Deming on Management

Topic: Management Improvement

I have added a new section to Curious Cat Management Improvement Connections titled: Deming on Management.

W. Edwards Deming's management ideas have greatly influenced modern management practice. Many quotes and thoughts are attributed to him. Sometimes these represent his ideas accurately, and sometimes they do not. In the Deming on Management section, I attempt to clearly indicate what he actual said and include some of my thoughts on the topic.

For example, Dr. Deming is often incorrectly quoted as saying: "you can't manage what you can't measure." In fact, he stated one of the seven deadly diseases of management was running a company on visible figures alone.

On page 121 of Out of the Crisis Deming wrote:

the most important figures that one needs for management are unknown or unknowable (Lloyd S. Nelson), but successful management must nevertheless take account of them.

For more on details see, Manage what you can't measure, in our new Deming on Management feature.

Toyota in India

Topic: Management Improvement

The Toyota Way Goes Bottom-up by Subir Roy, Business Standard (India). An interview with managing director of Toyota Kirloskar: Atsushi Toyoshima.

Toyota's official vision is a 15 per cent share of the global market by 2010. But that is just a convenient number. The key internal focus has been set by the new president who has identified three goals: offer drastically better value in terms of environment, safety, quality and cost; contribute to the economy; and give something back to society through non-business activity (corporate social responsibility).

None of the 3 main internal goals are directly related to profit. See the previous Curious Cat post on this topic: the Purpose of an Organization. Toyota is the most profitable automobile company in the world. I believe other companies would be wise to learn from them.

He sees a change in India and has an observation to share. The number of Indian manufacturing companies applying for and winning the Deming prize (named after an American expert who helped post-war Japan set out on the holy grail of quality) is indication of the desire for excellence.

In several ways this article from India shows the incredible globalization taking place. The paragraph above has an American who influenced Japan who are now influencing India. And the comments of a Japanese, Toyota executive stationed in India are being listened to worldwide (such as by me, in America, and now you - wherever you are). It just struck me, in this particular instance, how small a world it has become in some ways.

Google Talk

Google is at it again. They have announce Google Talk:

Google Talk is a simple and free way to talk with and send instant messages to your friends. Like Gmail, Google Talk uses Google's innovative technologies to help people communicate more effectively and efficiently. Think of it as Google's approach to communications.

Google Talk is easy and intuitive to use. All you need to make free calls is an Internet connection, a microphone, and a speaker. After you download Google Talk, sign in with your Gmail username and password. Invite your friends to download Google Talk, and once they do, you'll be able to talk or IM with them instantly.

The rumors sure got this one right. Google Talk is already, and will continue to get Google a huge amount of publicity. It sure seems like the love affair with Google is cresting. Those pointing out problems (privacy...) are increasing. It will be interesting to see how much longer Google can retain the golden touch.

Japan Airlines using Toyota Production System Principles

Toyota Production System Steers JAL Group Cargo Operations at Narita, press release from Japan Airlines (via Lean Manufacturing Blog)

By applying the ingenuity and originality of the Toyota Production System to their cargo operations at Tokyo's Narita Airport, Japan Airlines are on the way to saving millions of dollars annually and making huge strides in improving efficiency and productivity, while at the same time maintaining service quality and safety.

I don't think I have ever seen such a press release. It reads like a good article for actually learning about their lean efforts. Unlike most press releases, it is actually worth reading.

In accepting new ideas the project team found that the people who had been on the job longest, ever since Narita started operating, and who had a lot of accumulated know-how and experience, had the most difficulty accepting in new ideas. The perspective from inside the company tended to be narrowly focused and it was hard to make changes, so the team started by trying to change attitudes with the help of the Toyota know-how.

The team carried out their project by encouraging personnel to take on challenges. The team discovered that staff needed to learn that making a mistake while acting proactively was not a problem. The problem lay in not attempting to do anything at all.

Has Six Sigma been a failure?

