W. Edwards Deming on the Future of Capitalism
Great read! The Deming of America
The following are W. Edwards Deming's comments transcribed from the PBS video "The Deming of America" (funded by Arthur Anderson) which was recorded in 1990. Much of the video consists of interviews with the heads of Ford, General Motors, Xerox, Proctor and Gamble, GE Aero Engines and also people from the Navy and government. These portions of the video are not transcribed. The interviewer is Priscilla Petty (PP).
The introduction describes Deming's influence in Japan.D: I did not export American practice. I took to them new knowledge, philosophy of management, theory of management, which is optimization of a system whereby everybody gains. Everybody gains. The Japanese man, executive or otherwise, is never too old or too successful to learn. He is eager to learn and to listen. It is not hard for him to change because he understands the system, that he is part of a system and the job is to optimize the system.
D: It is only management that breaks out of the system that makes impact
PP: Management that breaks out of the system? Tell me what you mean.D: Optimizes the system, for example. Instead of doing it the way we've always done it, to do what is best for the whole system.
PP: Could we talk about optimization?D: An orchestra is an example that most people can understand, a system. Everybody there is supporting all the other players. 140 piece orchestra, everybody supports the other 139. He's not there to play a solo. He's not to play as loud as he can play to attract attention. He's there to support the other 139. The job of the conductor is to optimize their talents, their abilities.D: Ever hear of a bank that failed?
PP: Yes.D: Do you think it failed because of mistakes, sluggishness at the teller's windows? Mistakes in calculation of interest? Mistakes in bank statements? Don't be silly. All that could go off without blemish and the bank would fail. Purely a matter of management. A manager is a leader. Should be. He understands how he, his work, and the work of his people fit into the system, for optimization of the system. That's the first job of the leader, to try to find, recognize that all people are different. Try to fit each one into what he can do best. Takes joy in learning, in helping to improve. He's coach and counsel, not judge. You judge people, you shut them up. They don't talk.
PP: What happens in a system when you ask someone to achieve a result that's impossible to achieve?D: Everybody suffers. He'll make it happen, by destruction of the company or impairment in some way. He'll make it happen. And we all lose. Anybody can accomplish anything if we don't count the cost.
PP: When you set up a system that makes the individual, that puts the individual in an impossible situation, then he's going to do what he has to do?D: If that's his job, he'll make it happen, by fudging figures or by destroying the company. Can you blame him? That's his job.
PP: So, you're saying that the component of the system is really responsible for the larger whole, for the benefit and good of the larger whole?D: That is a good way to put it. A component, any group, anybody, is to be judged by his contribution to the system, not for his individual profit or gain, in sales or anything else.
D: We've grown up on short term thinking, short term planning. Profits now, high dividends, churning money. Impossible to advance under such forces.
D: Well, people, given a choice, be thankful we do have a choice, they buy the imported product many times in preference. And our products do not sell in other parts of the world. There are exceptions, great exceptions. Aircraft industry has 70 percent of world's business.
PP: I asked Dr. Deming why he felt American workers had not been turning out quality products.D: How could they? All they ask is a chance to do a good job, to take pride in their job and be proud of the company. That's all they ask for.
PP: This worker can't make that product better unless the system is changed?D: He can only make what he's asked to do, under the difficulties that he meets, with poor materials, equipment that doesn't work, all sorts of problems.
PP: Workers in this country have been blamed for a number of years, saying that they are lazy and that they don't want to work and that they don't care and they're not producing quality and that they are not doing it right and that's why our automobile industry went down and that we have to change our attitudes as people. Is there any truth in that at all?D: Not a bit.
PP: Not a bit?D: Not a bit.
PP: Not a bit?D: Absolute nonsense. We'll get nowhere as long as people think that.
PP: Factory workers always have a question when they hear about Deming. They want to know, are you against unions?D: Against? Of course not.
PP: Good, I'm glad to hear you say that.D: Unions are a part of the system, a very important component in the system.
