Chapter 6: Deming’s 14 points
Introduction to the 14 Points
It is important to have an appreciation of the following "fundamental knowledge" concerning the 14 points as a whole before we attempt to examine and discuss each of the 14 points individually :
The 14 points were developed gradually during a period of 20 years. They are not written on 'Tablets of Stone'. Indeed many minor and a few major adjustments were made to them from time to time, reflecting the way Deming saw the world changing and the changing needs of the people with whom he worked. These 'enhancements and refinements' demonstrated his continued flexibility and responsive attitude to the changing industrial environment.
The points do not constitute the whole of the Deming philosophy, though they are especially important constituents of it – rather they are 14 consequences of his philosophy . They are not a list of instructions, they are not techniques, they are not a check list. There is a great danger in simply obeying the words without first studying and developing a deep understanding of why he is saying these things. To treat the 14 points just as a recipe may be a pretty sure recipe for disaster!
They are vehicles for opening up the mind to new thinking, to the possibility that there are radically different and better ways of organising our business and working with people.
Any full adoption of the Deming philosophy will require full attention and movement towards the principles expressed in the 14 points. However, the need is not simply to adopt the 14 points, individually or collectively, but to create a new environment which is fully consistent with and conducive to them. They may be regarded, not as 'steps to be taken' but as 'goals to be achieved'. Deming does not call for 'overnight changes'. This is not a 'project', nor a 'program'. This is never-ending – forever.
The context of the14 points is a commitment to continual improvement in Quality, in it's widest sense and interpretation, and what is needed to fulfil that commitment. This involves a lot of action, education and understanding of why that action is needed, and of the pathways that need to be cleared before some of the action becomes appropriate.
Beware of dismissing Deming's thoughts because some of what he says appears impossible in today's world. This would be indicative of over-concentration on short term thinking – the 2nd deadly disease! Of course we have to deal with the short term according to the circumstances in which we find ourselves. But are we resigned to always staggering from one short term crisis to another without having any semblance of a long term direction to look toward.
None of the 14 points is unimportant and can be ignored. However we can 'implement' some of the more difficult aspects only after the right foundations have been laid.
6.1. Point 1: Constancy of purpose
Create constancy of purpose for continual improvement of products and service, allocating resources to provide for long range needs rather than only short-term profitability, with a plan to become competitive, to stay in business, and to provide more jobs.
How can such constancy of purpose be achieved?
By developing understanding of the need, and by understanding how continual improvement satisfies that need. That is good and necessary theory. But how does Deming suggest it can be attained in practice? In schools, colleges and universities by joy in study; in industry by joy in work. And Management and employees of any organisation do not have any chance of joy in work unless the organisation has good, clear and proper long term aims and principles, genuinely held, with their employees being made fully aware of them and believing in them :
"Create and publish to all employees a statement of the aims and purposes of the Company."
"The Values and beliefs of the organisation as set forth by the Top Management are important."
There must be a consistent, inexorable, never-ending , widespread push for continual improvement in all activities and operations of the Company. Management's commitment to such continual improvement is a critical factor for securing the enthusiastic interest and involvement of employees at all levels , and for enabling them to contribute more.
Such commitment can only be acquired by people in management taking the trouble to learn and understand deeply the New Philosophy and then setting a good example by their consistency of purpose constantly filtering down throughout the organisation to feed and nurture a constancy of purpose throughout.
What are the other implications of point 1?
6.2. Point 2: The New Philosophy
the new philosophy ( win – win ). We are in a new economic age, created in
What does the New Philosophy imply?
Since this whole subject is about the new philosophy there is little to mention specifically under this point which is not mentioned elsewhere. However, some of the most important aspects are summarised here:
· Unwillingness to change;
· Fear of failure;
· Fear of the unknown - "where would change leave me?";
· People measuring productivity instead of helping to improve it ( Deming says there are far more of the former than the latter! );
· Financial people who merely beat down costs rather than learning the new philosophy and help accomplish the changes that must take place and
· The system of reward.
What is the extent of change which the new philosophy entails and can it be accomplished in a short time?
It is important to understand that the new philosophy is not merely a few guidelines, ideas, rules, or techniques which you can tack on to the end of whatever you do now. It involves a thorough, radical, rethink – a complete reversal of attitudes towards some strategies, modes of behaviour and beliefs to which you have become accustomed and conditioned over the years. If you do not accept the fact that we are talking of a deep, fundamental change then it will not happen.
This change cannot happen overnight. But there must be a constant, consistent movement in the right direction: every day there must be a move closer to total involvement in ever improving Quality of all systems, processes and activities within the organisation.
6.3. Point 3: Cease dependence on mass inspection
Eliminate the need for mass inspection as the way of life to achieve Quality by building Quality into the product in the first place. Require statistical evidence of built-in Quality in both manufacturing and purchasing functions.
Is Deming saying that we should abolish inspection?
No he is not asking us to eradicate all inspection : it is mass inspection which should go. Mass inspection is costly, wasteful, non-productive; it aims to sort out good from bad; it does not contribute to progress. There is a world of difference between :
a) On the one hand, dependence on inspection as an attempt to provide the customer with something that he will not complain about and
b) On the other hand, use of inspection to provide guidance toward improvement of a stable process as well as to pick up the occasional special cause that creeps unannounced into that otherwise stable system.
While inspection should be used in the manner indicated at b), the dependence indicated at a) is harmful and the aim should be to eradicate such dependence.
Dependence on mass inspection – a formula for going out of business.
100% inspection is very expensive and not necessarily 100% effective. Less than 100% inspection immediately introduces the concept of AQL (Acceptable Quality Level). The AQL represents a supposedly-acceptable level of defectives, a contradiction to the philosophy of continual improvement.
The better way is to build Quality into the process and product in the first place.
Examples of dependence on mass inspection, the fallibility of inspection procedures and the fallacy of divided responsibility.
" Why do you think the manager called on
a) Require only the signatures of the employee. Make him responsible for the card.
b) Do not ask employee to record nor compute the total for the day.
Do this arithmetic in the payroll department. The problems evaporated within a week.
Auditing, validating reports, performance appraisals and proof reading are examples of widely prevalent mass inspection in non-manufacturing processes.
Considering the poor Quality in supplies, systems and services and the high level of mistakes, errors and defects is it at all possible to cease dependence on mass inspection?
Yes, it indeed requires very high standards but these are being achieved by those who have accepted and genuinely adopted Deming's approach.
An undeniable result of reaching consistent high standards (such consistency being backed by statistical evidence and methods of process control) is that the expensive, non-productive activity of mass inspection indeed becomes irrelevant,. Since scrap at source is eradicated.
6.4. Point 4: End Lowest-Tender contracts
End the practice of awarding business solely on the basis of price tag. Instead require meaningful measures of Quality along with price. Reduce the number of suppliers for the same item by eliminating those that do not qualify with statistical and other evidence of Quality. The aim is to minimise total cost, not merely initial cost, by minimising variation. This may be achievable by moving toward a single supplier for any one item, on a long-term relationship of loyalty and trust. Purchasing managers have a new job and must learn it.
Why not purchase solely on the basis of the lowest price?
Because even if a number of suppliers all satisfy customer needs expressed in terms of specifications, Quality and hence cost of use can vary enormously. In the real world of variation it is not possible for all the suppliers to meet the customer needs exactly.
Even if there is no problem with specifications and the product from a number of suppliers is known to be meeting the needs of the customer there will be variation in other aspects which influence cost of use such as timely delivery, accuracy and timeliness of their paperwork, assistance in unloading etc.
As the19th century English art critic
"It's unwise to pay too much but it's worse to pay too little. When you pay too much you lose a little money – that's all. When you pay too little, you sometimes lose everything because the thing you bought was incapable of doing the thing it was bought to do."
Should we always opt for a single supplier on any one item?
Deming's answer: "No – you have to be practical."
No one supplier may be able to provide the capacity that you need. Even if the capacity is there, it may be that none of the potential suppliers may be good enough to be trusted with the responsibility and privilege of becoming your single supplier.
Why should we even aim for a single supplier?
...to reduce variation, the fundamental requirement for improving Quality. With multiple suppliers we have a limitation in regard to reduction of variation – however good they may be they are, of course all different--different locations, different systems, different processes, different people etc. All these differences are extra sources of variation compared with the case of a single supplier. Multiple suppliers are therefore a bar to continuous improvement.
The additional variation caused by change of suppliers is self-inflicted injury. People on the shop floor know that adjustments of machinery to compensate for such additional variation is time-consuming and costly.
Isn't competitive tender a way to avoid corruption?
Deming's retort :
"Competitive tender fosters corruption."
And also :
"If you feel that a single supplier is likely to produce complacency, laziness, corruption, falling behind, then the foundations have not been laid."
What are these foundations which must be laid before you can move on to single sourcing?
The relationship must be a customer-supplier partnership of trust and action. This partnership culture is a prime ingredient of a single-sourcing policy. The purpose must be to enable construction of a genuine long-term mutually beneficial relationship involving trust and friendship – a relationship where a genuine handshake is more powerful than a legal contract.
Such a partnership culture would imply customer and supplier helping each other. A supplier often has lots of relevant knowledge that the customer cannot possibly have. The reverse is also often true. Deming suggests that rather than people just staying with their colleagues in the working groups, they should instead work with their suppliers and customers.
customer-supplier partnership relationship is an obvious application of the Co-operation
: Win-Win Philosophy. That relationship is not feasible under a policy of
multiple-sourcing. It's spirit is encapsulated in the following words of
"This is what I can do for you. Here is what you might do for me."