Topic: Management Improvement

My response to the message, Has Six Sigma been a failure? on the Deming Electronic Network email list (DEN).

I think Six Sigma has been a success. Do I think it the best option? No, I would prefer a Deming based approach. But I think Six Sigma can be a successful improvement strategy. Like most any management strategy, many applying it do so poorly (hacks as Deming would say). But if most any DEN participant worked with the leading thinkers in the Six Sigma community you would find they fit very well within the community of the DEN, though with some distinguishing traits.

To varying extents the Six Sigma thinkers might not accept the level of importance we place on certain items, things like: "joy in work," co-operation (vs. Competition), the need to change the organizations culture, the importance of unmeasurable factors, or eliminating performance appraisals. But the best minds (as I see it) in the Six Sigma community share our beliefs, to a large extent. The approach they have taken is to work with the current culture more than most of us would like, if we could instead have the culture move toward a more Deming based culture.

Many Six Sigma proponents have done great things: Gerry Hahn, Roger Hoerl, Soren Bisgaard, Bill Hill, Ron Snee, Forrest Breyfogle. They happen to all be statisticians, I believe; as were most (though not all) of those who taught with Deming. I think there is a connection. Statisticians that follow the applied statistics school of thought fit very well with Deming's ideas, and with the good practice of Six Sigma.

I am biased, however. My father worked with George Box, who I see as a leading figure in the applied statistics community. They wrote (along with Stu Hunter) Statistics for Experimenters which is heavily used in good Six Sigma efforts. The second edition was recently published (the first edition was published in 1978). I grew up with the ideas of applied statistics and Deming's ideas.

I believe part of the distrust of Six Sigma is because many efforts are done poorly and deserve criticism. In addition, the general Six Sigma community believes things I disagree with. The whole 1.5 sigma shift idea is not sensible. The name of the effort is not good. But, many of us (or if that is not accurate, then at least me) who have to try and convince others to practice Deming\'s ideas find the "System of Profound Knowledge" less than an ideal name. The whole percentage failure example theme is silly (if we accept just 99.4% success that means 15 doctors will drop the baby they deliver every day).

Six Sigma efforts are missing some import ideas that would improve it, in my opinion. Still, I would rather take a good Six Sigma effort and then add more of Deming's ideas than take a company that has not had any such effort (just like I would like to build on a good
implementation of "TQM" or Lean Thinking...).

Read several good articles by Roger Hoerl.

You can also see more articles, by those I mentioned above as leading Six Sigma thinkers, via the Curious Cat Management Improvement Library:


John Hunter
www.johnhunter.com

Transforming Aggression into Creative Problem Solving

Transforming Aggression into Creative Problem Solving by Margaret J. Wheatley and Geoff Crinean

With their intelligence awakened, people want to contribute, want to change things, want to make things happen. They will work with existing structures and processes, but they will be altering and adapting them as needed, almost without noticing. Too often, leaders fear a loss of control and attempt to rein in such groups. Their own fear pushes them back into aggressive patterns of command and control.

A previous post making this point: Managing Fear

I think, some can leap to the conclusion that managing fear means you must avoid doing anything that may bother some people. That is not the case. If things need to be changed, that still must happen; even though people may fear change.

But managers must understand the psychological effects of fear and seek to move forward in the most effective way possible. That means taking into account the effect of the change, and the way the change is brought about, on those affected by the change.

David Anderson CMMI Webcast Aug 18

CMMI Webcast Scheduled for August 18th

David Anderson will present the Microsoft Solutions Framework for CMMI Process Improvement material live at 11am Pacific Daylight Time on August 18th. After the presentation he will answer questions in a chatroom session.

Microsoft Solutions Framework (MSF) for CMMI Process Improvement is a highly iterative, adaptive planning, agile software development process which meets the requirements for the Software Engineering Institute's (SEI) Capability Maturity Model Integration (CMMI) level 3 and provides a smooth transition all the way to level 5. In this Webcast, David Anderson (PM for MSF for CMMI Process Improvement, author and award-winning blogger) will introduce this feature Visual Studio Team System. Immediately following the Webcast, there'll be an online chat with David and other members of the MSF team.

