Frame the Challenge: Path for Improvement (Part 3)

11 nov · In Their Own Words

00:33:50

John Dues and Andrew Stotz are diving deeper into the improvement model that John is building with his team. In this episode, learn the three ways to think about an improvement frame for your big challenge.

TRANSCRIPT

0:00:02.6 Andrew Stotz: My name is Andrew Stotz and I'll be your host as we dive deeper into the teachings of Dr. W. Edwards Deming. Today I'm continuing my discussion with John Dues, who is part of the new generation of educators striving to apply Dr. Deming's principles to unleash student joy in learning. And the topic for today is Frame the Challenge. John, take it away.

0:00:23.6 John Dues: Hey Andrew, it's good to be back. Yeah, we're gonna talk about Framing the Challenge today. We kicked off a new series a couple of episodes ago. I introduced this improvement model that we can use to set ambitious goals backed with this sound methodology. Make this disclaimer again, we're sort of building the plane while we are flying it. So this improvement model is new at United Schools where I work. And so again, we're actually letting listeners sort of see it as it's being built and first put to use. And so I think just starting out with a quick recap of the model is a good place to start. So what is this improvement model that we've been looking at? I'll pull up my screen so we can share a visual of the model for those that are watching. Right. Can you see that all right?

0:01:21.2 AS: Yep.

0:01:21.3 JD: Great. Give me one second. All right. So we have this improvement model. Basically the core idea of the model is it gives us the scientific way of thinking. And remember, we talked about we're working to close this gap between current conditions in our organizations and future aspirations. In order to close this gap, we're walking through the four steps on the model. So first, we set the challenge of direction. That's really where we focused our time last episode. The second step is to grasp the current condition. The third step is to establish the next target condition. And then the fourth step is to experiment to overcome obstacles. And that's where we spend most of our time in this four-step process. And then the other thing we've talked about is we do it with this team. The people working in the system, that's one part of the system, one part of the team.

0:02:19.8 JD: And we've talked about this in our case. This can be students, it can be teachers, whoever the frontline people are in your organization. Then there's those with the authority to work on the system, to make changes to the design or the architecture of the system. That could be a teacher in a classroom, or we've said the principal of a school, or maybe the superintendent of a system of schools. And then one of the innovations that we've made to this improvement model is that that third group or that third person on the team is someone that has Profound Knowledge, someone that's using Deming's principles to guide the work. So that's the basic model that we looked at in the first episode and...

0:03:11.8 AS: And I would just highlight... By the way, can you put it on slideshow?

0:03:15.3 JD: Sure.

0:03:15.4 AS: And I've been reading Mike Rother's book, rereading his book on Toyota Kata and stuff. And so this has really got me back to it. But what you're doing is applying this and helping us understand it as you're putting it into action at your school, right?

0:03:35.0 JD: Yeah, we've had an improvement model. And I think... Yeah, so like it says down in the right hand corner, that this model, it's based on Mike Rother's work, the Toyota Kata work. I think one thing that was missing from our model previously was like, how do you set this challenge or direction? How do you do that in an ambitious but reasonable way? And I think Mike Rother's sort of model speaks to this. So that's why I like his four-step model. I also like the four steps because it's pretty simple. It's not 15 steps. It's not 20 steps. It's four steps. Now there are some steps that you have to learn and stuff like that. There are different pieces to each of the steps, but I like that it's four steps. It's sort of easy to remember. It's memorable. And I think the innovation that we've done so far is who is the team that's working through this? And I think to frame it as the people working in the system, the people working on the system, and then someone with Profound Knowledge, I think that's an innovation, from what I've read about Mike Rother's work.

0:04:39.6 AS: Yep.

0:04:40.4 JD: Yeah. And so to continue the recap from last time, I think in the last episode, so we introduced the model two episodes ago. And then last episode, what we said we were gonna do is start walking through each of the steps, episode by episode, and do a deeper dive into each of the steps. And we did that with step one last time. So we did Set the Challenge last time. And just as a refresher, this is that longer range goal that would differentiate us from other schools in our case, if we achieve it. But remember, we also said it seems nearly impossible at the outset. This is something that's off in the horizon. It's probably gonna take at least six months, probably more like two or three years. And then I gave this example at United where I am. So we're a school system. One of the challenges that we've set is to reduce our chronic absenteeism from 52%. So that's sort of the current condition. And we wanna bring that down to 5%. And there's this huge gap between those things. Obviously, we talked about an order of magnitude, and we don't quite know how to get there right now.

0:05:48.7 AS: Yeah, I think that's the point is we don't know how to get there right now.

0:05:57.6 JD: Yeah. Yeah. And I think... And so what I originally had planned to do is to go on to step two. And I think we're gonna do that next. But I wanted to pause because last time we briefly touched on this idea of Framing the Challenge as an improvement goal. And so with this episode, what I wanna do first before we go on to step two is talk about how to sort of think about that framing. And I sort of have studied a little bit of performance management from healthcare specifically. And there's really these three phases of performance management. When you're setting a goal, there's sort of performance measurement that has a research orientation. There's performance measurement that has an accountability orientation. And there's performance management that has an improvement orientation. And I think it's really important to understand the difference between those three types of measurement because I think conflation of those three things can derail and often derail improvement efforts. And in fact, as I was doing some research for this episode, I read this quote in one of the journal articles that I was sort of reviewing. It said, "the problem with measurement is that it can be a loaded gun, dangerous if misused, and at least threatening if pointed in the wrong direction."

[laughter]

0:07:19.6 JD: Right. So, when I read that I was like, this is important enough to take a pause and do a little bit deeper dive into that, you know, the differences between the three that we sort of got into on a surface level last time.

0:07:33.5 AS: One of the things that I like to say these days when I talk to people about measurement is measurement... If the subject being measured, let's say a table, I'm gonna measure the length of a table versus measuring the performance of an individual as an example. If the subject being measured knows, is aware that they're being measured, you're gonna have a problem.

0:08:02.0 JD: Yeah, I think that's very well put. And...

0:08:07.5 AS: The table doesn't care.

0:08:09.3 JD: The table doesn't care, but people always do. No doubt. No doubt. So I thought it'd be... I put together a table for those that are watching 'cause there is a lot of nuance to this and we'll kind of walk through this step by step, sort of the differences between goals or measurement for research, measurement for accountability, and then measurement for improvement. So I think just... I came up with these dimensions in some of the research I was doing. So, what's the purpose of each of those? What questions are you trying to answer? What are some example questions that are answered with that type of measurement? What's actually getting measured? How often is it getting measured? And then why does quality improvement or quality measurement matter in that particular area? So let's start with the purpose first. So when we're thinking about measurement for research, what we're really trying to do is contribute to some knowledge base, right?

0:09:01.8 JD: You know, I think the classic example is, what a university professor is often doing in their research. The second type of measurement is measurement for accountability. And really there, what we talked about last time is the purpose is to determine the application of rewards and sanctions or rewards and punishments. And that's really juxtaposed against measurement for improvement, which is... The purpose there is to learn our way to a system that produces a higher level of performance, right? And so let's look at measurement for research. We talked about the purpose being contributing to the knowledge base. If the questions that we're asking are about constructs or relationships between constructs or theories, then research is probably the direction we wanna go. An example question would be what's the relationship between two conceptual variables and what gets measured is... Could be numerous latent variables, but how often is this measurement happening? Typically once or twice during a study. And what we're trying to do is detect a relationship where they exist, right?

0:10:16.8 AS: So it could be... Like in a school, it could be a relationship between being late, the late rate and the absenteeism rate.

0:10:29.9 JD: Yeah. I mean, you could do research into why is it that student... Why are students chronically absent? You could do research into what's the best way scientifically to teach reading, right? And so you're gonna sort of come up with some answers there, at least answers that are sort of coming out of a lab, right? And a lot of times measurement for research or research goal or research study, that can be helpful to sort of initially point you in the right direction. You might do a literature review when you're trying to come up with solutions in your particular context.

0:11:10.3 AS: And it's important to remember that surveys properly done are a great form of research. So not only going back and seeing what's already been... What is the knowledge base on attendance, but also trying to do some research into what do students or teachers or parents think are root causes as an example.

0:11:33.3 JD: Sure.

0:11:34.8 AS: Okay. Great.

0:11:35.5 JD: Gives you a starting point, right? And so you certainly need measurement for research for sure. In that second bucket, we have measurement for accountability. And this is probably the thing that teachers and educators are most used to because there's accountability systems in all 50 states, right? And remember, we said the purpose is to determine who should be rewarded and who should be sanctioned. That's the purpose of an accountability measure. It's gonna answer questions about merit or status or accomplishment. It could be of someone like an individual teacher in a classroom, or perhaps about a school, for example. It's gonna answer questions like who's performing well and who isn't, who should be considered knowledgeable enough to do whatever, something X, right? But when we're talking about measurements, they're typically end-of-the-line outcomes, usually once per year after the fact. I've given state tests as an example multiple times. That's a very typical accountability measure end-of-the-line outcome. And why it's important to have quality measurement for accountability is that we can assign consequences based on measurement that lacks sufficient technical rigor so.

0:12:56.0 AS: Consequences as in rewards and sanctions?

0:13:00.4 JD: Could be... Yeah, consequences as in rewards and sanctions. And so there's technical guides that go with accountability systems. So how is the state, for example, calculating all of these different measures that show up on a school report card, test scores, value-added progress scores, chronic absenteeism rates? All those things have to be well-defined. Data has to be collected systematically. And it has to be done the same across the entire system so that rewards and sanctions are meted out equally amongst all the districts and schools and classrooms. But those two things are very different than measurement for improvement. And that's where I focus most of my time and where these talks really, really focus. And again, we said the purpose is to learn our way to a system that produces a higher level of performance.

0:13:48.4 JD: So we're talking about questions about specific changes as potential improvements to our systems. So some questions might be, are the changes I'm making leading to improvement? How are my changes affecting other parts of my system? And really, we're talking about outcomes and processes relevant to the object of change in terms of what gets measured. And that's happening... Those measurements for outcomes or processes are happening frequently as the practice or as the process occurs, right? Because we want feedback on a much more frequent basis than once or twice per study or at the end of the school year. That's one of the advantages here of measurement for improvement. And why does quality measurement matter in this particular area? Well, we wanna learn which changes are an improvement without wasting resources or will. Those are both very finite things in organizations, schools are... That's the same in schools.

0:14:55.2 AS: Will as in energy towards this objective, is that what you mean by will?

0:15:01.7 JD: Yeah. So two finite things, resources, which could be time or money. But will, I literally mean the will of the people, the will of the frontline people that you have to get on board with whatever this change is gonna be. And if you're moving between this thing and that, you sort of use up that will for good...

0:15:23.4 AS: It seems you have depleted the will of the people.

0:15:27.4 JD: And that happens all the time, especially where you're in a service business like education, the frontline people are being burned out all the time, teachers, in hospitals it's nurses and other folks in other industries. So that's the basic overview. And then I think one of the key things here is that there are some real measurement limitations when it comes to accountability measures and research measures or goals, when we're thinking about organizational improvement.

0:16:08.5 JD: I think the key limitation for accountability goals is that... The key limitation for improvement is that it does not illuminate why the outcomes occur or what should be done to change them when we're thinking about accountability system. For research, the key limitation for improvement is that it is impractical to administer it and not designed to inform changes in practice. So those are some real limitations. But what often happens, I think... And I should say again, like we said at the outset, that the three types of measurement are complementary. Like we need each of these three different types of performance measurement. But I think what happens is that problems arise when they're not used for their intended purpose. Remember, we said research, we wanna contribute to the knowledge base, that's the purpose. For accountability, application of award and sanctions. And for improvement, there we're actually learning our way to a better system, right? So, I thought it would be useful here. I may put you through like a little quiz here to apply the purposes of measurement to the right scenario. So, I have three situations here. They're unrelated to education. So, there's no pressure there. So, I'll read the three situations and then you're gonna tell me how would you... Which of the measurement purposes would you use?

0:17:47.7 AS: So, research, accountability, or improvement.

0:17:49.2 JD: Research, accountability, or improvement so.

0:17:53.6 AS: And I'm doing this on behalf of our listeners and readers so... And listeners and viewers.

0:17:55.7 JD: Everyone yeah.

0:17:56.7 AS: So, pay attention ladies and gentlemen, 'cause my answers may be wrong, but yours may be right. Okay.

0:18:01.7 JD: This is the check for understanding. This is a true education exercise here. And we're gonna be talking about avocados, right? So, there's no prior knowledge needed. So, I'll read through the first three situations, give you a chance to think, and I can repeat them if necessary, and you kind of think between those three. So, the first situation is rank the grocery stores in Columbus, Ohio, according to the quality of their avocados. So, would you use measurement for accountability, measurement for research, measurement for improvement? That's the first situation. The second situation is understand the relationship between weather, soil, acidity, and the eventual quality of an avocado grown in California. And the third situation is improve the quality of avocados on sale across all stores in Columbus. So, let's go back to that first situation. So, if you're gonna rank the grocery stores in Columbus according to the quality of their avocados, what type of measurement orientation makes the most sense?

0:19:15.5 AS: So I'm thinking accountability.

0:19:20.0 JD: Yeah, that's exactly right. Accountability, it's basically a grading system for avocados. You think how meat gets graded, it's grade A meat. That's really an accountability system.

0:19:33.6 AS: Okay, so listeners, viewers, did you get that one right? These are tough. John's a tough teacher. All right. Next one.

0:19:39.0 JD: You're one for one, and you have A grade schools, right? So you have A grade avocados, and that's an accountability measure. The second one was you're understanding the relationship between weather, soil, acidity, and the eventual quality of an avocado grown in California.

0:20:00.2 AS: Ladies and gentlemen, is this research, accountability, and improvement? Well, we've already eliminated accountability, so it's got to be either research or improvement. And if I get this one right, then I'm gonna get the third one right naturally. And I would say that sounds to me more like research.

0:20:15.8 JD: Yeah, that's exactly right. Research, right? So 'cause you're experimenting to see how the manipulation of variables, in this case weather, like the pH level of soil, acidity, impact the quality of an avocado. So you're basically a researcher trying to figure out what's the best combination of those things that gives you the best avocado. But this experimenting is gonna take probably years as you adjust those variables, right? And the last...

0:20:46.5 AS: Yeah, avocados don't grow so fast.

0:20:50.2 JD: They don't grow so fast, yeah. And then the third situation was you wanna improve the quality of avocados on sale across all stores in Columbus. There's only one left, so it's got to be...

0:21:03.5 AS: Well you used the word improve in it, so I think it's improvement orientation, huh?

0:21:06.8 JD: There you go. That's a giveaway. So aim is the quality of the avocado. So the basic theory of change is something like maybe improving the transport time from the field to the store. So there you can see that it's not like one is bad in terms of a measurement orientation and one is good. It's just... Is it being applied to the appropriate situation?

0:21:35.6 JD: There are certainly appropriate situations for accountability, appropriate situations for research and appropriate situations for improvement. So basically to sort of wrap this up, I mean, I thought it was really important because last time we talked, when you set the challenge and then it's gonna be something like a vision far out into the future, maybe two or three years, it's gonna be really important that that challenge is framed correctly because you're gonna be working on this thing for a long time. So with the model, we now have a way to bridge the gap between conditions and future aspirations. There's always gonna be a gap. We now have this model that gives us the scientific way of thinking and working to close the gap. And then we've said it's the responsibility of upper management to set this overall challenge as a key priority.

0:22:37.5 JD: And then we've said it's really important to understand the difference between these three types of performance measurement because conflation of the three can derail our improvement efforts. So the key takeaway here is you wanna frame this challenge or this far out direction that we're heading in as an organization as an improvement goal. And that's gonna orient the work. It's gonna orient the types of questions that you're asking. It's gonna orient the people, and the outcomes and processes that they're tracking. It's gonna orient your measurement system. You're gonna have to come up with frequent process and outcome measures that let you know how you're doing along the way. And the purpose of all of this is to learn our way to a better system. That's the purpose of measurement for improvement.

0:23:34.1 AS: That's great. A great summary. I wanna ask a question. Recently I've been teaching my corporate strategy course and I've been talking about the teachings of Richard Rumelt, who wrote the book called Good Strategy Bad Strategy, which is such a great book on strategy. But one of the things he complains about when he says his bad strategy is just setting an aspirational goal. Because as we learned from Dr. Deming, by what method? Like now, so there's... You've got to have a vision. You've got to have an aspiration of where you're going. But what he really focuses on... I think we're gonna talk about this in next sections. He really focuses on, have we really identified what the problem is?

0:24:21.7 AS: Like, what is the constraint? What is the thing that is holding us back from getting there? And what ends up happening is, when you clearly articulate the problem, what happens is it focuses... It becomes hard. Because to solve that problem, you need new resources. You need to get rid of old stuff. You've got to make substantial changes. And so it's much more comfortable for people to set strategies that are based upon wonderful visions. But never really deal with the problem. And then the workers in the companies, an employee in a company just looks up and goes, what did management just do for that long weekend? They did a weekend getaway to do their corporate strategy. And then they just came up with a fluffy vision of whatever with no help for us of how do we deal with the hardest problem is that we can't beat our competitor with the technology that we have. And we're never gonna get to that goal if we can't solve that problem.

0:25:28.7 JD: Yeah. And that's really the essence of the steps two, three, and four. I mean, the very next thing that we're gonna talk about is one, what's the current situation on the ground? Now we have this aspiration, but what's actually happening? For whatever data we have, whatever time period, 10 years, five years, whatever it is, we're gonna look at that data in a way that gives us a very firm understanding. And then remember, there's that crack in the model. That's the threshold of knowledge. So right up front, we're acknowledging.

0:25:58.0 AS: We don't know how to get over this. We don't know what's blocking us. We don't know...

0:26:03.3 JD: Yeah. We may have some ideas, but... Some initial ideas, but we do not know how to solve this chronic absenteeism problem. And that's where the experimentation comes in.

0:26:11.4 AS: So let me ask you one last question before we go. This is completely selfish, but also for the listeners and viewers out there, that is, I always ask my students this question in corporate strategy, should corporate strategy be kind of secretive in the sense that you're trying to build a competitive advantage and therefore some of the best battle attacks in war were kept secret. Stonewall Jackson was famous in his Shenandoah Valley campaign for not letting anybody know what he was gonna do the next morning. And then... Or should it be public? Like your number of 50 to five is pretty scary. And I'm just curious, what are your thoughts on that?

0:27:00.4 JD: Well, if you're in war, I think you should keep it secret. But pretty much anywhere else, I think public. Now that'd be my opinion. Now I'm in a school setting. I acknowledge that. But I've also seen...

0:27:11.4 AS: This is my quiz for you, by the way.

0:27:14.7 JD: What's that?

0:27:15.6 AS: This is my quiz for you.

0:27:15.7 JD: Your quiz for me. Yeah. Well, I have seen... And I've had the same thought. I think it was one of the founders of Toyota, or maybe someone that was an early CEO basically said, well, you give away your playbook basically. And he's like, well, just because someone has my playbook does not mean they can do it. And so education is a different orientation. There's not corporate secrets. And we're very open, we often share our practices. But I've often been on the...

0:27:45.2 AS: If you could get from 50 to five, you would want the world to know.

0:27:48.8 JD: I would want the world to know. I want everybody to do it. But I've been on the other side of this where I've gone to school and I've reached out to people get a manual or an artifact or something that they have that they do really well at their school system. And I look at it and I'm like, I don't know what to do with this. Right? So it's something altogether different to have the thing and then be able to do it. In our case, it's gonna benefit kids. We're gonna share it as far and wide as possible. So yeah, I think the setting matters. If I'm... The Union Army fighting Stonewall Jackson, then I'm gonna keep my secrets secret, my battle plan secret. But for most of the things I'm gonna share.

0:28:32.9 AS: Nathaniel Banks taking on Jackson. It was a rough series of battles for him. So I'll close out with my thoughts on this, which is that, yeah, I think ultimately once you've decided on what's your goal, where you wanna be, then I think you've got to make it public. And the reason why is because you need your employees to deliver that. It can't be... Everybody needs to be bought in. But even more importantly from a marketing and a relationship with customers, suppliers and others, they need to feel that vision. And they need to feel that mission. I think another great book is Start With Why. And that is why are we doing this? And I just read a great book on corporate strategy that is called Corporate Strategy Demystified.

0:29:25.5 AS: But it's just great because it was written in 2006. So he's talking about the battle between Apple and Compaq and Dell and all of these and IBM. And he doesn't know the outcome that Apple ends up being this multi-trillion dollar business. And basically his last sentence that I read in the last chapter is, it's over for Apple. They just can't compete in this space. And what he missed... This is what I'm teaching tonight, what he missed was the trusting connection that the customers had to Apple, to Apple's mission. Somehow Steve Jobs was able to create that mission and get it out to the world. And in the valley of death, when they were going through the worst time and it didn't seem like they were ever going to be able to do anything, it was customers that stuck with them because they believed in the mission of what they communicated. And it is that total, let's say intangible, that is very hard to measure and very hard to understand. But this is what I got when I was reading that book from 3:00 AM 'till 4:00 AM This morning, John.

0:30:44.4 JD: Whoever that author is was a small miss, a small miss.

0:30:48.8 AS: Yeah. And he's a brilliant guy. And so it's also a great point that just stick with your vision 'cause people's commitment to Apple and all that is so so strong. So being public about what you're doing and sharing it is critical because the last thing, as you said, even if somebody else has your playbook, I like to tell people that if somebody was working at General Motors and they had all the list of all the parts for Cadillac or whatever it is that they're building, and then they went to Toyota and said, build this, just because you have a list of parts and you have that operating system doesn't mean that they can build it because the product was actually designed for the operating system. And it's that entanglement in the actual process of production that makes that corporate strategy almost impossible to duplicate, even if you have the playbook.

0:31:41.8 JD: Yep. Yeah, that's it right there, I think. That's it.

0:31:46.5 AS: So fantastic. Well, on behalf of everyone at The Deming Institute, I wanna thank you again for this discussion. And for listeners, remember to go to deming.org to continue your journey. You can find John's book, Win-Win: W. Edwards Deming, The System of Profound Knowledge and the Science of Improving Schools on amazon.com. This is your host, Andrew Stotz. And I'll leave you with one of my favorite quotes from Dr. Deming. "People are entitled to joy in work" and in school.

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Episódios

Worse Than a Thief: Misunderstanding Quality (Part 9)
23 dez· In Their Own Words
Join Bill Bellows and Andrew Stotz as they discuss what actions (or inactions) make us worse than thieves and how that relates to expiration dates, and acceptability vs desirability. Plus, stories about job swapping, Achieving Competitive Excellence, and birthdays.

TRANSCRIPT

0:00:02.3 Andrew Stotz: My name is Andrew Stotz, and I'll be your host as we dive deeper into the teachings of Dr. W. Edwards Deming. Today, I'm continuing my discussion with Bill Bellows, who has spent 31 years helping people apply Dr. Deming's ideas to become aware of how their thinking is holding them back from their biggest opportunities. Today is Episode 9, and it's entitled "Worse Than a Thief." Bill, take it away.

0:00:27.2 Bill Bellows: Welcome, Andrew. I haven't seen you in a while, and great to be back.

0:00:29.1 AS: It's been a while.

0:00:32.0 BB: Here we are. Episode 9 already. Gosh, [chuckle] time flies when we're having fun. First, let me say a shout out to people who are reaching out to me on LinkedIn. I spoke with another one of them this afternoon. It's always exciting to connect with them. And then I ideally connect in a regular basis and help them as best I can, and learn from them as best I can.

0:01:03.0 AS: Yep.

0:01:03.2 BB: So, for those who are thinking about it, they keep hearing you say, "Hey, you know how to reach Bill? Find him on LinkedIn." So, a reminder for those who are waiting for a nudge, here's a nudge. So, "Worse than a thief" is an expression that Dr. Taguchi used when he say, Andrew, "Don't be worse than a thief." And we'll get to that, but let me just give our audience some context on that.

0:01:37.8 AS: Yep.

0:01:39.0 BB: Dr. Taguchi would say... And actually, I don't know if Dr. Taguchi explained it. Someone explained it to me this way. He said a thief could be someone who steals your wallet, finds $20; which means they're up 20, you're down 20; which people refer to as "zero sum gain." Right? So, the thief's gain is my loss, zero sum. What could be worse than that? Well, "worse than a thief" would be a situation where what someone gains is nothing compared to what I lose. A simple example is, [chuckle] I'm not the only one who does this, but if I'm going to the supermarket and I get out of the car and I see a nail in the parking lot or a piece of glass in the parking lot on my way in. So, I'm not talking about walking all around the parking lot. I'm talking about if on my way into the store I see a nail, something that could puncture a foot, a tire, and I spend a few seconds to pick it up, throw it in the trash can right by the door, then my theory is the reason I do that, the reason others do that, is the belief that that little bit of time that I am spending doing that could potentially save someone far more than the few seconds it took me.

0:03:20.9 BB: Well, "worse than a thief" would be, I see that broken bottle, let's say a bunch of shards of glass. And having worked at my father's gas station, I've seen... A nail on a tire is one thing. Nail creates a puncture. A piece of glass in a tire creates a fracture. A piece of glass can destroy a tire 'cause you get a crack and it spreads, and that's hard to repair. A puncture with a nail, yeah, it's inconvenient, but that doesn't destroy the tire. So, I'm overly sensitive when I see pieces of glass in a parking lot, that that could ruin a tire.

0:04:04.8 AS: And ruin a day.

0:04:06.2 BB: Ruin a day, oh yeah. And so the idea is that for someone to not take the time, and the time they save cost you more than they saved, that's worse than a thief.

0:04:19.8 AS: Right.

0:04:20.0 BB: So, if I meet a set of requirements, leave the bowling ball in the doorway, deliver minimally, but in the world of acceptability, what do we call that, Andrew? It's good.

0:04:35.3 AS: It's good.

0:04:36.0 BB: Right? It's good. It's just within requirements, but good.

0:04:41.8 AS: It's not beyond looking good.

0:04:43.9 BB: And forget about beyond looking good; this is looking good. So, I leave the bowling ball in the doorway. I deliver to you the absolute minimum, which is still good. So, your response to that, Andrew, is, "Thank you, Bill." [chuckle]

0:05:00.0 AS: Yeah.

0:05:00.1 BB: And I'm not saying you know what I did, but let's say the situation where I am unaware of the loss function. I'm unaware that what I'm doing is make making your life worse.

0:05:12.2 AS: Right.

0:05:13.3 BB: But the idea is that my shortcut to deliver the D minus; D minus, minus, minus, minus, minus. 'Cause that's still not an F. What Taguchi is talking about is that the amount of resources I save, may be a fraction of what it cost you in terms of extra effort to use it. So, my savings of an hour, a minute, a second causing you far more than I saved, is worse than a thief. But in the world of acceptability, there is no such thing. In the world of acceptability, a little bit within requirements on the low side, a little bit within requirements on the high side, it's all the same. Again, there may be a situation where if you're putting a shelf on a piece of wood on a wall as a shelf and it's a little bit longer, a little bit long on either side, that may not have an impact; may not be touching anything on either side. It doesn't have to fit in.

0:06:25.9 BB: Now, this past weekend, our son and I were installing a new floor at our daughter's condo, and we wanted the pieces to fit in-between other pieces and this laminate floor which is a [chuckle] lot of work. Our son is turning into quite the artist when it comes to woodworking and things. But it's very precise getting things just right, just right, just right. And that attention to detail, that attention to making sure the gaps are just right, minding the gap and not the part. And there were pieces of this floor that he was trying to install. And it was driving him nuts, and finally... He's trying to figure it out and he finally figured it out what was going on. 'Cause he wanted that floor and the spacing between not just to meet requirements [chuckle] not that our daughter gave him and set the requirement, but he wanted the floor in those gaps to be invisible. He wanted things to... Right? He had a higher level, a higher standard.

0:07:25.3 BB: Now, this is the same kid who when he was 13 left the bowling ball in the doorway. But I would've done that. You would've done that. So, anyway, that's the difference between... Another reminder of, one, the difference between acceptability and desirability. But to add to this idea of "worse than a thief," embedded in the concept of desirability is not to be worse than a thief, is to understand the consequences of your action on others, and the amount of time and your decision on how you deliver it and how you meet the requirements. The idea is that, the less time you take in order to save at your end might be causing the person downstream in your organization more than you're saving.

0:08:22.8 AS: In other words, something small, you could adjust something small that would have a huge impact down the line, and you just didn't... You don't know about it.

0:08:32.2 BB: Again, that's why I go back to the nail in the parking lot. To not pick up the nail could cause someone so much more than the few seconds you didn't spend. But again, that could be...

[overlapping conversation]

0:08:44.0 AS: And one of the things that makes it easier or better for a working environment is you know your downstream.

0:08:51.8 BB: Yes.

0:08:51.8 AS: When you're walking in the parking lot, you don't know your downstream; it's just anybody generally, and hopefully I've stopped something from happening here, but you're never gonna know and all that. But with a business, you know your downstream, you know your upstream, and that communication can produce a really, really exciting result because you can see it and feel it.

0:09:11.8 BB: Well, and thank you for bringing that up, because I've got notes from... Since the last time we met, I keep a file for the next sessions we're gonna do. And so as things, ideas come up from people that I'm meeting on LinkedIn or elsewhere, then I, "Oh, let me throw that in." And so I throw it into a Word file for the next time. And so somewhere, I can't remember who, but since the last time we spoke, someone shared with me... Hold on, let me find it here. Okay. In their organization, they do staff rotation. They move people around in their organization. And the question had to do with, "Isn't that what Dr. Deming would promote? Is having people move around the organization?" And I said... Hold on, I gotta sneeze. I said, "Well, if I am the person that makes the parts that you have to assemble, and I make them just within requirements unaware of the downstream impact... " I don't know where they are within the requirements, let's say.

0:10:30.0 BB: All I know is that they're acceptable. I machine it, I measure it, the inspection says it's good, I don't know where within it's good. I don't know. So, I'm unaware. All I know is that it met the requirements. And I hand off to you on a regular basis, and then the boss comes along and says, "Bill, I wanna have you go do Andrew's job." So, now, I'm on the receiving end. And maybe you are upstream doing what I used to do. And you are likewise unaware that... You don't know that you're delivering acceptability. All you know is all the parts you deliver are good. You're trained the same way I'm trained, I'm doing your job. Does that change anything? [chuckle] If I take on your job and let's say, banging it together, whereas the week before you were banging it together, does that rotation create the conversation?

0:11:27.2 AS: So, you're saying rotation for the sake of rotation is not necessarily valuable if in fact, what could be more value is just the two of us sitting down and saying, "So what is it that you're doing with yours and what do you need?" and maybe visiting the other side or something like that.

0:11:44.9 BB: My point is, until the thought occurs to either one of us on the distinction between acceptable and desirable, neither one of us is the wiser as to why we do what we do. So, having people move around the organization and take on different roles, absent an understanding of this contrast, absent an understanding of what Dr. Deming is talking about, which includes these distinctions, that's not gonna do anything.

0:12:16.0 AS: Right.

0:12:16.8 BB: I would say it's a nice idea, and you hear about that all the time about oh the CEO's gonna go work at the front desk. But if the CEO goes to the front desk, again, unless he or she has a sense of what could be, that things could be smoother than what they are because of where they've worked before and it's so much smoother over there, that could lead to why at the Atlanta office does it take so much longer than the LA office. Now I'm beginning to wonder what might be causing that difference. But if I just take on your job for the first time, or if you and I every other week change jobs. So, I'm doing your job, we are both doing assembly, we're both making the parts. Absent an understanding of the contrast between a Deming environment or a non-Deming environment, which would include an appreciation of what Dr. Deming would call the System of Profound Knowledge and the elements of psychology and systems and variation, the theory of knowledge, just not enough. Insufficient. Nice idea. But it's when at Rocketdyne we would call "reforming."

0:13:39.0 BB: And we started 'cause Russ... Dr. Deming talks about transformation, and Russ talks about reforming. And so I started thinking, "How would I explain what... " I just thought it was too... My interpretation of what Dr. Deming is saying of the individual transform will begin to see things differently, okay. My interpretation is, I begin to hear things differently, I begin to hear the contrast between somebody referring to their son as "their son" versus "our son," my idea versus our idea; I start paying attention to pronouns, so I start hearing things differently; I start to think about, see things as a system a little... I become more aware, visually more aware.

0:14:43.9 BB: And to me, another aspect I think about relative to transformation is that, if I'm the professor and you're the student in a class, or in any situation, I don't see... I think about how I've contributed to whatever it is you're doing. I have somehow created the headache that you're experiencing. If I'm upstream of you in the organization, whether that's me delivering a report or a tool, or I'm the professor delivering the lecture, I began to realize that your issues I've created, and I begin to see things as a... I begin to see that I am part of the issue, Part of the solution, part of the problem. When I explained to students this, I began to realize as a professor that I am not an observer of your learning, asking "How did you do on the exam?" I am a participant in your learning, saying "How did we do in the lecture?" And to me, that's all part of this transformation.

0:15:53.0 BB: Now, the other word, "reform," which is associated with things I've heard from Russ. He talks about... Yeah, I'll just pause there. But I started thinking, well, Deming's talking about how I see the world, how I begin to see relationships differently, think about variation differently. That's a personal transformation. Reforming, and others began to explain to people at Rocketdyne and I do with clients and students is, reforming is when you and I swap jobs. Reforming is when I look at the process and get rid of a few steps. Reforming is changing titles. Reforming is painting something, [chuckle] changing the color. I think I shared, maybe in the first podcast series, I was doing a multi-day, one-on-one seminar with a pediatrician in Kazakhstan, who came to London to meet me and a bunch of other friends to learn more about Dr. Deming's work. And the entire thing was done through a translator.

0:17:07.1 BB: And so I would ask a question in English, it would be translated to Russian then back to me in English. And so at some point, I said to Ivan Klimenko, a wonderful, wonderful guy. I said, "Ivan," I said [chuckle] to Yuri, the translator, I said, "Ask Ivan, what's the fastest way for a Red Pen Company, a non-Deming company, a "Me" organization, to become a Blue Pen Company, otherwise known as a Deming company or "We" organization." And these are terms that we talked about in the first series; I don't think in this series. But, anyway, I said, "So what's the fastest way for a non-Deming company to become a Deming company? A Red Pen Company to become a Blue Pen Company?"

0:17:44.9 BB: And so he asked, and I'm listening to the translation. And he says, "Okay, I give up." I said, "Spray paint." [chuckle] And that's what reforming is: Getting out the red spray paint, having things become neat, clean, and organized, and you're just going through the motions. There's no change of state. And so, "I do your job, you do my job," that's not sufficient. But get us to think about the contrast of a Deming and a non-Deming organization, then you and I changing roles could be enormously beneficial as I begin to understand what it's like to be on the receiving end. Now, we're talking. And I think I mentioned in a previous podcast, I had a woman attend one of the classes I did at Rocketdyne, and she said, "Bill, in our organization, we have compassion for one another." It's the same thing. It's not sufficient. And that's me saying, "Andrew, I feel really bad. I lost a lot of sleep last night thinking about how much time you spend banging together all those parts that I give you. And if there was anything I could do to make things better, I would love to help you. But at the end of the day, Andrew, all the parts I gave you are good, right? I don't give you bad stuff, right? Have I ever given you a defective part, Andrew?"

0:19:12.0 AS: Nope.

0:19:13.1 BB: "So, everything's good, right? Everything's good that I give you? Well, then, if I could help you, but I don't know what else to do. Everything I give you is good. So, it must be on your end." [laughter]

[overlapping conversation]

0:19:24.1 AS: And I'm busy. Yeah.

0:19:26.6 BB: Must be on you. And that's what I'm talking about. Now, if I understand that I'm contributing to your headache, I'm contributing to the trouble you're having with an example, now I'm inspired; now I understand there's something on me. [chuckle] But, short of that, nice idea, it's not helping.

0:19:50.0 BB: [laughter] So, the story I wanted to share before we're talking about this role-changing. Again, role-changing by itself, nah, not sufficient. So, see if this sounds familiar. It has to do with acceptability. I'm pretty certain it's part of the first series. I wanna make sure it's part of the second series. So, I was in a seminar at Rocketdyne on something to do with quality. And I think United Technologies had purchased Rocketdyne. They were bringing to us their new quality management system. Not just any quality management system, Andrew. This was called ACE, A-C-E. And, when we first learned about this, I remember being in a room when their United Technologies, ACE experts started to explain it. And some of my colleagues said, "Well, what is ACE?" They said, "Well, it's Achieving Competitive Excellence." "Well, what is it? What is it, 'competitive... '"

0:20:52.2 AS: It sounds like you wanna put that up on the wall as a slogan.

0:20:56.0 BB: It was a slogan, "Achieving Competitive Excellence." And people says, "Well, what is it?" I said, "Well, it's Lean Six Sigma." Well, so why do you call it ACE? Well, our arch rivals, General Electric. they call it Lean Six Sigma. We ain't gonna call it Lean Six Sigma. So, we're calling it ACE, A-C-E, Achieving Competitive Excellence. But it's the same thing as Lean Six Sigma. [chuckle] And so we had all this mandatory ACE training that we would all sit through and pray that the rosters were never lost, were never lost so we wouldn't have to take the training again. So, in the training, there was a discussion of, how does the environment impact quality? And I don't know how it came up, but similar, there's a conversation about the environment could affect quality. And, so when that was raised, I think it was a question that came up.

0:21:56.9 BB: How does the environment affect quality? The physical environment: How hot it is, how cold it is. So, one of the attendees says, "I've got an example." He says, "I worked for a Boeing supplier," and it might have been, "I worked for Boeing in Australia." I know he said he worked in Australia. They made parts, big parts, very tall parts like a 15, 20... Very long section. And I think he said it had to do with the tails, part of the tail for Boeing airplane. [chuckle] He says, "When we would measure it," he said, "we knew that if we took the measurement first thing in the morning before the sun came up and it started to get hot, then there's a good chance that the length would meet requirements. And, we knew that once that part saw the heat of the sun and expanded, then it wouldn't meet requirements. So, we measured it first thing in the morning, [laughter] and that's an example of how the environment affects quality." And, my first thought when I heard that was, "You can't make that story up, that I will keep measuring it until it meets requirements." That, Andrew, is me shipping acceptability. Do I care at all about how that part is used, Andrew? [chuckle]

0:23:18.7 AS: Nope.

0:23:19.9 BB: Do I know how that part is installed? Am I watching you install it and go through all, you know, hammer it? Nope. No. Again, even if I did, would I think twice that I measured it before the sun came up and that might be causing the issue? No, that still would not occur to me. But the other thing I wanted to bring up on this, on the topic of ACE, remember what ACE stands for?

0:23:46.0 AS: Achieving Competitive...

0:23:50.0 BB: Excellence.

0:23:50.3 AS: Excellence.

0:23:51.8 BB: So, Rocketdyne was owned by United Technologies of Pratt and Whitney, division of West Palm Beach, for 10 years or so? 10 long years. ACE, ACE, ACE, ACE, ACE. So, I kept thinking, [chuckle] I said to some of my Deming colleagues, "There's gotta be another acronym which is A-C-E." Achieving Competitive... What? What might be another E word? 'Cause it's not... Instead of ACE, Achieving Competitive Excellence, I kept thinking of this, what might be another way of what this is really all about? And it dawned me. The embarrassment is how long it took me to come up with what ACE translated to. And it was "Achieving Compliance Excellence." [chuckle]

0:24:42.9 AS: Excellent.

0:24:45.0 BB: Does it meet requirements? Yes. And so what is compliance excellence? It gets us back to acceptability. So, traditional quality compliance. But then while I was on the thought of Achieving Compliance Excellence, and then, well, there's a place for meeting requirements. There's a place for compliance excellence. I'm not throwing it out the window. I would say, if I ask you, Andrew, how far it is to the closest airport and you say 42 miles, 42 kilometers, or you say it takes an hour, then embedded in that model is "A minute is a minute, an hour is an hour, a mile is a mile, and all the miles are the same." Well, maybe they aren't. Maybe they aren't. Maybe I'm walking that distance, and I'm going uphill and downhill. Maybe I'm driving that distance. And those changes in elevation don't matter as much. So, then, what I thought was, there's Achieving Compliance Excellence that's acceptability, and then there's Achieving Contextual Excellence, which is my understanding of the context.

