Copyright 1998 Indian Express Newspapers (Bombay)

The Deming System of Profound Knowledge

Dr. W. Edwards Deming Institute, Washington, DC – USA

http://www.deming.org

The following is an excerpt from Chapter 4 of The New Economics, second edition by W. Edwards Deming (MIT, 1993):

The prevailing style of management must undergo transformation. A system can not understand itself. The transformation requires a view from outside. The aim of this chapter is to provide an outside view-a lens-that I call a system of profound knowledge. It provides a map of theory by which to understand the organizations that we work in.

The first step is transformation of the individual. This transformation is discontinuous. It comes from understanding of the system of profound knowledge. The individual, transformed, will perceive new meaning to his life, to events, to numbers, to interactions between people. Once the individual understands the system of profound knowledge, he will apply its principles in every kind of relationship with other people. He will have a basis for judgment of his own decisions and for transformation of the organizations that he belongs to. The individual, once transformed, will:

 Set an example  Be a good listener, but will not compromise  Continually teach other people  Help people to pull away from their current practice and beliefs and move into the new philosophy without a feeling of guilt about the past

The layout of profound knowledge appears here in four parts, all related to each other:

 Appreciation for a system  Knowledge about variation  Theory of knowledge  Psychology

One need not be eminent in any part nor in all four parts in order to understand it and to apply it. The 14 points for management (from Dr. Deming’s book entitled: Out of the Crisis, Ch. 2) in industry, education, and government follow naturally as application of this outside knowledge, for transformation from the present style of Western management to one of optimization.

The various segments of the system of profound knowledge proposed here can not be separated. They interact with each other. Thus, knowledge of psychology is incomplete without knowledge of variation.

A manager of people needs to understand that all people are different. This is not ranking people. He needs to understand that the performance of anyone is governed largely by the system that he works in, the responsibility of management. A psychologist that possesses even a crude understanding of variation as will be learned in the experiment with the Red Beads (Ch. 7) could no longer participate in refinement of a plan for ranking people. Further illustrations of entwinement of psychology and use of the theory of variation (statistical theory) are boundless. For example, the number of defective items that an inspector finds depends on the size of the work load presented to him (documented by Harold F. Dodge in the Bell Telephone Laboratories around 1926). An inspector, careful not to penalize anybody unjustly, may pass an item that is just outside the borderline (Out of the Crisis, p. 266). The inspector in the illustration on page 265 of the same book, to save the jobs of 300 people, held the proportion of defective items below 10 per cent. She was in fear for their jobs.

A teacher, not wishing to penalize anyone unjustly, will pass a pupil that is barely below the requirement for a passing grade.

Fear invites wrong figures. Bearers of bad news fare badly. To keep his job, anyone may present to his boss only good news.

A committee appointed by the President of a company will report what the President wishes to hear. Would they dare report otherwise?

An individual may inadvertently seek to cast a halo about himself. He may report to an interviewer in a study of readership that he reads the New York Times, when actually this morning he bought and read a tabloid.

Statistical calculations and predictions based on warped figures may lead to confusion, frustration, and wrong decisions.

Accounting-based measures of performance drive employees to achieve targets of sales, revenue, and costs, by manipulation of processes, and by flattery or delusive promises to cajole a customer into purchase of what he does not need (adapted from the book by H. Thomas Johnson, Relevance Regained, The Free Press, 1992).

A leader of transformation, and managers involved, need to learn the psychology of individuals, the psychology of a group, the psychology of society, and the psychology of change. Some understanding of variation, including appreciation of a stable system, and some understanding of special causes and common causes of variation, are essential for management of a system, including management of people (Chs. 6, 7, 8, 9, 10).

Condensation of the 14 Points for Management

The following is excerpted from Chapter 2 of Out of the Crisis by W. Edwards Deming:

The 14 points for management (Out of the Crisis, Ch.2) in industry, education and government follow naturally as application of this outside knowledge, for transformation from the present Western style of management to one of optimization.

Origin of the 14 points. The 14 points are the basis for transformation of American industry. It will not suffice merely to solve problems, big or little. 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. Such a system formed the basis for lessons for top management in Japan in 1950 and in subsequent years (see pp. 1-6 and the Appendix).

The 14 points apply anywhere, to small organizations as well as to large ones, to the service industry as well as to manufacturing. They apply to a division within a company. The 14 points.

1. Create constancy of purpose toward improvement of product and service, with the aim to become competitive and to stay in business, and to provide jobs. 2. Adopt the new philosophy. We are in a new economic age. Western management must awaken to the challenge, must learn their responsibilities, and take on leadership for change. 3. Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place. 4. End the practice of awarding business on the basis of price tag. Instead, minimize total cost. Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust. 5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs. 6. Institute training on the job. 7. Institute leadership (see Point 12 and Ch. 8). The aim of supervision should be to help people and machines and gadgets to do a better job. Supervision of management is in need of overhaul, as well as supervision of production workers. 8. Drive out fear, so that everyone may work effectively for the company (see Ch. 3). 9. Break down barriers between departments. People in research, design, sales, and production must work as a team, to foresee problems of production and in use that may be encountered with the product or service. 10. Eliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as 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.

