Where are we? The answer is that the good economic times have leveled off. The problem is quality. The possibility to improve the future under the present system of management is slight. The present system runs by the economics of WIN, LOSE: I WIN, YOU LOSE. I CAN WIN ONLY IF YOU LOSE. There is no more free land. The sacred cow (WIN, LOSE) has run dry.
We need a transformation to a new kind of economics where everyone comes out better: COOPERATION, WIN, WIN. There will be inequalities and some people will win more than others, but everyone will gain.
— Orsini, Dr. Joyce. The Essential Deming. (p. 40)
Nothing will happen without change.
Your job is to manage the change necessary to create the new climate.
— Neave, Dr. Henry quoting Dr. Deming. The Deming Dimension. (p. 196)
GREETINGS fellow Deming enthusiasts, practitioners, and avid and inveterate learners of the transformation arts, and welcome once again to our weekly AMA series where you pose the questions about Dr. Deming’s management theory (or anything adjacent) and I do my best to find you the answers!
Today’s question comes from an old friend, Andrei C., who asks:
What did Dr. Deming mean by “a new climate” ?
Q8: What did Dr. Deming mean by “a new climate” ?
Great question, Andrei! This is a really interesting bit of Deming esoterica that you won’t find him mentioning directly in either Out of the Crisis (1986) nor The New Economics (1993), but you will find mentioned in a book that bridges the two published by his UK collaborator, Dr. Henry Neave, The Deming Dimension (1990), and explained more fully in the Day 8 materials for his course, 12 Days to Deming (2020). By my research, credit for the concept of “The New Climate” goes to Neave, which I think analogous to what Deming would later come to call “The New Economics”.
Let’s dive down this rabbit hole…
tl;dr
The New Climate isn’t a Deming concept per se, but an approved interpretation by Dr. Neave on how to apply Deming’s theory to transform traditional Western management and organizational culture away from the faulty practices of the old climate and toward better ones rooted in cooperation, joy in work, innovation, and systems thinking. It runs along a parallel track to Deming’s System of Profound Knowledge, with the same aim of providing a route to the same destination of transformed leadership: The New Climate for Neave, and The New Economics, for Deming.
Brief Origin Story
In Out of the Crisis, Deming briefly mentions “climate” in reference to the prevailing conditions and motivations of management and what it would take to shift them toward the new economics:
How long? How long will it take to change the climate? An advertising agency changed in a decade an entire nation with respect to one commodity.¹ Could an advertising agency change a nation's views on quick profits, to give to management a new outlook and a chance to adopt constancy of purpose? If yes, how long would it take? A decade? Two? More like three. How many years will pass before economists learn the new economics, and teach it? A decade? Two?
(p. 151)
In the introduction to his Day 8 course materials for 12 Days to Deming, Neave explains that “The New Climate” emerged from his observations of how Deming’s seminars were evolving in the latter half of the 1980s, starting with an emphasis on eliminating bad practices (the “Old Climate”) and shifting toward new practices that would replace them. He intuited that in order to bring about the transformation in management Deming was aiming toward it would be necessary to frame the behaviours and practices that defined the end state. He drafted this as an article and sent it to Deming in 1989 who urged him to turn it into a book, which then became the basis for The Deming Dimension, in particular Part 3 ("The New Climate”) and Part 5 (“14 Points Revisited”)
In brief, they are:
Joy in Work
Innovation, Not Just Improvement
Cooperation: Win/Win — Backbone of the New Philosophy
14 Points Revisited
Neave’s intent, as he describes it in the Day 8 materials, was to introduce this “New Climate” concept to people already familiar with Deming’s work as presented in Out of the Crisis, as it was a re-framing of the elements to explain a new state of transformation, slightly ahead of what Deming was already thinking.
The New Climate Explained
Deming would often explain the purpose of his theory of management with an expression he learned from friend and colleague Dr. Ed Baker: “One could learn all there is to know about ice, yet know very little about water.” His point was that what he was describing was as different to current management thinking as water was to ice.
With “The New Climate”, Neave’s aim was to describe what the post-transformation state would look and feel like to leaders and employees through the lens of Deming’s theory. Some of what he proposed in his article and in The Deming Dimension would make their way into The New Economics, almost verbatim, including an adapted exercise by Fred Z. Herr of Ford to illustrate how the “backbone” of Deming’s philosophy, win/win cooperation, contrasts with the status quo.
Deming explains:
Illustration of selfish competition versus cooperation between departments. Harm comes from internal competition and conflict, and from the fear that is thereby generated. A manager of purchasing, under pressure to reduce costs, changes to a cheaper source. Engineering Design imposes unnecessarily tight tolerances to compensate for the fact that Manufacturing never reaches the standards asked of it. Departments performing better than budget start spending near the end of the year because they know that otherwise their next year’s budget will be reduced. As the end of the month looms, salesmen start doing everything they can to meet their quotas, with scant regard to the problems caused to Manufacturing, Administration, and Delivery, let alone to the customer. Figures are massaged, computations redefined, so that reports show more of what senior management wish to see.
