Chapter 3

1. Chapter 3 Philosophies and Frameworks

2. Ritz Carlton 1890’s pg 90 • “Ladies and gentlemen serving ladies and gentlemen.” • Anticipating the needs of guests • Resolving their problems • Exhibiting genuine and caring conduct towards guests and each other • Skilled and empowered workforce operating with pride and joy.

3. Ritz Carlton 1890’s pg 90 • Two-time Malcolm Baldrige National Quality Award winner • “pride and joy” in work, and its impact on quality, are concepts developed by Deming

4. Leaders in the Quality Revolution pg 90 • W. Edwards Deming • Joseph M. Juran • Philip B. Crosby • Armand V. Feigenbaum • Kaoru Ishikawa • Genichi Taguchi Comparison of their Philosophies…

5. Texas Nameplate Company pg 90 • Small company (43 employees) • Manufactures and sells ID labels • International sales • Small company attributes honed… • Streamlined communications • Rapid decision making • Shared goals and accessible leaders • Now are competitive advantages

6. Texas Nameplate Company pg 90 • “Fear is useless; what is needed is trust” • Closely knit organization • Finely tuned to needs of customers • Customer site visit • TNC team visits various sites • Identifies opportunities to improve products and services • Findings shared with entire company

7. Texas Nameplate Company pg 90 • Customer service reps empowered • Without management approval • Factory workers responsible to tailor processes • Optimize contributions to company goals

8. Texas Nameplate Company pg 90 • Defects reduced from 3.5% to 1% • Customers give 5 of 6 rating • 12 key business areas • Quality, on-time delivery • Reliable performance, overall satisfaction • Employees satisfied • Fair pay, job content, recognition, fairness/respect, career

9. Cedar Foundation pg 91 • Delivers its mission by living and upholding its values of respect for the individual, equality of opportunity, pursuit of excellence, openness and accountability, teamwork and partnership, and commitment to enthusiasm.

10. Cedar Foundation pg 91 • Committed to continuous improvement • Applied numerous quality management tools • Use of balanced scorecard • Achieved financial growth • High employee satisfaction

11. The Deming Philosophy pg 91 • Most influential individual in quality management • Ph.D in physics • Trained in statistics • Worked for Western Electric • Developed a sense of viewing management processes statistically

12. The Deming Philosophy pg 91 • Taught quality control courses • Part of national defense effort • Mostly engineers and factory staff • Realized it would not solve quality problems • Attempts to convey quality message to upper level management in the U.S. was unsuccessful

13. The Deming Philosophy pg 91 • Traveled to Japan for census job • Japanese were aware of his theory • Began teaching SQC / SPC • Preached: • Importance of top management leadership • Customer / supplier partnerships • Continuous improvement

14. The Deming Philosophy pg 92 • Japanese embraced philosophy • Deming influence profound • Japanese established Deming prize in 1951 • Received highest honor in Japan • Royal Order of the Sacred Treasure • Presented by the Emperor • If Japan can, why can’t we?...1980 • Invited to work with Ford, GM, others

15. The Deming Philosophy pg 92 • “A product or a service possesses quality if it helps somebody and enjoys a good and sustainable market” • Variation is chief culprit of poor quality • Mechanical variations lead to wear • Human inconsistencies hurt customer service

16. The Deming Philosophy pg 92 • “A product or a service possesses quality if it helps somebody and enjoys a good and sustainable market” • Variation is chief culprit of poor quality • Mechanical variations lead to wear • Human inconsistencies hurt customer service

17. Deming Chain Reaction pg 93 Improve quality Costs decrease Productivity improves Increase market share with better quality and lower prices Stay in business Provide jobs and more jobs

18. Key Idea pg 92 The Deming philosophy focuses on continual improvements in product and service quality by reducing uncertainty and variability in design, manufacturing, and service processes, driven by the leadership of top management.

19. Deming’s 14 Points pg 93 • He practiced his 14 points • Sometimes misunderstood • He synthesized his 14 points • System of profound knowledge • Insights needed to design management practices

20. Deming’s System of Profound Knowledge pg 94 • Appreciation for a system • Understanding variation • Theory of knowledge • Psychology

21. Appreciation for a System pg 94 • Components of a system must work together to be effective • Traditional organizations manage according to functions vertically (silo) • Managers must understand the whole system and not just their function • Actions must be aligned with organization and common goals

22. Appreciation for a System pg 94 • It is poor management to purchase materials at the lowest cost if it is at the expense of the of the system • Possible cost to mfg system • Possible cost to customer • Systems must be focused towards a purpose • Pitting departments is detrimental

23. Appreciation for a System pg 94 • Traditional appraisals do not consider interactions within the system • Factors affecting employees performance: • Training received • Information and resources provided • Leadership of supervisors & managers • Disruptions on the job • Management policies and practices

24. Key Idea pg 94 The aim of any system should be for all stakeholders—stockholders, employees, customers, community, and the environment—to benefit over the long term.

25. Understanding Variation pg 95 • Many sources of uncontrollable variation exist in any process • Hitting golf balls • Meals and service in a restaurant • Quincunx example • Same drop pattern, bell-shaped curve • Excessive variation results in product failures, unhappy customers, and unnecessary costs

26. Understanding Variation pg 95 • Variation occurs due to factors uncontrolled • Controllable factors include: • Tool wear • Machine wear • Speeds / feeds • Management should focus on understanding variation and reducing it • Less inspection, less scrap, less rework

27. Key Idea pg 96 Excessive variation results in products that fail or perform erratically and inconsistent service that does not meet customers’ expectations.