Once entered into it is vital to the interests of both partners that the long-term relationship works.
What are the advantages of having a single supplier?
How should a customer set about choosing a supplier?
Get talking and interacting to the possible suppliers and find out:
The guiding principle for the choice must again be that of Co-operation : Win-Win. The supplier must be enthusiastic to develop specialist-knowledge about the needs of the customer beyond those which either of them currently understand, in order to improve product and service.
The problem of choosing a single supplier has given rise to one of Deming's strongest statements :
"The overriding requirement for a single supplier is his burning desire and ability to work with you on a long-term basis."
6.5. Point 5: Improve every process
Improve constantly and forever the system of planning, production and service, in order to improve every process and activity in the company, to improve Quality and productivity, and thus to constantly decrease costs. Institute innovation of product, service and process. It is management's job to work continually on the system (design, incoming supplies, maintenance, improvement of equipment, supervision, training, retraining etc.)
Many of the other aspects of Deming's teachings have direct relevance to this point, for example:
Delusions of improvement which we must watch out for :
Examples of failure to improve.
Deming provides many anecdotes, most of which pertain to service organisations. It is important to appreciate that point 5 and the teachings of Deming make no distinction between manufacturing and service industries. Some of the examples quoted in 'Out of the Crisis' ( Page 95-96 ) are:
What are the essential pre-requisites for adopting Point 5?
6.6. Point 6: Institute Training
Institute Modern methods of training for everybody's job, including management, to make better use of every employee. New skills are required to keep up with changes in materials, methods, product design, machinery, techniques and service.
Difference between training and education.
Training is for skills i.e. learning to do a particular job in a particular way; To be this specific about the purpose of training has important consequences: It imparts a clear focus, leaving little room for doubt in the mind of the trainer about what is required, thus reducing variation which is essential for improvement of Quality.
Education is for development of knowledge. It concerns development, growth and expansion. There can, therefore, be no categorical definition of what we need to do in furtherance of education.
Need for understanding of operational definitions.
A trainer needs good understanding of operational definitions. Operational definitions will help the trainer in understanding the job in an unambiguous, clear-cut way. He must understand and provide operational definitions of relevant characteristics of the job (such as clean, satisfactory, careful, correct, attached, tested, level, secure, complete, uniform, consistent, balanced, vertical, dry, smooth, equal) within the training procedure. If this is not done the trainees will depart with different beliefs and that particular job will not get done in a particular way.
Important aspects relevant to training.
a) People learn indifferent ways. Many learn best from illustrations and pictures, others from demonstrations, some prefer the written word to the spoken, others vice versa.
b) Once a worker has brought his work into statistical control, further lessons will not help him
When the work has reached a state of statistical control it means that the worker's performance in the particular skill has become predictable. This implies that he has learnt whatever he could learn and reached a 'stable state' – further training of the same kind will not make him learn more. Hence if he has learnt the job wrongly, his performance has become predictably bad and there are 3 options to consider:
a) Option 1 is to admit that the system has failed, transfer the worker to a different job and try to be more successful in training him for that. This sounds drastic and costly but it may not be more expensive than leaving him on the same job with the almost sure consequence that he will carry on doing the job badly.
b) Option 2 is to put him through the same training again. However this would be fruitless – the stable performance tells us that only common cause variation is present & only changes to the system itself have a chance of improving matters.
c) Option 3 is to try him on some different training for the same skill. This is liable to be difficult and expensive but may be successful since we are not talking of training by the same method – training by a different method implies a change in the system.
Benefits of Training
a) Improvement and innovation are products of learning.
b) Costs involved are very small in proportion to the total costs and in comparison with the potential advantages of the employee knowing his job and doing it well.
c) Considerable positive un-quantifiable gains due to the worker gaining satisfaction and pleasure from doing a good job--thus wanting to continue so doing and improving yet further.
6.7. Point 7: Institute Leadership of people
Adopt and institute Leadership aimed at helping people to do a better job. The responsibility of managers and supervisors must be changed from sheer numbers to Quality. Improvement of Quality will automatically improve productivity. Management must ensure that immediate action is taken on reports of inherited defects, maintenance requirements, poor tools, fuzzy operational definitions and all conditions detrimental to Quality.
Deming on the role of Leadership:
"In place of judgement of people, rating them, putting them into slots (Outstanding, excellent, satisfactory etc), there will be leadership. The aim of leadership is to help people, to improve the service and profits of the organisation."
Some attributes of a Leader as spelt out by Deming in his Seminars.
a) Formal b) Knowledge c) Personality.
A successful leader develops 2 and 3: does not rely on no.1. He has nevertheless obligation to use no.1, as this source of power enables him to change the system – equipment, methods, materials – to bring improvement, such as to reduce variation in output.
It will be seen from the above that:
a) Many fundamental features of the Deming philosophy are represented in the list – co-operation, joy in work, understanding of variation and improvement of systems.
b) Each attribute involves people in an understanding, constructive, sympathetic and humanitarian way. This is one of the many aspects of his philosophy which makes it so different from other approaches to Quality improvement. This approach is also evident from his following quotations :
"A Leader must understand that the system is composed of people, not mere machinery, nor activities, nor organisation charts."
"A Leader's job is to help people, not judge them. It is to know when people need special help, and provide it. He is not a Leader unless he does know."
Need for Leaders to be proactive in their search for difficulties and in their desire to help those for ( and to ) whom they are responsible.
Some relevant points:
Time spent on chasing people, browbeating people to do a proper job etc is a sign of a low standard of the work environment.
It is the job of management to develop an environment where workers have genuine interest in their work and are helped to do it well.
Interest creates the will to do well and doing it well increases interest--these are thus complementary activities. Thus a positive cycle must be set up. ( Instead it is often an opposite negative cycle – Conditions force a worker to do a bad job; this creates lack of interest resulting in a still poorer job! )
The 5th Century BC Chinese sage Lao Tzu provides a prescription for Leadership valid in the 21st Century also:
" As for the best leaders, people do not notice their existence. The next best people honour and praise. The next the people jeer. And the next , the people hate. When the leader's work is done people say: 'We did it ourselves.' "
6.8. Point 8: Drive out fear
Encourage effective two way communication and other means to drive out fear throughout the organisation so that everybody may work effectively and more productively for the Company.
Harmful effects of fear
Why does fear have the above harmful effects?
What should management do to remove fear?
"The answer lies, I believe, in a plan by which, under competent leadership, everyone will work on the changes required, with faith that everyone will come out ahead. Everyone will help to plan his own destiny."
Or, more briefly:
"The need is for everybody to be part of the change, and belong to it."
6.9. Point 9 : Break down barriers.
Break down barriers between departments and staff areas. People in different areas, such as Research, Design, Sales, Administration and Production must work in teams to that may be encountered with products or service.
"Optimisation overall, Win-Win – instead of sub-optimisation, by which each one tries to maximise his own profit."
Deming further points out that one clear symptom of sub-optimisation is proliferation of paperwork resulting in considerable inefficiency, irritation and cost.
"Can you blame someone for maximising his own profit if he gets rated that way?"
"Too often the finance people in a Company merely beat down costs, on the thought that any cost is too high. They could make genuine contributions to our economy by learning the New Philosophy, and by joining in to help to accomplish the changes that must take place."
What should be done by management to break down barriers?
6.10. Point 10: Eliminate exhortations
Eliminate the use of slogans, posters and exhortations for the work-force demanding Zero Defects and new levels of productivity, without providing methods. Such exhortations only create adversarial relationships; the bulk of the causes of low Quality and low productivity belong to the system, and thus lie beyond the power of the work-force.
6.11. Point 11: Eliminate arbitrary Numerical Targets
Eliminate work standards that prescribe quotas for the work force and numerical goals for people in management. Substitute aids and helpful leadership in order to achieve continual improvement of Quality and productivity.
Examples of harm caused by MBO / MBR /MBC, arbitrary numerical targets, quotas etc.
6.12. Point 12: Permit Pride of workmanship
Remove the barriers that rob hourly workers and people in management of their right to pride of workmanship. This implies inter alia, abolition of the annual merit rating (appraisal of performance) and of management by objective. Again, the responsibility of managers, supervisors, foremen must change from sheer numbers to Quality.
The annual merit rating (performance appraisal) is the main barrier to pride in work for people in management. Deming's use of the term covers schemes which involve the judgement and ranking of people, failing to realise that the large majority of the variation in performance comes system in which people live and work rather than from the people themselves. It is objectionable and has harmful effects in the following ways:
Some of the barriers to pride in work for workmen are:
· Not being sure of what is acceptable workmanship – right today, wrong tomorrow!
· Uncertainty regarding his job.
· Management not doing anything regarding their problems, They establish employee involvement schemes but do not take action on suggestions.
· Long winded, complicated and confusing work instructions.
· A situation in which inspectors are not sure what is right, instruments and gauges are out of order and the foreman is pushed from above to meet a daily quota of numbers, not Quality.
· Machine is out of order and no one listens to the worker's plea for adjustment.
· Supervisor knows nothing about the job and has no intention to learn.
· Worker gets poor Quality of material to work with.
6.13. Point 13: Encourage education
Institute a vigorous programme of education and encourage self improvement for everyone. What an organisation needs is not just good people; it needs people that are improving with education. Advances in competitive position will have their roots in knowledge.