0:25:56.7 BB: And given my understanding of the context, if you say to me, "How far is it to the nearest airport?" I say, "Well, tell me more about the context of your question. Are you driving there? Are you riding your bike there? Are you walking there?" 'Cause then I'm realizing that every mile with Compliance Excellence, I just treat it as "a mile is a mile is a mile." They're all interchangeable, they're all the same. With Contextual Excellence, the context matters. And I say to you, "That's a... I mean, 42 miles, but boy, every mile is... They're brutal." And so then just the idea that context matters, that the understanding of a system matters. All right. So, next thing I wanna get to, and we've talked about this before but we never got it in, but I wanna provide, I really... Well, what I think is a neat example. [laughter] Okay. Calm down, Bill. [laughter]

0:26:54.8 AS: Yeah. You're excited about it.

0:26:57.0 BB: All right.

0:26:57.1 AS: So, about your idea... [chuckle]

0:27:00.2 BB: All right. So, again, in this spirit, my aim in conversation with you is to provide insights to people trying to bring these ideas to their organization. They're either trying to improve their own understanding, looking for better ways to explain it to others. And towards that end, here is a keeper. And for those who try this, if you have trouble, get back to me. Let me know how it goes. Here's the scenario I give people, and I've done this many, many times. What I used to do is give everyone in the room a clear transparency. That's when you had overhead projectors. [chuckle] 'Cause people say, "What is a transparency? What is an overhead projector?"

[overlapping conversation]

0:27:45.0 AS: Yeah exactly.

0:27:46.8 BB: It's a clear piece of plastic, like the size of a sheet of paper. And on that sheet, on that piece of plastic was a vertical line and a horizontal line. I could call it set a set of axes, X-Y axis. And the vertical axis I called "flavor." And the horizontal axis, I called "time." And, so everyone, when they would walk into a seminar, would get a clear transparency. I give them a pen to write on this transparency. And I'd say to them, "Here's what I want you to imagine. The horizontal axis is time. The vertical axis is flavor." And I would hold up a can of soda and I'd say, "Imagine. Imagine, inside this can, imagine before the lid is put on, soda is added to this can," any kind of soda. Right? "Imagine soda's in the can. Imagine in the can is a probe, a flavor meter. And the flavor meter is connected to the pen in your hand." And what that... Wirelessly, Andrew. So, there's this probe that goes into the soda, into the can. It is, let's say, with Bluetooth technology connected to the pen in your hand, such that you have the ability with this magic pen to trace out what the flavor of the soda in the can is at any point in time.

0:29:31.0 BB: And so I would put on the vertical axis, right, the Y axis, I would put a little tick mark, maybe three quarters of the way up the vertical axis. And so everyone started at that tick mark. And I would say, "Okay, get your pen ready, get it on the tick mark. This flavor meter is inside the can. It's transmitting to your hand and the pen the flavor of Pepsi. If I was to seal this can, put the lid on it, and I say, 'Now the device is activated.' As soon as I put the lid on the can, the pen is activated and your hand starts to trace out what is the flavor of the soda doing over time." And I would say, "If you think the flavor gets better, then you have a curve going up. If you think the flavor of the soda's getting worse, then it goes down. If you think it stays the same, it just goes across."

0:30:37.1 BB: And I would just say, "What I want each of you to do, as soon as that can is sealed, I want you to imagine what the flavor of Pepsi, Coke, whatever it is, I want you to... " The question is, "What do you think the flavor of soda is doing in a sealed can over time?" And I would say, "Don't ask any questions. Just do that." Now, most of the people just take that and they just draw something. They might draw something flat going across. [chuckle] Now and then somebody would say, [chuckle] "Is the can in a refrigerator?" [chuckle] And my response is, "Don't complicate this."

[laughter]

0:31:26.1 BB: So, I just throw that out. Most people just take that and just trace something out. And for the one who says, "Is it refrigerated? What's the timescale? Is the horizontal axis years or minutes?" I'd say, "Don't complicate it." [chuckle]

0:31:46.8 AS: "And don't ask questions."

0:31:48.9 BB: "And don't ask... " But you can bring me over and I'll ask you a question. You can ask your questions, I would just say, "Don't complicate it." So, what do we do? Everyone gets a few minutes, they draw it. I take all those transparencies that you can see through, and I put them on top of one another. And I can now hold them up to the room and people can see what I'm holding up. They can see all the different curves.

0:32:17.0 AS: Right.

0:32:18.0 BB: 'Cause they all start at the same point. And then I would say to the audience, "What do they all have in common?" Well, they all start at the same point. "What else do they have in common? What do they all have in common?" And people are like, "I don't know." Some of them are flat. They go across, the flavor doesn't change. Most of them think it goes down at some rate.

0:32:43.4 AS: Yep.

0:32:45.0 BB: Either concave down or convex down. Now and then, somebody will say it goes up and up and up; might go up and then down. But most people think it goes down over time. That's the leading answer. The second leading answer is it's constant. Up and down, rarely. So, I've done that. I've had people do that. I used to have a stack of 500 of transparencies. I used to save them and just go through them. I've done it, let's say in round numbers, 1,500 to 2,000 people. So, all the curves start at that tick mark in the 99.9999% of them either go down or go across. What's cool is, all those curves are smooth. Meaning, very smoothly up, very smoothly across, very smoothly down. Mathematically, that's called a "continuous function." And what I explained to them is, if I draw a vertical line halfway across the horizontal axis, and I look at every one of those curves, because the curves are smooth, if I draw a vertical line and how each curve, your profile and all the others go across that line, immediately to the left and immediately to the right, it's the same value because the curve is smooth.

0:34:28.3 BB: But I don't ask them to draw a smooth curve. I just say, "What do you think the flavor does over time?" They always, with three exceptions, draw a smooth curve. And so when I ask them what do they have in common, you get, "They start at the same point." Nope, that's not it. I don't know if anyone's ever articulated, "They're all continuous functions." Very rarely. So, then I explained, "They're all continuous functions. But I didn't ask you to draw a continuous function." Well, when I point out to them that three times, three times, Andrew, out of nearly 2,000, somebody drew a curve that goes starting at the tick mark, zero time, and it goes straight across halfway across the page at the same level, and then drops down to zero instantly, it's what's known mathematically as a "step function."

0:35:26.9 BB: So, it goes across, goes across, and then in zero time drops down to zero and then continues. So, three out of nearly 2,000 people drew a curve that wasn't smooth. Again, mathematically known as a step function. And each time I went up to that person and I said, and I comment on it, and each of them said, there's a point at which it goes bad. And each of them had a job in a quality organization. [chuckle] And so why is this important? Because in industry, there's this thing known as an "expiration date." What is an expiration date? It's the date past which you cannot use the chemical, the thing. And what's the assumption? The assumption is, a second before midnight on that date, Andrew, you could use that chemical, that acid, that glue, whatever it is in our product; a second before midnight, before the expiration date, you can use that. But a second after midnight, we put this tape and we call it "defective." And so I've worked with companies that are in the chemical business, and they literally have this tape. At the expiration date, we don't use it. A second before midnight, we do. And so what you have is a sense that it goes from good to bad, you know how fast, Andrew?

0:37:15.0 AS: Tick of a clock.

0:37:17.0 BB: Faster than that, Andrew. Zero time.

0:37:21.0 AS: Yeah.

0:37:22.0 BB: Zero time. And so what I ask people is, "Can you think of any phenomenon that happens in zero time?" And people call that's... "Well, the driver was killed instantly." No, it wasn't zero time. "Well, someone is shot." It's not zero time. And so what's cool is, when I ask people to describe a phenomenon, describe any physical phenomenon that happens in zero time, that we go from one location to another, from one state to another in zero time, I've not been stumped on that. Although actually, [chuckle] there are some situations where that happens. Well, the reason that's important for our audience is, that's a demonstration that expiration-date thinking is an organizational construct. It's not a physical construct. Milk goes bad fast. [chuckle] I'll admit, the expiration date on the half gallon of milk, it goes bad fast.

0:38:27.2 BB: But a second before midnight and a second after midnight, it's still the same. So, expiration-date thinking is what acceptability is about; that everything is good, equally good, but once we go across that expiration date, Andrew, then the flavor changes suddenly. And so what I used to kid people is, imagine if that really happened, right? Then we'd have this contest. I'd say, "Andrew, I had a can of Pepsi recently. And have you ever done this, Andrew? You get the can of Pepsi that has the expiration date on it. And if you listen to it at midnight, on the expiration date, you listen closely, you can hear it go from good to bad, Andrew." [chuckle] Would that be awesome? [chuckle] So, I was sharing some of this recently with our good friend, Christina, at The Deming Institute office.

0:39:31.0 AS: Yep.

0:39:32.7 BB: And it happened to be her birthday. And, so I sent her a note and I said, "Happy birthday." And I said, "So, did you change age immediately on the second you were born?" 'Cause she said, 'cause I think she said something like, "My mom reached out to me and she reminded me exactly what time I was born." And I said, "Oh," I said, "so did you feel the change in age as you crossed that?" And she said, she said, "Hi, Bill. Of course, I felt instantly different on my birthday. My mom even told me what time, so I'd know exactly when to feel different." [chuckle] Now, so here's a question for you, Andrew. Can you think of a situation where something changes from one value to another in zero time? In zero time. Again, we don't go from living to dying in zero time. The change of Pepsi doesn't go from one value to another in zero time. The quality of any product is not changing, you go from one side to the other. But can you think of anything that actually happens in zero time: Across that line, it goes from one value to another?

0:41:05.0 AS: Nope, I can't.

0:41:08.8 BB: Oh, come on, Andrew. You ready?

0:41:16.2 AS: Go for it.

0:41:20.0 BB: Did you ever hear of the German novelist, Thomas Mann, M-A-N-N?

0:41:24.0 AS: No.

0:41:25.7 BB: All right. I wrote this down as a closing thought; it may not be the closing thought. We'll just throw it in right now. So, this in an article [chuckle] I wrote for the Lean Management Journal.

0:41:38.0 AS: By the way, it's gotta be the closing thought because we're running out of time. So, perfect.

0:41:43.7 BB: Fantastic! Well, then here's my closing thought, Andrew. You want my closing thought?

0:41:47.1 AS: Do it.

0:41:48.1 BB: All right. So, from an article I wrote for the Lean Management Journal, so here's the quote. "I have witnessed industrial chemicals in full use right up to the expiration date, and then banned from use and tagged for immediate disposal with a passing of the expiration date only seconds before the chemicals were freely used. While they may rapidly sour, it is unlikely that they expire with a big bang, all in keeping with a sentiment of German novelist Thomas Mann's observation about New Year's Eve," Andrew. What he said was, "Time has no divisions to market's passage. There's never a thunderstorm or a blare of trumpets to announce the beginning of a new month or year. Even when the century begins, it is only we mere mortals who ring bells and fire off pistols." So, at midnight on December 31st, a fraction of a second before midnight, we're in 2024 and we go to 2025 in zero time, Andrew. So, legally things change as you go across a line. You go from the United States to Mexico across a line of zero thickness. So, legally things across a line change instantly.

0:43:17.0 AS: Well.

0:43:18.0 BB: A coupon, Andrew, expires at midnight. [laughter]

0:43:22.7 AS: Yep. All right. Well, on behalf of everyone at The Deming Institute, I want to thank you again for this discussion. And for listeners, remember to go to deming.org to continue your journey. And if you wanna keep in touch with Bill, as he mentioned at the beginning, just reach out to him on LinkedIn. This is your host, Andrew Stotz, and I'll leave you with one of my favorite quotes from Dr. Deming. "People are entitled to joy in work."
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Define the Problem: Path for Improvement (Part 5)
18 dez· In Their Own Words
Before you start solving a problem, you need to know what, precisely, you're trying to solve. In this episode, John Dues and Andrew Stotz talk about how to figure out the problem on which you will focus your team's efforts.

TRANSCRIPT

0:00:02.2 Andrew Stotz: My name is Andrew Stotz, and I'll be your host as we dive deeper into the teachings of Dr. W. Edwards Deming. Today, I'm continuing my discussion with John Dues, who is part of the new generation of educators striving to apply Dr. Deming's principles to unleash student joy in learning. The topic for today is, Define The Problem. John, take it away.

0:00:22.9 John Dues: Hey, Andrew. It's good to be back. Yeah. So, we've been going through this improvement model just as a refresher. Two episodes ago we looked at the three phases of performance measurement, research, accountability, and improvement. That was an important frame at the start of this process. And then in the last episode we discussed how we made sure in that first step of the model, we step back and see our system, see the full system in which we work. And I showed you some improvement tools that we use to visualize the improvement team or the group's thinking for each of a set of guiding questions. So, we looked at a system flow chart and that sort of said to us, within our system, kind of saw how things flow into the system, the things that we do, and then the outputs, and the questions there were, what's the largest system to improve on and what's the aim of that system? And then we took a look at an affinity diagram, and we used that just to answer the question, what are the opportunities for improvement within the target system? And then we used this tool called an interrelationship digraph, where we prioritize basically the various opportunities for improvement. And then it's been through this model that everybody can see these four steps that we're talking...

0:01:57.7 AS: Well, for the listeners, they may not be able to see, but for the viewers, yeah.

0:02:01.7 JD: For the listeners, they can't see it. But the model that we've been talking through, for sure, we've been working through this four-step improvement model, and we've spent most of our time on step one, which is set the challenge and direction. And we'll remain here at this point in the process today as well. And then later on in the series, we'll go on to the subsequent steps. So step two, grasp the current condition. Step three, establish your next target condition. Step four, experiment to overcome obstacles. And some of the first episodes in the series, we talked through just a high level overview of each of those things. And then we've also said that we wanna do all of these steps with a team that's made up of somebody that has Profound Knowledge, some number of people that have the authority to work or change or redesign the system, and in some number of people that are working in the system.

0:02:57.3 JD: So that's just kind of a refresher for those that have been following along. And again, in step one of this model, this is where we're at right now, we ask, where do we wanna be in the long run? And so we're really thinking about a longer range goal that will differentiate us from other organizations. So in our case, schools. And it seems nearly impossible at the outset. We've said that. And we've also talked about what's the right time period for this challenge or direction to be set for, in terms of out in the horizon? Then what I said was, somewhere in the neighborhood of six months to three years, sort of anything less than six months, it's just too fast to put the team together and really dive in and do the work that you need to do. Anything beyond three years, it just seems so far that, you now, things can kind of get away from you if you set the vision out that far.

0:03:48.8 JD: Not that it's impossible, but six months to three years seems to be a sweet spot in my perspective. And then I gave this example, we're working on this chronic absenteeism problem. Chronic absenteeism is when a student in a K-12 school is absent for more than 10% of the school year, and coming out of the pandemic, we've talked about a very high number of kids across the country in the United States are chronically absent. And in our particular system, like a lot of high poverty systems, those numbers are particularly stark. So over the last few years since the pandemic, the chronic absenteeism rate in our school system has been hovering right around 50%.

0:04:34.3 AS: It's just so incredible, every time I hear you say that, I just can't believe that.

0:04:38.3 JD: It is incredible, incredible. And we're trying to get that down, that number down to 5%. So it'd be a huge...

0:04:44.0 AS: Which is also an incredible stretch goal.

0:04:47.3 JD: Incredible stretch goal. Seems almost impossible. That's sort of how we've framed things in our school system.

0:04:54.4 AS: So let's stop there just for a second, because I think for the listeners and the viewers, what's your long range? Let's take three years. What is your three-year goal that is nearly impossible? Where do you wanna be? Yeah, I liked it the way, you know, the diagram that you're showing is kind of a mountain, and so why not think, what mountain do you wanna plant your flag on three years from now? And that really is what you're describing, what you guys are focused on is a very challenging goal, but for the listener and the viewer, what's yours?

0:05:31.4 JD: Yeah. Yeah, that's a great point. Yeah, I mean, I think encouraging people to think through how they would step through this process, how they would frame goals within the system that they're working in, I think that's a really important sort of thought process to be going through as you're listening to, at least to our approach.

0:05:49.8 AS: Yep.

0:05:51.1 JD: So at this stage in the process, like I said, we've stepped back. We have this sort of long term goal. We've mapped out our system, we've talked about some opportunities for improvement and prioritize those. So at this stage in the process, the next thing we're gonna do is we're gonna define the problem. We know we have an issue with chronic absenteeism, but we don't necessarily know what the specific problem is that we're going to work on. So they're, like, with See the System, and we had a set of guiding questions, similarly, we have a set of guiding questions that we're asking at this step in the process to find the problem.

0:06:32.1 JD: So the one that we're gonna focus on today is how is the project being funneled from a general to a more specific problem? So again, we've got this general problem area, chronic absenteeism. Some other guiding questions that we'll tackle later, what's the precise problem statement? What are key operational definitions, concepts that we're gonna measure? Who will benefit the most from the improvement effort? What are their needs? And then what's the vision for excellence? So those are all the things that we're tackling in this stage that we're calling Define the Problem. But we're gonna focus just on this one question today, how is the project being funneled from a general to a more specific problem?

0:07:19.1 JD: So, in our case, and we talked about this last time, by this point we've formed an improvement team. So we have an actual group of about 10 people cross-disciplinary, meaning different roles that are, and they're coming from different parts of our system, different departments, all four of our campuses are represented. So this is the improvement team that we've formed to work on this particular problem. And really what we're trying to do in this step is show the importance of this particular attempted improvement. And we're trying to paint a picture for everybody else that's not on the team why energy should be spent here instead of elsewhere. Because there's gonna have to be resources both obviously in people, money, whatever, deployed as a part of this effort. And we have any number of problems like most school systems...

[laughter]

0:08:19.7 JD: That we could focus on. And so we have to really paint the case for why we're gonna focus on chronic absenteeism.

0:08:27.3 AS: I have to tell you a story, John. When I was, I don't know, 10 years ago I went to visit my first boss who was so successful that he bought a piece of land in New Zealand, and it was a farm. And it was 250 square kilometers. So I went to visit him and he had a little house on this big farm, and it had all these mountains. And he looked at me and said, what mountain do you want to climb today? And I said, "That one." And so we climbed up that one, and I was there for five days and we had to take a break in between, 'cause it's pretty exhausting climbing up one of these mountains, but there was endless mountains, and you can't climb 'em all.

0:09:03.2 JD: Yeah.

0:09:03.7 AS: And you only have limited time, and you only have limited energy. So what mountain are you gonna climb? And I think part of what you're talking about, showing the importance of spending the energy here is that, you know, hey, this is a very hard challenge that we want to get to, and we have to explain that we cannot climb two of these mountains at the same time, and we cannot climb all of these mountains over a period of time. We have to really be able to focus and make the argument of why we're planting our flag on that particular mountain.

0:09:35.5 JD: Yeah, absolutely. Absolutely. And in terms of the team, one of the things we talked about last week was that, or last episode is that, one of the ways that we use this set of guiding questions for each step in the process is, we're tagging that guiding question to a tool that we use to visualize the group's thinking. So again, we're funneling from this sort of general problem, this mountain to climb to a more specific mountain to climb, so to speak. So we'll keep doing that today. And again, what we're trying to get to is what's the precise problem statement? But we have sort of a general area of focus now, and we're thinking about, are we ready to write that more precise problem statement? Or perhaps is there more study that's needed? And one of the things that we do is we use this tool called a Problem Statement Readiness Check.

0:10:41.0 JD: And, so basically, so the group's been working for about a month and a half, and so we have quite a bit of information that we've gathered about this process thus far. And part of the power of this Problem Statement Readiness Check is it puts all of that information in one place, or at least the most important information. So you can kind of see at the top for folks that are viewing, there's this general problem focus area. And basically this captures the problem as we understand it early in the process. And basically what it says is that our average daily attendance across our four campuses is between 85% and 88%. And currently chronic absenteeism rates are between 43% and 53% depending on the campus. High number of students are excessively absent or habitually truant.

0:11:39.1 JD: So those are sort of officially defined attendance terms in Ohio's attendance laws, basically. And that we... We know that, you know, fairly obvious that missing a high amount of school, missing a lot of school is detrimental to students and their ability to grow and achieve academically. So it's, also when you have, you know, so students that are experiencing these problems require a lot of intervention. And so when you have high numbers, obviously it becomes harder to intervene because it's an intensive process. And when you're interviewing with chronically absent students, school leaders are being pulled away from other things. So that's sort of part of the case that we're making for this being a worthy problem. Although it's not very hard actually to paint this picture.

0:12:35.4 AS: Right.

0:12:35.5 JD: And so we have this focus area. Then what we say is, what insights into the problem focus area are helpful? What learning has the potential to lead to effective solutions? So this is stuff we've done so far. Again, we're kind of summarizing where we are to date. So the leader of this group is saying, well, we created this affinity diagram. We have these six categories of problems that we could focus our attention on: Data, academic systems, communication, transportation, culture and engagement, our intervention systems. And then we use that in a relationship digraph to try to come up with what's the dominant cause of the attendance problem? And if you remember from last time, what we settled on when we looked at that digraph was transportation. But then we said, well, we're not gonna focus on transportation because we already have an improvement team in our system that's working on the transportation issues that we're seeing here in Columbus.

0:13:40.8 JD: The other thing is we're looking at a bucket of questions that remain to be answered. So after we looked at of all the data that we've gathered so far, the conversations that we've had, what questions remain to be answered, what do we still need to know as a team? Maybe what new questions has the problem analysis revealed? So some of those questions are things like, why aren't students coming to school consistently? What does the intervention process look like at each campus? There's variation, we've already found out there's variation in the campus... How the campuses intervene. What does the typical attendance intervention plan look like at the individual student level? Is that intervention process at each campus effective? How do we know? Are we tracking data? So you can start to see how there are a lot of questions to sort of consider even after you've done some study digging into your data.

0:14:37.7 JD: So that's sort of the first part of the problem focus... Sorry, the Problem Statement Readiness Check. So this is a worksheet that we use. And the second part is we have a series of six questions that we ask after the group has talked through that first part of the worksheet. And basically they're just yes/no questions. They're six questions. So the first question is, has our team investigated multiple perspectives on the problem focus area? And basically what we said there is the team basically understands a higher percentage of students are not coming to school consistently, but the team doesn't have a strong understanding of what those causes are. So in that case we checked no, we haven't investigated multiple perspectives. The second question is, have you challenged assumptions our team held about why the problem occurs?

0:15:37.3 JD: So you can imagine anytime you're working in team with or without data, people are gonna have these preconceived notions, "Oh, I know why kids don't come to school." It's this reason or that reason, right? These are assumptions that we have. So in terms of challenging those assumptions with data, with study, we said, no, we haven't done that. The third question is, have you gained useful insight into why previous efforts haven't been as successful as desired? Basically there we said not systematically. We haven't studied this issue for a while, so we checked no there. The fifth question is, has your team gained sufficient insight into students' needs to give you confidence that you know which kinds of improvement will lead to improve student experiences and outcomes? To that we said no. We haven't done a lot of talking to students and families about specific challenges individual students are facing.

0:16:31.5 JD: And then the last question is, have you identified existing school-based practices or processes connected to the problem that might be improved? So that was the one question that we checked yes to. So basically there's this little guidance done at the bottom, then of the worksheet. It says, if the team checks three or more boxes, we'll move on to draft the problem statement. Well, we only draft... Sorry, we only checked one of the six boxes as a yes. The other five were no. So we're basically saying there, we don't have enough information to write the specific problem statement that we're gonna work on. So we have to do something else that's going to give us additional information about our process. So you can see how this thing has, you know, it's starting to be funneled from sort of a general understanding that we have a problem with chronic absenteeism, a problem with students attending school consistently.

0:17:29.8 JD: We think we know generally some of the reasons that's happening, but we haven't done enough study to really understand the specific obstacles that individual students are facing. So, then we, you know, since we're not ready to write the problem statement, we have to think about, well, what do we do to dig in and get sort of additional information? And so in our case, what we decided to do next was a Plan-Do-Study-Act cycle. So this is a way, if properly designed, where we can get some of that additional information from students and families. So that's what we're in the process of doing right now. And it's been really interesting. So what we did was, so we started the PDSA a couple weeks ago. This sort of coincided with the end of our first grading period.

0:18:22.9 JD: We're on trimester, so this was at the end of November. And we knew that parent conferences were coming up during that time. So that would give us a unique chance to talk to some of the students and families that are having attendance issues. So basically what we did was we said, well, we're gonna talk to one student and one family member from each campus that's been chronically absent. And we created a structure for the PDSA. So the plan was, so we have a Dean of Family and Community Engagement at each campus, and they're the point person for this attendance work. And so the guy that's leading this project, he's like the System of Profound Knowledge coach, the improvement coach on this, he created a little interview protocol, and basically then the DFCEs, the family engagement person at each campus took the protocol and sat down with the family member to interview them.

0:19:24.0 JD: And they're basically asking, you know, if the person is missing days of school, they're asking why, what's going on, what are the obstacles? Sometimes, because Ohio counts attendance by hours, so sometimes families are consistently bringing their student late, and those one and two hour misses in the morning add up to days pretty quickly, or you get the vice versa where someone is coming to pick the student up early repeatedly for some reason. And then of course some folks have a combination of these things. But what we said was, let's get some information from specific families. And we made a prediction, we said, you know, if we talk to people about the attendance issue, start to gather some information from them and let them know that, hey, your child, your student has this attendance issue, we all then made predictions for, is this gonna have an impact?

0:20:23.5 JD: Just this little intervention, is this gonna have an impact on the attendance rates? So we're in the middle of this, now we're gathering this data. It's been really fascinating to see the information that was gathered, to see, like, on a day by day level, the specific reasons, not the attendance codes that get put into the system, like drilled down specific data, specific anecdotes about what's happening on any given day that leads to a kid missing all or part of a school day. So this is sort of the first part in our process, PDSA cycle one is just to gather this information to see, you know, get a better sense, a detailed sense of some of the obstacles that our families are facing when it comes to attendance.

0:21:08.9 AS: Like, I got up and I went out and started the car and it didn't start.

0:21:15.4 JD: That's exactly right. That's exactly right. That's a...

0:21:19.6 AS: So I gave up...

0:21:21.8 JD: Oh, sorry, go ahead.

0:21:22.1 AS: So I gave up and I thought, I can't be bothered with this. I've gotta take care of other stuff and whatever.

0:21:28.7 JD: Yeah, it's stuff like that. And we've talked about this bus issue that we're having in Columbus. So it's not uncommon for a bus to come late, an hour late in the morning to a student bus stop.

[overlapping conversation]

0:21:39.4 AS: Do you sit there for an hour, wait for it, or, you know?

0:21:42.9 JD: Tomorrow it's gonna be something like 19 degrees in Ohio. Are you gonna sit out there for an hour when it's 19 degrees and wait for your bus? Right? And maybe you go home and you're right, and the car doesn't start. Or we had a family tell us that the bus stop that the kid is assigned to is dangerous, you know? And so you start to dig into these things and they're very reasonable explanations for attendance issues.

0:22:12.6 AS: Yeah.

0:22:13.2 JD: And so this is a way for us to sort of dig into some of those questions to help us better define the problem. And we're spending a lot of time on these early stages. And what I typically tell people is these early stages, before we ever develop a solution, account for at least 50% of any of these projects, because we wanna be very sure that when we start solutions that the problem is well understood, otherwise if there's misalignment between that problem identification and then the solution, then we're just wasting time and spinning our wheels.

0:22:50.7 AS: What do you say to people, like, "Come on, this is so much work. I mean, let's just solve the problem. Come on, John. You know, it's a problem. We know it's out there. Let's go, let's solve it"?

0:23:00.8 JD: Yeah. I mean, that's actually something that, I mean, there's that. And then when you're in an improvement team, there's, I have many other responsibilities that I need to attend to. And for a team like this that's cross campus, we have to have the meeting somewhere. So we pick a campus, and that means the people at the other three campuses have to travel to the meeting. So there are sort of hardships or at least extra work that's associated with this. But we just sort of keep reminding people like, this deep study is worth it. And the good thing with us, I think, is that we're a very mission-driven organization. That mission orientation is assessed during the interview process. So the vast majority of people that work at United are very bought in and very driven by that mission. And something like this is a very mission-aligned effort. So it's not like we're trying to improve some web traffic or something like that that may be harder to find, maybe important, but maybe harder to find meaning in. This is kids' futures, like improving this...

0:24:16.6 AS: People are generally aligned.

0:24:17.7 JD: Have a significant... What's that?

0:24:19.7 AS: People are generally aligned.

0:24:22.6 JD: People are generally aligned. That's right. Yeah. Yeah. So I'm really interested, like I said, we're in the middle of this PDSA, so I'm really interested in what the outcome is gonna be. We're gonna run this for about 20 days, basically until our winter break here in about a week and a half, gather the data, we're gonna use that to go back and then see if we're ready to write this problem statement, basically.

0:24:44.8 AS: So how would you summarize today's discussion?

0:24:49.0 JD: Yeah. If I was gonna kind of recap where we are, just sort of overall, I'd say the first thing is we, as an organization, senior leadership team, we set this chronic absenteeism as a key priority, right? So that was set at the organizational level, our senior organizational level, this overall challenge. And then in talking with the team, because we're telling them for the first time, hey, this goal is to go from 50-ish percent down to 5%, so it's really important, again, with that team that we frame this as an improvement orientation. This is not an accountability orientation. This isn't an individual person's fault if we don't achieve this metric. This is a team effort. And people have to understand that because people, especially in education, really have this accountability sort of mindset ground in. So we have to sort of...

[overlapping conversation]

0:25:46.8 AS: Which can also bring in defensiveness or...

0:25:50.1 JD: Defensiveness or what's gonna happen if we don't meet these goals, those types of things. So we kind of constantly have to talk about that frame. I think it's important for that challenge to be quantitative. So it's very clear if we have met it, if we're on track, if we didn't meet it, if we're not on track, if we're not moving in the right direction. I think that's really important. I also talked about how long we're spending defining the problem, understanding the problem, understanding the system before we ever got to solutions, before we ever attempted any solutions. This PDSA is not about testing an intervention, it's about gathering information, gathering additional data, which is a fine use of the PDSA. And then the final thing I would say is, the model is then paired with this improvement process. These guiding questions that are tagged to these tools are very helpful, because we have this now written record and people can respond to it.

0:26:53.0 JD: They see it in black and white, and then we can refine it based on the input of the group. And I know that sounds simple, but most of the time we just talk and we don't write stuff down, and we don't have a record, and just makes it harder to see sort of what we said we were gonna do, did we do those things? One thing I didn't mention, in our sort of project and meeting tracker, there's a tab called Journey. And every milestone, every meeting, there's a one-sentence description of what happened, and there's a link to any tool that was created at that meeting. So on one single tab of a spreadsheet, anybody could see the entire process that a particular improvement team went through on their particular project.

0:27:40.3 AS: Excellent. Well, on behalf of everyone at the Deming Institute, I want to thank you again for your discussion. And for listeners, remember to go to deming.org to continue your journey. You can find John's book Win-Win: W. Edwards Deming, the System of Profound Knowledge, and the Science of Improving Schools on amazon.com. This is your host, Andrew Stotz, and I'll leave you with one of my favorite quotes from Dr. Deming, "People are entitled to joy in work."
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Beyond Looking Good: Misunderstanding Quality (Part 8)
9 dez· In Their Own Words
In this episode, Bill Bellows and Andrew Stotz dive further into acceptability versus desirability in the quality world. Is it enough that something is "good" - meets requirements - or do you need to focus on degrees of "good"? How can you tell the difference?

TRANSCRIPT

0:00:02.5 Andrew Stotz: My name is Andrew Stotz, and I'll be your host as we dive deeper into the teachings of Dr. W Edwards Deming. Today, I'm continuing my discussion with Bill Bellows, who has spent 31 years helping people apply Dr. Deming's ideas to become aware of how their thinking is holding them back from their biggest opportunities. Episode, today is episode eight, Beyond Looking Good. Bill, take it away.

0:00:25.4 Bill Bellows: Hi, Andrew. How are you doing?

0:00:29.1 AS: Beyond looking good. So beyond my good looks, that's what you're saying. Okay.

0:00:33.6 BB: No, but it's funny, this beyond looking good and so I could say, Andrew, how you feeling? Oh, I'm feeling good. Right? I'm feeling good. So we have this, and that's part of why I think is funny is how are things? Things are good, things are good.

0:00:49.3 AS: Looking good.

0:00:51.0 BB: And that's what I find is, I mean, and it's not that people are necessarily honest, but when somebody says how was your day? Good. Or it could be the extreme other, and we won't use any foul language, but it's like, but I find it's just a very common, how are you feeling? Oh, I'm feeling good. Or I could say, great, which is better than good. So anyway, so I'm gonna pick up on, well first say that a heavy focus of this series, Misunderstanding Quality, is for you, quality professionals out there around the world that are excited by Deming's work, learning about Deming's work, trying to bring Dr. Deming's ideas to your organization in your quality function.

0:01:41.6 BB: Or it could be, you're elsewhere in the organization and you believe that...you're inspired to realize that there's something about how quality is managed in your organization, whether you're in design or manufacturing, which is inhibiting what you might want otherwise to do. And what I'm hoping is that the examples and concepts presented here can help you, one, absorb the ideas yourself, begin to absorb them, eventually explain them to people at work. At least once a month I'm contacted by someone listening to the podcast who says, hey, they wanna connect with me on LinkedIn, and then quite often I reach out to them and ideally end up in a conversation with them to find out more about what they're trying to do.

0:02:38.7 BB: But what I'm hoping is that this fundamental information, knowledge, wisdom is useful to you and personally learning, but then depending on what you wanna do with it, you have to engage others. And that's why I've been encouraging, and this is what I do with people I mentor, is you have to develop the ability to explain it to others. 'Cause you can't be the only one talking about these differences. You're gonna drive your coworkers nuts. You might get in a jam where somebody's confused by what you're trying to do, and you need help, or you need help in implementation, help in explaining.

0:03:17.6 BB: So I'm gonna go back to acceptability and desirability. And I was in the Finland, the Netherlands and the Sweden about a month ago with friends in each of those countries. And what came up was, again, this acceptability/desirability and that contrast. So acceptability again, as a reminder is, there's no need to know where we are within the requirements. It is absolutely good. All we know is that it meets requirements for whatever the requirements are. It is you're comfortable with good versus bad. I was talking with somebody, some clients today and we were talking about, pass versus fail. And I said, 'cause it's really a pass. Acceptability is a pass-fail system. And what does passing mean?

0:04:17.5 BB: Passing means not failing. It's like, years ago when I was a summer student working for this jet engine company in Connecticut and got together for beers one Friday night with a couple of the executives, and there were a couple of us summer interns there with these directors. Yeah. Senior directors. And one of the senior directors says to us, says, so what's the difference between business and crime? And we're like, this and this and this and this. And I don't know what our answers were, but we. And finally one of them said, no, no, no, no, no, no. He said, the basic difference is crime's illegal.

0:05:03.0 BB: So you end up with what is bad, what is bad is what's not good. And what is good, good is what's not bad. And so what is passing? Passing is not failing. And so when I was explaining to somebody today I was asking him, what's the letter grade? What letter grade? In fact, I asked a very senior NASA executive this question once. What letter grade do they expect for everything they buy that put into their missions? And he said, A plus. And I said, A plus is not the requirement. He said, what's the requirement? I said, D minus. And he is like, nah, it's not D minus. I said, your procurement system is based on things being good or things being bad. He said, yep.

0:05:45.7 BB: I said, well, what is good but passing? Right. Good is not... Good is... To be good is to not be bad, to pass is to not fail. What is crime? What is crime is what's illegal versus legal. It's one or the other. We talked once on the previous podcast about Kepner-Tregoe problem solving, decision making. And part of decision making I mentioned is you come up with a bunch of characteristics of a decision. You're buying a house and you want it to be one story, three bedrooms, two bathrooms, whatever it is. And you put down all the requirements and then you ask for each of those requirements. Is it a must or a want? And a must is yes or no. It has it or it doesn't. So it must have three bedrooms, must be one story. The must could be must be under a million dollars or whatever the number is.

0:06:53.5 BB: And then you get into, well, is that really a must or is that a high weighted want? For our daughter, Allison, I remember taking her out to buy a bike for her birthday one year and she said, well, how much can we spend? And I said, $200. So, what did she say, Andrew? "What if it's 201?" Well, then you get into, well, is that a must or a high weighted want? You know what I say? Depends on how much money's in your wallet. If you don't have $201, it is a must if you're...

0:07:34.7 AS: I thought she was gonna say, if I can get it for 150, can I keep the 50 bucks?

0:07:41.3 BB: But that's it. So acceptability is like treating it as a must. It is absolute. It has to be three bedrooms. And then what is desirability? Desirability is the lower the cost, the better, the higher the performance, the better. And so acceptability is absolute, it is good versus bad. Desirability there's relativeness. And the next thing I wanna say is why should we be interested in desirability? Which also based on what we've talked about before, is to be appreciative of desirability in regard to the Dr. Deming's Red Bead Experiment. Deming Red Bead Experiment, we had red beads and white beads the customer wanted white beads. And then one of the things we looked at was, if all the red beads are gone, can we still improve?

0:08:46.1 BB: And then people would say, well, we can make the white beads faster, we can make them cheaper, but can we make the white beads better? And the huge blind spot and asking that question to audiences on a regular basis is, they get stuck. Well, then we got into, well, what if there's variation in the white beads? So part of desirability is that there's variation in good. And that allows us to go beyond just being good to better. But what is better than? Well, better than is, I mean, what would be better for the organization would be a better appreciation of the white bead variation. One, could prevent red beads from happening in the first place. And so why do we have a gas gauge that goes anywhere from E to full? It allows us to watch the gauge go down and go down and go down.

0:09:39.7 BB: What does that? It's watching variation in good and then getting gas before it runs out. So if we use a run chart and monitor vacuum level in a braze oven if we're monitoring something on a variable way, not just saying it's good or it's bad, that allows us to see trouble coming before it happens. We could use that information to create a control chart and go one step further. And so relative to a given characteristic, what we're doing is trying to prevent non-conformances, trying to prevent bad from happening by monitoring what is good. What we can also do and what I shared is with appreciation of Dr. Taguchi's insights, the idea that the closer we are to that ideal value so when we're at home cutting the piece of wood really close to that line, why do we do that?

0:10:33.7 BB: Because at home we have to get those pieces of wood together and they're not quite square or straight, then that's extra work over there. So those are two aspects of the value proposition for desirability. And then I wanted to mention is, our son is a handyman and a pet sitter. And he is self-employed in both. And the handyman stuff involves and sometimes it involves woodworking. And recently he's doing some work in our house and some really cool stuff. So he experiments in our house, which is great for us. He also experiments in our daughter's condo. So there's great opportunities for him to practice doing something. So he was cutting some long pieces of wood and they weren't, he was very frustrated. They weren't coming out straight. So we called a friend who's a master craftsman over, and he gave us both a lesson on how to, how desirability, how to get a really straight cut, not just anywhere within spec, but you need a really straight cut so they fit together well.

0:11:38.6 BB: Well, this carpenter friend, Alex, shared with me a while ago, years ago, what it's like in the construction industry. 'Cause I explained to him acceptability, desirability, focusing on the target. And in the world of construction, he gets involved, he'll be involved on a team building a multimillion dollar home for six months to a year. And it's not uncommon he's called in to have to deal with everybody else barely meeting requirements. And his job is to go in there and straighten things up because they're not quite right. And that's all this compensation stuff. And that's what with his insights trying to help our son get around that. All right, so, I do wanna share a couple anecdotes from Rocketdyne the world of acceptability and so it was a fun story.

