Out of the Crisis

1. Quality Improvement: A Paradigm Shift in Management

Quality can be defined only in terms of the agent. Who is the judge of quality?

A new economic age. The traditional Western management style, focused on short-term profits and quick fixes, is no longer sufficient in today's competitive global market. Deming proposes a radical transformation in management thinking, emphasizing long-term sustainability and continuous improvement.

The quality chain reaction. Improving quality leads to decreased costs, increased productivity, and greater market share. This chain reaction results in job creation and better return on investment. By focusing on quality, companies can break free from the vicious cycle of declining competitiveness and job losses.

Customer focus. Quality must be defined from the customer's perspective. This requires:

• Understanding customer needs and expectations
• Designing products and services to meet these needs
• Continuously improving based on customer feedback
• Recognizing that the customer is the most important part of the production line

2. The 14 Points for Transformation of Western Management

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.

Fundamental change. Deming's 14 points provide a comprehensive framework for transforming management practices. These points are not a checklist but a interconnected system of principles that must be adopted holistically.

Key principles include:

• Creating constancy of purpose for improvement
• Adopting the new philosophy of quality
• Ceasing dependence on mass inspection
• Ending the practice of awarding business solely on price
• Constantly improving the system of production and service
• Instituting leadership and training
• Driving out fear in the workplace
• Breaking down barriers between departments
• Eliminating slogans, exhortations, and numerical quotas
• Removing barriers to pride of workmanship
• Instituting a vigorous program of education and self-improvement

3. Common Causes vs. Special Causes: Understanding Variation

Costly confusion. Confusion between common causes and special causes leads to frustration of everyone, and leads to greater variability and to higher costs, exactly contrary to what is needed.

Types of variation. Deming distinguishes between two types of variation in processes:

1. Common causes: Inherent in the system, affecting all workers and products
2. Special causes: Specific, identifiable factors that are not part of the regular system

Management responsibility. The vast majority (94%) of problems in an organization stem from common causes, which are the responsibility of management to address. Only 6% are due to special causes, which can often be addressed by workers themselves.

Avoiding tampering. Misunderstanding the nature of variation leads to "tampering" - making adjustments to a stable process based on normal fluctuations. This often results in increased variability and decreased quality. Proper statistical analysis is crucial for distinguishing between common and special causes, allowing for appropriate action.

4. The Deadly Diseases and Obstacles to Transformation

Transformation of American style of management is not a job of reconstruction, nor is it revision. It requires a whole new structure, from foundation upward.

Major impediments. Deming identifies several "deadly diseases" that plague Western management:

• Lack of constancy of purpose
• Emphasis on short-term profits
• Evaluation of performance, merit rating, or annual review
• Mobility of management
• Running a company on visible figures alone

Additional obstacles include:

• The search for examples (believing success can be copied without understanding)
• The supposition that solving problems, automation, and new machinery will transform industry
• Obsolete schools and incorrect teaching of statistical methods
• Reliance on quality control departments to "fix" all quality issues
• The belief that "our problems are different"

Overcoming barriers. Recognizing and addressing these diseases and obstacles is crucial for successful transformation. It requires a fundamental shift in thinking and a long-term commitment to change.

5. Statistical Process Control: The Key to Quality and Productivity

A statistical chart detects the existence of a cause of variation that lies outside the system. It does not find the cause.

Understanding process capability. Statistical Process Control (SPC) provides a method for understanding and improving processes. By using control charts, managers can:

• Distinguish between common and special causes of variation
• Identify when a process is in statistical control (stable and predictable)
• Determine the capability of a process to meet specifications

Benefits of stability. A process in statistical control:

• Has a definable identity and predictable performance
• Allows for accurate cost prediction
• Enables focused improvement efforts
• Simplifies relationships with suppliers
• Facilitates the implementation of just-in-time production systems

Continuous improvement. Once a process is in control, efforts can be directed towards improving its capability through systematic experimentation and analysis.

6. The Importance of Operational Definitions in Quality Management

An operational definition puts communicable meaning into a concept.

