BUS300: Operations Management

Deming takes a systems and leadership approach to quality. Concepts associated with his approach include (1) the "System of Profound Knowledge," (2) the "Plan- Do-Check-Act Cycle," (3) "Prevention by Process Improvement," (4) the "Chain Reaction for Quality Improvement," (5) "Common Cause and Special Cause Variation," (6) the "14 Points," and (7) the "Deadly" and "Dreadful Diseases".

"System of Profound Knowledge"

 Understanding the concepts of profound knowledge is critical to understanding Deming's approach to quality. Deming states in his seminars that there is no substitute for knowledge. Hard work and best efforts are not the answer. Without profound knowledge, management action can cause ruination. The system of profound knowledge is made up of four interrelated parts: (1) theory of systems, (2) theory of variation, (3) theory of knowledge, and (4) knowledge of psychology.

Theory of Systems. "A system is a series of functions or activities... within an organization that work together for the aim of the organization". He adds, "Without an aim, there is no system".

The components of a system (e.g., management style, employees, customers, environmental constraints, shareholders, training, recruitment) and its interrelationships to each other must be studied. Lack of appreciation of organizations as systems leads to fragmentation, people going in different directions unaware of the internal and external influences and interactions that affect their work.

Theory of Variation. Knowledge of statistical theory is essential to profound knowledge. Managers must be able to recognize a stable system and understand the concepts of special and common causes of variation. Failure to appreciate the difference will lead to frustration, increased variability, and higher costs. These adverse effects result from management taking action and responding to problems without knowing if the cause belongs to the system ("common") or if it is localized ("special"). Measurement of variation provides the means for predicting the behavior of a system.

Theory of Knowledge. The third part of profound knowledge addresses the way in which knowledge is advanced. The process of advancing knowledge can usually be described as a slow, continuous stream of tests and experiments, each designed to advance the state of knowledge in a particular field. Occasionally "breakthroughs" occur that produce rapid advances in knowledge, but the general process is that of slow, incremental growth based upon experimentation, guided by theory.

Deming believes that managers should pursue goals similar to those of science (explain, predict, and control) to gain more knowledge about the systems and processes in their organizations. They will need to learn how to increase their knowledge of the processes for which they are responsible by participating in such "scientific" activities as formulating theories, developing hypotheses, designing and conducting experiments. They will need to know how to collect, analyze, interpret, and apply data derived from experimentation. A theory need not be complex, it may be as simple as stating (predicting) that one method of training may be more effective than another for learning certain skills.

Deming is critical of managers who lode elsewhere for solutions (e.g., copying a remedy, adopting others' successful ideas). "An example is no help in management unless studied with the aid of theory. To copy an example of success, without understanding it with the aid of theory, may lead to disaster". Theory advances knowledge and knowledge is obtained through use of the scientific method.

A common "false start" encountered by organizations beginning to focus on quality is their failure to understand the importance of teaming the theory of quality management. No two organizations are alike, each has different requirements and may require tailored applications of the theory.

Knowledge of Psychology. The fourth part of profound knowledge involves psychology, in particular the dynamics of people in the workplace, group or team performance, learning styles, and cultural change. Management needs to have knowledge of people and how they interact, of their individual needs, and of their working and learning styles. People are different from one another, and it is management's responsibility to be aware of those differences and use them to optimize performance.

The "Plan-Do-Check-Act Cycle"

 Deming emphasizes continuous improvement and believes that it is management's obligation to constantly and forever improve the system of production and service. The concept of ongoing improvement is illustrated by the Shewhart cycle or the Plan-Do-Check-Act (PDCA) cycle (Figure 3).

Figure 3. The Shewhart cycle as described by Deming (1986).

"Prevention by Process Improvement"

Deming stresses that inspection at the end of the process is too late and too costly. His approach is a shift from detection to prevention (Figure 4). To Deming, the prevention approach to quality is achieved by process analysis, control, and improvement A process is defined as any set of conditions, or set of causes, that work together to produce a given result. It is usually a blending of machines, methods, materials, and people (Figure 4).

Measurement is used to monitor processes and take action to minimize the possibility of producing unacceptable products or services to the customer.

Note that the size of the "process" box has been enlarged in the prevention approach and contains "causes" for a product or service. The diagram is presented this way to emphasize the point that quality results from studying and changing the process, not inspecting the final product.

Figure 4. The detection versus the prevention approach to quality.

"Chain Reaction for Quality Improvement"

Dealing's philosophy can best be depicted by what he calls the chain reaction for quality improvement (Figure 5). By improving quality, costs decrease and productivity improves. As a result, there is a greater potential for an increased market share.

To address the first box in the chain reaction (improve quality), management must adopt the 14 principles of management (Figure 6) and understand the statistical approach to process improvement. To appreciate fully the meaning of improving quality in Dealing's chain reaction, an understanding of the concept of variation is required.

