Lockheed Martin's Deming transformation
How Deming’s philosophy took flight at Lockheed Martin and changed everything
Executive summary
In the early 1990s, Lockheed Martin’s Fort Worth aircraft plant was at a breaking point. Deadlines were slipping, costs were soaring, and quality problems threatened the future of its most important defense programs. Then leadership made a bold, unconventional choice: to rebuild the organization around the philosophy of Dr. W. Edwards Deming. What followed was not a management fad, but a transformation—one that turned Deming’s ideas into a decisive competitive advantage.
By replacing fear with trust, silos with collaboration, and short-term targets with systems thinking, Lockheed Martin unleashed the full potential of its people. Costs dropped by nearly 40 percent. Inventory was cut in half. Jet production time fell from 42 months to just 21.5. More importantly, the workforce rediscovered meaning in their work, and improvement became everyone’s job, every day.
The results were astonishing: defects plummeted by 97 percent, on-time delivery soared to 99 percent, and employee retention exceeded 95 percent. But the real victory was strategic. While competitors chased incremental gains, Lockheed Martin built a self-improving organization—one capable of adapting faster, innovating deeper, and sustaining excellence long after the initial transformation.
Lockheed Martin’s Deming journey is more than a story about quality—it’s a story about advantage. It proves that organizations grounded in Deming’s principles don’t just perform better; they endure. For leaders seeking to outpace their competition through culture, purpose, and relentless improvement, this story shows exactly how it’s done.
In the early 1990s, parts of Lockheed Martin’s business were under serious pressure. For example, at Lockheed’s Fort Worth aircraft plant (where F-16 fighter jets were built), production had slowed, quality was slipping, and costs were too high. Management realized that to stay competitive – or even survive – they needed a radical change in how they operated. Lockheed’s leadership chose to improve, using Deming principles as their guide.
Dr. W. Edwards Deming (1900-1993) was a renowned expert in quality management. His philosophy urges organizations to improve systems continuously, foster teamwork, and take a long-term view. Many modern managers wonder if these decades-old ideas apply outside of textbooks. But one of the world’s most advanced companies – Lockheed Martin – put Deming’s philosophy into action and achieved eye-popping results. In fact, by focusing on quality and continuous improvement (core Deming tenets), Lockheed Martin dramatically boosted performance: slashing costs and production times, winning prestigious quality awards, and energizing its workforce. This article explores how Lockheed Martin applied Deming’s principles and why even a skeptic might be convinced to give them a try.
Embracing continuous improvement
Starting in the mid-1990s, Lockheed Martin adopted a culture of continuous improvement across its operations. This meant shifting away from the old mindset of “inspect and fix” to a Deming-like mindset of “find and prevent.” The Fort Worth plant launched initiatives to streamline production, eliminate waste, and empower employees to suggest better ways of working. They used PDSA cycles (Plan-Do-Study-Act) – Deming’s iterative problem-solving method – to tackle issues big and small. In fact, Lockheed Martin credits broad use of PDSA for “major reductions in manufacturing costs and delivery times” on its aerospace projects. Rather than guessing or making knee-jerk fixes, teams would plan a change, test it, study the results, and adapt – a scientific approach to improvement.
One Japanese term the company embraced was Kaizen, meaning continuous incremental improvement. Through countless Kaizen workshops and projects, Lockheed systematically attacked inefficiencies. The results were dramatic. Between 1992 and 1997, their fighter aircraft division reduced manufacturing costs by 38% and cut inventory in half. Even more astonishing to those on the shop floor, they slashed the production lead time for a jet order from 42 months to just 21.5 months. In other words, they started delivering fighters in about half the time it had taken previously. This wasn’t achieved by forcing employees to work faster through sheer will – it came from redesigning processes for flow and quality. For example, one improvement team found that parts were spending a month sitting in receiving before being stocked for assembly. By fixing that process, they shrank that delay from 30 days to only 4 hours. These changes illustrate Deming’s idea that “Improve quality, [and] you automatically improve productivity” – when the process was made better and simpler, with less waiting and error, output soared.
Constancy of purpose
Such sweeping changes required strong leadership commitment – something Deming insisted on. Lockheed Martin’s top management set a constant purpose around quality and performance excellence. Rather than focus solely on quarterly financial targets, leaders like Dain M. Hancock (then-president of Lockheed Martin Aeronautics) made it clear that continuous improvement and customer satisfaction were long-term strategic priorities. “This recognition culminates many years of diligent effort by the employees of our Fort Worth unit, who have consistently pursued continuous improvement and customer satisfaction in every aspect of our operations,” Hancock said in 2000 when the company celebrated a major milestone. He was addressing thousands of employees after Lockheed’s Aeronautics business won the Shingo Prize for Excellence in Manufacturing – a prestigious award often called the “Nobel Prize of manufacturing.” The Shingo Prize committee specifically praised Lockheed for “implementing lean manufacturing principles” in building fighter jets and for “partnering with customers and suppliers” to improve the whole value chain. Hancock’s pride was evident as he told employees that the award “validates that we are making steady progress on a credible path toward ... being recognized as the best military aircraft company in the world.” This is a perfect example of Deming’s “constancy of purpose” – Lockheed’s leadership stayed true to a quality-first vision over many years, and it paid off.