Register for the webcast

Prevoius Curious Cat Management Improvement posts on David Anderson's ideas:

• Agile Management


• Stretching Agile to fit CMMI Level 3

Purpose of an Organization

Topic: Management Improvement

W. Edwards Deming described the purpose of an organization in New Economics, on page 51, as:

The aim proposed here for any organization is for everybody to gain -
stockholders, employees, suppliers, customers, community, the environment - over the long term.

Like so much of what Deming said that makes sense to me. It is my sense the "conventional wisdom" would state something more along the lines of the purpose of a company is to make money. I would not agree. Rewarding the owners is important, but other stakeholders should be included in the purpose.

Even with a strictly legal argument it is not true that a company exists only to make money. The company enters into legal obligations to employees, suppliers, customers and communities.

Conventional wisdom agrees that a company must comply with the law. Many of those laws are requirements society has put in place to ensure that companies focus on obligations to their customers, community, suppliers and the environment (over the long term).

Some might chose to view those legal requirements as only a means to make money. That a company exists to make money and that so long as a law doesn't require something else, any decision should be based only on long term financial benefit. I would not agree. The laws are a manifestation of the belief of the society that other important considerations exists that must be considered.

In the early stages of capitalism the business world was largely seen as amoral. That is no longer the case (again as I see "conventional wisdom"). Moist, though not all, believe that companies have moral obligations to the environment, community, customers and employees. Many of these obligations have been turned into laws (just as there are laws that require the interests of the shareholders to be cared for).

Those laws set the minimum legal limit that must be met. And they seem to pretty clearly express the decision society has made that companies exist within a society and have a larger purpose than making money for the owners. One benefit of companies is that they reward those who invested in them. They also provide jobs to employees and products and services to customers.

How those interests are balanced is not such an easy issue to address. I think Deming's quote is a good starting point for discussion. Right now we have the balance pretty heavily in favor of the owners (and making profit). I personally, think it makes sense to have that as a very important factor, though I favor increasing the focus on some other factors than is the current normal practice. Most importantly, I believe we need to increase the importance of the purpose of providing good jobs for employees.

The marketplace does a pretty good job of asserting the importance of customers and suppliers. Even so, regulation and law enforcement are necessary actors in those instances where the free market is insufficient.

The changes in the world are making it very difficult for the community interests to be respected. And I think that this trend with likely increase. I plan to think more about what this will mean going forward.

There is an important difference between those that see the only true purpose of a company is making money and those that see a variety of purposes that must be balanced. I hope we can move the conventional wisdom to a more balanced view of the importance of the various stakeholders (even my spell-checker wanted to change this to stockholders) from what I see now as the current unhealthy focus.

There are some thoughts on these ideas in the Deming Electronic Network thread on "What is the purpose of a commercial firm." One opinion expressed there is that: "There is but one purpose of a commercial firm and one only; to make money. All other things are secondary."

Indian Firms Learning From Toyota

Topic: Management Improvement

Taking A Page From Toyota's Playbook, Business Week:

The goal for Wipro is to become the Toyota of business services. Toyota preaches continuous improvement, respect for employees, learning, and embracing change. "It's the soft stuff that makes a big impact on the hard numbers," says Kurien, a cheerful 45-year-old. There is plenty of hard-edged analysis, as well. To embrace Toyota's methods, Kurien last year assigned teams to examine business processes, break them into discrete components, and come up with streamlined services to sell to clients.
...
Wipro also adopted Toyota's kaizen system of soliciting employee suggestions for incremental improvements, and made The Toyota Way required reading.

The Toyota Way is an excellent book.

