Remove Barriers to Pride in Workmanship

Pay for What You Get, Get What You Pay For. Right?

Reward for merit brings strife and contention.

- Attributed to 6th century philosopher, Lao Tze, whom Deming was fond of quoting.

What do you have without pride of workmanship? Just a job, to get some money. There’s not much joy in that.

- Deming, W.E. as quoted by Neave, Dr. Henry. The Deming Dimension (SPC Press) (p. 375)

12a. 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.     

b. Remove barriers that rob people in management and in engineering of their right to pride of workmanship. This means, inter alia, abolishment of the annual or merit rating and of management by objective.

- Deming, W. Edwards. Out of the Crisis (MIT Press) (p. 24).

Raises in Pay. Someone raised this question. How could you know whom to give raises in pay if we don’t have a merit system?

The answer is that the ranking of people is a farce. This we shall learn from the Red Beads in Chapter 7.

Whom to raise? Everybody within the system (see top of page 118 in the book, Out of the Crisis). There will be not be No. 1, No. 2, No. 3, No. last, as there will be no ranking. Anyone outside the control limits is in need of special help (Ch. 6).

The ranking of people indicates an abdication of management.

The aim of anybody under the merit system, is to please the boss. The result is destruction of morale. Quality suffers.

Judging people, putting them into slots, does not help them to do a better job.

- Deming, W. Edwards. The New Economics, 3rd ed. (MIT Press) (p. 20).

THE AIM for today’s post comes courtesy of a recent podcast episode hosted by Loren Feldman for the 21 Hats entrepreneurial blog called “What Would Deming Say?” featuring management consultant and Chair for the Deming Institute Advisory Council, Kelly Allan. In the podcast, Kelly fields questions from three entrepreneurs who are learning about Deming’s theory, in particular the 14 Points for Transformation of Management (or obligations as he would later call them), grappling with how it applies in the context of small businesses today. One of the points, the 12th, is discussed in some detail, and will be our topic for today.

Operational Definitions

Deming’s 12th obligation is divided into two complementary parts, each concerned with barriers to pride in workmanship and productivity, and by extension quality, for both employees and managers: The first concerns working against targets without methods, materials, or the right tools to do the job properly; the second concerns rewards to the fittest who can overcome the barriers erected by the first. Combined, they are the abdication of leadership.

What did Dr. Deming mean by the merit pay system? In the podcast, it’s clear that this term causes some confusion for the participants who equate it to:

• Paying people according to their skill and productivity

• Paying bonuses for hitting targets or doing good work

• A meritocracy system

No doubt, many managers think this is exactly what merit pay does, however, in Out of the Crisis, Deming defines the merit system as a quality and productivity motivation scheme with mis-directed rewards:

12a | Remove barriers to pride in workmanship, eg. poor quality tools, time paid to idle with nothing to show for it, forgoing doing the job right just to meet deadlines or quotas.

12b | Drop the merit pay system because you don’t get what you pay for, you get precisely the opposite: Worse performance, worse productivity, worse quality. To the worker or manager under such a scheme, they bias to the criteria for the award even if it contradicts doing good work. (Neave, Dr. Henry, The Deming Dimension, SPC Press)

3. Evaluation of performance, merit rating, or annual review. Many companies in America have systems by which everyone in management or in research receives from his superiors a rating every year…

The idea of a merit rating is alluring. The sound of the words captivates the imagination: pay for what you get; get what you pay for; motivate people to do their best, for their own good…

Merit rating rewards people that do well in the system. It does not reward attempts to improve the system. Don’t rock the boat. (pp. 101-102)

Does Not Work as Advertised

While sounding correct in theory, merit pay in practice fails to deliver on its promises, moving attention away from causes attributable to the system and toward the individual working within it. Deming elaborates on the consequences:

It nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, nourishes rivalry and politics…

Basically, what is wrong is that the performance appraisal or merit rating focuses on the end product, at the end of the stream, not on leadership to help people. This is a way to avoid the problems of people. A manager becomes, in effect, manager of defects.

Deming, W. Edwards. Out of the Crisis (MIT Press) (p. 102).

