 44145, !216^ 871-6597, Fax: !216^ 871-1182.) Herzberg, Frederick. One
More Time: How do you Motivate Employees? Harvard Business Review, September-October 1987 (pp. 109-
120). Hitchcock, Darcy. Performance Management for Teams--A Better Way. Journal for Quality and Participation,
September 1990. Huber, Vandra. Comparison of the Effects of Specific and General Performance Standards on
Performance Appraisal Decisions. Decision Science, Vol. 20, 1989 (pp. 545-557). Kane, Jeffrey and Kimberly
Freeman. MBO and Performance Appraisal: A Mixture That's Not a Solution. Personnel, Part 1, 1986 (pp. 26-36),
Part 2, 1987 (pp. 26-32). Kohn, Alfie. No Contest. Boston, MA: Houghton Mifflin, 1986. Kume, Hitoshi. Statistical
Methods for Quality Improvement. Tokyo: The Association for Overseas Technical Scholarship, 1985. (Available
through: UNIPUB, One Water Street, White Plains, NY 10601, !800^247-8519.) Perhaps the best book on
statistics for manufacturing processes. Skip the parts on testing hypotheses (esp. Ch. 9). McLean, Gary, Susan
Damme and Richard Swanson. Performance Appraisal: Perspectives on a Quality Management Approach.
Alexandria, VA: American Society for Training and Development, 1990. Orsini, Joyce Nilsson. Bonuses: What is
the Impact? National Productivity Review, Spring 1987 (pp. 180-184). Scholtes, Peter R. An Elaboration on
Deming's Teachings on Performance Appraisal. Madison, WI: Joiner Associates Inc., 1987. (To order, contact:
Joiner Associates Inc., PO Box 5445, Madison, WI 53705 !800^ 669-8326.) Scholtes, Peter R. The Team
Handbook. Madison, WI: Joiner Associates Inc., 1988. Walton, Mary. Deming Management at Work. New York:
Putnam, 1990. Chapter 8: Doing Without Performance Appraisals. Walton, Mary. The Deming Management
Method. New York: Putnam Publishing, 1986. (Order from: Putnam Publishing, Telephone Sales, ISBN 399-
55000-3, !800^ 847-5515.) A good, easy-to-read starting point. Peter R. Scholtes is a senior consultant with Joiner
Associates Inc., of Madison, Wisconsin. He is a well-known writer and speaker on total quality and the principal
author of The Team Handbook.
Note: This article is copyrighted by Joiner Associates. It is posted to the TQM BBS, Clemson University, and
QUALITY.ORG with permission, but it may not be further copied or reproduced without permission from Joiner
Associates. Call 1-800-669-8326.
_____________________________________________________________
**NOTE**
This article was posted on the TQM BBS for public download with the express permission of Joiner Associates
Incorporated. But the text is copyrighted and may not be reproduced without permission. For permission, further
information, or a list of other publications available from Joiner Associates, call or write:
Susan E. Reynard Senior Editor Joiner Associates Incorporated 3800 Regent Street Madison Wisconsin 53705
Telephone: 608-238-8234, extension 232 Fax: 608-238-2908
____________________________________________________________
VARIATION, MANAGEMENT AND W. EDWARDS DEMING Brian L. Joiner Marie A. Gaudard
The article was first published in Quality Progress, December 1990, pp. 29-37. Jack and Sarah were preparing
for their monthly meeting. Jack, the vice president of sales, wasn't looking forward to it. Sales were down again
this month, and he was going to have to confront Sarah, a regional sales manager. He really thought Sarah was
doing a good job overall, and the fact that he needed to chastise her periodically frustrated him. But reprimanding
Sarah usually improved sales--at least for a month or so.
Sarah wasn't looking forward to the meeting either. Even though she could easily come up with a thousand
reasons why sales were down, they were the same reasons she had used many times before and would use
many times again: absenteeism, sales force turnover, poor training, lack of product promotions, and a host of
other factors that were mostly beyond her control. Even in those months when she was credited with unusually
good sales, Sarah was nervous about the monthly meeting because she was never sure of exactly how she had
improved sales.
At the meeting, Jack asked Sarah to explain the most recent drop in sales. Sarah gave her reasons. Jack
pretended to believe her. He felt obliged to emphasize that her job was to keep sales up. Both felt this meeting
was necessary, but both felt they hadn't really solved anything and that the same thing would happen again in
subsequent months.
What were these managers doing wrong? Or, rather, what could they have done better? Both were acting in the
best interests of the company. Both were competent managers who had risen to high levels in the company. Yet
Jack didn't enjoy reprimanding people, and Sarah felt uneasy each time she had to explain drops or rises in the
sales figures.
What these managers and millions like them lack is a key piece of the management puzzle, a piece that W.
Edwards Deming calls the theory of variation. In Deming's view, the first step is to recognize that variation is a
part of everything: supplier goods, temperature, measurement systems, and even people's performance. But the
real benefit comes from knowing something about the theory of variation so you can act on it. Understanding the
theory of variation enables managers to recognize, interpret, and react appropriately to variation in the data,
figures, performance, and outputs they deal with daily.
Knowledge of the variation theory is one of the most powerful tools a company can develop in its quest for
quality. It can improve a manager's effectiveness and create opportunities for continuous improvement. It is part of
the foundation of Deming's management philosophy; each of his 14 points is based, in part, on the desire to
reduce variation.
Some basics about variation
Variation is not a new concept. Statisticians and scientists have studied it for decades. What's new is that their
awareness of variation and how it affects everyday activities is infiltrating the workplace. There are seven
concepts about variation that everyone should know: 1. All variation is caused. There are specific reasons why
your weight fluctuates every day, why sales go up, and why Maria performs better than Robert. 2. There are four
main types of causes. Common causes are the myriad of ever-present factors (e.g., process inputs or conditions)
that contribute in varying degrees to relatively small, apparently random shifts in outcomes day after day, week
after week, month after month. The collective effect of all common causes is often referred to as system variation
because it defines the amount of variation inherent in the system. Special causes are factors that sporadically
induce variation over and above that inherent in the system. Frequently, special cause variation appears as an
extreme point or some specific, identifiable pattern in data. Special causes are often referred to as assignable
causes because the variation they produce can be tracked down and assigned to an identifiable source. (In
contrast, it is usually difficult, if not impossible, to link common cause variation to any particular source.)