0:12:41.2 BB: I was meeting with a small team and one of them was a senior quality manager and in the quality organization. And he says, you know what the problem is Bill? He says, what's, you know what the problem is? He said, "the problem is the executives VP of quality and as directors are not getting the quality data fast enough." So I said, "well, what data?" And he says, "scrap and rework data. He said, "they're just not getting it fast enough." So I said, "I don't care how fast they get it it's already happened."

[laughter]

0:13:18.9 BB: And I kept saying to him, the speed doesn't matter. And so how many red beads did we have today? Well, we gotta instantly report the number of red beads on a cell phone. No. If you monitor the white bead variation, then that's a means to do that. Also say, when I joined Rocketdyne in 1990, there was a big movement on the space shuttle main engine program. And I don't know what instigated this, but Rocketdyne developed, designed and developed and then produced for many years the space shuttle main engine. I mean the world's first reusable rocket engine. And there was a movement before I got there to change the drawings. And so a set of manufacturing drawings will have a nominal value, let's say 10. And then it might be something must be 10 plus or minus one.

0:14:19.4 BB: And what does that mean in terms of acceptability? It means anything between nine and 11. And then what I learned was they'll say that the number 10, that's the nominal value. And then we have 10 plus or minus one. Well, what matters to the person downstream is not the 10 plus or minus one. What matters to the person downstream is it's gotta be between nine and 11. So no matter what that nominal is, the nominal goes out the window. So there was a movement to get rid of the nominal value. 'Cause now the machinist has to do the math, 10 plus or minus one. Okay? Anything between nine and 11. So we're gonna save you all that trouble and just give you two numbers. The min and the max. And so what is that system? That is a system based on acceptability.

0:15:07.0 BB: And so that was the starting point when I joined. And so what I wanted to add for our listeners, if you're in an organization, this came up recently with one of my clients, and they're talking about the nominal value of that 10. The 10 plus or minus one, or it could be the nominal value is 11 and they'll say 11 plus nothing minus two. And so what does that mean? 11 plus nothing means eleven's the max minus two means nine and 11. So when I saw it doesn't really matter what the nominal value is, 'cause all that's gonna happen is gonna get translated to a minimum and max. And so in this client, they're talking about nominal values, nominal values. And I said, my recommendation is when it comes to desirability, don't say nominal.

0:16:00.3 BB: 'Cause I'm not convinced we use that term the same way. What I would suggest, again, this is for those listening to the podcast on a regular basis, is don't use the word nominal. It's confusing. Use the word target. Say that is the ideal. And the idea, by using the word target, which may not be part of the vocabulary, you can differentiate from nominal, which I find to be confusing and just say that's what we want. I'm gonna give you another fun story relative to acceptability. I was at a supplier conference, so in the room are a couple hundred Rocketdyne suppliers. And the person speaking before me says, and there was some very heavy duty brow beating.

0:16:48.0 BB: And the person ahead of me says, when we give a Rocketdyne employee a job and they sign that it's good, that's their personal warranty, Andrew. That's their personal warranty. So for you suppliers, when you tell us something is good, that's your personal warranty to us. And so that has to be transmitted to your organization. That's personal warranties. We take it seriously. This is the space business, Andrew. So that was going on and there was some heavy duty browbeating. And on the one hand I'm thinking, I wonder what happened recently where somebody said, Andrew, get up there on stage and go browbeat 'em, go browbeat 'em. And so this guy's up there, browbeating, browbeating.

0:17:42.7 AS: We need people to take this serious.

0:17:44.0 BB: Well, this is personal warranty, Andrew. When you say it's good, that's your warranty. So I got up and I told the story of the bowling ball being left in the doorway of the bedroom. And I said, the fact of the matter is, Wilson gave us his personal warranty that the bowling ball was in the bedroom. And just trying to say, 'cause the personal warranty is not a personal warranty of an A plus Andrew. It's not a personal warranty. It's a personal warranty that it's good and what is good, Andrew? Not bad. And so when I hear this talk of personal warranty, it's like it's not all that it's cracked up to be. When you start to look at what is good is what's not bad.

0:18:36.4 AS: By the way, I have a funny one to share in this one. And that is, every time I start my ethics in finance class with a new batch of fourth year finance students here in Thailand, class starts at 9:00 AM and the students think that the time to arrive is somewhere a little bit before or a little bit after nine. And when they arrive at the class at 9:01 or actually just after 9:00, they find the door is locked.

0:19:12.3 BB: Yeah.

0:19:13.3 AS: And then I leave them outside. And then after about five minutes, I go out after they've built up a group of people out there and I come out and I talk to them. I said just so you know I want you to be on time for my class. Don't tell me about traffic. Don't tell me you're busy. I got a full-time job and I'm working like crazy and I'm here for you. I'm not making much money out of this. So show me the respect and be here on time. They come in, they walk in shame, past all their classmates, and then they sit down and then I lock the door again, and of course another batch comes at about 9:05 or 9:10.

0:19:46.0 AS: And then I do the same. And then I bring them in, and then next week they come and they're all there at 8:58, let's say 8:59, but nobody arrives past 9:00. And then in the following weeks, I never locked a door anymore. Curious how things change. And of course, things start to shift back to that range around it, but it just made me think about what I do in trying to communicate that, whether it's right or wrong or whatever. But I like doing it because I want the students, I wanna set the parameters from the beginning. Like, take it seriously.

0:20:26.4 BB: Oh yeah. I go to a daily meeting and it starts exactly on the hour and it's done exactly. And everybody knows that. And the degree to which things are accomplished and 'cause the whole strategy was to develop a cadence that, yeah, no, that's...

0:20:56.8 AS: And I have a hard time. I want to, with my valuation masterclass bootcamp, which I do have classes at 6:00 PM. I'm generally pretty lenient letting students come in, but there's a part of me that has... I've started locking the room after 6:03 or so, and then I'll unlock it five minutes, 10 minutes later and let a few people that are... But I've had some questions in my mind as to whether I should just be hard line and say, it starts at 6:00, if you don't make it, see you next time. Now we also record it so they can watch it. But I don't know, I haven't really figured out whether I should be that tough or not.

0:21:35.0 BB: Yeah. And that's what it comes down to. I think depending on the environment, there could be, I mean, it's about synchronizing watches, right?

0:21:48.9 AS: Well, yeah. And the other thing that you could say is that, well, Andrew, come on if you understand variation, then you understand that there's gonna be some people that are gonna be late, and there's gonna be some people that are gonna be early. You set the target at 6:00 PM what else would you expect? But I guess what I'm thinking is, if for a student they should be thinking, I need to shift my target to be 8:00, sorry, 5:55 if the meeting's at 6:00, that way I could be a little bit late, you know?

0:22:16.2 BB: Exactly.

0:22:16.7 AS: And it's same concept, it's just that shifting that target. So maybe I need to start working on that one.

0:22:25.3 BB: No and it's respect for the other 15 people in the meeting that... you know, and this idea that we are... This meeting is designed for this reason, but it has to fit the work. And, yeah, I mean, so is that necessary for a college class? Again, I mean, if it depends on how much you wanna squeeze in. And five minutes if you're trying to get a whole bunch in and develop a cadence, then, yeah.

0:23:07.6 AS: Well, it also depends. What are you teaching.

0:23:11.4 BB: Exactly.

0:23:12.5 AS: In my Valuation Masterclass about valuing companies, I've decided I'm not teaching Excel. You can go somewhere else and get that, and people ask me for it, and I let them use my Excel model that I've created, but I've just decided that's not what I'm gonna teach. And so in this case, with being an ethics class, I think it is probably important to teach about the importance of time and understanding that. And so for that, but for the bootcamp, Valuation Masterclass Bootcamp, I am trying to teach discipline and helping young people realize you gotta deliver. And so that's it. By the way you're looking good, Bill. So let us summarize beyond looking good. How would you like people to... What would you like them to take away from our discussion on this topic?

0:24:07.3 BB: It goes, this is...I mean, we started off this whole series talking about quality and the eight dimensions of quality and the book and the article by David Garvin of the Harvard Business School. So to first introduce in this series called Misunderstanding Quality, that there are dimensions of quality. And amongst those dimensions were capacity and reliability and repairability. And one was aesthetics, and one was a sense of a reputation that through everything else, you're developing a reputation. Well, one of them was acceptability, and that then was the inspiration to get into the contrast between acceptability and desirability.

0:25:05.6 BB: And there's a lot to that. And so what I found in the beginning I had a little bit in mind based on some things I've seen. And then the more I researched it, the more I saw and what I wanna get into next time is, and these are questions I was asking people in the trip to Europe is, first is, can acceptability - a focus on acceptability explain the incredible reliability of Toyota products? At least that I have experienced. Can you explain that with acceptability? And I don't think so. Next, okay, I'll go back to my notes here.

0:25:57.7 BB: Next is, does your organization, again, for those calling in, the better you understand this distinction between acceptability and desirability. Does your organization distinguish those? Does your quality system... Is your quality system based on acceptability? Does it have acceptability and desirability? That is a question for our audience. What I want to get into next time is, and I think I've mentioned this before, I've read much a great deal about Lean. I've gone to Lean conferences. I've written plenty of articles for the Lean Management Journal involving reading articles and commenting on them. Everything I see within Lean is acceptability. I don't see any mention of desirability. Six Sigma quality is that we wanna have 3.4 defects per million. There's no mention in acceptability, either explicitly or implicitly to this difference between acceptability and desirability nor in Lean.

0:27:04.9 AS: Sorry, can you clarify that for just a second? Okay. So you said Lean was one and Six Sigma was the other, which was focused on which?

0:27:13.4 BB: Well, what I'm saying is that I don't see explicitly... I don't see a call out in the Lean literature a conversation about acceptability and desirability. What I see is plenty of evidence of an acceptability-based quality mindset in Lean, in Six Sigma quality, in Lean Six Sigma, in Operational Excellence, in the Toyota Production System is what I see is a heavy emphasis directly about things being good versus bad. I don't see any inference to desirability that there's something beyond good in that system.

0:28:06.4 BB: And that's what I've been wanting to point out, is I think Dr. Deming's work is unique in its appreciation of that distinction in explaining the difference and the value of understanding when acceptability makes sense, when desirability makes sense. And that's what this whole Misunderstanding Quality series, a big part that I'm trying to introduce through my experiences is, if you're interested in moving your organization or just your personal awareness beyond a good mindset into continual improvement, that's what I'm trying to bring about in this series.

0:28:50.5 AS: Fantastic.

0:28:50.9 BB: That's my story, Andrew, and I'm sticking to it.

0:28:53.7 AS: Yeah. Exciting. Exciting. Well, Bill on behalf...

0:28:58.9 BB: It'll be on my tombstone, acceptability is not desirability.

0:29:01.7 AS: Yeah, exactly. We have accepted the death. It is acceptable. It's not desirable, but... On behalf of everyone at The Deming Institute, I want to thank you, Bill, for this discussion. Again, it's a fun one to hear what you're thinking about. And for listeners, remember to go to Deming.org to continue your journey. Any final thoughts Bill?

0:29:31.4 BB: Keep looking good Andrew, keep looking good.

0:29:34.0 AS: I wanna go beyond looking good. If you wanna keep in touch with Bill, just find him on LinkedIn. He responds. This is your host, Andrew Stotz, and I'll leave you with one of my favorite quotes from Dr. Deming. People are entitled to joy in work.
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See the System: Path for Improvement (Part 4)
4 dez· In Their Own Words
Before you jump into tools and solutions, you need to take a step back. In this episode, John Dues and Andrew Stotz discuss the four questions you need to ask in order to make the system you want to work on visible, and decide on a direction.

TRANSCRIPT

0:00:02.5 Andrew Stotz: My name is Andrew Stotz and I'll be your host as we dive deeper into the teachings of Dr. W. Edwards Deming. Today I am continuing my discussion with John Dues, who is part of the new generation of educators striving to apply Dr. Deming's principles to unleash student joy in learning. And the topic for today is, what is the topic for today, John?

0:00:25.4 John Dues: See the System.

0:00:27.3 AS: All right. Well, why don't you take it away?

0:00:30.3 JD: All right. Great. Yeah, it's good to be back. Yeah, just as a quick refresher for people following along in the series, so two episodes ago we briefly talked about the importance of framing the challenge as an improvement goal. And then last episode, if you remember, we went deeper into those three sort of faces of performance measurement. There was research, there was accountability, and then there was improvement. And if you remember, you took the avocado quiz and you got 100% on that quiz. But the whole purpose of sort of taking that time to dive into those three different types of measurement or three different types of goals was this idea that problems arise when measures aren't used for their intended purpose. And what we talked about was, if you're gonna do a research goal, then, you know, the basic goal for research is to contribute to the knowledge base.

0:01:32.4 JD: And for accountability, the purpose of the goal is to determine the application of rewards and sanctions. And then for improvement, the goal is to learn our way to a system that produces a higher level of performance. And basically, at the end of that sort of episode, we established that the challenge or direction should be framed as an improvement goal, in my opinion, and not as an accountability goal, not as a research goal. And then we have this model that we've been working through which is up on the screen for those that are also watching the podcast, and it's this four-step improvement model. So we've outlined these steps. So step one is to set the direction or challenge. That's what's gonna be your improvement goal, not your accountability goal.

0:02:28.7 JD: Step two is to grasp the current condition or conditions on the ground where you are in your organization. Step three is to establish the next target condition. Step four is to experiment, overcome obstacles in the way of meeting that next target condition on the way to that ultimate goal or that direction or challenge that you've set for your organization. And then we've said multiple times that all of the steps are done with this team that's including those working in the system, those with the authority to work on the system, and then someone that has this System of Profound Knowledge lens. That's sort of a quick recap. And so what I thought we could do today is to sort of go back to, actually to step one.

0:03:16.8 JD: So we've gotten an overview of it, and talk about some other things to think about when you're on this particular step. And if you remember in step one of the model, what we're asking is, where do we want to be in the long run? Or what do we as a team or as an organization, what do we wanna accomplish? And we've talked about that this is this longer range goal, and it's a big goal. It may seem even impossible or nearly impossible at the outset, but if we achieve it, what we're saying is this thing, whatever it is, is really gonna differentiate us from other organizations, from other schools in our case, or you know, it could be differentiating you from other businesses or other hospitals or whatever the thing is that you're working in.

0:04:07.9 JD: We said this challenge or direction typically has this sort of long-term timeframe, six months to three years as sort of a rough guide. And then I talked about this example, one of our goals or challenges that we sort of set in our organization is we wanna significantly reduce student chronic absenteeism. If you remember, when we looked at this a couple episodes ago, that number rose significantly coming out of the pandemic. And so it's right around in the 50% range. So 50% of our students are chronically absent, which is a very high number. And we wanna take that all the way down to 5%. So right now as things currently stand, that seems like a very tough, nearly impossible challenge that we've set for the organization.

0:05:07.4 AS: I'm curious about how stretch of a challenge should someone be thinking about in this case? I mean, it's one of the hardest things when you start setting goals, is like, are we thinking about 10 years from now? Are we thinking about one year from now? Are we thinking about, come on guys, let's dream big, let's envision what we could be, or are we talking about realistically we think we can get to this point? How do you think about that?

0:05:32.7 JD: Yeah. I like this six month to three-year timeframe for step one, for the challenge or direction, that sort of ultimate goal that you're reaching for. It's not so long that it seems like it's, you know, there's no urgency. It's not five years, it's not 10 years. But it's not so short that it's gonna be impossible to achieve this tough thing. Six months to three years, when you're talking about a significant organizational effort, you gotta be realistic. There's, you gotta have a team working on this. You have to train people, you have to educate people on why this goal is an important goal. And so I think that all of those things take time. Some infrastructure within your organization has to be set up, resources have to be deployed.

0:06:21.5 JD: And so to be realistic but not so far off into the future, I think that six month to the three-year timeframe is a pretty good one. And then step three is to establish your next target condition. So along the way you're setting these intermediate sort of goals that you're working towards along the way ultimately to reach that challenge or direction. So I like the six month to three-year timeframe. And previously when we talked about set the challenge, almost all of our focus was on that quantitative goal. Like, how are we gonna quantify that challenge? And I talked about this chronic absenteeism example. But during this first step, I think it's also really helpful to take a couple sort of sub-steps. And one of them that we talk about in our organization is See the System.

0:07:16.8 JD: Like literally see the system in which we work. And I've found that it's really helpful to have some questions to ask the team that's working on this, questions like on the outset of, so we've set this challenge, we wanna reduce chronic absenteeism from 52% to 5%. Well, what is the largest system to improve when we're working towards that goal? What's the aim of that particular system? What are the opportunities for improvement within that target system? How will the opportunities for improvement be prioritized? Those are sort of four of the questions we ask at the outset of one of these improvement projects, when we're working towards one of these long-term goals. And when we've started asking those questions, at this point in the process, we formed an improvement team.

0:08:15.9 JD: For something like attendance, it's cross-disciplinary, meaning we have a number of people in a number of different roles. We have four school buildings in our school system, so there's representation from all four school buildings. So it's really a cross-functional team that's working through those particular questions. So I think that's really, really important. And then throughout the process, even if folks aren't a member of the team that's meeting on a regular basis, in this case it's a weekly team meeting, there are other people that are going to be important to gather information from; students and families, for example. That's an obvious one. Other staff members that aren't necessarily members of the team that are meeting every week, but that there are ways to gather their input as well.

0:09:04.5 AS: And in this...

0:09:05.5 JD: Oh, sorry, go ahead.

0:09:06.7 AS: In this graphic you show on the left, some people work on the system, some people work in the system, and then you've got your System of Profound Knowledge coach. Is that what you mean by improvement team or are you just highlighting some roles?

0:09:19.3 JD: Yeah. Well, so the improvement team members should be composed of each of those three groups. So in our particular team there's actually two people that have sort of like enough of the knowledge of the System of Profound Knowledge that they could, I'm one of them and then there's another person that also has that knowledge that's working on this project. And then there's a number of people that are working on the system, working in the system in different ways when it comes to this chronic absenteeism, this attendance problem.

0:10:00.3 AS: Okay.

0:10:01.3 JD: And really what we're thinking about during this See the System step in the process is it's really a funneling process. So, even within just the chronic absenteeism, student attendance realm, there's almost unlimited opportunities for improvement and many different areas where we could focus our efforts. And so we're trying to funnel down, focus down to the most vital areas that will have the biggest impact on this chronic absenteeism problem.

0:10:38.5 JD: And we're also really working hard to make sure that people on the team and will be impacted and responsible for implementing whatever this new theory is, this new improvement theory or this new improvement system, they're a part of the team from the get go. One reason is because they're close to the work and they're gonna inform a lot of the ideas that we try. And ultimately for things that are put in place, they're also the people that are gonna have to implement. So if they were a part of developing those solutions, they're much more likely to sort of be bought in from the get go versus just being told you're gonna do this new thing.

0:11:17.3 AS: Yeah.

0:11:17.9 JD: And I think something that I've found to be very, very critical, when you work with teams like this and you're answering those questions like I talked about, what system are we gonna focus on? What's the aim of that system? Is we have a series of tools that are gonna be known to a lot of people that listen to this podcast, maybe some of them are new to people, but we have this series of tools that we use that help us visualize the group's thinking. I'm a big believer when you're working in groups that you write stuff down and you have people react to it, right?

0:11:53.5 JD: You actually do that. You write it down, can be as simple as chart paper with post-its, and you paste that, you post that to a whiteboard or whatever, the wall, and everybody can see it as it's being made. And you can ask clarifying questions, you can ask for what people are thinking when they put up that idea or that brainstorm, and I just think it's really, really important. And so I think a key part of our improvement process here is that we've matched the tools to these guiding questions.

0:12:29.3 JD: So for this question, we use this tool or this tool because we know we use that particular tool, it's a good way to represent that particular question. So we've provided some of the structure because a lot of times people see the System of Profound Knowledge, and even when they start to grasp that as a management theory or a management philosophy, they need some type of structure beyond that to then work with the team in their organization to answer those questions to, like I said, aggregate the group's thinking and put in into something that's coherently understood by the whole organization.

0:13:12.6 AS: Right.

0:13:14.3 JD: So I thought we could just start with the first two questions. What is the largest system to improve and what is the aim of this system? So when we started working with this team on this chronic absenteeism problem this year, those were the first two questions that we asked. And we use a tool called a System Map to represent our system as we understand it. And then we also worked with the group to write an aim for this attendance work. So this may be a little small on the screen, but the target system is up here as attendance. And then we've written an aim as a group to figure out, oh, I can put this in Slide Mode. That'll make it a little bigger. We've written an aim as a group so that we all know like, what is it that we are aiming for as the attendance team? That's the first thing that we did.

0:14:19.7 JD: So for this particular system, this target system that says the aim of the United Attendance System is to first, or one, define strong attendance for students and staff. Two, ensure that students, families, and staff have a shared understanding of what it means to have strong attendance. And three, create and improve systems that identify and remove barriers to strong attendance for students and staff. So it's not necessarily, this is sort of a qualitative statement, there's not necessarily right and wrong answers, but as we were sitting with the group, it's about a 10-person improvement team. And we just took a Google form and said, what do you think the aim of this work should be? There was like one or two people that included staff, like, we should actually think about staff attendance in addition to student attendance, and the whole group was like, oh yeah, that's a really good idea.

0:15:15.9 JD: And so right from the get go, that became a part of the aim. And you can see how the inclusion of staff in that would maybe change the nature of the improvement effort. Again, it's not right or wrong, but it just, when you explicitly set that aim for the group, there's a much clearer guide for what you're gonna be working on. There's also things in here that may not have been obvious to people. So that first part of the aim is define strong attendance. So, many people may think, well, everybody knows what good attendance is in the school, but that's not true. That's really not true.

0:15:54.3 JD: And the problem is, the main problem is, is because when you think of what's good attendance in your brain, your mental model, what I've found with both students and adults is that there's an association with grade scales. And so when you think about a grade scale, if you get a 90% on a test, for most students would say that's a pretty good grade. In most systems, that's an A minus, right? And so when you say, well, what if a student has 90% attendance, is that good attendance? People say, oh yeah, 90% is good, but 90% means you're missing 10% of the year. So in a traditional 180 school day year, 180 times 10% is 18 days. So when you ask people, is it okay for students to miss 18 days? Almost 100% of them say, no.

0:16:45.0 AS: Yeah. One day every two weeks.

0:16:47.9 JD: Yeah. Basically one day every two weeks. But there's a disconnect between 90% and 18 days for people. And so one of the things that we're building as a framework that defines how many days is sort of reasonable and if you miss so many days per quarter or semester, what's that gonna add up to at the end of the year? And then how's that translate into a percentage? So just little stuff like that becomes more apparent when you start to write this stuff down, when you get input from the group. And then, so we have the aim. And then we also sort of represented the attendance system in the System Map. So on the left hand side of our System Map, we have the contributions and conditions of the attendance system. So there's things like Ohio Attendance Laws that we have to attend to.

0:17:37.9 JD: There are things like family dynamics and stability and beliefs, that's gonna contribute to attendance at our schools. There's sort of health perceptions, especially coming out of COVID. We trained people to sort of be more cautious and keep kids at home during the pandemic. Well, some of those habits took and there's sort of a different, for a lot of people there's a different interpretation of when you should keep a kid home versus when they should be in school. And so all of these things sort of contribute to what we're seeing in our system. And then there's all these core activities that we do that impact attendance. Now, one thing that's really interesting with the core activities is that when the group originally sat down, a lot of the core activities had to do very explicitly with our attendance systems.

0:18:28.8 JD: Like at what point is a student considered truant, truancy systems, the attendance tracking systems. And this is one of the areas where I pushed the group to think, well, what are all of the core activities that we do as a school that contribute to a kid coming to attendance, I think... Or sorry, coming to school, and effect their attendance. Now, could some of those attendance systems have an impact? Yeah. And you can see that attendance intervention systems makes up one of these sort of core activity boxes here in the middle. But there's many other things like for example, student and family onboarding. Like, how was a student brought and their family brought into the school community? Do they feel welcome? Do they make a connection to a staff member? Their school culture and trust, is it safe? Do I have friends in my classroom?

0:19:20.2 JD: There's academic systems. Are the classes engaging? Do I want to go to science class because we do experiments or whatever? And so you can see there's many other core activities just besides the core attendance systems that influence attendance. Some of the other ones we have on here are health and wellness and transportation, 'cause I've spoke before that that's a big problem in Columbus right now. And then, so we have these sort of inputs, the contributions and conditions, and then things happen while the kids are at school. And then there's these positive and negative outputs, right, that our system is producing. A positive output would be student academic growth, a negative on the flip side would be student academic stagnation.

0:20:04.8 JD: And then as you sort of go up from the outputs, you have to think about sort of how are we collecting feedback from our constituents, our families, our students. And then how do we use that information to design and redesign our system? And then it sort of loops back, sort of forms a feedback loop to the contributions and conditions. So this may seem like, is it worth the time or not? But it really is very helpful at the outset to sort of represent your system visually. So you have, this gives you an idea of all the different things going on in your system, in this case, our attendance system. And it also starts to give us ideas where we might focus our efforts because we have a, like a comprehensive picture of what these core activities are in our organization.

0:20:57.3 AS: When I look at this, I just think, no wonder it's so hard to improve. When you look at the system and all the different aspects and when you bring someone into this group and they say, wait a minute, we didn't think about staff or as an example, or wait a minute, we didn't think about transportation, oh, yeah. And then you realize like how big the system is, how interdependent it is and how difficult it is to really make lasting change. Whereas it's kind of just natural state that all these things fall into place and bring, I wouldn't say stagnation, but they bring the current state.

0:21:36.2 JD: Yeah. I mean, it certainly helps you understand the complexity level, right? Yeah.

0:21:43.7 AS: It also makes you think that once you've gone through this, you've got everything there, then you have to really think as a team, where can we have the most influence or what is the area that we think has the biggest, or is the leading item that if we could fix this, it can impact other parts, 'cause when you look at what you're putting up on the screen, it's just overwhelming. Like, we can't do all this.

0:22:11.4 JD: Nope. And we're not gonna focus on all of these things. So as a part of this improvement model and this improvement process that's sort of nested within the model, that's the whole purpose, is to sort of represent the whole system and then start to narrow the focus of the team. And that's a perfect segue because the next two questions that we're asking when we're trying to see the system is, what are the opportunities for improvement within the target system and how will the opportunities for improvement be prioritized? So probably many people on here will be familiar with something that looks like this. And again, there are certainly places for technological resources, but I will say the vast majority of the work I do with improvement teams is done with chart paper like this, post-it notes and a marker.

0:23:16.7 JD: You can be pretty powerful when you're armed with those tools when you have the System of Profound Knowledge philosophy. But basically what we did was just post that question right on top of the chart paper. What are the opportunities for improvement within the United Schools system of attendance? And then all of these blue and pink post-its, which you probably can't read, but those are just the people on the team answering those questions. Basically one idea per post-it note. And then we basically took those ideas and kind of grouped them categorically. And then once it sort of emerged what the categories were, they were given these labels, these category headings.

0:24:04.6 JD: So we have data, we have about four post-it notes about data, academic systems, communication. That's a big one, you can see has a lot of post-it notes, not surprising. Transportation, it's a pretty big category and that's on the top of everybody's mind in Columbus right now. We have sort of improvement and intervention ideas and then we have culture and engagement. So once we brainstorm, we categorize, put them in these affinity groups, basically. And then from there, and see, it's a tool. You can see this, this isn't just people sit around and talk. They have to write their ideas and then there's actually a tool that we use to organize those ideas. And then we store this in our project and meeting tracker so people can refer back to this. And then we use this information to help us complete subsequent steps.

0:24:56.2 AS: So was this a source of the chart that you showed us prior?

0:25:03.0 JD: When you say source of the chart...

0:25:06.3 AS: The layout of the system that you showed previously that had all these different things in it, did that originate from this discussion with post-it notes and putting stuff up on the wall and then later you put that into that, or is that different?

0:25:18.4 JD: System Map happened first. So I'm actually going in like sequential order. So the System Map happened first and then the affinity diagram.

0:25:26.3 AS: Now it's opportunities. Okay. Yep.

0:25:28.5 JD: Yep. Now it's opportunities. Once we understand what our system looks like, what are those opportunities for improvement? Then what we did is we said, how will the opportunities for improvement be prioritized? And we created this tool, it's called an Interrelationship Dye Graph. So we basically took the categories from the affinity diagram and those are these boxes here. So you have transportation, improvement and intervention, culture and engagement, academic systems, communication and data. And basically we systematically go around the circle and the first question we say is, is there a relationship between transportation and improvement and intervention? And if the group sort of consensus is, yep, those two things, there's a relationship, then we say, which one is impacting the other thing the most? And we draw an arrow away from that sort of dominant cause.

0:26:35.8 JD: So you can see transportation, that group thought transportation was having an impact on improvement and intervention. And then you just basically keep doing that for each of the categories. Then we compare transportation and culture and engagement. We ask those same two questions about what, is there a relationship and if so, what's the directionality of the relationship? We go around the circle until we've done that with every one of these categories. And then we basically tally up the number of "in" arrows versus the number of "out" arrows. And the thing with the most out arrows is sort of starred. And that's thought of as the dominant cause. Now, you have to know context, what this team is talking about and thinking about, 'cause there's not a lot of information just right on this page.

0:27:29.2 JD: But you might ask like, why is transportation having such an impact on improvement and intervention? Well, or why is transportation having an impact on culture and engagement? It's because the transportation system right now is so flawed in Columbus, buses aren't showing up at all sometimes, kids don't get picked up, so their parents have to bring them in. They're often an hour, two hours late to school. And so what people are saying is there's so many of those problems being caused by transportation right now that it's impacting the ability to do interventions with the kids, for example, or it's impacting the ability to build culture and engagement 'cause kids are constantly having to be making up school and making up work and those types of things. So...

0:28:16.8 AS: And in Thailand, when we have problems like that, the free market solves it because we can get, people can apply to transport through vans and other activities. But, well, is it a socialist state of Ohio these days or what's going on?

0:28:33.4 JD: Well, I would say there are various transportation possibilities. I would say there are no great systems for, you've been assigned and you've opted to ride the school bus and it doesn't come on a particular day, there's no sort of like on-demand on that particular day type of solution for the kid to take besides the parent taking them or that type of thing, so, unfortunately.

0:29:01.4 AS: Just a funny, a fun story. When I was a kid, we grew up, the piece of land that our development was built on was a piece of farmer Barlow's land that he sold off in parcels. And we worked in his farm on the summertime. And then he drove the bus to school during the wintertime. So see Farmer Barlow right there and you get on the bus and he showed up every single day. I don't think Farmer Barlow...

0:29:22.5 JD: I was gonna say...

0:29:22.8 AS: Ever missed a day.

0:29:24.3 JD: I know a lot of farmers and I'm assuming that bus driver was pretty reliable.

0:29:27.4 AS: Yeah.

0:29:28.3 JD: So yeah, unfortunately that's just not the case right now. So, but context's also important. So we actually have a few different improvement teams going on in our school system right now. And one of them is transportation. So as a group, we sort of decided like, while transportation is having a large impact this year, it's not the thing for this group to work on because there is a transportation improvement project also going on, but there's also an acknowledgement that there's gonna be overlap between those two things. And as the group talked about knowing the kids and knowing the students, it's certainly not the only reason kids are absent. And I think that someone in the group actually said even if transportation was perfect, we would still have this chronic absenteeism problem. So there are other things that we need to focus on and work on, so.

0:30:21.1 AS: Great.

0:30:21.3 JD: Those are just some examples of tools and you know, visualizing the thinking of the group and you have to know your system. You can't just sort of go straight off the tools, there's other sort of analysis that has to happen along the way. And so that's kind of where I wanted to go today. And I think sort of wrapping up See the System is where we're at now. So I can kind of wrap that up and we can go from there.

0:30:48.4 AS: Fantastic. If you had it in one simple statement that could wrap up what we talked about today, what do you think is the most valuable thing for people to take away from this discussion?

0:31:03.1 JD: From this discussion? I think there is a desire, an impulse almost to jump in and create solutions. But I think it's... What I've seen, it's very important to step back and make sure you really see the system and do a number of things around seeing the system. Next time we'll talk about defining the problem, to really make sure you do those things before you start jumping to solutions. And in fact, about 50% of the work or more in our improvement process occurs before we ever even talk about possible solutions. And I think it goes to that old Einstein quote where it's like, if I had an hour to save the world, I'd spend 55 minutes, make sure I understand and define the problem and five minutes. You know, putting that solution into action.

0:32:00.3 JD: I'm sure I'm messing up the quote, but you get the gist of it. So I think what we've seen is we set this challenge at the organizational level, that we have to understand the difference of those three faces of performance improvement or performance measurement. We wanna focus the challenge or direction, we wanna frame it as an improvement goal. And it's important to do that and it's important to make that ambitious, to quantify that. But then there's these other sort of qualitative things that we need to step back and do that allow us to see our system. And there's, you know, we went through some guiding questions and some related tools that can help put this into action with an actual team that you're working with in your system. And these tools are not education specific. You can use these in any type of organization.

0:32:45.0 AS: I'm gonna sum it up in five words. Slow down to speed up.

0:32:48.7 JD: I like that. Slow is smooth and smooth is fast.

0:32:52.7 AS: Smooth is fast.

0:32:54.3 JD: I like it. Yep.

0:32:55.4 AS: So John, on behalf of everyone at The Deming Institute, I want to thank you again for this discussion. And for listeners, remember to go to deming.org to continue your journey. You can find John's book, Win-Win: W. Edwards Deming, the System of Profound Knowledge and the Science of Improving Schools on amazon.com. This is your host, Andrew Stotz, and I'm gonna leave you with one of my favorite quotes from Dr. Deming, people are entitled to joy in work.
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Frame the Challenge: Path for Improvement (Part 3)
11 nov· In Their Own Words
John Dues and Andrew Stotz are diving deeper into the improvement model that John is building with his team. In this episode, learn the three ways to think about an improvement frame for your big challenge.

TRANSCRIPT

0:00:02.6 Andrew Stotz: My name is Andrew Stotz and I'll be your host as we dive deeper into the teachings of Dr. W. Edwards Deming. Today I'm continuing my discussion with John Dues, who is part of the new generation of educators striving to apply Dr. Deming's principles to unleash student joy in learning. And the topic for today is Frame the Challenge. John, take it away.

0:00:23.6 John Dues: Hey Andrew, it's good to be back. Yeah, we're gonna talk about Framing the Challenge today. We kicked off a new series a couple of episodes ago. I introduced this improvement model that we can use to set ambitious goals backed with this sound methodology. Make this disclaimer again, we're sort of building the plane while we are flying it. So this improvement model is new at United Schools where I work. And so again, we're actually letting listeners sort of see it as it's being built and first put to use. And so I think just starting out with a quick recap of the model is a good place to start. So what is this improvement model that we've been looking at? I'll pull up my screen so we can share a visual of the model for those that are watching. Right. Can you see that all right?

0:01:21.2 AS: Yep.

0:01:21.3 JD: Great. Give me one second. All right. So we have this improvement model. Basically the core idea of the model is it gives us the scientific way of thinking. And remember, we talked about we're working to close this gap between current conditions in our organizations and future aspirations. In order to close this gap, we're walking through the four steps on the model. So first, we set the challenge of direction. That's really where we focused our time last episode. The second step is to grasp the current condition. The third step is to establish the next target condition. And then the fourth step is to experiment to overcome obstacles. And that's where we spend most of our time in this four-step process. And then the other thing we've talked about is we do it with this team. The people working in the system, that's one part of the system, one part of the team.

0:02:19.8 JD: And we've talked about this in our case. This can be students, it can be teachers, whoever the frontline people are in your organization. Then there's those with the authority to work on the system, to make changes to the design or the architecture of the system. That could be a teacher in a classroom, or we've said the principal of a school, or maybe the superintendent of a system of schools. And then one of the innovations that we've made to this improvement model is that that third group or that third person on the team is someone that has Profound Knowledge, someone that's using Deming's principles to guide the work. So that's the basic model that we looked at in the first episode and...

0:03:11.8 AS: And I would just highlight... By the way, can you put it on slideshow?

0:03:15.3 JD: Sure.

0:03:15.4 AS: And I've been reading Mike Rother's book, rereading his book on Toyota Kata and stuff. And so this has really got me back to it. But what you're doing is applying this and helping us understand it as you're putting it into action at your school, right?

0:03:35.0 JD: Yeah, we've had an improvement model. And I think... Yeah, so like it says down in the right hand corner, that this model, it's based on Mike Rother's work, the Toyota Kata work. I think one thing that was missing from our model previously was like, how do you set this challenge or direction? How do you do that in an ambitious but reasonable way? And I think Mike Rother's sort of model speaks to this. So that's why I like his four-step model. I also like the four steps because it's pretty simple. It's not 15 steps. It's not 20 steps. It's four steps. Now there are some steps that you have to learn and stuff like that. There are different pieces to each of the steps, but I like that it's four steps. It's sort of easy to remember. It's memorable. And I think the innovation that we've done so far is who is the team that's working through this? And I think to frame it as the people working in the system, the people working on the system, and then someone with Profound Knowledge, I think that's an innovation, from what I've read about Mike Rother's work.

0:04:39.6 AS: Yep.

0:04:40.4 JD: Yeah. And so to continue the recap from last time, I think in the last episode, so we introduced the model two episodes ago. And then last episode, what we said we were gonna do is start walking through each of the steps, episode by episode, and do a deeper dive into each of the steps. And we did that with step one last time. So we did Set the Challenge last time. And just as a refresher, this is that longer range goal that would differentiate us from other schools in our case, if we achieve it. But remember, we also said it seems nearly impossible at the outset. This is something that's off in the horizon. It's probably gonna take at least six months, probably more like two or three years. And then I gave this example at United where I am. So we're a school system. One of the challenges that we've set is to reduce our chronic absenteeism from 52%. So that's sort of the current condition. And we wanna bring that down to 5%. And there's this huge gap between those things. Obviously, we talked about an order of magnitude, and we don't quite know how to get there right now.

0:05:48.7 AS: Yeah, I think that's the point is we don't know how to get there right now.

0:05:57.6 JD: Yeah. Yeah. And I think... And so what I originally had planned to do is to go on to step two. And I think we're gonna do that next. But I wanted to pause because last time we briefly touched on this idea of Framing the Challenge as an improvement goal. And so with this episode, what I wanna do first before we go on to step two is talk about how to sort of think about that framing. And I sort of have studied a little bit of performance management from healthcare specifically. And there's really these three phases of performance management. When you're setting a goal, there's sort of performance measurement that has a research orientation. There's performance measurement that has an accountability orientation. And there's performance management that has an improvement orientation. And I think it's really important to understand the difference between those three types of measurement because I think conflation of those three things can derail and often derail improvement efforts. And in fact, as I was doing some research for this episode, I read this quote in one of the journal articles that I was sort of reviewing. It said, "the problem with measurement is that it can be a loaded gun, dangerous if misused, and at least threatening if pointed in the wrong direction."

[laughter]

0:07:19.6 JD: Right. So, when I read that I was like, this is important enough to take a pause and do a little bit deeper dive into that, you know, the differences between the three that we sort of got into on a surface level last time.

0:07:33.5 AS: One of the things that I like to say these days when I talk to people about measurement is measurement... If the subject being measured, let's say a table, I'm gonna measure the length of a table versus measuring the performance of an individual as an example. If the subject being measured knows, is aware that they're being measured, you're gonna have a problem.

0:08:02.0 JD: Yeah, I think that's very well put. And...

0:08:07.5 AS: The table doesn't care.