Engaging employees
A cornerstone of Deming’s philosophy is respect for people and engaging the knowledge of employees. Deming warned that the greatest waste in a company is not scrap metal or excess inventory, but “failure to use the abilities of people… to learn about their frustrations and about the contributions that they are eager to make.” Lockheed Martin’s improvement journey tapped deeply into employee know-how. They trained and involved everyone – from engineers to machinists – in identifying problems and crafting solutions. The company’s Operating Excellence program (branded “LM21” internally) offered extensive training in Lean and Six Sigma methods, creating an army of problem-solvers. More than 10% of the workforce became certified Six Sigma “Green Belts” or “Black Belts,” and many more participated in grassroots improvement teams as Yellow Belts. By investing in on-the-job training and skill development (Deming’s Point #6), Lockheed gave employees the tools to improve their own work processes.
The greatest waste in America is failure to use the abilities of people. — W. Edwards Deming
Equally important, management empowered front-line workers to speak up and take initiative – embodying Deming’s advice to “drive out fear” so that people can freely point out issues. A continuous improvement culture took hold. One observer noted that at Lockheed’s facilities, even external auditors “are hard-pressed to locate problems” because employees themselves proactively catch and fix issues as they arise. Instead of a blame game when something went wrong, the attitude became: “Let’s solve it together.” This boosted morale and trust. When workers see their ideas implemented – like that receiving-to-stock time reduction – they feel valued. And when employees feel valued, productivity increases. (After all, who knows the job best? The people doing it daily.) Lockheed Martin witnessed this truth: production and quality rose as they harnessed employees’ insights and broke down silos between departments. Cross-functional teams (engineers, technicians, supply chain specialists, etc.) started collaborating regularly to streamline workflows, rather than each department guarding its turf. This echoes Deming’s Point #9: “Break down barriers between departments” – encourage collaboration over blame. A practical example was how the Fort Worth team worked closely with a major supplier to redesign a radar component process, eliminating redundant steps and saving costs for both sides. By treating the supplier as a partner, not an adversary to squeeze on price, they improved quality and cost – aligning with Deming’s advice to end the practice of awarding business on price tag alone and to instead build long-term supplier relationships.
The result: Best-in-class performance
Lockheed Martin’s application of Deming’s principles didn’t just result in happier employees or a shelf full of awards – it delivered tangible business results that would make anyone sit up and take notice. Here are some of the standout improvements and achievements from their Deming-inspired journey:
Cycle time and cost improvements
As noted, the Aeronautics division cut build time for fighter jets by 50% in the 90s, while manufacturing costs dropped nearly 40%. These efficiency gains translated to hundreds of millions in savings and enabled Lockheed to offer more competitive prices to customers. By 2012, similar continuous improvement efforts across Lockheed Martin’s Missiles and Fire Control unit (MFC) were saving about $225 million every year through reduced process times and waste elimination. In Deming terms, they “improved constantly and forever the system of production” – and reaped the financial rewards.
Quality and reliability
Process improvement had a direct impact on quality. Defects and rework plummeted. At one electronics plant in Florida, a relentless focus on quality over a decade led to a 97% reduction in defects in its products. Company-wide, Lockheed began tracking product quality in terms of “sigma level” (a Six Sigma measure of defects). One site consistently achieved near Six Sigma quality (~1 defect per 10,000 opportunities) – an almost unheard-of level in complex manufacturing. And because quality was built in, inspection findings became almost boring – external auditors often found zero compliance issues, a sign that the processes were truly robust. This validates Deming’s point that catching defects at the end is “too late, ineffective, and costly,” and the real goal is to prevent defects by improving the process.
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. — W. Edwards Deming
On-time delivery and throughput
Deming preached that a focus on quality would also improve delivery and flow, and Lockheed saw exactly that. Even as production volumes surged (one division had a 1,000% increase in annual deliveries due to business growth), they achieved 99.4% on-time delivery to customers. In other words, nearly every order – whether a missile system, rocket, or sensor – went out the door on schedule. This kind of reliability is crucial to customers, especially military clients with critical needs. It wasn’t achieved by expediting frantically, but by smoothing out the process and removing bottlenecks ahead of time, a result of continuous improvement and careful data analysis of production flows. Deming would nod in approval here, having famously said, “In God we trust; all others bring data.” Lockheed’s use of data – from Statistical Process Control (SPC) charts on the shop floor to monthly management reviews of key performance metrics – allowed them to predict and prevent delays rather than react after the fact.
