Category Archives: Deconstructing Deming

Deconstructing Deming VII – Adopt and institute leadership

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7. Adopt and institute leadership.

W Edwards Deming Point 7 of Deming’s 14 Points. This point leaves me with some of the same uncertainty as Point 6 Institute training on the job. But everybody thinks they know what training is. Leadership is a much more elusive concept.

In a recent review of Archie Brown’s book The Myth of the Strong Leader: Political Leadership in the Modern Age (Times (London) 12 April 2014), Philip Collins observed as follows.

The problem with Brown’s book is his idea that there is a single entity called “leadership” that covers all these categories. It does not follow from the existence of leaders that there is such a thing as “leadership”. It may be no more possible to distil wisdom on leadership than it is on love. Every lover is different, I would imagine. There doesn’t seem to be much profit in the attempt to set out a theory of “lovership” as if there were common traits in every act of seduction.

Collins identifies a common discomfort. Yet there remain good and bad leaders, as there are good and bad lovers. All who aspire to improve must start by distinguishing the characteristics of the good and the bad.

Deming elaborates his own Point 7 further in Out of the Crisis and, predictably, several distinct positions emerge. I identify four but they don’t all help me understanding what leadership is.

1. Abolish focus on outcomes

Deming’s point is well taken that, for the statistically naïve, day to day management based on historical outcomes typically leads to over adjustment, what Deming called tampering. The consequences are increased operating costs that have been themselves induced by the over active management.

However, outcomes must be the overriding benchmark by which all management is measured. The problem with the over adjustment that flows from a lack of rigorous criticism of data is that it frustrates the very outcomes it aspired to serve. There has ultimately to be some measure of success and failure, an outcome. That is the inevitable focus of every leader.

2. Remove barriers to pride in workmanship

This is picked up at greater depth in Deming’s Point 12. I shall come back to it then.

3. Leaders must know the work they supervise

Alan Clark was a British politician, a very minor, and comically gaff prone, minister in the Thatcher government of the 1980s. He is now mostly remembered as a notorious self styled bon viveur and womaniser. His diaries are as scandalous as they are apocryphal. A good read for those who like that sort of thing.

In 1961, Clark published an historical work about the First World War, The Donkeys. The book adopted a common popular sentiment of mid-twentieth-century Britain, that the enlisted men of the war were lions led by donkeys. The donkeys were the officer class, their leaders. Clark helped to reinforce the idea that the private soldier was brave and capable, but betrayed by a self styled elite who failed to equip and direct them with commensurate valour. Historian Basil Liddell Hart endorsed Clark’s proofs.

To be fair there is legitimate controversy about the matter. But I think that now academic, and certainly popular, sentiment has swung the other way, no longer regarding the leaders as incompetent and indifferent, but rather as diligent and compassionate though overwhelmed. Historian Robin Neillands put it thus:

… the idea that they were indifferent to the sufferings of their men is constantly refuted by the facts, and only endures because some commentators wish to perpetuate the myth that these generals, representing the upper classes, did not give a damn what happened to the lower orders.

I find Deming content to perpetuate a similar trope about industrial managers in his writings. In Out of the Crisis:

There was a time, years ago, when a foreman selected his people, trained them, helped them, worked with them. He knew the job. … Supervision on the factory floor is, I fear, in many companies, an entry position for college boys and girls [sic] to learn about the company, six months here, six months there. … He does not understand the problem. and could get nothing done about it if he did.

I frankly don’t know where to start with that. It goes on. I constantly see Deming’s followers approving and sharing this sort of article. They all simply have the whiff of lamp oil about them. They fail to ring true and betray the same sort of lazy, chippy, defensive emotions as the donkeys attribution.