PP: Now, what's been the problem then as people have dealt with unions?D: Failed to understand the system, that's the problem.
PP: So, we have people pitted against each other, union and management, rather than saying this is the whole system which must be managed? D: Optimization of a system should be the basis for negotiation between management and labor, between buyer and seller, with suppliers of the company, between countries. He who goes into negotiations to defend his rights is already licked.
PP: What do you mean?D: It should be optimization of the system by which you gain more than any other way.
PP: So, if I'm going in, I'm thinking only of my own self interest, I'm a factory worker and I want a higher wage …D: You're a country, You're anybody.
PP: Or I'm a country, or I'm anybody and I'm thinking only of myself and not thinking of the total system and I'm going to lose?D: Defend your rights, you lose.
PP: How do the people without power, how do they not be taken advantage of? Everybody is not of good will.D: Purely a matter of understanding. He who is in power must understand the system. And the best solution is for everybody to win. Everybody to gain. No losers.
PP: It's so foreign to us. It is not what we've been taught. It's not what we've done.D: Economists have led us down the wrong road. They've taught us adversarial competition is a solution. It is not. Worrying about share of market, trying to choke your competitor. Spend your time that way instead of working on the product, to develop a better product.
PP: So what do you do instead of compete for share of market?D: Expand the market. Put out better product.
PP: It's a different philosophy. It's as if we are saying there is a finite amount versus an infinite amount here. D: I think that's a good way to put it. People make the supposition that the market is a finite amount and the successful companies have taken the other point of view, that the market is expansible. By paying attention to the future needs of customers, they expand the market.
PP: So you don't worry so much about being an adversary to your competitor, you worry about what? Continual improvement of your own product and getting something better out there and looking to your own system to enhance it?D: That's right, that's right. (?) you and your competitor. It's just a law of nature. He who spends his time worrying about his competition, worrying about his share of market is already licked. If
you have any stock in that company, you'd better sell it. Competition is part of the system and any competitor who improves his product improves the market, helps his competitors. And the worse thing that can happen to you is to have a lousy competitor.D: Customer doesn't know what he wants. He makes a choice. He does not see his future needs. Customer's expectations are only what you and your competitors have let him to expect. He is a rapid learner, but he does not foresee what he might need. No customer asked for electric lights. No customer asked for photography. No customer asked for telephones.
PP: How has the prevailing style of management crushed innovation?D: By ranking people. It starts with grading in schools, from toddlers on up, through the university. Grade, ranking people, making top people scarce, only so many A's allowed. It is not a game. In playing tennis, a beauty contest, horse race, play poker, it's a game. Somebody wins. We knew that before we started. Perfectly all right. I have nothing against it. But management is serious, education is serious.
PP: But we are so used to in this country to ranking people, to being ranked ourselves and those of us who want to achieve always want to make sure we rank at the top in whatever system we are in. It's just counter to our usual thinking, and even I get a little scared when I think but what would happen if you weren't evaluated or ranked? How does it work? If I'm not going to be ranked will I be rewarded for the results that I produce?D: You want reward?
PP: Yes.D: You want reward? The reward you want is pride and joy in your work. That's what you want.
PP: Yes, you're right, that's the first thing.D: There's nothing more to ask for.
PP: But I also want money sometimes.D: Pay is not a motivator.
PP: Sometimes …D: No.
PP: No?D: No. Pay is not a motivator, sure you have to have enough to live on, and to live right. Beyond that, pay is not a motivator. Remember Norb Keller's statement which I think is famous. On the seventh of November, 1987, Mr. Norb Keller, of General Motors, at a meeting, stated that if General Motors were to double the pay of everybody commencing the first of December, nothing would change. Performance would be exactly what it is now. Ranking doesn't do any good. Of two people, one'll be worse, one'll want to be better. I don't know what we'll do about it. The question is: is one outside the control limit, or does the difference mean nothing? And management must know these things. There is no excuse. There is an excuse for ignorance but there is a penalty for ignorance and we all pay it.
