AA181 - Deming's 14 Points: The Management Revolution We Needed (40 Years Ago)

welcome to the Arguing Agile Podcast, where Enterprise Business Agility Coach Om Patel and Product Manager Brian Orlando argue about product management, leadership, and business agility, so you don't have to. Today on the arguing agile podcast, we're talking Deming's 14 points. This is gonna lead into our larger Deming podcast, which will be a mega podcast or perhaps a series of several podcasts. Key principles for management is how he put it. He offered 14 key principles for management. So you follow those 14 to improve the effectiveness of a business or organization. That's right in the preface to the book. That's right. Preface it says the aim of this book is transformation. Of the style of American management. That's right. We're doing transformation back in the day, and we're still we're still in the transformation, but we don't call it, we call it product operating model. We don't call it right now. We'll call it something else in a year. But you know, back in the eighties, this was called transformation. And even before the eighties so a lot of this stuff comes out of Dr. Deming's work in Japan in the fifties, And I'm going to skip the history lesson because I'm going to get straight into the 14 points cause I think there's enough here to take up the entire podcast. So this is just going to be the core of Deming's ideas to help us with this podcast. We're going to throw up on the screen the helpful W Edwards Deming Institute which contains the collective work of Deming. And they continue his teaching and stuff like that, so their website that I'm using. You can go here. You can explore and slash explore slash 14 points, 14 hyphen points. And that's this screen I'm looking at now, I'll try to remember. When I do the description to put this link in the description, so people can go here themselves and read if they want to, but if you don't want to read like me, you're welcome. We're going to go point by point. So I have the book that these come from, which is out of the crisis. This is the first Deming book of several, I believe it's the first book 1982, originally published in 1982 out of the crisis. So 1982 and all of these problems still exist. Every one of them, unfortunately, but you can work on some of these at the end of this podcast. Cause you're going to take away some golden nuggets. So the 14 points, 14 points to the basis for transformation of American industry. it will not suffice merely to solve problems, big or, little adoption. And action on the 14 points are a signal that the management intend to stay in business and aim to protect investors and jobs. So there you go. That's pretty endemic. Even today, that behavior, that's what you see. I'm going to read what's in the book. Ohm's going to double check the website here to make sure that they match and they should match. So I wanted the points to be as, as, as clear as possible to come straight from the book, right? Without any interpretation, because if you read these on different sites, you get interpretation. Anyway, number one, create constancy of purpose towards improvement of product and service with the aim to become competitive and stay in business and to provide jobs. So constancy of purpose. Constancy of purpose has, it infers a time, a time horizon, right? To me and, and so we don't really have everybody's buy in. Not just the employees of the organization, but customers too. Why does that organization exist? Why are they in business? So yeah, it's, Deming nailed this one I feel like square on, right? Create constancy of purpose toward improvement of product and service with the aim to become competitive and stay in business and to provide jobs. If you're changing your organization frequently, a few years, every couple of years, three years, four years, then I feel like the constancy of purpose gets diluted and so consequently what happens if customers don't know who, what your identity is, what are you in business to do? Yeah. Well, also we've had many podcasts where we talk about when the market moves around you and you don't react like your customers, like that, even your most loyal customers. They're gone, man. It's not personal. It's not a big thing, if you're in the business of selling transistors you know that oh, no, I'm sorry a vacuum tubes, right? Like you get the best vacuum tubes on the market every the cheaper that you know either they're fast to produce whatever for you and then the the transistor comes along and Like all your customers are gone, like magically overnight over a, it wasn't overnight, but it was like over like a five, seven year period it was very fast for these businesses. Saying that's one of the biggest differences between what the business environment was like when he came up with this and what it's like today. It's much more dynamic today. You have to shift today. You didn't have to back then because everything was kind of. Longer time horizon is mostly manufacturing, right? And today it's mostly the knowledge economy, even the manufacturing that exists today has a fair element of knowledge. You know so you look at the new cars that are being produced. There's a lot of software in those cars now that wasn't the case back then. So this is one of those points where you can look at it and go, yeah, I can see how it was absolutely valid. Then it's still valid today in terms of identifying what you're about. But at the same time you have to shift and you have to shift quickly. Be nimble. Well, again, companies, especially like the modern invention of thinking that we need growth is the marker of our success. We're just growing, growing, growing. We have a million different businesses engaged in a million different, lines of business or products or whatever. But the idea is you break your organization down and then look at each one of those and the customers they serve together, and maybe you can build. Constancy, a purpose like I'm, I'm thinking of like very large organizations that there's no way that they could build the, he, he, in the book, he, he goes through and he says, this problems of today, there's two, two types of problems in businesses, problems of today, and there's problems of tomorrow, right? And most businesses are wrapped up in problems of today. Sure. And they, they, even if they wanted to, again, going back to the. Podcasts on strategy that we did with Nisha, even though they wanted to, they don't write their strategy down that if you ask different people, the different people will tell you what they think the strategies are, and then nobody's looking toward the future. And even in the future, when he's talking about future, he lists a couple of bullet points. the time horizons for the future that he was talking about is 10, 20, 30 years for us. You're very lucky if you even have a five year plan Everyone knows that you know so he says innovate allocated resources for long term planning planning for the future and then he gives A lot of things that you could be looking into to put money aside or resources aside For the future. And then the other one he says, put resources into his research and education, and then item C is a constantly improved design of product and service. So again, continual improvement is like a normal piece of this, a lot of these organizations where people are in feature factories and it's a, do what I say type of environment, you say like, Oh, everyone's doing continuous improvement. When you peel back the covers and you look on it, like the slightest look underneath, you're like, Ooh, yeah, you don't like what you see. It's like, put the covers back down, right? Put them back down, check out exactly somewhere else. I think there's parallels to what he's saying in this point. Number one, with your point large companies, I can think of companies like Unilever or GE companies like that. Constancy of purpose is not at that level. It's at the business unit level. So GE finance might