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The
Power of TRUE Quality Management
Copyright
©2000 By Matthew Cross, President of Leadership Alliance
According
to the legendary Einstein of quality and business, Dr. W. Edwards
Deming (1900-1993), all businesses are really in one business
only. Regardless of what business you are in - service, manufacturing,
education, non-profit, etc. - there is one primary aim that you
must be acutely aware of and continuously strive to master if
you wish to grow and prosper. If you don’t focus and master
this critical success factor, your days may be numbered; at the
very least, you will likely be doomed to mediocrity.
What do you
think your number one aim in business should be to best guarantee
your success?
Before we
explore Dr. Deming’s answer to this question, and how it
can transform your business, let’s consider the man for a
moment. Who was W. Edwards Deming? Why should we value what he
has to say about succeeding in business? For those who may never
have heard of him, or who have but forgot the details, here’s
a quick overview of the man many consider to be the most brilliant
business mind of this (or any) century.
By now, most everyone in the business world has heard of “TQM”
(Total Quality Management). It is important to note that TQM is
just one of many erroneous “Flavor of the Month” names
often used in a Western attempt to describe pieces of the powerful,
holistic system Deming created. For this reason, I have chosen
to change the “Total” in TQM to “True” to
better reflect the scope and genius of Deming’s complete
quality system.
A master statistician
with a profound understanding of systems theory, Deming played
a vital role in the US victory in WW II. He helped create and
teach the quality standards crucial to the precision manufacture
of America’s war equipment. However, when WW II ended America
was the only major industrial power left standing, with enormous
worldwide demand for everything it could produce. So, the US disregarded
the same quality methods that had helped it win the war and shifted
full-speed into quantity production. Deming had tried in vain
to interest US business in adopting his quality methods after
the war, but his efforts fell on deaf ears. The long-term impact
of the US decision to focus on quantity over quality would take
decades to surface.
Ironically,
Deming is perhaps best known as the man who introduced the fundamentals
of Quality to Japan. After WW II, Japan was a ruined nation, its
people literally starving in the streets. Prior to the war, Japan
had one of the worst reputations for quality in the world. Today
they have the best. This was not an accident, nor because of anything
special about Japanese culture. According to the Japanese themselves,
Dr. Deming is the primary reason.
In 1950 Gen.
Douglas MacArthur suggested to his friend Dr. Deming that he teach
the Japanese his quality methods, to help them rebuild their war-shattered
economy. Deming began lecturing to the heads of Japanese businesses
in 1950, and made this now-famous prediction: If the Japanese
learned and adopted his quality systems, they would become an
exporting nation within five years, and be well on the way to
producing the world’s highest quality and most in-demand
products. The rest, as they say, is history.
The original,
comprehensive quality system Deming taught the Japanese directly
resulted in their becoming a world-class business and economic
power. In fact, the highest business award in Japan since 1951,
equivalent to an annual business quality Nobel Prize, is named
after an American: The Deming Prize. Emperor Hirohito would
also award Dr. Deming Japan’s highest civilian honor, the
Second Order Medal of the Sacred Treasure, for Deming's vital
role in the rebirth of Japan’s economy.
It wasn’t
until the early 1980’s, when Deming-inspired higher quality
Japanese exports began to capture and dominate US markets, that
America woke up and rediscovered Deming, then in his eighties.
The primary catalyst was a 1980 NBC News special entitled “If
Japan Can, Why Can’t We?” which featured a brief section
on Deming’s work.
Soon, many
leading American and international businesses, including Ford
Motor Co., Xerox and Proctor & Gamble adopted the Deming quality
approach. In fact, the leaders of Ford and Xerox directly credited
Dr. Deming with saving their companies from certain extinction.
For example, in 1980 Ford was losing 1.5 billion dollars a year
and had the worst reputation for quality and reliability of any
American Car Company. Today, Ford is both the highest quality
American car maker and the most profitable – Ford is in fact
poised to overtake GM as the largest American auto maker for the
first time in almost seventy years. Again, this is not an accident.
Deming is the reason. And a US News & World Report cover story
named Deming’s contribution to the world as one of only nine
“Hidden Turning Points in World History,” along
with events like Columbus’ discovery of America, and Napoleon’s
conquest of Europe.
Contrary to
what we’ve been hearing about Japan’s recent economic
challenges, the well-known Japanese industries that adopted the
Deming Method and stuck with it continue to enjoy great success.