· Deming used to say at the start of his 4 day seminars : "We're not here to learn skills; we're here for education – to learn theory."
· Training for skills is finite –it ends when performance has reached a stable state. In contrast education is knowledge / theory. It is for growth and that is never ending.
· One who concentrates on training is the "practical" man – also defined as one who practices the evils of his forefathers! But all substantial advances contain much that in the past was considered too theoretical.
· It is sheer nonsense to pretend that one can measure the results / rewards of what is spent on education. Education is priceless, beyond calculation. Education is vital for improving the future.
"Quality Control begins with education and ends with
· "Educate your customers, suppliers and the Government about the need for constancy of purpose, and the tremendous costs of variation to business and to individuals; develop a better understanding of management in Government, industry and education."--this is of top priority in influencing and encouraging the changes which are so needed.
· When recruiting, look for people who are learning and are keen to learn, are improving and are keen to improve.
6.14. Point 14: Top Management Commitment and Action.
Clearly define Top Management's permanent commitment to ever improving Quality and productivity and their obligation to implement all of these principles. Indeed it is not enough that Top Management commit themselves for life to Quality and productivity. They must know what it is they are committed to – that is, what they must do. Create a structure in Top Management that will push every day on the preceding 13 points, and take action to accomplish the transformation. Support is not enough: action is required.
· "One of management's jobs is to manage the required change and to involve everyone in the change."
· "There's a lot of noise about Quality. But management are washing their hands of it. Quality cannot be better than the intent. Quality cannot be neglected."
· "Quality is made in the Board Room" but "Limitations on Quality are also made in the Board Room." The Quality of what comes out of a Company – product and service – cannot be better than the Quality directed at the Top (Directed, not delegated).
· "Of course you need good operations, but you can go out of business making without blemish a product which cannot sell." When plant's close down it is not because of poor workmanship; it is because what is being produced (product or service or both) does not have a market. The responsibility is that of Top Management.
· Top Management are also in a system, and as in any system, they too have their suppliers and customers ( the stock market, the government, the economy, the leveraged buy-out, the unfriendly take-over etc ).
"People at the top are handicapped in so many ways."
· True. But they are in positions of high privilege and heavy responsibility. They, even more so than everybody else in the Company, have a new job. They must learn it and carry it out. Who else can do it?
· Management's Job : to learn how to change and to accomplish the required transformation; it is leadership of people, to help people, to enable joy in work; it is to improve systems and the working environment, to optimise systems rather than sub-processes; it is to look for opportunities to widen boundaries of systems for greater service and profit; it is to focus on innovation of product and service rather than only improvement, it is to establish priorities using the Taguchi Loss function, it is to aid and encourage education, it is inseparable from the welfare of the community; it is take pride in adoption of the New Philosophy and in their new responsibilities.
Chapter 7: A System of Profound Knowledge
was around the same time that he was invited to give a talk on Management for
the Future at the
In today’s world, products and services along with customer requirements have become very complex. The processes that go into making these products and services have become even more so. Newer and newer sciences and fields of discipline are emerging everyday and this has led to the development of two kinds of people – the Specialists and the Generalists.
The Specialists are people who are masters of their particular subjects – these are people who know more and more about less and less. The Generalists are people who are aware of all the sciences, or at least appreciate the importance and subtleties of the different disciplines – these are people who know less and less of more and more. THE SYSTEM OF PROFOUND KNOWLEDGE helps managers of today and tomorrow to come to terms with dealing and channelling the efforts of these two types of people resulting in a win – win situation for the organisation.
with government and industry in the
The SYSTEM OF PROFOUND KNOWLEDGE provides an outside view - a lens ; a map of theory by which to understand the organisations we live in .
System of Profound Knowledge is much like the Bootstrap Theory of Sciences .
· Appreciation for a System
· Understanding Variation
· Understanding Psychology
· Understanding a Theory of Knowledge
The figure below brings out the SOPK effectively
7.2 Appreciation for a System
is a System ?
All the components are interdependent – that is not only are they independent but are also dependent on the other components for their existence . In effect , the components not only exist for each other but also because of each other . We are talking of Man – Made systems here , so , a system , in an organisation , consists of an integrated collection of personnel , knowledge , abilities , motivations , equipment , machinery , methods , measures , processes and tasks . To manage a system – there must exist an aim for the system – without an aim there can be no system . Without an aim , all the components of the system are unguided , and , left to themselves , operate independently in a selfish manner thus destroying the system as a whole . For an organisation – there must exist an aim and the aim must not be defined in terms of some specific activity or method but should always relate to a better life for everyone .
Thus the aim should be for all the components to gain – over the long term . A System also includes all the organisation’s competitors as well – so it does not serve to try to choke your competitor . Instead working with your competitor to put out better product without duplication of efforts expands the market making life better for everyone – the Customer , the Organisation as well as your competitor . The market then becomes infinite in stead of finite .
Some of the salient points to note here are :
· a system is a network of interdependent components that work together to try to accomplish the aim of the system
§ interdependence, cooperation – everyone must gain
§ obligation of a component is to contribute its best to the system
§ a system must have an aim, purpose, or mission – a common goal ( P1 – constancy of purpose )
§ a system includes the future
· optimisation of the system is the basis of negotiation
· the whole company, as a system, must be managed
§ management of a system requires knowledge of the interrelationships between all the components within the system and the people that work in it
§ a manager understands and conveys to his people the meaning of the system (mission and vision) and how the group supports these aims
§ a manager helps his team see themselves as components of the system, working toward achievement of the mission
§ only management can change the system!
The trouble sets in when we as managers or superiors do not understand the learning process of a person . We must understand the learning process of a person and improve the process continually. So , the job of a manager or a leader changes . Not only should we understand how people work together – but we must also understand how they learn and hone their learning processes that would lead to them improving . Ranking and grading destroys people’s natural inclination to learn . They do not do their work because it gives them pleasure – but they do it to please the boss .
The Performance Appraisal system acts as a system akin to Quality by Inspection . People , in a quest of achieving a higher rating , put others down . The job of a manager is not to be a judge – rather he / she should be a coach and a counsel .
The only living parts of any organisation are its people. If an organisation wants to grow – it must allow its people to grow. Enhancement of abilities / capabilities is one of the prime duties of management. Merely treating workers / staff as people who are supposed to carry out pre – programmed tasks is an old fashioned way of managing.
Nowadays, with the advent of new technology and speedy ways of gathering information, it is obvious that the customers are getting more aware than ever before which has resulted in them becoming even more demanding than ever before.
Organisations who have to respond to these rapid changes rapidly must have a workforce that is ready to respond to these changes or even make changes proactively. This is possible only through continual learning and continual education, which ultimately leads to continual improvement.
Some of the salient points to note here are :
· People are different from one another
§ A manager of people must be aware of these differences
§ People learn in different ways and at different speeds
· You can over reward and remove dignity
· Rewarding only a few creates competition, rather than cooperation
§ abolish the merit system in your company; study the capability of the system
§ abolish incentive pay and pay based on performance
§ give everyone a chance to take pride in their work
7.4 Understanding Variation
“Variation is the product of any System…. management’s job is to study Variation, with the proper theory, to unravel the message that variation is trying to tell us about how to improve the processes. “
The above sentence was
The central problem in management
is the failure to understand the information in variation. To manage for
improvement, managers need to recognise variation, interpret the messages it
contains about the organisation and act according to the implications of those
messages. In the 1920s,
However , this theory need not be used only for processes but also to understand people ( as before ) . Most people lie within the “common cause” region – some lie in the special cause region . This means that there are some – but only some that perform exceedingly well and some that perform exceedingly badly . Instead of reprimanding those that lie on the lower side – we must help them come into the system ; alternatively , the performers must be studied in order to raise the level of all the people in the system . This is an important use of this chart but is seldom carried out .
Interest is in studying the group or resources the samples were taken from.
A prediction will be made about the process that produces the resources.
No predictions are made about future
A prediction will be made about the process that produces the resources.
The sample was chosen randomly from the resources.
A decision will be made to change or not change the process that will produce resources in the future.
Interest is in studying the group or resources the samples were taken from.
A decision will be made only on the resources studied.
The process will be worked on.
No decision will be made based on the process that generated the resources studied.
Document the statistical control of the variables.
Most statistical analyses are valid for
inferences on the resources under study.
Statistical methods of inferences (DOE, t-tests, etc.) are not meaningful for prediction. If the conditions of the study are repeatable in the future, then statistical inference may be valid.
A control chart can assist in this assessment. If the variable of interest is in a state of statistical control over many conditions the expert may infer that the material sampled today will represent material made tomorrow. It is important to recognise that the validity of an enumerative study aimed at answering analytical questions can never be known until we can study the variable of interest under many conditions. The correct number of conditions that must be studied before the validity of the study is known is also decided by experts in the subject matter.
Some of the salient points to note here are :
· Variation is part of any process
· Statistical Theory should be applied to management of the system
§ need to determine if the "system" is stable or unstable
§ variation is predictable only in stable systems
§ need to set control limits to predict system behaviour
§ control limits are calculated limits – not specification limits, arbitrary goals, or quotas
§ a manager understands a stable system
§ each person's performance will reach a stable state
§ Half of the people are always above average, the other half are below average!