Tampering is additional variation caused by unnecessary adjustments made in an attempt to compensate for
common cause variation. Structural variation is regular, systematic changes in output. Typical examples include
seasonal patterns and long-term trends. 3. Distinguishing between the four types of causes is critical because the
appropriate managerial actions are quite different for each. Without this distinction, management will never be
able to tell real improvement from mere adjustment of the process or tampering. In practice, the most important
difference to grasp first is the difference between special cause variation and common cause variation. 4. The
strategy for special causes is simple: get timely data. Investigate immediately when the data signal a special
cause was present. Find out what was different or special about that point. Seek to prevent bad causes from
recurring. Seek to keep good causes happening. 5. The strategy for improving a common cause system is more
subtle. In a common cause situation, all the data are relevant, not just the most recent or offending figure. If you
have data each month for the past two years, you will need to look at all 24 of these points. In-depth knowledge of
the process or system being improved is absolutely essential when only common causes are present. This
knowledge can come from basic statistical tools, such as flowcharts, cause-and-effect diagrams, stratification
analysis (used for measurement data such as process cycle time), and Pareto analysis (used for count data such
as number of accidents). These and other tools can help identify fundamental changes to the system, but they
should be tried on a small scale first to see whether results improve. Statistically designed experiments might also
be helpful in identifying system innovations. [1, 2] 6. When all variation in a system is due to common causes, the
result is a stable system said to be in statistical control. The practical value of having a stable system is that the
process output is predictable within a range or band. For example, if a stable order entry system handles 30 to 60
orders a day, it will rarely slip to fewer than 30 or rise to more than 60. If some variation is due to special causes,
the system is said to be unstable since you cannot predict when the next special cause will strike and, therefore,
cannot predict the range of variation. If the order entry system just described were unstable and subject to special
cause variation, its capability might sporadically (and unpredictably) drop sharply below or rise sharply above the
30 to 60 range. 7. How much system variation is present can be determined by performing statistical calculations
on process data. Thus control limits can be set. Control limits describe the range of variation that is to be
expected in the process due to the aggregate effect of the common causes. Calculating these limits lets
managers predict the future performance of a process with some confidence. [3, 4, 5] These seven fundamental
concepts provide the framework for improving managerial effectiveness. The following example shows how.
The pernicious periodic report
Managers often base decisions on data prepared daily, weekly, or monthly by their subordinates. These data are
usually displayed in a table. Figure 4.1 is a typical example.
When asked what they look for in such tables, most managers respond "big negative variances." Like Jack in the
opening story, they will focus on the undesirable figures and ask, "What happened? What is being done about it?"
They'll say things like: "Manufacturing losses are up this month. Why? What are you doing about it?" "Why have
sales gone down two months in a row? What are you doing about it?" "Your project came in more than 10% over
budget. Why?"
Look back at the description of what to do in response to special cause variation and common cause variation.
Which one most closely describes these reactions? The answer is the strategy for special causes: seek out
explanations for that data point and investigate how that point differs from the rest of the data.
Is this the appropriate strategy to follow? Although it is hard to tell without more data, the answer is probably no.
Tables such as Figure 4.1 give no clue as to whether the undesired figure arose from a special cause or common
cause. However, experience shows that the overwhelming majority of undesirable figures are, in fact, due to
common causes. Not only do such tables hinder a manager's ability to determine appropriate action, they also
reinforce the human tendency to overreact: if you receive a report, you feel the need to use it.
Yet the responses are characteristic of Western management: treat everything as a special cause. This invariably
leads to tampering, which increases variation and makes matters worse, not better. The consequences of
tampering can be fully appreciated only when a manager knows the alternatives.
A better way
Managers will do better if they use the theory of variation to react to figures. To use this knowledge, they must
first look at the data in a different way. Figure 4.2 shows the monthly sales data for a product line. This
presentation is different from Figure 4.1 in two important ways: the data are plotted in time order and the overall
average and control limits are indicated on the plot. The resulting chart is a statistical control chart. (A product line
with no growth in sales was chosen to simplify the presentation. If there had been a trend in sales--say, a 5%
growth per year--the trend would be used as a center line and the control limits would be plotted parallel to that
trend line.)
How does such a display help managers? It is immediately evident that all the points fall within the control limits.
With a little training, a manager would also recognize that there is no evidence of special causes, patterns, or
trends in the data. Thus the graph shows that the variation in this system is most likely due to common causes--it
arises from the myriad of ever-present factors, each contributing a small amount to the variation seen each
month.
In a system where only common cause variation is present, asking why the sales for a given month are lower or
higher than the preceding month is a low-yield strategy, which means you won't get much payback for the time
and resources you expended trying to answer the question. Worse, investigating one point will not give you the
answers you need, and the problem will most likely resurface.
There are additional, less obvious costs incurred when variation is ignored or misinterpreted. including:
* attention being diverted from more pressing problems that could be effectively addressed. * more variation in
the system. * loss of productivity. * low morale. * subordinates losing confidence in their manager. * jobs/careers
being put in jeopardy. Tampering revisited
Despite these costs of inappropriate reactions, treating everything as a special cause is exactly what most
American managers are asked to do, and they learn to do it well. An example is shown in Figure 4.3.
Here the manager compared the pounds of product he predicted would be sold in a certain month with what was
actually sold. As you can see, he came up with explanations for practically every pound of difference between the
two numbers. His reaction to these figures was probably to chastise his salespeople for losing business to
competitors. The implicit assumption in this reaction is that there are special causes his salespeople could track
and eliminate. As displayed, it is impossible to tell which of these figures could, in fact, be credited to special
causes. His facts were correct, but his use of them (chastising salespeople) had only marginal benefit.