Other than in the simplest of endeavours, perhaps a window cleaning business, perhaps, the value of an enterprise flows from the confluence and integration of diverse materials, skills, technologies, knowledge and people. A manager or leader is the person who makes that confluence occur. But for the manager it would not have happened. Inevitably that means that the leader’s domain knowledge of any particular element is limited. It is the manager’s ability to absorb and assimilate information from a variety of sources that enables the enterprise. Leadership demands capacity to trust that other people know what they are doing, and to use the borrowing strength of diverse sources of information to signal when assumptions are betrayed. The hope that the leader can be a craft master of all he or she seeks to integrate is forlorn.

4. Leaders understand variation

I dealt with this under Point 6. It is a strong point. Without understanding of statistics, rigorous criticism of historical data is impossible. Signal and noise cannot be efficiently separated. That leads to over adjustment, tampering, increased costs and frustrated outcome. Only managers who are not held to outcomes will ultimately be indulged in an innumerate pursuit of over adjustment. But it takes a long time for things to shake out.

The role of a manager of people

Deming wrote under this head in his last book The New Economics. There are another 14 points with overlaps and extensions of his original 14. A lot of it expands Principal Point 12. I will need to come back to them at another time. However, Deming certainly saw a leader as somebody with a plan and an ability to explain the plan to the workforce.

Attempts to define leadership abound yet no single one is, to me, compelling. However, part of it must be engagement with strategy. Strategy is the way of dealing with the painful experience that plans do not survive for very long. I liked the way Lawrence Freedman put it in his recent Strategy: A History.

The strategist has to accept that even when there is an obvious climax (a battle or an election), the story line will still be open-ended … leaving a number of issues to be resolved later. Even when the desired endpoint is reached, it is not really the end, The enemy may have surrendered, the election won, the target company taken over, the revolutionary opportunity seized, but that just means there is now an occupied country to run, a new government to be formed, a whole new revolutionary order to be established, or distinctive sets of corporate activities to be merged. … The transition is immediate and may well be conditional on how the original endpoint was reached. This takes us back to the observation that much strategy is about getting to the next stage rather than some ultimate destination. Rather than think of strategy as a three-act play, it is better to think of it as a soap opera with a continuing cast of characters and plot lines that unfold over a series of episodes. Each of these episodes will be self-contained and set up the subsequent episode. Unlike a play with a definite ending, there is no need for a soap opera to ever reach a conclusion, even though the central characters and their circumstances change.

That leads us to my first response to Deming’s Point 7.

  • Leaders take responsibility for aligning outcomes to targets.
  • Targets are in constant motion.
  • Continual rigorous statistical criticism of historical data is the way to align outcomes and targets, by avoiding over adjustment and by navigating the sort of strategic soap opera Freedman describes.
  • Leaders need to trust that their team know what they are doing.
  • Leaders use the borrowing strength of diverse data to monitor performance.

There is much else to leadership. I have not addressed people or engagement. That takes me back to Deming’s Principal Point 12 (yet to come). I want to look closely at those topics at a later time within the framework of Max Weber’s ethics of responsibility.

I also want to come back to Freedman’s narrative approach to strategy and the work of G L S Shackle on statisics, economics and imagination. It will have to wait.

Deconstructing Deming VI – Institute training on the job

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6. Institute training on the job.

W Edwards Deming Point 6 of Deming’s 14 Points. I think it was this point that made me realise that everybody projects their own anxieties onto Deming’s writings and finds what they want to find there.

Deming elaborates this point further in Out of the Crisis and several distinct positions emerge. I identify nine. In many ways, the slogan Institute training on the job is no very good description of what Deming was seeking to communicate. Not everything sits well under this heading.

“Training”, along with its sagacious uncle, “education” is one of those things that every one can be in favour of. The systems by which the accumulated knowledge of humanity are communicated, criticised and developed are the foundations of civilisation. But like all accepted truths some scrutiny repays the time and effort. Here are the nine topics I identified in Out of the Crisis.

1. People don’t spend enough on training because the benefits do not show on the balance sheet

This was one of Deming’s targets behind his sixth point. It reiterates a common theme of his. It goes back to the criticisms of Hayes and Abernathy that managers were incapable of understanding their own business. Without such understanding, a manager would lack a narrative to envision the future material rewards of current spending. Cash movements showed on the profit and loss account. The spending became merely an overhead to be attacked so as to enhance the current picture of performance projected by the accounts, the visible figures.