§ workers work within a system that – try as they might – is beyond their control
· Need to separate [even in your own measurement system]:
o special causes of variation
§ those variations that are not part of the system of common causes
§ identify if it can reoccur and eliminate it
§ can be assigned to a specific cause (rather than random variation)
§ usually corrected by someone who is directly connected with the process
§ show up on control charts as points outside the control limits
o common causes of variation
§ do not want to react to common causes (only makes the system unstable)
§ react only to unusual trends
§ a fault of the system, usually has to be corrected by management, but often identified by others
§ variations inside the limits on control charts [from Shewhart]
· Improvement of the Process...
§ should only occur after statistical control is achieved in a stable system (with no indication of the existence of a special cause, over a long period of time)
§ change the process in attempt to:
§ narrow the variation
§ move the average closer to the optimum level
§ or both
§ change is tested on a sample (statistics again)
7.5 Understanding a Theory of Knowledge .
To put it simply – a theory is a statement that relates cause with effect . However it must fit without fail all observations of the past and help you predict the future . The theory in hand need not be elaborate. It may be a hunch, or a statement of principles. It may turn out to be a wrong hunch.
Hypothesis or theory gives us a ground to stand upon; a starting point. A venture into the unknown could be simplified by establishing a theory and while actually experiencing the journey the theory would be revised, extended or even disbanded. The four important points to be remembered here are:
· Information , though easily available to everyone , is not knowledge .
· Theory is a statement that relates cause to effect and helps us predict the future .
· Interpreting information with the aid of theory leads to knowledge .
· No theory is wrong - just adequate or inadequate .
If we manage our organisations with the aid of theories , we can learn and improve the systems we work in . If we do not have any theory to guide us we tend to copy examples of success without really understanding why or how the other company or division really achieved this success . Sometimes we look into past data , draw graphs , and then extrapolate to set future targets .
This is not good management . This is like driving a car by looking into the rear mirror - you will surely crash into a wall ! Is collecting and stratifying past data wrong ? No it isn't ! It's just not enough . Instead , if we were to first decide what it is we are trying to study , collect data accordingly , stratify the data accordingly and then interpret the data with the aid of theory , we will then realise what we can expect in the future ! Again , the theory should be a statement that relates cause to effect .
For example if we come across an example of success which we would like to implement in our organisation , we must first collect data pertaining to this example of success , learn how and why the success was achieved and formulate a theory .
Armed with this theory , we can carry out a small experiment to test this theory on a small scale – maybe in a single department , a line of products , a single process , etc . Since we have predicted certain outcomes , we must actually record our observations of the “ Experiment ” and compare the data to our predictions .
If our observations matched our predictions , we can say that our theory is adequate . We can then go for a full scale implementation of this theory and watch what actually happens when the theory is implemented on a large scale . We might observe certain things that we did not when we tried out our experiment . We must use these observations as inputs to the revision , extension or even abandonment of our theory and start all over again .
Alternatively , if the outcome of our “ Experiment ” does not match our predictions , we can revise our theory and start all over again . This revision of theory must be cyclic - in the sense that we must not stop once our theory has been proved “ adequate ” - we must keep on observing and learning and trying to prove ourselves wrong so that we can gain more knowledge . In other words , our improvement , revision or abandonment of theory actually is increasing our learning !
· management = prediction
· knowledge is built on theory, build a hypothesis which:
§ predicts a future outcome
§ identifies risk of being wrong
§ must fit, without failure, with the observations of the past
· without theory, we have nothing to revise, nothing to learn
· there is no true value, effected by
§ changes in how the measurements are taken
§ changes in how the measurements are defined
· information is not knowledge – a statement devoid of rational prediction does not convey knowledge
explained above , the System of Profound Knowledge is a lens with which
I am not here to teach you something new – I am here to make you see things that you normally wouldn’t see
We will tend to view events differently , view relationships differently , view interactions differently .
Chapter 8: Application of the Deming Management Approach
8.1. Examples of application of the Teachings of Deming
Some practical examples of application of the Teachings of Dr Deming are given at Appendix B. These examples bring out how Deming's Teachings help us in gaining a deep insight into Various processes, in understanding of the ground reality and in bringing about improvements in performance..
Control charts can be of great help in assessing the benefits of improvement efforts and in giving the right direction to such efforts. The traditional method of comparison between two figures tells us only a small part of the total story. In fact in many cases it may lead to very wrong conclusions. The deep understanding and clear guidance provided by application of control charts in such cases has been brought out in "The Story of a Traditional Improvement Effort" at Appendix C.
(Appendix C to be copied from power point presentation)
8.3. Faulty vs. Better practices of management
The Table below gives some of the faulty practices of 'conventional' management compared with the 'better' practice as recommended by Deming:
Reactive: skills only required, not theory of management. Mind not required.
Theory of management required
Ranking , rewards & punishment. Internal competition and conflict which destroys the system. Ranking comes from failure to understand variation, common & special causes.
Incentive pay, pay based on performance.
Performance of an individual cannot be measured, except possibly on a long term basis. Effect of incentive pay is numbers, not Quality. Result: backfire, loss.
M.B.O, management by numbers. ("Do it. I don't care how you do it. Just do it.")
The Company's objective is parcelled out to various components or divisions. The assumption is that if every component or division accomplishes it's share, the whole Company will accomplish the Objective. Unfortunately, because of their interdependence, efforts of the components do not add up.
Setting numerical goals and quotas accomplishes nothing. Only the method is important, not the goal. Pressure for goals leads to distortion of the data or the system.
The so called merit system – actually, destroyer of people. Under the merit system the aim of any body is to please the boss. The result is destruction of morale. Quality suffers.
MBR. Immediate action on any fault, defect, complaint, delay, accident, breakdown. Action based on the last data point.
PRR (Problem Report and Resolution): Tampering, making things worse.
Work Standards. They increase costs, rob people of pride of workmanship and are a barrier to improvement in output.
Buying materials and services at lowest bid.
Lack of constancy of purpose. Short term thinking. Emphasis on immediate results. Keep up the price of the Company's stocks, maintain dividends.
No number of successes in short term problems will ensure long term success.
Failure to manage the organisation as a system. Instead the various components are individual profit centres. Everybody loses.
Worker training worker in succession. This is application of Rule 4 of the funnel i.e. 'just like the last' rule. It causes the 'system to explode in one direction' and the wrong methods only get magnified!
Delegate Quality to someone, or a group. Appoint someone as the vice-president in charge of Quality. The result will be disappointment and frustration.
The whole organisation managed as a system, the function of each 'Unit' being to contribute towards optimisation of the system.
Abolish Ranking which is a farce – apparent performance is attributable mostly to the system, not to the individual.
Performance of anyone is governed almost entirely by the system. Give everyone a chance to take pride in his work.
Organisations and individuals will, of course, have aims. But the aim should be improvement, not to reach a number.
So, a better way is to improve the system to get better results in the future. Study the theory of a system. Manage the components for optimisation towards the aim of the system. One will only get what the system will deliver. Any attempt to beat the system will cause loss.
Work on improvement of the process. By what method? Flow charts and the PDSA cycle will help.
Judging people, putting them into slots, does not help them to do a better job.
Change the system from conflict to co-operation: Win-Win. Put all people under a regular system of increase in pay. Institute Leadership of people.
Understand and improve the processes that produced the fault, defect etc.
Understand variation. The distinction between common and special causes is especially important in the leadership of people.
Study the system, understand it's capabilities and improve them. Provide Leadership of people to enable pride and joy in work. Wherever work standards have been replaced by competent Leadership, Quality and productivity have gone up and people on the job are happy.
Estimate the total cost of use of materials and services: purchase price plus predicted cost of problems in use of them, and their effect on the Quality of final product or service.
Do some long term planning. Adopt and publish a statement of constancy of purpose..
Of course , management must work on short term problems as they turn up. But it is fatal to work exclusively on "stamping out fires."
Ask these questions: Where do we wish to be five years from now? By what method?
Manage the organisation as a system.
A system has an aim. The individual components strive for achievement of the aim of the system, not for individual profit nor for any other competitive measure. Everybody wins.
A better way is for somebody competent to do the training.
(Note that we are here talking about training for a skill, not about education and growth)
The responsibility for Quality rests with Top Management and cannot be delegated.
8.4. A New approach/methodology for reducing incidence of failures / sick marking / out of course repairs etc.
12.4.1. The old (conventional approach)
In the old / conventional approach the aim of failure investigation is to find out the root cause(s) of any failure/problem and take action on the basis of this finding. Most often the effort is to zero down on 1 (or some times 2) causes. The action taken is very often individual action i.e. the action assumes that there is something special about the particular loco/coach/wagon or about the persons who have attended it. In some cases, action for improvement of maintenance practices is also taken.
8.4.2 Drawbacks of the conventional approach
The conventional approach is based on some wrong assumptions and on lack of knowledge in regard to certain aspects of 'profound knowledge'. The new approach / methodology overcomes these drawbacks and takes into account the following knowledge which is ignored in the conventional approach:-
a)Knowledge of common and special causes – The fact that in any industrial or business situation 85% to 95% of problems are due to variation which occur on account of common causes i.e. variation due to 'chance'. Hence in such cases improvement can be brought about only by improvement of systems/procedures/practices and not by individual action.
b)In almost all problems/failures, there is a multiplicity of factors which influences the failure/problem. The failure/problem occurs due to a chance combination of these factors. Therefore, for bringing about improvement in performance, even small improvements in regard to a number of such factors will be helpful – this will reduce the chances of occurrence of the failure/problem.
c)The reality of continuous improvement - This means that if we examine the subject sufficiently in depth there will always be some improvement possible in any maintenance practice /system /procedure..
d)The necessity of creating a climate where joy in work and intrinsic motivation flourish so that employees at various levels apply their mind for bringing about improvement. This climate is created by creating trust, removing fear and encouraging application of mind.
e)The internal customer concept - This means that each unit/person should do what is best for the next unit/person down the line. Hence the problems should be prioritised in accordance with the needs of the "internal customer".
