Management

Deming 14 points

Sep 4 2012

Rereading Deming’s 14 points

The richest discussion in this blog to date, on Deming versus Drucker,  is all about point 11.b. from the list of 14 points that is the best known legacy of Deming’s 1986 book  Out of the Crisis. But what are his actual 14 points, and who are they intended for? Let us start with Deming’s own summary, from p. 23 of the book:

  1. Create constancy of purpose toward improvement of product and service, with the aim to become competitive, stay in business and to provide jobs.
  2. Adopt the new philosophy. We are in a new economic age. Western management must awaken to the challenge, must learn their responsibilities, and take on leadership for change.
  3. Cease dependence on inspection to achieve quality. Eliminate the need for massive inspection by building quality into the product in the first place.
  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.
  5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.
  6. Institute training on the job.
  7. Institute leadership (see Point 12 and Ch. 8 of Out of the Crisis). The aim of supervision should be to help people and machines and gadgets do a better job. Supervision of management is in need of overhaul, as well as supervision of production workers.
  8. Drive out fear, so that everyone may work effectively for the company. (See Ch. 3 of Out of the Crisis)
  9. Break down barriers between departments. People in research, design, sales, and production must work as a team, in order to foresee problems of production and usage that may be encountered with the product or service.
  10. Eliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force.
  11. a. Eliminate work standards (quotas) on the factory floor. Substitute with leadership.
    b. Eliminate management by objective. Eliminate management by numbers and numerical goals. Instead substitute with leadership.
  12. a. Remove barriers that rob the hourly worker of his right to pride of workmanship. The responsibility of supervisors must be changed from sheer numbers to quality.
    b. Remove barriers that rob people in management and in engineering of their right to pride of workmanship. This means, inter alia, abolishment of the annual or merit rating and of management by objectives (See Ch. 3 of Out of the Crisis).
  13. Institute a vigorous program of education and self-improvement.
  14. Put everybody in the company to work to accomplish the transformation. The transformation is everybody’s job.

On the face of it, this is an odd mixture of actionable recommendations — like “a single supplier for any one item” — with generalities like “adopt the new philosophy,” and expressions like “a vigorous program” that don’t meet Deming’s own criteria for an operational definition (See Ch. 9 of Out of the Crisis). As a consequence, the summary is not sufficient to understand what Deming actually meant.

Deming elaborates on each point in the remainder of Ch. 2 but, contrary to what the reader might expect, the whole book is not organized around the 14 points. About 20 years after Deming, in  The Toyota Way, Liker also identified 14 principles, and then devoted a chapter to each, which gives the reader a sense of structure that is missing in Deming’s book.

On the other hand, what comes out of Deming’s book is a sense of urgency. He was in his eighties when he wrote it,  a celebrated figure in Japan but obscure in the US until 1980 when NBC aired its documentary If Japan Can… Why Can’t We?  In the early 1980s, industries like steel, cars, semiconductors, and consumer electronics in the US were facing formidable competition from Japan, but most American managers credited it to long working hours for low wages and unfair trade practices. The idea that there was anything to learn from Japan was a hard sell, and only a few, well-informed individuals like Deming knew that it was the case.

Deming obviously felt he had much to say to American management that was essential to future competitiveness, and little time to say it. He couldn’t afford to sugarcoat his message and didn’t have the leisure to organize it into a neat theory. His readers would just have to handle the truth and organize the parts themselves.

Deming is blunt and direct, and backs up his assertions with examples. He is often prophetic but, in hindsight from 2012, occasionally off the mark. He correctly predicted that Japan would achieve a standard of living on a par with the US and Western Europe, but he perceived the breakup of the AT&T monopoly as “wrecking our system of telephone communication” (p.152), which works pretty well for a wreck.

One criticism I have for all lists of 14 points, whether from Woodrow Wilson, Deming, or Liker, is that they are impossible to remember. They should have boiled their lists down to 7 or even 5 points. I will have more detailed comments on each point in forthcoming posts.

By • Deming • 16 • Tags: , ,

Deming versus Drucker

Aug 26 2012

Deming’s Point 11.b of 14 – Deming versus Drucker

In his 14 points, by saying “Eliminate management by objective. Eliminate management by numbers and numerical goals,” Deming directly attacks Peter Drucker, the most revered guru of American management and creator of Management-By-Objectives (MBO). By the time Deming contradicted him, Drucker was an American institution, as sacred as the constitution. Drucker has published a new book every two to three years from 1939 to 2005 and contributed more than 30 articles to the Harvard Business Review. He received numerous awards from several governments, including the US Presidential Medal of Freedom, and has streets and a business school named after him.