have a different identity than GE appliances or whatever. So like knowing that I'm not getting into a, a growth as a strategy type of discussion, which is a whole different podcast. So that would be a real argument. I mean, it would, cause it, cause it has to do with organizational. I gotta think about that one for a minute. Like if anybody listened to this if you can think of somebody who would be a good person to talk to about organizational design and why large companies like that don't kind of segment themselves and prepare the different business units for success by saying Hey, we need to draw a box around you and not have you be under this cognitive load of all the rest of the business units and what their strategies are and whatever. It's like, how can you play in your space and be successful? And then. Yeah. what can we learn from you and stuff like that? like there are some people now that call it descaling, but you know, people haven't really figured out a good way to move that forward as referenced by the 18 billion scaling frameworks that are out there. I think a lot of it gets muddled with this whole idea of being autonomous as a business unit or a subunit. Um, And then when you're not doing so well, you know some people will come in and quote unquote rescue you by breaking up the, the bigger piece into multiple pieces and selling off the, the unprofitable ones. Let's move on to the number two, adopt the new philosophy. We're in a new economic age. Western management must awaken to the challenge, must learn their responsibilities and take on leadership for change. I feel like this, again, it, it harkens back to the day when he wrote it in that economic climate. That's where I think when he's saying new philosophy, he's not talking about. What we work in today in in the knowledge economy is talking about the manufacturing space, right? This is where a new economic age which back then 50 years ago was true Yeah, coming out of the the second world war and countries were rebuilding so western management Specifically he's taking a taking aim at western management says they must awaken to the challenge. Yeah learn their responsibilities and You know take on leadership for change western management back then was really kind of focused on Well, frankly, Taylorism, right? I mean, he gives a great example in the book. He says between American style of management road along unchallenged between 1950 to 1968 when American manufactured products held the market. So basically like there was a period of rapid. Expansion and demand for American products. And you know, you could skip a stone anywhere to hit success. And basically there was no competition. Basically it was, it was a lot of new markets and there wasn't any competition. And he says the thought still lingers. We must have been doing something right. But you know, I mean the feeling like, wait a minute, our business is successful. Of course, we were doing something right. I've seen a lot of products and the product organizations that because they were either first in the market or because they were first innovate or whatever, they had a lot of, I mean, they were just a bad companies and bad teams with successful products because that whatever that lightning is, is in a bottle, they were the first there. Right yeah, coming back to this idea about leadership for change, right? his focus was on Leadership rather than management here You could argue that is still extremely relevant and valid. There's a lot of focus on management out there instead of leadership, true leadership I'm talking about. So instead of checking the boxes, really empowering your staff, your people to do the right thing and, and truly meeting the needs of your customer, not looking at short term profits, but the latter is more prevalent. Yeah. There's also the The deadly diseases in chapter three that that management suffers from. He's talking about curing the deadly diseases. I don't know if we'll have time to go into the deadly diseases. It's chapter three. Probably not. Yeah, let me, let me see if they're, let me see if I can just list them. If, if possible. I mean, I do have the book here enumeration of Deadly Diseases. So quickly lack of constancy of purpose, which we already talked about. Emphasis on short term profits. Oh boy. We just threw corporate America under the bus right there. Evaluation of performance, merit ratings, or annual reviews. Another one, corporate America love. Mobility of management and job hopping of management. He's specifically talking about management which we talk about on this podcast quite a bit. management by use only of visible figures with little to no consideration for figures that are unknown or unknowable. Number six, excessive medical costs, because again, this book was about kind of the whole economy at the time. Anyway excessive medical costs and excessive costs of liabilities swelled by lawyers that work on contingency fees. So that interesting that was his seven deadly sins. A lot of those seven deadly sins are still relevant, going to say, shocking, they're all still around. Let's see. So, number three. Cease dependence on inspection to achieve quality. Eliminate the need for inspection over time. On a mass basis by building quality into the product in the first place. Oh boy. Like another one that you're like, here we are red in the face, still talking about this year, many, many years later of you know, we've got to do all the programming up front and then we got to do all the testing in a phase and then we got to do it. Like there's plenty of shops that work like that. Another topic that we've addressed on the podcast a couple of times inspecting for quality at the end, rather than building it in what Demi was saying is the quality. As such good, bad or ugly or is already in the product. Right. By the time your customer gets their eyes on it. So inspection, according to him is too late. Right. And we're still doing that. We still do exactly what we were doing back then in manufacturing. So now we do it with other things like software, et cetera. If we weren't doing that, we wouldn't have the fiascos that we have now with the likes of Boeing, for example. Oh boy. He says routine , 100 percent inspection to improve quality is equivalent to planning for defects, acknowledging that the process has not the capability required for the specifications as terrible. inspection to improve quality is too late, ineffective, costly. Yeah. And I think it's Dodge, Harold Dodge, who said you can't build. Quality into you can't inspect quality into a product or something like that is what he said. I'm paraphrasing He says right here when product leaves the door of a supplier It is too late to do anything about its quality quality comes not from inspection But from improvement of the production process inspection scrap downgrading and rework are not corrective actions on the process So the process that produces the product, which again, like this TDD extreme programming, peering, all of these things are process changes that directly correlate to quality improvements. Yeah, and it's not even a tangential correlation. it's a direct correlation, right? I think some companies got it way back then specifically the Japanese auto companies. Back then there was a company called Datsun. And they learned from that and they started to build quality in. And today we have Nissan, the rebranded Datsun. And then they have their luxury line as well, The infinity. So yeah, so that's that point on dependence on inspection to achieve quality, The key part of this here is that the the quality comes from your process, you know So improve the process if you want better quality, right? All right, so let's skip to number four And the practice of awarding business on the basis. Of price tag instead minimize total cost Moving or move toward a single supplier for any one item on a long on a long term relationship of loyalty and trust Oh boy, think about that like he's packed a