 Another example of typical management practices is when managers concentrate on only the most recent data,
although sometimes they might compare them with the previous year's. Figure 4.4 (which uses the same data as
Figure 4.2) shows the most recent monthly sales figure (indicated by an "o") and the figure resulting from the
same calculation a year previously (indicated by an "x").
Compare this plot with the complete chart in Figure 4.2 Which is more useful? Which puts the manager in a
better position to plan, predict, and improve?
Again the question of whether these approaches are adequate arises. The answer, again, is no. Figure 4.3
represents a failure to appreciate common cause variation. Like the causes that produced the data in Figure 4.2,
the causes that produced the data in Figure 4.3 are most likely the same for all months. Trying to explain the
reason for the exact increase or decrease in the latest point will most likely identify false causes and result in false
solutions. Time, energy, and money will be wasted treating the wrong disease, exacerbating the situation instead
of improving it --a perfect definition of tampering.
Figure 4.4 shows that managers are seriously handicapped if they cannot see all the data displayed on a control
chart. Managers can make much sounder decisions that will lead to continuous improvement if they plot all the
data on control charts and apply statistical theory to interpret what they see.
Deming has often said that the use of statistical control charts should start at the top, not on the shop floor, to
foster an understanding of variation among the leaders of the organization, to aid them in improvement efforts,
and, particularly in the early years of a quality improvement effort, to help them reduce their tendency to tamper.
Improvements cannot really be made until tampering stops.
Appropriate managerial action
Charts such as the one in Figure 4.2 provide the quickest, surest way to determine the appropriate reaction to
variation. They enable managers to quickly distinguish common cause variation from special cause variation.
Such plots also help managers predict system capability. For example, using the data in Figure 4.2, it's clear that
unless something changes in the system, sales for this product will almost always fall between $10,000 and
$130,000 per month.
What recourse does a manager have against common cause variation? If the manager is not happy with the
range of variation, he or she would have to improve the system as a whole using basic statistical tools and
methods.
Here's where data like those in Figure 4.3 are helpful With such data, you can get a lot of mileage out of a
common cause strategy. For instance, you might lump together the gains and losses over a series of months, not
just single out the latest month or a month you don't like. You could look for patterns. You could stratify the data by
categories: How much business is being lost to each competitor? How much to plant closings? How much to
other factors? How much by region? You could also plot the data for each competitor on separate charts to see
whether, over time, there were special causes within any one competitor, which might be masked if just the
aggregate data for all competitors were plotted. (This tactic could, for instance, signal that a competitor was using
new promotions or introducing new products that were drawing away business.) And you could look for other
ways to stratify and desegregate the data.
If the data do signal the appearance of a special cause, you should find out what is unique about the particular
month and then take action to prevent future problems. Failure to react in such a special cause situation would be
inappropriate and costly.
Many managers say they are already using the common cause and special cause strategies. That's great, but it
will only lead to rapid, continuous improvement if it is done systematically, if the focus is always on the appropriate
strategy, if the manager reacts to the latest figure only when there is evidence of a special cause, and if
employees are not wasting their time trying to explain why each month's figures are up or down. An article by
Thomas Nolan and Lloyd Provost provides further background relative to common and special causes of
variation. [6] Through numerous examples, the authors demonstrate the value of appropriate reactions to
common and special cause variation.
The need for reacting appropriately to variation seems to be relatively easy for managers to accept when the
data plotted are for widgets or processes. But what happens when knowledge of variation is applied to something
much closer to home: the evaluation of employee performance?
Variation and people: "half below average"
Current managerial strategies used in this country show a lamentable lack of appreciation for simple math and
variation. Managers are taught to reward employees who rank highest in groups, work with those employees who
perform "below average," and punish those who rank lowest. An average is simply a number calculated from data.
By virtue of how it is calculated, roughly half the people in any group will perform below average, no matter how
smart or talented they are. Even if you could improve the performance of those people "below average," as soon
as you gathered new data, you'd find that the average had simply been raised and there are still people below the
new average. When people are ranked according to performance, someone will always be highest and someone
will always be lowest. These are incontrovertible facts. The issue for management is not whether this will
happen--it will--but how to deal with this inevitability.
The red bead experiment, popularized by Deming, illustrates this. [7] Five workers draw beads from a box with a
paddle that has fifty holes. The box contains both red and white beads: white represents good products, and red
represents defective products. All workers use the same procedure for drawing the beads, with the five workers
alternating draws until each worker has drawn five paddlefuls. At the end of the demonstration, the two workers
who have the largest total numbers of red beads are fired. Since these workers did nothing different from the
workers who were not fired, they are obviously victims of a game of chance. They were the ones who were "below
average," yet they did nothing to merit being fired. They were merely working within a system of common cause
variation. This scenario does occur in real life and has a demoralizing influence on the entire work force.
But people really are different
You might be saying, "But people really are different." Of course they are. The point is what to do about it.
The concepts of variation can help people understand what they should do when it is their job to guide other
employees. Deming says that the manager's job is to learn who, if anyone, performs at a level outside the system
of common cause variation. [8] When a manager finds an individual outside the system--that is, above or below
the "control limits"--the manager needs to follow a special cause strategy: investigate how this person's case
differs from those of others working in the same process or system.
If this employee consistently performs better than anyone else, perhaps he or she uses different equipment or
has invented more effective procedures. In that case, it is in the best interests of the company that this person's
knowledge and insight be shared among all employees performing this task and that every effort be made to
improve methods, equipment, and so forth.
If the person consistently performs worse than others, perhaps he or she was never properly trained or has a
physical limitation (height, vision, hearing, dexterity) that impairs his or her ability to perform this particular job. In
such a case, the manager owes it to the employee to identify the cause of the difficulty and work to eliminate the
source of the difference, if possible.
