EP174 – Out of the Crisis: Rethinking Management with Deming

Is your organization facing challenges? Deming’s “Out of the Crisis” helps with leadership, quality, and continuous improvement. #AdvancedQualityPrograms #TheQualityGuy #Deming #Leadership

In “Out of the Crisis,” W. Edwards Deming begins by describing the dire state of American industry in the early 1980s. He argues that many companies were struggling due to their focus on short-term profits instead of long-term quality and customer satisfaction. Deming attributes these issues to poor management practices and emphasizes that a new approach was necessary to overcome this crisis.

Although this book was written in 1982 and primarily focused on manufacturing businesses, its principles apply to almost any business. A crucial point is that defects are not cost-free. Someone produces them and gets paid for producing them. Poor quality results in high costs because customer expectations remain the same. If you produce a defective product, you incur costs for rework, reimbursements, and other issues.

Deming introduces his famous 14 Points for Management, which are guidelines designed to transform management practices and improve quality. These include creating constancy of purpose, adopting a new philosophy, ending the practice of awarding business based on price alone, constantly improving, and instituting strong leadership.

In my opinion, one of the most important points is the fifth principle: “Improve constantly and forever the system of production and service.” This principle resonates with many of my experiences in the industry. Simply “putting out fires” does not constitute an improvement of the process. Neither does the discovery and removal of a special cause detected by an out-of-control signal. These actions only return the process to its previous state. A fundamental operating principle is that every time something goes wrong, you must identify the root cause through systematic analysis. This ensures that everyone in the business understands the importance of systematic processes and that deviations from these processes create problems.

Break down barriers between staff areas. Service personnel can learn a great deal from customer feedback regarding their products. Unfortunately, some companies never utilize this information. This is, in essence, a continuation of the same point. As a company or industry grows, it is essential to establish processes and create a culture where any issue is communicated to someone who can understand and resolve the root cause. “Putting out fires” does not lead to improvement. A well-functioning company requires that everyone feels responsible for preventing problems.

Deming and the total quality movement were, in some ways, a reaction to a “pushing numbers” culture that attempted to reduce all business activities to spreadsheets. In this culture, productivity meant higher volumes. “Out of the Crisis” introduces a different perspective, emphasizing that many important aspects of business are not easily measured. Many crucial figures necessary for effective management are either unknown or unseen. Successful management must consider these factors.

Deming introduces the concept of statistical process control (SPC), which he believes is crucial for achieving quality improvement. He explains that SPC involves using statistical methods to monitor and control a process, ensuring its efficient and consistent operation. By adopting SPC, he argues, companies can identify and eliminate variations in production, leading to higher quality products and services.

Understanding the concept of variation is crucial. Deming argues that most problems within a system are caused by common causes of variation, not by specific individuals. By understanding this concept, managers can focus on improving the system instead of blaming and punishing employees for issues beyond their control.

Deming then introduces his System of Profound Knowledge, which consists of four interrelated components: appreciation for a system, understanding variation, theory of knowledge, and psychology. He emphasizes that these four components are essential for effective management because they provide a deep understanding of how organizations function and how they can improve.

• Appreciation for a system involves understanding the interconnected nature of an organization and how individual actions impact the entire system.
• Understanding variation involves recognizing and managing the natural variations that occur within a process.
• Theory of knowledge encourages a scientific approach to decision-making.
• Psychology focuses on understanding and managing the people within the organization.

Deming then introduces the idea of transforming management, emphasizing the need for an upgraded style of leadership. He advocates for a shift from a traditional, authoritarian style of management to a more participative and supportive approach. This improved style encourages collaboration, innovation, and continuous improvement.

He highlights the importance of employee training and development, believing that investing in people is essential for achieving quality improvement. He suggests that companies should focus on creating a supportive environment that encourages learning and personal growth, rather than one that punishes mistakes.

In the final sections of “Out of the Crisis,” Deming explores the concept of quality improvement as a never-ending journey. He argues that achieving and maintaining high-quality products and services requires a long-term commitment to continuous improvement and innovation.

In conclusion, “Out of the Crisis” by W. Edwards Deming offers a comprehensive analysis of the problems that American industry faced in the 1980s. As many have likely realized, it also provides a detailed blueprint for transforming management practices to overcome ongoing management challenges. Deming’s ideas, particularly the 14 Points for Management and the System of Profound Knowledge, continue to influence management theory and practice today.