The Faulty Practices of Management

The Curable Blindnesses that Distract from Improvement of Quality

Theory of management now exists. There is now a theory of management for improvement of quality, productivity, and competitive position. No one can ever again claim that there is nothing in management to teach. Students in a school of business now have a yardstick by which to judge the curriculum that is open to them. Does the school show some attempt to present a curriculum for today’s problems, or does it show obsolescence? Obsolescence need not be planned: it can just move in.

- Deming, W. Edwards. Out of the Crisis (MIT Press) (p. 19)

Question: Dr. Deming, how many organizations are using your methods one hundred percent, today?

Deming: None.

Question: But, Dr. Deming, if no organization is using your methods one hundred percent today, how many will be using your methods in a hundred years?

Deming: All that survive.

- Excerpt from opening for new 11th chapter to the revised 3rd edition of The New Economics relating a story shared with Kelly Allan by Peter Scholtes. (p. 157)

THE AIM for today’s post is to take a quick, high-level view of the “faulty management practices” that Dr. Deming presents in the second chapter of The New Economics as juxtaposed to his perspectives. We can think of these as blindnesses that come from a system of thought that keeps our ability to improve ever further out of our reach, no matter how much effort we put into doing them “right”. The good news, of course, is they can be cured, just by learning a little theory and learning to “see” phenomena that’s been hidden from view by the world pulled over your eyes — which is what this newsletter helps to provide!

Here follows the top nine blindnesses according to Deming, along with his proposed better practices for restoring sight:

Short-Term Thinking, Emphasis on Immediate Results

A classic thread through all of Deming’s writings, this describes the common practice of managing to the quarterly dividend and in our modern times the “Ship It!” mentality to hit a deadline and deal with the consequences after.

Rx: Adopt and publish what your long-term constancy of purpose for the organization is and plan where you want to be five years or more into the future. Predict customer needs and realize them instead of asking them what they’d like right now. Avoid sinking into what David J. Bland calls “The Product Death Cycle”.

Rating and Ranking People, Teams, Divisions, the Merit System

Another classic marker for management blindness is the belief that rating and ranking is the way to find the best performers in an organization, and from this the optimization of the whole follows by rewarding them over their lessers. Deming pointedly observed this is because of an insufficient understanding of variation. He demonstrated the folly in this with his un-solvable equation x + [yx], where x is the contribution of an individual and yx the system’s effect on their performance. Our blindness leads us to think we can solve for x while ignoring yx, the predominant term.

Rx: Abolish rating and ranking, don’t replace it with anything; manage the organization as a system by orchestrating all contributions toward optimizing the system as a whole. Learn about common causes of variation and how to perceive them.

Incentive Pay, Pay-for-Performance (Extrinsic Motivation)

A common refrain in the prevailing style of management is “pay for what you get, get what you pay for” - and Deming knew there was nothing further from the truth. It isn’t that incentives don’t work, but rather what they work best at doing: Causing individuals or teams to bias to do whatever is required to get the incentive while explaining away the destruction in their wake.

Rx: Enable pride in workmanship and joy in work for everyone by continually working to remove common barriers to intrinsic motivation. Learn what inspires people differently. Consider running exercises like Jurgen Appelo’s Moving Motivators to uncover this.

Managing Organization as Individual Profit Centres

One of Deming’s many prescient observations in The New Economics is that a system cannot manage itself, it must be managed: “Left to themselves in the Western world, components become selfish, competitive, independent profit centres, and thus destroy the system. It’s worth noting that a destroyed system doesn’t necessarily mean an inoperable one. The current economy is rife with such systems.

Rx: Deming’s advice is for management to direct all the efforts of components within the system toward its aim. “The first step is clarification:,” writes Deming, “everyone in the organization must understand the aim of the system, and how to direct his efforts toward it. Everyone must understand the danger and loss to the whole organization from a team that seeks to become a selfish, independent, profit centre.”

Management by Objective (MBO)

This blindness is a variation on trying to optimize a system through its parts rather than their interactions. It typically manifests in situations where a whole objective is disassembled into discrete pieces and distributed to various parts of the organization, possibly with some numerical goals and incentives, with the expectation the whole company will then achieve the objective. Sadly, the interdependence between the parts fouls this up, as efforts of the parts are not linearly additive and come with unintended consequences.

Rx: Same as above, managing components for optimization of the aim of the system.

Setting Numerical Goals without Methods to Achieve Them

Deming first described this common management defect in his 11th Obligation for Management (14 Points) regarding elimination of quotas and management by numerical goals. In The New Economics, he bluntly states, “A numerical goal accomplishes nothing. Only the method is important, not the goal. By what method?” and perhaps more pointedly, “If you can accomplish a goal without a method, then why were you not doing it last year? There is only one possible answer: You were goofing off.”

Rx: Work on a method for improvement of the process to achieve higher goals of performance.

Management by Results (MBR)

This is a beguiling and bedevilling blindness manifests as the default assumption that outcomes of a system come from a special cause when, in fact, they may just be how the system operates normally. Troubles begin when we react and adjust our next intervention according to the last result, injecting more variation into the system and priming another compensating feedback loop of further interventions and more variation.

Rx: As Deming observes, “No amount of care or skill in workmanship can overcome fundamental faults of the system.” Work to improve it with the aid of understanding how to visualize common and special causes of variation in processes.

Lowest-Cost Procurement

If you have ever worked in an environment where cost trumped utility or quality of a purchased material, product, or service, then you are intimately familiar with this blindness. It frequently appears in organizations that need to waste enormous amounts of time and money drafting RFPs or RFQs, soliciting bids, and then interpreting them, often without context. It’s done as a means of guaranteeing “due diligence” without having to invest the effort to do the job right by working with suppliers. It’s also inspires win/lose competition within the organization.

Rx: Estimate total costs of the product or service being purchased, ie. the purchase cost + predicted costs of problems that may arise in use, eg. repair cycles, variation in processing times, defects per lot, etc. You may need to aim for an imperfect solution today to obtain the better one tomorrow, and that in turn may require sub-optimizing a part of the system in response.

Delegating Quality to a Person or Group

As Joyce Orsini notes in her book, The Essential Deming, Deming often said that quality is made in the boardroom: Employees can only follow the directives of management and are unable to change decisions, designs, or systems. It therefore follows that quality cannot be delegated because accountability for it rests with top-management. To do otherwise is, as Deming notes in The New Economics, a recipe for frustration.

Rx: In Out of the Crisis, Deming pointedly notes that “support of top management is not sufficient… They must know what it is that they are committed to—that is, what they must do. These obligations cannot be delegated. Support is not enough, action is required.” In the case of quality, they must learn what to do and how their decisions and actions cascade throughout the organization, enabling or limiting their employees’ abilities to do quality work.

Reflection Questions

What do you make of the nine faulty practices or “blindnesses” of management? How many are prevalent in your organization, right now? How many do you subscribe to, today? Why? Which do you disagree with? On what basis? How many of the suggested “better practices” or “cures” are in effect in your organization? To what extent? How were they enacted? How could you begin to improve quality just in your own sphere of influence, acknowledging that big moves will require top-management involvement and participation? What other questions come to mind as you read each faulty practice and better practice? What would cure blindness in your organization?