0:08:09.3 JD: The table doesn't care, but people always do. No doubt. No doubt. So I thought it'd be... I put together a table for those that are watching 'cause there is a lot of nuance to this and we'll kind of walk through this step by step, sort of the differences between goals or measurement for research, measurement for accountability, and then measurement for improvement. So I think just... I came up with these dimensions in some of the research I was doing. So, what's the purpose of each of those? What questions are you trying to answer? What are some example questions that are answered with that type of measurement? What's actually getting measured? How often is it getting measured? And then why does quality improvement or quality measurement matter in that particular area? So let's start with the purpose first. So when we're thinking about measurement for research, what we're really trying to do is contribute to some knowledge base, right?

0:09:01.8 JD: You know, I think the classic example is, what a university professor is often doing in their research. The second type of measurement is measurement for accountability. And really there, what we talked about last time is the purpose is to determine the application of rewards and sanctions or rewards and punishments. And that's really juxtaposed against measurement for improvement, which is... The purpose there is to learn our way to a system that produces a higher level of performance, right? And so let's look at measurement for research. We talked about the purpose being contributing to the knowledge base. If the questions that we're asking are about constructs or relationships between constructs or theories, then research is probably the direction we wanna go. An example question would be what's the relationship between two conceptual variables and what gets measured is... Could be numerous latent variables, but how often is this measurement happening? Typically once or twice during a study. And what we're trying to do is detect a relationship where they exist, right?

0:10:16.8 AS: So it could be... Like in a school, it could be a relationship between being late, the late rate and the absenteeism rate.

0:10:29.9 JD: Yeah. I mean, you could do research into why is it that student... Why are students chronically absent? You could do research into what's the best way scientifically to teach reading, right? And so you're gonna sort of come up with some answers there, at least answers that are sort of coming out of a lab, right? And a lot of times measurement for research or research goal or research study, that can be helpful to sort of initially point you in the right direction. You might do a literature review when you're trying to come up with solutions in your particular context.

0:11:10.3 AS: And it's important to remember that surveys properly done are a great form of research. So not only going back and seeing what's already been... What is the knowledge base on attendance, but also trying to do some research into what do students or teachers or parents think are root causes as an example.

0:11:33.3 JD: Sure.

0:11:34.8 AS: Okay. Great.

0:11:35.5 JD: Gives you a starting point, right? And so you certainly need measurement for research for sure. In that second bucket, we have measurement for accountability. And this is probably the thing that teachers and educators are most used to because there's accountability systems in all 50 states, right? And remember, we said the purpose is to determine who should be rewarded and who should be sanctioned. That's the purpose of an accountability measure. It's gonna answer questions about merit or status or accomplishment. It could be of someone like an individual teacher in a classroom, or perhaps about a school, for example. It's gonna answer questions like who's performing well and who isn't, who should be considered knowledgeable enough to do whatever, something X, right? But when we're talking about measurements, they're typically end-of-the-line outcomes, usually once per year after the fact. I've given state tests as an example multiple times. That's a very typical accountability measure end-of-the-line outcome. And why it's important to have quality measurement for accountability is that we can assign consequences based on measurement that lacks sufficient technical rigor so.

0:12:56.0 AS: Consequences as in rewards and sanctions?

0:13:00.4 JD: Could be... Yeah, consequences as in rewards and sanctions. And so there's technical guides that go with accountability systems. So how is the state, for example, calculating all of these different measures that show up on a school report card, test scores, value-added progress scores, chronic absenteeism rates? All those things have to be well-defined. Data has to be collected systematically. And it has to be done the same across the entire system so that rewards and sanctions are meted out equally amongst all the districts and schools and classrooms. But those two things are very different than measurement for improvement. And that's where I focus most of my time and where these talks really, really focus. And again, we said the purpose is to learn our way to a system that produces a higher level of performance.

0:13:48.4 JD: So we're talking about questions about specific changes as potential improvements to our systems. So some questions might be, are the changes I'm making leading to improvement? How are my changes affecting other parts of my system? And really, we're talking about outcomes and processes relevant to the object of change in terms of what gets measured. And that's happening... Those measurements for outcomes or processes are happening frequently as the practice or as the process occurs, right? Because we want feedback on a much more frequent basis than once or twice per study or at the end of the school year. That's one of the advantages here of measurement for improvement. And why does quality measurement matter in this particular area? Well, we wanna learn which changes are an improvement without wasting resources or will. Those are both very finite things in organizations, schools are... That's the same in schools.

0:14:55.2 AS: Will as in energy towards this objective, is that what you mean by will?

0:15:01.7 JD: Yeah. So two finite things, resources, which could be time or money. But will, I literally mean the will of the people, the will of the frontline people that you have to get on board with whatever this change is gonna be. And if you're moving between this thing and that, you sort of use up that will for good...

0:15:23.4 AS: It seems you have depleted the will of the people.

0:15:27.4 JD: And that happens all the time, especially where you're in a service business like education, the frontline people are being burned out all the time, teachers, in hospitals it's nurses and other folks in other industries. So that's the basic overview. And then I think one of the key things here is that there are some real measurement limitations when it comes to accountability measures and research measures or goals, when we're thinking about organizational improvement.

0:16:08.5 JD: I think the key limitation for accountability goals is that... The key limitation for improvement is that it does not illuminate why the outcomes occur or what should be done to change them when we're thinking about accountability system. For research, the key limitation for improvement is that it is impractical to administer it and not designed to inform changes in practice. So those are some real limitations. But what often happens, I think... And I should say again, like we said at the outset, that the three types of measurement are complementary. Like we need each of these three different types of performance measurement. But I think what happens is that problems arise when they're not used for their intended purpose. Remember, we said research, we wanna contribute to the knowledge base, that's the purpose. For accountability, application of award and sanctions. And for improvement, there we're actually learning our way to a better system, right? So, I thought it would be useful here. I may put you through like a little quiz here to apply the purposes of measurement to the right scenario. So, I have three situations here. They're unrelated to education. So, there's no pressure there. So, I'll read the three situations and then you're gonna tell me how would you... Which of the measurement purposes would you use?

0:17:47.7 AS: So, research, accountability, or improvement.

0:17:49.2 JD: Research, accountability, or improvement so.

0:17:53.6 AS: And I'm doing this on behalf of our listeners and readers so... And listeners and viewers.

0:17:55.7 JD: Everyone yeah.

0:17:56.7 AS: So, pay attention ladies and gentlemen, 'cause my answers may be wrong, but yours may be right. Okay.

0:18:01.7 JD: This is the check for understanding. This is a true education exercise here. And we're gonna be talking about avocados, right? So, there's no prior knowledge needed. So, I'll read through the first three situations, give you a chance to think, and I can repeat them if necessary, and you kind of think between those three. So, the first situation is rank the grocery stores in Columbus, Ohio, according to the quality of their avocados. So, would you use measurement for accountability, measurement for research, measurement for improvement? That's the first situation. The second situation is understand the relationship between weather, soil, acidity, and the eventual quality of an avocado grown in California. And the third situation is improve the quality of avocados on sale across all stores in Columbus. So, let's go back to that first situation. So, if you're gonna rank the grocery stores in Columbus according to the quality of their avocados, what type of measurement orientation makes the most sense?

0:19:15.5 AS: So I'm thinking accountability.

0:19:20.0 JD: Yeah, that's exactly right. Accountability, it's basically a grading system for avocados. You think how meat gets graded, it's grade A meat. That's really an accountability system.

0:19:33.6 AS: Okay, so listeners, viewers, did you get that one right? These are tough. John's a tough teacher. All right. Next one.

0:19:39.0 JD: You're one for one, and you have A grade schools, right? So you have A grade avocados, and that's an accountability measure. The second one was you're understanding the relationship between weather, soil, acidity, and the eventual quality of an avocado grown in California.

0:20:00.2 AS: Ladies and gentlemen, is this research, accountability, and improvement? Well, we've already eliminated accountability, so it's got to be either research or improvement. And if I get this one right, then I'm gonna get the third one right naturally. And I would say that sounds to me more like research.

0:20:15.8 JD: Yeah, that's exactly right. Research, right? So 'cause you're experimenting to see how the manipulation of variables, in this case weather, like the pH level of soil, acidity, impact the quality of an avocado. So you're basically a researcher trying to figure out what's the best combination of those things that gives you the best avocado. But this experimenting is gonna take probably years as you adjust those variables, right? And the last...

0:20:46.5 AS: Yeah, avocados don't grow so fast.

0:20:50.2 JD: They don't grow so fast, yeah. And then the third situation was you wanna improve the quality of avocados on sale across all stores in Columbus. There's only one left, so it's got to be...

0:21:03.5 AS: Well you used the word improve in it, so I think it's improvement orientation, huh?

0:21:06.8 JD: There you go. That's a giveaway. So aim is the quality of the avocado. So the basic theory of change is something like maybe improving the transport time from the field to the store. So there you can see that it's not like one is bad in terms of a measurement orientation and one is good. It's just... Is it being applied to the appropriate situation?

0:21:35.6 JD: There are certainly appropriate situations for accountability, appropriate situations for research and appropriate situations for improvement. So basically to sort of wrap this up, I mean, I thought it was really important because last time we talked, when you set the challenge and then it's gonna be something like a vision far out into the future, maybe two or three years, it's gonna be really important that that challenge is framed correctly because you're gonna be working on this thing for a long time. So with the model, we now have a way to bridge the gap between conditions and future aspirations. There's always gonna be a gap. We now have this model that gives us the scientific way of thinking and working to close the gap. And then we've said it's the responsibility of upper management to set this overall challenge as a key priority.

0:22:37.5 JD: And then we've said it's really important to understand the difference between these three types of performance measurement because conflation of the three can derail our improvement efforts. So the key takeaway here is you wanna frame this challenge or this far out direction that we're heading in as an organization as an improvement goal. And that's gonna orient the work. It's gonna orient the types of questions that you're asking. It's gonna orient the people, and the outcomes and processes that they're tracking. It's gonna orient your measurement system. You're gonna have to come up with frequent process and outcome measures that let you know how you're doing along the way. And the purpose of all of this is to learn our way to a better system. That's the purpose of measurement for improvement.

0:23:34.1 AS: That's great. A great summary. I wanna ask a question. Recently I've been teaching my corporate strategy course and I've been talking about the teachings of Richard Rumelt, who wrote the book called Good Strategy Bad Strategy, which is such a great book on strategy. But one of the things he complains about when he says his bad strategy is just setting an aspirational goal. Because as we learned from Dr. Deming, by what method? Like now, so there's... You've got to have a vision. You've got to have an aspiration of where you're going. But what he really focuses on... I think we're gonna talk about this in next sections. He really focuses on, have we really identified what the problem is?

0:24:21.7 AS: Like, what is the constraint? What is the thing that is holding us back from getting there? And what ends up happening is, when you clearly articulate the problem, what happens is it focuses... It becomes hard. Because to solve that problem, you need new resources. You need to get rid of old stuff. You've got to make substantial changes. And so it's much more comfortable for people to set strategies that are based upon wonderful visions. But never really deal with the problem. And then the workers in the companies, an employee in a company just looks up and goes, what did management just do for that long weekend? They did a weekend getaway to do their corporate strategy. And then they just came up with a fluffy vision of whatever with no help for us of how do we deal with the hardest problem is that we can't beat our competitor with the technology that we have. And we're never gonna get to that goal if we can't solve that problem.

0:25:28.7 JD: Yeah. And that's really the essence of the steps two, three, and four. I mean, the very next thing that we're gonna talk about is one, what's the current situation on the ground? Now we have this aspiration, but what's actually happening? For whatever data we have, whatever time period, 10 years, five years, whatever it is, we're gonna look at that data in a way that gives us a very firm understanding. And then remember, there's that crack in the model. That's the threshold of knowledge. So right up front, we're acknowledging.

0:25:58.0 AS: We don't know how to get over this. We don't know what's blocking us. We don't know...

0:26:03.3 JD: Yeah. We may have some ideas, but... Some initial ideas, but we do not know how to solve this chronic absenteeism problem. And that's where the experimentation comes in.

0:26:11.4 AS: So let me ask you one last question before we go. This is completely selfish, but also for the listeners and viewers out there, that is, I always ask my students this question in corporate strategy, should corporate strategy be kind of secretive in the sense that you're trying to build a competitive advantage and therefore some of the best battle attacks in war were kept secret. Stonewall Jackson was famous in his Shenandoah Valley campaign for not letting anybody know what he was gonna do the next morning. And then... Or should it be public? Like your number of 50 to five is pretty scary. And I'm just curious, what are your thoughts on that?

0:27:00.4 JD: Well, if you're in war, I think you should keep it secret. But pretty much anywhere else, I think public. Now that'd be my opinion. Now I'm in a school setting. I acknowledge that. But I've also seen...

0:27:11.4 AS: This is my quiz for you, by the way.

0:27:14.7 JD: What's that?

0:27:15.6 AS: This is my quiz for you.

0:27:15.7 JD: Your quiz for me. Yeah. Well, I have seen... And I've had the same thought. I think it was one of the founders of Toyota, or maybe someone that was an early CEO basically said, well, you give away your playbook basically. And he's like, well, just because someone has my playbook does not mean they can do it. And so education is a different orientation. There's not corporate secrets. And we're very open, we often share our practices. But I've often been on the...

0:27:45.2 AS: If you could get from 50 to five, you would want the world to know.

0:27:48.8 JD: I would want the world to know. I want everybody to do it. But I've been on the other side of this where I've gone to school and I've reached out to people get a manual or an artifact or something that they have that they do really well at their school system. And I look at it and I'm like, I don't know what to do with this. Right? So it's something altogether different to have the thing and then be able to do it. In our case, it's gonna benefit kids. We're gonna share it as far and wide as possible. So yeah, I think the setting matters. If I'm... The Union Army fighting Stonewall Jackson, then I'm gonna keep my secrets secret, my battle plan secret. But for most of the things I'm gonna share.

0:28:32.9 AS: Nathaniel Banks taking on Jackson. It was a rough series of battles for him. So I'll close out with my thoughts on this, which is that, yeah, I think ultimately once you've decided on what's your goal, where you wanna be, then I think you've got to make it public. And the reason why is because you need your employees to deliver that. It can't be... Everybody needs to be bought in. But even more importantly from a marketing and a relationship with customers, suppliers and others, they need to feel that vision. And they need to feel that mission. I think another great book is Start With Why. And that is why are we doing this? And I just read a great book on corporate strategy that is called Corporate Strategy Demystified.

0:29:25.5 AS: But it's just great because it was written in 2006. So he's talking about the battle between Apple and Compaq and Dell and all of these and IBM. And he doesn't know the outcome that Apple ends up being this multi-trillion dollar business. And basically his last sentence that I read in the last chapter is, it's over for Apple. They just can't compete in this space. And what he missed... This is what I'm teaching tonight, what he missed was the trusting connection that the customers had to Apple, to Apple's mission. Somehow Steve Jobs was able to create that mission and get it out to the world. And in the valley of death, when they were going through the worst time and it didn't seem like they were ever going to be able to do anything, it was customers that stuck with them because they believed in the mission of what they communicated. And it is that total, let's say intangible, that is very hard to measure and very hard to understand. But this is what I got when I was reading that book from 3:00 AM 'till 4:00 AM This morning, John.

0:30:44.4 JD: Whoever that author is was a small miss, a small miss.

0:30:48.8 AS: Yeah. And he's a brilliant guy. And so it's also a great point that just stick with your vision 'cause people's commitment to Apple and all that is so so strong. So being public about what you're doing and sharing it is critical because the last thing, as you said, even if somebody else has your playbook, I like to tell people that if somebody was working at General Motors and they had all the list of all the parts for Cadillac or whatever it is that they're building, and then they went to Toyota and said, build this, just because you have a list of parts and you have that operating system doesn't mean that they can build it because the product was actually designed for the operating system. And it's that entanglement in the actual process of production that makes that corporate strategy almost impossible to duplicate, even if you have the playbook.

0:31:41.8 JD: Yep. Yeah, that's it right there, I think. That's it.

0:31:46.5 AS: So fantastic. Well, on behalf of everyone at The Deming Institute, I wanna thank you again for this discussion. And for listeners, remember to go to deming.org to continue your journey. You can find John's book, Win-Win: W. Edwards Deming, The System of Profound Knowledge and the Science of Improving Schools on amazon.com. This is your host, Andrew Stotz. And I'll leave you with one of my favorite quotes from Dr. Deming. "People are entitled to joy in work" and in school.
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Paradigms of Variation: Misunderstanding Quality (Part 7)
4 nov· In Their Own Words
In this episode, Bill Bellows and Andrew Stotz explore the intersection of variation and quality through awareness of the "Paradigms of Variation.” In a progression from acceptability to desirability, Bill created this 4-part model to offer economic insights for differentiating “Zero Defect” quality from “Loss Function" quality," with the aim of avoiding confusion between precision and accuracy when desirability is the choice. Learn how to decide which paradigm your quality management system fits into!

TRANSCRIPT

0:00:02.5 Andrew Stotz: My name is Andrew Stotz and I'll be your host as we dive deeper into the teachings of Dr. W. Edwards Deming. Today I'm continuing my discussion with Bill Bellows, who has spent 31 years helping people apply Dr. Deming's ideas to become aware of how their thinking is holding them back from their biggest opportunities. This is episode 7, The Paradigms of Variation. Bill, take it away.

0:00:30.3 Bill Bellows: Thank you, Andrew, and welcome to our listeners, as well as viewers, if you have access to the viewing version. Yeah, so I went back and listened to Episode 6. I'm going out bike riding 2-3 hours a day, so I listened to the podcast, listened to other things, stop and write down. Let me go write that down. And, so, we're going to pick up today on some major themes. And, what I keep coming back to is, is I think the difference between acceptability and desirability is the difference between how most companies operate and how a company inspired by Dr. Deming would operate.

0:01:29.3 BB: And, I just think of, if there was no difference between the two, then... Well, lemme even back up. I mentioned last time we were talking about why my wife and I buy Toyotas. And, yes, we've had one terrible buy, which I continue to talk about. [laughter] And, it's fun because it's just a reminder that even a company like Toyota can deliver a really lousy product, which we were unfortunate to have purchased. And, we're not the only ones that, and they've rebounded and they've apologized, they've had issues. There's no doubt about that. They have issues, but they have notably been inspired by Dr. Deming.

0:02:30.6 BB: The one thing I brought up last time was relative on this thinking of acceptability, desirability, where acceptability is looking at things and saying it's a quality system of good and bad. It's acceptable, which is good and unacceptable is not good. And, that's how most organizations view quality. Again, the focus of this series is Misunderstanding Quality. Our previous series was broadly looking at implications for Dr. Deming's ideas. And, here our focus is quality. And, so what I'm trying to get across here is quality management, traditional quality management.

0:03:17.4 BB: In most organizations, in all organizations I've ever interacted with is acceptability basis, good parts and bad parts. It's a measurement system of it meets requirements, we ship it, if it meets requirements, we buy it. And, I'm not saying there's anything wrong with that, but I don't think a system focused on acceptability can explain... To me, it does not explain the incredible reliability I have personally experienced in Toyota products.

0:03:46.9 BB: Now, I'm working with a graduate student and I wanna pursue that as a research topic in the spring, 'cause for all I know, the reliability of components in all cars has improved. I don't know if it's, I only by Toyota, 'cause so this woman I've met recently and I'm mentoring her and we're working on a research project. And, I thought recently, I'd like... And, I'm not sure how to do this, but I just know, I think I've mentioned I worked at my father's gas station back in the '70s and I remember replacing water pumps and alternators and all this stuff. This was before Japanese cars were everywhere. There were Japanese cars, but not like you see today.

0:04:33.3 BB: And, so I'm just used to all those components being routinely replaced. And, all I know is I don't routinely replace anything but the battery and the tires and change the oil. I think that's about it. Everything else is pretty good. But, I do think the differentiation between Toyota and most other companies is their appreciation of desirability and how to manage desirability. And, that's why I keep coming back to this as a theme for these sessions. And, what I think is a differentiation between a Deming view of quality and all other views of quality. What I tried to say last time is I just give you indications of a focus on acceptability. It's a quality system which looks at things that are good or things that are bad. It's, last time we talked about category thinking. It's black and white thinking. If the parts are good, then the mindset, if they're good, then they fit.

0:05:38.4 BB: Well, with a focus on continuum thinking, then you have the understanding that there's variation in good. And, that leads to variation in fit and variation in performance. And, that's a sense of things are relatively good, not absolutely good, whereas black and white category thinking is acceptability. They're all good. And, if they're all good, then they should all fit. I was, when I was at Rocketdyne, met, and the one thing I wanted to point out is... Again, as I said in the past, so much of what I'm sharing with the audience and people I've met through these podcasts or people I'm mentoring, helping them bring these ideas to their respective organizations or their consultants, whatever it is.

0:06:29.0 BB: And, so I like to provide examples in here for things for them to go off and try. You at the end of each podcast encourage them to reach out to me, a number of them have, and from that I've learned a great deal. And, so one guy was... A guy I was working with at Rocketdyne, he was at a site that did final assembly of rocket engine components. And, so one thing I'd say is the people who... And for those listening, if you wanna find people in your organization that would really value the difference between an acceptability focus and a desirability focus, find the people that do assembly, find the people that put things together. 'Cause the ones that machine the holes, they think all the holes are good. People that make the tubes, all the tubes are good. But, find the people that are trying to put the tubes into the holes. Those are the people I loved working with because they were the ones that felt the difference every day.

0:07:31.1 BB: And, so I was in a workshop for a week or so. And there's two people ahead of me. They came from this final assembly operation of Rocketdyne. And, during a break, I was trying to clarify some of the things I had said and I used, I shared with them an example of how when we focused on not the tubes by themselves or the holes by themselves, that we focused on how well the tubes go into the holes, which has a lot to do with the clearance between them and the idea that nobody owns the clearance. One person owns one part, one owns another. And, what we realized is if we focused on the relationship, what a big difference it made. So I'm explaining it to him and he turns to me and he says, he's like, "Oh, my God," he says, "I've got hundreds of turbine blades and a bunch of turbine wheels and the blades slide into the wheel." And he says, "I can't get the blades onto the wheel."

0:08:31.0 BB: And I said, "But they're all good." He says, "They're all good." But he said, "Well, what you're now explaining to me is why they don't go together. Why I have this headache." So I said, "Well, do you know where the blades come from?" He says, "yeah". And I said, "Do you know where the wheels come from?" He says, "yeah". I said, "Well, why don't you call them up and talk to them?" He says, "There's no reason for a phone call 'cause all they're going to say is, "Why are you calling me? They're all good." So, he just walked away with his head exploding 'cause he's got all these things.

0:09:05.8 BB: And, so I use that for our listeners is if you want to find people that would really resonate with the difference between acceptable and desirable, talk to the people that have to put things together. There you will find... And, so my strategy was, get them smart. Now they have to be patient with the people upstream 'cause the people upstream are not deliberately doing what they're doing to them. So, what you don't want to do is have them get... You want their consciousness to go up but you now wanna use them to talk to the component people. Now you've got a conversation. Otherwise, the component people say, "Why are you talking to me? Everything I do is good."

0:09:51.6 BB: So, I just want to talk at this point, just to reinforce that I think there's something going on with Toyota that is very intentional about managing desirability when it makes sense using acceptability. So, it's a choice. And, so indications of a focus on desirability is when you look at options that are acceptable and you say, "Of all these apples, I want this one. It's the ripest. Of all these donuts, I want this one. It's got the most sprinkles. Of all these parking spots, I want this one. It's a little bit wider than the other. I want this surgeon. I want this professor for this course."

0:10:33.8 BB: All right. So, what we're saying "is of all the choices, I want this one". So, some new ideas I want to get into tonight are the Paradigms of Variation A, B, C, D, and E. Paradigm A we looked at in the past. That's just acceptability. Does it meet requirements or not? The quality focus is achieving zero defects. And tonight I want to get into B and C. The next time we'll look at D and E. In explaining these ideas recently to someone who listened to one of our previous podcasts and were focusing on, he started asking about decision making. And that got me thinking about, of course, I took years ago decision making with Kepner and Tregoe. And there they talk about decisions. We're gonna look, we're gonna go buy a car, go buy a house. We're gonna make a decision.

0:11:29.4 BB: And, once you decide on the decision, you then list the criteria of the decision. And you come up with all the things you want in this decision. And then you look at each of them and you say, "is it a must or a want"? And let's say you're looking at houses. It could be a lot of houses to go look at. What makes this focus on acceptability, it's musts and wants. And must is very much acceptability. So you say: "We're looking for a house that must be one story, it must be in the middle of the block. The house must be in the middle of the block. It must have four bedrooms, must have two bathrooms". So now when you're looking at all these houses, acceptability says "I'm only gonna look at the ones that meet those requirements". And, so now the strategy is to go from hundreds of options down to an order of magnitude less.

0:12:25.1 BB: Now we're going to get it down to maybe 20. Now you look at the wants. So you've got an original list of all the things, the criteria, and you look at each one and say, "is it a must, is it a want"? And what I've just said is the first screening is all the ones that pass the must get into the next category. Well, with the Kepner-Tregoe folks, they talk about must, which is acceptability, and the wants are about desirability.

0:12:51.4 BB: And then here it ties into Dr. Taguchi's mindset, and we'll look at Taguchi in a future session. Taguchi looks at a characteristic of quality, such as the diameter of a hole, the performance of an automobile, miles per gallon. And he says, in terms of desirability, there's three different targets. There is desirability, I want the smallest possible value. So, if you're buying a house, it could be, I want the lowest possible electric bills where zero is the goal. It's not gonna be zero, but I'm looking, of all the ones that pass the must, now I'm looking at all the houses, and I'm saying "I want the lowest possible electric bill". That's a Smaller-is-Best.

0:13:35.9 BB: Larger-is-Best is I want something which is as big as possible. It could be I want the most roof facing the sun, in case I put solar in. That's a Larger-is-Best characteristic, where Taguchi would say the ideal is infinity, but the bigger, the better, as opposed to Smaller-is-Better. And, the other characteristic is what Taguchi calls Nominal-is-Best, is I have an ideal single value in mind. And in each case, the reason I point that out is that desirability is about going past acceptability and saying amongst all the things that are acceptable, I want the smallest, I want the largest, or I want this. It is a preference for one of those.

0:14:19.4 BB: So, I thought... I was using that to explain to this friend the other day, and I thought that would be nice to tie in here. That desirability is a focus on of all the things that meet requirements, now I want to go one step further. That's just not enough. All right, so now let's get into Paradigms B and C. And I want to use an exercise we used in the first series. And, the idea for our audience is imagine a quality characteristic having a lower requirement, a minimum, otherwise known as the lower spec, the lower tolerance. So, there's a minimum value, and then there's a maximum value. And, when I do this in my classes, I say "let's say the quality characteristic is the outer diameter of a tube." And, then so what I'd like the audience to appreciate is we've got a min and a max.

0:15:18.9 BB: And, then imagine your job as listener is to make the decision as to who to buy from. And. let's say we've got two suppliers that are ready to provide us with their product, these tubes that we're gonna buy. And, your job as a listener is to make the decision as to who to buy from. Who are we going to buy from? And, so we go off and we tell them, "Here's the min, here's the max," and they come back. And, they each give us a distribution. And, so what I'd like the audience to think about is a distribution. Just think very simply of two normal distributions, two Gaussian distributions. And, let's say the first distribution goes all the way from the min to the max. It takes up the entire range.

0:16:08.5 AS: So wide and flat.

0:16:12.1 BB: Wide and flat. That's supplier one. And supplier two, let's say is maybe three quarters of the way over. It's incredibly uniform. It uses a very small fraction of the tolerance. So that's tall and narrow. That's distribution two as opposed to wide and flat. So, imagine we've got those two to buy from. But imagine also, and this is a highly idealized scenario. And, I use this and this is why I want to share it with our audience. Because it becomes a great way of diving into what I think is a lot of confusion about meeting requirements. And, so what I want you to imagine is that no matter who you buy from, they both promise that they will deliver at the same price per tube.

0:17:00.8 BB: So, no matter who you buy from, price-wise, they are identical. To which I'd say that's highly idealized, but that's a given. Criteria number two, the delivery rates are the same. So, we cannot differentiate on delivery. We cannot differentiate on price. The third condition we find out is that everything they deliver meets requirements, 100%. So, if there is any scrap and rework, they don't ship that to us. So, everything they deliver meets requirements. And, again, that's highly idealized.

0:17:41.6 BB: Number four is the distributions are in control. And, that means that the processes are predictable and stable. And, that's guaranteed. So, imagine these distributions day by day every order is the same shape, the same average, the same amount of variation. Also, it will never change. It will never change. And, the other thing I want to point out in this fourth point here is that your job as the buyer is to buy these. They are used as is within our organization.

,

0:18:15.5 BB: And, the fifth point is that there's a min and a max. And, so I've been using this exercise for, gosh, going back to 1995, and I throw it out there and then I show them the distributions. I say "same price, same schedule, delivery rate, everything meets requirements, distributions never change shape or location. You're going to use as is. And there's the min, there's the max. Who do you buy from?" And, I give people not only do we buy from one or two, but I also say I'll give you a third option.

0:18:51.5 BB: The third option is it doesn't matter. It doesn't matter. So, what I find is that three quarters of the audience will take distribution two, the narrow one. And when I ask them, why do you like distribution two? They say, "because it has less variation". I then say, "From what?" Then they say, "From each other." And, that's what a standard deviation is, variation from each other. So roughly 75% plus and minus...

[overlapping conversation]

0:19:25.8 AS: When you say of each other, you're talking about each other curve or each other item in the...

0:19:31.3 BB: Each other tube. So, the amount of variation from all the tubes are close together, so the variation from each other.

0:19:38.6 AS: Okay. Each item. Yeah, okay.

0:19:41.8 BB: Standard deviation is the average variation from the average value. So, when I ask them, why do you like two? Okay, and then I asked the ones who take the wide one in the middle, I say, "why do you like that one," and they say because... And, actually, we'll come back to that. This is pretty funny. They will take that, but a very small percent say it doesn't matter, and here's what's interesting, if I didn't show the distributions, if all I did was say there's two suppliers out there, the same price, same schedule, that guarantee zero defects, the results will never change. Here's the min, here's the max, I'm willing to bet if I didn't show the distributions, people would say "it doesn't matter, I'll take either one". But, as soon as I show them the distributions, they want the narrow one. And, I use this for our attendees, this is a great way to show people that they really don't believe in tolerances, 'cause as soon as you go past meeting requirements, what you're really saying is, there's a higher bar.

0:21:05.6 AS: Okay, so requirements would be... Or, tolerances would be the extremes of that flat, wide curve. And, any one of those outcomes meets the tolerance.

0:21:17.5 BB: Yes, and so for companies that are striving to meet requirements, why is it when I give you two distributions that meet requirements... Why is it when I show you the distributions, and I'm willing to bet if I don't show you the distributions and all you know is they're 100% good, then you say "well, it doesn't matter," Well then what changes when I show you the distributions?

0:21:43.6 AS: I know why I'd choose the narrow one.

0:21:48.1 BB: Go ahead.

0:21:49.1 AS: I know how damn hard it is to reduce variation and I forget about any tolerance of anything, if I have two companies that show me a wide distribution, and another one shows me a narrow one, and let's say it's accurate. I'm much more impressed with how a company can do the same exact output as another company, the same product that they're trying to deliver, but they are producing a much more narrow range of outcome, which could be that they just have automation in their production line and the other one has manual.

0:22:27.4 BB: And, I have seen that within Rocketdyne, I've seen processes do that. I have seen the wide become the narrow through automation. Yeah. Okay, so hold that thought then. So, what I do in my graduate classes is I show that... Not only do I give them two options, I give them four options. So, I throw in two other distributions, but really what it comes down to is the wide one versus the narrow one, and then the other two, I throw in there that usually aren't taken, they're distractions. All right, so what I'll do in a graduate class in quality management is to show that and get the results I just showed. If I present the same exercise and then say, "imagine the average value of distribution one, the middle of distribution one, imagine that is the ideal value".

0:23:24.7 AS: That, you're talking about the wide and flat.

0:23:28.4 BB: Yes. So, all I do is I go back to the entire exercise and now I add in a line at the average of the wide distribution, and then go through and ask one more time, who would you take.

0:23:46.3 AS: So, now the dilemma that the listener has is that now we have a, within limits, within tolerances, we have a wide but flat distribution that's centered on the middle point between the upper and lower tolerance.

0:24:06.4 BB: Yeah, yes.

0:24:08.8 AS: And, then we have... Go ahead.

0:24:11.7 BB: Well, yeah, that is distribution one, same as the first part, we went through this, and all I'm doing now is saying, "imagine the average value of the middle is said to be the ideal value".

0:24:29.4 AS: And, now you're gonna tell us that the narrow one is not on that central or ideal value.

0:24:36.2 BB: No, that is still where it is at the three-quarter point, all I've done is now said, this is desirability. I'm now saying "that is the ideal value, that is the target, that is the value we prefer". And, people still take the narrowest distribution number two.

0:24:58.8 AS: I wouldn't take the narrow one because I would think that the company would have to prove to me that they can shift that narrow curve.

0:25:06.6 BB: Well, okay, and I'm glad you brought that up because according to the explanation I gave of equal price, equal schedule, meets requirements. I deliberately put in the criteria that you have to use them as is. So, now I'm forcing people to choose between the narrowest one over there at the three-quarter point, and the wide one on target. And, there's no doubt if I gave them the option of taking the narrow distribution and sliding it over, they would. Every single person would do that. But, when I give you a choice of, okay, now what? So, two things here, one is, is it calling out the ideal of value, 'cause desirability is not just beyond acceptability, it is saying, "I desire this value, I want this parking spot, I want this apple, I want this value". And, that's something we've been alluding to earlier, but that's what I wanna call out today is that...

0:26:13.7 BB: So, in other words, when I presented the exercise of the two distributions, without calling out what's desirable, all I'm doing is saying they're both acceptable, which do you prefer? But, instead of saying it doesn't matter, I'd like the narrowest one, and it may well be what people are doing is exactly what you're saying is the narrowest one seems better and easily could be for what you explained.

0:26:40.8 BB: But, what's interesting is, even when I call out what's desirable as the value, people will take the narrowest distribution, and so now what I wanna add to our prior conversation is Paradigm A, acceptability, the Paradigm A response would be, it doesn't matter. Choosing the narrowest one, otherwise known as precision, we're very precisely hitting that value, small standard deviation, that's what I refer to as Paradigm B, piece-to -piece consistency. Paradigm C is desirability being on the ideal value, that's piece-to-target consistency. And, in Dr. Taguchi's work, what he's talking about is the impact downstream of not just looking at the tubes, but when you look at how the tubes are inserted into a hole, perhaps, then what he's saying is that the reason you would call out the desirable value is what you're saying is how this tube integrates in a bigger system matters, which is why I want this value.

0:27:54.2 AS: Okay, so let's go back, A, meet requirements, that's acceptability. Anything within those tolerances we can accept. B is a narrow distribution, what you called precision or piece-to -piece consistency. And what was C?

0:28:12.8 BB: C is, I'll take the wide distribution where the average value is on target, that's piece- to-target consistency. Otherwise known as accuracy.

0:28:27.3 AS: Okay. Target consistency, otherwise known as accuracy. All right, and then precision around D is precision around the ideal value.

0:28:37.7 BB: Well, for those that want to take the narrowest one and slide it over, what you're now doing is saying, "I'm gonna start with precision, and I'm going to focus on the ideal". Now, what you're doing is saying, "step one is precision, step two is accuracy".

0:28:56.4 AS: Okay. And step three or D?

0:29:00.9 BB: Paradigm D?

0:29:02.7 AS: Yeah.

0:29:02.7 BB: Is that what you're... Yeah. Paradigm D would be the ability to produce, to move the distribution as needed to different locations.

0:29:17.4 AS: The narrow distribution?

0:29:18.9 BB: Yes, and so I'll give you an example in terms of, let's say tennis, Paradigm A in tennis is just to get the ball across the net. I just wanna get it somewhere on the other side of the court, right. Now that may be okay if you and I are neighbors, but that doesn't get us into professional level. Paradigm B, is I can hit it consistently to one place on your side of the court. Now, I can't control that location, but boy, I can get that location every single time. Next thing you know, you know exactly where the ball is going, and that's Paradigm B. Paradigm C is I can move it to where I want it to go, which you will eventually figure out, so I can control where it goes. Paradigm D is I can consistently hit any side of the court on the fly.

0:30:11.0 BB: So, Paradigm D is I can take that narrow distribution and move it around for different customers, different applications, and Dr. Taguchi refers to that as Technology Development, and what Taguchi is talking about is developing a technology which has incredible precision in providing your sales people the ability to move the next move it to accuracy and to sell that product by tuning it to different customers as you would in sports, move the ball around to the other side of the court. So now you're going to the point that you've got incredible precision, and now you've got “on demand accuracy,” that's Paradigm D. Paradigm C is I can do one-size-fits-all which is, which may be all you need for the application.

0:31:06.9 AS: I wanna separate the Paradigm B, the narrow distribution and that's precision around some value versus Paradigm D is precision around the ideal value.

0:31:20.7 BB: And, the idea is that desirability is about an ideal value. And, so if we're talking piece-to-piece consistency, that means it's uniform, but I'm not paying attention to... I have a value in mind that I want. And that's the difference between Dr. Taguchi's work, I mean, it's the ability to be precise. Again, accuracy, desirability is I have an ideal value in mind. And acceptability is it doesn't really matter. Precision is uniformity without accuracy. And so, if you are... What Dr. Taguchi is talking about is, is depending on how what you're delivering integrates, being consistent may cause the person downstream to consistently need a hammer to get the tube into the hole.

0:32:24.2 BB: So, it's consistent, but what you're now saying, what Taguchi is saying is, if you pay attention to where you are within requirement, which is desirability, then you can improve integration. And, that is my explanation for why Toyota's products have incredibly reliability, that they are focusing on integration, not just uniformity and precision by itself.

0:32:49.8 AS: I would love to put this in the context of a dart thrower. The Paradigm A meeting requirability or acceptability, they stand way behind and they throw and they hit the overall dart board.

0:33:04.3 BB: Dart board. It's on the board. Yes.

0:33:07.2 AS: And, the narrow distribution is, well, they hit the same spot over to the left, right towards the edge, they hit that spot consistently. And, then basically, I'm gonna jump to D just because I'm imagining that I'm just gonna ask the guy, Hey, can you just move over just a little bit, and I'mma move them over about a half a foot, and when I do, you're gonna start throwing that dart right at the same location, but over to the right, meaning at the target. The center of the dart...

0:33:43.9 BB: The bull's eye. Yeah. Yeah, well, that's... And you call that C or D?

0:33:47.6 AS: I call that D.

0:33:49.5 BB: No, I would say, let's call that C being on target, meaning that C is, for games of darts where the most points are being on the bull's eye, that's Paradigm C.

0:34:04.0 AS: So accuracy, yeah.

0:34:05.4 BB: Paradigm D would be a game in which the ideal value changes. So now, okay, now I watch the... When I play darts, I'm sure there's lots of darts games, but one game we used to play it in our cellar at home was baseball. So, the dart board is divided into has numbers one, two, three through, and you'd go to... There'd be a wedge number one, a wedge number two, a wedge number three, that's Paradigm D that I could hit the different wedges on demand. But that's what it is. So A is anywhere in. B is consistent, precision, but again, the idea is if you can move that, but now what we're talking about is, is there an impulse to move it or are we happy just being precise? What Taguchi's talking about is the value proposition of desirability is to take precision, take that uniformity and move it to the ideal value, and what you've just done and doing so, you're now focusing on not this characteristic in isolation, you're now focusing on how this characteristic meshes with another characteristic. And, it's not just one thing in isolation, one thing in isolation does not give you a highly reliable automobile.

0:35:38.9 AS: Is there anything you wanna add to that, or are you ready to sum it up?