Tables 1 to 4 illustrate loss in the environment of conflict, and gain from cooperation.6
—Deming, Dr. W.E. The New Economics, 3rd ed. (pp. 57-58), 2nd ed. (pp. 82-83)
I’ve adapted and annotated the following tables from Neave’s Day 8 course materials to better illustrate this and capture Neave’s intent, which I really like, of moving in phases away from darkness to light.
Phase 1: In the Beginning, there was Darkness…
In the first Phase of the exercise we see an organization beset by selfish competition between people and departments who all ask “What’s best for me or my department?” when considering a range of options. These are denoted by “+” markers in Table 1. Note how the columns for the other departments on each row are dark. This is really close to how many organizations work when optimizing parts not interactions. In this state, we’re not even concerned with how bad our practices are, just survival.
Phase 2: Move Toward the Light
In the second phase, we’re moving towards the light by learning about how options we take for our own benefit can negatively impact other departments. For example, look at option a1 in Table 2 and how the positive benefit for A is wiped out by the negative impacts for B and C. Further, note how the sum of all the system effects is null, effectively meaning that we may as well have done nothing for all the effort. This is another common effect in orgs where you feel like you’re spinning your wheels, moving backward for every step taken.
Table 3 illustrates what happens when we choose our actions in consideration of the impact to other departments and the system as a whole, opting to choose those that are net positives. Note the increase in net positives in the totals column. This can be brought about by simple communication and alignment/adaption of practices. It’s good, better than most organizations, but we can do better.
Phase 3: Into the Light
In Phase 3, we begin to see what Deming means by a cooperative WIN/WIN approach to managing a system. Whereas in Phase 2 we are preoccupied with limiting the negative consequences of our actions, we are now concerned with choosing the options that will benefit the whole system, even if it means disadvantaging our own department.
Note how in Table 4 each department chooses options that are a negative impact to themselves, but of benefit to the others so that the system can win as a whole. This isn’t to suggest a hard and fast rule, just to illustrate a point.
In Table 5 we see the accrual of significant gains as the best options for the whole system are combined, doubling the amount we saw in Table 3.
Question: How were the judgements to grade the options, “+” or “-” made for Tables 1, 2, and 4? According to The Old Climate or The New Climate? This can be tricky to answer considering your current frame of reference; the answer is the old, as each is still being viewed through the lens of self interest, even if we’re working against ourselves for the good of the whole. In The New Climate, this becomes irrelevant.
System of Profound Knowledge
In The New Economics, Deming describes his capstone theory, The System of Profound Knowledge, as the route to transformation, which begins with the individual learning new theory.
He explains what the future state looks like:
Once the individual understands the system of profound knowledge, he will apply its principles in every kind of relationship with other people. He will have as a basis for judgment of his own decisions and for transformation of the organizations that he belongs to. The individual, once transformed, will:
Set an example
Be a good listener, but will not compromise
Continually teach other people
Help people pull away from their current practice and beliefs and move into the new philosophy without a feeling of guilt about the past
The outside view. The layout of profound knowledge appears here in four parts, all related to each other.
Appreciation for a system
Knowledge of variation
Theory of knowledge
Psychology
3rd ed. (p. 63-64), 2nd ed. (p. 92-93
Moreover:
One need not be eminent in any part nor in all four parts in order to understand it and to apply it. The 14 Points for Management (Out of the Crisis, Chapter 2) in industry, education, and government follow naturally as an application of outside knowledge, for transformation from the present style of Western management to one of optimization.
Ibid.
So, while defined differently, The New Climate as defined by Neave and The New Economics as defined by Deming, are running on parallel tracks toward the same future state, with Neave’s reframing only slightly ahead of Deming’s. Both represent the application of outside knowledge to bring about a transformation in management, with Neave’s contextualized to those already familiar with Deming’s earlier theory and concepts, and Deming’s a refinement focused on the individual as leader..
Summing it Up
So, what have we learned? “The New Climate” wasn’t a Deming concept per se, but a re-framing of his earlier theory from Out of the Crisis by a close colleague, Dr. Henry Neave, to explain to those already grounded in the theory, what it means to move into a state where the philosophy has been fully adopted, or in other words, transformed. It nets together signature aspects such as joy in work, innovation over improvement, win/win cooperation, and a commitment to implementing the 14 Points. It came about at the same time Deming was refining his System of Profound Knowledge which he would describe as upstream of his earlier theory.
What do you think Andrei? Am I over the target, or have I over or under-shot? How would you define “The New Climate” ? Is it really The New Economics by another name? Let me know in the Chat thread for this AMA or in the comments below (paid subscribers only).
Apologies for the delay in getting this out, I missed my deadline owing to getting this question late for my minimum amount of time to get it to press. With Good Friday next week, I think we will push the next Doctor’s Orders two weeks hence to Friday, April 5th. I’ll open a new chat thread next week where you can post your questions.
Related Posts
Subscribers Only
Access to my Miro board for this post is available to paid tier subscribers via the link below.
Keep reading with a 7-day free trial
Subscribe to The Digestible Deming to keep reading this post and get 7 days of free access to the full post archives.