Customer satisfaction and market growth
By improving quality and delivery, Lockheed Martin naturally saw customer satisfaction climb. The Missiles and Fire Control unit tracked a “customer loyalty” index, which improved 18% from 2007 to 2012, reaching best-in-class levels. In a survey, fully 100% of MFC’s customers said they “definitely or probably” would choose Lockheed again for similar business. This is a powerful business outcome: it helped Lockheed win repeat orders and expand in a competitive market. Indeed, MFC’s repeat annual orders grew by 32%, and international orders quadrupled over a recent five-year period. Consistent quality created trust, and trust brought more business. Deming’s philosophy centers on delighting customers, and Lockheed’s rising customer loyalty reflects how well they internalized that principle.
Profit in business comes from repeat customers, customers that boast about your project or service, and that bring friends with them. — W. Edwards Deming
Employee morale and retention
Perhaps one of the most skeptic-swaying results is what happened with Lockheed’s workforce. In many companies, “quality programs” of the past were met with eye-rolls and sinking morale (think of teams being pushed to hit numeric quality targets without support – something Deming strongly warned against). But at Lockheed Martin, the Deming-style approach boosted employee engagement. In a 2011 survey, nearly 85% of employees said they were proud to work for the Missiles and Fire Control unit – above the national benchmark. People could see that management genuinely cared about improvement and about their ideas. Employees weren’t being blamed for problems; they were invited to fix problems. This positive culture led to remarkably high employee retention rates: MFC retained 95% of its employees in 2011 and 94% in 2012, far above typical industry retention and essentially meaning almost no unwanted turnover. High retention saves cost (less recruiting and training of new hires) and retains institutional knowledge, creating a further competitive advantage. It’s also a sign that people enjoy their work environment. Deming would not be surprised – he often said a byproduct of a good system is joy in work. One Lockheed manager described how even after big wins, “no one seems satisfied. The mindset of continuous improvement is found at all levels” – not as a pressure, but as a shared passion to keep getting better. That kind of energized atmosphere is every manager’s dream.
How could this work for you?
Lockheed Martin’s experience shows that Deming’s principles aren’t pie-in-the-sky theory – they are practical methods that can transform performance. What makes Deming’s approach especially convincing in this story is that success wasn’t achieved by a one-time program or silver-bullet technology; it was achieved by changing the management philosophy and culture. Here are a few takeaways from Lockheed’s journey that highlight how Deming’s ideas can be applied in an approachable way:
Start with a committed vision. Lockheed’s leadership set a clear, consistent vision (e.g. “be the best, focus on quality, satisfy the customer”) and communicated it constantly. This echoes Deming’s first principle of “constancy of purpose.” For a skeptical manager, this means picking an improvement goal that truly matters for the long run (better quality, reliability, customer trust) and sticking with it. James F. Berry, president of MFC, put it well when his team won the national quality award: “It represents the culmination of a 15-year journey focused on performance excellence, which has been ingrained in all we do.” In other words, make excellence a habit, not a one-quarter project.
Problems of the future command first and foremost constancy of purpose and dedication to improvement of competitive position to keep the company alive and to provide jobs for their employees. — W. Edwards Deming
Empower your people and teams. Give employees the training and freedom to improve their work. Lockheed Martin invested in hands-on training programs (Lean/Six Sigma workshops, etc.) and encouraged cross-functional teams to tackle issues. Managers became coaches rather than micromanagers. Deming insisted on “institute training” and “institute leadership” – meaning leaders should help people do a better job, not just judge them. A skeptic might worry that involving everyone is inefficient, but Lockheed saw the opposite: a small improvement by a shop-floor team could eliminate hours of rework or months of delay. Engaged employees are more productive. Deming insisted that 94% of the reasons for failure in an organization are due to poor systems and processes, not individual workers, and that it’s management’s job to fix those systems. Lockheed’s managers took that to heart, and once the system improved, their people naturally performed better.
Focus on systems and process, not blame. One practical Deming-ism to apply is: “Drive out fear.” Create a safe environment for reporting problems. At Lockheed, when a defect or delay occurred, the response became “let’s examine the process” rather than “whose fault is this?” By using data and the PDSA approach, problems were solved without drama. For example, if a test failed, the team would collaboratively find the root cause and fix it so it wouldn’t recur, instead of berating the tester. This replaces finger-pointing with curiosity. Over time, workers see that management truly wants to fix issues at the source, and trust builds. One could almost hear Deming’s voice in those meetings saying, “Manage the cause, not the result.” Lockheed’s cause-minded fixes led to results that spoke for themselves.