Clear communication. Operational definitions are essential for effective quality management. They provide:

• A specific test or measurement procedure
• Criteria for judgment
• A clear decision-making process

Avoiding misunderstandings. Without operational definitions, terms like "quality," "reliable," or "safe" become subjective and open to interpretation. This leads to miscommunication between:

• Suppliers and customers
• Different departments within an organization
• Management and workers

Examples of operational definitions:

• Defining "on-time delivery" as "arrival within 15 minutes of scheduled time"
• Specifying "acceptable quality" as "no more than 3 defects per 1000 units"
• Measuring "customer satisfaction" through a specific survey process with defined scoring criteria

7. Transforming Service Organizations Through Quality Principles

The principles explained here, along with the chain reaction displayed on page 3, the flow diagram in Fig. 1, and techniques taught to hundreds of engineers, commenced the transformation of Japanese industry.

Applicability to services. Deming's principles are not limited to manufacturing but are equally relevant to service industries. This includes:

• Healthcare
• Education
• Government services
• Retail and hospitality
• Financial services

Key considerations for services:

• Defining and measuring quality in intangible outputs
• Managing customer interactions and perceptions
• Adapting statistical methods to service processes
• Focusing on system-wide improvement rather than individual performance

Examples of application:

• Reducing patient waiting times in hospitals
• Improving accuracy and speed in financial transactions
• Enhancing customer satisfaction in hospitality services
• Streamlining government processes to reduce bureaucracy

8. The Fallacy of Management by Objectives and Numerical Goals

Eliminate work standards (quotas) on the factory floor. Substitute leadership.

Harmful effects. Management by objectives (MBO) and numerical quotas often lead to:

• Short-term thinking and suboptimization
• Manipulation of figures to meet targets
• Decreased quality and employee morale
• Inhibition of continuous improvement

Focus on the process. Instead of setting arbitrary numerical goals, management should:

• Understand and improve the underlying processes
• Provide leadership and resources for improvement
• Foster an environment of learning and innovation
• Recognize that most variation comes from the system, not individual workers

Alternative approaches:

• Use statistical methods to understand process capability
• Set goals for improvement of the system, not numerical targets
• Encourage experimentation and learning
• Recognize and reward efforts to improve the process, not just results

9. Continuous Improvement: The Never-Ending Cycle of Quality

Improvement of quality transfers waste of man-hours and of machine-time into the manufacture of good product and better service.

The Shewhart Cycle. Deming popularized the Plan-Do-Study-Act (PDSA) cycle, also known as the Deming Cycle, as a framework for continuous improvement:

1. Plan: Identify opportunities and plan changes
2. Do: Implement changes on a small scale
3. Study: Analyze the results and learn from the change
4. Act: Adopt, adapt, or abandon the change based on results

Never-ending improvement. Quality improvement is not a one-time event but a continuous process. This requires:

• A long-term perspective and commitment
• Willingness to challenge existing methods and assumptions
• Systematic approach to problem-solving and innovation
• Involvement of all employees in the improvement process

Examples of continuous improvement:

• Regular review and updating of processes
• Ongoing training and education programs
• Systematic gathering and analysis of customer feedback
• Benchmarking against industry best practices

10. Leadership and Training: Cornerstones of Quality Management

The aim of leadership should be to improve the performance of man and machine, to improve quality, to increase output, and simultaneously to bring pride of workmanship to people.

Transformational leadership. Quality improvement requires a new style of leadership that:

• Focuses on long-term vision and system improvement
• Empowers employees to take pride in their work
• Removes barriers to effective performance
• Fosters a culture of continuous learning and improvement

Importance of training. Effective quality management requires ongoing education and training at all levels of the organization:

• Management must learn statistical thinking and quality principles
• Workers need training in problem-solving and process improvement techniques
• Cross-functional training helps break down departmental barriers
• Continuous learning is essential to adapt to changing market conditions

Key leadership actions:

• Clearly communicate the organization's vision and quality philosophy
• Provide resources and support for improvement efforts
• Lead by example in embracing new methods and thinking
• Recognize and celebrate improvements and learning, not just results
• Create an environment where it's safe to experiment and learn from mistakes

Last updated: October 19, 2024