That is the key to successful management and survival, Deming said. The prevailing style of American management defeats a system because it attempts to make each department, each division, each section an individual profit center.
In August 1950, during a lecture at the Hotel de Yama near Hakone, Japan, Deming produced a simple flow diagram that illustrated his concept of a system. That diagram, or a slight variation thereof, can be found in just about every Japanese corporation today.
Nothing Deming was teaching the Japanese existed in corporate America. These were not American management methods he was exporting to Japan. He was teaching the Japanese an original principle, a principle that he first began to formulate in 1925 when he began work as a statistician at Western Electric`s Hawthorne Works plant in west suburban Cicero and which he further solidified in the course of earning a Ph.D. in mathematical physics from Yale in 1928.
It was at the giant Hawthorne plant that Deming met Walter Shewhart, a physicist at Bell Labs who developed the idea that you can improve
manufacturing systems and eliminate latent defects by controlling statistical variations in the production process. The aim at Western Electric was uniformity, Deming recalls. Of 46,000 workers employed at the plant, one-fourth were inspectors, each assigned to make sure that every piece of equipment was the same. Unfortunately, while Western Electric was smart enough to ask for Shewhart`s help, they never really understood his ideas, Deming recalls. Most American corporations still don`t.
Deming knew his ideas were regarded as sacrilege in the hallowed halls of America`s business schools and in the paneled boardrooms of its mighty postwar corporations. Indeed, Deming insists that most of American management still hasn`t seen the light and that the nation`s business schools are still content to perpetuate destructive ideas of ”management by objective” or ”results-oriented management.”
”U.S. business schools teach you how to survive in the current American business environment,” Deming says in his gravelly Midwestern drawl. ”They teach managers how to destroy workers, how to be inefficient, how to waste resources, how to perpetuate the current system, how to get paid to make things worse. It`s terrible . . . discouraging. But most of all, it is killing us.”
Indeed, what he calls the ”forces of destruction” are still widely practiced in American corporations. Numerical goals are still being set. Workers are still judged, ranked and rated. So are divisions, departments, teams. Merit systems and annual performance appraisals force workers to please the boss, not the customer. These practices destroy morale and diminish quality. Above all, they remove joy from the workplace-and we should all take joy in our work, he says.
Ranking, Deming told the Japanese, comes from a failure to understand variation-in particular, a failure to understand the differences between special causes and common causes of variation and how to bring a production process or system under statistical control.
To demonstrate this idea, Deming often conducts what he calls the ”Red Bead Experiment.” Ten seminar attendees are picked and assigned jobs: six
”willing workers,” two ”inspectors,” one ”chief inspector” and one
”recorder.”
The objective is to show how a poorly managed system, not the workers, leads to defects and poor quality.
Deming explains that the ”company” has received orders to make white beads. Unfortunately, the raw materials used in production contain a certain number of defects, or red beads.
With both the white and red beads in a plastic container, the six workers are given a paddle with 50 indentations in it and told to dip it into the container and pull it out with each indentation filled with a bead. They then take the paddle to the first inspector, who counts the red beads, or
”defects.” The second inspector does the same, and the chief inspector checks their tally, which the recorder then records.
Deming, playing the role of misguided manager, acts upon the results. A worker drawing out a paddle with 15 red beads is put on probation, while a worker with just 6 red beads gets a merit raise. In the next round, the worker who had 6 red beads now has 8, and the worker with 15 has 10. In his misguided-manager role, Deming thinks he understands what`s happening: that the worker who got the merit raise has gotten sloppy-the raise went to his head-and the worker on probation has been frightened into performing better.
And so it continues-a cycle of reward and punishment in which management fails to understand that the defects are built into theewarding and punishing good workers, creating mistrust, fear, trying to manage people instead of transforming a flawed system and then managing it.”
That was Deming`s message to the Japanese. They listened. They learned. They practiced what Deming preached. And the rest, as they say, is history. Japanese corporations today are the envy of the world-profitable, well-managed, competitive, innovative and growing.
And they owe it all, Japanese CEOs will tell you again and again, to W. Edwards Deming. Indeed, so grateful were the Japanese to this unheralded American mathematician who came all the way to Japan to show them the way that the highest business award in Japan, next to a citation from the emperor himself, has since 1951 been one called the Deming Prize.
Littlethe steady erosion of once-competitive American industries. And, as the Japanese did four decades ago, they have come to learn-even if it is a little late.
”What business are we in?” Deming asks, rummaging through his pile of notes. ”Is it sufficient to have loyal customers?” He pauses and looks out at the audience. Some are nodding their heads ”yes.”