If no one's performance falls outside the system of common cause variation, then the manager needs to work on
the system to bring everyone to a higher level of performance with reduced variation. The common cause strategy
described earlier is the high-yield improvement strategy in such a situation. Focusing on those who are below
average or on the person with the lowest performance rating is not effective and has serious negative
psychological effects. (An example of how the theory of variation relates to the supervision of salespeople can be
found in the previously mentioned article by Nolan and Provost. [9])
Variation and kicking tush
It is very hard to get managers to apply common cause and special cause strategies to people. Their experience
tells them to use what works: punishment and negative feedback. Praise an employee for exceptional work this
week, and that employee's performance almost invariably worsens next week. But chastise an employee for poor
work, and that employee's performance will probably improve.
The key to the puzzle is the fact that employees are usually functioning in a common cause system. A portion of
the data used in Figure 4.2 is reproduced in Figure 4.5. Let's treat the data as if they represent one employee's
performance over a 12-week period.
When Luella performs very well one week, achieving high sales, she's unlikely to perform better the following
week. In fact, it's likely her sales figure will go down. But if Luella performs badly one week, then she's likely to
perform at a higher level the following week. Thus, as many managers have discovered, giving praise for a good
week seems to lead to worse results and kicking tush after a bad week seems to lead to better performance. The
lesson is "obvious" to those who do not understand variation: kicking tush works better than giving praise! The
kick tush approach to managing is just another example of destructive behavior nurtured by ignorance of the
theory of variation. [10]
Learning the basic concepts of variation can prevent a lot of tension between managers and the people they lead
and can create opportunities for real improvement. Had Jack and Sarah, the people in the opening story,
understood the theory of variation, they could have dispensed with their monthly praise-or-blame sessions.
Instead, Jack could have been helping Sarah figure out how to study and improve the systems and processes
that affected her work and that of her salespeople. He could have helped her identity special causes and shape
her tactics for tracking them down and preventing their recurrence. They could have worked on the common
cause system to reduce variation and to bring all Sarah's salespeople to improved levels of performance.
In short, Jack and Sarah's working relationship would have changed. Knowledge of the theory of variation alters
people's view of the world forever. It influences practically every aspect of how companies are managed. That is
why variation is a central theme of Deming's 14 points.
Variation and Deming's 14 points
Deming maintains that management's job is to optimize the enterprise as a whole, creating a win-win situation for
customers, shareholders, employees, and suppliers. Think about what this would mean for your company. What
would you have to do to make sure customers received high-quality goods and services all the time, shareholders
were satisfied with their return, employees looked forward to coming to work, and suppliers worked closely with
your employees to ensure the supplied goods were exactly what was needed? What would it take for you to do all
this simultaneously?
That's the challenge that Deming presents. An in-depth understanding of variation is central to your ability to
meet this challenge.
Point 1. Create constancy of purpose. Having a clear goal that everyone can work toward every day, month after
month, allows employees to focus on tasks important to the organization and its customers. Changing the goal
from time to time to meet managerial goals and quotas creates serious loss. Forcing a system to produce
predetermined figures to delight executives or shareholders is extremely costly in terms of future profits, customer
loyalty, and employee morale. Doing so represents a fundamental failure to understand that variation will
inevitably be present in any system. Constancy of purpose toward delighting the customer each and every day is
far better. It reduces variation because the employees will not have to constantly shift their priorities.
Point 2. Adopt the new philosophy. We are in a new economic age, says Deming. Higher levels of quality at lower
costs are possible if you learn to manage differently. Learning to manage differently involves learning how to
improve systems in the presence of variation. As previously described, managing differently includes reducing
variation in materials, people, processes, and products. Tampering and overreacting to variation, which only
increase variation, must end.
Point 3. Cease dependence on inspection. Depending on inspection is like treating a symptom while the disease
is killing you. The need for inspection results from excessive variability in the process. The disease is the
variability. Ceasing dependence on inspection means you must understand your processes so well that you can
predict the quality of their output from upstream activities and measurements. To accomplish this you must have a
thorough understanding of the sources of variation in your processes and then work toward reducing the variation.
Ceasing dependence on inspection forces you to reduce variability.
Point 4. End purchasing on price tag. Reducing variation requires that you rethink your purchasing practices.
Working with a selected supplier on a long-term basis of loyalty and trust reduces variation in incoming material
and hence in the finished product. Involving the supplier in the collaborative design of new products further
improves quality and reduces variation
Point 5. Improve constantly. You must constantly improve your production and service systems by understanding
the causes of problems and seeking to reduce variation. Everyone in the company must participate in a
disciplined way using the plan-do-check-act cycle.
Point 6. Institute training. Some of the most insidious sources of variation are the lack of documentation on the
best known methods for performing tasks and the lack of standardized training for all employees working on the
same function. The best-known methods quickly dissipate without training and retraining. Variation creeps in.
Having the last worker training the next is a pervasive source of variation. [11]
Organizations must take action to train employees effectively and consistently. There is variation in how people
learn, and training programs must accommodate it. How much training is needed should be addressed using
common and special cause thinking. [12] In the words of Eddie "The King" Feigner, the famous fast-pitch softball
pitcher who struck out more than 100,000 batters in his career, "Practice makes permanent, not perfect." Once
the practice has reduced the variation to the point where only common causes are present, the effect of the
training has become "permanent," and further training of the same kind is not likely to be effective. If the results
are not good enough, moving to a new job with a fresh start at effective training is usually the best course.
Point 7. Institute leadership. Managers who ask "Why is that point up? Why is this one down?" are not leaders.
Managers who merely find fault with their employees or who punish the lowest-ranking employee without
knowledge of the system increase variability. According to Deming, a leader is someone who, enlightened with an
understanding of variation, helps employees do their jobs better with less effort. Such a person works toward
diminishing the differences among people by learning which employees are within the system and which are not
and then acting appropriately. A leader also supports the goal of the company, focuses on internal and external
customers, functions as a coach, and nurtures pride of workmanship. In doing these things, a leader provides
constancy of purpose and helps reduce variation.
Point 8. Drive out fear. Companies who have struggled with implementing Deming's 14 points know that fear is a
powerful force that maintains the status quo and impedes many changes that accompany the transformation to a
quality- and customer-driven organization.