"Common Cause and Special Cause Variation"

When Deming describes quality, he talks about products that possess a predictable degree of "uniformity," suited to the end-users at a price that they can pay. McConnell refers to it as "a predictable degree of variation". Deming says that there's no such thing as two of a kind, since variation is inherent in everything we do. No two services offered are identical. So, to produce quality, you must produce outcomes that are predictably uniform as well as satisfactory from a customer's perception.

Deming has labeled sources of variation as common cause and special cause. He talks about them in terms of who is responsible for taking action. Common causes of variation exist because of the system or the way the system is managed. These causes are beyond the reach of the workers and only those who manage or control the system are responsible for them. Most process problems in an organization, the common causes of variation, are correctable only through managerial action. Examples of common cause variation are incoming materials not suited to the requirements, poor instructions, poor supervision, and poor design.

There are also special causes of variation. Special causes of variation are localized. They are not part of the overall system. They are exceptions or abnormalities. They deserve attention by those who are close to them. Usually the workers or their immediate supervisor can identify and remove special causes.

Tribus says, "It is management's responsibility to work on the system and it is the worker's responsibility to work in the system" (1988). Supervisors and workers must cooperate with each other to remove the special causes so that management can work on the system and begin the transformation (the adoption of the 14 points). This transformation is not easy. As Deming says, "Everyone doing his best is not the answer. It is necessary that people know what to do". He adds, "The responsibility for change rests on management The first step is to learn how to change".

The best way to identify and monitor special and common causes of variation is by using Walter Shewhart's control charts. (Shewhart's discoveries and contributions are far beyond the scope of this report Suggested readings on control charts appear in the reference list).

Figure 5. Deming's chain reaction for quality improvement (Deming, 1986).

"14 Points"

According to Deming, the "14 Points" or "obligations" (Figure 6) apply anywhere, in any organization, regardless of size or type of business. These points provide the basis for initiating and sustaining an organizational transformation that focuses on customer satisfaction through quality. These obligations are management's responsibility and they cannot be delegated. Deming says, "Adoption and action on the 14 points are a signal that the management intend to stay in business and aim to protect investors and jobs". To adopt the 14 points, management needs to put aside short-term thinking for the long-term good of the company so that they can be in business tomorrow.

The 14 points have undergone revision by Deming to help people understand his observations. However, the essence of each point has remained essentially the same from one version to the next.

"Deadly" and "Dreadful Diseases

There are many roadblocks to institutionalizing the transformation. Deming categorizes them as "deadly diseases" and "dreadful diseases" (Figure 7). "Deadly diseases" afflict most companies in the Western World.

The cure for deadly diseases is not easy. It requires a complete change of management style. The dreadful diseases are management practices that are harmful, but, in Deming's view, are easier to cure. To remedy the diseases, Deming "prescribes" his 14 points or obligations of top management.

Summary

Deming defines quality in terms of current and future needs of the customer. He places emphasis on statistical thinking and statistical methods. An understanding of profound knowledge (e.g., systems theory) is essential to his approach to quality.

He gives management the responsibility of adopting the 14 points and of leading by example, but does not provide a step-by-step approach on how to implement these roles and responsibilities.

He views the organization as a system and advocates using a scientific method to optimize the system.

Deming's 14 Points

1. Create constancy of purpose toward improvement of product and service.
   
2. Adopt the new philosophy.
   
3. Cease dependence on inspection to achieve quality.
   
4. End the practice of awarding business on the basis of price tag alone.
   
5. Improve constantly and forever the system of production and service.
   
6. Institute training on the job.
   
7. Institute leadership.
   
8. Drive out fear.
   
9. Break down barriers between departments.
   
10. Eliminate slogans, exhortations, and targets for the work force.
    
11. Eliminate numerical quotas for the work force and numerical goals for management.
    
12. Remove barriers that rob people of pride of workmanship. Eliminate the annual rating or merit system.
    
13. Institute a vigorous program of education and self-improvement
    
14. Put everybody in the company to work to accomplish the transformation.
    

Figure 6. Deming's 14 Points (Deming, 1986).

The Deadly Diseases

1. Lack of constancy of purpose.
2. Emphasis on short-term profits, short-term thinking.
3. Evaluation of performance, merit rating, or annual review.
4. Mobility of management; job hopping.
   
5. Management by use of visible figures only.
6. Excessive medical costs.
7. Excessive costs of liability.
   

The Dreadful Diseases or Obstacles

1. Search for examples of how to solve problems of quality.
   
2. Creative accounting.
3. Purchasing standards that assume a certain percentage of defects.
   
4. Management's delegation of its responsibilities to others.
   
5. The supposition that problems are the fault of the work force.
   
6. The attempt to safeguard quality by inspecting goods already produced.
7. False starts: modest, ad hoc efforts to bring about change.
   
8. Hope for instant pudding.
   
9. The supposition that automation will transform industry.
   
10. The supposition that it is only necessary to meet specifications.