lot under that one, right? so just looking at Giving business to someone based on cost so the lowest cost basically Yes automatically is going to give you inherently the lowest quality I mean, they're not going to use high quality parts, for example, into the product, because you're cheapening out at that point. Instead, he says, minimize total cost. Don't look at a component and say, let's get the cheapest component there. Because the thinking there kind of goes from one component that, let's say you have four components. Get the cheapest component number one. Therefore, get the cheapest number two. Therefore, get the cheapest number three. That's a fallacy that he's basically pointing out here. He's saying, no, look at the whole thing and try to minimize the total cost. Which isn't just the cost of materials. It's the cost of producing it, cost of labor, Cost of rework, Cost of bad quality, all of that. So he has a couple of nice, spicy hot takes at the beginning of this chapter. At the beginning of the section, it says we can no longer leave quality service and price to the forces of competition for price alone, not in today's requirements for uniformity, and reliability. That is James K. Bakken, Ford Motor Company, 27 January 1981. Price has no meeting without a measure of the quality being purchased. Without adequate measures of quality, business drifts to the lowest bidder, lowest quality, and high cost being the inevitable result. He says the aim in purchase of tools and other equipment should be to minimize the net cost per hour or year of life. But this would require long term thinking not just the cheapest price tag for purchase today and the quote there is Shewart, economic control of quality of manufactured product from 1931 so I mean, we're 1931 Right here. Schuart in 1931. Like we already solved this problem You Financial accounting, like formula to go into this to figure out what's the, what's the lifetime they do this corporate I know for a fact that corporate asset management, cause I remember working with like whenever the company would have like a contract with Dell or one of these places to provide laptops corporate laptops they would have the, Financial formula. And it's like annoyingly, they have to go and replace your laptop every like two years or something some ridiculous. And I'm like, I don't want to migrate my laptop because somebody on a spreadsheet has said like that the use of this laptop is three years, 36 months. So we're going to take the cost of the laptop divided by 36 months. And that will be the full financial life of this asset. Yeah, they amortize the asset over time. Because when they go to buy them, they're breaking that down to either per year or per whatever month, hour. I don't know what the formula would break it down. But when, so they're not, they could go with a more expensive laptop. And because when they do that formula and then they factor in the ease of setting it up, the cost to replace parts, the quality of how often things go wrong or whatever, and they factor all that. Data, the one that actually is more expensive might end up being a cheaper alternative over a longer time period. And also if you buy a more powerful machine, maybe this brand of machine is good for four years, not three years now you're getting 12 more months I don't know, but this is, he's saying this is the kind of stuff needs to be considered. Not just, Hey, here's your fixed price contract. I'm just going to pick the contract with the lower build my bridges out of jelly cause it's cheaper. It's cheaper now. Yeah, exactly. So you can't really see past your nose. You know, looking at the future. So that's one point in this major point that he's talking about moving towards a single supplier. And even today, we learned this. Specifically came to the floor during covid when we had that whole supply chain crisis, right? Single supplier at that point was deemed to be an issue because if they were having trouble, well, you couldn't get anything. So you would look around. But then everybody was having trouble, right? So singles of this single supplier model is, it's not just that if you're, if you're trusting a single supplier, you get the best price that that may be a small part of it. It's the fact that the longer you work with them, the better relationships you have with them, the trust, right? And so he's talking about that the loyalty and the trust. I've known companies that were small enough where they only had one or two major customers, and then there were a couple of smaller customers, maybe five or six small customers. And the company was in financial strife, and one of the major customers actually helped them on by prepaying for equipment for two years ahead. So that company could have fumes to survive on, right? That doesn't happen unless you have loyalty and trust. Right. Yeah. Using individual suppliers at the lowest cost that you didn't really bring them into your, Like the supply chain, you didn't really bring them in and truly partner with them You just they were kind of like your mercenary suppliers and as soon as you found a cheaper, you know By two pennies or whatever you would cut them loose with no, you know you don't even really know who they are and who you're dealing with That's a lot different than treating a supplier treating a vendor As a partner, basically, that's different and also to further complicate the matters is why do you need to ship widgets from literally the other side of the planet for because, well, the cost of shipping them and then the container ships and all the stuff that brings them, it's actually two cents cheaper per item. But again, if you're very myopic and the only thing you're looking at is the final cost on the dotted line as the one time payment and you're not considering the future. Like this short term thinking, yeah, I get it completely, , Oh, I don't care where it's coming from. just here's the money. Make it happen. Yeah. And then you turn around and you find Oh yeah, we're not going to give you these masks. we're going to keep them. We need them. Too bad, buddy. You know, Oh, I thought we were partners no, no, exactly. Cool. Yeah. So end the practice of awarding business on the basis of a price tag. I mean, it's a price tag alone really is yeah, I think he specifies that. Doesn't he? He says price tag alone. In his text. He gives a great example about like the finance people that will buy plane tickets for like the traveling salesperson, like they'll buy you the cheapest plane ticket and now you got to wait at the airport all day and now you're super jet lagged or they won't pay for a hotel the day before they make you come in the day of and now you spend a bunch of time traveling and now you're going in front of the client. You're all flustered from traveling. Like, wouldn't it be better if you had a hotel, you had time to relax, time to have a breakfast in the morning, whatever. And then you got to your client, you were gassed up and ready. I have lived that life in my previous job. So I can understand after an international flight, you land and then the three S's later you're in front of a client. I mean, you just, you're not putting your best face forward both literally and otherwise. So, yeah, I absolutely agree with that. I'm gonna move on to number five. Number five, improve constantly and forever the system of production and service to improve quality and productivity and thus constantly decrease costs. Costs. But we really like the word constantly. Four times. So there's an article linked to that on the site. Haircuts and continuous improvement. Oh, which is pretty interesting. Yeah, There's a link there. And there's a story that Professor Bill Bellows, deputy director of the Institute has we're probably not gonna have time to go through all of this, but I think definitely to the point of process improvements leading to quality improvements leading to decrease. Decreased costs, basically, is how I'd summarize it, right? Improve