Theodore Lowe and Gerald McBean identify six "monsters of fear" and discuss their consequences. [13] Fear of
reprisal and fear of failure are closely related monsters that result in a please-the-boss mentality and an aversion
to accepting risk or generating new ideas. Fear of providing information, which derives from fear of reprisal and
fear of failure, leads to concealing information that could help identify and solve problems. This monster also
encourages the fabrication of figures to please management and the accompanying increase in process variation
due to tampering.
Another of Lowe and McBean's monsters is fear of not knowing. This monster emerges in organizations where
managers are expected to control everything in their fiefdoms. The waste to the organization is incalculable. A
manager in this environment gets involved in even the most obscure details of work and ends up losing track of
the role his department plays in the organization--"he has his hands in all the ashtrays but doesn't know what the
floor plan is."
Fear of giving up control lurks in organizations where management's job is viewed as controlling people rather
than processes. This fear results in suboptimization, attaining one department's or group's goals at the expense of
others, and squelches the work force's intrinsic motivation. The final monster, fear of change, is an obvious
impediment to process improvement.
Such fears create an environment where accurate data are nonexistent and where people are too protective of
their jobs to accurately report on problems, failures, or defects. Without accurate data, it is impossible to describe
or measure variation and thus impossible to reduce or eliminate it. Fear paralyzes a work force that could
otherwise be actively engaged in reducing variation.
Point 9. Break down barriers between departments. Separate goals and objectives for different departments result
in variation and obstruction rather than cooperation. Reducing variation for the organization as a whole requires
cooperation across departmental boundaries. An understanding of variation and cross-functional cooperation is
required to optimize the organization as a system.
Point 10. Eliminate slogans, exhortations, and targets for the work force. Someone once said, "Insanity is hoping
for different results while continuing to do the same thing." Improvement comes only from changed processes and
methods. Since most of the complexities and problems in work are due to common causes, only management
can make the required changes. As shown in the cases discussed earlier, the results of slogans and exhortations
aimed at the work force only lead to demoralization, tampering, and increased variability rather than to effective
change.
Point 11(a). Eliminate work standards (production quotas). Work standards are an assertion that there is little or
no variation in a task. They presume, for instance, that the time to complete a job or the amount of work that can
be done in an hour is the same for all people under all circumstances. This presumption obviously ignores
variation in working conditions, materials, and methods. Another flagrant lack of understanding of variation is
portrayed in the statement: "You've done it once, that proves you can do it every time." There will always be
variation. Some days will be better than others. Work standards lead to a failure to measure and plan for variation,
which in turn leads to missed deadlines, short shipments, sandbagging, and poor morale.
Production schedules are, of course, necessary and desirable. Knowledge of the variation in a common cause
system enables managers to forecast what can be realistically produced. This can then be translated into
workable production schedules. Knowledge of process variation helps managers plan for variation, thus
minimizing missed deadlines, short shipments, sandbagging, and poor morale.
Point 11(b) Eliminate management by objectives. Management by objectives rewards people and departments for
reaching short-term measurable goals. Management by objectives leads to suboptimization--one department's
goals being reached at the expense of the company as a whole. For instance, it is common in many companies
that sales sells products that production cannot produce. The sales department therefore reaches its monthly or
quarterly goal, but the rest of the company (production, customer service, etc.) pays the price in stressed
systems, employees who rush to produce the products, and backlash from unsatisfied customers.
Some managers fake conformance to goals. For example, they might store products that exceed this month's
quota to meet next month's quota or fill the production quota at the expense of product quality. The system also
breeds fear and hostility, encourages finger pointing, and limits the amount of possible improvement. [14]
All of these consequences support mechanisms that increase real variability while often giving the illusion of
reducing variability. In effect, they destroy mechanisms that might reduce real variability. [15] Management-by-
objective systems reward results without paying sufficient attention to the methods by which they are received. A
system that rewards people's efforts toward improvement would have greater value. [16]
Instead of pleasing the manager by providing the right figures, the focus needs to be on pleasing the customer
each and every day. It should not be acceptable to have end-of-the-month rushes to meet quotas or goals.
Point 12(a). Remove barriers to pride of workmanship for hourly workers. Examples of barriers to pride of
workmanship for the hourly worker include pressure to use defective materials in production to meet daily quotas,
inspection procedures that lack operational definitions, instruments and machines that do not function properly or
are not in control, and poor supervision. Workers often have no way of knowing whether the job is performed
correctly. In addition to contributing to the demoralization of the work force, these barriers contribute to variability
in output.
Point 12(b). Remove barriers to pride of workmanship for management and engineering. In this point, Deming
calls for the abolishment of annual or merit ratings and management by objectives. A merit rating system
"nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, nourishes
rivalry and politics." [17] People working in the same common cause system can be rated quite differently when,
in fact, their apparent performance is beyond their control. Managers should not act as judges, inspecting results
at the end of the process; instead, they should be leaders, working upstream with employees to reduce variability
at the early stages of the process. In short, merit rating systems support behaviors that increase variation and
destroy behaviors that reduce variation. [18, 19, 20]
Point 13. Institute a vigorous program of education and self-improvement. Knowledge is needed for the
advancement of an organization as well as society. Providing information on variation and other elements of what
Deming calls "profound knowledge" (systems theory, theory of knowledge, and psychology) is an obvious place to
start. [21] But, to have benefits, education and self-improvement need not be directly related to an employee's
job. Any education or self-improvement increases an employee's self-esteem and potential to contribute to
improvements in existing processes and advances in technology.
Point 14. Put everybody to work to accomplish the transformation. Coordinating the activities of everyone
connected with the organization contributes significantly to the reduction of variation and the optimization of the
entire system.
The unknown and unknowable
Deming writes, "It was Dr. Lloyd Nelson who years ago remarked that the most important figures for
management are unknown and unknowable. We could add that the most important losses and gains are not even
under suspicion."[22] The effects of the reward system, the efficacy of the training program, losses that result from
tampering, losses that ensue from suboptimization, and loss of market share due to unsatisfied customers all
seem to defy quantification. Yet these are prominently among the most important figures for management.