0:35:45.0 BB: No, that's it. The big summation is, we've been building up to the contrast between acceptable and desirable. I just wanted to add some more fidelity. Desirable is I have a value in mind, which Dr. Taguchi referred to as a target. So, for people at home, in the kitchen, the target value could be exactly one cup of flour. We talked earlier about our daughter, when she worked in a coffee shop and then, and at home she'd give us these recipes for making coffee and it'd be dad, exactly this amount of coffee and exactly that. And, we had a scale, it wasn't just anywhere between. She'd say "dad, you have to get a scale." I mean she was... We started calling her the coffee snob, 'cause it was very, this amount, this amount. So, in the kitchen then it's about precisely one cup. Precisely one this. And that's desirability.

0:36:40.6 AS: And, I was just thinking, the best word for that is bull's eye!

0:36:48.3 BB: Yes.

0:36:48.8 AS: You hit it right on the spot.

0:36:50.6 BB: Yeah.

0:36:51.6 AS: Great. Well, Bill, on behalf of everyone at The Deming Institute, I wanna thank you again for this discussion. It was not only acceptable, it was desirable. For listeners, remember to go to deming.org to continue your journey. And, if you want to keep in touch with Bill, just find him on LinkedIn. He'll reply. This is your host, Andrew Stotz, and I leave you with one of my favorite quotes from Dr. Deming, "people are entitled to joy in work."
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Myth of Tech Omnipotence: Boosting Lean with Deming (Part 6)
28 out· In Their Own Words
Many companies strive to automate by using more technology and fewer humans. But does their productivity really improve? Does it keep them agile? In this episode, Jacob Stoller and Andrew Stotz share stories of companies that improve productivity because they focus on processes instead of tech alone.

TRANSCRIPT

0:00:02.3 Andrew Stotz: My name is Andrew Stotz, and I'll be your host as we dive deeper into the teachings of Dr. W. Edwards Deming. Today, I continue my conversation with Jacob Stoller, Shingo Prize-winning author of The Lean CEO and Productivity Reimagined, which explores applying Lean and Deming management principles at the enterprise level. The topic for today is myth number five, the Myth of Tech Omnipotence. Jacob, take it away.

0:00:29.8 Jacob Stoller: Great, Andrew. Thanks. Great to be here again. Yeah. Tech omnipotence. Well, it's quite a myth. We sort of worship technology. We have for a long time, and we tend to think it can solve all our problems, and sometimes we get a little too optimistic about it. What I wanna talk about is in the context of companies adopting technology and go through some of the stories about that and how that relates to productivity. Really, the myth of tech omnipotence is kind of like a corollary to the the myth of segmented success. In other words, people have believed that you can take a chunk of a company. Now we'll take Dr. Deming's pyramid, and we take a chunk out of that and say, oh, well, that fits so and so in the org chart, let's automate that.

0:01:28.1 JS: And they don't consider what happens to the rest of the organization. It's just this idea that you can superimpose automation. So this has a long checkered history. And the way technology gets justified in organizations is generally what it's been, is reducing headcount. And I used to work in a tech firm, and we used to do this. We would do these studies, not really a study, but you do a questionnaire and you figure out if we adopt this, if we automate this workflow, let's just say, I don't know, it's accounts payable. So you automate accounts payable and you say, well, you got so many people involved, we think we could cut this by three people or something like that. So that becomes your business case. Now, they had categories in these little questionnaires where you would try to get other benefits from the technology, but they tended to be what they call soft benefits.

0:02:35.4 JS: And you know what that word means. Soft benefits means, well, okay, nice to have, but it's not going to get budget money or it's not gonna get approved. So anyway that's really been the kind of standard way of getting tech projects justified. And that goes through pretty much any industry. So what would happen is people adopt these technologies without looking at the whole system. And guess what? You put the software in, you start to implement it, and you run into problems. Doesn't quite work. Doesn't work the way it was supposed to. And so the tech people tended and still do tend to blame the company. They say, well, they had user problems. Users weren't really adjusting to it. These people are sort of way behind. We're a tech company. We've automated the same process for 50 different companies, we know what's good for them. We have to educate them, but they don't seem to want to be educated. So that was kind of the way it was. And I'll give you an extreme example. I did some freelance work for research firm, and one of the studies I worked on, I'm not making this up, it was called Aligning the Business with IT. So it was trying to get people to smarten up with their business and align it to what the smart people are doing with IT. So that's how extreme that kind of feeling was.

0:04:17.3 AS: As opposed to maybe aligning with the customer or something like that.

0:04:21.1 JS: Well, yeah, wouldn't that be crazy? Or how about aligning IT with the business? Finding out what the business wants. So anyway, that whole way of thinking has had, it's sort of filtered into manufacturing in the same way. And I found this out really researching Productivity Reimagined as I interviewed Ben Armstrong from MIT Industrial Performance Center. And what I learned from him is the whole history of automation and manufacturing in North America. And really, what he told me is that between 1990 and 2010, there were increases in productivity, but those were always from reducing headcount. They never found ways to actually grow the value of the business by using automation. So around 2010 or leading up to 2010, manufacturing started to change, and we started to transition into what they call a high-mix, low-volume type of markets.

0:05:33.3 JS: And I've talked to manufacturers that have said, 10 years ago, I only had to make two or three variations of this part, now I have to make 50 or 60. So you're getting shorter product cycles, larger mix. And the big buzzword now in manufacturing is agility. You've gotta be agile. So there was a study MIT, I think this Performance Center did a study. And they found that when you actually try to grow productivity, and this is really since 2010, you actually lose agility at the same time. You're kind of caught in that situation because you can't... That you lose agility when you let go of people. But that was the only way they could increase productivity. Does that make sense?

0:06:29.1 AS: Yeah. So I'm thinking about that's interesting because agility means being flexible, being able to accommodate. And when you think about the typical automation, it's about repetitive, repetitive, repetitive.

0:06:46.5 JS: Yeah.

0:06:47.3 AS: And so I can kind of get that picture about the agility versus, let's say automation or repetitive processes.

0:06:56.3 JS: Yeah. And I think that people are longing for this golden age. You go from the 1920s to 1960s, and manufacturers made incredible gains in productivity with automation. You put in these huge welding lines where they just weld. You look at the body welding, say in a plant, and it's at lightning speed. There's no question about that. But they basically ran into a plateau with that. And one of the robotics companies told me, he said, we learned decades ago how to automate these mass production processes, but now we're getting into a different kind of age where as somebody put it, we're moving from the industrial mass production age into what they call the process age, where processes are becoming more and more important. So to...

0:07:50.8 AS: And I'm thinking about the automation. I've seen videos on like online about let's say a fulfillment center with all these little robots going around and picking, putting things on them and packaging them, and all of that. So I'm thinking, well, automation has become definitely more maybe, I don't know if the words agile, but it's definitely, it's gone beyond like just automating one little part of the process.

0:08:21.4 JS: Yeah. It's gone away from the let's replace people type scenario. And so what the fastest growing segment right now in robotics is collaborative robots, which can work with people. So to put it very simply, instead of a human replacement, they're becoming tools. But these things are amazing. A worker online on the shop floor can programming these, and they have to be able to because things are changing so fast. So a worker, a welder can actually hold the robotic arm and guide it through a weld and thereby program it so it can learn how to do that weld. So then you can get the robot doing all the dangerous parts. If they're welding something large where they might have to get up on scaffolds or something, they might be able to get the robot to do some of the more dangerous types of positions. So that's when you get the real benefit.

0:09:27.7 AS: Yeah. I would think like in a paint booth, which we had in factories I worked at, now you can seal it off and have a robot in there, and all of a sudden lung problems and other things like that just go away.

0:09:40.8 JS: Interesting. Well, so anyway, we're still in a, I think in a rough spot generally with manufacturing because between 2010 and present day, at least in North America, productivity's gone down. And it's because people haven't been able to... They've depended on those people to keep their agility, but they haven't learned how to add value.

0:10:08.3 AS: Can you discuss that just for a second about productivity going down? That's a little bit of an odd thing because I think most people think that productivity's probably going up. What is the measure you're talking about, and how long and why is that happening?

0:10:23.5 JS: I think it's basically... At least I'd have to look at the study that they have, but it's basically output in proportion to the number of hours. I think that's pretty well accepted. So they're losing ground as the demands for agility are increasing. And their attempts to automate have been, caused problems. You automate and you lose your people, and then you're gonna have a heck of a time getting them back right now because that's really hard in manufacturing. But yeah, I would have to look at the study in detail to understand how they got that number, but I was taking it on faith that this is from Ben Armstrong, who's the director of the Industrial Performance Center.

0:11:11.8 AS: Yeah. You just mentioned something that I was just recently talking with another person about, and that was, one of the downsides of an aging workforce is that you're losing really senior people and you're replacing 'em with people that may not have the skills. Also, US kind of is notorious in America for a declining education. And with education coming down for the last 30 years or so, it's also hard to find, let's say, engineers and people that... There's not a deep market in some of these places where there's need. So that's a real challenge that businesses are facing.

0:11:55.2 JS: It is. Yeah.

0:11:56.3 JS: Yeah. And now what they're doing is they're looking at manufacturing from that standpoint. They're now acknowledging that the scarce resource is the human. And we have to actually build, if we're gonna automate, we have to build those processes around people. And that's... I'm gonna just read you a description here. There's, I think you heard of Technology 4.0, where they talked about putting sensors all over the place and having smart factories and that kind of thing.

0:12:27.7 AS: Yeah.

0:12:28.3 JS: Well, we now have something called Industry 5.0, and I'm just trying to get the wording here 'cause this has been around for a couple years, but it's on the EU website. It says it's "a vision that places the wellbeing of the worker at the center of the production process and uses new technologies to provide prosperity beyond jobs and growth while respecting the production limits of the planet." So they're really trying to center technology around that so you're not doing your sort of environmental and your DEI and all that independently of your production, it's all integrated part of it, which is I think something I'm sure Dr. Deming would have advocated.

0:13:17.8 AS: I'm still kind of fascinated by the productivity, and I just look at here in Asia, productivity is just rising. Education levels are rising. Engineering skills are rising. Competency in certain areas, specialties is just rising. And I oftentimes, I think that one of the things why this... One of the reasons why this is a good discussion that we're having is because in the West, in particular in the US, there's a new challenge. And that is how do you bring business... How do you bring jobs back to the economy when you're facing a very, very different workforce from when, let's say I left Ohio in 1985, roughly. It's a very different workforce nowadays.

0:14:07.1 JS: Well, yeah. And I think a lot of the offshoring arguments were about, well, we'll keep the smart jobs here 'cause we're all well educated and we'll export the low paying, less skilled jobs abroad, and we'll all win. But now, of course, we're finding that people overseas are getting darn well educated, so you can't have a more expensive labor force and have people that maybe aren't even as well educated.

0:14:40.0 AS: Yeah.

0:14:40.2 JS: So it's... Yeah, I think the West is in a very tight spot right now.

0:14:45.3 AS: Yeah. So speaking of automation and technology, I was just typing as you were speaking, and looking at productivity, it says... I was using ChatGPT and that says, US productivity growth average 2.7 annually from 2000 to 2007, but slowed to 1.4% from 2007 to 2019. There was a brief pickup in 2020, and then it's been slow since then. And they talked about this productivity paradox that I think is what you're referencing what Ben is saying.

0:15:21.3 JS: Solow's paradox? Yeah.

0:15:22.6 AS: Yeah. So that's interesting. Yep.

0:15:25.8 JS: Yeah. Solow's paradox, what does it say, that you can see the impact of technology everywhere except in the productivity numbers. I think that's what he said.

0:15:36.8 AS: Yeah, so he said that...

0:15:37.2 JS: He said that by the way in 1987. So anyway, yeah, maybe we're slow learners or something like that. But no, that's really fascinating. But I think that there's a difference between GDP growth and the growth of productivity in manufacturing. I think probably the ones that Ben Armstrong quoted were a little closer to actual manufacturing. But right now, GDP includes financial intermediation, it includes... If you own a home in North America, they include imputed rent, the rent you would have been paying as part of the GDP. So I think there's a bit of inflation, I guess, in the GDP over the years. So I think we have to take that sometimes with a little bit of a grain of salt and look a little more carefully at what the numbers are telling us.

0:16:32.8 AS: Yeah. The main ways that we typically look at it outside of GDP is like non-farm productivity, like non-farm worker, what's the output? And the other one is total factor of productivity. So yeah, GDP can be quite distorted for sure.

0:16:50.4 JS: Yeah, for sure. And anyway, and also just taking GDP per worker can be a very misleading number.

0:17:00.5 AS: Yeah.

0:17:01.3 JS: But anyway, yeah, it's fascinating. But again, the myth is... This myth that technology will solve everything is all over the place. I think with autonomous vehicles, the idea of being able to replace drivers is a just enormous economic cherry, I guess, that everybody wants to pick. You think about it what that would mean if you could... If you bought a car and then you could rent it out as a taxi at night, or what it would do to Uber if they didn't have to have people driving the cars. It's just enormous. But it's been very, very frustrating to get to that point. And when you look at a lot of the forecasts, it's still a long way away. So I think we have to be more conservative about that and talk about more the benefits really of technology and people working together. And I think the automatic driving features they have on cars now are fantastic. You can make a car a lot safer. You can slow down if you're tailgating somebody, it alerts you of just even the simple things that if there's a car to your left passing on the freeway, you get an alert, and that's... This is all really, really good stuff, but I still think that the self-driving part is maybe longer off than people think.

0:18:39.4 AS: Yeah. I think regulators too get panicked and then people want action when there's an accident or something like that. You also mentioned something about the computing power that's required for some of what this is doing, and that's a fascinating topic because it's funny, it's just amazing how much computing power is really going to be required over the next 10, 20 years.

0:19:05.0 JS: Yeah. I think there's a bell curve around some of this stuff, and I'm just gonna talk and I'm gonna jump to regenerative AI, which everybody is talking about. And they're saying, how long before I can have regenerative AI write a document that we could actually be held liable for? It can write documents, but you can't trust it. So they keep trying to improve it, but it's a kind of an exponential problem here where the wider you make your bell curve, the exponentially more power you need to do that. To the point where Microsoft is talking about buying Three Mile Island nuclear plant and rebuilding it to power all this AI stuff. So it's just phenomenal amount of power. I think that's somewhat... I don't know, relying purely on more computer power seems like it might not be a winning strategy.

0:20:13.3 AS: Yeah. It's the regenerative AI and all that's going on is also... I like to say when proponents talk about it and its strengths, which it definitely has strengths, I'm not arguing against that, I use ChatGPT almost every day. And I can say I used to have an editor sit next to me a lot of times and now I don't need that because I can go back and forth. But what I can say is that when a proponent of AI gets accused of murder and they're innocent and they're gonna go before a judge, is that proponent of AI gonna use purely AI to build their defense or would they prefer to have a lawyer who's using AI as a tool. I think I would argue we're far away from the trust level of being able to walk in there and say, I trust AI to get me out of this situation that I've been accused of murder and I'm innocent and it can get me out. There's no way any of the proponents of AI would take on that I would argue.

0:21:23.3 JS: Yeah. Well, it's interesting. I very recently had to write an affidavit and my lawyer was being a little slow on it, so I tried ChatGPT just for the heck of it and I created what I thought was pretty convincing. I gave it the facts and it gave a pretty convincing sounding affidavit, but then the lawyer did it and I saw what she did and it was so much... She had it... It was almost a human touch to it. It almost looked a little less like an affidavit. It was more of a sort of a document that had some meaning to it. That was an eyeopener for me.

0:22:10.8 AS: Yeah. Yeah. Interesting.

0:22:13.6 JS: But anyway, yeah, I'm wondering if we could jump back to automation and manufacturing because there's a story I wanted to share with you about some of the followers here of Toyota and, of course, company that's strongly dedicated to Deming's principles as well. And this is a company called Parker Hannifin. And what they do, and this is in the Lean tradition, is they're very conservative about adopting robots or any kind of automation. And they realize, when you bring in robots, you're bringing in software, you have to upgrade the software, you have to maintain it, you gotta train people, there's a risk of obsolescence or whatever, there's all that risk. So you really wanna be very, very careful. So what they do at Parker is you have to, but if you're gonna present a business case for a robot, you gotta be able to show that that's the only way that you can get the improvements you want.

0:23:22.3 JS: And by the way, you gotta have a target. You don't just say I wanna automate this, you say I wanna make this process better, here's how. So I got an example from Stephen Moore who's... He's retired now, but he was the VP I think of operations. So he was certainly the top person in terms of all the Lean initiatives that they did. But he told me and gave me an example. He said that somebody came to them, they had a cell with three people and they wanted to use the robot, one, so that they could reduce from three to two because they needed another person in another area. And secondly, there was a safety problem with that cell with loading and unloading the machines. So they came to Stephen and Stephen said, okay, let's divide our team into two groups. One group can sort out, plan the robotic implementation, how it's going to be done. The other group is gonna see if they can achieve the same objectives without a robot. So by the end of the week, the team that was without the robot team was able to achieve both objectives. They were able to reduce it down to two people and they solved the safety problem over the loading. So just by thinking it out by really going deeply into the process, they were able to do everything that people expected the automation to do.

0:24:58.3 JS: So that is a philosophy, I think is a lesson I think to anybody that's automating. 'Cause remember, we've got lots of companies that are just thinking about replacing people, whereas Parker Hannifin is talking about increasing the value of processes. They're concerned about safety here as well as headcount. And very often, they're looking at processes to improve the quality. So we've gotta look with a broader lens.

0:25:29.1 AS: That's fascinating. And for those people that don't know Parker Hannifin, I had mentioned before that was one of my father's big accounts when he was working in DuPont in the old days.

0:25:37.4 JS: Oh yeah.

0:25:38.4 AS: He was living in Cleveland. We were living... I grew up near Cleveland. But Parker Hannifin is about a $77 billion company. It's got a net profit margin of 14% versus the industry average of about 11%, which is already pretty high. And that's pretty impressive. But what's really impressive about Parker Hannifin is that it is the 11th most... If you look at all companies in America and you ask them which has been consecutively producing dividends since 1957, so about 66 years, Parker Hannifin has been producing an annual dividend. And in fact, they've been increasing that dividend ever so slightly every single year for 66 years. That is a very, very impressive feat. And very few companies are out there. In fact, only 10 companies are better than that, that are listed in the stock market. So there's some fun information from a finance guy.

0:26:35.4 JS: Well, of course, and the fact they've... We talked about some of the productivity challenges in the last while and the fact that they've sustained this. We're talking post 2010 when the productivity has been slowing down, and they've clearly kept things going, which is... We've seen that with Toyota and a lot of companies that follow these principles. It's a way of sustainable growth.

0:27:03.3 AS: Yeah. One of the things about Toyota is it's so fascinating is that they're not sold on automation, they're sold on improving processes. And if automation can help that, that's impressive. That do it, but otherwise, fix the process before you automate.

0:27:21.5 JS: Absolutely. And that's again I think this isolation of operations is a sort of a black box of the corporation where people sit in the boardroom and they just say to the operations person, well, that's your problem, solve it. We don't wanna know about it. So they see things outside the box in a sort of a financial lens. I think we talked about that in myth two.

0:27:45.2 AS: Yeah.

0:27:45.8 JS: Whereas the things that go on with process actually defy financial logic. We're improving quality and productivity and timeline very often too, delivery at the same time.

0:28:03.3 AS: Yeah.

0:28:04.2 JS: 'Cause it's a better process. It's simpler, it's better and it's a powerful concept. But I think a lot of people that are not inside process or not inside operations, aren't aware of that.

0:28:17.8 AS: Yeah. So how would you sum up what you want people to take away from this discussion?

0:28:25.3 JS: Okay. Well, I think there are a few, I guess, bullet points I would emphasise. First of all, there's no question that technology has potential to help companies get significant productivity gains. But you shouldn't see it as a technology-only solution, I think again like we were saying, you have to look at it as a way of improving processes and that's where the power of it really is. I think it shouldn't be about replacing people, but it should be combining the strengths of people and the strengths of technology. I think that's where a lot of the high potential is right now. But that means you've got to know how to optimize your process. And that's what Dr. Deming, what the Lean folks all work very hard on. And I kind of think this is a time when companies maybe need to think more seriously about that. And finally, last but not least, I think one of the wonderful things about technology is you can use it to remove the dull, dangerous aspects of work and you can make the jobs more, you know, safer and more human, I guess, more friendly for human workers by using technology. So I think that's a big hope there.

0:29:55.5 AS: Well, that's a great discussion of myth number five, The Myth of Tech Omnipotence. Jacob, on behalf of everyone at the Deming Institute, I wanna thank you again for this discussion. And for listeners, remember to go to deming.org to continue your journey. You can find Jacob's book Productivity Reimagined at jacobstoller.com. This is your host, Andrew Stotz, and I'll leave you with one of my favorite quotes from Dr. Deming and I hope you're living it right now. "People are entitled to joy in work."
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Myth of Sticks and Carrots: Boosting Lean with Deming (Part 5)
21 out· In Their Own Words
Traditional management uses "carrots," like bonuses, and "sticks", like Performance Improvement Plans, to motivate employees. But are humans really built that way? In this episode, Jacob Stoller and Andrew Stotz dive into the myth surrounding that approach and talk about what actually motivates people at work.

TRANSCRIPT

0:00:02.7 Andrew Stotz: My name is Andrew Stotz, and I'll be your host as we dive deeper into the teachings of Dr. W. Edwards Deming. Today, I'm continuing my discussion with Jacob Stoller, Shingo-Prize winning author of The Lean CEO and Productivity Reimagined, which explores applying Lean and Deming management principles at the enterprise level. The topic for today is myth number four, the myth of sticks and carrots. Jacob, take it away.

0:00:46.2 JS: Thank you, Andrew, and great to continue our conversation. Yeah, it is widely believed that people are motivated by threats and rewards. And to demonstrate that, all you have to do is go into an HR department and look at the job descriptions and the reward programs. And it's all assumes that people are motivated by externalities, right? And that goes back, actually, it's a very, very old way of looking at the world, that there's a term, it's a bit of Latin here, homo economicus. And it's the idea that humans are sort of goal seeking creatures. They seek what's better for them, and it's all material. They'll seek their material gain, and they will behave in very predictable ways, according to that. So you can set up external motivators, mainly money, and you can regulate the way people will behave.

0:01:38.2 JS: So that's the assumption that many businesses are built on. But science has proven that that's not the way human humans work. There've been a number... And starting really in the 1950s, a number of scientists have sort of poked serious holes in that thinking. One of them is Edward Deci, who talked about motivation and did a number of experiments to see that, to find out that people, you know, their motive for doing tasks really kind of transcends rewards. Often they'll do something, for the satisfaction of doing it, in spite of the rewards being greater. We have Frederick Herzberg who developed something called Hygiene Theory. And that's really that... He determined in an organization that money can't actually be a positive motivator. It can't motivate positive behavior, but lack of money can motivate negative behavior.

0:02:49.6 JS: So, you know, and a number of experiments to support that. And then we have, Mihaly Csikszentmihalyi, hard to pronounce, who talks about joy at work and really did experiments and kind of proved that joy at work isn't just some kind of fancy idea that somebody had. But it's actually a scientifically proven principle. Whereas when people have joy at work and they're fully engaged in their work, they do much higher quality work. So that's kind of the background really here. So what we want, when we manage, is we want people to be intrinsically motivated so that they do their best work. And Deming principles are very, very, I think representative of that. I think Dr. Deming understood that people are motivated when they feel a part of something, when they contribute, when they feel that their team members around them are supporting them. And so that's what we try to do. And Lean eorld tries to do that, and we try to do that with Deming principles.

0:04:06.8 AS: You know, when I start off my discussion on this with students and people that I teach in seminars and the like, I always ask them, you know, which, do you believe in, a carrot or a stick? Do you think more people are motivated by rewards or punishments? And it's a great...

0:04:18.1 Jacob Stoller: Oh, okay.

0:04:24.1 AS: Way to kick off a conversation. But, you know, obviously we're gonna get some people that say, I want people to be feeling, you know, positive rewards and feel positive. And then you have the other people that... What I invariably find is that people who are running large companies with lots of employees, it's sticks. Yes, because...

0:04:40.4 JS: Interesting.

0:04:41.8 AS: It's overwhelming. And then when I think about where it's easiest to do joy in work, and where it's easiest to get the intrinsic motivation is, you know, smaller companies where everybody's close and they're really working together. And that's a dilemma that I never really have had a great reconciling of, but I'm interested to learn more about it from the direction that you're coming. So continue on. But that's just something I have in my mind when heard you talk about it.

0:05:13.1 JS: It's tough to do with a big company, but I wanna tell you a big company story. And actually I'm gonna read, a page or two of the book just because it's, I don't want to, it's a complicated story and I wanna make sure you get all the...

0:05:32.5 AS: Well, you've it written so well. So might as well do that.

0:05:36.1 JS: Well, like, gosh, let's hope so. Let's hope so. But, anyway, this is actually by coincidence. I just, what appeared, this morning on their podcast, so, of this company called Barry-Wehmiller. So, but the CEO of Barry-Wehmiller is a gentleman named Bob Chapman. And he's become quite well known in the Lean world and outside of the Lean world because as a pioneer of what we could call human-centric leadership. So he believes in treating people in the company like family members. But he didn't start out that way. He started with a very traditional background. He took over his father's business and he had a typical MBA background with accounting. And so he grew that company in a traditional way. You know, it started, as one company, and it started really by acquisition.

0:06:25.5 JS: He got very, very good at finding undervalued companies and developing them. So the company grew and it became a sort of a multinational, diversified manufacturer of various kinds of machinery. And so he was a huge success. I mean, he was written up in Harvard Business Review, all this kind of stuff, but he had a feeling, he was very much a family man too, and he had a feeling that something wasn't quite right in the companies that he was running. And he's a... Bob is a very... He watches people, he's very sensitive about body language. And he told me of a time he was in the cafeteria of a company, and it was sort of basketball season, you know, March Madness. That's when the university teams, you know, have their finals and all that, and everybody's betting on them, you know, it's a big deal.

0:07:21.9 JS: So he remembers being in there, and the people in the cafeteria all just having a great time and watching them chatter. And then, he watched the... When the clock sort of moved, so it's a few minutes to having to go back to work, he said the body language changed, all of a sudden they just weren't that happy. You know, it just, all the joy kind of drained out of them. And then they went off to their jobs. And Bob said, you know, this is wrong. You know, that it shouldn't be this way. And he was a family man. He said, I wouldn't want my children who I care about to be working in this kind of environment. So how can we care for the people and how can we actually make that work? So here's what I'm gonna start to read, because here's where it gets complicated.

0:08:08.6 JS: "Chapman vowed to change how people were led at Barry-Wehmiller. His business background, however, didn't provide any help for this. 'When I was in business school, I was never taught to care,' he said. 'It was about creating economic value. It was all business models, market cap, market share. I don't remember in my undergraduate in accounting or my graduate school ever learning to care or inspire the people I had the privilege to lead. And I never read, never was told, never heard that the way I would run Barry-Wehmiller would impact the way people go home and treat their families and their health. But the biggest thing we've learned is that the way we learn impacts the way people live.' Working with a group of team members from across the organization, he developed a set of principles called the Guiding Principles of Leadership, or GPL, which put caring for people as front and center to the job for all leaders in the company.

0:09:05.2 JS: "But the question remained, how do we organize the work in a way that gives workers the experience of working in a caring environment? It happened that Barry-Wehmiller had recently acquired a Baltimore based manufacturer of corrugated paper machines called MarquipWardUnited the company had implemented a number of Lean tools and practices under the leadership of Jerry Solomon, who was also the author of several books on Lean accounting. In Chapman's first meeting with Solomon, he introduced him to the Guiding Principles of Leadership and Solomon immediately saw a connection with the challenges companies face when trying to create a Lean culture. Most companies practicing Lean, he noted, never get to the culture piece. The same concern that caused the Shingo Institute to revise its model in 2008." And by the way, I have to interject here. That was covered in a previous chapter, how Shingo Institute found that they had left out the people and the caring part.

0:10:14.4 JS: And that had caused a lot of companies that had adopted Shingo principles to actually, and had won Shingo prizes to actually fall off the ladder, so to speak. But that's another story. Anyway, "Solomon," Jerry Solomon, this is the, from MarquipWardUnited "felt that what the company needed was what he called a delivery mechanism to integrate the Guiding Principles of Leadership with the company's day-to-Day operations. How, for example, does a supervisor in the shop floor interact with the people doing the work? Solomon felt that Lean and GPL were an ideal fit. Chapman was skeptical, though, 'cause he'd heard that Lean is purely about reducing waste and increasing profits, but not about leading people ... passed.

0:11:06.2 JS: And the group that was working on it, this company in Green Bay, actually was ready to report on some of their results. So they invited Bob Chapman and Jerry to come, to fly in to see the report. So what they got was a sort of a typical consultant's report. They said, well, we've implemented this thing and we've got, we've shortened the lead time, we've reduced the defects, whatever. And Chapman's reaction was actually different than what you would expect. He was very, very upset. 'Cause he said, this is supposed to be about people and Guiding Principles of Leadership. That's what you told me Lean was about. But here all I hear is a bunch of numbers. So he was quite upset. He left the room, actually. And they sort of calmed him down, and they said, Bob, please give us another chance.

0:12:03.6 JS: And it so happened that, the next morning there was going to be a report out from people that were actually on the team that had made the improvements. So Bob says, okay, I'll give you another chance, but I want the people that were actually working on that project to come and report to the presidents. So, an incredible setup. You know, you can imagine, you have these people 7 o'clock in the morning. Well, that's not hard for you to imagine, with the hours you keep. But anyway, 7 in the morning, you have all the principals, presidents of these companies, and you have, a couple of, people in the team and a guy who's never presented to a group like that, getting up in front of a whole group of CEOs. So he had some notes, and he went through his presentation, which was very sort of, you know, what you would expect.

0:12:54.2 JS: It was, yeah, we've got the, pretty much what the consultants had said the day before, right? Yeah. We cut the lead time. We did this. And, Bob listened patiently. He said he listened for about 10 minutes, and then he says, and he says, I don't know where this came from. He stood up and said, Steve, that's the name of the guy presenting. How did this change your life? And there was a silence. And you imagine, right? All the CEOs and or the presidents. And then, and this guy who has never presented to a group like that. And Steve just sort of blurted out, my wife is talking to me more. And Bob said, help me, Steve. I don't understand. Please, please explain this. And Steve then went ahead and told, what Bob said was one of the most moving stories he'd ever heard, you know, and what Steve said is, well, Bob, you know how it is.

0:13:53.9 JS: You go to work and, you know, you punch in your clock. And then they give you some things to do. They give you a list of things to do, but they don't give you any support or anything, or they don't give you the tools you need, but you sort of figure it out. You know, you get through the day and you get nine out of 10 things, right? But then maybe that 10th thing you'll run into some problem. He said, and immediately what they do, they never thank you for the things you did right. They jump on you for the problem you have, that you confronted. They tell you, you didn't do things right. And then they complain about your salary and how they have to pay overtime and all these kinds of things.

0:14:41.6 JS: And he said, you know, at the end of the day, I wasn't feeling too good about myself. And I'd go home and I think it was rubbing off on me. I wasn't being very nice to my wife and she wasn't talking to me. But he said, now with this program we have, the Guiding Principles of Leadership with Lean, people, I'm part of something. I'm part of a team. We've worked on some things and I can see the results. And when I ask questions, these engineers are answering my questions. And when I say things, they listen to me. And, you know, we've got the satisfaction of this project where we see the flow now really working out in this area. So I go home and I'm feeling better about myself. And I think I'm nicer to my wife and she's talking to me. And at that point, Bob Chapman turned to Jerry Solomon and he said, we have a new metric for Lean's success. It's going to be the reduction of the divorce rate in America.

0:15:41.7 JS: So that's, I think, very, very central. That story to everything we're talking about here with intrinsic motivation. Because it's not about money. It's, you know, you've gotta pay people decently and then they have to be able to support their families. But it's about respect. It's about seeing yourself accomplish things. And this isn't just a frill, this is a basic human need. I think Dr. Deming recognized that. And he has a wonderful diagram in The New Economics where he talks about, he calls it Forces of Destruction. You know that diagram?

0:16:23.1 AS: Yeah.

0:16:27.5 JS: Yeah. It's the... How the school system and then the job environments just basically wear a person down, wear down their will and their enthusiasm. And, you know what, another CEO pointed out to me that, very interestingly, he said, we have a crisis in this country because people don't have purpose in their work. So they go from job to job when they don't like their job. It's, he said, it's like changing an app. Something goes wrong, they change it, but they got no purpose in their work.

0:17:03.3 JS: And this company, I should I call them out, 'cause he, mention his name is Mark Borsari. And it's a company that makes wire brushes in Massachusetts. But they do, you know... He said, you really have to find the purpose in the interactions of people. It's in the people and it's in the processes. You don't get people excited about wire brushes. You get people excited about being part of a work environment where your opinion is respected and where you can make improvements. So, he said, that's what people need in the workplace right now. And he said, the result is that people, you know, we have people just depressed and upset and, you know, it's a crisis that's perhaps underestimated, but really needs to be addressed. So that's why I feel maybe so passionate about this sticks and carrots myth, because I see how destructive it is to human beings. And I've experienced some of that myself in, you know, my early days in corporate life where you're kind of blamed and evaluated for things that often you have no control over. And it's, you know, you look at something like the Red Bead Game. There are people that actually live that.

0:18:31.0 AS: Just to highlight for the listeners and the viewers, the book that Bob Chapman wrote is called Everybody Matters: The Extraordinary Power of Caring for Your People Like Family, very highly rated on Amazon. And it looks like it's also in audible form, which would be a fun one. And you also mentioned about Jerry Solomon, his book, Who's Counting is another one on the topic.

0:18:32.5 AS: But you know, I was thinking about this for a moment. And I was thinking, you know, I was kind of inoculated to this, I was vaccinated against negative thinking by two things that happened to me when I was young. The first one is, you know, I went into rehab as as a young guy with drug addiction. And I came out of that when I was almost 18. And from that point till today, I've been drug free, alcohol free. And so I had to kind of face all the demons that I had, you know, accumulated at that time, but I left it with a really positive outlook on life.

0:19:29.7 AS: Like I wanted happiness.

0:19:29.8 JS: Interesting.

0:19:29.9 AS: I wanted serenity. And then and then I went to work... I went studied, enjoyed that, I went to work for Pepsi, I really enjoyed it. And then I met Dr. Deming when I was, you know, 24. And and he told me, you know, we should have joy in work. And from that moment on, it's like, that's what I wanted in life. And so I never, I never got caught up in this idea when I worked at Big Bank, you know, Citibank and other places, I just never, nobody could ever convince me that, you know, I should be unhappy with what I'm doing.

0:20:05.5 AS: Like, I really, really enjoyed it. And then I was just thinking about how painful it is, if you haven't been inoculated from the beginning, to have to go through this, and then you end up with, you know, it's it's 9 to 5, it's painful work, it's called work for a reason, it's hard, you know. And I think that before I come to the next questions, you know, about the question we always get on the topic of carrots and sticks, what do we do instead?

0:20:30.6 AS: Before I talk about that, I think I really wanna highlight that what's important is getting your thinking right about this. Whether it's the thinking about I wanna treat people like a family, I want people to enjoy work, I want work to be a source of pride, I want people to wanna work here. You know, if you can get those thoughts right, the solutions to the carrots and sticks, and how do we evaluate and all of those questions, you know, can kind of, they wither away to some extent. What are your thoughts on that?

0:21:02.4 JS: Well, I think Jerry Solomon said it very well, actually. He said, you need a delivery mechanism. And Lean provided that, you know, it has a bunch of tools and organizing principles. So does the Deming's System of Profound Knowledge, right, and the various frameworks that Dr. Deming put together. So that provides that kind of framework. It's not easy to do. I think one of the big hurdles, and this is kind of central to my book is that you're dealing with a lot of unlearning. And they say that it's harder to unlearn something than it is to learn new skills. So we really can't afford to underestimate that.

0:21:51.1 JS: And I think when we have managers and leaders facing massive unlearning challenges, I think what's needed is compassion, you know, we shouldn't be putting them down for applying what they learned, we should be understanding about the changes. And I think Dr. Deming, you know, from the stories I've heard was very good about that.

0:22:00.0 AS: Well, he had something he would say, which was kind of one of his methods of compassions, but I remember him saying, how could they know? How could they know, you know, like, they were brought up in this system, as you've just said, and so, but it's based upon the carrot and sticks and all of these different things. But I'm curious, you know, which I think we at some point we'll get to in our discussion is the, there's listeners and viewers out there. It's like, okay, Jacob, totally agree with you. Andrew, totally agree with you. I want people to have joy in work. But you know, I'm constrained by, you know, the performance appraisals that I got to do.

0:23:07.3 AS: I'm constrained by the punishments and rewards that my company does. And or a leader of a company says, if I let these things go, we're gonna fall apart. How do you respond to that?

0:23:11.6 JS: Well, gosh, I mean, I think you have to just look at the case studies of people that have let that go. And that's why I emphasize I one of the points I emphasize in the book with advice for companies moving forward is a very first step before you do anything is go visit companies that have been successful. You know, go visit Bama Foods, where they have a great culture. Go watch how people interact with people. Go to some of the great Lean companies. All these companies understand that the best gift they can give their employees is to allow them to share what they've learned with other people. It's a great motivator for people. So it's a real win win. So I think it begins with that you've got to see it first. And then you can start to assess where you stand.

0:24:13.6 JS: But we're talking about a transformation here, as Dr. Deming said. We're not talking about implementing a few tricks that we can superimpose on our management system. You've got to manage it completely differently to actually get this kind of intrinsic motivation to be a driving force in your workplace.

0:24:19.2 AS: It just made me think that I wanna come up with the five happiest companies in Bangkok and do a tour and take my students out and my teams out and my company managers out and let's go, you know, see how they're turning on intrinsic motivation, you know. And one thing about Thailand that's interesting is that what people want from work is very different than in the West.

0:24:50.1 JS: Right.

0:24:51.2 AS: And what people want from work is good relationships, harmony.

0:24:57.6 JS: Really.

0:24:57.8 AS: They want connection. They want meaning, more meaning from their work than the typical Western.

0:25:05.8 JS: Isn't that interesting? Interesting.

0:25:05.9 AS: And so when I see and I rail sometimes on to my students about, you know, be very careful about bringing this KPI disease into Thailand, where all of a sudden, you're setting up the Thai people to go against each other, which takes away from what is a core strength is their desire and ability to get along.

0:25:33.3 JS: Isn't that interesting? Wow, so they got a head start.

0:25:42.5 AS: Yeah. My first move to Thailand in 1992, I taught an MBA class. And the first thing I did is what was done with me in my MBA class is say, all right, here's a case study, break into groups, and then, you know, and then they came back and, and then after getting to know them in my first semester that I taught, now I've been teaching for 32 years in Thailand. The first lesson I learned is Thais do not need group work. They need individual work. And because they need to kind of flex that muscle.

0:26:08.8 AS: And then I thought, well, why are we do so much group work in America? Well, because it's Americans are trained and taught from the beginning to think independently, have their own idea, watch out for themselves. And they need help in, let's say, MBA classes to work together.

0:26:26.8 JS: Isn't that interesting?

0:26:26.9 AS: And so what I just saw was a very different dynamic.

0:26:30.3 JS: Wow.

0:26:30.9 AS: And it helped me also to understand that we... The good side of the American, let's say, I know, American worker, I know Americans, just 'cause that's where I grew up. But the good side of that is that there is a lot of independent thinking, they can come up with the good systems and all of that.

0:26:47.3 JS: Sure.

0:26:48.9 AS: But the bad side is that they're oftentimes fired up to be in competition with each other. And KPIs just ignite that fire that just...

0:26:58.2 JS: They do.

0:26:58.3 AS: Really causes, you know, a lot of damage.

0:27:00.5 JS: Well, I got to ask you something, then, do you think that that East versus West kind of mindset is why Dr. Deming's ideas were taken up in Japan when they had been kind of ignored in the US?