quality and productivity because your processes are better. And in turn, those will yield lower costs. And if you can market well, if you can sell well, then it should mean better profits for you. The point about this one, I think, is simply that whole relentless pursuit of improvement. Improve constantly. constantly and forever the system of production and service to improve quality and productivity so that you can decrease your costs. It says, putting out fires is not improvement of the process. Neither is discovery and removal of a special cause detected by a point. Out of control. This only puts the process back to where it should have been in the first place. Yeah, this is most companies right here, it is, he's talking about process control where things fall outside of the. control band and those things you need to bring back in the band. He's not talking about that under this point here. He's saying once they're in the band, you then can continuously strive to improve the processes. Adjustment of a process that is in statistical control initiated on appearance of a fault item or a mistake as if it arose from an obvious immediate cause will only create more trouble not less. It's a theorem due to Lloyd S. Nelson. If you start meddling with things that are in control, that's kind of where he's going. you start meddling with things that are in control as if they were special causes. So in other words, as if they were not in control, is what he's saying. Once things are in control, you can start to really look at improving things, but if they're out of control, you gotta bring them in control first. another final hot take before we move along from this section. Mere allocation of huge sums of money for quality will not bring quality. There is no substitute for knowledge, but the prospect of use of knowledge brings fear. Which is another point in the future. Yeah, I mean, we see that all the time, don't we? Throwing money on quality. So you can't buy quality into something. That's right. Like a certain company that may or may not have a blue screen'd the world, and now it's a spoiler alert for a future podcast, one of their fixes is we're gonna have an outside company. Yeah, we're going to farm out quality basically, that's right and then there are companies that sloganize it and say, well, quality is it, we strive for quality, quality is job one, this is their findings though, this was their findings is like, oh, we need our official findings, how we're going to rectify this issue, we're going to spend some extra money on quality, right? Yeah, after having destroyed the world. Some people just want to set the world on fire. All right. Number six Institute training on the job. One of my favorites is to do training on the job. So you know, it's no surprise. Anybody's listened to any of our podcasts where I go on about how I'm a big fan of this model training on the job, not just going out to a training class and come back and, Be a self self declared expert training on the job under the tutelage and guidance of somebody who's Come up through the ranks. I mean, there's just no substitute for that, right? training must be totally reconstructed period. So here we go. Shots fired. Management needs training to learn about the company all the way from incoming material to customer a central problem is need for appreciation of variation. Management must understand and act on the problems that rob the production worker of the possibility of carrying out his work with satisfaction. Yeah, from the perspective of the manufacturing environment, right? That's where he wrote this. But if you take our work environment today in knowledge work, this applies still, I say. Production worker. They give you no instruction. What they do is they set you down in a machine. They tell you to go to work. There's nobody to teach you. My colleagues help me, but they have their own work to do. Don't you have a foreman? He knows nothing isn't his job to help you learn yours if you need help You don't go to somebody that looks dumber than you are do you he wears a necktie, but he doesn't know anything But the necktie helps doesn't it? No. Oh, that's right. Oh my god. Oh my god I can't imagine why Deming's stuff wasn't adopted by a bunch of people who say I know what needs to happen. No, I don't need evidence I'll just tell you that's right. Yeah, my goodness. so today as well like You know people join a company and they're basically told go watch this video or five videos or Go read these docs and you'll get up to speed and that's your onboarding, right? there's not even a simple thing like a buddy system where you can turn to somebody and say why are we doing this? What are we doing? Who's our real customer? You can't ask questions like that anymore It's such a shame because they expect you to be productive After a few days of that induction, if you like self induction, right? And it just doesn't work Two final hot take points in this section. Money and time spent for training will be ineffective unless inhibitors to good work are removed. there's that one. And then the other one is It should be noted further in connection with 6 and 13, which we'll get to money spent on training. Retraining and education does not show on the balance sheet. It does not increase the tangible net worth of a company. In contrast, money spent for the equipment is on the balance sheet and increases the present net worth of the company. Yeah, I mean, that's an issue. Investing in training definitely doesn't reflect on the balance sheet, right? Investing in your people doesn't we can't put that on the balance sheet. So we have no time for it. That's exactly right. We'd rather buy stuff so we can say we have assets. That's right. Now get out of my office. So true, man. It is so true. Oh man. This it's like, I feel personally attacked , by item number six. I want to move on quickly. Let's see. Seven. Number seven, institute leadership. The aim of supervision should be to help people and machines and gadgets to do a better job. Supervision and management is in need of overhaul as well as supervision of production workers, adopt and institute leadership. In our world today, what happens, right? We're simply pointed at something and told to do something as opposed to empower to do something well, and then continuously being empowered to improve how well we do things on an ongoing basis that doesn't happen. So he's saying that people in machines and gadgets should do a better job. Supervision of management basically should be. It should be overhauled is what he's saying, right? How should it be overhauled? That might be later in the book. And if you want a deep dive on that one, he's talking about a leader being a coach, a leader being somebody who empowers. People that he's leading as opposed to somebody who judges them. Yeah, right? That's not a leader according to to deming. He's got a few I mean that this section is substantial compared to some of the other sections Some suggestions remove barriers that make it impossible for the hourly worker to do his job with pride of workmanship, which is 0. leaders must know the work that they supervise, which is one of the ones that you kind of pointed out item C in the sections sort of it tells a story about like seven people doing their job that they were doing good, but basically the system was designed. To promote failure basically. So it wasn't the individual people in the department that were at fault for the issue. Basically the system needed to be improved because they thought that the system was stable and it wasn't. That's one of Deming's more well known sayings don't fix the people fix the system. Yeah. And then he has a story here. I'm going to read it. supervision on the factory floor. What is, I fear, in many companies, an entry position for college boys and girls to learn about the company. Six months here, six months there. They're smart enough, and some of them do indeed try to learn the work, but how