The best weapons against these losses are embodied in Deming's 14 points: providing constancy of purpose,
understanding variation and removing it from our processes and systems, and reducing fear. Only by internalizing
the 14 points and understanding the role of variation will management be able to deal effectively with challenges
in coming years.
Acknowledgments
Sue Reynard did her usual outstanding job of improving the content and exposition in this paper. Many people
have contributed to the knowledge presented here, including W. Edwards Deming, Thomas W. Nolan, John
Dowd, Peter R. Scholtes, Kevin Little, Rob Stiratelli, and Harold Haller.
References
1. Lynda Finn, Tim Kramer, and Sue Reynard, Design of Experiments: Shifting Quality Improvement into High
Gear. Madison, WI: Joiner Associates Inc., 1987. [This article is available for download from the TQM BBS.
Filename: DOX.ZIP.]
2. George Box, William Hunter, and J. Stuart Hunter, Statistics for Experimenters. New York, NY: John Wiley and
Sons, 1978.
3. Hitoshi Kume, Statistical Methods of Quality Improvement. Tokyo: The Association for Overseas Technical
Scholarship, 1985.
4. Donald Wheeler and David S. Chambers, Understanding Statistical Process Control. Knoxville, TN: Statistical
Process Controls, Inc., 1986.
5. Continuing Process Control and Process Capability Improvement. Dearborn, MI: Ford Motor Company,
Statistical Methods Office, 1983.
6. Thomas W. Nolan and Lloyd P. Provost, "Understanding Variation," Quality Progress, May 1990, pp. 75-77.
7. W. Edwards Deming, Out of the Crisis. Cambridge, MA: MIT Press, 1986. pp. 346-353.
8. Ibid, p. 248.
9. Nolan and Provost, "Understanding Variation," pp. 75-77.
10. Daniel Kahneman and Amos Tversky, "On the Psychology of Prediction," Psychological Review, Vol. 80, 1973,
pp. 237-251.
11. Thomas J. Boardman and Eileen C. Boardman, "Don't Touch That Funnel!" Quality Progress, December 1990.
12. Deming, Out of the Crisis, Chapter 8.
13. Theodore A. Lowe and Gerald M. McBean, "Honesty Without Fear," Quality Progress, November 1989.
14. Brian L. Joiner and Peter R. Scholtes, Total Quality Leadership vs. Management by Results. Madison, WI:
Joiner Associates Inc., 1985. [This article is in preparation for posting on the TQM BBS. Filename:
TQMVSMR.ZIP.]
15. Lowe and McBean. "Honesty Without Fear."
16. Stanley M. Moss, "Appraise Your Performance Appraisal Process," Quality Progress, November 1989.
17. Deming, Out of the Crisis, p. 102.
18. Ronald D. Moen, "The Performance Appraisal System: Deming's Deadly Disease," Quality Progress,
November 1989.
19. Peter R. Scholtes, An Elaboration on Deming's Teachings on Performance Appraisal. Madison, WI: Joiner
Associates Inc.. 1987.
20. Moss, "Appraise Your Performance Appraisal Process."
21. W. Edwards Deming, "Foundation for Management of Quality in the Western World," unpublished manuscript,
1990
22. Ibid.
About the Authors
Brian L. Joiner is co-founder and CEO of Joiner Associates Incorporated. One of the original nine judges for the
Malcolm Baldrige National Quality Award, he has received numerous honors, including the W. Edwards Deming
Medal and the 1992 ASQC/William G. Hunter Award. He holds M.S. and Ph.D. degrees from Rutgers University.
Marie A. Gaudard is a professor in the Department of Mathematics at the University of New Hampshire in
Durham, NH. She received her Ph.D. in statistics from the University of Massachusetts in Amherst.
The following obituary/tribute to W. Edwards Deming was written by Jerry Bowles, editor of The Quality
Executive, a monthly newsletter on quality issues. It appeared in the January 1994 issue. Jerry Bowles is co-
author of the book Beyond Quality and the writer of FORTUNE magazine's annual quality supplement. For a free
sample issue of The Quality Executive, leave a message with your name and address on the TQM BBS mail
system or fax a note to (212) 246-7916.
W. EDWARDS DEMING: THE MAN AND THE LEGEND
In every field of endeavor there are people who are famous for being unknown. W. Edwards Deming was the
ultimate manifestation of this peculiar art. From the moment of his "discovery" by American management in an
NBC television documentary in 1980 until his death last month on December 20, Deming never lost his carefully
cultivated image of an "outsider," the "prophet who was ignored in his own country," an "antiestablishmentarian,"
who liked nothing better than telling chief executives (and fellow members of the quality establisment) what they
were doing wrong. In truth, he was the most famous quality guru in the world, a man welcome in any boardroom
or factory floor, deeply admired by even those whose feathers he ruffled, which was pretty much everybody. He
blamed management for most of America's ills but perhaps his most revolutionary message to the managerial
classes was his fundamental belief in the competence of the average worker and his or her willingness to work
hard and work well, given an environment in which the worker was permitted to think and exercise control over
quality. With "empowerment" now the rage (if not necessarily the reality), that message has gained widespread
acceptance. William Edwards Deming was born in Sioux City, Iowa, on October 14, 1900. His father, a not-very-
successful rural attorney, was from Woodbury County, his mother from around Perry. When he was 4, the family
moved to a 300-acre farm near Polk City owned by his grandfather. Two years later, the family moved to Powell,
Wyoming. Although his family was poor, Deming worked hard ad received a bachelor's degree in electrical
engineering from the University of Wyoming and earned a master of science degree in physics from the University
of Colorado in 1924. He taught physics at CU before and the Colorado School of Mines before going to earn a
Ph.D. in physics from Yale in 1927. The early hardscrabble days left a deep impression on Deming. Although he
earned millions in fees in his later years, he never lost his aversion to waste. He drove a 1969 Lincoln Continential
and took the bus or subway until he began needing a wheelchair two or three years ago. He worked out of his
modest Washington, D.C., home in a basement office around the corner from a washer and dryer. He had one
full-time assistant, Cecilia "Ceil" Kilian, who was with him for 39 years. When his health permitted, he worked six
days a week, usually 7 a.m. to 7 p.m. He used a felt tip pen to date the eggs in his refrigerator to ensure the
oldest were used first and no egg ever went bad. In 1992, the University of Colorado announced the
establishment of a Deming chair. It was attributed to an anonymous donor, but Richard Seebass, CU engineering