8.4.3. Steps to be taken as per the new approach and methodology
a) Prioritise problems /failures by interacting with the internal customer and based on analysis of his records.
b) Take action to eliminate any obvious special causes.
c) Study the systems / procedures / practices to bring about improvement as follows :
i. identification of various factors which influence the failure / problem.
ii. Identification of the maintenance practices / systems / procedures which influence these factors.
iii. study of the identified practices/systems/procedures to compare "What is going on ?" with "what should be". Inculcate a spirit of continuous improvement among supervisors close to the job and involve them in study.
d) Create the right environment for intrinsic motivation to flourish by encouraging people to find out their own mistakes, encouraging application of mind and bringing about an understanding of continuous improvement.
8.5. Suggested application of knowledge gained
1. Common and Special causes.
· Identification of type of action based on type of cause.
· New approach and methodology for solving problems, reducing failures etc. (as outlined at para 4 above)
2. Deming's chain Reaction and Deming Shewhart Theory.
· Give Quality top priority – do what is best for next person / Unit down the line and the following ones(Internal customers) – and what is best for the final customer, through the chain of internal customers.
3. Modern View of Quality vs Traditional view of Quality (Taguchi Loss function).
· Always work for continual improvement towards the `nominal'/ `best' value / performance – not for mere achievement of Specifications, Standards or Targets.
4. Limitations of and harmful practices associated with inspection.
· Focus on process improvement (not on inspection), as the route to Quality with the ultimate aim of ceasing reliance on mass inspection to avoid defects, failures, out of course repairs and customer complaints.
· Avoid multiple inspections.
5. Data presentation, interpretation and Reporting. Superiority of Shewhart's control chart approach as compared to the traditional comparison to specifications / comparison to averages approach.
The 3 stages of Statistical Process control (SPC) as intended by Shewhart:
The immense potentialities of this approach and method for bringing
about improvement at all levels, specially when used in respect of data which lands on the table of the Top Managers of the Unit / department.
· Report and ask for Reports in the form of Control Charts, instead of the traditional comparisons between two figures.
· Use SPC & Control Charts for guidance regarding action to be taken for improvement at all levels e.g.
a) For performance parameters which are monitored on a daily / monthly basis at the Depot / Shed, Divisional & Headquarters levels such as: ineffective percentage of coaches / wagons, percentage of coaches marked sick, No. of out of course repairs for different causes in diesel sheds, enroute & secondary detachments of coaches, no. of cases of brake binding etc.
b) Results of inspection at various stages for different components, assemblies, coaches, wagons & locos in Workshops and P.Us.
c) Cycle time of repairs of coaches, wagons and Locos in Depots and Sheds for different types of repairs.
d) Lube oil consumption and fuel consumption in Diesel Sheds: loco-wise as well as for the whole shed.
7. Funnel experiment.
· Look for application of rules of the funnel in management and stop tempering.
· Instead focus on system improvement..
8. Red beads experiment.
· Appreciate big role of chance – do not jump to a single cause as the root cause of a problem.
· Do not judge people solely on the basis of results.
· Focus on System improvement.
9.M.B.O , Performance Appraisal and Targets are harmful.
· Do not put pressure for targets and objectives – instead focus on process improvement and help / guidance in improvement.
· Discuss with employees regarding their performance, difficulties, improvements being made, plans etc with a view to help, not to judge. ( Render the bad effects of merit system ineffective by giving bad C.Rs / superseding very rarely.). do not use C.Rs as weapons to threaten people.
10. Clear understanding of Quality.
11.Close relationship between Quality & management. For "building Quality into the system" changes in attitudes, systems, procedures and practices are required.
12. Common traps in dealing with figures:
· Lack of appreciation of important matters for which figures are unknown and unknown & unknowable.
· Wrong use of averages.
· Misuse of figures for creating fear.
13. Importance of working on the system with an understanding of systems & processes, use of Flow diagrams / charts.
14. The Deming-Shewhart cycle of improvement.
15. Operational Definitions.
16. Importance of creating a climate where improvement, innovation & joy in work flourish and employees become able, willing and enthusiastic to contribute to the 4 prongs of Quality.
17. Importance of Co-operation (win-Win) as the backbone of the philosophy and harmful effects of internal competition.
18. Huge Financial Advantages of co-operation.
19. Understanding of Deming's 14 points for management::
· As Vehicles for opening up the mind to new thinking and radically different & better ways of managing the organisation.
· As goals to be achieved, not the steps to be taken. The need for creating an environment which is fully consistent with and conducive to their adoption.
· In the context of a commitment to continual improvement in Quality in the widest sense and interpretation.
Spread this understanding at all levels.
Do not regard 'Quality' as the job of inspection or the Q.C. Department.
Management at all levels should take action to 'build Quality into the system'.
Take action to improve in such matters e.g.
Employee morale, enthusiasm and joy in work, customer loyalty etc.
Do nor judge and act on basis of averages alone.
Do not threaten people in connection with achievement of targets.
Construct valid flow charts to understand the system and improve it.
Co-ordinate activities to optimise whole system.
Judge contribution on basis of contribution to aim of the system not individual production or profit.
Give importance to the real customer as seen from the flow chart rather than imposed customer (the boss) as seen in hierarchy diagram.
Use this cycle for planning and carrying out improvement efforts.
Use operational definitions for reducing variation by:
· Clearly specifying the work.
· Defining procedures.
· Identifying needs of internal & external customers.
· Stop de-motivating people by faulty practices which destroy joy in work.
· Concentrate on generating joy in work.
One important way this can be done is by removing fear & creating systems which give a chance to people to apply their minds towards improvement & innovation.
· Learn to practice co-operation as a system, a principle, a strategy and an objective--not incidental or an accident.
· Provide Leadership which nurtures teamwork. Form teams so that people on a job have the privilege of working together with people in the preceding and following stages as a team for the common aim of the system.
· Remove manifestations of the Win-Lose philosophy which hold us back from co-operation, vis managing departments in a system of competition, merit rating, performance appraisal, MBO, MBR, stress on arbitrary numerical targets etc.
· Extend 'All one Team' outside the organisation to suppliers & customers.
· Co-operate with competitors (Road Transport, for example) for mutual benefit.
· Educate management at all levels in regard to these advantages.
Form Teams from different departments / Units / work Areas. These teams should identify different options and their effect on different areas. Adopt those options which give maximum net benefit to the Organisation.
Take necessary steps in regard to each of these points in accordance with this understanding. Much of what is written above will constitute the steps to be taken.
8.6. A Railway Example
Data regarding coach and wagon ineffective percentage for one of the Railways was obtained for a 5 year period and control charts prepared. Notes at Appendix D bring out the Objective, methodology and interpretation of these control charts. The further line of investigation to be followed by the Railway concerned, that will lead to actions for improvement in performance has also been indicated--this is based on interpretation of the control charts, as given in the 'Note'.
(In the words of
"There must take place in the Western world a transformation. So many people are at work on productivity – so they say. They're not working on productivity at all: they are working on how to measure it! The thermometer here might read 108 F – blistering hot. But the thermometer does not do anything about it--it just tells the problem. It's time that people do something about it. But Management cannot when they know not what to do. Most do not know that there is a problem or that there's anything they can do. It's always for someone else, improvement is for somebody else."
"Disease number 1 is lack of constancy of purpose to stay in business by providing service and product that will have a market in future. I see it in the work that I do – with hospitals, motor freight, railways, manufacturing, department stores. People have not decided what it is that they are in business for. They really don't know. Do you define it in terms of service: to produce product and service that will have a market of the future? Or is it just to have jobs – get paid, have jobs, live a little while, maybe get into something else? Lack of constancy of purpose means short term thinking."
· No planning for the future.
· Lack of long term definition and goals.
"The 2nd deadly disease is emphasis on short term profits, short term thinking. Dividends, no matter what. Creative Accounting. Shipping stuff out no matter what. Make it look good. Devastating to long term planning with a plan to stay in business through improvement of Quality of product and service. They cannot live together. American Management has worshipped the quarterly dividend. They're rated on price of the company's stock. Acquisition, creative accounting. There is a better way. A better way to protect investment; and that is with plans that will keep the company in business and provide jobs and more jobs. Unemployment is not inevitable. Unemployment is a sign of bad management, loss to market."
Deadly disease no.2: Emphasis on short term profits.
· Worship of the quarterly dividend
· Sacrificing long-term growth of the Company.
third deadly disease is the annual
system of rating salaried people, known also as merit system, annual appraisal
of performance, annual rating of performance, known also under the name
"management by objective." Someone in
Now the effect is devastating. People have to have something to show, something to count. In other words, the merit system nourishes short term performance and annihilates long term planning. It annihilates team work: people can't work together. To get promotion you have to get ahead. By working with a team, you help other people. You may help yourself equally but you don't get ahead by being equal: you get ahead by being ahead – produce something more, have more to show, more to count. Whereas teamwork means work together, hear everybody's ideas, fill in for other people's weaknesses, acknowledge their strengths, work together. This is impossible under the merit rating, review of performance. For people are afraid. They're in fear, they work in fear, They cannot contribute to the company as they would wish to contribute. This holds at all levels.