In the Lean world, MBO has been replaced by Hoshin Planning, which is subtly but radically different. Drucker’s influence in the US remains so strong, however, that my favorite book on Hoshin Planning, Pascal Dennis’s Getting the Right Things Done, actually pays homage to him. The title itself is Drucker’s definition of effectiveness and, inside, Dennis presents Hoshin Planning as a refinement of MBO. It is still easier today to get through to an audience of American managers by standing on Drucker’s shoulders than by debunking him.

But Deming was in his eighties when he wrote his 14 points, his success in Japan had finally given him an audience in the US, and he must have known that he was running out of time to make his points. He thought MBO was a bad idea  and he would not pussyfoot. 15 years later, Drucker himself came around to the same point of view and recognized that MBO had failed. What did Deming find wrong with it?

In The Practice of Management (1954), Drucker repeatedly asserts that it is essential for managers to have quantitative objectives to work towards. They should set these objectives themselves, consistent with the objectives of the business as a whole. But Drucker is short on how this could actually be done, how you identify proper metrics, how you set targets for each metric, and how you go about reaching these targets. It is not an accidental omission. In  Drucker’s world, managers can find the answers themselves. It is part of their job, and they are supposed to have the requisite talents.

Instead,  Deming sees 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. Deming sees MBO as “an attempt to manage without knowledge of what to do.” The managers focus on outcomes without looking into the processes that produce them. They end up gaming metrics rather than improving  processes, and playing management whack-a-mole.

About managing by numbers, Deming notes that performance evaluations of groups or individuals fail to  differentiate between fluctuations and outliers. Whether you measure quantities produced or units sold, there will always be a ranking, but top performance only indicates a difference in effort or talent if it is high enough to be an outlier. Otherwise, it would be just as meaningful to rank people based on the number of heads in 50 coin tosses.

Deming makes the case that fluctuations should never be the basis for management decisions. If you sell a product through three dealers of equal talent and resources, with territories of equal sales potential, you will still observe differences in results that will enable you to rank the dealers, even though these differences are just the luck of the draw for this particular period.

What Deming does not go into is what happens when you repeat this kind of ranking over a sequence of periods. If the first period was a fair competition, the following are not, as the top performing dealer starts receiving preferential treatment, such as an award to post in the show room, priority access to new products and marketing materials, and special training in sales or customer support. All of these advantages make it more likely that the ranking will be the same in the next period, with a larger gap. Revisiting Pareto shows how iterations of a pure game of luck can lead to the top 20% of the players holding 80% of the chips when the outcome of each round determines the probabilities of success in the next round.

If one of the dealers sold not 5% more but three times as much as the other two, it would be difficult to explain it away as a fluctuation or a fluke. It would be most likely due to the use of a different and more effective approach, which would warrant special treatment.

What is perhaps most remarkable about the story of MBO is that its poor performance has made no dent in Drucker’s reputation as a business thinker, and that many companies continue to use it.

By • Deming • 82 • Tags: , , ,

Microsoft's lost decade

Aug 14 2012

Metrics in Lean – Alternatives to Rank-and-Yank in Evaluating People

The July, 2012 edition of Vanity Fair had a cover story about Microsoft and the damage caused to the company by its stack ranking system, also known as rank-and-yank. This story caused a flurry of responses in the press, including an article in Forbes defending the practice. The idea is not just that employees should be evaluated individually and ranked, but that the bottom few performers should be mercilessly culled from the work force, thus bringing up the overall level, tightening the performance range, and motivating survivors for the next round. This assumes that the performance of employees can meaningfully be reduced to a single number, and that living in permanent fear of losing your livelihood is the best motivation for improvement.

According to another Forbes article, GE, the company that championed Rank-and-Yank in the 1980s, abandoned it in 2005. Another once celebrated showcase of this method is the notorious Enron, and now Microsoft is under fire because of it.  Yet, according to the same article, the practice is now widespread among large American corporations, hidden under a variety of names. But where is the evidence that it actually works in the long term?

