Performance in an Organization-- Excerpts from Deming's Out of the Crisis

I. Performance is a function of the system and of special events System

• Employee
• Management
• Government
• Taxes
• Health Plan
• Unions

A common fault in the interpretation of events (mistakes, defect, accidents, problems with quality) is to suppose that every event is attributable to someone or is related to special events. The fact is that most troubles with service or production are due to the system.

II. The goal is to develop an stable system then to improve the system

a. Variations on performance are due to common causes (system) and special causes (out side the system). Before we can study a system, we must remove the special causes.

b. A stable process, one with no indication of special variation is said to be in statistical control. In the state of statistical control, all special causes so far detected have been removed. Without statistical control, the process is in unstable chaos, the noise will mask the effect of any attempt to bring improvement to performance. Consequently, before we can improve on performance, we must have the process under control.

III. Differentiating between common and special causes

a. Differentiating between common and special causes is best done with statistics. This is accomplished by studying the frequency distribution of performance. Confidence bands are established to identify outliers. Then we must decide on the reason for the aberrant performance (special cause).

b. Once we have achieved a state of statistical control, control limits tell us what the process is, and what it will do. The control chart is the process talking to us.

c. Without statistical methods, attempts to improve the process are hit or miss, with results that usually make matters worse.

d. The proportion of common and special causes is usually a

• 94% common
• 6% special

split.

IV. Improve quality

• a. Low quality means high cost
• b. When you improve quality you also improve productivity
• Improve quality
• Cost decreases because of less rework, fewer mistakes
• Productivity improves
• Capture the market with better quality and lower prices
• Stay in business
• Provide jobs
• c. Management should help people to work smarter not harder.

V. Basic principles for improving quality

a. Experience alone, without theory, teaches management nothing about what to do to improve quality and competitive position, nor how to do it.

Where do you hope to be five years from now?

How may you reach this goal? By what methods?

b. Top management must be committed to quality and must know what to do to improve it.

c. It is a common supposition that quality and productivity can be achieved by putting on the screws, and by installing gadgets and new machinery. This is the wrong way of doing it.

VI. Deming's 14 Points for good management

• 1. Create a constancy of purpose for improvement of product and service.
• 2. Adopt a new philosophy-- a philosophy of quality
• 3. Cease dependence of mass inspection-- you can't inspect quality into the product
  • Quality comes not from inspection, but from improvement on the production process.
• 4. End the practice of awarding business on the basis of price tag alone-- price have no meaning without a measure of quality attached to it.
• 5. Improve constantly and forever the system of production and service.
  • Improvement of the process includes better allocation of human effort. It includes selection of people, their placement, their training, to give everyone, a chance to advance their learning and to contribute their talents.
  • Putting out fires is not improvement of the process.
• 6. Institute training
  • The greatest waste in America is failure to use the abilities of people.
• 7. Adopt and institute leadership

  • The job of management is not supervision but leadership.
  • Remove barriers that make it impossible for the worker to do his job with pride of workmanship.

• 8. Drive out fear-- no one can put her best performance unless she feels secure, not afraid to express ideas, not afraid to ask questions, etc.

  • In most corporations there is widespread resistance of knowledge.

• 9. Break down barriers between staff areas-- teamwork is sorely needed in any company.
• 10. Eliminate slogans, exhortations, and targets for the work force that urge them to increase productivity.
• • The supposition here is that the production worker can by putting their backs into the job accomplish improve productivity.
• 11a. Eliminate numerical quotas for the work force.
• 11b. Eliminate numerical goals for people in management.
• 12. Remove barriers that rob people of pride of workmanship.
• 13. Encourage education and self-improvement for everyone.
• 14. Take action to accomplish the transformation.

VII. Diseases and obstacles to good management

• 1. Lack of constancy of purpose to plan product and service that will have a market and keep the company in business, and provide jobs.
• 2. Emphasis on short-term profits; short term thinking by fear of unfriendly takeover, and by push from bankers and owners for dividends.
• 3. Evaluation of performance, merit rating, or annual review.
• 4. Job hopping.
• 5. Management by the use of visible figures, with little or no consideration of figures that are unknown or unknowable.
• 6. Excessive medical costs.

More on Evaluation of Performance, Merit Rating, or Annual Review

• It Nourishes short-term performance, annihilates long-term planning, builds fear, demolishes team-work, nourishes rivalry and politics.
• It is unfair, as it ascribes to people differences that may be caused totally by the system that they work in.
• It focuses on the end product, not on leadership to help people.
• Under this system, everyone propels himself forward, or tries to, for his own good, on his own life preserver. The organization is the loser.
• One of the main effects of evaluation of performance is nourishment of short-term thinking and short-time performance.
• People that are measured by counting are deprived of pride of workmanship.
• Stifles teamwork-- good performance on a team helps the company but leads to less tangible results to count for the individual, Every Man for Himself.
• Evaluation of performance nourishes fear. The game becomes one of politics.

• What can we do instead?
• Abolish the annual review and substitute it with better leadership.
• Institute education in leadership; obligations, principles, and methods.
• More careful selection of the people in the first place.
• Better training and education after selection.
• Have leaders rather than judges.
• Look for people outside of the confidence band of performance, good and bad. Use your judgment. Spend time learning about your people.
• The people of a group will all be subject to the company's formula for raises in pay. This formula may involve seniority, but it will not depend on ranking within the group.
• Hold long interviews with employees. Find out how they are doing? What can you do to help?
• Figures on performance should be used not for ranking people, but to help the managers improve the system.
• Allow for individual differences and talents. An organization needs a variety of skills.