Why W. Edwards Deming's ideas are the future of American business

Deming and his revolutionary management model helped the Japanese manufacture the highest-quality vehicles in the world. How did he do it?

Throughout most of the Industrial Age, American businesses embraced hierarchical structures and command-and-control management philosophies, meaning that employees were viewed as necessary—though unreliable—interchangeable resources, requiring direct supervision and limited autonomy. In modern terms, command-and-control hierarchies reflect the “My way or the highway” culture of management. This way of management was brought about by mass production, which devalued the role of labor to the equivalent of draft animals divided into groups of weak mules, ordinary days, and super-strong workhorses.

100 years of management models

Numerous individuals have contributed to the science of management in the past century. The following descriptions are not intended to be exclusive but represent significant contributors.

Frederick M. Taylor

Frederick Taylor, a self-taught engineer, published his theory of scientific management in his book The Principles of Scientific Management in 1911. His view was that workers were naturally wasteful and inefficient, colluding in groups to slow the pace of work and output. [2] To apply his theory, he developed time and motion studies to identify and mandate the most efficient process methods to establish individual task performance targets. He believed that the most efficient workplace was based on a strict set of rules and guidelines as to how to work efficiently.

In his book, Taylor advocated that companies transform the workforce into “high-priced men,” which he described in a conversation with a worker at Bethlehem Steel:

“Well, if you are a high-priced man [the manager], you will do exactly as this man tells you tomorrow, from morning till night. When he tells you to pick up a pig [a piece of iron weighing 92 pounds] and walk, you pick it up and you walk, and when he tells you to sit down and rest, you sit down. You do that right straight through the day. And what's more, no back talk. Now a high-priced man does just what he's told to do, and no back talk. Do you understand that? When this man tells you to walk, you walk; when he tells you to sit down, you sit down, and you don't talk back at him. Now you come on to work here tomorrow morning and I'll know before night whether you are really a high-priced man or not.” [3]

Taylor is credited with developing time and motion studies that became the basis of industrial engineering. However, while his stated intent was to promote individual worker accountability and reward, his practice focused more so on time studies to exploit workers by speeding up work, intensifying the distrust between business owners and their workers.

Henry Ford

Sometimes identified as the greatest industrialist of the 20th century, Ford is noted for developing the assembly line for mass production. Ford, an admirer of Taylor, coordinated a series of short, repetitive work cycles with detailed, prescribed task sequences with the pace of movement of the motorized assembly line. Speeding up the line boosted production and the workloads of the employees.

Management generally considered the workforce as a variable cost to be constantly reduced. The callous attitude led to the unionization of the industry's blue-collar workers (UAW) and regular, often violent, conflicts between the auto companies and their workers. [4]

Ford's success and the popularity of Taylor's Scientific Management spread across American industries seeking to increase production, lower costs, and increase profits. During testimony in a Senate committee investigating the Paterson silk workers strike in 1913, workers told of the “inhuman Taylor speed-up system in the plants, and even the employers, in their testimony, boasted that as a result of the speed-up system ‘we got 40% more production with the same number of men.’” The labor force reacted by increased unionization. The lack of management's respect for their employees as a critical resource widened the growing abyss between company management and labor.

Following WWII, command-and-control systems were under pressure. A wave of strikes in the winters of 1945 and 1946 idled workers in the steel, rubber, meatpacking, oil refining, and appliance industries.

Returning veterans were more militant than before the war, causing management's worry over labor unrest. The more enlightened management teams recognized that an agreeable workforce was critical to reaching company goals. [5]

Peter Drucker

Management consultant Peter Drucker is generally given credit for the Management by Objectives (MOB) model, repudiating Taylor's command-and-control structures, including their lack of respect for the everyday worker. Drucker considered employees as “assets,” not variable costs as the Taylorites. He proposed that their input and assent to common objectives were critical to success. [6]

The primary differences between Taylor and Drucker are the latter's greater reliance on measures of speed and cost to identify problems, and the advocacy of employee participation in determining how company objectives are to be achieved. Even so, the two shared the belief that management retained the responsibility for establishing organizational goals and the process of work evaluation and subsequent corrective actions. In short, the two agreed that, “What gets measured gets managed.”

While Taylor prioritized the “carrot and stick,” i.e., reward or punishment, approach consistent with his perception of the working class, Drucker's system relied on financial rewards and his belief that workers have the ability and interest to improve their position. In the 1950s, such thinking was novel for business management.