Continue reading…

By • Metrics • 25 • Tags: , , , ,

MB in cell

Aug 6 2012

What to look for on a gemba walk

Gemba (現場) means actual place. As consultants, we ask clients to show us their gemba, and we exhort their managers to do it routinely. But we must have a clear idea of why we should go to the gemba and what to do once we are in it. In Manufacturing, the gemba is the production shop floor.

Consultants and Managers on Gemba Walks

For a consultant, the point of walking through a factory shop floor is to learn about its current state, complete through direct observation what could not be known through previously received written or oral input, and to validate or refute this input. For a manager, making daily rounds through the shop floor is different, and involves two-way communication.

The manager’s presence, body language, and attire are a message to the work force. Everybody watches the manager.He or she can listen and ask questions, but must be cautious not to give instructions to operators over the heads of supervisors.

Example: Scheduling

From documents received ahead of time or personal communication, the consultant might know that the plant is using dispatch lists from an ERP system. On the shop floor, he or she sees these dispatch lists and the way operators use them.

Manual annotations reveal where operators do not follow the recommended task sequence. A supervisor then explains how this is due to setups or missing parts. In other words, you don’t go to the shop floor to find out what the intended scheduling system. You go to find out how operators actually sequence the work, and what relationship it has with the scheduling system. A manager walking with the consultant would make a note of the situation, and follow up on it later with supervisors and Production Control.

What to See

Shop floor observations include the overall design of the plant for production and internal logistics, as well as operational details. You can tell whether it is a job-shop, a flow line, or a collection of flow lines. You can tell whether the flow of materials is visible, what kind of equipment is used for materials handling, and how much of the floor is used for warehousing versus production.

When you zoom in on individual stations, you can assess the level of automation and the attention that has been paid to the design of operator jobs. You can also check out the accuracy of the signage, the presence and use of andons, mistake-proofing devices, production monitors, and team performance  boards.

Tell-Tale Signs

It is quite possible to walk through the aisles and not notice that the plant is anything but a tight ship. The key to actually seeing is to not just watch but instead act. This activity yields information both directly and indirectly. Several tools are available to help you see better, some of which require more than a quick visit. They include the following:

  1. Using a Seven Wastes Checklist. The list of seven wastes helps you identify occurrences of them, whether you keep in on a paper checklist or in your mind.
  2. Following the flow. Pretending you are a work piece and following the process backwards from the end to the beginning,  noting where and how many times it waits for transportation or processing, how operators perceive upstream and downstream colleagues, the tools,  fixtures and storage devices  used at each operation.
  3. Counting. You emulate Sesame Street’s “The Count”  and start counting people, machines, parts or fixtures. That’s how you may notice that 20% of the people are walking in the aisles. You ask questions and find out that half of those 20% are going to or returning from the tool crib. You have not only discovered that the plant uses a wasteful method for distributing tools. You also have a ballpark estimate of the productivity improvements at stake in setting up tool pickup and delivery milk runs. Thus the simple act of counting people has led you to discover a pattern of wasteful operation. You will then recognize elsewhere. In other words, you have learned to see it.
  4. Hunting for bugs. Kei Abe came up with the “bug hunt” as a means of making managers aware of common small problems that are easily overlooked. 10 to 20 managers get each a stack of 10 red tags. They have 20 minutes to attach them to frayed cables, broken gauges or switches, puddles of oil, lubricant on the floor, devices held in place by duct tape,… Wherever I have seen this method used, all managers used up their stack of tags. They came away stunned by the sheer number of small maintenance problems they found.
  5. Conducting video time studies. These directly generates process time data, and indirectly causes you to notice details of the work that you would otherwise miss. For example, you see that an operator is much busier than a neighbor, or lit from behind behind and working in his or her own shadow, etc.

Other Perspectives

Other perspectives on this topic include the following:

  • Michael Bremer, in 2018,  has written a book on How to Do a Gemba Walk.
  • Eugene R. Goodson, in the May 2002 issue of the Harvard Business Review, published a paper entitled Read a Plant — Fast proposing a method for a small team to rate a plant in 11 categories–including safety, scheduling, inventory, teamwork, and supply chain. The recommendations are useful but insufficient, particularly in layout and workstation design. I also don’t believe in assigning scores on subjective scales, with categories ranging from “poor” to “best-in-class.”
  • Joseph Paris has a blog post called The Gemba Beyond the Window, with insights on the monetary value of the shop floor.
  • The AME’s Accelerating the Journey blog contains the following list of  “10 Questions asked on a Gemba Walk”:
  1. What are the business issues with this product?
  2. Who is responsible for the value stream for this product?
  3. How are orders from the customer received?
  4. Where is the pacemaker process, triggered by customer orders?
  5. How capable, available, adequate, and waste-free are assembly activities?
  6. How capable, available, adequate, and waste-free are the fabrication activities feeding assembly?
  7. How are orders transmitted up the value stream from the pacemaker process?
  8. How are materials supplied to the assembly and fabrication processes?
  9. How are materials obtained from upstream suppliers?
  10. How are employees trained in Lean procedures motivated to apply them?