Wipro's employees seem sincerely excited about their jobs -- work that would likely be considered sheer drudgery by U.S. college grads. Take 28-year-old Priya, who has worked for Wipro for nearly seven years. She has already submitted a handful of kaizen, and is thrilled at how quickly her bosses respond. "Even though it's something small, it feels good. You're being considered," she says.

This might not seem like a huge deal but it is critical to achieving true world class performance. To be compared to companies like Toyota, Dell, Intel and the like you need to change the way people at the company think. Not everyone at all times has to (these companies are not utopian oases from reality), but a significant number have to believe that they are valued and their contributions are making a difference for their co-workers, company and customers.

This article is only one more indication India is making significant progress. Obviously the macro economic statistics are showing great progress. Indian firms have also been making great strides winning more Deming Awards than Japanese firms the last few years.

Science and Engineering Macroeconomic Investment

Topic: Economics

I posted to the Curious Cat Science Blog on the Science and Engineering Doctoral Degrees being granted around the world. Why do I post this here as a Economic post? I believe, as do some countries that have made significant commitments to investing in science and technology education that such investments can have a large impact on long term economic success. A couple points from that post:


From The Brain Drain by Debra W. Stewart, The Boston Globe

Thirty years ago the United States annually produced the vast majority of the world's doctoral degrees. But in 1999, Europe surpassed US production of PhDs in science and engineering by more than 2,000 scholars. Asia, too, is rapidly closing its gap in doctoral production, with the governments of China, India, and Korea heavily investing in capacity at the graduate level.

And from Security, Innovation, and Human Capital in the Global Interest by Dr. Shirley Ann Jackson, President, Rensselaer Polytechnic Institute

It may come as a surprise that, in the most recent year for which data is available (2000), out of 2.8 million first university degrees in science and engineering granted worldwide, only 400,000 were granted in the U.S.A. while European universities granted 830,000 and 1.2 million were earned by Asian students in Asian universities.

How we choose to spend the hundreds of billions above the taxes collected each year is a political decision. When you look at the current transportation bill signed today by President Bush you get a picture of where those priorities lay: "The bill's price tag was $30 billion more than Bush had recommended, but he said he was proud to sign it." - see CNN article.

Two years in the making, the highway bill contains more than 6,371 special projects valued at more than $24 billion, according to Taxpayers for Common Sense.

Taxpayers for Common Sense Statement on the President's signing of the porky highway bill.

Statement from the Coalition for National Science Funding on the current budget plan for the National Science Foundation for FY 2005.

mark of $5.47 billion is two percent less than the current FY 2004 NSF budget and is five percent less than the President'’s FY 2005 budget request for the NSF. Reduction in the NSF budget will curtail many current research efforts and inhibit new program starts - putting at risk this country's leadership in many scientific fields.

This budget action is diametrically opposite of Public Law (PL) 107-368, authorizing a doubling of the NSF budget over five years.

Choosing to spend $30 billion over what President Bush proposed on building more highways while cutting the National Science Foundation budget (which totals less than 20% of the excess funding for the highway bill) seems like a bad idea to me. Also this shows why you shouldn't pay much attention to what is "said" by politicians but instead look where they put our money.

The United States has benefited tremendously from the decisions to fund the National Science Foundation (as well as other investments in science) for decades. Other countries have seen the wisdom in those investments and seem to be committing much more to those investments than the US lately. I think it is very wise of them and will serve the world well. But I fear the United States has already allowed itself to lose a great deal of the competitive advantage it built up in the middle of the last century.

In the last couple decades we have been able to coast on the lead we had. We could have many of the best minds come to our colleges and then keep them here once they graduated with advanced degrees. However, the lead we had is rapidly being eliminated. This does not mean the US will immediately be uncompetitive. But it will mean one of the great advantages we had will be greatly reduced.

The United States still has competitive advantages that will continue to serve us well in harnessing advanced technology for economic gain. But others have been making strategic decisions to gain some of those advantages for themselves. And the United States will almost certainly continue to see its scientific and engineering leadership in the world erode. And the economic consequences will be dramatic.