A disciple of Drucker, George Odiorne, refined MBO in his 1965 book Management by Objectives: A System of Managerial Leadership as

a process whereby the superior and subordinate managers of an organization jointly identify its common goals, define each individual's major areas of responsibility in terms of the results expected of him, and use the measures as guides for operating the unit and assessing the contribution of each of its members. [7]

George Doran further expanded MBO with his definition of SMART objectives [8]:

• Specific (clearly formulated)

• Measurable (with traceable progress)

• Assignable (involving specific people)

• Realistic (having all resources at hand)

• Time-related (with a particular deadline)

MBO continues in many American businesses. One researcher found that 79 percent of the Fortune 1000 companies had adopted some form of the model by 2008. [9] Despite its popularity, critics note that it encourages obtaining objectives by any means necessary and is dependent on a robust system of expensive, specialized inspections. Others are more critical, describing MBO as an “inadequate conceptualization of variables and glib generalizations from idiosyncratic laboratory conditions to the multifarious real world of many non-homogeneous industries and professions.” [10]

Deming's revolutionary management model

W. Edward Deming, an engineer, mathematician, and statistician, promoted a new management model—Total Quality Management—in 1981 with the publication of Out of the Crisis. He has been called “The Father of the Quality Movement.” Deming based his model on a practical understanding of statistics, explicitly differentiating between normal fluctuations and outliers, focused on the company-wide quality and continuous improvement programs he had developed with Toyota and Sony in Japan's reconstruction following WWII.

In 1980, Shoichiro Toyoda, Honorary Chairman and director of Toyota, wrote, “There is not a day I don't think about what Dr. Deming meant to us. Deming is the core of our management.” His company won the Deming Prize for quality in 2016.

W. Edwards Deming with Union of Japanese Scientists and Engineers (JUSE) executives working over tea, 1956. Photo courtesy of The W. Edwards Deming Institute.

Deming claimed that “The basic cause of sickness in American industry and resulting unemployment is the failure of top management to manage.” [11] He believed that applying specific principles and processes could simultaneously reduce costs through less waste, rework, staff attrition, and litigation through increased product quality, customer loyalty, worker satisfaction, and profitability. His teachings about the role of the worker and quality conflicted with Peter Drucker's MBO model that emphasized management's autocracy and an emphasis on costs and production volume. Drucker's philosophy was in vogue when Deming introduced his quality-focused model.

Drucker vs. Deming

Drucker advocated the establishment of quantifiable objectives by management with little detail about identifying proper metrics, setting targets for each metric, and creating a system to reach the targets. Deming thought MBO consisted of “arbitrary objectives, unrelated to the purpose of the business, set without any plan on how to achieve them or even a means of taking accurate measurements.”

Unfortunately, the writings of both men have been frequently misinterpreted, misunderstood, and misapplied. There was substantial overlap in the thinking of the two, the difference often being a matter of degree or intent. Kelly Allan, an advisor to the US-based Deming Institute, writes, “What Drucker is to management, Deming is to quality is sometimes used to describe the differences between the two men's bodies of work. That is unfortunate because Drucker also wrote about quality, and Deming wrote extensively about management.”

The Deming Wheel

Deming expanded the Shewhart Cycle of Learning and Improvement (Specification, Production, and Inspection) [12] into the Deming Wheel, a continuous series of Plan-Do-Check-Act cycles. (In 1993, Deming changed “Check” to “Study” and “Act” to “Adjust” to clarify his meanings.)

In his book Out of the Crisis, Deming presented 14 principles to transition a company into cycles of constant improvement and maximum management effectiveness:

Company strategy

Point 1. Create constancy of purpose

Point 2. Adopt the new philosophy

Point 14. Involve everybody in accomplishing the transformation

Human resource management

Point 8. Drive out fear

Point 9. Break down organizational barriers

Point 12. Facilitate pride of workmanship

Measurement of results

Point 10. Eliminate arbitrary numerical goals

Point 11. Use statistical methods for continuing improvement

Training and supervision

Point 6. Institute modern methods of training

Point 7. Focus on supervision

Point 13. Institute education and training

Quality assurance

Point 3. Replace mass inspection with statistical monitoring

Point 5. Continuous improvement

Purchasing policies

Point 4. Stop awarding business on basis of price

System of Profound Knowledge (SoPK)

Toward the end of his life, Deming acknowledged that he developed his 14 Principles from his System of Profound Knowledge capsuled in The New Economics for Industry, Government, Education. His system is detailed in four aspects:

• Appreciation for a system. A system is an interdependent set of actions or beliefs that collectively produce similar outcomes. Systems can be unintentional or intentional. Actions outside a system are chaos with extreme variations in output. Deming believed in the importance of systems. In his introduction to The Team Handbook, he asserted that “the system that people work in and the interaction with people may account for 90 or 95 percent of performance.” [13]

  The aim of any system should be that everybody gains, not one part of the system, at the expense of any other.