I have considered Hayes and Abernathy’s analysis elsewhere. Whatever the conditions of the early 1980s in the US, I think today’s global marketplace is a very different arena. Organisations vie to invest in their people, as this recent Forbes article shows (though the author can’t spell “bellwether”). True, the article confirms that development spending falls in a recession but cash flow and the availability of working capital are real constraints on a business and have to be managed. Once optimism returns, training spend takes off.

But as US satirist P J O’Rourke observed:

Getting people to give vast amounts of money when there’s no firm idea what that money will do is like throwing maidens down a well. It’s an appeal to magic. And the results are likely to be as stupid and disappointing as the results of magic usually are.

The tragedy of so many corporations is that training budgets are set and value measured on how much money is spent, in the idealistic but sentimental belief that training is an inherent good and that rewards will inevitably flow to those who have faith.

The reality is that it is only within a system of rigorous goal deployment that local training objectives can be identified so as to serve corporate strategy. Only then can training be designed to serve those objectives and only then can training’s value be measured.

2. Root Cause Analysis

The other arena in which the word “training” is guaranteed to turn up is during Root Cause Analysis. It is a moral certainty that somebody will volunteer it somewhere on the Ishikawa diagram. “To stop this happening again, let’s repeat the training.”

Yet, failure of training can never be the root cause of a problem or defect. Such an assertion yields too readily to the question Why did lack of training cause the failure?. The Why? question exposes that there was something the training was supposed to do. It could be that the root cause is readily identified and training put in place as a solution. But, the question could expose that, whatever the perceived past failures in training, the root cause, that the training would have purportedly addressed, remains obscure. Forget worrying about training until the root cause is identified within the system.

In any event, training will seldom be the best way of eliminating a problem. Redesign of the system will always be the first thing to consider.

3. Train managers and new employees

Uncontroversial but I think Deming overstated businesses’ failure to appreciate this.

4. Managers need to understand the company

Uncontroversial but I think Deming overstated businesses’ failure to appreciate this.

5. Managers need to understand variation

So much of Deming’s approach was about rigorous criticism of business data and the diligent separation of signal and noise. Those are topics that certainly have greater salience than a quarter of a century ago. Nate Silver has done much to awaken appetites for statistical thinking and the Six Sigma discipline has alerted the many to the wealth of available tools and techniques. Despite that, I am unpersuaded that genuine statistical literacy and numeracy (both are important) are any more common now than in the days of the first IBM PC.

Deming’s banner headline here is Institute training on the job. I think the point sits uncomfortably. I would have imagined that it is business schools and not employers who should apply their energies to developing and promoting quantitative skills in executives. One of the distractions that has beset industrial statistics is its propensity to create a variety of vernacular approaches with conflicting vocabularies and competing champion priorities: Taguchi methods, Six Sigma, SPC, Shainin, … . The situation is aggravated by the differential enthusiasms between corporations for the individual brands. Even within a single strand such as Six Sigma there is a frustrating variety of nomenclature, content and emphasis.

It’s not training on the job that’s needed. It is the academic industry here that is failing to provide what business needs.

6. Recognise that people learn in different ways

Of this I remain unpersuaded. I do not believe that people learn to drive motor cars in different ways. It can’t be done from theory alone. It can’t be done by writing a song about it. it comes from a subtle interaction of experience and direction. Some people learn without the direction, perhaps because they watch Nelly (see below).

Many have found a resonance between Deming’s point and the Theory of Multiple Intelligences. I fear this has distracted from some of the important themes in business education. As far as I can see, the theory has no real empirical support. Professor John White of the University of London, Institute of Education has firmly debunked the idea (Howard Gardner : the myth of Multiple Intelligences).

7. Don’t rely on watch Nelly

After my academic and vocational training as a lawyer, I followed a senior barrister around for six months, then slightly less closely for another six months. I also went to court and sat behind barristers in their first few years of practice so that I could smell what I would be doing a few months later.