”No,” he roars. ”Loyal customers are not enough. You must continually introduce, by innovation, new products that will do the job better. Where today are the makers of carburetors? There was a time when every automobile had a carburetor. How would it run without one? The makers of carburetors improved their product year by year. Customers were happy, loyal. What happened? Innovation. Came the fuel injector, which does the job of a carburetor and a lot more. The fuel injector costs more than a carburetor, but when one line of cars adopted it, all the others followed. Carburetors were out, even on trucks. Fewer people year by year, will remember carburetors.
”Still fewer will remember vacuum tubes,” Deming continues. ”There was a time when a radio depended on vacuum tubes. An eight-tube radio occupied space. A nine-tube radio was better than an eight-tube radio, but occupied more space. Makers of vacuum tubes improved year by year the power of vacuum tubes and made them smaller and smaller. Customers were happy. Then along came William Shockley and others at Bell Laboratories who were working on the diode and transistor effect, which led to the integrated circuit. Happy customers of vacuum tubes deserted the vacuum tube and ran for the portable pocket radio.
”The moral is that it is necessary to innovate, to predict needs of the customer, to give him more,” says Deming, returning to his seat. ”So what business are we in? In the case of carburetors, was it to make carburetors?
Yes. What business should they have been in? Answer: to produce an apparatus that will put a stoichiometric mixture of fuel and air into the combustion chamber of the engine. Innovation on the part of somebody else led to the fuel injector and to hard times for the makers of carburetors.”
Deming turns silent as he looks out at his audience. Satisfied that this little lesson has been absorbed, he orders that the seminar break for lunch.
Immediately, a line forms in front of the platform of seminar attendees holding copies of Deming`s book ”Out of the Crisis” that they want their guru of quality to autograph. Patiently, Deming obliges, scribbling
”Greetings to” each person, the date and his signature. The scene is repeated each time the seminar breaks for lunch or morning or afternoon coffee.
”I don`t know, I just have the feeling that I`m in the presence of someone very great, one of the great genuises of our time,” says a CEO who has shelled out a $1,085 fee to attend the seminar. ”But don`t quote me. The people back in my office will think I`ve been converted, born again.”
Actually, that is what seems to be happening as the seminar proceeds and Deming`s ideas begin to take hold. And he succeeds, not bypeal that had worked so well with the Japanese.
”Dr. Deming is one of a kind,” says Cecelia Kilian, his secretary of 35 years. ”His energy, his ideas and his talent are endless. And he hardly ever takes time to eat. Except tonight. He is going to dinner with the undersecretary of the Navy. If I can ever get him out of his office. Until I do, the undersecretary will just sit upstairs and wait.”
”Upstairs” is the living room of the modest Northwest Washington, D.C., house Deming bought 60 years ago.
The ”office” is a basement divided into two offices-one for Deming, cluttered with books on business and industry and journals from the American Statistical Association, the other for Kilian.
Deming, twice widowed, has reared three daughters in the house, which, Kilian says, reflects Deming`s lifetime of work.
”It has taken me 35 years to realize why I am not allowed to throw anything out,” Kilian says. ”I realize how very important everything in this house is to Dr. Deming. He loves this house and everything in it. He and I get along beautifully because I never see him. He`s always gone.”
Indeed, Deming not only conducts between 20 to 22 seminars every year; he still consults with Ford, GM and other corporations on a regular basis. In between, he teaches at New York University and Columbia University. He composes music and has even written, he says, ”a better version” of the national anthem. He writes books, management manuals and evaluations of corporate clients.
”He`s tough,” says Nancy Mann, president of Quality Enhancement Seminars, the company that produces the Deming seminars, and author of the first Deming biography, printed in 1982. ”He never slows down.”
There have been a couple of slowdowns recently, however.
In 1968 he was hospitalized after he chose to battle a mugger on the streets of New York. He was stabbed in the chest and was rushed to the hospital with a collapsed lung. Then, in the summer of 1990, while conducting a quality seminar in Newport Beach, Cal., Deming became ill and was rushed to the hospital. Doctors installed a pacemaker. It was defective. A second unit was later installed, which he still wears.
”I`m not encouraged,” says Deming during a break at the Scottsdale seminar. ”We just aren`t learning. We`re still making the same mistakes we were making in 1950. Except for a few companies, things aren`t really any better. And they aren`t getting much better. There`s a lot of lip service by selfish managers who are only interested in solidifying their own positions of power, in getting bigger bonuses, in using people and tossing them out like empty cans.”
How does he want to be remembered then? As the messiah who failed to save American industry?
”I don`t really care,” Deming says. ”I probably won`t even be remembered.”
Deming pauses for a moment, then adds, ”Well, maybe, if I`m remembered as someone who spent his life trying to keep America from committing suicide . . . .”