28. Understanding Variation pg 95 • Statistical methods are the primary tools used to identify and quantify variation. • Deming proposed all employees understand and utilize these tools • These tools can become the common tool used to communicate. • No ambiguitity, no interpretation

29. Theory of Knowledge pg 97 • Knowledge is not possible without theory • Experience alone does not establish a theory, it only describes • And is limited • Theory shows cause-and-effect relationships that can be used for prediction

30. Theory of Knowledge pg 97 • Deming never provided any solutions in his assignments • He helped them learn to analyze concrete data • Objective data and systematic problem-solving process provides a rational basis for making decisions

31. Key Idea pg 97 Experience only describes – it cannot be tested or validated – and alone is no help in management. Theory, on the other hand, helps one to understand cause-and-effect relationships that can be used for prediction and relational management decisions.

32. Psychology pg 97 • Deming’s philosophy… • Understand human behavior • Treat people fairly • People differ from each other • Effective leaders know and understand this and use their strengths and preferences • Rotek purchasing staff

33. Psychology pg 97 • People are motivated intrinsically and extrinsically; intrinsic motivation is the most powerful • Fear is demotivating • It prevents one from reaching full potential • Managers should develop pride and joy in work

34. Psychology pg 97 • Psychology helps us to nurture and preserve the positive innate attributes of people • Otherwise, people resort to the “carrot and stick” tactics are not long-term solutions • Deming believed pay is not a motivator (controversial, GM)

35. Impacts of Profound Knowledgepg 98 • When people do not understand systems… • When people do not understand variation… • When people do not understand psychology… • When people do not understand the theory of knowledge…

36. Profound Knowledgepg 98 • It is not all original to Deming’s first principles • Walter Shewhart’s distinction between common and special causes of variation is an addition • Business schools began to teach these • These concepts became the theory of management

37. Deming’s 14 Points (Abridged)(1 of 2) pg 99 1. Create and publish a company mission statement and commit to it. 2. Learn the new philosophy. 3. Understand the purpose of inspection. 4. End business practices driven by price alone. 5. Constantly improve system of production and service. 6. Institute training. 7. Teach and institute leadership. 8. Drive out fear and create trust.

38. Deming’s 14 Points (2 of 2) pg 102 9. Optimize team and individual efforts. 10. Eliminate exhortations for work force. 11. Eliminate numerical quotas and M.B.O. Focus on improvement. 12. Remove barriers that rob people of pride of workmanship. 13. Encourage education and self-improvement. 14. Take action to accomplish the transformation. www.deming.org

39. Pt. 1 – Create a Vision…pg 99 • Define values, mission and vision • Do not exist simply for profit • Business is a social entity • Purpose is to serve customers and employees • Take long-term view, invest in training • Top management commitment • Many mgrs do not change…denial, excuses

40. Pt. 2 – Learn the New Philosophy…pg 99 • Historical mgmt built on early practices • Quotas • Work measurement • Adversarial relationships • Call centers still operated this way • Companies must produce quality • Users must have a positive outcome • Companies must value customer first

41. Pt. 3 – Understand Inspection…pg 100 • Inspection does not add value • Encourages defects by allowing someone else to catch and fix them • “get it out of my area, higher rate of prdn” • Higher bonus based on higher output • Workers must take responsibility • Statistics help • few managers understand this

42. Pt. 4 – Stop Making Decisions…pg 100 • Purchasing and reductions • Price…no meaning without quality (Shewart) • Typically evaluated by cost • Establish long-term relationships with fewer suppliers • Fewer means less variation in quality / process • SCM

43. Pt. 5 – Improve Constantly and Foreverpg 100 • In both design and operations • Understand customer needs • feedback • Understand the mfg and delivery process • Reduce causes of variation • Solicit all employees to innovate • Continuous improvement was not a common practice, now it is mandatory

44. Pt. 6 – Institute Trainingpg 101 • People are the most important resource • They want to do a good job, possible? • Management must take responsibility • Morale improves • Company dedicated to helping • Reduces barriers between workers and supervisors • Honda of America in Marysville

45. Pt. 7 – Institute Leadershippg 101 • Lack of is an impediment to improvement • Management task is to lead, not supervise • Coach • Eliminates fear in employees • Encourages teamwork

46. Pt. 8 – Drive Out Fearpg 102 • Fear of reprisal, failure, teardown, unknown, relinquishing control, and change… • Managers and workers must respect each other or system will not work • Workers cannot be afraid to report • Firms must create a culture without fear

47. Pt. 9 – Optimize the Efforts of Teamspg 102 • Teamwork optimizes the efforts between departments and individuals • Barriers between functional areas occur when managers fear loss of power • Lack of cooperation results in poorer quality • Cannot understand what internal customers seek • Training and employee involvement!

48. Pt. 10 – Eliminate Exhortationspg 102 • All improvements cannot be eliminated by posters • “Zero defects” • Directed at the wrong people • Assume all quality problems are due to human behavior • Cannot be changed through motivationals • Must be eliminated by the “system”

49. Pt. 11 – Eliminate Numerical Quotas and MBOpg 102 • Measurement often used punitively • Often devised by short-term goals • Workers often short-cut to achieve • Buy less quality for less money • Goals without means to achieve have no meaning • 10% reduction in inventory at Rotek • Variation in demand v. supply • Management must cont. improve

50. Pt. 12 – Remove Barriers to Pride in Workmanshippg 103 • Factory workers treated as “commodity” • Given monotonous tasks • Work on inferior machines, tools, mat’ls • Directed to process defective goods • Performance appraisal one of biggest barriers to pride in workmanship • Promotes competition for limited resources • Objectives driven by boss’s wants