There's something worse than all that. When the annual ratings are given out , people are bitter. They cannot understand why they are not rated high. And there's good reason not to understand, because I could show you with a little time that it is purely a lottery. Now if it was recognised as a lottery and called that, then some people would be lucky and some unlucky, They'd at least understand the system, and some people would not feel inferior and others would not feel superior."
The above describes:
Deadly Disease no.3: Annual Rating of Performance
· Arbitrary and unjust system.
· Demoralising to employees.
· Nourishes short term performance.
· Annihilates team work.
· Encourages fear.
"This annual rating encourages mobility of management. Somebody does not get the top rating, which means a raise: he looks around for another job. The fourth deadly disease is mobility of management. People moving around, not having roots in the company, not understanding the Company. Just trying to bring in some abilities, learn some more, move along. Management requires knowledge of the company, requires roots in the Company……..Takes a long time…………People in Management to-day know nothing about the problems of anybody else; they don't even know their own.
The above describes :
Deadly disease no. 4: Mobility of management.
· No roots in the Company.
· No knowledge of the Company.
· No understanding of it's problems.
"The fifth deadly disease is use of visible figures only for management, visible figures only with little or no consideration for figures that are unknown or unknowable. Now you may ask me: "Well, why do you talk of figures that are unknown? If it's unknown how do you know that it's important?" Well , let's have a look at some of the unknown and unknowable figures. Very simple. One of them is the multiplying effect of a happy customer. How much business does a happy customer bring in to you? Nobody knows. ….
What about the multiplying effect of an unhappy customer that drives business away?…..
I don't see the figures. They're very important. He that runs the Company without them will have no Company. Schools of Business have done their work. They're not teaching transformation. They're teaching use of visible figures, creative accounting, how to maximise the price of the Company's Stock by keeping up that quarterly dividend."
The above describes:
Deadly disease no.5: Use of visible figures only
· No use of figures that are unknown and unknowable.
· Encouraged by Business Schools.
The Deming of
introduction describes Deming's influence in
D: I did not export American practice. I took to them new knowledge, philosophy of management, theory of management, which is optimisation of a system whereby everybody gains. Everybody gains. The Japanese man, executive or otherwise, is never too old or too successful to learn. He is eager to learn and to listen. It is not hard for him to change because he understands the system, that he is part of a system and the job is to optimise the system.
D: It is only management that breaks out of the system that makes impact.
PP: Management that breaks out of the system? Tell me what you mean.
D: Optimises the system, for example. Instead of doing it the way we've always done it, to do what is best for the whole system.
PP: Could we talk about optimisation?
D: An orchestra is an example that most people can understand, a system. Everybody there is supporting all the other players. 140 piece orchestra, everybody supports the other 139. He's not there to play a solo. He's not to play as loud as he can play to attract attention. He's there to support the other 139. The job of the conductor is to optimise their talents, their abilities.
D: Ever hear of a bank that failed?
D: Do you think it failed because of mistakes, sluggishness at the teller's windows? Mistakes in calculation of interest? Mistakes in bank statements? Don't be silly. All that could go off without blemish and the bank would fail. Purely a matter of management. A manager is a leader. Should be. He understands how he, his work, and the work of his people fit into the system, for optimisation of the system. That's the first job of the leader, to try to find, recognise that all people are different. Try to fit each one into what he can do best. Takes joy in learning, in helping to improve. He's coach and counsel, not judge. You judge people, you shut them up. They don't talk.
PP: What happens in a system when you ask someone to achieve a result that's impossible to achieve?
D: Everybody suffers. He'll make it happen, by destruction of the company or impairment in some way. He'll make it happen. And we all lose. Anybody can accomplish anything if we don't count the cost.
PP: When you set up a system that makes the individual, that puts the individual in an impossible situation, then he's going to do what he has to do?
D: If that's his job, he'll make it happen, by fudging figures or by destroying the company. Can you blame him? That's his job.
PP: So, you're saying that the component of the system is really responsible for the larger whole, for the benefit and good of the larger whole?
D: That is a good way to put it. A component, any group, anybody, is to be judged by his contribution to the system, not for his individual profit or gain, in sales or anything else.
D: We've grown up on short term thinking, short term planning. Profits now, high dividends, churning money. Impossible to advance under such forces.
D: Well, people, given a choice, be thankful we do have a choice, they buy the imported product many times in preference. And our products do not sell in other parts of the world. There are exceptions, great exceptions. Aircraft industry has 70 percent of world's business.
PP: I asked
D: How could they? All they ask is a chance to do a good job, to take pride in their job and be proud of the company. That's all they ask for.
PP: This worker can't make that product better unless the system is changed?
D: He can only make what he's asked to do, under the difficulties that he meets, with poor materials, equipment that doesn't work, all sorts of problems.
PP: Workers in this country have been blamed for a number of years, saying that they are lazy and that they don't want to work and that they don't care and they're not producing quality and that they are not doing it right and that's why our automobile industry went down and that we have to change our attitudes as people. Is there any truth in that at all?
D: Not a bit.
PP: Not a bit?
D: Not a bit.
PP: Not a bit?
D: Absolute nonsense. We'll get nowhere as long as people think that.
PP: Factory workers always have a question when they hear about Deming. They want to know, are you against unions?
D: Against? Of course not.
PP: Good, I'm glad to hear you say that.
D: Unions are a part of the system, a very important component in the system.
PP: Now, what's been the problem then as people have dealt with unions?
D: Failed to understand the system, that's the problem.
PP: So, we have people pitted against each other, union and management, rather than saying this is the whole system which must be managed?
D: Optimisation of a system should be the basis for negotiation between management and labour, between buyer and seller, with suppliers of the company, between countries. He who goes into negotiations to defend his rights is already licked.
PP: What do you mean?
D: It should be optimisation of the system by which you gain more than any other way.
PP: So, if I'm going in, I'm thinking only of my own self-interest, I'm a factory worker and I want a higher wage .
D: You're a country, You're anybody.
PP: Or I'm a country, or I'm anybody and I'm thinking only of myself and not thinking of the total system and I'm going to lose?
D: Defend your rights, you lose.
PP: How do the people without power, how do they not be taken advantage of? Everybody is not of good will.
D: Purely a matter of understanding. He who is in power must understand the system. And the best solution is for everybody to win. Everybody to gain. No losers.
PP: It's so foreign to us. It is not what we've been taught. It's not what we've done.
D: Economists have led us down the wrong road. They've taught us adversarial competition is a solution. It is not. Worrying about share of market, trying to choke your competitor. Spend your time that way instead of working on the product, to develop a better product.
PP: So what do you do instead of compete for share of market?
D: Expand the market. Put out better product.
PP: It's a different philosophy. It's as if we are saying there is a finite amount versus an infinite amount here.
D: I think that's a good way to put it. People make the supposition that the market is a finite amount and the successful companies have taken the other point of view, that the market is expansible. By paying attention to the future needs of customers, they expand the market.
PP: So you don't worry so much about being an adversary to your competitor, you worry about what? Continual improvement of your own product and getting something better out there and looking to your own system to enhance it?
D: That's right, that's right. That helps both people you and your competitor. It's just a law of nature. He who spends his time worrying about his competition, worrying about his share of market is already licked. If you have any stock in that company, you'd better sell it. Competition is part of the system and any competitor who improves his product improves the market, helps his competitors. And the worse thing that can happen to you is to have a lousy competitor.
D: Customer doesn't know what he wants. He makes a choice. He does not see his future needs. Customer's expectations are only what you and your competitors have let him to expect. He is a rapid learner, but he does not foresee what he might need. No customer asked for electric lights. No customer asked for photography. No customer asked for telephones.
PP: How has the prevailing style of management crushed innovation?
D: By ranking people. It starts with grading in schools, from toddlers on up, through the university. Grade, ranking people, making top people scarce, only so many A's allowed. It is not a game. In playing tennis, a beauty contest, horse race, play poker, it's a game. Somebody wins. We knew that before we started. Perfectly all right. I have nothing against it. But management is serious, education is serious.
PP: But we are so used to in this country to ranking people, to being ranked ourselves and those of us who want to achieve always want to make sure we rank at the top in whatever system we are in. It's just counter to our usual thinking, and even I get a little scared when I think but what would happen if you weren't evaluated or ranked? How does it work? If I'm not going to be ranked will I be rewarded for the results that I produce?
D: You want reward?
D: You want reward? The reward you want is pride and joy in your work. That's what you want.
PP: Yes, you're right, that's the first thing.
D: There's nothing more to ask for.
PP: But I also want money sometimes.
D: Pay is not a motivator.
PP: Sometimes .
D: No. Pay is
not a motivator, sure you have to have enough to live on, and to live
right. Beyond that, pay is not a motivator. Remember
PP: What is an alternative? What can they do instead?
D: To help. To coach and to counsel, to help and optimise. Don't judge. We need to develop self-esteem, dignity, joy and pride in work so that people may be innovative and contribute their best to the job. If we destroy them, they are humiliated. Ranking them destroys them.
PP: The question is: are business leaders really taking the responsibility which is theirs? Are they educating themselves that they need this and don't admit it to themselves?