0:27:16.9 AS: Yeah, I mean, I definitely I mean, Japan is like an extreme example of Asia and trying to have harmony and everybody, the bigger mission is the company, the bigger mission is the community, the bigger mission is the country. I would say that Japan is like the ultimate in that. Thailand is less so there's more independence and people don't have to be completely allegiant to those things. But still, that desire to be happy at work is there, you know, I think it's there more, it's more innate, for some reason in Thailand, than I saw it in America.

0:27:55.8 AS: And I always explain that, when I worked in America, I think I never went out on a weekend with my colleagues.

0:28:04.5 JS: Really. Interesting.

0:28:05.3 AS: And in Thailand is a very common thing to arrange activities together with your workmates, and go bowling and do this and do that. And I thought, I saw that everywhere. And I was pretty, you know, that just was fascinating to me. So I really, you know, this discussion is all about opening up people's minds, that carrots and sticks are not the only way. And as you said, it's a transformation, it takes time, you got to think about it, you got to reconcile it.

0:28:37.8 JS: Well, and that brings up another really important point, Andrew. And that is that teamwork, team productivity really makes the difference in a company. And when you think about it, you've got a whole bunch of individuals that productivity is very often not gonna add up for reasons, you know, that we've already talked about, you know, it's not part of the system. So team productivity becomes really, really essential. But team productivity, and Kelly Allen actually pointed this out really well to me. And I mean, I'm gonna just look in my notes here to get his words exactly, 'cause he said it so well.

0:29:21.0 JS: Let's see here. And here's Kelly, "a useful operational definition of a team is the collaborative and coordinated efforts of people working together in an atmosphere of voluntary trust." So you got to build that. And, you know, that's kind of tough to do in a lot of North American companies.

0:29:48.5 AS: Yeah. It's such a great point. And I think I've recently been teaching a corporate strategy. And I talk about Michael Porter and all the he's taught about strategy. But one of the things that he mentions towards the end of his books is the idea of fit. And he's talking about how do the pieces fit together in the company. And everybody knows that feeling when the when the process before you or the process after you in your company is being run by somebody that you have a good fit with. It's like everything comes together. And so I think what I realize now is that the power of that coordination that Kelly Allen's talking about is all about how do we get these pieces fit together, working together, coordinating together. That's the magic.

0:30:37.3 AS: Interesting. But Porter, I mean, he talked about a lot of I think, you know, it's been a long time since I've looked at his books, but a lot of his stuff was either or, right? I mean, you know, you decide, am I gonna be a price leader or am I gonna be a quality leader? And I think a lot of what he did disregarded, you know, Deming's Chain Reaction, you know, where he where you actually invest in both. So I mean, that's got a problem and with strategy people in general. Now, I know you've taught strategy. So maybe you're gonna take me apart on this one. But it seems to me that the strategy folks are really missing something.

0:31:29.1 AS: Well, I think most people are missing the type of stuff that Dr. Deming's talking about, but I use an example of McDonald's and Starbucks.

0:31:35.5 JS: Okay.

0:31:37.3 AS: You know, one is a low cost leader. And one is a premium, you know, differentiated, you know, product and service. And we all know which one's which. So which one leads to a sustainable competitive advantage? Which one is better? I always talk to my students. And I say, the fact is, is that both of them have led to a competitive advantage. So part of what, you know, I would say, when I think about corporate strategy, from my perspective, is figure out the direction that fits your DNA, and then pursue that, whether that's about making, you know, I like to tell my students that think of a company run by an engineer, who may be focused on the processes and all that, who may create a very efficient operation, versus a business, let's say run by a marketing or sales person who has a much better contacting and messaging to the customer. Those two business owners should be developing their corporate strategy around their DNA, you know, and if they do that right, that, in theory, should lead to some competitive advantage.

0:31:58.9 AS: And to me, competitive advantage is how do we make sure that our company creates a level of profitability that is higher than the industry average over a sustained period of time. If we think we're doing a corporate strategy that works, and we're making a very low amount of profitability, I think that there's enough reason to argue that that's probably not achieving a competitive advantage.

0:32:37.1 JS: Yeah. And I think we have to put the word sustainable competitive advantage. But along the McDonald's, Starbucks, though, I have a very interesting twist. And I think this was done locally in Canada. But somebody did a blind test of coffees from various outlets to see what rated the highest. And I have to tell you that McDonald's coffee rated very high, higher than Starbucks. So...

0:33:47.1 AS: But it's definitely the case in Bangkok that McDonald's coffee is fantastic.

0:33:50.8 JS: Really.

0:33:51.8 AS: I happen to know very much about that. But I highly recommend that.

0:33:55.7 JS: Yeah. Well, I think we're, you know, we are focusing in this book, essentially on, you know, productivity. Now, marketing, marketing strategy and stuff like that is yeah, I'll acknowledge that. Sure. And that's maybe, you know, I think what Michael Porter was talking about it's very true in terms of marketing. But in terms of quality, output of quality, I think that's where the Deming magic and the Lean magic all come into play.

0:34:12.2 AS: Yeah, I mean, it took me a long time to figure out that what Dr. Deming saying is, if we are continually improving our products and service and our quality, we're driving down costs, and we're making people happier, and we're bringing more value to the market. How... Shall we wrap this up? And how would you summarize what you want people to take away from this?

0:34:26.1 JS: I would say that intrinsic motivation is underestimated in workplaces, it's misunderstood. It's not reflected in the way most companies are organized or their strategies. So it's a big learning curve for companies to create the kind of environment where intrinsic motivation is connected with the workplace. But I think it's worthwhile, it's a very, very important thing. And we have a lot of unhappiness in society. And a lot of it can be traced to a lack of that. So, you know, I hope that more companies will see the importance of this.

0:35:16.6 AS: You know, it's my, my friend who never... He was helping me when I was writing my book, Transform your Business with Dr. Deming's 14 points.

0:36:02.2 JS: That's a great book.

0:36:02.7 AS: And he was editing a book.

0:36:02.8 JS: I love that book, by the way.

0:36:04.3 AS: Thank you. I was trying to make it as simple as possible for the 14 points. But my friend, as he was helping me edit it, he turned to me after many hours of working together over many weeks, he said to me, I figured it out. Dr. Deming is a humanist, he cares about people. And that was just so funny, because he thought going into it, it's all gonna be about, you know, charts and graphs and statistics. And I think that's, you know, that's the key, it's the mindset. I wanna wrap up by by just going through some of Dr. Deming's 14 points that apply to what we're talking about. And, you know...

0:36:39.2 JS: Great.

0:36:39.6 AS: The question really is, you know, when my friend said that Dr. Deming was a humanist, it's 'cause as he started working on the 14 points with me, he started to realize, just listen to these points. Here's point number eight, drive out fear. Yeah, that's critical to having a joyful workplace. Number nine, break down barriers between department. That's the source of so much trouble for people at work is that they're working in silos. Number 10, eliminate slogans and targets and exhortations. Stop focusing on pushing the workers constantly. Figure out how to improve the system.

0:37:10.2 AS: Number 11, eliminate work standards or quotas, eliminate management by objective, management by numbers, substitute leadership. And number 12, remove barriers that rob the hourly worker of the right to pride of workmanship. Remove barriers that rob people in management and engineering of their right of pride of workmanship. My goodness, from eight, nine, 10, 11, 12, all focused on this concept of intrinsic motivation. And to me, that thinking, changing that thinking is what's so critical. Anything you would add as we wrap up?

0:37:25.0 JS: Yeah, I will add one thing to that. And this is very strongly in the book. That is why the first step if you're gonna transform your company is making everybody feel safe. That's got to be the first step, even before you start training them with methods and things like that. You have to build safety, then you can build trust.

0:37:47.2 AS: Fantastic. Well, Jacob, on behalf of everyone at the Deming Institute, I wanna thank you again for this discussion. And for listeners, remember to go to deming.org to continue your journey. So much happening there. You can find Jacob's book, Productivity Reimagined at jacobstoller.com. And this is your host, Andrew Stotz. And I'll leave you with one of my favorite quotes from Dr. Deming that I just never stop talking about. And today we talked about it a lot. And that is, "People are entitled to joy in work."
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Top-Down Knowledge Myth: Boosting Lean with Deming (Part 4)
14 out· In Their Own Words
In this episode, Jacob Stoller and Andrew Stotz discuss the myth that managers need to know everything in order to manage. What happens when you ask non-managers for feedback?

TRANSCRIPT

0:00:02.2 Andrew Stotz: My name is Andrew Stotz, and I'll be your host as we continue our journey into the teachings of Dr. W Edwards Deming. Today I'm continuing my discussion with Jacob Stoller, a Shingo-Prize-winning author of The Lean CEO and also Productivity Reimagined, which explores how to apply the Lean and Deming management style at the enterprise level. The topic for today is Myth Three: The Top-down Knowledge Myth. Jacob, take it away.

0:00:31.2 Jacob Stoller: Okay. Great to be here again, Andrew. And, yeah, the myth we're gonna talk about is this notion that managers can make their workers and their people more productive by telling them exactly what to do. And that's surprisingly prevalent in the workplace. But I wanna start out by just saying how this relates to the other myths that we were talking about, 'cause we started with this, what Dr. Deming calls the "pyramid," the org-structure type or...

0:01:08.9 AS: Organizational chart.

0:01:09.9 JS: Paradigm idea, yeah, the organizational structure that says that everything is a independent component, right? You got your different departments, they all work independently, we optimize each, and we optimize the whole, right? So, from that, it naturally follows. And we did Myth Number Two that we can follow financial logic, 'cause financial logic fits nicely into that structure. And of course, we saw last time that all the shortcomings and problems you get when you follow that kind of thinking. So, the third myth is we get to top-down knowledge. And again, that follows from the pyramid structure. If it were true that interdependent components weren't interdependent, that everything could act independently, it would certainly follow that you could have knowledge about those components taught in school and that it would all make sense. I think it's the interdependence that really shoots that whole thing down of top-down knowledge. So... Sorry. Yeah.

0:02:16.3 AS: Go ahead.

0:02:18.8 JS: I wanted to start with a bit of a story just to illustrate how prevalent this is. I was doing a workshop with a small excavation company, and we were looking at ways to make them more effective and serve more customers, grow more effectively, and stuff like that. I did an exercise with them, and we looked at where maybe the waste was taking place the most. And they were driving trucks around a lot. This was a rural area, so there was a lot of mileage that was perhaps being wasted. So, we did an exercise with tracking value and non-value mileage. If you're going to a customer, that's adding value. But if you take a detour to have lunch or something, well, that doesn't add value to the customer, right?

0:03:08.8 JS: So, we were exploring those things, and that exercise worked out really well. They made some big changes, and it actually really helped the company grow. They started posting little notes in the trucks talking about, "Remember, value versus non-value." They were tracking it. And it was really interesting. But the success was largely due to one participant. And I'm sure you've seen this, Andrew, in workshops where somebody really seems to get it. And he had all these ideas, a very, very thoughtful guy, and we were just writing down his suggestions. He had a lot to do with that. But after the workshop, I sat down with him when we were chatting, and he told me that he'd been in the construction business for 15 years, and nobody had ever asked him for his opinion about how work was done. Never.

0:04:04.7 AS: Incredible.

0:04:07.1 JS: I was just stunned by that. This guy was so good. [laughter] When you think about that, it's pretty typical. And I think it's really, people are, managers are taught that it's their job to tell people what to do. And often that puts them in a tough spot. Often they have to be in a role where maybe that they're not that comfortable, because maybe they know deep down inside that there's a lot of knowledge out there that they're not aware of.

0:04:41.3 AS: Yeah, it's interesting. It reminds me when I was a first time supervisor at Pepsi, and I worked in the Torrance factory in Los Angeles, in Torrance, California, and then I worked in the Buena Park factory. And at Buena Park, I was given control of the warehouse. In both cases, I was a warehouse supervisor.

0:05:02.9 JS: Right.

0:05:03.1 AS: And I remember I worked with the union workers who were all moving the product all day long. And I just constantly focused on improvement and that type of thing, and talking to them, and trying to figure out how can we do this better, faster, cheaper and with less injury and all of that. And when I left, it was two years, it was maybe a year and a half that I was at that facility. And one of the guys that had been there, he said... He came up to me, he said, "25 years I've been here, and nobody really listened to us the way you did."

0:05:41.0 JS: Oh, wow. Well, that's a hint.

0:05:41.8 AS: And it just made me realize, "How can it be?" Now, I know Pepsi was taking first-time graduates out of school and putting them in this job, and... I don't know. But I just was... I was baffled by that. So, at first blush you would think you'd never hear that. People are always talking, but people aren't always talking. That's not that common.

0:06:03.1 JS: Yeah, for sure. And it's so really deeply entrenched in the system that it's very, very hard to break. One of them, I talked to a couple of companies that actually went through transformations, and this was with Lean, where they transformed their managers as a lot of Lean companies do. And I know Deming companies do this as well, where they changed their role from being someone that tells people what to do, to somebody who actually is a coach and an enabler, and draws people out and uses their knowledge and encourages them to solve their own problems, whether it's PDSA or whatever methods they support. And both of these companies lost half their management team through that transition. But both of the leaders admitted, they were honest enough to admit, that the reason why they lost the managed, they blamed themselves. They said, "It's 'cause we as the top leaders didn't prepare those people for the change." So, that was interesting as well.

0:07:17.6 AS: I want to go back and just revisit... Myth Number One was the myth of segmented success. The idea that, "Hey, we can get the most out of this if we segment everybody and have everybody do the best they can in each of those areas." Dr. Deming often said that we're destroyed by best efforts. And part of that's one of the things he was saying was that it doesn't work. Segmented success doesn't maximize or optimize the output for a system. The second one was the myth of the bottom line, and that was the idea that just measuring financial numbers doesn't tell you about productivity, and just measuring financial numbers doesn't give you success. And then the third one was, that we're talking about now, is the Myth Number Three, is top-down knowledge myth. And so, I'm curious. Tell us a little bit more about what you mean by "top-down knowledge myth."

0:08:17.7 JS: Essentially it's knowledge from outside the workplace being... How do I wanna say it?

0:08:26.0 AS: Pushed down. [laughter]

0:08:28.0 JS: Pushed down, imported, or imported into the workplace, imposed into the workplace. It's really that idea that something from outside can be valid. And it certainly can, to a degree. You can have instructions on how to operate a machine. You can have all kinds of instructions that are determined from outside, but there's a limit to that kind of knowledge. And when you really wanna improve quality, it really does take a lot more input. But I think there are many... This is one of the myths I think that there are very many different sides to. And one of the sides is that what I call the... It's related to variation, but it's really what I call the "granularity problem." And it's the fact that problems are not these nice, big omnibus types of items that a manager can solve. They tend to be hundreds of problems, or thousands.

0:09:37.0 JS: And so, when you've seen transformations, for example, in hospitals, I think that's an environment we can all understand, again, it's because of many, many different improvements that they become better. One example that I was given is, let's suppose you have a medication error problem. That's really, really common in hospitals now, right? But medication error is, it's not one thing. It could be because of the label, labeling on the bottles. It could be the lighting when people are reading the medications. It could be the way they're arranged on trays. It could be the way they're stored. It could be in the supply chains. The really successful healthcare transformations have been by getting thousands of improvements. And I mean literally thousands of improvements from employees who live with those processes every day. Managers can never [chuckle] know all these hundreds and thousands of things, especially, they can't be everywhere. So, really, the answer is that you do need an army of problem solvers to really get the kind of excellence that we want.

0:10:56.0 AS: Dr. Deming had a quote that he said which was, "A system cannot understand itself." And he's talking about, you got to understand... Sometimes it takes someone from outside looking at the system. And that's different from what you're talking about, which is the idea of someone at the top of the organization saying, "I know how to do this, here's what you guys got to do, and here's how you solve it," without really working with the workers and helping understand what's really going on. And I think what you're saying in this too is the idea that people who are empowered at the work level to try to figure out what's the best way to organize this with some support from above, that's management in that sense is a supporting function to give them ideas. If there's a person that understands quality or Lean, or they understand Deming's teachings, then that outside person can also give that team resources and ideas that they may not typically have. But the idea that a senior executive could be sitting up at the top of the company and then being able to look down and say, "Here's how to do each of these areas," is just impractical.

0:12:12.3 JS: Oh, yeah. And I think Dr. Deming was... He was giving managers, I think, a very challenging task to understand systems and to know, 'cause you're responsible for the system if you're management. So, you really have to know when you have to be constantly getting feedback from people who are working in the system and trying to improve their work within the system. So, yeah, it's got to be a definite give and take. And in Lean, they call that "catchball," where there's a constant back and forth between the managers and the workers in terms of the problems they're having and what needs to be done to help them. So, yeah, it's very tuned in to each other.

0:12:55.0 AS: Yeah, and I would say, from my experience in most companies, management's not really trying to help them. Each unit's fending for itself and trying to figure it out, and they're not really getting that much support from management. And so, the idea being that with the proper support and encouragement to learn and improve, the teams that we have in our businesses can achieve amazing things. And this goes back to also to the concept of intrinsic motivation versus extrinsic. And I think what Dr. Deming, what was appealing to me about Dr. Deming when I first started learning about it, was he was talking about "unleash the intrinsic motivation of people, and you will unleash something that is just amazing." And the desire to improve is going to be far better than... And that's why sometimes he would just say, "Throw out your appraisal system," or "Throw out these things, get rid of them," because what you'll find is you're gonna unleash the passions and desires and the intrinsic motivations. And so, that's another thing I'm thinking about when I'm hearing Myth Three: The Top-down Knowledge Myth. It just, it doesn't unleash that intrinsic motivation.

0:14:16.8 JS: Well, it's interesting, this thing was really studied by the Shingo Institute, where they, they, about, as I think you may know, they give out something called the "Shingo Prize for Excellence in Manufacturing." They also give prizes for books too, which I was fortunate to receive. But they had for years been giving the Shingo Prize to excellent manufacturers leading up to 2007 or so. But they found out that most of the people that had got the Shingo Prize had essentially fallen off the ladder. So, they did a very detailed study, interviewed all kinds of organizations: Ones that had fallen off the ladders, so to speak, and ones that had actually maintained the kind of excellence that they had won their prize for.

0:15:20.5 JS: And they found that the ones that had fallen off the ladder had a top-down engineered approach, whereas the ones that had been successful were much more respectful of their people and getting a lot more feedback from the people, the sort of the respect-for-people-type idea that Toyota has. So, really, what they were saying is that the top-down approach, you might be able to fix up your factory and get really good ratings for a while and you have great processes, but in the long run it's not sustainable. So, they changed their criteria so that now, to get a Shingo Prize in manufacturing, you really have to show culture; you have to show how you're listening to your people, the whole thing. So, it's very different now.

0:16:12.0 AS: Yeah. And it's interesting, we have a company in Thailand that the company and its subsidiaries won the Japanese Deming Prize. And there was 11 companies total in this group that won the prize at different years as they implemented throughout the whole organization. And then a couple years later, the CEO resigned. He retired; he reached the end of his time. And the new CEO came in. He wasn't so turned on by the teachings of Dr. Deming, and he saw a new way of doing things. And so, he basically dumped all that.

0:16:57.0 JS: Oh, really?

0:16:57.8 AS: And it's tragic. It's a tragic story. And the lesson that I learned from that is, one of the strengths of a family business is the ability to try to build that constitution or that commitment to "What do we stand for?" Whereas in a publicly listed business where you're getting turnover of CEOs every four, six years, or whatever, in just the case of Starbucks recently, we just saw turnover happen very, very quickly. And the new CEO could go a completely different direction. And so, when I talk to people about Deming's teachings, I say that family businesses have a competitive advantage in implementing it. And I think Toyota is the ultimate family business in Asia, right?

0:17:50.9 JS: Yeah. Yeah. Yeah, yeah, pride in the family name, and that's... Yeah, and a lot of the interviews I did were businesses like that, where there was a desire to do more than make money, to have a purpose, sustain the family name and that kind of thing. So, yeah, for sure.

0:18:10.0 AS: So, let's wrap this up with you giving us a final recap of what we need to be thinking about when it comes to the Myth Number Three: The Top-down Knowledge Myth.

0:18:24.0 JS: Okay. Well, I think essentially people need to understand that there are limits to what a manager can actually know. And I think the healthcare example, this illustrates that very well. I think they also need to understand that what you ultimately want if you wanna maximize productivity is team productivity. It's the productivity of the group. And people are motivated. You were talking about intrinsic motivation. Part of that comes from actually working together as a team. So, you need to create the kind of trust where information flows freely, and where somebody doesn't hoard their own knowledge but is willing to share it with others, because they don't feel they're in competition with each other. So, again, that's related to driving out fear. So, everything's really interrelated. But I think we have to accept knowledge as something part of a shared collaborative work environment, where everybody wins if knowledge flows freely. And people have to be willing to admit that what they've learned in the past, what they've learned in school has limits in how it can be applicable. And those limits have to be respected. And you have to be willing to listen to every employee, not just the ones that have degrees.

0:20:00.8 AS: All right. Well, that's a great recap. And, Jacob, on behalf of everyone at the Deming Institute, I wanna thank you again for this discussion. And for listeners, remember to go to deming.org to continue your journey. And you can find Jacob's book, Productivity Reimagined at jacobstoller.com. This is your host, Andrew Stotz, and I'll leave you with one of my favorite quotes from Dr. Deming: "People are entitled to joy in work."
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Category and Continuum Thinking: Misunderstanding Quality (Part 6)
3 out· In Their Own Words
Is quality simply a matter of two categories: good and bad? But then how do you get to "better"? In this episode, Bill Bellows and Andrew Stotz discuss categories and continuum thinking.

TRANSCRIPT

0:00:02.4 Andrew Stotz: My name is Andrew Stotz and I'll be your host as we dive deeper into the teachings of Dr. W Edwards Deming. Today I'm continuing my discussion with Bill Bellows who has spent 31 years helping people apply Dr. Deming's ideas to become aware of how their thinking is holding them back from their biggest opportunities. And today is episode six, Category Thinking and Continuum Thinking. Bill, take it away.

0:00:27.9 Bill Bellows: Welcome Andrew great to see you again. All right, so in podcast five, I went back and it was just posted by The Deming Institute. And I just wanna clarify again on the topic of acceptability and desirability. Where we're going tonight is looking at acceptability and desirability in a little bit more detail, a little bit differently, but those are still the prevailing themes. And again, I just wanna reinforce that none of this is to imply that desirability is better than acceptability. What's important is to be aware of when I'm using acceptability thinking. And when I'm using desirability thinking and use the one that makes the most sense in that situation. We were talking earlier about companies whose products we enjoy using and we're loyal to them. And I mentioned that my wife and I have developed a loyalty to Toyota products.

0:01:40.4 BB: Going back to 1989 was our first Toyota product. And I knew I wanted a pickup truck. 'Cause I was borrowing a pickup truck from a number of friends and I thought, I really like a pickup truck. There's a lot you can do with a pickup truck. So, I knew I wanted a pickup truck. And I knew from having worked in my father's gas station, I had reason to believe I wanted a Japanese pickup truck and not an American pickup truck. So, I then it was a question of is it a Mazda, Toyota.

0:02:11.1 AS: Nissan.

0:02:13.2 BB: Sorry Nissan. And I looked at all of them and yeah I just all I knew is I was gonna be one of those. And I think the major reason I went with... My wife and I went with a Toyota... I don't think the prices were that different. But it just had a, it was the styling was a little bit better. But I did not... That's why I bought it.

0:02:46.5 AS: The loyalty wasn't built yet.

0:02:49.0 BB: No I knew to stay away... I knew I had seen plenty of examples of... Well, I had traded in my first car that my father, my parents got me when I was in college was a 1975 Chevy Nova. Four door Chevy Nova. And the reason four doors is important is a... If it was a two door, the door would be longer. But it was a four door. By the time I gave that car to a friend, the engine was running beautifully but the body was falling apart. And, so, by the time I sold it to get the pickup truck, in order to get out of it, I'd have to throw my shoulder into the driver's door. Why? Because the door droop was so great that when you close the door, I mean the door drooped and this is not a four door, this is a two door. So, imagine if it was a two door the door would be even heavier. So, on a four door, the door drooped. And, so, when you closed it, you'd had to lift it and then close it in order to get out you had to... Oh, it's just my wife couldn't drive. It was just a nuisance.

0:04:17.6 AS: And, that in '75 was just about when the Japanese were really starting to go after the US car makers. And but I want to tell you just a quick one. I can't remember if I've told you, but I used to have a 1963 Lincoln Continental here in beautiful Bangkok. And I owned it for 10 years. And then eventually I sold it. But what a beautiful car. And people always ask me the same thing and they said, isn't it hard to take care of? And I said, you gotta remember back in those days, cars were simple.

0:04:49.1 BB: Yeah, yeah. So, the... So, with... So, the experience of 14 years or so, with the '75 Chevy Nova. And the door was like the straw that broke the camel's back. It just done with this, all right. So, we're gonna buy Japanese, bought a Toyota. That was the first one. And I think I've mentioned in the first podcast I mentioned that we had a 1998 Toyota Sienna, which is their first, it was their Toyota third attempt at a minivan. The first one I think was underpowered, the second one... And we knew we wanted a minivan. It was time, the kids were getting a little bit bigger. It was time for minivan. And just as we were ready to go buy it, they had a... I think a competitor came out with dual sliding doors. Dual sliding doors. And, so, instead of Toyota coming out with a one sliding door, they stepped back. I think Chrysler came out with two sliding doors. And they figured we can't come to market with one sliding door. They've got two sliding doors. So, then we waited another year and they finally came out and given all of our delight with the Toyota pickup truck, boom, that's what we wanted. And then the transmission failed, six months later with 10,000 miles in the car.

0:06:18.5 BB: And I have a photo of that. Not only did the transmission fail at 10,000 miles, but it failed on Christmas morning on our way to see friends about an hour away. And this guy, people were going to see, he knew I loved Toyota. And when he drove to pick us up, we transferred everything from that to his Ford F-150. He says to me... So, then we had to have the car towed on a flatbed to his house and the next day to the dealership, what a nuisance headache. But when he showed up, he looks at me knowing that I like Toyota. And he says, how's this data point change your theory about Toyota?

0:07:06.5 AS: I thought he was gonna say, if it was me, I would've said pop in the back.

0:07:12.6 BB: And I was like, yeah, that really hurts. Well when I shared that story with students at Northwestern's Business School, the Kellogg Business School, their advice and these are students that had worked in all different industries from Coke to banking, and a number of 'em have worked in the auto industry. And their advice was, I said, Professor Bellows never buy anyone's first model year, even Toyota. Now I have a friend who he and his wife bought the same model year Toyota Sienna. They did not have a problem. Oe did. When I met at a Deming conference, a guy who worked in Georgetown, Kentucky which is where the Sienna was made. And, so, I met him at a conference and when he said he worked for Toyota, I said, oh, my wife and I buy nothing but Toyotas. He says, oh. And I said, we have a first model...

0:08:08.6 BB: Year Sienna. And everything was good. And then I'm thinking, I'm gonna ask the guy a question. And I looked straight in his eyes. We were pretty close together. And I'm about to ask him a question. I'm looking straight in his eyes and I said, we got a Toyota Sienna. He says, how do you like it? And I looked right at him and I said, the transmission failed at 10,000 miles. And he rolled his eyes. And I said, so, you know about this. It wasn't a look of shock. It was, yeah, all right. So, I said, all right, all right. Your expression just told me that you know something about this. I said, what's up? He says, we tried. This is so cool. He says, we tried to save a few pennies on a bearing.

0:09:00.8 BB: I said, you did but what you did cost me more than you saved. So, yeah you guys saved a few pennies on a bearing and cost my wife weeks of aggravation to have it towed from where it happened to the place we were going because it Christmas Day, it broke. Everything's shut down on Christmas days. You can't have it right? And, so, we had it towed, had to get a rental car. Then they're complaining about, we had... Who authorized this rental car? We only pay... It was just headache after headache. But we still buy Toyota Andrew. We still buy Toyota. Why? Because I'm afraid to buy from anybody else. Well, part of the reason I wanted to share that with our audience is I buy Toyota products based on value. And I believe that the best value we get in transportation, personal transportation is the money we spend buying a Toyota most often brand new. We've also bought some used, got great use out of them, never had a problem, anything like what I just shared with you. And that's having owned five or six different Toyotas. I mean, right now in our family we have three of them.

0:10:16.7 AS: I think I need to correct you.

0:10:19.1 BB: Go ahead.

0:10:19.9 AS: You buy Toyotas on value and values.

0:10:25.7 BB: Yes!

0:10:28.2 AS: You're aligned with their values and therefore you're willing to look beyond the mistakes and problems that it comes with every product, every service, every company, because you're aligned with their values.

0:10:42.2 BB: Well, what's funny is when we bought the Sienna and we're talking with 'em, doing the driving and signed agree to buy it, that's the color we want. We want these seats, blah, blah, blah. And then you go talk to the closer and the closer's a guy, the gal at the dealership that wants to add on the undercoating and the this and the this and the this and the this. And he wanted to sell us at a premium price, this extended warranty and I dunno what it costs, but I said, I've done a whole lot of research. And he says to me it's so funny. He says, when these things break down, a circuit board breaks and that'll cost you this and this and this, and, so, I'm gonna sign you up for the insurance policy, the extra coverage. And I said, no, and he is going on and on. And I said, look it, I've done a lot of research into how they're made and I said, and the values of that organization. So, I said, the reason we buy Toyota is that I have an understanding, a pretty damn good understanding of how they manage the product, the pieces and how it all comes together. And he's pushing back at me. Finally, I said, I teach university courses on how Toyota operates and their quality system.

0:12:14.8 BB: So, we didn't get the extra coverage. Now it was still covered under warranty, so, it was kind of laughable that. But anyways, the reason I bring that up is that...

0:12:27.3 AS: Before you do that, I want to just say for the listeners and viewers out there, what is the messaging from a corporate strategy perspective? And that is have values that you stand for. Communicate those to the market, stay loyal to them and the customers who align with those values will stick with you through the hard times that you're gonna definitely have. There's a quote by Alexander Hamilton says, "those who stand for nothing, fall for everything." If you do not stand for a clear set of values that the market can perceive, then people are gonna fall away from you as soon as times get tough.

0:13:07.2 BB: Oh yeah. And I...I, I. It's about that and that's why I've read lots about Toyota. How they operate written by people outside of Toyota trying to explain it, people inside of Toyota and their explanations. But part of the reason I bring this up is my fascination, my interest in Dr. Deming's philosophy, is a great deal to do with his system is based on an incredible appreciation of the difference between acceptability and desirability. All other quality management systems, whether it's the quality management within Lean is acceptability based, good parts and bad parts, Operational Excellence, Six Sigma Quality. In fact, there's a quote at the end of chapter 10 in "The New Economics". And chapter 10 was the original last chapter until the third edition came out. In which case there's chapter 11 written in large part by Kelly Allen, a good friend.

0:14:15.1 BB: And when chapter 10 was the end I thought it was pretty cool that at the very end of chapter 10. The last few pages of chapter 10 of “The New Economics” are about Dr. Taguchi's loss function. And this is what turned me on to Dr. Taguchi, was finding “The New Economics" in a brick and mortar bookstore. I knew from ASQ Quality Progress that this was coming out. So, I remember when it came out, this was before Amazon, going to the bookstore. Going through it and saying what does this guy think about Taguchi? Because Taguchi was my, the one I really idolized. And I opened it up and I turned to chapter 10 and it's all about the loss function, the problem and I thought this is way cool. So, the closing quote... The closing... The last sentence in chapter 10 which again was the original last chapter until third edition came out, is the following "Conformance to specifications," that's acceptability, "zero defects," that's acceptability. "Six Sigma quality," which is acceptability "and all other specification-based nostrums all miss the point, ,stated by Donald J. Wheeler."

0:15:42.6 BB: So, then I looked up, but what is a nostrum? And Dr. Deming not Dr. Deming a nostrum is defined as “quack medicine.” So, "Conformance to specifications, zero defect, Six Sigma quality, and all other specification-based nostrums all miss the point." And, so, I wrote an article about this, gosh, 20 years ago. I said, what's the point? And my explanation, the point is, all of them are about managing parts in isolation. Looking at things in isolation. Again that's acceptability. And as I said earlier, I'm not saying acceptability is bad, I'm just saying acceptability is not desirability. And the other thing I wanna add is, why do I... My wife and I love Toyota products. I've got reason to believe through a lot of research and talking, sharing the ideas that we talk about in these podcasts with people within Toyota. And they have a desirability focus that nobody else... That I'm not aware of anybody else has.

0:16:54.9 BB: And, that's having presented around the world doing classes, at Kellogg Business School, at university. Yeah, the Kellogg Business School Northwestern University. I teach online classes at Cal State Northridge, Southern Utah University. I've lectured at many universities. And I never had anyone come to me working in industry saying, Bill, what you're talking about, we practice where I work. No. And, so, for those that are pursuing the Toyota Production System stuff. My response is, I don't buy Toyota products because they use the Toyota Production System. Now, that may help with getting the car to market faster. But I don't believe the Toyota Production System is why people buy Toyota products. I believe Toyota's quality management system... At least I buy Toyotas because I believe their quality management system, inspired by Dr. Taguchi, inspired by Dr. Deming, is providing something that nobody else has in many industries. All right. So, I wanted to get that out.

0:18:06.7 AS: So, are you saying Toyota Production System is more of a tool that is in their toolbox of quality management system?

0:18:18.4 BB: Um, the Toyota Production System is classic Industrial Engineering.

0:18:26.8 AS: Right.

0:18:27.0 BB: It's how to...

0:18:28.3 AS: It's a natural.

0:18:30.5 BB: How to improve flow, how to improve throughput by minimizing number of steps, by minimizing inventory. It's highly credited to Taiichi Ohno, who was mentored by the founder of the Toyota Motor Company. And it's all about, they don't have a lot of money. So, we need minimal inventory, minimum steps. So, it's like... So, the Toyota Production System is an efficiency based system based on, we don't have a lot of money, we're not gonna buy a lot of inventory. But the quality aspect of the Toyota Production System everywhere, everything I've written, everything I've read by people describing the Toyota Production System it's all explained by acceptability. So, that they may be moving things closer together so people don't walk so far.

0:19:27.8 BB: But what I'm looking at with Dr. Deming's work inspired by Dr. Taguchi is what is it about the quality system that causes those parts to come together so well and the products to perform so well? So, it's not just having the parts when I reach out, the part is there, but those parts integrate better. I've mentioned in the first podcast series that Toyota had 100% snap-fit pickup truck in 1969 at a time when Ford was banging things together using rubber mallets to get the parts together. They took apart and assembled a Toyota pickup truck twice 'cause they didn't believe the results the first time the parts went together without mallets. That's what I'm talking about, that within that system, the ability for the parts to come together to work together cannot be explained by an acceptability based system. And, so, having spoken with people and having the opportunity to share with people within Toyota the ideas we talk about inspired by Dr. Deming, I've learned that they do desirability in a way that nobody... I'm not aware of anyone else having done.

0:20:48.5 BB: All right, so, what I want to get into, add to the discussion tonight, relative to category thinking, is this idea of category thinking, continuum thinking. Category thinking quite simply is putting things in categories. So, in acceptability we have two categories, good or bad, or maybe three categories. It's good or it's scrap or it's rework. So, category thinking is generically putting things into categories. And so, we could look at category... Categories could be... There could be two categories, three categories.

0:21:27.1 BB: It's been a while since I've gone to see a movie, but I believe they still have a rating system of PG, PG-13, R, R-17, maybe X. Those are categories. Fruits and vegetables. Those are two high level categories. Within each of those categories, we have types of, we have apples and oranges, and within them we have types of apples. That's all category thinking. You go into a supermarket and every aisle... There's the cereal aisle. That's a category. There's the canned goods, those are categories. Religions - talk about categories. So, every religion you look at is its own category. And, then within those categories they have subcategories. How about music? How many categories in music are there Andrew?

0:22:18.9 AS: Well, it gets all messed up on my iTunes where I'm like, that's not heavy metal. That's rock.

0:22:28.6 BB: Yeah. And then there's types of rock. In the beginning it was rock and roll, and then there's types of rock and roll.

0:22:34.0 AS: Progressive rock.

0:22:34.0 BB: Progressive rock. And then we have people... So, what category would we put... I think somebody asked Lucinda Williams, we're going to see her in a few weeks. So, what category? Well, she doesn't fit a category. So, that's category thinking. Category thinking is putting things in categories. We could say, where did you go to college? That's a category. These are USC grads, those are Cal State grads. And, part of the point I want to make is that we use category thinking all the time. Putting people in categories is what we do. Such as you and our daughter are Cal State graduates.

0:23:17.6 BB: And, so, what degrees do they have? Those are categories. So, I don't know what we would do if we couldn't put things in the categories. So, I don't think category, putting people in category is not a bad thing. Now, when you start to associate values with the categories, now we're getting into racism or sexism and then, okay. But this idea that putting people in categories is a bad thing, I'd say category thinking is our simple way of organizing everything around us and these little file cabinets. Now added to that is when you put four or five things into a category, then what you're implying is that they're all the same. And that gets into acceptability.

0:24:12.8 BB: So, if this is a good part, that's a good part. That's a bad part. That's a good part. So, all the good parts go into the good part category. Then we say, oh, these are all good. Then we get into the sense of, and they're interchangeable. Well, maybe not. And that has to do with what I call continuum thinking. All right, so before we get to continuum thinking, Andrew, remember the question. What do you call the person who graduates last in their class of medical school?

0:24:43.3 AS: I don't remember that.

0:24:45.2 BB: Okay, so take a wild guess, Andrew, putting the pressure on, what do you call the person that graduates last in his or her class in medical school?

0:24:55.7 AS: Surgeon general.

0:24:56.9 BB: What's cool is that's a question I've been able to ask all around the world. Now, depending on where I go, I can't talk about baseball because they don't understand baseball. Or depending on where I go, I can't say soccer or I have to say football. Then if I say football, I have to say, well, I mean your football, not American football. But what's neat about this question, what do you call the person that graduates last in their class in medical school, that's "doctor." That's also acceptability thinking. From the first in class to the last in class, they all met requirements. Andrew, you know what that is? Acceptability. So, category thinking is a form... Acceptability is a form of category thinking. All right. Now I'm gonna give you three numbers and I'm going to ask you which two of the three are closest to being the same. You ready?

0:25:58.0 AS: Yep.

0:26:01.7 BB: 5.001, 5.999 and 6.001.

0:26:11.1 AS: 5.999 and 6.001.

0:26:17.6 BB: Are close to being the same?

0:26:18.8 AS: Yeah.

0:26:20.2 S3: That's what most people think. Okay. But...

0:26:25.7 AS: One's a six and one's a five. That's a problem.

0:26:29.5 BB: All right. And, so, again, the numbers were 5.001, 5.999 and 6.001. And the question is, which two of the three are close to being the same? And, what most people will say is 5.999 and 6.001, which infers that what does same mean?

0:26:48.5 AS: The integers?

0:26:49.1 BB: If you answered.

0:26:49.9 AS: I looked at the integers at the end rather than the whole number at the beginning.

0:26:56.7 BB: But is it safe to say you chose those numbers by saying they were closest together?

0:27:01.6 AS: Correct. Yes.

0:27:03.2 BB: So, in your case you're saying, if I plot those numbers from zero to infinity. Then those two are really close together. That's one definition of same is proximity. But, same could also be, they begin with five, in which case the first two are close to being the same. 'cause they both begin with five or they're both less than six. Or, I could say 5.001 and 6.001, because they both end in .001. So, it turns out there's three answers to the question. But the answer of the last two and proximity is what category is what continuum thinking is about. On a continuum these two are closest together. All right.

0:27:51.2 AS: And I have to tell you, we're gonna be running out of time, so we gotta wrap this up.

