The W. Edwards Deming Institute: The W.

Edwards Deming Institute Page 1 of 2

INSTITUTE INFO DEMING PRIZE THE MAN RESOURCES HOW TO HELP EVENTS CALENDAR PARTICIPATION

Teachings

The Deming System of Profound Knowledge

The following is an excerpt from Chapter 4 of The New Economics, second edition by
W. Edwards Deming:

The prevailing style of management must undergo transformation. A system can not
understand itself. The transformation requires a view from outside. The aim of this
chapter is to provide an outside view-a lens-that I call a system of profound knowledge.
It provides a map of theory by which to understand the organizations that we work in.

The first step is transformation of the individual. This transformation is discontinuous. It

comes from understanding of the system of profound knowledge. The individual,
transformed, will perceive new meaning to his life, to events, to numbers, to
interactions between people.

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 a basis for
judgment of his own decisions and for transformation of the organizations that he
belongs to. The individual, once transformed, will:

z Set an example
z Be a good listener, but will not compromise
z Continually teach other people
z Help people to pull away from their current practice and beliefs and move into
the new philosophy without a feeling of guilt about the past

The layout of profound knowledge appears here in four parts, all related to each other:

z Appreciation for a system

z Knowledge about variation
z Theory of knowledge
z Psychology

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, Ch. 2) in industry,
education, and government follow naturally as application of this outside knowledge,
for transformation from the present style of Western management to one of
optimization.

The various segments of the system of profound knowledge proposed here can not be
separated. They interact with each other. Thus, knowledge of psychology is incomplete
without knowledge of variation.

A manager of people needs to understand that all people are different. This is not
ranking people. He needs to understand that the performance of anyone is governed
largely by the system that he works in, the responsibility of management. A
psychologist that possesses even a crude understanding of variation as will be learned
in the experiment with the Red Beads (Ch. 7) could no longer participate in refinement
of a plan for ranking people.

Further illustrations of entwinement of psychology and use of the theory of variation

(statistical theory) are boundless. For example, the number of defective items that an
inspector finds depends on the size of the work load presented to him (documented by
Harold F. Dodge in the Bell Telephone Laboratories around 1926). An inspector,
careful not to penalize anybody unjustly, may pass an item that is just outside the
borderline (Out of the Crisis, p. 266). The inspector in the illustration on page 265 of
the same book, to save the jobs of 300 people, held the proportion of defective items
below 10 per cent. She was in fear for their jobs.

A teacher, not wishing to penalize anyone unjustly, will pass a pupil that is barely
below the requirement for a passing grade.

Fear invites wrong figures. Bearers of bad news fare badly. To keep his job, anyone
may present to his boss only good news.

A committee appointed by the President of a company will report what the President
wishes to hear. Would they dare report otherwise?

An individual may inadvertently seek to cast a halo about himself. He may report to an
interviewer in a study of readership that he reads the New York Times, when actually
this morning he bought and read a tabloid.

Statistical calculations and predictions based on warped figures may lead to confusion,
frustration, and wrong decisions.

Accounting-based measures of performance drive employees to achieve targets of

sales, revenue, and costs, by manipulation of processes, and by flattery or delusive
promises to cajole a customer into purchase of what he does not need (adapted from
the book by H. Thomas Johnson, Relevance Regained, The Free Press, 1992).

A leader of transformation, and managers involved, need to learn the psychology of

individuals, the psychology of a group, the psychology of society, and the psychology

http://deming.org/index.cfm?content=66 5/6/2008
The W. Edwards Deming Institute: The W. Edwards Deming Institute Page 2 of 2

All Contents Copyright © 2008 The W. Edwards Deming

of change. Institute® Privacy Policy
Hosted by Evolving Systems, Inc.

Some understanding of variation, including appreciation of a stable system, and some

understanding of special causes and common causes of variation, are essential for
management of a system, including management of people (Chs. 6, 7, 8, 9, 10).

Condensation of the 14 Points for Management

The following is excerpted from Chapter 2 of Out of the Crisis by W. Edwards Deming:

The 14 points for management (Out of the Crisis, Ch.2) in industry, education
and government follow naturally as application of this outside knowledge, for
transformation from the present Western style of management to one of
optimization.

Origin of the 14 points.

The 14 points are the basis for transformation of American industry. It will not suffice
merely to solve problems, big or little. Adoption and action on the 14 points are a signal
that the management intend to stay in business and aim to protect investors and jobs.
Such a system formed the basis for lessons for top management in Japan in 1950 and
in subsequent years (see pp. 1-6 and the Appendix).

The 14 points apply anywhere, to small organizations as well as to large ones, to the
service industry as well as to manufacturing. They apply to a division within a
company.

The 14 points.

1. Create constancy of purpose toward improvement of product and service, with

the aim to become competitive and to stay in business, and to provide jobs.
2. Adopt the new philosophy. We are in a new economic age. Western
management must awaken to the challenge, must learn their responsibilities,
and take on leadership for change.
3. Cease dependence on inspection to achieve quality. Eliminate the need for
inspection on a mass basis by building quality into the product in the first place.
4. End the practice of awarding business on the basis of price tag. Instead,
minimize total cost. Move toward a single supplier for any one item, on a long-
term relationship of loyalty and trust.
5. Improve constantly and forever the system of production and service, to improve
quality and productivity, and thus constantly decrease costs.
6. Institute training on the job.
7. Institute leadership (see Point 12 and Ch. 8). The aim of supervision should be
to help people and machines and gadgets to do a better job. Supervision of
management is in need of overhaul, as well as supervision of production
workers.
8. Drive out fear, so that everyone may work effectively for the company (see Ch.
3).
9. Break down barriers between departments. People in research, design, sales,
and production must work as a team, to foresee problems of production and in
use that may be encountered with the product or service.
10. Eliminate slogans, exhortations, and targets for the work force asking for zero
defects and new levels of productivity. Such exhortations only create adversarial
relationships, as the bulk of the causes of low quality and low productivity
belong to the system and thus lie beyond the power of the work force.

z Eliminate work standards (quotas) on the factory floor. Substitute

leadership.
z Eliminate management by objective. Eliminate management by numbers,
numerical goals. Substitute leadership.

11. 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.
12. 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 (see Ch. 3).
13. Institute a vigorous program of education and self-improvement.
14. Put everybody in the company to work to accomplish the transformation. The
transformation is everybody's job.

http://deming.org/index.cfm?content=66 5/6/2008