 Eliminate work standards (quotas) on the factory floor. Substitute leadership.  Eliminate management by objective. Eliminate management by numbers, numerical goals. Substitute leadership.  11. Remove barriers that rob the hourly worker of his right to pride of workmanship. The responsibility of supervisors must be changed from sheer numbers to quality. 12. Remove barriers that rob people in management and in engineering of their right to pride of workmanship. This means, inter alia, abolishment of the annual or merit rating and of management by objective (see Ch. 3). 13. Institute a vigorous program of education and self-improvement. 14. Put everybody in the company to work to accomplish the transformation. The transformation is everybody's job. The Dr. Deming Style Red Bead Experiment

Developed and manufactured by: Michael Arthur Johnson, Cupertino, California, USA and Riga Latvia – http://www.redbead.com I. Introduction

The following information is adapted from materials entitled: The New Economics by W. Edwards Deming; MIT, 1993

Dr. Deming often employed simple sampling experiments to demonstrate the workings of the “common cause system” and the senselessness of blaming workers for causes in the system that are out of their control.

The most famous of these is the “Red Bead Experiment” that Deming performed in all of his short courses and seminars, with the help of several members of the class who were chosen as the “willing workers”, inspectors, and the recorder of the data from inspection.

The Red Bead Experiment is also particularly good in reinforcing the materials used in Design and Control of Experiment college classed as outlined in typical text books as the following entitled: Statistical Quality Design and Control – Contemporary Concepts and Methods, authored by: DeVor, Chang, Sutherland, Macmillan, ISBN#0-02-329180-X .

II. Example of the RED BEAD Experiment being played

Thursday, November 19, 1998 Of red beads, white beads & professional management

Written by: Manjari Raman -- http://www.redbead.com/expressindia19111998.html Who would think that 850 white beads and 85 red beads could actually transport an auditorium full of managers back to B-school? But that is exactly what George P Koshy, regional director-Asia, Omnex Inc.--down from Ann Arbour, Michigan--did. Of course, with a little help from Dr Deming's Red Bead Experiment, designed specifically to jog managers out of their complacency and to remind them of their role and responsibility towards ensuring quality in the finished product.

THE GAME: Koshy reserves for himself the star role: The Maverick Management (think Dilbert's boss with satanic hair). He then asks for volunteers who don't mind being laughed at--it's surprising just how many managers spring up with alacrity--and who are then cast into supporting roles: five operators on a shopfloor; two quality inspectors, positioned at different corners of the stage; a chief quality inspector, who supervises the two inspectors; and finally, a defects record-keeper. The five ``workers'' are then trained in their job: they have before them a plastic bowl consisting of 850 small white beads and 85 red beads. Each worker is given a paddle which has 50 holes perforated in it. For ``production'' each operator has to run the paddle through the beads and scoop up 50 beads. White beads represent a product that can be sold--all red beads are a defect. Even though zero-defect is the goal, the management generously specifies that the maximum number of defects--or red beads--allowed per worker is one. Each worker must now scoop the paddle through the balls, and then carry the paddle to Inspector A and B, to record the defects. Both inspectors note down the defects independently and silently. The supervisor then checks if both have written down the same number of defects, and announces the defects per worker aloud. Each time a worker's productivity is announced, management has something threatening or cajoling to say. The game records this process over five ``days''. There is much mirth--initially--as the workers struggle to get only white balls on the paddle. The results are quite dismal as in five attempts each worker gets fluctuating success in keeping defects down. On day one, for example, the five operators score the following defects respectively: 9, 6, 5, 5, 7. Eventually, the number of total red beads per day, for the five days are: 32, 39, 39, 38, 38. Slowly, as the game progresses, the mood turns serious as managers realise the underlying lessons. Koshy strings together the learnings of the red beads: The knowledge of psychology: Operators admitted to feeling bad when they drew red balls instead of white balls on the paddle. Does management realise people feed bad when there are defects, even if it is beyond their control? Instead of blaming workers, it's management which needs to change its mindset. Interaction of forces: Management can optimise processes, only if it understands the interdependence of the components of the process such as equipment (the kind of paddle determines the number of defects), the raw material (instead of only white beads, there are impurities of red beads), the method (how operators scoop the beads adds to defects). Capable versus incapable processes: In the experiment the process is stable but it is incapable of delivering defect-free results. That's because there are defects in raw material: if 10 per cent of the total beads are red, any random or mechanical sampling will result in close to a 10 per cent defect rate. Managements must recognise incapable processes. In-control versus out-of-control processes: A control-limit analysis of the proportion of defective beads shows that the process is giving results within control limits--but it is not capable of satisfying customer requirements. Once again, it's the management's responsibility to change the process. Tampering: Rather than attack root causes, managements and operators tamper with processes. Management tampers when it shirks its responsibility of changing the process and instead blames operators. Operators tamper with processes by making adjustments to specified norms of production--in the experiment, an operator tried to remove a red bead by hand. Common causes and special cause variation: Variables which contribute to variation, but are not easy to identify--like red beads in the raw material--are common causes, which the management needs to work on. Variables which contribute to variation but are easier to identify are special causes--the effect of a powercut, for example--and should be left to operators to handle. Operational definitions: Since only red beads were specified as a defect, at one stage, there was confusion between the number of defects recorded by the two inspectors in the case of `no beads'. Management must realize that the lack of proper operational definitions causes confusion. Theory and actual: In theory you can get zero defects--after all, out of 850 white beads, it should be possible to scoop out 50 white beads. In actual fact you cannot. Managements should realize the difference--it's the reason why sometimes, a design will not work on the shop floor. Copyright © 1998 Indian Express Newspapers (Bombay) Lt

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