can anyone learn in six months? It is easy to understand an hourly worker who stated that if he goes to his foreman with a problem, the foreman, just smiles and walks away. He does not understand the problem, and could get nothing done about it if he did. this is a classist kind of a thing that he's pointing out happening Hey, the college, the smart college people are going to come in and they think they. know better, but they actually don't in today's environment. We have a lot of matrix type structures This exacerbates the problem because the person is not going to know right? It's the person you turned is not gonna know what you know or better than you so they can help you and guide you They're not gonna know that because they're not vested in here. They are working for some of the groups somewhere else and they're seconded to your team. The, like the interesting thing about this section is what we talked about in the podcast before that there are these the, the, the big fan companies, almost every single one of them has this. Pipeline from the the big schools directly into product management, like the associate product management, where they take people from top schools and they go straight in and try, trying to call the shots, even though they have no product management, no tech experience, let alone product management experience but they got their MBA or whatever. And now they're so I'd like to say. You know, wow. Things are a little bit different there. You know, I see the pattern in other places too. So yeah, definitely case. You didn't think it was in your business. Like, yes, it's in mine. I don't know if it's in yours, but it's in mine for sure. Yeah. Let's see. Number eight, number eight, drive out fear so that everyone may work effectively for the company. Drive out fear. No one can put in his best performance unless he feels secure. Today we call this psychological safety, but yeah, it's exactly the same thing. You know, empower people to speak up just like on the manufacturing floor in certain companies, people are empowered to push the red button and stop the assembly line, right. Just because they saw something that wasn't right. Far better to stop it now. Huddle around the issue, fix it, and restart it, then just let it go, saying no high problem. So that's what he's saying. Drive out fear, encourage people to speak their minds, and empower them to take decisions. Yeah, I mean, we're either all one team or we're not. I mean, That's definitely evolved since I've been purely a product manager. he's got there's a widespread resistance of knowledge. There's a widespread resistance of knowledge Advances of the kind needed in western industry require knowledge yet. People are afraid of knowledge pride may play a part Play a part in resistance to knowledge. New knowledge brought into the company might disclose some of our failings. A better outlook is, of course, to embrace new knowledge because it might help us to do a better job driving out this stuff You know, yeah, I mean fear he says fear invites wrong figures It leads people to just present the good and hide the bad right and we've seen that happen I mean, especially in the offshore model, I see that happen. People don't speak up, and you wonder why they don't speak up? Because they're chastised when they do, right? So, he says, to keep his job, anyone may present to his boss only good news. it's uncomfortable if you start to tell him bad news. But then, that's a manager that you're talking to, not a leader. A leader would make sure the environment is safe, is fixed, the system so that people can speak their mind. And he kind of rewards that, to unearth the bad causes so they can be fixed. That's pretty rare these days. It says more on fear and another loss from fear is inability to serve the best interests of the company through necessity to satisfy specified rules or the necessity to satisfy at all costs, a quota of production. It says I'm, I may not make my quota today. This is an hourly worker to a plant manager. I do not have the time to take a careful look at my work. I must turn this job out and start on another one. This is the engineering, like I gotta, gotta knock out all these bugs, gotta knock out all these stories or whatever. I don't have time to sit down and look at the process, and we don't have time to improve them. We're too busy to improve. So that, this is one of my pet peeves when teams say, We gotta get this done, no matter what, because we have a deadline. But who set the deadlines? They were arbitrarily set to begin with. The other side of it that I really want to talk about though is, How are teams incented? They're not incented to improve quality. They're incented to get things done and meet a deadline to heck with the quality. And that's a big problem in today's environment, right? That that's what I think anyway. so somebody said, somebody who probably has never done the work, honestly, sets a deadline and says, you will get this delivered to production by this date and the teams are now. Whipped into getting that done and they will get that done because they're rewarded based on that if they don't that they're punished All right. I believe number eight segues perfectly into number nine which is breakdown barriers between departments, people in research, design, sales, and production must work as a team to foresee problems of production and in use. That may be encountered with the product or service. it's a word salad, but it's basically saying people in different debates need to work together in unison in order to produce a system produce a product or service that they deliver. So breaking down barriers between departments. Here we go. A new president came in, he talked with the heads of sales, design, manufacturing, consumer research, and so forth. Everybody was doing a superb job and had been doing so for years. Everything's great. No blockers. Nobody had any problems yet somehow. the company was going down the tube. Why? The answer was simple. Each staff area was sub optimizing its own work, but not working as a team for the company. it was the new president's job to coordinate the talents of these men for the good of the company. So that's classically what we call local optimization, right? Yeah, I mean, it just doesn't work the overall, what the customer doesn't see is how well a given area is working. What they see is the result of everybody's work. And if you're not working together, you're going to deliver a suboptimal product or service. Yeah, here's this great diagram in this book. Is that a process behavior chart or something like that? No, it's the one about the entire system. And then he draws circles around all the different departments to show how easy it is to destroy the system. It's in here. Hello, computer. Sorry. Got carried away. This is what it looks like. Oh yeah. I've seen that one. Yeah. Yeah. So it's, it's the suppliers and they're the people who take receipt of the test materials and the people who test the processes and machines and methods and the people that actually work on the production and assembly and inspection lines. People that do distribution, the consumers, they're all working together as a system and everyone knows the goal of the system. They know what business they're in. They have this constancy of purpose that we're talking about, but then when you draw little circles around each department the assembly department and the little circle around that, and they're incented by whatever. And then the production department, you draw a little circle around that. And then the assembly. Department says, well, we're judged on these metrics. So it's like the QA department, we're judged on the number of defects that we let go. And we're judged on the number of defects come back in, And I remember QA department one time we were judged per analyst on the number of. Support tickets that we cleared that we worked on and we're in a done status basically. And how many we had open at any one