D: They don't know about it. How could they admit when they don't know about it? But how could they know? How could they know there was anything to learn? How could they know? How could they have any suspicion that there is anything to learn? How could they?
PP: Well, I think they should know.
D: How could they? How could they?
PP: They ought to know.
D: How could they?
D: How could they? Themselves . Profound knowledge comes from the outside, never from the inside, must come from the outside and only by invitation.
PP: When you say that knowledge must come from the outside, what do you mean? I don't quite understand it.
D: You ever find it inside the company?
PP: Well, sometimes, some parts.
D: Have you?
PP: Some parts.
D: Have you?
PP: You're talking about profound knowledge?
PP: Or you're saying that knowledge.
PP: Profound knowledge?
D: Yes, profound knowledge, knowledge about a system.
PP: Why is that? Why can't it come from inside the company? What do you think is going on?
D: Everybody is doing his best, with the greatest, the best of intentions, everybody working hard at doing what is wrong, not guided by a theory of management. Reactive behaviour, managing by results. Sure we want good results. Manage by results, quality goes down, morale goes down. Management has not a theory of management. They work hard, very hard, under terrible stress that I could not endure. Best efforts, hard work, our ruination.
PP: And you're talking about CEO's and presidents and vice presidents and all other people who are in charge .
D: Government people, people in education.
PP: And we're missing it somehow, we're missing the real point?
D: Pretty obvious. Deming's Second Theorem: We're being ruined by best efforts and hard work, doing what is wrong.
PP: What are they missing?
D: Theory of management.
PP: So, how can we tell them? How can we tell them they need to listen to this? How can we get the message out?
D: A physician can do nothing for somebody who does not acknowledge he needs help. First step, he must ask for it.
D: Our education is failing.
PP: What are we doing that we should be not doing?
D: We just don't educate, people, youngsters. We grade them but don't educate them. Don't teach them to think.
D: Our worse thing is, failure to understand what learning is. For example, experience teaches nothing. The fact is, there is no experience to record without theory. Theory enables us to ask questions, to learn. Without theory there is no learning.
PP: That was a really hard one for me. When I first met you .
D: Why should that be hard?
PP: Well, because that's not what we're taught. We're taught to look at an example and say, I see, I'll do that, that's the right thing to do. But .
D: But that's their downfall. People copy examples and they wonder what's the trouble. They look at examples and without theory they learn nothing. Theory leads you to questions.
PP: For a while people thought they had the answers about the problem of quality and they went through all kinds of things such as quality circles and a number of other methods which they saw working for the Japanese. Why do you think those didn't last?
D: That's all window
dressing. That's not fundamental. That's not getting at change and
the transformation that must take place. Sure we have to solve
problems. Certainly stamp out the fire. Stamp out the fire and get
nowhere. Stamp out the fires puts us back to where we were in the first
place. Taking action on the basis of results without theory of knowledge,
without theory of variation, without knowledge about a system. Anything
goes wrong, do something about it, overreacting, acting without knowledge, the
effect is to make things worse. With the best of intentions and best
efforts, managing by results is, in effect, exactly the same, as
PP: I asked
PP: How did you feel when he gave that to you?
D: Felt unworthy.
PP: You felt unworthy?
D: It was a matter of luck.
PP: I asked about another medal from our president.
D: Oh, the medal
from the President of the
PP: Are you anxious to get back to work?
D: No, I'm just desperate, that's all, absolutely frantic.
D: Management's job is optimisation of the whole system. Decide what constitutes the system, certainly customers, suppliers, employees, stockholders and the welfare of employees, their education, their chance to improve skills and education, their chance to have a little time at home and not work too hard. Their chance to learn good management so they can contribute to their clubs and churches and schools. Our schools need it sadly. Optimisation would mean teaching everybody so they may help other people. Optimisation of the whole system, everybody gains, no losers.
Notes on control charts prepared by IRIMEE based on data for coach and wagon ineffective percentage obtained from one of the Railways.
and analysis of control charts of important performance parameters (based on a
time-series graph) can give useful guidance on the type of action which needs
to be taken for bringing about improvement in performance with respect to the
particular parameters. With a view to prepare such control charts, data for
some of the important performance parameters pertaining to the Mechanical
Department of S. E. Railway was obtained from CME of the Railway by
In this note the control-charts prepared for 2 of the parameters (viz. Coach and wagon ineffective percentage) have been analysed and discussed. This analysis raises some relevant questions which have been brought out in the note. Investigations and enquiries will need to be made at the field level to find out the answers to these questions. These answers will, in turn, give us guidance regarding the Action to be taken by the Management of the Railway, at various levels, for bringing about improvement in performance in regard to these parameters.
The final objective of making the control-charts, studying, analysing and interpreting them and making further investigations (based on this study,
analysis and interpretation) is to find out what actions should be taken by the Railway to bring about significant reduction in the coach and wagon ineffective percentage.
The control-charts will enable us to achieve the above objective by helping us to find out the underlying reasons for variation between individual values or sets of values---i.e. enabling us to distinguish:
a) Whether the values form part of the same system, the variation being 'not significant' and due to nothing but chance (common causes)--in which case only changes in systems / procedures / methods / practices will reduce such variation.
b) Whether the variation in the values are 'significant' and occur due to special causes outside the system---in which case further investigations have to be made to find out what exactly are these special causes. In such cases variation will reduce only by action to eliminate the special causes.
c) Whether any two sets of values are significantly different or not i.e whether they represent two different systems or whether they are part of the same system. If the answer is in the affirmative then further investigations need to be made to determine how exactly do the two systems differ from each other. Action required for bringing about improvement will have to be decided based on the results of these investigations.
3. Methodology-preparation of control charts at Annexures 1-A and 2-A.
a) On the basis of the figures for ineffective percentage for each month, tabulate the 'moving range values' i.e. the mR values. The mR value for a particular month is the absolute difference between the figure for that month and the figure for the previous month. E.G., the mR value of ineffective percentage for May 1995 will be the difference between the figures of ineffective percentage for May and April 1995.
b) Construct a control chart for individual values (X chart) and one for moving ranges (mR chart) one below the other as follows:
· X Chart.
Make a 'time-series graph' showing the figures for ineffective percentage month-wise from April 1995 to September 2000. The average, upper control limit (UCLx) and lower control limit (LCLx) for this chart are calculated (and plotted as straight lines on the time-series graph) as indicated below :
where R is the average of the moving range values from May 1995 to March 1996 and X is the average of the individual values from April 1995 to March 1996.
( Question: Why have we considered only the first 12 values from April 1995 to March 1996 for calculating the average and the limits? )
Answer : There is no hard and fast rule to decide what values we should consider for calculation of the average and the limits. It will depend on what is the type of inference we are looking for from the control chart. In this case we are reviewing the performance for the last 5 years and one of the important inferences we would like to derive is to understand what variation have taken place in the ineffective percentage, with reference to the first year of the 5 year period--taking the same as the 'base year.'
Calculation of average and limits based on the 12 values from April 1995 to March 1996 will be helpful in arriving at this understanding).
Longer the period, variation would get ‘averaged’ over longer period. Since the objective is to effect improvements in monthly values in a year, averaging data over longer period would hide signals that would normally prompt the type of action to be taken. If the data available is for shorter duration, we could start by drawing control-charts based on a minimum of 5-6 figures.
· mR Chart.
Make a 'time-series graph' showing the mR values from May 1995 to September 2000. The average ( R ) and upper control limit (UCLmR) for this chart are calculated (and plotted as straight lines on the time-series graph as indicated below:
# R = average of the mR values from May 1995 to March 1996.
# UCLmR = 3.27*R
The X chart and mR chart prepared as per above methodology for coaching ineffective percentage are at Annexure 1-A. Similar charts for wagon ineffective percentage is at Annexure2-A.
4. Interpretation of control charts at Annexure 1-A.
It is seen from the X chart that from April 1996 to July 1998 i.e. for 28 consecutive months all the figures for coach ineffective percentage remained below the average line i.e. below the average figure for the period April 95 to March 96. This means that during this long period of 28 months the performance was significantly better than in the first 12 month period from April 95 to March 96. It will be worthwhile to ask the question 'why was this so?'
Again we see from the X chart that 8 consecutive values from March to October 99 are also at or below the average line. This means that performance during this period was also significantly better than either in the first 12 month period or in the last period from November 99 to September 2000. Investigation of the reasons for this better performance may give us some worthwhile clues regarding what needs to be done to improve performance in the future.
Thirdly we also see from the X chart that for 7 consecutive months from March 2000 to September 2000 all the values are at or above the average line. This means that the performance during this period is significantly worse. The reason for this being so also needs to be investigated.
It is seen from the mR chart at Annexure 1-A that all the values are well within the upper control limit. This means that there are no significant month to month variation which need investigation.
5. Methodology: Preparation of control charts for coaching ineffective percentage at Annexure 1-B.
It is clear from the X chart at Annexure 1-A that in the year commencing from April 96 there was a different (and perhaps better) 'system' in operation as compared to the 'system' in operation in the previous 12 month period. We would like to know how much was the difference, quantitatively i.e. what was the average value, the upper and lower control limits of this system. We therefore calculate the average value and the limits based on the figures from April 96 to March 97 and redraw these lines on the X chart--portion BC of the X chart at Annexure 1-B.
