How Could They Know?

A Case Study

IW: Two words that are popular today in describing changes in American industry are downsizing and reengineering. What do these words mean to you?

Dr. Deming: Desperation. Management doesn't know anything else to do. They don't have the knowledge to manage with. All they can do is sack people. Crude. A crude way to do it. You only dig yourself into another pit.

Stevens, Tim. “Dr. Deming: ‘Management Today Does Not Know What Its Job Is.’ (Part 3)” IndustryWeek, January 17, 1994.

American industry is on the decline, has been for 14 or 15 years, it will continue on the decline until style of American management changes: the time fuse is not long. So many people at work on on productivity, so they say; they're not working on productivity at all, they're working on how to measure it.

The thermometer might read under 108 degrees Fahrenheit, blistering hot, but the thermometer does not do anything about it, it just tells us the problem.

We had the problem without looking. We didn't need the thermometer, it does nothing about it. Time the people got up in their hind legs and did something about it, but management cannot when it know not what to do. They don't know what to do. 98% I suppose don't even know that there's a problem or there's anything that they can do; it's always for somebody else to prove, it is for somebody else.

Deming, Dr. W.E. “Dr. Deming - The 5 Deadly Diseases 1984”. The Deming Institute YouTube Channel, (0:46).

THE AIM for today’s post is to put some of our acquired knowledge about Dr. Deming’s philosophy on management to the test on a real-life case study. We will imagine that our client is the top-management of a company that makes high-end furniture and accessories for board game enthusiasts who are finding themselves between a rock and a hard place with rising inflation, labour costs, and supply chain problems putting the squeeze on their margins, forcing them to make hard decisions.

We’ve been contacted in some haste to help, so to catch us up on the situation and what has transpired, they’ve put together a video where we go behind-the-scenes into their management team meetings at the senior and middle tiers. They warn us that the video has them speaking frankly with each other and using some blue language, and advise listening on headsets or muting and reading the subtitles or transcript:

Background

In the past, Wyrmwood has been a very successful manufacturer of gaming tables and accessories, and launched over twenty products into the market via Kickstarter. Their management philosophy has been radically open, with much of their growth documented in cinéma vérité style videos that they upload to YouTube for a very enthusiastic customer base. Over the past several years, they have grown by leaps and bounds, but now find their desire to make great products with skilled craftsmen challenged by hard economic realities, and perhaps their prevailing theory of management.

The CEO’s Diagnosis and Rx

Within the first minute of the video we learn that Wyrmwood’s CEO, Doug, is concerned for the future of his company: Inflation and rising fuel costs are making life harder for their shop-floor workers, and he wants to address this in a way that’s fair, but realistic. Simultaneously, he sees the costs of materials to make their products is also increasing significantly, causing them to buy-and-hoard to prevent losing money on pre-ordered products, and turning to Chinese suppliers for magnets to reduce per-unit costs from $0.12 to $0.02. In addition, the economic sanctions on Russia have eliminated one of their chief lower-cost suppliers of plywood, which will drive up per-sheet costs from $50 upward from a domestic supplier.

Accordingly, the CEO has announced he wants to improve the bottom line of the company with the following actions, effective immediately:

• Recoup ROI on “hundreds and hundreds of thousands of dollars” of investment in equipment to boost their productivity by employing only top-performing hourly-wage workers, who will receive raises — poor performers who are not aligned with their work ethic and philosophy will be laid off.

• Prices for products will increase by 10% across-the-board.

• Source plywood from domestic providers, even at higher costs.

• Go to China for cheaper magnets, even knowing they will get jammed up at the ports.

• Innovate on and introduce new products to “drive growth”.

What Would You Advise?

Imagine our client now turns to us for advice on their plan based on what we’ve learned from observing their meetings with members of top-management team and the senior managers/foremen on the shop floor. Based on your knowledge of Dr. Deming’s management philosophy, what is your appraisal of the situation faced by Wyrmwood? What practices do you see at play? What risks do you foresee? What recommendations would you propose to them? What additional questions would you have for the management team? What do you think Dr. Deming might say or ask about? Write up your responses and post them in the comments section below - I will post a follow-up later this week (probably Friday) with my own ideas.

PS: If you need a refresher on the topics we’ve covered over the past year, take a look at the back-issues here.