dean, said Deming endowed the $500,000 chair himself. "He didn't want to be pestered for money," Seebass
said. Deming in Japan
Deming is generally credited with the post-war introduction of quality concepts to Japan, although the reality is
much more complicated and there is considerable evidence that he learned as much from Japanese thinkers like
Kaoru Ishikawa and Taichi Ohno as he taught them. Indeed, one of the great myths of the modern quality
revolution is that it began with a series of eight lectures given in Japan in 1950 by Deming. Deming had first gone
to Japan in 1947 to help the U.S. Occupation prepare for the 1951 Japanese census. While there, he met and
socialized with a number of members of the Japan Union of Scientists and Engineers (JUSE), Japan's most
important quality control organization, founded in 1946. Deming biographers point in particular to a dinner at
Tokyo's Industry Club on July 13, 1950, in which he told the presidents of 21 (in some interviews Deming says 45)
leading manufacturers that if they would only use statistical analysis to build quality in their products, they could
overcome their reputation for shoddy quality within five years. One might reasonably wonder why so many senior
business leaders turned up to hear an obscure Census Bureau statistician deliver a lecture on an esoteric,
effectively untranslatable subject in a language that virtually none of them understood. The answer is that both
they, and Deming, had been invited by Ichiro Ishikawa, a wealthy industrialist who, in addition to being president
of JUSE, had also served as the first president of Japan's Keidanren, the Federation of Economic Organizations.
On the surface, FEO sounds like some sort of benign industry trade group. In fact, it is an organization with the
power--sometimes exercised--to topple prime ministers and change the course of the nation. Set up in August
1946 under the aegis of the government and the occupation, FEO is an all-inclusive, all-powerful organization
composed of more than 750 large corporations and 100 major national trade associations. It is the supreme
coordinating body of what Americans call "Japan, Inc.," and its main purpose is "to maintain close contact with all
sectors of the business community for the purpose of adjusting and harmonizing conflicting views and interests of
the various businesses and industries represented in its huge membership...It is the front office of the business
community and is in effect a partner of the government." In 1950, refusing an invitation from Ishikawa was about
as sensible as refusing a request from Don Corleone. It is unlikely, however, that Ishikawa wanted the business
leaders there to be introduced to the concept of statistical quality control, for the simple reason that statistical
methods had been introduced four years earlier and were already being widely promoted in Japanese industry. A
more likely reason for Ichiro Ishikawa's Deming dinner is that he wanted Japan's new industrial leaders to hear,
from this tall, loud, terrifying gaijin--a slightly derogatory word used to connote anyone who isn't Japanese--what
has been Deming's central message for the past 60 years: that they--management--were the problem, and that
nothing would get better until they took personal responsibility for change. And on that score Deming delivered. In
a speech in Tokyo in November 1985, Deming recalled the dinner: "I did not just talk about quality. I explained to
management their responsibilities... Management of Japan went into action, knowing something about their
responsibilities and learning more about their responsibilities." But, according to Kaoru Ishikawa, Ichiro's son, who
would become Japan's leading quality guru, the Japanese quality movement made limited progress in the years
immediately following Deming's 1950 visit. And, despite his father's pivotal role in bringing Deming to Japan in the
first place, the younger Ishikawa maintained a deliberate distance from Deming throughout his life. In the
Japanese edition of a book on Deming, Ishikawa noted that Deming had borrowed many of the ideas for his
famous Fourteen Points (the first ten or so of which were written in the mid-1960s, not--as is often assumed
earlier) from Japanese TQC and J. M. Juran. This heretical passage does not appear in the English translation.
In fact, when Deming made his dinner speech on statistical process control before Tokyo's Industry Club in the
summer of 1950, SPC was already being widely promoted in Japanese industry. It had been introduced as part of
the post-war reconstruction effort. Shortly after Japan's surrender, the Civil Communications Section (CCS) was
established by the Allied Command to help rebuild the country's telecommunications infrastructure. General
MacArthur urgently wanted Japan to mass-produce radios so that Occupation authorities could reach every
Japanese village quickly. The section's small Industrial Division was assigned to work with Japanese
manufacturers of communications equipment, whose products at the time were highly unreliable. Except for
Homer Sarasohn, who had worked as a radio product development engineer at the old Crosley Corp. (now part of
Textron), the group's key engineers--W. S. Magil, Frank Polkinghorn, Charles Protzman--had all worked at
Western Electric or Bell Labs, the birthplace of American quality control. Indeed, it is Magil--not Deming--who is
the father of statistical quality control in Japan, having advocated its use in lectures in 1945 and 1946 and
successfully applied its techniques to vacuum tube production at Nippon Electric Company in 1946. From 1945 to
1949, the CCS engineers worked on a variety of projects, including establishing the Electrical Testing Laboratory
to certify that quality standards were being met, advising Japanese business leaders on production management,
and generally upgrading working environments. During 1949-50, Sarasohn and Protzman organized a series of
eight-week courses on industrial management to which only top executives in the communications industry were
invited. Among the students were Matsushita Electric's Masaharu Matsushita; Mitsubishi Electric's Takeo Kato;
Fujitsu's Hanzou Omi; Sumitomo Electric's Bunzaemon Inoue; Akio Morita and Masaru Ibuka, the founders of
what is now Sony Corp. The courses were so popular that they continued for another 24 years after the Allied
command was disbanded. Kaoru Ishikawa (the son of Ichiro, who had invited Deming to speak) was familiar with
statistical methods through the Western Electric engineers' work at NEC and NTT and had been influential in
helping JUSE launch a magazine called Statistical Quality Control several months before Deming's visit.