I believe it would be wise to invest billions in our scientific and technological future (including more funding for the National Science Foundation and improving our k-12 math and science education). But that is a decisions our political leaders will make. Lets hope they chose wisely.

Design of Experiments in Advertising

How Two Guys From the Gold Country Are Changing Advertising Forever by Robert X. Cringely

James Kowalick and Mario Fantoni, two guys who say they can show you how to use science to design ads that cost less while being 10 or more times as effective as doing it the old way.

Their secret is the Taguchi Method, which is a technique for designing experiments that converge on an ideal product solution.
...
"I taught over 300 courses for industry where we designed cars and electronic devices, but it wasn't until one day I took over my wife's kitchen and used Taguchi to perfect my recipe for vanilla wafer cookies that I realized how broadly it could be applied," Kowalick recalls. "It took 16 batches, but by the end of the afternoon I had those wafers dialed in."

It is great to see the application of Designed Experiments increasing. I am reminded of an article by my father, William G. Hunter, from 1975: 101 Ways to Design an Experiment, or Some Ideas About Teaching Design of Experiments. Examples of the topics of the designed experiments his students performed:

• taste of stewed chicken
• toys child chose to sleep with
• quality of ground malt for brewing beer
• distance football was kicked
• absorption characteristics of activated carbon used with municipal waste water

I am also reminded of a fun article I ran across a few years ago: Three Romeos and a Juliet: - Our early brush with Design of Experiments.

Deming's Seven Deadly Diseases

Topic: Management Improvement

Dr. Deming noted seven deadly diseases in chapter 3 of Out of the Crisis, 1986. Below his words from pages 97-98 are bolded. As with Deming's other thoughts, his list of deadly diseases was continually modified as he learned more (to adjust the focus, the basic concept of the diseases were not changed). It is amazing how true all of these points still are.

Seven Deadly Diseases

1. Lack of constancy of purpose
2. Emphasis on short term profits (Overreaction to short term variation is harmful to long term success. With such focus on relatively unimportant short term results focus on constancy of purpose is next to impossible.)
3. Evaluation of performance, merit rating or annual review (see: Performance Without Appraisal: What to do Instead of Performance Appraisals by Peter Scholtes).
4. Mobility of top management (too much turnover causes numerous problems)
5. Managing by use of visible figures, with little of no consideration of figures that are unknown or unknowable. Many important factors are "unknown and unknowable." This is an obvious statement that runs counter to what some incorrectly claim Deming taught - that you can only manage what you measure. Deming did not believe this and if fact saw it as a deadly disease of management
6. Excessive medical costs
7. Excessive costs of liability, swelled by lawyers that work on contingency fees.

I posted earlier this year on this topic:USA Health Care Costs reaching 15.3% of GDP - the highest percentage ever. The Centers for Medicare & Medicaid Services release focused on it a different way saying: "HEALTH CARE SPENDING IN THE UNITED STATES SLOWS FOR THE FIRST TIME IN SEVEN YEARS" (I am repeating their use of ALL CAPS). Of all the deadly diseases, excessive medical costs seems to be doing the most critical damage to the country and I see little hope that it won't keep getting worse.

Thankfully, it does seem more people understand some of the problems of focusing on short term profits; but the disease is still rampant. And we can take hope that more people are willing to say that performance evaluations are causing significant problems (Abolishing Performance Appraisals is a good book for those battling this disease). Yet while some organization have eliminated them, most still go through the motions of this annual ritual, that it seems to me few believe in.

While we are making some progress we have quite a bit of work to make significant progress against these deadly diseases. Thankfully the improvement in management over the last two decades has been significant, though nowhere near enough. We have strengthened our ability to cope with the effects of the deadly diseases. Building on those successes, and the steps being made against some deadly diseases, it would be nice to see more progress to directly address the deadly diseases themselves in the future.