point in time. So you can look at an analyst and say, Oh, that analyst has four tickets open on average or eight tickets open on average. even when I was a manager and I would see those numbers that people were being judged on, I knew it was nonsense. I knew it was a nonsensical way to judge. So what I would do is. I did not appear on that spreadsheet, believe it or not. Even though I did take support tickets. So what I would do as a manager is I'd look at all the incoming support tickets before they get assigned and I would choose ones and put them on my status, them to me, and then they'd be hidden on those reports because I could tell that the resolution of a particular ticket, just because I had such expertise in all the products I could tell which support tickets we were going to be very messy and we're going to cut across products and be a real problem. And I would just take those. You know, I mean other people would help me. It's not like I would just do them by myself. Sure. I'd ask for help Hey, can you look at my support ticket and do whatever so people so we're doing it but I only did that because I was like this is a stupid way of judging things because he there's no telling when that phone Is gonna ring and a support ticket comes in and a customer's having a problem or whatever We need to resolve the customers problem I mean really what you should be doing is you should have a big board that says this is how many customer problems we resolved And then pat yourself on the back as a team, though, not an individual. Yeah, yeah, yeah. Reality, no one person resolved the support tickets by themselves. Measuring people that way. If I was an individual on that team, I'd be incented to just basically close off as many tickets as I can. That's exactly right. That's hurry up and don't even bother testing. I specifically remember what you got from that process is you got a ping pong where people would try to like the average number of hours or days or whatever the ticket stays open. People will be like, Oh, I need one more piece of data. And then send it back one more piece of data, send it back. For, yeah. People will play games. Yeah, exactly. I was just going to say people know how to game the system. Well, that's the kind of nonsense. That you get there, there's a, there's a real example from Brian's experience. what point are we on nine? Anybody can see advantages of low inventory. Everybody, but people in manufacturing and sales. The plant manager prefers to have heavy inventory on hand. He's afraid to run out of parts. The salesman and servicemen prefer. Full inventory on hand, all sizes, all shapes, all colors. The customer may not be willing to wait. This would mean a loss of sale management. Management have the job of trying to help all people involved with inventory to work together on a give and take basis towards the rules for inventory that renders service to the customer. He's bringing this example up because the larger inventory that you have, the more money you have sitting around on your books, it's not great. And it's dead weight. Yeah. You want just in time production so that there's very little inventory sitting around and you don't have this giant paying for this giant warehouse and paying for all this stuff. Stuff and creating all this stuff and paying for the cost to produce it, but then not selling it. That's not great. Yeah. There's a financial ratio of return on capital employed. That just goes through the floor when you hold onto inventory. Yeah. So there you go. MBA folks, we understand inventory. He's saying, but before you go slashing your inventory and saying like, sorry, those parts are you got to wait to have that or whatever. Before you do that. You got to consider the whole system here. Alright, so let's go to number 10. Number 10 is pretty straightforward. eliminate slogans, exhortations, and targets for the workforce, asking for zero defects and new levels of productivity. Such exhortations only create adversary relationships as the bulk of causes of low quality and low productivity belong to the system and thus lie beyond the power of the work. Actually, I thought this was going to be a quick one, but actually, this is a very serious eliminate targets, slogans, and exhortations, posters for the workforce that urge them to increase productivity. Your work Is your self portrait. Would you sign it? Oh boy. Yeah, the sign a pledge, zero defects do it right. The first time take quality in your work, take pride in your work. There's a lot of companies that have these slogans. you know, what's wrong with posters and exhortations? Om, he says here in the book, they're doing, he didn't say Om, but I imagine it's, I'll pencil it in and it'll be there. They are directed at the wrong people. They arise from management supposition that the production workers could, by putting their backs into the job, accomplish zero defects, improve quality, improve productivity, and all else that is desirable. Exhortations and posters generate frustration and resentment. They advertise to the production worker that the management are unaware of barriers to pride of workmanship. Barriers to pride. Wow. What a lovely phrase. I don't know. Think about today, right? This was then, and again, this is all around manufacturing, but today, how does that play out in today's world? You have people that basically put these slogans out. You know, we produce the best quality software. We produce the best this and that, and everybody understands that's the slogan, but. Do you really produce the best stuff? Right? How many times do you look at anything that is subpar and say, here's the delta between what we actually delivered and where we should be and strive as a system? Instead, what we find is pinpointing and the blame game. Right? And that's the problem. Words like this sound pervasive. Words like these sound pervasive. Hold people accountable. For what? What is meant by crystal clear? What is failure? Who's failure? Employee's failure? Or the system's failure? Yeah like, this, this this section has a lot to do with understanding of statistics. You know what I mean, tracking, tracking proper things not, not, not your vanity metrics, things that actually matter. You know, I, I feel like this, this section is so large like it deserves its own podcast I don't know. I even think of like zero defects is a good one for me. Cause it's like, again, with a QA background this is another one that, if your developers are all incented and pressured, not even an incentive, they're just pressured on get things out faster and faster, we would say that back in the day, too, is like developments, incentives. Again, they're not incentives because they're not paid a dime if they ship stuff out faster. But their, their incentive is not to get yelled at by a project manager or their boss, or the, the, the classic office space. I have five bosses and every time I mess up, like I had to hear about it five times. That's their, that's their benefit of being successful and hitting their deadlines and not having bad quality or whatever it is. They don't get yelled at by five different people about it. Right. So that their incentive is to get stuff out as quick as possible. And then on the QA side, their incentive is don't have anything come back in, I mean, most of the time their incentive is to, even if they're not paid anything financially or otherwise, their incentive is to just keep their job. You could come out tomorrow in your development department. You know, it's whatever development product of any of these departments and say, okay, we're dedicating now we're going to do TDD and we're going to do extreme programming and we're going to try these process fixes and then we're going to measure all the same metrics that we're measuring. So basically we're making process changes, right? We're not just going to say, oh we need to. Do more testing. Hire another tester. The process changes will inherently deliver the quality over a