The dynamic created by using merit pay to address system gaps can be visualized with a causal loop diagram, as shown below, based on the Shifting the Burden archetype which describes scenarios where a symptomatic problem is addressed with an immediate solution (merit pay) rather than a fundamental solution (leadership) and in time triggering side-effects that end up exacerbating the original problem (fear, employee rivalry, diminished teamwork):

A refresher on reading a causal loop diagram: Each node is connected in pairs with a directional arrow indicating a cause and effect relationship, with the color and type of arrow indicating whether the cause and effect move in the same direction (solid green) or in opposition (dashed red). Nodes joined in loops that in sum move in the same direction are called reinforcing loops and seek to amplify a condition or state; those that in sum move in opposing directions are called balancing loops and seek out a goal or state of equilibrium.

This diagram illustrates how, for a time, merit pay can seem to address the problem of gaps in performance (B1), and consequently diminish the impetus for helping people with acts of leadership by understanding and fixing the system for their benefit (B2), with the consequence of depressing pride in workmanship and widening the gaps.

Two accompanying reinforcing loops (R1, R2) further act as depressing forces, but take time for their effects to appear such as fear, employee rivalry, and diminished or destroyed teamwork, with the net effect of the gaps widening again over time. And ever on it goes, with the hapless manager applying and re-applying a self-defeating strategy.

Rx? Understand the Capability of the System, Improve It

In the podcast, Kelly’s expertise as a Deming management method practitioner is shown when he reinforces an important distinction between merit pay and recognizing ability to handle more complex work through improvement of skill and capability:

What is the capability of the process in which people work?…

Don’t always bring the focus back on money. What you’re trying to do is help them build skills. You’re trying to help them get more joy in work, because handling more complex work is more interesting after a certain point. People start to get bored.

This is what podcast participant, Laura Zander, did when she took over a yarn production business, observing the capabilities of employees to handle complex tasks and churn out skeins at a rate of 12.5 per hour or better and paying accordingly (7:55 mark). However, her intent by rewarding expertise was to give employees a sense of progression towards higher levels of competency. The only missing piece for me in her strategy is having the most productive workers explain how they work to others for clues on improving the system of hiring, training, and up-skilling new and existing workers with the aim toward making these capabilities easier to achieve along with higher levels of quality.

A Short, Personal Anecdote

In May while driving north to the family retreat we had to come to a sudden stop on the highway due to congestion (a regular phenomena on holiday weekends, here) and while we avoiding colliding with cars in front of us, the driver behind us did not and rear-ended our car. We filed an insurance claim right on the highway and had the car in at a reputable shop that afternoon. The very next day a windstorm blew through Ontario causing a lot of property damage and insurance claims, in the order of around 10,000. Guess what happened to my claim, despite getting filed before this happened?

My car still sits at the shop, awaiting an appraiser to approve the work order for the fix, which is well below the market value of the car (I was lucky). Meanwhile, I’ve learned that the insurance adjusters are furiously trying to catch up, working a perfectly imperfect system ever harder but to little apparent effect. My claim was obviously de-prioritized or lost in the chaos and top-management seems incapable of scaling their system to process the other claims. My policy comes up for renewal in the near future. Guess what I’m doing in the interim? Shopping for a new policy provider.

Undoubtedly, it must be miserable work that the adjusters are doing, likely incentivized to give up evenings and weekends to cover the gap. And yet, the gap remains, and the dissatisfaction of customers like me mounts. They are probably tired and as frustrated as I am as they tread water. No amount of money will improve their lot without a fundamental system improvement, so what possible pride can they take in their work?

The effects of mismanagement on their business will be unknown and unknowable for years to come.

Reflection Questions

In what circumstances would merit pay work? In other words, what conditions or types of work would rewards for productivity apply? In what circumstances would merit pay backfire? Think back to a situation where you either earned or were denied a merit pay increase. What sense of fairness did it impress on you? What sentiments or feelings did you observe in your colleagues and managers? Was the original problem or symptom resolved? Was the resolution enduring or did it require regular intervals of merit awards? What was the effect of this scheme on customers?