0:27:55.4 BB: All right. So, when I asked you the question, what do you call the person who graduates last in their class of medical school? And you said doctor, that's category thinking. If you used... Well actually the thing is, if I ask, what do you call the person who graduates last in their class at the United States, US Army's Military Academy, known as West Point, one answer is Second Lieutenant. 'cause they're all Second Lieutenants. But West Point uses continuum thinking to define the very last person in their class. So, it's the last person in class is not called second lieutenant. The last person in the class is called goat, as in the animal.

0:28:43.2 BB: And a very famous goat at West Point, who from my reading, was very proud to have graduated last because there's... I think Mike Pompeo, who was Secretary of State under president Trump, was first in his class at West Point, first in his class. A very famous, I wanna be the last person in my graduating class at West Point was George Custer. You've heard of him?

0:29:14.3 AS: Yep.

0:29:15.5 BB: And, he was deliberately lazy, so he wanted to be the very last person in his class. But that's, but the idea is that category thinking says they're all Second Lieutenants, they're all doctors. Continuum thinking is when you say this is the first, this is the second, this is the third. And when you come up, when you start to order them and say, the last one is goat, that's looking at things on a continuum, which is continuum thinking. Well, given that most quality systems, including Boeing's Advanced Quality System, are based on category thinking and category thinking, you have good parts and bad parts. When I ask a question as I brought up in the podcast five. I said I go to audiences and ask, how much time do you spend discussing parts which are good, that arrive on time? And the answer is none. And I say, well why is that? 'Cause in that system they're focusing on taking things from bad to good. And then what? Stopping at good.

0:30:20.0 BB: Well, part of the thing I wanna get across in this episode is the reason we're stuck in that model of stopping at good is because the quality system is based on category thinking of bad and good. And in a world of good and bad, there is no better. In a world of short and tall, there is no taller. And, so, continuum thinking allows us to go beyond that. And, so, going back to Dr. Deming's quote, conformance requirements, which is category thinking, zero defect, Six Sigma quality, those are all category based systems, which means it's good parts and bad parts. But then I come back to how does a system which is based on good parts and bad parts deliver such incredible reliability in the products? And, I believe it's because they're using continuum thinking. Not... And again not continuum thinking everywhere, but I think they have very judiciously figured out where to use continuum thinking and that is their differentiator. In my admiration for Dr. Deming's System of Profound Knowledge is, I've not come across any other type of management theory, which has that level of fidelity to explain that. And, in order to practice continuum thinking, implement it, you have to work together.

0:31:43.9 AS: And I'm gonna wrap this up by... One of the revelations that I come upon when I listen to what you're saying is. That's also what makes Deming's teachings sometimes hard to grasp, because there is no clear category and there is no clear beginning and end. There is no certification and therefore it's just hard for us who are used to being in categories to grasp. And that's my conclusion what I draw from everything you've just said.

0:32:16.6 BB: Well and let me add to that, really appreciate you saying that. Let me add to that,much of what I was doing at Rocketdyne... When I began to appreciate that the reason I was focusing on solving problems, solving problems and the problems we didn't solve were the problems where the customer, NASA said, we're gonna take this work and take it to the company down the street because you guys can't make it happen. And, that scared the hell out of me that we're gonna lose this work to competitors because... And when I looked at it, was why are we stuck? And I looked at Dr. Deming's work, the reason we're stuck is we're... 'cause our quality system is based on good parts and bad parts. We're waiting for trouble to happen. And, so, but still what I found is, and when I started to focus on... I went from being 100% Taguchi to more about Dr. Deming's work and trying to come up with everyday examples to make Dr. Deming's work more accessible.

0:33:16.9 BB: So, in Dr. Deming's work, you're not gonna find category thinking, continuum thinking. So many of the concepts we talk about in this series, in the prior series are... I refer to them as InThinking Concepts, just trying to make it easier for people to begin to absorb the brilliance of Dr. Deming's work. Because, I think absent that, when he says quality, what kind of quality is he talking about? Acceptability quality, desirability quality. So, I'm with you, I think the work is brilliant. I'm just hoping through our conversations and these podcasts that we can make his work far more accessible.

0:33:56.4 AS: Yep. Well, I think we're doing that. And Bill, on behalf of everyone at The Deming Institute and the audience, I wanna thank you again for this discussion. For listeners, remember to go to deming.org to continue your journey. Of course, if you wanna keep in touch with Bill, just find him on LinkedIn. This is your host Andrew Stotz. And I'm gonna leave you with one of my favorite quotes from Dr. Deming. "People are entitled to joy in work."
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Myth of the Bottom Line: Boosting Lean with Deming (Part 3)
23 set· In Their Own Words
Is your financial bottom line the true story of your organization? In this episode, Jacob Stoller and Andrew Stotz take on the myth of the bottom line - maybe it doesn't tell you what you think it does.

TRANSCRIPT

0:00:02.5 Andrew Stotz: My name is Andrew Stotz, and I'll be your host as we continue our journey into the teachings of Dr. W. Edwards Deming. Today, I'm continuing my discussion with Jacob Stoller, a Shingo prize winning author of "The Lean CEO" and also "Productivity Reimagined" which explores how to apply the Lean and Deming management style at the enterprise level. The topic for today is myth number two, the Myth of the Bottom Line. Jacob, take it away.

0:00:32.7 Jacob Stoller: Thank you, Andrew. Great to be back here with you. Yeah, the myth of the bottom line, it is widely believed that if you look at the financials, that tells you everything you need to know about the productivity in your organization. And it's almost when you think what we talked about last time, so that the pyramid, the idea that the whole equals the sum of the parts, I think the myth of the bottom line is really kind of flows naturally out of that. If you believe in this pyramid that Dr. Deming was so critical of, the myth of the bottom line seems to make sense. Just that dollars flow through, you save a dollar here, it's all going to add up.

0:01:23.8 JS: So the problem with that is that productivity as we've learned from Dr. Deming, is actually determined by lots of non-financial factors. And what the bottom line gives you is a kind of an oversimplified, I guess, aggregated view. So you take the total sales of a company and you divide it by the number of employees. You can call that productivity, but it's not really productivity, 'cause productivity, strictly speaking, comes from making increasing output with a set of inputs. So you go from time A to time B, are we making more while keeping all our fixed costs constant? So there are things that get in the way of measuring that and one of the big ones is something called price recovery. So if you look at profitability, it's really a combination of price recovery and productivity. But price recovery would be any change in cost, any kind of financial cost during or between the two periods that you're measuring.

0:02:45.7 JS: So if you've got say the cost of labor, cost of materials, facility costs, energy costs, all these things can change between two time periods. And at the same time, maybe your selling price changes. So it turns out that factoring all those things out is much more difficult than you would think. It doesn't come easily using ERP systems in those things. And one of the pioneers of Lean accounting [0:03:16.8] ____ explained to me how he, when he first realized this, how much work it was to actually just separate all these price recovery factors from the total that contributed to productivity. So it's not that easy to even get to productivity and really get an accurate figure on it.

0:03:39.1 AS: It's interesting. I'm a financial guy, so I look at the P&L all the time of so many companies. So I think I've got some fun stuff that we can talk about, but was there something more you were gonna wrap that up with?

0:03:51.9 JS: Well, yeah, I think what happens with that is you get a sort of a cultural divide, because executives, I'm told, typically see operations as a black box. They'll say, well, okay, someone worries about process and manufacturing process, or it could be in any field. It could be medical, it could be something else, but that's something that operations worries about, so we'll let them do that. So they're left, these executives, with only one language, and that's financial language to understand things. And that's basically the iron law there is you get what you pay for. So we wanna get better quality, okay, we invest in it, that costs money. We wanna get faster delivery times, well, we'll pay money for that. And we wanna lower cost, well, then we better get rid of some people.

0:04:51.7 JS: So these things are all looked at sort of transactionally from the outside, not inside this black box of process. But inside that black box, that's where all the magic happens. That's where the Deming chain reaction happens. The fact that when we invest in quality, costs are gonna go down, but you tell that to an accountant, they'll tell you you're nuts. So it's really, I think there's a big challenge there of getting people to understand that the laws of that really determine productivity are not purely financial. And people need to... I think a lot of people need to broaden their thinking to understand that.

0:05:43.0 AS: Maybe out having looked at the financial statements of thousands of companies and have valued thousands of companies in my life, let's look from a top down, first of all. So people organize, people give money, give capital to companies, because they expect to get some return from that capital. Some people care about what that company does, others don't care, but that's the first step. And so the company gets capital that they deploy and they organize their business however they want, and ultimately they generate revenue. Now, revenue is price times quantity. And I think the first thing that supports what you're talking about is that, if a manager of a company says, our revenue went up 20% last year, and it was all driven by increasing prices only, well, that's... If you could sustain that, that would be fantastic, but it's quite likely when you increase prices, you're gonna have a knock on effect of your demand falling as your competitors have lower prices. But then, what you could say is that that company really didn't change anything about the way it's operating, it's output, it's productivity. Would that be correct in saying that in your mind?

0:06:56.9 JS: Yeah, it would be correct, and I think that a lot of the companies that are protected from... We got stories about this that are protected price wise and are able to kind of raise their prices at will, actually get very sloppy with their operations, and they don't increase their productivity. So I would say to your clients or whoever when you're analyzing that, that what productivity growth will give you is sustainable improvement over time. Productivity is the one thing that every company has control over, and you can control it year after year, but it's long term. It's a long term prospect. So that's... If you're managing quarter by quarter, that's maybe not gonna be so attractive.

0:07:52.0 AS: Yeah. So I think that's a great point about the long-term nature of trying to improve your productivity, because anybody can be a one hit wonder and increase price, let's say, and then tell everybody, "hey, we got more revenue, or we got more profit." Now let's look at the other side. So the P&L, the profit and loss statement, or the income statement is revenue minus costs, equal profit. There's a second aspect, is that a top level executive who come in and say, "I'm slashing the marketing budget, and I'm slashing the cost related to our operations and all that," and in the end, they would get an increased... Increase in profit. But they may get that at the sacrifice of future growth of let's say the image, the brand image of the company as an example, which doesn't necessarily have to do with the black box of actually making the product, but does have to do with creating a bottom line that looks great, but sacrificing the future bottom line. What are your thoughts about that?

0:08:55.1 JS: That's a great point. Yeah, of course, Dr. Deming would tell us to look at the system. They're all interdependent, marketing, sales, production and everything. But when I said black box, I mean, yeah, it does conjure sort of an image of manufacturing, but that same black box thinking, I think needs to spread through the entire company. And some of these really mature companies, Lean companies and Deming companies too, they're thinking everything as within that operational framework. Because it's operations within that, that you have your complex adaptive system. Financial, pure finance is not really in the same way... The laws of finance are not... Don't reflect that kind of complexity.

0:09:45.0 AS: I would like to just define this black box, because what you're... When we think of it of a black box, we think, okay, people just look at it, and they don't really know what's going on inside. But you're saying that that's the way a senior executive oftentimes comes in and they don't even know what's really going on. I remember when I worked for Pepsi in the factory, that the factory manager was even out of touch with what was happening on the floor. He wasn't out there all the time. So when you're talking about black box, you're talking about kind of people looking from the outside in, but inside that black box is where all this productivity work is being done of how do we get more efficient in what we do, use less resources, and get a better outcome? How do we hit the specifications or the desire product that the customer needs. Which is one of the great things about capitalism is that you're actually trying to reduce the resources that you're putting in to create an output.

0:10:43.4 JS: Yeah, exactly. Well, I would expand the black box again. It can be anything, it can be in your accounting department. So the black box really is process. It's the whole concept of process. So it's not a physical entity at all, or a plant floor, it can be everything in the company, but yeah, you can look at... You can take same kind of principles and say, "how come it takes you 10 days to close our books at the end of the month? Can we shrink that down to three?" So we can use the same principles anywhere in the organization. And similarly, we can use these principles in healthcare and services industries and just about anything. So yeah, so the black box is a very conceptual idea.

0:11:33.4 AS: The process, the systems.

0:11:33.4 JS: Yeah.

0:11:37.0 AS: The other thing I always tell my finance students on first day, the first thing I put up on wall, on the board is, "finance adds no value." Which is a very disappointing thing for undergrads in finance. But what I try to show them is that, finance is a feedback. It's a tool for feedback. And the feedback in this case is financial feedback. And with that financial feedback, it's information that the management team can use to create value, to make better decisions, ultimately about the business and what they're doing. And so for those people that think that finance is something that creates value in a business, I always say it's a support function. And when it's done really well, it's a fantastic support function to give feedback of, here is the big picture of what we're producing, whether that's looking at the cost accounting on a production line, or whether that's looking at the overall company. So finance adds no value is one of the things I always say to kind of wake my students up to see that really, finance can be great if it's supporting the CEO and the management team at making good decisions.

0:12:47.8 JS: That's a great point, Andrew. And of course that's said often in the Lean world. When they separate out, muda, which they call waste, they have... Well, they have necessary waste and unnecessary waste. Unnecessary waste is too many steps in a process or whatever, but the necessary waste is things like finance, and it's not just finance, but it's things like having an HR department. Because HR is not actually making any products for your company. So all these support functions, administration, even executive management would be considered to be not adding value in that framework. So I think what you're saying makes perfect sense.

0:13:38.4 AS: I came across a company when I was a young analyst here in Thailand, and it's a factory. And I was looking at the financials, and I was seeing that the profitability was rising quite fast, and the cash conversion cycle basically went negative, which I've never seen a factory have negative cash conversion cycle. So I called up the company and asked if I could come out as a analyst. I went out to visit the CEO and the management team and went around and I asked him, "how did you get your cash conversion cycle to be so low?" He said, "well, we focused on reducing an inventory in our business." And I said, "how long did it take you?" He said, "it took us about five years." And he said, "but I really gave the responsibility to each team leader and each team to think about how they could reduce the inventory in their area."

0:14:27.4 AS: And that was, first of all, a lesson in focus. If you focus on one thing and it's the right thing, let's say, let's assume that was the right thing at that time, you can get there. But the reason why I'm telling you this story is 'cause he told me another thing that was interesting. He said, "we have a... Each area we have a profit and loss statement for, and we try to get people to think about that." But I said, "how do you handle the overhead of management, the cost of management?" He said, "we list out the exact cost of management and we post it on the wall, and then we calculate it per area so that everybody knows how the management cost is hitting their P&L. And then we challenged them to help push us to drive down that overhead." And I was like, that's pretty transparent, I thought, in a Thai factory.

0:15:18.2 JS: Well, that is interesting and I'd be curious. A lot of companies use standard cost accounting and what often happens is inventory actually... When they reduce inventory, that's an asset right? On the balance sheet, and they take a hit from reducing inventory. So I'd like to know how your client dealt with that, or if they had to deal with it.

0:15:42.1 AS: I am not sure how he did the accounting, but I know that many, many companies in Thailand do not use standard cost accounting, just because it's a pretty advanced thing. And I think that they're pretty simple in some of their operations. Not all, but yeah.

0:16:00.8 JS: Yeah. Okay. Well, no, standard cost accounting is just not a good way if you're interested in maximizing your productivity, because it basically hides the... It hides the true cost of inventory. It postpones them to a later year. So when you sell the product, then you're paying the carrying costs of the inventory, which is crazy. So somebody overproduces, they don't take the hit for that.

0:16:25.3 AS: Right. One last thing from me, and then maybe we'll wrap it up by thinking about the takeaway of what we want the listeners to be able to do from this discussion. But I just, since it's myth number two, the myth of the bottom line, I wanna address another myth that I always talk to about my students, and that is that the goal... This is the myth, "the goal of the management is to maximize profit." And I teach my students that if we wanna look at the financial goal of the management of a company, it is not to maximize profit. And if anybody says that, I always stop them and say that "actually, the goal of the management is to maximize value. And value is a function of profit and risk in the calculations that we use in the world of finance." So you can... A manager, two managers of different companies, but let's say competing companies, they could be, one could be getting a huge amount of future cash flows coming in, but they could be doing it through bribery, let's say.

0:17:28.8 JS: Yeah.

0:17:29.6 AS: And that is raising the risk secretly behind the scenes. And so the ultimate, the value that's being created in that company is going to disappear. Another good example is Amazon. When Amazon listed in the stock market, it went seven years with losses. So was it doing the wrong thing? No, it was creating value even though it had loss. So ultimately, the importance is to create value, maximize value, not maximize bottom line. That's kind of me from the top down finance perspective, but what are your thoughts about that?

0:18:08.6 JS: Well, value is tricky. Because it's determined by the customer. So a bunch of things. I always give the example of ballpoint pens because I scribble a lot on my calls with a ballpoint pen, but supposing I'm making 10,000 of these an hour or something, and I up that by 10%, well, that's fine. And with all my machinery, maybe I'm running it faster and I'm using all the same plant, I figured out a way to do that. But what if the productivity, or sorry, the productivity will show as an increase, but what happens if some of those pens skip? I have a quality problem as a result of picking that up. Well, if the pens are not really acceptable to my buyers anymore, then I haven't gained anything. So it shows...

0:19:01.6 JS: So you can't just do a productivity calculation based on numbers that are turning out. You have to maintain that quality and that's not that easy to do. 'Cause it might be that my quality problem is that, I have to increase by 10%, but it's only skipping one out of 10,000 pens or maybe one out of 5,000, but the customer might not care about that, or they might not... They might rather pay a little bit less and have that slight defect. So it's a tricky business, I think, with value, you have to constantly be getting customer feedback, and knowing what the customer needs, what level of quality they need, and making sure that you consistently deliver that. So value, yeah, absolutely.

0:19:55.8 AS: It's a good time to come back to point number one of Dr. Deming's 14 points, which is, "create constancy of purpose towards improvement of product and service with the aim to become competitive, and to stay in business and to provide jobs." And the idea of focusing on improving product and service is the holy grail. If every day, you are working as an organization, as teams, as groups to improve product and service, it's just amazing, and I think that that's where Toyota has been a great example of just relentlessly pursuing that. But let me ask you, how would you sum up what you want people to take away from the myth of the bottom line number one, and what action do you think that they should take as they go back and look at their business or look at their department?

0:20:52.1 JS: I would say stop. First of all, stop pretending that you know everything based on the financials. Go look at, go study Deming principles or learn about what actually happens and how the value is created. Go onto the front lines where value is created. Whatever your company is, study that and start to learn what some of their problems are, and how that affects value. I think there's this... They've said that... It's often said that it's much harder to unlearn things than it is to learn new things. So I don't think it's an easy... I don't think it would be an easy thing to do. It's very convenient to believe that the finances tell you everything, especially if you're outside the company. If you're an investor or you're Wall Street or whatever, and you're providing guidance on companies, telling them that they don't really understand what's driving the value of that company is not a very welcome message. So I think it's it's not easy.

0:22:05.8 AS: I was just reading a book called, "The Six Month Fix" by Gary Sutton, which is a great book about turning around companies, but he has a chapter talking about Hewlett and Packard, the two gentlemen who started Hewlett Packard, but he talked about how they just... They were constantly walking around out in the production area. They were in the maintenance area, they were on the loading dock. They did it at evenings, they did it on weekends, they did it on day... They were just constantly out there. So part of what I'm hearing from you is step back from the financials and get into the operations, see what's happening in the processes, and helping support people to work towards improving the product and service, so that you get a consistent growth in your business that's driven not by like raising prices, but by getting more efficient in what you're doing. That would be kind of how I would summarize the takeaway.

0:23:02.3 JS: Yeah. I think you have to acknowledge that there are people out there on the front lines that are creating the value in your company. And there's a lot you can do to help them as a leader. You can remove roadblocks. And if the company's been running purely on financial metrics, you can bet there are tons of roadblocks and frustrations that these people are seeing. But you can also... Eventually you can create a kind of a culture where people work together. Because as I think we see with Deming, the productivity is a team sport. You really wanna have team productivity, and people working together, not knocking each other down, as we talked about in the sort of the pyramid structure is what people do. You want them working together and leaders can do a great deal to kind of create that culture and lead by example and all those things.

0:24:03.9 AS: Well, that's inspiring. And I know for all of us, the myth of the bottom line, we can get trapped into it at times, particularly when the bottom line's not that strong and times tend to get focused in on it and maybe at the cost of other things, but this is a good reminder for everyone. I'm gonna wrap it up there.

0:24:24.9 JS: Okay.

0:24:26.3 AS: Jacob, on behalf of everyone at the Deming Institute, I wanna thank you again for this discussion. And for listeners, remember to go to deming.org to continue your journey. You can find Jacob's book "Productivity Reimagined" at jacobstoller.com. This is your host, Andrew Stotz, and I'll leave you with one of my favorite quotes from Dr. Deming, "People are entitled to joy in work."
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The Myth of Segmented Success: Boosting Lean with Deming (Part 2)
16 set· In Their Own Words
Is the whole simply a sum of its parts? In this episode, Jacob Stoller and Andrew Stotz discuss what happens when you divide a company into pieces and manage them separately - and what to do instead.

TRANSCRIPT

0:00:02.5 Andrew Stotz: My name is Andrew Stotz, and I'll be your host as we dive deeper into the teachings of Dr. W. Edwards Deming. Today, I'm continuing my conversation with Jacob Stoller, Shingo Prize winning author of The Lean CEO and Productivity Reimagined, which explores Lean and Deming management principles at the enterprise level. The topic for today is myth number one, the myth of segmented success. Jacob, take it away.

0:00:30.4 Jacob Stoller: Great to be here with you, Andrew. And yeah, before I dive into that myth, I'd like to just start with a quote by Albert Einstein. "There is no failure in learning, but there can be in refusing to unlearn." Now that's something that's gonna occur over and over when we talk about the different myths. And the fact is, as many people have observed, unlearning can be a lot tougher than learning. So I think we always have to keep that in mind. So I want to tell a little story which kind of illustrates just how deep this unlearning can go. And this was told to me by Rich Sheridan, who has a company called Menlo Innovations, they're a software development company. And very interestingly, the theme of his work has been about joy in work. Sounds familiar?

0:01:28.3 AS: I love it.

0:01:28.5 JS: Well, he didn't really discover Dr. Deming until he had already written two of his books. So it just shows to me that there's some very underlying truths behind what Dr. Deming was teaching. But anyway, the story Rich tells is that he had his family in for a wedding. And they had a new office they'd moved into, so everyone wanted to see it. So he brought his granddaughter in, an eight-year-old. And he said, well, where do you sit, pop-pop? And he said, right here. Here's my desk. Here's my computer. And the granddaughter looked at his desk and was puzzled. You know, she said, well, where's your name? You got to have your name somewhere. And so, I mean, Sheridan was amazed. He says, I thought, wow, she already has it in her head that as CEO, I should have a corner office with a placard that showed how important I am. And you know, I felt a little embarrassed. She was somehow implying that I can't be much of a CEO if I didn't have a placard with my name on it.

0:02:35.5 JS: And she's only eight. So no, here's a CEO that's just really, really, you know, ahead of a lot of people. You know, he understands a lot of the Deming principles. And he sees just how deeply people hold these myths. She believed that there's this pyramid structure and there's got to be a CEO at the top and there have to be all these departments and people reporting to various people, et cetera, et cetera. So this really, this belief she had is really, it's sort of the pyramid that Dr. Deming described. And Dr. Deming actually wrote, he said, in The New Economics, you know, his last book, he wrote, this book is for people who are living under the tyranny of the prevailing style of management. And he talks about the pyramid. And I think that kind of encapsulates everything we're dealing with in terms of beliefs. And I'm just going to read it because he was so concise about saying it. "The pyramid only shows responsibilities for reporting who reports to whom. It shows the chain of command and accountability."

0:03:55.3 JS: "The pyramid does not describe the system of production. It does not tell anybody how his work fits into the work of other people in the company. If a pyramid conveys any message at all, it is that anybody should first and foremost, try to satisfy his boss and get a good rating. The customer is not in the pyramid. A pyramid as an organization chart, thus destroys the system, if ever one was intended." So I've never seen a more pointed description of the prevailing style of management. But think of this young girl at age eight, you know, I mean, and a lot of them, what happens is they go to school and they learn. And then maybe they eventually go to business school. And then sometime, maybe 30 years later or something, this person, this young woman is being told, we're not going to manage according to a pyramid anymore.

0:04:54.3 JS: We're gonna change the whole structure. We're gonna respect people and we're gonna respect their opinions. And we're not gonna assume that all these departments automatically fit together like building blocks. We're gonna work to define a system. All these things that Deming taught, you know, how do you think she's gonna react to that? You know, we're talking about things that this person has believed, not just from training in business school, but for years and years. So I think that kind of underlines the task we all have in terms of learning and unlearning. It's just an enormous thing we have to deal with, which is why I think it's important to look at the myths and various myths. And that's why I really worked to define those. So, when we...

0:05:46.5 AS: I would just highlight one thing about, if we go back to maybe, I don't know, constructing the pyramids, it was all about power and force, you know, get things done. It was about power and force. And I think what Dr. Deming was saying at a very, you know, many, many decades ago, he was saying that power and force are just, you know, a tiny factor in the world of business. The real motivating factor is intrinsic motivation, satisfying the customer, working together. Those types of things are the forces that will bring a much better outcome in your business, rather than just having an organizational chart that just shows the flow of power and force.

0:06:30.4 JS: Exactly. You know, and I think that if you look at the pyramid structure, it's actually a great system for consolidating power. So it works that, and, you know, but if you start to look at producing quality products and services for customers, it doesn't work at all. And, you know, so we need a new kind of logic, not this kind of logic. If we really do, like I say, we want to produce excellence. And if we want to have productivity as our competitive advantage, right?

0:07:06.4 AS: And one thing I just want to, for the listeners and viewers out there that may get confused, like what is a pyramid chart? We're talking about an organizational chart with a CEO, you know, and the like at the top, and then all the different department heads and the people below them. So Dr. Deming referred to that, and Jacob's also referring to that as a pyramid chart. Let's continue.

0:07:27.5 JS: That's right. Yeah. Yeah. Thanks for clarifying that. Okay. So that gets us to myth number one, because, and myth number one is the myth of segmented success. And the idea behind it is that the productive resources, this is a myth, this isn't true, but according to the myth, the productive resources of a company can be organized as a collection of independent components. The whole equals the sum of the parts. So this is essentially the glue that holds this org chart structure together. If that myth were true, then that org chart structure would be perfect for organizing a productive organization. But it is a myth. And what we see is that when you run a company according to that, with that assumption, you get into all kinds of trouble.

0:08:20.5 JS: And I'll just give you a very simple example. We have, let's say we have a company that does heating, ventilating, air conditioning, and they're selling stuff to industry, various machines, and they're installing them, and they're servicing them, all that kind of thing. Right? So let's say there's the end of the quarter and the sales rep has to make his or her numbers. Now salespeople are rewarded based on their sales numbers. Production people or the service people are rewarded based on their numbers, on how many service calls they satisfy or whatever. So installation people are rewarded for how much installing they do. So everybody's got quotas, and they're all sort of independent like components. So you get this sort of negative chain reaction where the sales rep does a big deal to make the numbers at the end of the quarter. He brings it in, the bell rings, you know, hooray, this person's made his numbers, he gets to go to Hawaii or whatever it is. Right?

0:09:27.6 JS: But let's supposing to get that deal, that's a big deal, it's high volume. So guess what? Low margin. And guess what? Maybe the sales rep had to make a few concessions to get that deal. Maybe the sales rep didn't reveal all the fine print to the customer, you know, in sort of the rush of getting the deal. So after the deal, the next quarter, well, the service department's got problems now dealing with this order. The installation department's got problems. So both of these departments have to hire extra people, have to pay overtime. So the end of that quarter, their numbers are going to look bad. Right? So that's a classic case. But it just happens over and over and over again, because you have all these different business entities compensated based on their own separate objectives as if they were separate companies. And yet that's glorified, that's seen as entrepreneurial. We'll run our department as a business, as a profit center. But they don't consider the whole overall system. So that's the kind of the tragedy, I guess, in modern business. And again, it's assuming that everything is kind of gonna work out if you manage them independently.

0:10:53.2 AS: And I was thinking that, you know, the head of the sales department is gonna be rewarding the salesperson for what they're doing. And if the head of the manufacturing or service department could anticipate that this deal that the salesperson's closing is gonna cause a lot of problems because of, you know, they're rushing it and they're trying to give great terms to get something under a deadline. There's just a very difficult for the head of the sales department to listen to that complaint to the head of, let's say the service department as an example, because they're being judged by the numbers they're delivering in their department by their boss. And so they got to kind of let it happen.

0:11:33.5 JS: Yeah. Yeah. And this is by the way, based on a real life story. And this is a company called Air Force, I think, Air Force One, it's called actually, and it's based in Ohio. It's a heating, ventilating air condition company. I could say HVAC, but they use the acronym. And they worked with Kelly Allen. And very soon after working with Kelly, they got rid of sales quotas and put everybody on salary. And the whole thing took off, you know, as the CEO told me. They're getting better deals, customers are happier, veteran sales reps are helping the younger ones close deals. Everyone's helping everybody. And the business is really, really expanded rapidly. You know, they've, I think, doubled or tripled their revenues in the last three or four years. So yeah, these things, when you get rid of these artificial barriers, businesses can really take off. And we got all kinds of case studies showing that.

0:12:45.3 AS: Yeah. And for the listeners and viewers out there, like, wait a minute, I can't do this. You know, my salespeople, they only are gonna work when they're incentivized individually as a department. I think the first thing that I would say is listen to what Jacob's telling you, listen to the stories that you're hearing and think about it. You don't have to move on it. I think that transformation in the way that you think about, you know, things takes time. And the natural reaction, when you hear something new, you know, you started with the idea of unlearning the natural reaction, when you hear something new is to say that can't work, but just keep that open mind as we continue through myth number one. So why don't you continue on, Jacob?

0:13:25.3 JS: Yeah, well, and as Kelly Alley, Kelly Allen you know, made some points on that. First of all, he said, you don't go in with your guns blazing and just take away the sales quotas. He said they worked very carefully so that CEO understood the whole system, how all the parts interact. And then once you understand the system, then you're in a position. Often people go in prematurely, remove all the sales quotas and you get chaos because people don't understand all the dependencies that are there. So it's really, really important, I think to manage the change in a responsible way. And again, as Kelly says, you've got to understand the system and how it works.

0:14:10.4 AS: Great. And I think you have more stories to tell.

0:14:14.2 JS: Oh yeah. Well, I actually a wonderful one. It's, and it's not just sales quotas, by the way, it's any kind of rating and ranking system. And one of the real classics is the, a company called Bama, Bama Foods, which is, uses Deming's principles. And the CEO, Paula Marshall, actually might've been this little girl, eight-year-old girl who was looking for the desk of the CEO 30 years later, because she started working with Deming just by accident, really, because she had taken over the company business at a young age and she, they were trying to deal with some quality problems. And she went to a Deming seminar and Dr. Deming asked who in the audience is the CEO? And she was the only one that raised her hand. And so he said, will you come and , be part of a study group? So that's how she got to work and got to become actually today's the only living CEO that's actually worked directly with Deming, or the only active CEO that's actually worked with Dr. Deming.

0:15:32.4 JS: But anyway, she started to talk with Dr. Deming about the problems they were having and he said, and she described a rating and ranking system that they had had, and they had spent, I think millions of dollars even back then with a very, very reputable consulting firm. And it was one of these things where they rank people on a scale of one to 10. And the idea was let's make all our people accountable. That's how we're going to get quality. We'll have accountability. Everybody has to be rated by their managers and we'll create some fear and we'll create some incentive for people to work harder and solve our problems. Well, the first thing Dr. Deming told her is get rid of that rating and ranking system. So it was very, very hard for her at first, you know, she'd spent a lot of money on it. And she said, you know, but eventually she said she realized that it wasn't helping the company. It wasn't doing anything, but it was still very, very hard to let go of that idea. But eventually she did. Eventually she got on a conference call.

0:16:40.3 JS: They got rid of it and the results were just incredible. She said by the, you know, everyone had hated the system and it just turned the conversation around. I mean, instead of saying, well, here's why I've ranked you, Andrew, on, I've only given you a seven instead of a nine. We would be having a sort of a constructive conversation about the problems you're facing in the workplace, how we can make things better, how can we work together, that sort of thing. So it was, it became much more constructive and much more cooperative. And they were able to evolve to a whole system where teams of people work together to solve problems. But without taking away that system, it would have been very, very difficult to do that 'cause, you know, well, that means that person will be ranked higher than me maybe, you know.

0:17:31.2 AS: And we know very well in the area of sports that, you know, great coaches are not sitting there ranking and rating and ranking their employees and beating them over the head with that. They're trying to identify the strengths and weaknesses. How do we, you know, build this team so that we can beat the other teams? And that really requires coordination. And if you do rating and ranking type of thing, you start to destroy coordination. And for those people that are thinking, of course, you know, I'm terrified to look at this and remove my rating and ranking. One thing you can do is take, you know, five or 10 people that you respect their opinion within the company and ask them how they feel about the rating and ranking system. And you'd be surprised what you hear.

0:18:15.3 JS: Oh, yeah. Oh, yeah, for sure. Right. And, but yeah, about the sports team, I guess. Yeah. I mean, there's some documentaries on the Chicago Bulls, you know, and I think they had some very good stories about teamwork and stuff like that.

0:18:30.5 AS: Well, Phil Jackson was amazing in that the documentary on Netflix was great, The Last Dance. But what you can see and you can hear it from the players, I think Dennis Rodman was a great example where Phil Jackson understood how to deal with this kind of disruptive kind of situation and guy. How do you deal with that and get the most out of him on the court in a way that still follows the values of yourself and your team? And he just showed that very well in that. And so I think that that was a great example of how you coordinate your resources.

0:19:08.5 JS: Yeah, a great example, I think, for people to watch. Yeah, 'cause it really does. It does really show that.

0:19:15.3 AS: You know, you were talking to me about just before we turned on the recorder about Deming was a scientist and physics and all this, some things I never even thought about. But maybe you can tell us a little bit about your thoughts in that area.

0:19:28.4 JS: Yeah, you know, I mean, I think that, first of all, the when you look at the traditional pyramid and all the traditional style of management, I mean, that's really based on reductionism, cause-and-effect. Essentially, it's Newton, you know, it's Newton's golden principles. So you have a business system that's built on 17th century logic, basically. And so what I think is wonderful about Dr. Deming, I mean, we think of him as this philosopher. But here he was, Dr. Deming in the 1920s, getting his PhD in mathematical physics. So at the time he's doing his PhD, I mean, there's Heisenberg developing his uncertainty theorems, all that kind of stuff was just exploding. And the whole view that people had of the physical world was just being turned upside down. So Dr. Deming was very, very cognizant of that.

0:20:35.2 JS: You know, when it started, you know, with statistics, but gosh, you know, science of psychology was changing too. And I think Deming, you know, when you read him, he was really thinking like a scientist. You know, this is the way the world works. And was very, very sensitive about all the components of that. You know, the science of the way people think and what motivates them. You know, he knew that people aren't motivated by sticks and carrots. And we'll talk about that later. He knew that there are limits to how much you can know if you're not right there in the workplace. You know, he understood all that because of variation. But I think when he was introducing those ideas, people really weren't thinking that way. I think they are a bit more today, but he was really a pioneer in that.

0:21:33.4 AS: Yeah. In fact, I was just looking at, he got his degree in mathematical physics from Yale university in 1928. So yeah, there was a lot going on in the world then.

0:21:46.3 JS: Sure was. Yeah. So yeah. And he, I guess he's very patient with us. You know, you think of someone having a degree like that talking, you know, over everybody's heads, but I think he really developed the style of communicating.

0:22:06.5 AS: So what else you got for us on this topic? I think you had some takeaways that you mentioned some four points or some other items.

0:22:14.3 JS: Sure. Yeah. I can, I did summarize at the end of the chapter just to sort of a bluffers guide, I guess, to, you know, this myth of segmented success. But, you know, first of all, you know, as we were just saying, conventional management practices are based on an outdated view of the world that emphasizes reductionism and predictability and ignores the influence of complexity and interdependencies. So you don't see how things actually affect each other in a company. Operating companies so that interdependencies are reflected in management practices and understood by all employees enables wide engagement in improving quality and productivity. To create a strong team environment, managers need to remove barriers such as siloed incentive plans and clearly communicate the aim of the organization. And finally, recent lessons from supply chain disruptions during the COVID epidemic show how segmentation extends beyond the walls of a company and how closer collaboration with supply chain partners can prevent such disruptions.

0:23:41.3 AS: So how would you, let me ask you, how would you wrap everything up in a very short statement? What do you want people to remember?

0:23:53.4 JS: I want people to remember that just because it says so in an org chart doesn't mean that that reflects the way things actually happen.

0:24:05.7 AS: Yeah, that's a great one. And I think we're trained, and this is where Dr. Deming used to say that, you know, what we're being taught in management schools, you know, is the wrong thing. And this is exact type of thing where we're talking about this concept of the, you know, the org chart and the way power flows and all of that stuff. So yeah, great points.

0:24:28.4 JS: Yeah. Not only in management school, but in grade school, you know, when we're rating and ranking kids before they even know how to learn and read, even before they know how to read and write.

0:24:41.2 AS: Yeah. And that brings us back to that first story where a kid walks in and what has she seen? She's seen the teacher and the principal with the name tag at the front, in front of the class.

0:24:53.4 JS: Exactly. Yeah. Yeah. And I don't know if we can keep talking, but you know, Rich Sheridan also discovered a drawing, which is actually, it's a diagram in The New Economics, but it shows how people's creativity and joy in work and stuff are systematically destroyed throughout their lifetime. They're constantly put down by teachers, principals, and they go to college and university and there's competition. And then they go into the workplace and they're rated and ranked. And it just destroys the natural of joy in work that people have and the enthusiasm people could have in the workplace.

0:25:39.5 AS: And for those listeners out there who used to listen to The Wall by Pink Floyd, Roger Waters was talking about how the school system was just pounding out any creativity, any fun, any joy. And so it's not unusual. And it's the case in many educational systems around the world. And so I think, you know, this is a good reminder of, you know, joy in work. And also this idea of segmented success. I think you had a statement that you said to me just before we started, which I thought summed it up perfectly, which was the whole doesn't equal the sum of the parts.

0:26:18.3 JS: Yeah, that's exactly. And we can basically reduce it all to that.

0:26:28.4 AS: Yeah. So I'm going to wrap up there. So for ladies and gentlemen, I think that's a great description of myth number one in Jacob's book, but I think ending it with this, the whole doesn't equal the sum of the parts, helps us all to realize that, you know, just bringing competition between different people and different units within an organization does not bring the optimum output. Jacob, on behalf of everyone at Deming Institute, I wanna thank you again for the discussion and for listeners, remember to go to deming.org to continue your journey. You can find Jacob's book, Productivity Reimagined at jacobstoller.com. And this is your host Andrew Stotz. And I'll leave you with one of my favorite quotes from Dr. Deming. We've been talking about it today. "People are entitled to joy in work".
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The Red Bead Experiment: Misunderstanding Quality (Part 5)
9 set· In Their Own Words
What can Dr. Deming's famous Red Bead Experiment teach us about quality? What happens when you only focus on the bad, and ignore the good? In this episode Bill Bellows and Andrew Stotz discuss acceptability vs desirability in the context of the Red Beads and a few of the 14 Points for Management.

0:00:02.1 Andrew Stotz: My name is Andrew Stotz and I'll be your host as we continue our journey into the teachings of Dr. W. Edwards Deming. Today I'm continuing my discussions with Bill Bellows who has spent 31 years helping people apply Dr. Deming's ideas to become aware of how their thinking is holding them back from their biggest opportunities. This is episode 5 of the Misunderstanding Quality series and the title is "The Red Bead Experiment." Bill take it away.

0:00:30.4 Bill: Thank you, Andrew, and welcome back. Welcome back to our listeners. One thing I want to say is, one is I listen to every podcast two or three times, listening for, is there a need for clarification, reminding myself, thinking, oh, I should have said this. Or sometimes I say, oh, make sure you make this point, and I do or I don't. And. so one is, nothing comes up from the last one that I thought I missed or mispronounced, but what I do want to clarify is, I'm viewing the target audience as quality professionals in your respective organization or people that want to become a quality professional that are learning, that are trying to apply these ideas in their organization, are fascinated with it. Could be quality professionals who are consultants looking for new awareness of the Deming perspective. So, that's...