little bit of time, but you're going to have to fight. You're going to have to fight with the bean counters that say, why are two people working on this thing? No boy, extreme programming. Yeah, right here. I mean this is probably the best case, like extreme programming is probably the best case in this is if you are doing extreme programming, right? Yeah. If you're doing extreme, I don't know why I was like a creepy. If you're doing extreme programming, like we would like to hear about it because you've somehow broken through this barrier. You know, and I don't mean like occasionally someone will roll over and look over your shoulder. I mean, literally two people write code whenever you're doing anything. I would like to hear about it because I'd like to hear about how you broke through the slogans and the motivational posters and all this stuff to actually have a process change that is meaningful. Yeah, I would love to hear from you. 11 is one of those that's broken up into two pieces, 11 and 12. I'm just gonna hit both of them at once. Eliminate work standards, quotas on the factory floor. Substitute leadership, Oh boy. And then 11 B is eliminate management by objective. Eliminate management by numbers. Numericals substitute leadership. Wow. in the eighties, maybe even starting in the seventies, eighties and nineties, there was a big thing about management by objectives. MBO. Right? Way before that, Dr. Deming had said, eliminate that. So we obviously didn't listen to him. We tried management by objective and we failed. Eliminate management by numbers because we're just simply coming up with these numbers arbitrarily and saying, this is what we need to meet. So our staff, our employees, they meet those. right? You will do this. They go out and tell you what the benefits are, why we're doing this. Cause they don't even understand the benefits themselves. Deming says substitute leadership, just two words. Right. But there's a lot packed into those two words. He's saying eliminate management like that management by objectives, by numbers, et cetera, and substitute leadership, meaning empower your teams to go after The best possible outcome for the customers, right? It's to me, that's the goal right there, but we're not doing it for the most part. Some companies may be doing it. And again, if you're working for a company like that, let us know. We'd love to hear from you. He gives an example in the section about A woman in, at the graduate school of business administration of New York university described her job with an airline, which was to answer the telephone, make reservations and give information. She must make 25 calls per hour. She must be courteous. Don't rush callers. She's continually plagued by obstacles. A, the computer is slow in delivering the information she asked for B it sometimes reports, no information whereupon she is forced to use dictionaries and guides. What, what is your job? It is. To make 25 calls per hour or to give callers courteous satisfaction with no brush offs. Well, if you measure it, it's the former and if you're incented on the calls per hour, it's the former We can go down a real dark road here about in order for sales to make the Sale, they promise all these features and now now development is under the gun to get things out. You know that this is a The management by objective also, also segues into my gripes with OKRs and whatever, everything else. People don't, people that are, most people are doing OKRs. They're not really even doing OKRs. It's my gripe with this. It's measurement along with measurement. Does this include yearly reviews? Well, if yearly reviews are a different one, then great. It's all a game and it's all game number one. And it all, it all obfuscates your, your real objective. You know, again, it is our objective. What you said before in the podcast is like, is our objective to satisfy the customer with whatever, or is our objective to do this departmental thing that we're measured on because we're not measured on customer satisfaction in any way, shape, or form. Oftentimes that, that customer satisfaction piece of it is far removed from the workers, right? I'll share a little anecdote just a few seconds. Back between high school and college, I worked at the Mars factory that produces. Mars bars and other candy on the manufacturing floor. And we were basically told to keep X number of quantity. Basically it's the X number of hoppers need to be filled on your shift. Right. So you couldn't really. Turn off the assembly line or the machine, because as soon as you turn it off, all your peers will look at you and give you the stink eye, because their quotas are being dinged as well, but you can see clearly that the labels are wonky on these bars that are flying by, and you know that's all going to be wasted. You can't sell that. Right. But you can't stop the machine either right so we would let it go I mean, what can you do? You know that by the foreman? Though the sweet spot was we could take some of those home with us. I see. Yeah, Are you like that? I love Lucy skit where you're shoving all the chocolate in your mouth Is that what you're doing pretty much? I like it after the first two three days. It kind of got yeah We got over it, but you could take it home and give it to all your friends but yeah, that's just an example of how you're measured. And, and again, an example of management, right. And not being empowered to say, yeah, hit the red button, stop it. So that was 11 a and B I believe. It was 11 a yeah, 11 a and B we rolled together. So internal goals set by the management of company without a method. Burlesque. That's an interesting, interesting word choice there. He says examples. One decreased cost of warranty by 10 percent next year to increase sales by 10 percent three improved productivity by 3 percent next year. Listen, I've seen every single one of these in real world. I have to improve. Here's, I got another great one for you there. Improve improve company revenue. 15%. Next year okay, like we'll pick a division. We'll sell that off. Yeah. And Fire a bunch of people. Yeah. Easy. Yeah. Improve revenue. Yeah, so without, without what are you saying is without a you know, by what method are we going to do this without an aim you know you're really kind of, again, playing a game. Number twelve, so let's do number twelve the same way we did number eleven. 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. Remove barriers that rob people in management. And in engineering of their right to pride of workmanship. This means inter alia abolishment, inter alia abolishment of the annual or merit rating and of management by objective. So in the first one, they're saying removing the barriers for the workers. Right, right. and it gives, an example of that is certain companies would measure the number of minutes somebody spends in the restroom. Because they seem like, why aren't they working? So they measure that. So that's an example of like, they actually measure it. And HR came back and one company that he cites came back and said, it works out to be six minutes a day or something. So you can't be in the bathroom for more than six minutes a day. What if you say, it's just ridiculous. I know a certain company that will not be named that you know, with their drivers Yes. Yeah. So that's an example of what he's trying to say here is right to pride of workmanship that people do have a certain expectation of the environment. Right. Performance management, I think is what he called it to include employees, personal business. Employees spending more than a certain amount of time doing other things. Making calls, for example. You gotta get a plumber in to take care of stuff at home. When are you gonna make the call? Their offices are closed outside of your working day. So, give people the opportunity to be human. He says you know, it's like telling colleagues to stop chasing bats in the office. So yeah, I mean, we've seen that we've all probably been