Measure only what matters. Deming wasn’t against metrics; he was against blind metrics without context. Lockheed Martin measured plenty of things – defect rates, cycle times, customer feedback scores – but they used those numbers to learn and improve, not to punish. Deming cautioned that arbitrary numerical quotas can “increase costs and decrease quality.” Instead of, say, a slogan to “reduce defects by 50%” with no plan, Lockheed set up systems to monitor defects daily and find causes. Managers reviewed balanced scorecards that included quality, schedule, and people metrics, ensuring no single target undermined the others. The lesson is to use data as a flashlight, not a hammer – it should illuminate where to improve, not hammer employees over every fluctuation. Done right, measurement empowers teams by making progress visible and supports the culture of continuous improvement.
Be patient but persistent. Finally, Lockheed Martin’s transformation didn’t happen overnight. It took years of steady effort – but importantly, they saw small wins early on and built momentum. Some skeptics fear that Deming’s approach is too slow or theoretical. The reality is that incremental improvements start paying off quickly. For Lockheed, every few months a Kaizen event would yield, say, a 20% reduction in a certain assembly time, or a simplification of a form that saved engineers hours. Over time, those wins add up to huge numbers. The Deming philosophy is about continuous improvement – there is no finish line, but there are lots of rewarding milestones. As one Lockheed employee described the culture, even after big gains “no one seems satisfied” – they keep looking for the next improvement. This isn’t a bad thing; it keeps the organization agile and forward-thinking. A Deming quote often shared in such contexts is: “To improve is to change; to be perfect is to change often.” Lockheed’s story shows that a company committed to always learning and adjusting can outperform competitors stuck in old ways.
Why Give Deming a Try?
The evidence from Lockheed Martin’s experience is that Deming’s principles deliver real-world results – not only in manufacturing fighters and missiles, but in building a resilient, high-performing organization. They took a holistic approach: improving processes, engaging people, and focusing on long-term excellence. The payoff was seen in all the metrics businesses care about: lower costs, higher quality, satisfied customers, and a motivated team. Importantly, these improvements sustained over time (decades, in fact), which suggests this was not a one-time gimmick but a durable way of managing.
Consider this question: If Deming’s methods can help a massive, complex enterprise like Lockheed Martin build jets faster, cheaper, and better than ever, what could they do for your operation? At its heart, Deming’s approach is about making work easier and smarter, not harder. It’s about finding the causes of headaches and eliminating them, so people can do a good job. When Lockheed reduced defect rates and rework, engineers and technicians actually had less firefighting to do and more time to innovate. When they fostered a blame-free culture, managers spent less time dealing with morale issues and more time guiding improvement. In short, demonstrated success builds credibility. Lockheed Martin’s quality transformation turned even internal skeptics into believers once they saw the results.
Deming often told a parable of two managers: one says “I don’t have time to train my people or fix processes, I’m too busy meeting targets,” while the other invests the time to improve, then leaps ahead of the first. Lockheed Martin leapt ahead by investing in Deming’s principles. And they’re far from the only ones – many world-class companies (Toyota is a famous example) have done likewise. The principles are universal, applying to service industries, small businesses, healthcare, you name it. Giving Deming’s approach a try doesn’t mean abandoning all your current practices; it means infusing them with a proven focus on quality and systems. Start small: pick a persistent problem in your area, form a team, and apply a PDSA improvement cycle. Listen to the people closest to the work. You might be surprised at how quickly a Deming-style experiment can yield a win.
As Deming himself said, “Improve quality, you automatically improve productivity.” It worked for Lockheed Martin – and it can work for you. The hesitation only lasts until the first results roll in, and then you’ll wonder why you didn’t start sooner. Lockheed Martin’s story is living proof that a focus on quality is not at odds with business success – it is a driver of business success. In an era where every organization seeks an edge, Deming’s principles provide a time-tested, people-positive way to achieve continuous gains. The experience of managers and employees at Lockheed Martin shows that you have far more to gain than to lose on your journey to quality excellence.
Sources
IndustryWeek Best Plants Profile: Lockheed Martin Pike County Operations
Lockheed Martin 2003 Annual Report – “Performance for a Changing World” (PDF)
Shingo Prize Announcement – Lockheed Martin Aeronautics (2000)
National Institute of Standards and Technology (NIST) – Baldrige Performance Excellence Program
NIST Malcolm Baldrige 2012 Award Recipient: Lockheed Martin Missiles and Fire Control (PDF)
iBase-t - “Lockheed Martin’s Flight to Perfect Quality” (PDF)
Deming, W. Edwards. The New Economics for Industry, Government, Education. MIT Press, 1993.
Another banger, Michael - I learned some things here! I'm curious about the extent of Deming's infuence among senior leadership over the course of LM's transformation from their 1990s operating model to today. Is Deming's influence still felt or is it more indirect? How do they keep from backsliding through leadership turnover?
Thank you, Michael!
Excellent article.