The legacy of Dr. William Edwards Deming Based on Deming Management Method by Walton In recent years, America has seen a rapid increase in the prices of stocks and other securities. At the same time most American industries have been on the decline in terms of production. How is this possible? Bad management. Top level managers are more and more isolated from their companies. They do not understand the dynamics of their businesses and thus rely strictly on paper profits, not thinking about the long term effects of their actions. Out of fear of hostile takeovers, they insist on increased dividends to drive up stock prices. Their companies suffer while stock prices soar. This can basically be described as eating one’s own foot. Management sacrifices the company for instant reward. Such management practices are extremely profitable in the short term while at the same time destructive not only to the company but to society overall. Dr. Deming, who by training was a statistician, introduced his thoughts on management to Japan after the Second World War. American industry was prospering and no one was willing to concede that it might have flaws. Japan, on the other hand, needed all the help it could get. Today, some would like to blame the failures of many American and successes of Japanese businesses on “culture”. This is very easy to do. It requires no analysis and no effort. What is clear however, is that company success is primarily caused by visionary top level management. It’s not the environment, not the culture, not the economic times, not the workers. A manager is completely responsible for what happens in his company. If a company fails, it is a manager’s failure! Dr. Deming presented his Management Method in the form of the Fourteen Points, the Seven Deadly Diseases, Obstacles and statistical analysis. The entire Method can be summarized in a hierarchical order of priorities. First and foremost, a firm must adopt a long term value producing strategy rather then a short term highly speculative and counterproductive scheme. Too often, the principal goal of a company becomes to increase dividends. Companies squeeze out the last dollar not thinking about tomorrow. Products are shipped on the last day of the month and not a day later simply to improve statistics. Quantity is all that matters. Quality is completely ignored just as long as it’s “good enough”. Employees are pushed to the limit. Without a long term plan, inept managers “put out fires” as their primary job. If the employees see that management is not committed to the workforce and is not serious about making a quality product, they will become alienated and unable to work well.! Performance evaluations worsen the problem rather then solving it, as they force employees to work on their short term performance without regard for the future of the company. Not only does a company suffer directly from bad decision making by the management but also indirectly from the workers not taking the company seriously. In the long run, such a company is self destructive. As already mentioned, everything comes from the management. It’s up to the manager to implement productive changes. The way for a company to be value producing and to grow and succeed over a long period of time is to constantly improve quality. By providing quality products a company contributes to the society. Only by providing quality does a company capture the market and create a good reputation for itself. Quality must be improved constantly. A product can always be just a little bit better. It can always fit the customer’s needs just a little bit more. It is not good enough to catch up to a competitor – he’s not standing still. To control quality, it’s always very costly and inefficient to perform mass inspections. If they do catch defects, these are caught too late in the process. What is important to realize is that a faulty production method leads to faulty products. Every minute detail of production should be considered at its design stage. Production method should then be constantly improved. And with production method, the inputs. That’s why it is so important to deal with as fe! w suppliers as possible. Companies don’t do business with other companies; people do business with other people. If a supplier sees the commitment of a company even though his supplies might sometimes be a bit more expensive, he will be much more willing to work with that company to custom fit his product to company’s needs. The way to continuously improve quality is to create good long term relationships based on trust with everyone who is involved with the business. As already mentioned, it is important to build a lasting relationship with one’s supplier. But what some managers don’t realize is that the most important asset in a company is employees. All employees want to work hard, be proud of their work and contribute to the company. What some managers miss is that the problem that prevents pride of workmanship is their own bad management. Ignoring employee suggestions, comparing people based on numbers, worker evaluation programs (MBO, etc), sloganeering, creating QC’s that don’t have any real power, not providing long term job security, having no worker education, high management mobility: all of these contribute to a workforce that is disgruntled, cynical and does not care for the company. Employee evaluations lead to breakup of teamwork as everyone looks out for himself. This in turn lead! s to impossibility of just-in-time production which leads to costly inefficiencies. Evaluations also make employees afraid and unable to perform at their best. It is very important to explain to the people in the company the new management policies. Everyone has to understand them and work to bring them about. To show that this is not just talk, money has to be spent on worker education, maintenance of equipment, and improvement of machinery and working environment. Innovation has to be encouraged, fear to make suggestions driven out. Every worker should be educated as to what his job is. Very often, employees learn from other employees who in turn learned from other employees. As a result, no one knows what exactly his responsibilities are. Also, there has to be a program of constant reeducation. As technologies change, the skills of the employees must be updated. This contributes to quality directly and shows employees commitment of the company which increases productivity a! nd quality indirectly. Employees must not be sacrificed to efficiency. In Japan this concept of long term employment has been called “the iron rice bowl”. Finally, workers must know how exactly their work contributes to the final product. This helps them make intelligent decisions when difficulties arise (and they always do) rather then acting like robots. There is no such thing as “too much information”. In order to constantly improve quality and the relationship with employees, statistical analysis must be used. A major pitfall is relying on the numbers too much. To begin with, numerical data is meaningless unless it is properly analyzed. Moreover, incorrect analysis leads to decisions that are completely off base. Also, if numerical analysis is not subservient to the other three goals, it leads to bad management. As mentioned earlier, quotas are counterproductive because they decrease quality. Employee evaluations are meaningless because they ignore statistical variations. Just as everyone in the company must be told about the Deming Management Method, everyone should also be taught the basics of proper statistical analysis. Statistics helps understand the cause and effect relationships of the numerous variables involved in production. However, statistics can only weed out so called “special causes” or problems that cause something in the production process to operate less ! efficiently then something else. It cannot pinpoint “common causes” – conditions that affect everything. These can include such things as bad lighting, inconvenient fixtures, etc. That’s why effort must be made to make every step of production as thought out as possible. The Deming Management Method has been proven in practice. During his numerous speeches in Japan, Deming- sensei was honored by the presence of top level management, middle level management and foremen from all major Japanese companies. The Deming Prize is the most prestigious business award in Japan today. Dr. Deming was also awarded the Second Order of the Sacred Treasure by the Prime Minister himself. Although recognition in America came slower, Dr. Deming gave many highly sought after lectures in US in the later years. Such major companies as AT&T, Ford Motor, Campbell Soup and others have already adopted his Method. The key to the survival of our society is not speculation and the stock market but value oriented quality production. The real value of currency is the value of the National Product behind it. It is up to the management of this country to build a solid foundation for the future.