in companies where this is real. here's a great quote. You're going to enjoy this one. In my experience, people can face almost any problem except problems of people. They can work long hours, face declining business. face loss of jobs, but not the problems of people faced with the problems of people. Management included in my experience, go into a state of paralysis, taking refuge in a formation of QC circles and groups for EIEP and QWL employee involvement, employee participation and quality of work life. These groups predictably disintegrate within a few months from frustration, finding themselves unwilling parties to a cruel hoax, unable to accomplish anything for the simple reason that no one in management will take action on suggestions for improvement. These are devastatingly cruel devices to get rid of the problems of people. There are of course, pleasing exceptions. Where the management understands their responsibilities, where the management participates with advice and action on suggestions for removal of barriers to product workmanship. So, so like we just explained an Agile Transformation. Absolutely. You know, I think he's saying the onus is really on management, not the workers. Yeah. To create the environment where workers can thrive. Yeah. Well, only management can change the system. And that's, that's true. That's a a specific point of this book. You know, the workers basically can't change the system. Management has to change the system. And then a couple of that with the number of 94 percent of issues that crop up are issues of the system, not of the individual worker or their labor. Right. It has to do with the system that needs to be solved. So there's both of those. You know, I feel we harp on the games of the yearly reviews and all that kind of stuff. Enough where I don't even want to go too deep into that one. But I'm glad that that's coupled into here. Cause I was wondering where that was annual merit rating and management by objective ranking people. And it just breeds competition among one another. These people bitter is saying desolate despondent. I mean, he's saying it breeds, it breeds intercompetition, rivalry and politics for no good reason. Alright, number 13, institute a vigorous program of education and self improvement. There's actually a very short section in the book. This actually requires deliberate investment in doing that, right? Where you don't really see, initially at least, how it ties to your bottom line. Why educate your people? Just get people that are trained up already. Right? Self improvement? Ah, that's their problem. You know, so they, I mean, I'm being facetious, but you know, this, we're seeing this today, actually, in a lot of the tech companies, that they don't have a program of education as such. They just say, you must have these 50 things, and by the way, you should be also able to do these other 40 things that, for this other role. Yeah. So, yeah it's incredible, really, this short line. His, he has a great, in, in this section, again, it's a very short section, but in this section, he has a great passage here. It says, in, in respect to self improvement, it is wise for anyone to bear in mind that there is no shortage of good people. All right. Let's stick with me on this one. shortage exists at the high levels of knowledge. And that is true in every field. Right? That's an interesting statement. Cause I think about, again, if we're going to stick with the theme of agile transformations retraining, all the management retraining, the people in the management positions, retraining the people at the top management, middle management, retraining the workers. Like you can find people that are motivated. You can find good, good people basically who they're making changes to the system. You know, Oh, we need to have more status reports. Oh, we need to have more whatever. I need to be in your standup because I don't understand what's happening. And you know, we haven't figured out how to scale properly to flow the information to where it needs to be. Things like that, like I've seen people struggle with that because they don't understand the different scaling methods. They don't understand how to customize their organization for agility. And maybe the customer is not at the center of things that we're doing. Maybe they got all these numbers and games and stuff. Maybe they don't understand that. Oh, these are all games that we're playing because they don't have that knowledge, but they are genuinely trying to improve. They just don't have the knowledge to help them. That, that's what I get out of these two sentences together. Yeah, I agree with that. I think that, for me, that's a better audience than those that have the knowledge but won't improve because they just simply give up and say this is how our system works. Right, right. You know, they're lifers basically. So yeah, I agree with that. And then number 14 put everybody in the company to work to accomplish the transformation. The transformation is everybody's job. Holy smokes. Yes, indeed. So, oftentimes you know, this is something that goes wrong quite badly. In top down transformation efforts right where leaders come in and say, I'm going to transform you come in to help me as a consultant. I'm going to transform. And that doesn't really work because of this point. Exactly. It's not their job to transform. It's their job to create a system where everyone else can transform the company. Everyone else is everyone, including their peers themselves. It's everybody's job and bottom up. Transformations fail for that reason as well. By the way, You may get an odd team here and there, and they want to do things in the right way. Agile ways are working, but they can't break through that middle management barrier. And so, yeah, I think this is very profound, actually. Transformation is everybody's job. He has some, questions to help you start on this journey Where in the total organization structure does your department fit? What products and services does it provide? how does it provide those products and services, i. e. what processes are used? What would be the effect if your organization, unit, section, department, whatever, stopped producing its product and services? And then he has different questions for suppliers, questions for customers, questions for you specifically. But yeah, there's a lot in this section. I like that one quote he has that says, a bad system will beat a good person every time. his system of profound knowledge is almost like a body of work, right? It's not just one specific thing that you learn. it's quite wide. It's also deep, which is why we're going to do multiple. The system of profound knowledge is in the second book, which is what I'm reading and marking up now and getting it ready. But I want to do this one first because this book came first and also the idea of There's a few key concepts that the second book kind of steps up on. This book is a foundation for it. The idea of norm the idea of variation. And normal versus special causes of variation. The idea that most issues come from the system. They don't come from individuals or workers or whatever. They come from the system and 94 percent are attributable to the system. Those are a few. And then the 14 points to say that the current style of management is an invention and not a natural thing. It's something everyone takes for granted that says, well, that's just the way it is everyone's kind of fixated on short term profits and we have all these short term. Solutions to long term problems and it's not sustainable like, well, it's, this, this thing has been developed and sold to people and it is changeable, maybe not the whole world may not be changeable at once, but play one place at a time is changeable. So hopefully you know, this has been useful to you. If you've had any thoughts around this topic or otherwise, just let us know in the comments below. don't forget to like and subscribe and we'll see you on the next one.