These are primarily the exporting companies involved in electronics,
automobile manufacturing, and steel production (e.g. Toyota, Sony,
Matsushita/Panasonic, Ricoh, etc.) These companies are world-renowned
for healthy profits, international market dominance, and quality
leadership. Unfortunately for the Japanese, Japan’s financial
industry and government never adopted Deming’s methods.
So, what does
all this have to do with your business, you ask?
Deming’s
quality methods are both timeless and applicable to all organizations,
of every size and type. They work - like a virtual “secret
weapon” – vastly increasing your odds of achieving lasting
success. The reason Deming is still so unknown to many is simple.
Despite decades of stellar results around the world in every kind
of business, Deming’s methods challenge the dated yet heavily
entrenched Western management status quo. His brilliant systems
and boldly humanistic approach to enlightened management fly in
the face of “conventional Western management wisdom,”
which manages people in a top-down, fear-based manner. The Deming
way manages in an integrated systems approach, whose aim is to
optimize the entire system – and everyone within it. A key
principle is to delight the customer and keep them coming back
again and again. This is a dramatic shift from the conventional
short-term results-now approach; yet every business that has adopted
the Deming Method and stuck with it invariably enjoys great success
– on all levels.
The essence
of the Deming Quality System is surprisingly simple. Indeed, much
of it is powerful common sense. Yet, like any great truth, it
requires time, patience, and commitment to realize its full impact.
Let’s start with an overview of what Deming called “Profound
Knowledge.” This consists of four interrelated and inseparable
parts that act as a critical foundation for implementing True
Quality Management. They are:
1. APPRECIATION
FOR A SYSTEM – Every business consists of many multiple
processes that must be viewed as a whole system. A system is simply
a series of interrelated processes and people whose aim is to
work together to accomplish the aim of the system. The context
is a place where cooperation and collaboration replace harmful
competition, so that everyone wins. By focusing on the whole rather
than just the isolated parts, organizations can actually outperform
their individual assets and optimize their resources and opportunities.
2. KNOWLEDGE
OF VARIATION – Variation is the voice of the System.
Managers must understand how to listen to this voice and then
make appropriate, continuous improvements. Too much variation
(including defects) in product or service is the villain of quality
and success; at the same time, it is a clear indicator of where
we need to focus attention to grow and transform our business.
The regular collection and correct interpretation of relevant
data (the key business “vital signs” and process results)
plays a major role here.
3. THEORY
OF KNOWLEDGE – There is a crucial difference between
information and knowledge. Information, no matter
how complete and speedy, is not knowledge. Most businesses are
swimming in ever-deeper oceans of information. What is required
is what Deming called Profound Knowledge – the kind
of knowledge that provides highly reliable predictive power. We
must learn to strategically see the whole picture, not just pieces
of it. This requires a basic understanding of the importance of
theory, for without theory we cannot intelligently guide and grow
our business.
4. PSYCHOLOGY
OF CHANGE – This helps us to understand and optimize
all interactions within our organization. People are born with
inner motivation, the desire for healthy relationships, a natural
inclination for learning, a strong need for love and esteem, and
a right to joy and dignity in their work. Good management must
honor and support these innate factors within their people, towards
optimizing the whole business system. Internal competition between
departments and people is especially destructive to optimal performance.
The introduction of constructive change must also involve and
include all members within the system for best results.
Simply put,
Profound Knowledge provides the lens through which businesses
can optimize all of their efforts and achieve greatest success.
Deming also created the specific “14 Points for the Transformation
of Business & Management” for further guidance. These
are fourteen basic principles which must be applied together for
maximum impact. They are:
1. CREATE
CONSTANCY OF PURPOSE. Create strong constancy
of purpose - a clear vision and aim - toward improvement of product
and service,
with the aim to become competitive, stay in business and provide
jobs.
2. ADOPT
A NEW PHILOSOPHY. We are in a new economic age. Management
must awaken to this challenge, learn their responsibilities, and
take on proactive leadership for change.
3. CEASE
MASS INSPECTION. Cease reliance on mass inspection to achieve
quality. (Some processes where the probability and cost of error
is great may be exceptions, e.g. bank proofing operations.) Eliminate
the need for inspection on a mass basis by building quality into
the product/service in the first place.
4. MINIMIZE
TOTAL COST: SINGLE SUPPLIERS. End the practice of awarding
business on the basis of price tag alone. Instead, minimize total
cost. Move toward
a single supplier for any one item on a long-term relationship
of loyalty and trust.
5. CONSTANTLY
IMPROVE SYSTEMS. Improve constantly and forever the system
of production and service to improve quality and productivity
and thus constantly decrease costs. KEY: Higher quality = Lower
costs.