It was important. So was the academic study and so was the classroom vocational training. It comes back to understanding how the training is supposed to achieve its objectives and designing learning from that standpoint.

8. Be inflexible as to work standards

This is tremendously dangerous advice for anybody lacking statistical literacy and numeracy (both).

I will come back to this but it embraces some of my earlier postings on process discipline.

9. Teach customer needs

This is the gem. Employee engagement is a popular concern. Employees who have no sight of how their job impacts the customer, who pays their wages, will soon see the process discipline that is essential to operational excellence as arbitrary and vexatious. Their mindfulness and diligence cannot but be affected by the expectation that they can operate in a cognitive vacuum.

Walter Shewhart famously observed that Data have no meaning apart from their context. By extension, continual re-orientation to the Voice of the Customer gives meaning to structure, process and procedure on the shop floor; it resolves ambiguity as to method in favour of the end-user; it fosters extrinsic, rather than intrinsic, motivation; and it sets the external standard by which conduct and alignment to the business will be judged and governed.

Deconstructing Deming V – Improve constantly and forever

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5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.

W Edwards Deming Point 5 of Deming’s 14 Points. Surely about this there can be no controversy.

Improvement means reducing operating costs, enhancing customer value, and developing flexibility and agility. Improvement means constantly diminishing the misalignment between the Voice of the Process and the Voice of the Customer.

The UK awaits fresh productivity statistics next month but the figures up to the end of 2013 make sobering reading. UK productivity has been in miserable decline since 2008. In response to tightening of demand, failures of liquidity, absence of safe investment alternatives, rises in taxation and straightened cash flows, the aggregate response of industry has been a decline in human efficiency.

The reasons this has happened are no doubt complex. The paradox remains that it is improvement in productivity that grows sustainable rewards, captures markets and releases working capital for new ventures. At first sight it appears the answer to all the ills of a recession.

How will you know?

In their seminal model for improving productivity, Thomas Nolan and Lloyd Provost posed the question:

How will you know when a change is an improvement?

It is such a simple questions but it is too seldom asked and I suspect that itself is a major barrier to improvement.

We are beset by human induced change, by government and by business managers. The essential discipline is critically to question whether such change results in an improvement. It is an unpopular question. Nobody who champions a particular change wants to be proved wrong, or confronted with a marginal improvement that fails to live up to an extravagant promise.

Business measurement is mandated in the modern corporation. Businesses, governments, organisations abound with KPIs, metrics, “Big Ys”, results measures … and often a distracting argument over what to call them. There is no lack of numbers for answering the question. We are constantly assured that we now have the Big Data whose absence frustrated past strategy.

The habitual analytic tool in old-style businesses was what Don Wheeler mischievously named the executive time series, two numbers, one larger (or smaller) than the other, selected to show movement in the desired direction. That is, as Scottish folklorist Andrew Lang put it:

… using statistics in the same way that a drunk uses lamp-posts — for support rather than illumination.

It is a moral certainty that no two measurements will yield the same number. One will be larger than the other. It will be easy to select two to support any pet project or theory.

Building a persuasive case that improvement has happened firstly requires a rigorously constructed baseline. Without an objective description of the historical experience base, claims as to improvement are simply speculative.

And beyond that, what the executive time series cannot do is distinguish signal from noise. It cannot help because the answer to the question When will you know …? is When there is a signal in the data. That can only be answered with the diligent and rigorous use of process behaviour charts.

At the top of this page is a “RearView” tab. Without the trenchant and determined use of process behaviour charts there is not even a white line in the rear view mirror. The only signal will come from the “bang” when we hit the kerb.

What to improve

Deming’s further message was that it was every process that was to be improved, not simply those whose customer was the end consumer. Many processes have internal customers with their own voice. Processes of management of human resources, maintenance and accounting can all have a critical impact on organisation performance. They must keep on getting better too.