I find these questions puzzling, for the following reasons:

  1. You don’t need to be on the shop floor to find the answers to questions 1, 2, 3, 4, 7 and 10.
  2. Questions 5 and  6, that are really about the shop floor, are leading. Asked in this form, they suggest that assembly and fabrication are indeed waste-free. What you are really after is finding out where the waste is, and where the processes lack capability or capacity.
  3. Question 4 implies that production is scheduled by heijunka on a pacemaker process and pull on other processes. The more general question is of how production is scheduled in the plant. As discussed above, only part of this answer is found on the shop floor.
  1. Question 10 implies that there should be a Lean training program. I don’t understand why training should be the only aspect of the company’s Lean program to rate a question. Before coming to the floor, I would ask whether the plant has such a program. On the shop floor, you should see its effects.

By • Asenta selection, Policies • 27 • Tags: , , ,

Aug 1 2012

What about operators who do not want to be cross-trained?

Question from Bret Matthews on LinkedIn:

We have been talking about cross training our people in the different areas of our shop and the question we have yet to answer is:

What happens when a person that is great at one process fails to meet the expectation in another area?

Ideally, We would like to have a crew that could do any position needed.

Do we just accept that they could be better at some things than others?
What if they just choose to not meet the expectation because they don’t want to do that particular job?

You have two seemingly contradictory objectives:

  1. You want your work force to become multi-skilled.
  2. You want to show respect to your people, particularly if they have spent many years developing specialized skills. You don’t want to punish them for having done what the company used to expect.

This is how I would recommend managing the transition, and it involves  Human Resources:

  1. Create a new job category, that you may call “technical operators” or “superoperators” or “operator-technicians,” or any other name that conveys that they are an elite within the work force.
  2. Train the superoperators to be multiskilled and give them also extra training in areas like quality and problem-solving.
  3. Post the skills matrices on the team performance boards, and make each certification of an operator on a new skill a small ceremony at the daily team meeting.
  4. Establish a policy that all new hires will be recruited at a higher level of education, will receive special training, and will join this group.
  5. Setup a road map for existing operators to receive the appropriate training and join this group.
  6. Revise the wage system so that the superoperators earn slightly more than regular operators.

The idea is to allow the old categories to coexist with the new for the transition period, and eventually disappear. Most operators will come around when they see that the company is serious about cross-training and shows it in visible, concrete and tangible ways. For those who don’t, you need to find the best way to use the skills they do have. To the extent it’s not disruptive, they can stay in place, but they can also migrate to other functions in Maintenance, Quality, or even Training.

You should also keep in mind that cross-training is a never ending quest, because people who are fully trained on all the jobs in a shop are first in line to be promoted out of the shop and new people come in.

By • Policies • 2 • Tags: , ,

Jul 31 2012

Kaizen and small things – A recent example

This picture shows a recent example of genuine Kaizen in a US factory. The workpiece in the vise is 28 ft long, and requires greasing in multiple locations. The operator on the left was tired of running back and forth to a fixed location to pick up the grease. The cart now contains everything he needs to apply grease anywhere on the work piece, and he wheels it back and forth as needed. To the right is the production supervisor for the area, who supports this and other similar projects.

How was it actually done? The production team from this area was given a budget of $500/operator to spend as they saw fit on supplies and devices for improvement projects at a Home Depot store. Their actual spend worked out to $113/operator, including the cart and bins you see on the picture and a magnetic sweeper.

It is a perfect illustration of the Kaizen concept. It is too small an improvement to warrant the attention of engineers or managers, yet it makes the work easier for the operator and makes him more productive. The only way to make sure such improvements are made is to enable and encourage the people who do the work so that they do it themselves. It is a valuable part of Lean, but it is not all of it. Higher-level issues must also be addressed, include make-versus-buy decisions and production line layout.

By • Policies • 25 • Tags: , ,

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