6. INSTITUTE
TRAINING ON THE JOB.
7. INSTITUTE
LEADERSHIP. The true aim of leadership (supervision) should
be to help people and machines do a better job. Supervision of
management is in
need of overhaul, as well as supervision of production and service
workers.
8. DRIVE
OUT FEAR. Drive out fear, so that everyone may work effectively
for the company. Fear is not the best motivator. It destroys innovation,
creativity and trust.
9. BREAK
DOWN DEPARTMENT BARRIERS. Break down barriers between
departments. All people in the system - people in research, design,
sales, and production must work as a team to foresee problems
of production and customer use that may be encountered with the
product or service.
10. ELIMINATE
SLOGANS, ETC. Eliminate slogans, exhortations and targets
for your
work force asking for things like zero defects and new levels
of productivity. Such exhortations only create adversarial relationships,
since 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.
11. ELIMINATE
MANAGEMENT BY NUMBERS. Eliminate work standards (quotas),
management by objectives, management by numbers, and numerical
goals for both management and workers. Substitute leadership.
12. REMOVE
BARRIERS THAT ROB PRIDE. Remove barriers that rob people of
their right to pride of workmanship. Supervisors should be responsible
for quality, not numbers. Eliminate annual reviews and merit ratings.
13. INSTITUTE
EDUCATION. Institute a vigorous program of education and self-improvement
for all employees.
14. INVOLVE
EVERYBODY. Put everybody in the company to work to accomplish
the transformation. The transformation is everybody's job.
Profound Knowledge
and the 14 Points provide critical support towards implementing
and supporting the Deming Method. Deeper study reveals increasingly
greater opportunities for integration and advancement, and opens
the door to highest achievement. Supporting quality tools and
processes such as the Deming-inspired Hoshin strategic planning/action
system provide the necessary foundation and guidance for breakthrough
results.
So, what is
that one primary aim all businesses must focus on, if they hope
to grow and profit? Answer: The creation and growth of LOYAL
CUSTOMERS. ALL of the word’s leading businesses have
this one pivotal area in common: They continually focus on providing
the highest quality and value of product and services that delight
their customers. This creates increasingly higher levels of customer
loyalty - and virtually guarantees success at all levels in the
process. In essence, the lower the “defection rate”
of your customers, employees, and investors, the higher levels
of success you will achieve. It’s that simple. Key: LOYAL
customers must be the aim – NOT just “satisfied.”
Studies show that four out of five “satisfied” customers
will defect, given a good enough reason. Merely “satisfying”
customers is no longer enough to achieve lasting success.
It may come
as a surprise, but loyal customers (and loyal employees and investors)
are also your most important business asset. Loyal customers keep
coming back; they refer their friends and they measurably grow
in value over time. For example, did you know that just a 5% increase
in customer retention (loyalty) translates into a 50% increase
in sales, on average? It costs very little to keep a customer;
yet it proportionally costs a fortune to continuously lose customers
and have to keep attracting new ones. A key outcome of the Deming
Method is ever increasing customer delight and loyalty.
Bear in mind,
the Deming Method is not an instant cookie-cutter approach. It
takes time, commitment, focus and work. Yet the results are huge,
and multiply exponentially over time. Competent coaching can definitely
accelerate the process, as it is nearly impossible to work effectively
on any system while working in the system. This is especially
true in the beginning stages.
Regardless
of what quality path you may choose to improve your organization,
be prepared for one of the most challenging yet rewarding experiences
in business. The Deming Quality Method provides a proven, holistic
formula for maximum success. It will transform the quality of
your business, life, and results. What else could you ask for
in your company?
Matthew
Cross is President of Leadership Alliance, an innovative consulting
organization providing breakthrough strategies for growth &
transformation. An acclaimed Deming scholar, his training systems
lead companies and individuals to reach and exceed their highest
potentials. For more information, contact Mr. Cross at Leadership
Alliance at 1.203.322.1456, or email: MCross@LeadershipAlliance.com
Further
recommended reading and resources:
The New Economics for Business, Industry, and Government
-Dr. W. Edwards Deming
Quality or Else: The Revolution in World Business -Clare Crawford-Mason
& Lloyd Dobyns
Deming’s Profound Changes -K. Delavigne & J.D. Robertson
The Loyalty Effect: The hidden force behind growth, profits and
lasting value -Frederick Reichheld
The Deming Management Method -Mary Walton
The Deming
Video Library – The comprehensive Deming Method video training
system.
32 total volumes, each with detailed workbook. Available at www.ManagementWisdom.com
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