Deming's Real Contribution
This slightly revisionist history is unlikely to make Deming loyalists happy, but his greatest contribution to the
quality revolution may well stem from two spectacular, and seemingly accidental, public relations coups. First,
there are the prizes that bear his name. Knowing Japan's poverty, Deming refused any payment for his 1950
lectures and JUSE used the proceeds from reprints to create the Deming Application Prize, a prestigious award
given annually since 1951 to companies with outstanding total quality programs, following a rigorous audit of their
operations, and the Deming Prize, an award given to outstanding individuals. The awards--medals bearing
Deming's likeness--are given each year with great fanfare and attendant publicity. Despite that measure of fame,
Deming might well have remained relatively unknown in his own country had he not been "discovered" in 1980 by
Claire Crawford-Mason, a veteran news reporter and TV producer, who was putting together a documentary on
the decline of American competitiveness for NBC called "If Japan Can...Why Can't We?" At the suggestion of a
faculty member at American University in Washington, she looked up Deming in his basement office in American
University Park. She was amazed to find a man who seemed to know the answer to the program's provocative
question living and working about five miles from the White House. Best of all, from the viewpoint of a TV
producer in search of an exclusive, virtually nobody outside the rather arcane world of quality control had ever
heard of him. "If Japan Can...Why Can't We?" aired on June 24, 1980. The final 15 minutes were devoted to
Deming and his consulting work at Nashua Corporation, a New Hampshire manufacturer of carbonless paper.
Among other things, Deming told the interviewer: "I think people here expect miracles. American management
thinks that they can just copy from Japan. But they don't know what to copy." The show was one of the most
successful business documentaries ever, and it turned Deming into a celebrity literally overnight. The next day, his
office was bombarded with phone calls. This was 1980, remember, and a lot of American companies were looking
for something--anything--that might help them stem the tide of red ink. Deming's message was a wake-up call for
American industry. Across the nation, the best senior executives heard the alarm. Among the early callers was
Ford, which credits Deming's philosophy with spearheading its amazing comeback in the 1980s. Besides Ford,
notable Deming disciples include Kmart, Hospital Corp. of America, and Florida Power and Light, the utility that in
1989 became the first U.S. entrant to win the Deming Prize for Overseas Companies, an offshoot of the Japanese
annual award. While Deming clearly did not "discover" quality or "introduce quality to Japan," he did as much as
anyone to introduce quality to America, at a time when it needed the message. He was the spiritual force behind
the quality improvement revolution that swept through thousands of American manufacturing and service
companies in the 1980s. Someone once asked Deming how he would like to be remembered in his native land. "I
probably won't even be remembered," he replied, adding after a moment's pause: "Well, maybe ... as someone
who spent his life trying to keep America from committing suicide." In retrospect, it seems obvious that Deming
understood that he could get his message across best by remaining an outsider. The last time I saw him was two
years ago on the 10:30 a.m shuttle from Washington to New York. It was the morning the Baldrige Awards were
being given out in Washington and, as usual, Mr. Deming was going in a different direction. --J.G.B.
Tributes to W. Edwards Deming
"Dr. W. Edwards Deming was instrumental in guiding Ford Motor Co. to a sharp focus on quality, not only in its
manufacturing processes, but in all of its operations," --Ford Motor Company.
"Dr. Deming stressed customer satisfaction without corporate bureaucracy. To him, total quality management is a
continuing As such, Dr. Deming's teachings will continue to challenge all companies that strive for excellence.
That is a fitting legacy." -- Stephen Frank President Florida Power & Light
"Dr. Deming's writings, his work and his personal tutoring made a difference to me and had a major impact on the
turnaround of Xerox Corp. He had a tremendous influence on the whole business world." --David Kearns Retired
chairman Xerox Corp.
"Deming had a few insights of enduring value for senior managers. . . . When quality is poor, blame the system,
not the people, and management is the system. This was a revolutionary concept. People used to say, hey, bad
workers. Deming said, no, bad system." --B. Joseph White Dean University of Michigan business school:

"He was persistent and dogmatic. . . . He was impatient with people who didn't understand that the quality
process is hard work, period. People have got to carve out time. It's a thinking game. Quality improvement is a
thinking game." --Roger Milliken, CEO Milliken & Co.
"He had an enormous impact in Japan and a belated impact in this country. Ed suffered terribly from a feeling of
being rejected in his own country; he was an exceedingly patriotic American."
-- Peter Drucker
"It was the threat from Japanese industry (which was following Deming's) principles that woke U.S. companies up
to TQM, rather than Deming himself directly. It was our reaction to that phenomenon that has stimulated us."
-- Thomas Murrin Dean Duquesne's A.J. Palumbo School of Business Administration:
"He was terribly important in being a kind of a dual prophet. He was critically important in the resurgence of
Japanese industry post-World War II. He was a kind of an icon there. They would credit him as much as any other
single person with their industrial renaissance." Then "he became a leader in America's resurgence. . . . He was a
major figure in two continents." -- David Halberstam author of The Reckoning
"Deming stood for eminent rationality. He looked at things rationally, he analyzed them rationally, and he
advocated rational measures for changing them." --Shoshana Zuboff author of In the Age of the Smart Machine:
"He made a significant contribution to all the people of Japan. He will be long remembered and appreciated for his
contribution to the remarkable development of postwar Japan." -- Seiichi Kondo Counselor for public affairs
Embassy of Japan

Box
One More Time: Deming's "14 Points for Management:" 1. Create constancy of purpose. 2. Adopt the new
philosophy. 3. Cease dependence on inspection to achieve quality. 4. Cease doing business on the basis of price
tag alone. 5. Improve constantly and forever the system of production and service. 6. Institute training on the job.
7. Institute leadership. 8. Drive out fear so that everyone may work effectively. 9. Break down barriers between
departments. 10. Eliminate slogans, exhortations and targets. 11. Eliminate numerical quotas. 12. Allow pride in
workmanship. 13. Institute a program of self-improvement. 14. Put everybody in the company to work to
accomplish the transformation.