Now with reference to the 'new system' prevailing from April 96 onwards (portion BC) we find that 10 consecutive values from August 98 onwards are above the average line. This means that the performance after August 98 has significantly worsened. In order to ascertain what is the quantitative difference we again calculate the average value and the limits based on the figures for the one year period from August 98 to July 99 and draw these limits--portion CD of Annexure 1-B, representing a system again different from the earlier system represented by BC.
Now with reference to the system prevailing from August 98 (i.e. portion CD) we find that 14 consecutive values from August 99 to September 2000 are at or above the average line. This means that the performance after August 99 has further worsened. In order to ascertain what is the quantitative difference we once again calculate the average value and the limits based on the figures for the one year period from August 99 to July 2000--portion DE of Annexure 1-B, representing a system different from the earlier system represented by CD.
We thus get the X chart at Annexure 1-B and the corresponding mR chart below.
6. Interpretation of control charts at Annexure 1-B.
Study of the X chart in chronological order indicates that during the 5 year period from April 1995 to September 2000 there have been 3 system changes and during this period 4 different systems have prevailed as follows:
System. From To Average UCLx LCLx
It is clear from the above that the performance during the period April 96 to July 98 was the best and very significantly better than either the current performance (September 2000) or the performance during April 95 to March 96.
It is worthwhile to investigate why the performance has varied as indicated above.
7. Line of investigation and study to be followed by the railway concerned that will lead to actions for improvement of performance: The following questions need to be answered by observation, study of records and analyses of field – data –
* What were the reasons for markedly better performance (lower ineffective percentage) during the period from April 96 to July 98 ? There appears to be a combination of factors that led to this continued improved performance. The ‘favorable’ factors have to identified and again brought into the system.
* There appear to be favorable special causes during May 99 and June 99 that resulted in marked improvement in performance, thought temporarily. It may be due to some causes that may have come into play even a month or two earlier and may have affected the performance only later. Thus we must find out what were these causes so as to make them happen more often and bring them into the system itself for continued improved performance.
* What were the special cause that prevailed for a long time (and thus become a part of the system) and adversely the performance during the period August 98 to July 99?
* Further line of investigation could be to find out as to which depots have contributed most to the improvement deterioration in performance? Cause-wise analysis of sick marking could further help in identifying the causes. Do they relate to any significant changes in the management personnel (Officers, Supervisors)? Any significant changes in the material (particularly wheels) supply position or procedure? etc.
Wagon Ineffective Percentage
8. Interpretation of control-charts at Annexure 2-A.
It is seen from the X-chart that from June 1996 till the very end of the date, all the figures for Wagon ineffective percentage remained above the average line i.e. above the average figure for the period April 95 to march 96. This means that during this long period the performance was significantly worse than in the first 12 month period from April 95 to March 96. It appears that a different system started from June 1996.
It is seen from the mR-chart at Annexure 1-A that the values of mR for the months Sept 95 Nov 96, Jan 97, Feb 97, Apr 99, Sept 99, Aug 2000 and Sept 2000 (a total of eight points) are beyond the upper control limit (UCLmR). They indicate that the month-to-month variation at these points are beyond the normal variation due to the system, and deserved to be investigated.
However, since the entire X-chart beyond Jun 96 is apparently from a different system, fresh chart needs to be plotted for different periods.
9. Methodology: Preparation of control –charts for wagon ineffective percentage at Annexure 2-B
It is clear the X-chart at Annexure 2-A that in the year commencing from June 96 there was a different ‘system’ in operation as compared to the ‘system’ in the operation in the previous 12 month period. We therefore, calculate the average value and the limits based on the figure from June 96 to May 97 and redraw these on the X chart –portion BC of the X chart at Annexure 2 B.
Now with reference to the ‘new system’ prevailing from June 96 onwards (portion BC) we find that all the value from May 97 till Oct 99 onwards are above the average line. This means that the performance after May 97 has significantly worsened ever when compared to an already deteriorated system indicated by portion BC. In order to ascertain what is the quantitative difference we again calculate the average value and the limits based on the figures for the one year period from May 97 to April 98 and draw these limits- portion CD of Annexure 2-B, representing a system again different from the crawlier system represented by BC.
Now with reference to the system prevailing from May 97 (i.e. portion CD) we find that more than & consecutive value from November 99 to July 2000 are below the average line. This means that the performance after November 99has improved somewhat. In order to ascertain what is the quantitative differences we once again calculate the average value and the limits based on the figure for the one year period from August 99 to July 2000- portion DE of Annexure 2-B representing a system significantly different from the earlier system represented by CD. We have taken only 9 value because it appears that the value for August ‘2000’ is under the influence of some special cause. This is also indicated by the mR chart explained below.
We thus get the X chart at Annexure 2-B and the corresponding mR chart below.
10. Interpretation of control chart at Annexure 2-B,
Study of the X chart in chronological order indicates that during the 5 year period from April 1995 to September ‘2000’ there appear to have been three system changes and during this period four different system have prevailed as follows:
System. From To Average UCLx LCLx
It is clear from the above that the performance during the period April 95 to May 96 was the best and very significantly better than performance at any other time.
It is worthwhile to investigate why the performance has varied as indicated above.
11. Line of investigation and study to follow by the railway concerned that will lead to action for improvement of performance. The following questions need to be answered by observation study of records and analyses of field- data-
· What were the reasons for markedly better performance (lower ineffective percentage) during the period from April 95 to May 96 ? There appears to be a combination of factors led to this continued improved performance. The ‘favourable’ factors have to identified and again brought into the system.
· For about one year from June 96 the system appears to be in turmoil with a lot of changes coming in. This has caused increased variability, and deterioration in average performance. It would be worth being worthwhile to investigate why this happened so that preventive measures could be taken.
· The system seems to have stabilised at a different level (with worse performance) from May 97 and continued for more than two years. There appears to be a combination of factors in the new system that has contributed to this deterioration. What were these factors? If we could find answer to this question, it would help improving the system.
· The system appears to have changed again from Nov 99 with an improved average but increased variability. What new factors came in around this to cause this change?
· There appears to be some special influence on the system in August 2000. It would be possible to find out what new factor (adverse) has come up around August 2000. It would be worthwhile to investigate this special cause.
· From the mR chart at Annexure 2-b, special cause are indicated in September 95 April 99 September 99 and August 2000. Out of these, the last point is common to that indicated by. X chart and deserves through investigating. At other points too the system has thrown up possibility of special causes. Investigating to find out what special causes were there would help in improving the system.
· Further line of investigation could be to find out as to which depots have contributed most to the improvement/deterioration in performance? Cause-wise analysis of sick marking could further help in identifying the causes. Do they relate to any significant changes in the management personnel (Officers Supervisors)? Any significant changes in the material (particularly wheels) supply position or procedure? etc.
Method of making control-charts in MS Excel
Data for …for location...
(for first 12X)
(=cell on the left)
(=cell on the left)
(=cell on the left)
(=cell on the left)
(=cell on the left)
=Max (Avg X-2.66*
(=cell on the left)
(=cell on the left)
(=cell on the left)
=difference between value of
=difference between value value of Feb and Mar
=difference between value value of Mar and Apr
(for the first 11mR
=cell on the left
=cell on the left
=cell on the left
=cell on the left
In case system changed is identified, fresh limits have to be drawn from the point where the new system has taken effect. Average mR then would be for 12 values because 12 values would be available.
After the worksheet has been field,
help can be taken of Chart –wizard feature of the software to build a
line-graph by selecting the rows of Period, X,
The charts then need to be modified by right clicking the mouse on the chart area to get rid of the grid lines, format data series pertaining to UCLx, LCLx, Avg X (also of UCL mR and Avg mR) to have ‘no makers’ changing the co lour and style of lines to our choice and replacing the makers of X (also of mR) with filled circles of weight 3. All these can be done by right clicking the mouse on the related aspect and then exercising choice. Since legend is not required, the same can be deleted. After adjusting the size of the chart so that it fits in one paper width the two axes may be formatted to have a font of about 7 or 8 point size.
If charts are prepared in this manner any change in the data would automatically get reflected in the chart
Rules for interpretation of X mR chart
The following constitute ‘signals’ that indicate possible personae of special cause (external to the system). Even though they are not guaranteeing that one would not be making either of the two types of mistakes (mistaking that a special cause exists where none exists, or mistaking that no special cause exists where one exists) but present an economic value at which the chances of making the two types of mistakes are less.
1. If any point on the X chart is outside the limits (higher than the UCLx or lower than the LCLx)
2. If any point in the mR chart is above the UCLmR
3. If at least three out of four consecutive points in X chart are closer to one of the control limits than to the average value.
4. If at least eight consecutive points are the same side of the average line on the X chart.
If the system is known to have changed (new method of working, new equipment, new type of stock, etc) fresh limits should be drawn after one has at least 5 or 6 points. Calculation may later include more figures to reduce the uncertainties till reasonable amount of data is available.
Similarly if the system found to have changed (as a result of investigations) fresh charts need to be drawn because the two sets of data (before and after the system change) do not come from the same system.
If signals are present look for special cause for the same and eliminate them (if the special cause is beneficial make it a part of the system if adverse eliminate it). This will stabilise the system.
In a stable system improvements (reducing the variation – depicted by the difference between the UCLx and LCLx and or improving the average value) can be made only by working on the system and not by setting arbitrary goals or pressuring people or looking for alternative method to calculate data.
Please note that large percent differences do not necessarily indicate a signal likewise small percent differences do not necessarily indicate lack of signal.