• Understanding variation. His practical and theoretical knowledge of statistics led to Deming's understanding that variations within a system are inevitable due to

  1. The system's design or management (“common causes”), and

  2. Temporary or extraordinary influences (“special causes”).

Common cause variations are due to system defects and are remedied by management's changing the system or process. Special causes of variation are usually attributable to a single identifiable factor, such as a change of procedure, equipment, or operator, and are typically easily corrected. Reducing common cause variation and preventing special causes should be a management priority.

• Psychology. Deming recognized that good management requires the knowledge and use of human psychology. People have varying needs, wants, fears, and experiences. No single management style applies to everyone. Unlike many of his management science predecessors, Deming believed in workers’ inherent capability and desire to do a good job. A well-designed system recognizes and promotes this nature through psychological, social, and financial rewards. Deming said it best: “We must preserve the power of intrinsic motivation, dignity, cooperation, curiosity, joy in learning, that people are born with.” [14]

• Theory of knowledge. Theory is integral to the growth of knowledge. Deming taught that knowledge is the product of a process of prediction (theory), observation (testing the results), comparison (checking actual results with theoretical results), and action (adjusting the theory to reflect the results). Deming embodies his belief in his Plan-Do-Study-Adjust cycle. The repetition of the cycle is the root of constant improvement and learning.

Final thoughts

Dr. Deming died in December 1993, not knowing whether his philosophy of management transformation, quality, and human virtue would continue in businesses worldwide. As a student engineer wrote in her thesis:

The most important theme running through this strategy is the value of the workforce. If everyone in the organization is treated with respect, then the organization will flourish. Managers should utilize employees to their fullest potential. By encouraging employees to make suggestions and to develop skills, the company goals can be obtained. Everyone will be working toward producing the highest quality product at the lowest cost.

Today, disciples at the Deming Institute in Idaho continue to preach the gospel of Deming to recalcitrant followers of command-and-control hierarchy, short-term results, and stock market prices. Driven by rapidly evolving technology, organizations learn that quality, agility, and resourcefulness are the path to survival.

References

1. Taylor, Frederick W. Principles of Scientific Management (New York, 1911), p. 13.

2. Foner, Philip. The Industrial Workers of the World 1905-1917 (New York, 1965), pp. 374, 382.

3. Taylor, Frederick W. Principles of Scientific Management, Chapter Two. (New York, 1911)

4. Degen, Ronald. (2011). “Fordism and Taylorism are responsible for the early success and recent decline of the US motor vehicle industry.” International School of Management, Working Paper No.81/2011 (September 2011)

5. Georgia State University, Southern Labor Archives: Work n' Progress - Lessons and Stories: Part V: "Post World War II" Era.

6. Drucker, P. F., Collins, J., Kotler, P., Kouzes, J., Rodin, J., Rangan, V. K., et al., The Five Most Important Questions You Will Ever Ask About your Organization, p. xix (2008)

7. Odiorne, George S. Management by Objectives: a System of Managerial Leadership. Fearon-Pitman Publishing. (1965) pp.55-56.

8. Doran, George. There's a SMART way to write management goals and objectives. American Management Review. (November 1981) pp.35-36.

9. Curtin, Joseph. "Using Management by Objectives Performance Appraisals to Improve Performance." Leadership Review. (January 2009)

10. Halpern, D. and Osofsky, S. “A Dissenting View of MBO.” Public Personnel Management, Volume 19, Issue 3. (September 1, 1990)

11. Deming, W. Quality Productivity and Competitive Position. Massachusetts Institution of Technology. May 31, 1982) p.340

12. Shewhart, W. Statistical Method from the Viewpoint of Quality Control. Dover Publications. (June 1, 1986)

13. Scholtes, P., Joiner, B. and Streibel, B. The Team Handbook. Goal/QPC, (August 1, 2018)

14. Deming, W. The New Economics for Industry, Government, Education. The MIT Press; 2nd Edition. (August 11, 2000)