PP: What is an alternative? What can they do instead?D: To help. To coach and to counsel, to help and optimize. Don't judge. We need to develop self esteem, dignity, joy and pride in work so that people may be innovative and contribute their best to the job. If we destroy them, they are humiliated. Ranking them destroys them.
PP: The question is: are business leaders really taking the responsibility which is theirs? Are they educating themselves that they need this and don't admit it to themselves?D: They don't know about it. How could they admit when they don't know about it? But how could they know? How could they know there was anything to learn? How could they know? How could they have any suspicion that there is anything to learn? How could they?
PP: Well, I think they should know.D: How could they? How could they?
PP: They ought to know.D: How could they?D: How could they? Themselves … Profound knowledge comes from the outside, never from the inside, must come from the outside and only by invitation.
PP: When you say that knowledge must come from the outside, what do you mean? I don't quite understand it.D: You ever find it inside the company?
PP: Well, sometimes, some parts.D: Have you?
PP: Some parts.D: Have you?
PP: You're talking about profound knowledge?D: Yes.
PP: Or you're saying that knowledge.D: Yes.
PP: Profound knowledge?D: Yes, profound knowledge, knowledge about a system.
PP: Why is that? Why can't it come from inside the company? What do you think is going on?D: Everybody is doing his best, with the greatest, the best of intentions, everybody working hard at doing what is wrong, not guided by a theory of management. Reactive behavior, managing by results. Sure we want good results. Manage by results, quality goes down, morale goes down. Management has not a theory of management. They work hard, very hard, under terrible stress that I could not endure. Best efforts, hard work, our ruination.
PP: And you're talking about CEO's and presidents and vice presidents and all other people who are in charge …D: Government people, people in education.
PP: And we're missing it somehow, we're missing the real point?D: Pretty obvious. Deming's Second Theorem: We're being ruined by best efforts and hard work, doing what is wrong.
PP: What are they missing?D: Theory of management.
PP: So, how can we tell them? How can we tell them they need to listen to this? How can we get the message out?D: A physician can do nothing for somebody who does not acknowledge he needs help. First step, he must ask for it.D: Our education is failing.
PP: What are we doing that we should be not doing?D: We just don't educate, people, youngsters. We grade them but don't educate them. Don't teach them to think.D: Our worse thing is, failure to understand what learning is. For example, experience teaches nothing. The fact is, there is no experience to record without theory. Theory enables us to ask
questions, to learn. Without theory there is no learning.
PP: That was a really hard one for me. When I first met you …D: Why should that be hard?
PP: Well, because that's not what we're taught. We're taught to look at an example and say, I see, I'll do that, that's the right thing to do. But …D: But that's their downfall. People copy examples and they wonder what's the trouble. They look at examples and without theory they learn nothing. Theory leads you to questions.
PP: For a while people thought they had the answers about the problem of quality and they went through all kinds of things such as quality circles and a number of other methods which they saw working for the Japanese. Why do you think those didn't last?D: That's all window dressing. That's not fundamental. That's not getting at change and the transformation that must take place. Sure we have to solve problems. Certainly stamp out the fire. Stamp out the fire and get nowhere. Stamp out the fires puts us back to where we were in the first place. Taking action on the basis of results without theory of knowledge, without theory of variation, without knowledge about a system. Anything goes wrong, do something about it, overreacting, acting without knowledge, the effect is to make things worse. With the best of intentions and best efforts, managing by results is, in effect, exactly the same, as Dr. Tribus put it, while driving your automobile, keeping your eye on the rear view mirror, what would happen? And that's what management by results is, keeping your eye on results.
...D: Management's job is optimization of the whole system. Decide what constitutes the system, certainly customers, suppliers, employees, stockholders and the welfare of employees, their education, their chance to improve skills and education, their chance to have a little time at home and not work too hard. Their chance to learn good management so they can contribute to their clubs and churches and schools. Our schools need it sadly. Optimization would mean teaching everybody so they may help other people. Optimization of the whole system, everybody gains, no losers.