Being held to account is never comfortable but neither is the realisation that we have surrendered control of assets without the means of knowing when such assets are incrementally put to increasingly efficient, effective and agile use.

We need louder demands of “Show me!”

The dark side of discipline

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W Edwards Deming was very impressed with Japanese railways. In Out of the Crisis (1986) he wrote this.

The economy of a single plan that will work is obvious. As an example, may I cite a proposed itinerary in Japan:

          1725 h Leave Taku City.
          1923 h Arrive Hakata.
Change trains.
          1924 h Leave Hakata [for Osaka, at 210 km/hr]

Only one minute to change trains? You don’t need a whole minute. You will have 30 seconds left over. No alternate plan was necessary.

My friend Bob King … while in Japan in November 1983 received these instructions to reach by train a company that he was to visit.

          0903 h Board the train. Pay no attention to trains at 0858, 0901.
          0957 h Off.

No further instruction was needed.

Deming seemed to assume that these outcomes were delivered by a capable and, moreover, stable system. That may well have been the case in 1983. However, by 2005 matters had drifted.

Aftermath of the Amagasaki rail crashThe other night I watched, recorded from the BBC, the documentary Brakeless: Why Trains Crash about the Amagasaki rail crash on 25 April 2005. I fear that it is no longer available in BBC iPlayer. However, most of the documentaries in this BBC Storyville strand are independently produced and usually have some limited theatrical release or are available elsewhere. I now see that the documentary is available here on Dailymotion.

The documentary painted a system of “discipline” on the railway where drivers were held directly responsible for outcomes, overridingly punctuality. This was not a documentary aimed at engineers but the first thing missing for me was any risk assessment of the way the railway was run. Perhaps it was there but it is difficult to see what thought process would lead to a failure to mitigate the risks of production pressures.

However, beyond that, for me the documentary raised some important issues of process discipline. We must be very careful when we make anyone working within a process responsible for its outputs. That sounds a strange thing to say but Paul Jennings at Rolls-Royce always used to remind me You can’t work on outcomes.

The difficulty that the Amagasaki train drivers had was that the railway was inherently subject to sources of variation over which the drivers had no control. In the face of those sources of variation, they were pressured to maintain the discipline of a punctual timetable. They way they did that was to transgress other dimensions of process discipline, in the Amagasaki case, speed limits.

Anybody at work must diligently follow the process given to them. But if that process does not deliver the intended outcome then that is the responsibility of the manager who owns the process, not the worker. When a worker, with the best of intentions, seeks independently to modify the process, they are in a poor position, constrained as they are by their own bounded rationality. They will inevitably by trapped by System 1 thinking.

Of course, it is great when workers can get involved with the manager’s efforts to align the voice of the process with the voice of the customer. However, the experimentation stops when they start operating the process live.

Fundamentally, it is a moral certainty that purblind pursuit of a target will lead to over-adjustment by the worker, what Deming called “tampering”. That in turn leads to increased costs, aggravated risk and vitiated consumer satisfaction.

Deconstructing Deming IV – Supply chain

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4. End the practice of awarding business on the basis of a price tag. Instead, minimize total cost. Move towards a single supplier for any one item, on a long-term relationship of loyalty and trust.

W Edwards Deming Point 4 of Deming’s 14 Points. For me, this is where Deming’s thinking starts to mark itself out from mainstream thinking. Moreover, the departure is tough to follow.

The key phrase is “long-term relationship of loyalty and trust”. Deming believed that benefit was maximised when organisations co-operated to create customer value and eliminate waste, internally and at the interface.

He bemoaned the “adversarial” nature of western purchasing, criticising it as wasteful and operating counter to continual improvement. Continual improvement is synonymous with improving the alignment between the voice of the process and the voice of the customer.

Deming further raised the more technical statistical issue that inter-supplier variability would always be greater than intra-supplier variability. In that itself, he argued, lay a dominant source of variation, and inevitably cost. Choosing a single supplier eliminated such variation at a stroke.

Trust

I have blogged a lot about trust here. The fact is that the business world turns on trust. This is not an obscure or even novel insight. I have blogged elsewhere about Matt Ridley’s analysis of trust in the evolution of co-operation. In his book The Origins of Virtue he quotes Nobel Laureate economist Kenneth Arrow.

Virtually every commercial transaction has within itself an element of trust.

— and entrepreneur Nigel Vinson:

Trust everyone unless you have a reason not to.

But Deming wanted to go further and end the perpetual challenge as to price tag and the perilously provisional wedlock of business entities. Value was created through a chain, or even network, of activities. Organisational boundaries, and the consequential border skirmishes, were effectively internal disputes, irrelevant to the customer, other than in being antagonistic to his interests.

For Deming, the animus of continual improvement, motivated by the workforce’s “joy in work”, would replace the fear of being under priced, or the greed for tapping “blue ocean” profits, as the prime mover of enterprise. Businesses so driven would naturally co-operate rather than compete and liberate a cascade of escalating economic benefits inherent in common purpose.

Ease

However, I think that the difficulty of such relationships is that human beings soon become conservative and complacent. They will not face the big challenges. Without the fear and the greed, it would be unthinkable to marshal the sort of resources that are necessary to develop a new computer or a novel aero-engine. It would be unthinkable to gamble society’s accumulated wealth on developing a new drug, a technology predicated on the microscopic bases of life or an income stream dependent upon populating outer space.

The principle is akin to Daniel Kahneman’s concept of cognitive ease. Each of us is disinclined to think too hard. Only greed or fear will be the spur, to hard thinking or to risk taking. Businesses represent real risk for their investors. Risks that investors are only willing to take over a finite horizon.

Economics

In commercial law, we often talk about business people dealing at arm’s length. We use that term to emphasise that the relationship is one of calculation as to profit and loss, without an emotional or affective dimension. Ventures between enterprises are not marriages “in sickness and in health”. The extent to which any organisation can be prepared to accommodate the misfortune of another is strictly limited to the self interest of a short time scale. To go further is to mistake inter-organisational dynamics for inter-personal affection.

Organisations only form, express and develop their relationships through the individuals who work for them. Inevitable misalignments arise and create agency costs. People shift, though Deming wished they didn’t. It is very difficult to recognise the sort of co-habitation that Deming envisaged in law. And if not recognised in law, how can the trust operate long term over shifting agents? The English case of Baird Textile Holdings v M&S illustrates the difficulties of trying to found business expectations on past relationships.

What Deming seems to ignore is the wealth of economic scholarship that is relevant to supply chain decisions. He identifies limitations of the competitive environment and exhorts us to embrace the benefits of closer and longer lasting ties. However, nowhere does he treat the advantages of remorseless competition or the disadvantages of a too narrow supply base.

In Deming’s analysis there is no concept of an efficient breach, as the costs (to society) of the destruction of trust are deemed to be, at once, unknown and unknowable, but surely to outweigh the calculations of the profit and loss account.

Competition law

There seems little doubt that much of what Deming advocated as to co-operation between organisations, and in particular in sharing information, would run foul of modern competition law. Deming saw competition law as a barrier to his new philosophy. In Out of the Crisis he wrote (p26):

Obstacles to the competitive position of American industry created by government regulations and anti-trust activities must be revised to support the well-being of the American people, and not to depress it.

The history of economic development offers ample testimony as to what happens when business people combine against the public, free from supervision or sanction. Much as Deming believed his exhortations would benefit the public, those sort of economic-legal policies can only be assessed through data generation on a global scale, trenchant analysis and imaginative policy creation. Then more data generation …. A point that one would have hoped that Deming would appreciate.

Legacy

Nominating a single supplier, embraced in a long term relationship of tolerance, mutual understanding and (lawful) benefit sharing, without a lucid vision of how that relationship would be managed and a cogent analysis of the risks, mitigated with robust safeguards, would be folly indeed.

However, Deming does remind us of some fundamentals of doing business successfully.

Build trust.

Work together.

Continually seek to reduce variation.