0:01:35.8 Bill: And so, some of what I have in mind is, and the examples is, things you can try at home. In fact one thing I encourage... What I encourage my students to do, undergraduate and graduate students, even the clients I consult with, companies I consult with, is develop the ability to explain these ideas, any of them, to people outside of work. So, that could be a spouse, a brother, a sister, a mother, father, son, daughter. And, why outside of work? 'Cause I view that as a safe audience. You say, hey, I just listened to this podcast. Somebody at work may not be as safe. And why are we having this conversation? So, I would say, it could be a college classmate, but one is, try explaining these things to people outside of work and then when whoever that is looks at you and says, I have no idea what you're talking about, or this makes sense, then as you develop that confidence then you're refining your explanations. And that puts you in a better position to apply, to explain it at work.

0:02:54.9 Bill: And why is that important? I'd say there's a lot you can do on your own. I mentioned that a month or so ago, my wife and I were in New England, and I met my doctoral dissertation advisor, who's 86 years old and lives in the middle of nowhere. And one of the things is the wisdom he gave us way back when it was so profound. One of the things he said, we were poor starving college students making seven bucks an hour, working 20 hours during the semester as Research Assistants or 40 hours during the summer. And what a life. Living in... This is poor starving college students. And he would say to us... We'd get together now and then, there'd be a keg on campus and we'd be... Which it wasn't all that often, but anyway, he'd say to us, "These are the best years of your life." [laughter] And we'd look at him like... Now again, I mean, we were... I wouldn't say we were poor starving college students, but I mean, we made ends meet. Now our classmates had gone, undergraduate, gone off to work and they were making real money, and we just stayed in the slum housing and doing... Just living cheap.

0:04:20.3 Bill: Then he says, "These are the best years of your life." We're looking at him like what are you saying? And what he said was, you're working on your research projects either undergrad, masters or PhDs. He said, "You will never have the time you have now to focus on one thing and not be distracted." Now a few of the classmates were married. Most were not married, but he just said this is... I mean, what a dream situation. You're in the laboratory every day. That's all of your focus. Your tuition is covered, blah, blah, blah. But it was just like, yeah, okay. So, when our daughter was in graduate school I shared that with her and she laughed at me. I said, "Allison, these are the best years of your life."

0:05:14.4 AS: If only we listened.

0:05:15.5 Bill: Right. So, that's... And well, I wanted to bring up... But the other thing I want to bring up aside from that story is, he'd say to us, when you go to work, he said trust me. He said "there will be more than enough time to get your job done. You'll have a lot of... You will have time to..." And he said, 'cause he used to brag about he'd be given a task and he can get it done in a fraction of the time that was allocated. And why I mention that is that every job has latitude. And so, to our listeners I would say, think about how to use the latitude you have to practice, to do a small scale Plan-Do-Study-Act thing. Now I really think that's what it's going to come down to is, either experiment at home or whatever, but just practice. And then as Andrew always reminds us at the end of each podcast, you can reach out to me on LinkedIn. And that's led to a number of people I'm meeting with once or twice a month.

0:06:31.8 Bill: And they are exactly who I hope to meet, is young quality professionals wanting to know more, to know more, to know more, and they're either in the States or they're living in Europe. All right. So, before we get into the Red Bead Experiment I wanna go back and talk more about acceptability, desirability which will be a focus of the Red Bead Experiment as well. But in the first series we did, there were 23 episodes before we got into the Misunderstanding Quality, and somewhere in there we discussed, you may recall the paradigms of variation. And the paradigms are labeled letters A, B, C, D and E. And we will look at them in this series. So, for those who don't know what I just said, don't worry we'll cover you. And for those who heard it before, okay, we're going to review it. And I mentioned that because paradigm A, the only one I want to talk about tonight, is paradigm A, is does it meet requirements? That's what acceptability is. Is it good? 'Cause we have this binary world in quality. Part of paradigm A is a binary world. It is good or it's bad. We talked about last time is, if it's bad can we salvage it? Which means we can rework it.

0:07:52.3 Bill: Now some of the rework means it could be we can rework it and use it. And in the aerospace industry what happens is, maybe we can't put it in a flight engine. When I was at Rocketdyne maybe it doesn't end up in a Space Shuttle Main Engine, but maybe it ends up in a test engine and a test stand, so it doesn't fly, but we're still going to use it, or it's scrapped. We have to throw it away. But paradigm A is acceptability. Another thing I want to mention is, I was commenting on LinkedIn the last couple of days over process capability metrics. And there's Cp which stands for capability of the process. And, then there's Cpk which is a little bit different. And I don't want to get into those equations tonight, maybe in a future episode. But what I want to say is, if you're looking at a metric such as yield, people say the yield is 100%. What does that mean? It means everything is good. What if the yield is 50%? That means we have to... 50% is good, 50% is bad.

0:09:06.2 Bill: So, yield is an acceptability metric. Why do I say that? Because the measure is percent good. What is a good versus bad? Also say that indices that involve the requirements. And we've talked in the past about a lower requirement and an upper requirement, the idea because we expect variation we give a min and a max. And so, if the equation for the metric you're using includes the tolerance limits, then that's a clue that that's an acceptability-based metric. Now, I don't care whatever else is in the equation, but if those two numbers are in the equation, then the inference is, what you're talking about is a measure, some type of measure of acceptability.

0:10:00.5 AS: Right.

0:10:02.6 Bill: But even if people talk about... If the metric includes the middle of the requirements, well, as soon as you say middle of the requirements, as soon as you say requirements we're back to acceptability. So, these are things to pay attention to is what we're talking about acceptability and desirability, 'cause what we talked about last time was I was trying to give everyday examples of both. And so, acceptability is when people talk about... In fact I listened to about an hour long podcast today on quality management. And one of the comments was, if you follow the steps correctly you get the right result. Well, that's acceptability. Right? If things are right as opposed to wrong. So, again, when you're in this world of good, bad, right versus wrong, that's acceptability.

0:10:58.7 Bill: Again, the reminder is this is not to say acceptability is bad, but it's not desirability. Which one is it? And then what we talked about in the last podcast number four was choose. Do we wanna to focus on acceptability or do we wanna focus on desirability? Where desirability is saying, of all the things that are acceptable, I want this one. I want that orange. I want that parking spot. I wanna date that person of all the ones that meet requirements in my search... You know, in the dating app. And so, that's acceptability. What got me excited by Deming's work in the early '90s was, I was spending a whole lot of time at Rocketdyne focusing on things that were broken. I'm trying to apply Dr. Taguchi's ideas to go, to take something that used to be good but then slipped into bad, and now we're focusing on the bad stuff to make it good. And now the good news is it kept me busy.

0:12:06.5 Bill: I was having a lot of fun. These are high visibility things and the solutions. We got the solutions working with some really wonderful people. But that led me to start asking questions. And I was once at an all-day meeting in Seattle at Boeing. Rocketdyne had been sold to Boeing Commercial Airplane Company. I got invited to a meeting up there. And it was a monthly all-day production meeting. I don't know 50, 60 people in the room. And they asked me to come up. So, I went up. And what time does the meeting start? You know 8 o'clock, 9 o'clock, whatever. And I said you know put me on a few hours into the meeting. Well, why then? Well, I want to listen to the first couple of hours of the meeting. Because in listening, now we're going back to what we talked about with Edgar Schein. And I've developed the ability... You know, I can hear are we focusing on acceptability, desirability, I can hear things you know with a Deming lens. People think of a lens as seeing, well, there's a Deming ear set as well.

0:13:10.7 Bill: And so, I listened for the first two hours and exactly what I expected. So, when I get up to speak at last I said before I got to the slides, I said, "How much time do you spend every day discussing parts that are good, that arrive on time?" And a couple of people in the front row made a circle with their fingers, zero. And I said, so why is that the case? And one of them says, if it's not broken don't fix it. And wherever I go that's what people say. I went to a big Boeing customer doing... Because they were a customer we sold them rocket engines of some size. And I was briefing that slide, had 110 people in the room for a lunchtime presentation. Before I could read the slide, the room erupted in laughter. And so, I share that because if we're spending all this time focusing on the bad but not the good, what is that? That's acceptability. That's what happens, is the economics of acceptability says, only focus on the bad to make it good. But we don't focus on the good because... And that's what we're gonna look at towards the end of tonight is, why don't we focus on the good? And so, next, I had a co-worker at Rocketdyne got a job in Chicago at a toy factory. They bottled soap bubbles. And as a kid's toy with a little wand inside and blowing bubbles and all that.

0:14:56.0 Bill: And she dramatically turned the place around, did some amazing, amazing work. She went from being the senior manufacturing engineer to the, I think plant manager. So, she called me up as she'd been promoted to plant manager. And the question was now that I'm plant manager what should I focus on? So, I said... I had known her for four or five years at that time. I had been mentoring her and the mentoring continued in that capacity. So, I said well, what do you think you should focus on? And the comment was, I think I should focus on all the things that are broken. Well, that's acceptability once again. And I said, so you're focusing on being 100% reactive. And she said, well, yeah. And I said, what you're doing then by focusing on acceptability, you're saying the things that are good I ship, the things that are bad I got to work on. But without understanding that there's actually variation in good... I mean, go back to the Boeing folks when the guy says to me if it's not broken don't fix it. My response to that was, if you use that thinking to drive your car when would you put gas in it? When it runs out. If you use that thinking relative to your plumbing system, your water system at home when would you call the plumber? When it breaks.

0:16:25.5 Bill: When would you go see the doctor? When... So, the downside of not working on things that are good and not paying attention to things that are good is that they may bite you. So, part of the value proposition of acknowledging from a desirability perspective that there's variation in good. If you pay attention to the variation in good there's two upsides. One is, you can prevent bad from happening if that's all you want to do. And two, the focus of a future episode is by focusing on things that are good and paying attention to desirability in the way that Yoshida, Professor Yoshida was talking about. That offers opportunities to do things that you can't do with an acceptability focus, which is improve how things work together as a system. And the idea being when you move from acceptability which is a part focus to desirability, which is a system focus, you can improve the system. Okay, more to follow on that. All right. So, I got some questions for you Andrew, are you ready?

0:17:37.4 AS: Uh-oh. Uh-oh.

0:17:39.8 Bill: So, Dr. Deming had how many points for management?

0:17:42.9 AS: Fourteen.

0:17:46.3 Bill: All right. Okay.

0:17:48.3 AS: I'm being set up here. I just feel it. You start with the easy ones.

0:17:52.8 Bill: All right. And...

0:17:54.3 AS: Listeners, viewers help me out.

0:17:56.9 Bill: All right. And which point, Andrew, was cease dependence on inspection to achieve quality? What number was that?

0:18:09.6 AS: I'm gonna say four or five, or six. I can't remember.

0:18:14.2 Bill: Three. Three.

0:18:14.6 AS: Really? Three. Okay. That was close.

0:18:16.1 Bill: I would not have known. That was number three.

0:18:19.1 AS: Yeah.

0:18:20.1 Bill: And it's followed by Dr. Deming saying, "Eliminate the need for inspection on a mass basis by building quality to the product." So, the first question is what point was it? And again, I had to look it up. I know it's one of the 14. Second question, Andrew, is, if Dr. Deming is saying cease dependence on inspection to achieve quality, would you think of that as an acceptability focus or a desirability focus?

0:18:55.1 AS: I don't know if I can answer that. I mean, I can only think about what he was saying, which was design quality in from the beginning and get everybody involved in quality, not just having an inspector at the end, but I'm not sure.

0:19:11.4 Bill: Yeah. No. And even as I asked the other question, I'm thinking... Well, this is great because if in the audience you think of quality from an acceptability perspective, right?

0:19:24.2 AS: Mm-hmm.

0:19:24.9 Bill: So, if you're working for Boeing, which is all about acceptability or most companies, and you hear step three, then you're thinking, cease dependence on the inspection to achieve..., you're thinking acceptability. If that's what you're used to, if you're used to quality being doesn't meet requirements...

0:19:42.9 AS: Okay.

0:19:43.2 Bill: Then what you're hearing is Deming talking about acceptability. But if you've been exposed to Yoshida's work and Dr. Taguchi's work and you're understanding that within requirements there's variation of things that are good, so it's kind of a trick question. The idea is it depends. Alright.

0:20:02.4 AS: Yep.

0:20:05.5 Bill: I got two other of 14 points to ask you about. Alright. Which of the 14 points is in the practice of awarding business on the basis of price tag alone? Instead, minimize total cost. So, first which point is that?

0:20:26.9 AS: I think it was also... I would say then four.

0:20:32.1 Bill: Yes.

[laughter]

0:20:33.6 AS: Yeah.

0:20:34.1 Bill: Yeah.

[laughter]

0:20:34.5 AS: You'd think I know. I wrote a book about it.

[laughter]

0:20:39.3 Bill: Alright. So, that's point four and...

0:20:42.1 AS: Okay. So, I got... I don't wanna be rated and ranked, but I got one right at least. Okay. Let's keep going.

0:20:49.1 Bill: Okay. And, so, is that acceptability or desirability? Let's say this. Is awarding business on price tag acceptability or desirability?

0:21:02.1 AS: Probably acceptability.

0:21:04.6 Bill: Yeah. 'Cause then you're saying...

0:21:06.5 AS: Can you hit this number? It's okay.

0:21:11.2 Bill: Yeah. Or you contact your insurance company and you say, I'm looking for a heart surgeon, and you say, and I found one, blah, blah, blah, blah, blah. And they call you up and say, yes, that person is a heart surgeon, but we prefer you use this one. [chuckle] What's the chance they're thinking about a cheaper option? Right? Alright? So, you're looking at from desirability perspective...

0:21:38.5 AS: This guy's really cheap on kidneys.

0:21:40.7 Bill: Right? And so you're thinking you've done a bunch of references. You've asked your friends. And why are you asking? Because all the doctors out there that meet requirements, you're blindly saying, I'll take any one. That's acceptability. And you're saying, I want this one. That's desirability. But the insurance company says, no. We consider them all to be the same in our policy. That's acceptability. Alright. Okay. And here's the last point we're gonna look at tonight. Which of the 14 points is "improve constantly and forever the system of production and service to improve quality and productivity and thus constantly decrease cost"?

0:22:23.5 AS: Isn't that number one? Constancy of... That's...

0:22:28.0 Bill: That's constancy of purpose. That's number one.

0:22:28.8 AS: Okay. Constancy of purpose. So, improve... Don't know. No. No.

0:22:39.4 Bill: That's number 5.

0:22:40.5 AS: Okay. Five.

0:22:44.5 Bill: And I was looking at, so I know those are three and one, and I thought, oh, that's three, four, and five. Alright. So, what I wanna do there is, we're gonna look at that a little bit later. So, I don't wanna ask you about acceptability, desirability, but I just wanna lay that on on the table. Alright. So, now we're gonna look at what Dr. Deming referred to as his chain reaction. The Deming Chain Reaction. Alright. So, what do you remember about the Deming chain reaction? It wasn't a motorcycle chain or a bicycle chain, right? What did Dr. Deming call his chain reaction?

0:23:31.3 AS: I can't... I mean, I'm thinking of the flowchart.

0:23:34.9 Bill: Yeah. We'll get to that. We'll get to that. The chain reaction...

0:23:36.5 AS: But that I can't remember.

0:23:39.6 Bill: And this is likely Out of the Crisis. The Deming chain reaction is, "if you improve quality, you will reduce scrap and rework, thereby reduce costs." And then he goes on to, by reducing costs, you can increase sales and expand the market. That's the chain reaction.

0:24:01.9 AS: Yeah.

0:24:02.2 Bill: So, when I ask students, again, in my either graduate, undergraduate classes is, talk about the Deming Chain Reaction, then I say, is the Deming Chain Reaction... Within the Deming Chain Reaction, Deming says, if you improve quality, reduce scrap and rework, lower cost, is that explanation of quality, acceptability, or desirability?

0:24:31.9 AS: I don't know. I'm fearful to answer nowadays because I'm not getting these right.

0:24:37.4 Bill: No. You are. You're on a roll. [chuckle] Again, the Deming Chain Reaction, if we improve quality, we reduce scrap and rework, thereby lower the cost thereby sell more and expand the market.

0:24:52.2 AS: I would say that's desirability.

0:24:56.1 Bill: Okay. One more time. If we improve quality, we reduce scrap and rework.

0:25:03.2 AS: Yep.

0:25:04.3 Bill: So, the clue is scrap. Is scrap something we talk about with acceptability or desirability?

0:25:12.1 AS: That's acceptability.

0:25:14.1 Bill: And rework.

0:25:18.2 AS: Well, we're trying to make it acceptable.

0:25:20.1 Bill: Exactly. And the reason I point that out is, I'm not sure... And I think we talked last time about things we agree with Deming or disagree with Deming. I'm not a big fan of the Deming Chain Reaction because I think... Again, if I'm in the audience and I'm working for a company that defines quality and in terms of acceptability, and he says to me, if you improve quality, reduce scrap and rework, that's what I'm used to. And my concern is, in other ways he's explaining quality in terms of constantly improving. Well, how can you constantly improve quality once you get to 100% yield? So. if all the product is good, which is acceptability, if there's no scrap and no rework, can you improve quality? Not if you're focusing on acceptability. And so, what I'm saying there is, that if Dr. Deming is in one hand defining the chain reaction and using the term quality in reference to scrap and rework, then he's projecting quality as acceptability. But if he's talking about improving constantly and forever, and then we get into, can you improve the quality forever? That's what he's saying.

0:26:49.1 Bill: What if you get to 100% yield, which is the maximum value of acceptability? Well, only if you shift to desirability can you improve forever quality, if you think it's worthwhile to do. So, that's why I wanted to go back and look at those things. One is revisit acceptability, desirability, and point out what I think are some opportunities for confusion in trying to explain Deming's work. Alright. Now we'll talk about the Red Bead experiment, which is, the very first time... I remember reading about it in the earliest books I read. I think, who is it that wrote the first books on Deming management, Deming management? She's a...

0:27:42.8 AS: Killian?

0:27:44.3 Bill: No, no, no. Cecilia Killian was Deming's admin.

0:27:48.9 AS: Mary?

0:27:50.5 Bill: Yeah. Mary Walton.

0:27:51.6 AS: Mary Walton.

0:27:52.5 Bill: Mary Walton. I remember reading a Mary Walton's book, that's when I first got exposed to this Red Bead experiment. So, The Deming Institute has a dedicated webpage, so, if you go to deming.org, or just do a Google search for deming.org Red Bead experiment, it's one of the most popular pages. I think that might be the second most popular, most visited page past the 14 Points. In there you can find short videos. There are longer videos, but there's enough on there to follow along with what I want to explain. So, Dr. Deming and the Red Bead experiment would take from the audience, and it could be four willing workers, six willing workers. He'd be the manager of the White Bead Company, and he would explain to them, he would share with them. He had a bowl, and in the bowl were 5,000 beads, maybe an eighth of an inch in diameter, small plastic beads, and there'd be 5,000 in the bowl, 4,000 white, 1,000 red.

0:29:00.6 Bill: And then there was a paddle, and the paddle could be roughly two inches by four inches, and the paddle had a little handle, and it had holes in it. So, the instructions he would provide to the willing workers, the production workers, is to take this paddle at a given angle, slide it in flat into the bowl, even the back of the beads. The beads are in one container, they get poured into another container.

0:29:27.7 AS: In a pan.

0:29:28.1 Bill: It's a mixing process, and then he pours them back in. So, just pour them from one to the other, and he would be very persnickety on pour at 45 degrees, tip from the corner. You pour back and forth, put the paddle in, and you'd end up with 50 of the beads would fill the paddle, and then you'd go to the inspector number one. And the inspector number one would count how many red beads, which is not what the customer wants. What the customer wants is white beads, but the raw material includes both. So, you go to inspector one, and they may count five beads. You go to inspector number two, and they quietly see five. The numbers get written down. Ideally, they're the same. And then you go to the, I think, the master inspector, and they say, five beads, and then "dismissed." And then write the five on a flip chart, and then the next person comes and does it, and the next person comes and does it. So, all six come up and draw beads, and then we count the number of red ones. The number of red ones go into this big table. Next thing you know we've done this over four different days. I've done this. This could take an hour. And even when you watch the videos, there's a fast forwarding.

0:31:00.1 Bill: I've done the Red Bead experiment, I think, just once, and I did it with a former student, which worked out really well, 'cause there was a lot of dead time, and the audience was watching, and so I was able to get conversation going with her. So, for those wanting to do this, boy, you've got to be pretty good on your feet to keep the audience entertained. To get to the point where you've got a table on the whiteboard, or on the flip chart, and on the table are the six willing workers on the left-hand side, and then day by day the red beads... Looking at the number of red beads. So, what are the red beads? Well, the red beads are not what the customer wants. What the customer wants are white beads, but in the production process, because the raw material includes red, well, then the red ends up in the output. So, I ask people, so, if the white beads are what the customer wants, what are the red beads? And typically, people say those are the defective, defects, scrap.

0:32:03.2 Bill: And, so now you get into this model is based on acceptability. The beads are either good, white, or bad, red. And so I would ask the students in class, in a work setting, what might the red beads be? I, in fact, asked our daughter. She said, is just moving from being a junior high school English teacher to a senior high school English teacher. Her undergraduate degree is from Cal State Long Beach.

0:32:34.3 AS: There you go.

0:32:34.3 Bill: So, her first day of school was today. She's also the varsity swim coach, which is way, way cool. Mom and dad are proud of her. So, I remember asking her a few years ago. So, I said, Allison, what are the red beads in the classroom? She said, well, the stapler doesn't work. The door doesn't close. The projector screen doesn't come down. The computer doesn't work. These are red beads in the classroom. So, I said, okay, Allison. What are the white beads?

0:33:01.1 Bill: Geez. So, we get so used to talking about the red beads are the defects or things that... Well, the white beads, by comparison, are the things that are good. So, I said, Allison, if the computer works, that's a white bead. If the door closes, that's a white bead. If you can close the window, that's a white bead. If you can pull down the screen, that's a white bead. So, the red beads are the things around us that are defects, broken, and the white beads are the others. And so, I wanna throw that out to do some stage setting. And ideally, this is a review for our listeners, and if not, you've gotta go watch as many videos as you can in The Deming Institute website. There's a lot of great content there. Watching Dr. Deming do this is pretty cool.

0:33:49.0 AS: He's a funny guy.

0:33:51.6 Bill: And I was very fortunate to be in Dr. Deming's very last four-day seminar. I did not participate in The Red Bead Experiment. I let somebody else do that, but it was classic. Well, the next thing I wanna get into is, and I would say to audiences many times, so we know... Well, a couple things. It's so easy to look at that data on a spreadsheet and say, Jill's the best performer. She has the minimum number of red beads. So, on the one hand, we can look day by day, and it could be Jill's number started off low. And we gave her an award, and then it went high, and then we started blaming her. So, there's variation in the number of beads, worker to worker and day to day. So, a given worker, their scores go up and down. So, that's called variation.

0:34:43.4 Bill: And so one of the aspects of the System of Profound Knowledge, which we haven't talked about too much, but ideally our listeners know Dr. Deming was really big about the value proposition of understanding variation. So, what Dr. Deming would talk about in his four-day seminars, and ideally anybody presenting this, is you take the data, you draw the usual conclusions. We're looking at data from an acceptability perspective. We look at the spreadsheet, and then voila, we turn it into a run chart and look at that data over time, calculate control limits, and then find that all the data is within the control limits and draw the conclusion that the process is in control. And then you move from in a non-Deming environment, looking at this data point versus this data point and drawing these conclusions that the white... The number of red beads is due to the workers.

0:35:33.7 Bill: So, the punch lines you'll find at Deming Institute webpage is that the workers are trying as best they can, that the red beads are caused not by the workers taken separately, but by the system, which includes the workers. A lot of great learning there. And a very significant piece is, in a Deming environment, where Deming's coming from is, again, this is before we go further in this in future sessions is, he's proposing that the majority of what goes on in the system relative to the performance of anything you measure is coming from the system. And if that is really, really understood, then you're hard pressed to blame people in sales for lousy sales or dips in sales or you look at grades of students in a classroom. So, for people looking at Dr. Deming's ideas, perhaps for the first time, realize that what he's talking about is coming from The Red Bead Experiment is a great eye opener for this is that, let's stop blaming the workers for the production issues and step back and look at our procurement system.

0:36:39.6 Bill: Do we have a procurement system where we're buying on price tag? If you buy on price tag, you end up with buying a lot of red beads. So, one aspect I wanna leave our listeners with today is, as you're studying this, realize there's a psychology aspect to The Red Bead Experiment. Not only the idea that there's variation up and down, but what are the implications of realizing that we can't be blaming the workers for the behavior of the system. The system includes the workers, but it also includes things that are well beyond their control. Well, where I wanna go next with this and then we'll next time get in and go further is, in appreciation of point five, "improve constantly forever the system," what I would ask audience is, so we know the red beads are caused by the system. We know the number of white beads goes up and down. But if we were to improve the system by not buying red beads or pre-sorting them out and get fewer and fewer red beads in there, then we get to the point that all the beads are white, perhaps. We have continuous improvement.

0:37:47.2 Bill: We end up with a 100% yield. Well, then we get into, again, and I've kind of set the stage in prior comments, what I would ask people is, what Dr. Deming's talking about trying to achieve zero red beads everywhere in the organization? Is that what we're striving for with the Deming philosophy, is to go around the organization, I want every single process to produce no red beads to make it to a 100% white beads? And if that's what Dr. Deming is talking about, then what does point five mean about continuously improving? Now we get into what I mentioned earlier is, you can improve the speed of operation to produce more white beads, so, we can do them faster, we can do them cheaper, but can we improve the quality of the white beads under that model? And the answer is no, because acceptability stops at a 100%. So, what we'll look at next time is, if you look at the beads and look closely, you'll see they have different diameters, different weights. They're not exactly the same color white. So, what is that Andrew? That's called variation.

0:39:00.9 Bill: And now it brings us back to desirability. So, what I encourage people to do, most of the times I see people presenting The Red Bead Experiment, they present it from an acceptability perspective. That's the starting point. But what I encourage our listeners to do is go through all that, and this becomes a great opportunity to move your audiences from acceptability focus to desirability by talking about the inherent variation in those beads. Again, we'll talk about the value proposition economically in future sessions, as well as the other paradigms of variation before we get there. So, that's what I wanna cover.

0:39:43.2 AS: Wow. Bill, on behalf of everyone at The Deming Institute, I wanna thank you again for this discussion. And for listeners, remember to go to deming.org to continue your journey. If you wanna keep in touch with Bill, just find him on LinkedIn, and this is your host, Andrew Stotz, and I'll leave you with one of my favorite quotes from Dr. Deming. It never gets old. "People are entitled to joy in work."
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Setting the Challenge: Path for Improvement (Part 2)
26 ago· In Their Own Words
In this episode, John Dues and Andrew Stotz discuss the first part of John's path for improvement model - setting the challenge. Using an example from United Schools Network, John explains their aspirations for cutting chronic absenteeism rates.

TRANSCRIPT

0:00:02.4 Andrew Stotz: My name is Andrew Stotz. And I'll be your host as we continue our journey into the teachings of Dr. W. Edwards Deming. Today, I'm continuing my discussion with John Dues, who is part of the new generation of educators striving to apply Dr. Deming's principles to unleash student joy in learning. And the topic for today is "set the challenge." John, take it away.

0:00:24.6 John Dues: It's good to be back, Andrew. Yeah. Last episode, we kicked off this new series. I introduced this improvement model that we can use to help us set ambitious goals backed with a sound methodology. I think I made this disclaimer last time. I'll make it again that this is sort of like showing listeners a peek behind the curtain because we're sort of talking about this as this model is being built and used for the first time in my network of schools here in Columbus in United Schools. So I think that caveat's important, and I think maybe starting with just a quick review of the model we looked at last time would be a good refresher for this episode for those that are reviewing and I'll talk through it for those that are only listening. I'll go ahead and share my screen quick. You see that all right?

0:01:17.1 AS: Yep.

0:01:18.4 JD: All right. Yeah, so this is the model we kind of stepped through kind of an overview last time. I think it's important to remember a few things. One, basically the core idea of the improvement model is it gives us the scientific way of thinking so that we can work in a way that makes sense to close the gap between our sort of current conditions in our organization and sort of our aspirations. So we frame those two things as the voice of the process, as current conditions, what's happening right now. And then the future aspirations, that's the voice of the customer. That's sort of what we or someone else wants those conditions to be. And what we're doing throughout this process is stepping through the four steps that you can see displayed in the model. So kind of just stepping through those quick.

0:02:06.5 JD: The first thing is that we set the challenge or the direction, and that's gonna be... We're gonna dive deeper into that step today. Then the second step over on the left hand side of the model, for those that are viewing, you work to grasp the current condition, so what's going on currently in your organization. And then the third step is we establish the next target condition. So think of that as like the intermediate goal that we're working towards sort of on a more proximate timeline. And then fourth, what we're doing is once we understand those things, then we're experimenting to overcome obstacles or impediments. And so all of those things we talked about, doing that with a team that includes someone or people working in the system, in our case students, a lot of the time, those with the authority to work on the system like the teacher in a classroom or the principal of the school building. And then that System of Profound Knowledge coach that has that awareness of the System of Profound Knowledge and sort of brings that lens to the improvement efforts. So that's sort of a quick rehash of the model that we went over in episode one. And then I'll stop. Well, you want me to leave that up or I can stop sharing?

0:03:29.9 AS: Either way. I don't mind.

0:03:31.0 JD: Okay. Well I'll stop sharing for now and then we can always pull it back up if we want to. Yeah. So with that sort of in mind, what I thought would be helpful is then do this deep dive into step one. And so kind of what we'll do through the next several episodes is focus on each of the steps. So we'll take this deeper dive into step one. Set the challenge or direction. So last time I mentioned that in step one of the model we asked this primary question, where do we want to be in the long run? And this is... Think about this as a overall challenge or direction that's set by organizational leadership typically. So senior leaders, the CEO, typically the board, they're gonna be the ones framing this challenge, setting the direction for the organization.

0:04:27.2 JD: And we can also think about it as a sort of a longer range goal that if we accomplish it, it will differentiate us in our case from other schools or if you're in the business community, it would differentiate you from competitors in some way. But even though it's something that we're striving toward currently we're setting this in a way that it's gonna stretch us and right now it almost seems impossible to accomplish this thing far out into the future. And this direction or challenge, I think it's fairly typical. Sort of set this on a six month to three year timeframe. So that kind of gives you a sense of sort of how far out we're looking and the timeframe we're looking to sort of achieve this challenge is. And last time I shared an example from our most recent strategic planning where we're trying to reduce our chronic absenteeism from the current state, which is 52% chronic absenteeism. We're trying to take that down to something closer to 5% chronic absenteeism.

0:05:44.4 AS: Seems nearly impossible.

0:05:44.5 JD: It does if you're on the ground in schools right now, especially schools like ours, it really does seem nearly impossible to sort of cut it at that large of a rate. So.

0:05:55.6 AS: I have an ethics class that I teach here, an ethics and finance class here in Bangkok. And I tell the students it's not mandatory to attend class from my perspective. School may require you, but it doesn't matter to me. My job is to make it so exciting and interesting that you wanna be here. That's hard.

0:06:16.7 JD: Yeah. That's a good frame. That's a really good frame. We have, unfortunately we have so many obstacles that our kids are going through to get to school. Even something as simple as consistent transportation from yellow school buses is a major impediment to school attendance here in Columbus. So there's all kinds of obstacles that... Challenges in front of us that we're gonna have to improve and solve to get down to that 5% rate.

0:06:43.0 AS: When I was growing up in Ohio, in Hudson, outside of Cleveland, the farm that I worked on in the summer, Barlow's farm. Mr. Barlow was our bus driver because there wasn't much going on in the wintertime. And so, yeah, he never missed [laughter] I don't ever remember a bus not arriving in my whole youth.

0:07:07.6 JD: Yeah, yeah. It's something in many places you take for granted. And then in a number of other places, it is a major, major challenge for sure.

0:07:13.0 AS: Interesting.

0:07:14.8 JD: That's certainly the case in Columbus where we are, for sure. So when we think about this challenge it's this... I kind of think about it and this is why it needs to a lot of times be set at the leadership level or the senior leader level is it's this new future condition and it serves as a sort of compass for us to follow. And that's important 'cause we don't have an exact roadmap for how to get there. So it's sort of like a general direction, but the specifics are what we're gonna have to be filling in as we go through some of those other steps. Some of those intermediate goal setting, some of the experimentation that I talked about. But think about this direction or challenge is it's really the purpose behind our efforts. And then when you sort of put together the tough challenge and then the scientific thinking, that's really powerful. And those two things together can really sort of move you into this new territory. I think that you're looking to... I think this map territory compass metaphor is really sort of spot on for this particular model. Oh, go ahead.

0:08:29.8 AS: I had a question because I have a client of mine and one of their objectives is to list their company on the stock market here in Thailand. Like many companies, but in some ways that's kind of an owner's goal. Like we've talked about some of their other goals, like being the leading company in their field in asia, Southeast Asia or something like that, and/or maybe to have a happy workforce or whatever. And I'm just curious, like how do people think about goals? What is a good way to think about it? Is there such a thing as like an internal or a higher level goal versus a goal for the company versus an external goal? How do you guys think about those types of things and target conditions?

0:09:17.2 JD: Yeah, I mean, I think... I don't know the exact answer. I mean, I think when you set a goal at the leadership level, then you're gonna... Well, one, you're gonna have to explain it throughout the organization, whether it's a 100 people or a 1000 people or 10,000 people. And then depending on the size, there's probably gonna be different types of goals that are in different business units, I'm guessing by business type. We're a pretty small organization and so we're pretty close to the... In fact, our office... My office, it is on the ground floor of one of our middle schools, so we're very proximate compared to like a bigger company. So I think this can look different in different places. I think the consistent thing is it's gotta be clear, it's gotta be spelled out, it's gotta be clearly communicated. It has to be something that you're talking about frequently. Otherwise you're obviously not gonna move in this direction.

0:10:11.2 AS: Yeah, I mean, that kind of answers it too. 'cause I thought... When you said that, I also thought about how people care about with them, what's in it for me. And so, as you said, you gotta explain it and you're gonna have to do a lot of talking about it. So people need to see that that goal is something that's gonna bring them value, otherwise they're not gonna be excited to go do the hard work that it takes to get there.

0:10:37.0 JD: Yeah. Maybe in that respect, like sometimes in education is... Some of the goals that we have set are so self apparent that there's just sort of immediate buy-in 'cause like who's against kids coming to school? Almost nobody. So that's I think a fairly easy one to get buy in. And maybe in other settings more time needs to be spent on the buy-in part, the explanation part. Maybe... This can be kind of hard, but who's involved in setting the goals in the first place? Maybe there's ways to get more people involved in that process.

0:11:10.6 AS: Well, and maybe the kids aren't involved in the buy-in.

0:11:13.8 JD: Yeah, that's true. That's true. Although, yeah, like the yellow bus thing that's out of their control. And I'd say that's actually a major obstacle. But I think...

0:11:26.5 AS: That's true. Nowadays, I'm sure there's plenty of kids that wanna be there.

0:11:29.5 JD: Oh yes for sure.

0:11:30.9 AS: But there's obstacles all over the place for them.

0:11:34.3 JD: The vast majority wanna be there, actually, I think. But your point is good, and that goes back to that team they're the ones working in the system and so they're gonna be the best at identifying the obstacles. So to stay in our setting, they certainly need to be a part of the experimentation that happens to improve the chronic absenteeism rate. One other important caveat to point out at this step in the process, and we've talked about this a little bit but I got this little chart that I think will help sort of explain when we were setting this direction or challenge, it's what I would call like an improvement goal. And it's not an accountability goal. And I think it's really important to be explicit about the difference between those two things.

0:12:24.4 JD: 'cause they often get conflated. And so I had built this chart for another improvement project, but I think it does a really good job. So I'll share my screen again. I think it does a really good job of sort of outlining the difference. And it's not that one is necessarily better than the other, it is just really important to know what's the purpose of this particular type of goal and what's it used for. And so I was just gonna take a moment to kind of run through this. So on the left you have sort of some key questions that are answered either by... And here it says measurement for accountability, but you can sort of replace that with an accountability goal and improvement goal over there on the right. So you have measurement for accountability or accountability goal, and then improvement goals or measurements for improvement.

0:13:20.7 JD: And you have some questions that that particular type of goal or measure will answer. Then you have in the next row their specific uses. And then why quality measurement matters. So just starting with accountability goals or measurement for accountability what those types of goals are gonna do is answer questions about merit or status or accomplishment of someone or something. Who's performing well, who isn't, who should be considered knowledgeable enough to do X. We're talking about end of line outcomes, like end of year outcomes. They're often... Goals for accountability often happen once a year. So I've talked about this repeatedly, but state tests would be a very good example of an accountability goal. The point of doing that is to separate the good from the bad basically, when you look at state test. Down there in the use sell for those that are viewing, it says the purpose of, or the use for accountability goals is to determine the applications of rewards or sanctions. Right? And so it's none of this really has to do with improvement.

0:14:38.8 AS: Sanctions, what a word, [laughter]

0:14:40.4 JD: Sanctions, right? Yeah. I mean, this happens in schools all the time. Schools can be sanctioned depending on what the law is at the time as it relates to state testing and accountability system.

0:14:50.9 AS: I thought we only sanctioned Russia [laughter] Okay. So there's even sanctions in schools. Okay, got it.

0:14:58.0 JD: Definitely sanctions in schools. And then we can juxtapose the accountability measures with the improvement measures over there on the right or improvement goals. When we're talking about improvement goals or setting the challenge, we're really talking about questions about specific changes as potential improvements to systems like our systems. So we're thinking about questions like, are the changes I'm making leading to improvement? How are my changes affecting other parts of my system? And what's measured is outcomes and processes relevant to the object of change. You know and how often are we doing this? Frequently. Much more than once a year, like the state test. And the whole point is to learn our way to a better system, right. And so with chronic absenteeism this could be both a measure for accountability and a measure for improvement, depending on how it's framed.

0:15:57.8 JD: Chronic absenteeism is actually reported on state report cards, but in this case, I'm talking about an internally created goal that we have for ourself that we've created for ourself that our organization is gonna work towards. And there's gonna be various things that we do to see if things that we're trying as interventions, experiments work in improving those rates, basically. So I think it's really important to call this out that when we are talking about this particular improvement model and the four steps, we are not talking about accountability goals at all. We're talking about improvement goals, two very different things.

0:16:37.6 AS: Interesting. And the improvement goals is the type of thing that it seems like is not as common as the accountability. Like everybody's trying to, you do this, you've gotta achieve this, that type of thing. Whereas this is such a bigger picture.

0:16:51.3 JD: Yeah. I mean, I think the key difference is because you could actually have an internal accountability goal. You could set up a similar system internally as what the state does when they're looking at schools. And if our mindset was, we're gonna set this goal and you people over here go do this, figure out how to do it, that would be much more like an accountability goal. But our mindset is like hey, this is something we all gotta take a look at. This has to get better. This isn't working for kids, so what are we gonna do? How are we gonna figure this out? That's really the key difference, you know? You're not doing this for some other group of people. You're a part of that group that's trying to make this thing better.

0:17:36.5 AS: So I'm just curious too, as I think about the listener or the viewer out here is how do they get started in this concept of setting the challenge or direction and maybe there's people at the top of the company. I mean, the first thing that I thought when you started talking about it is Oh, there's so many target conditions, there's so many challenges. Like there should be this one and that one. And all of a sudden I started coming up with like three to five challenges. And then I thought, oh no. Now this is overwhelming.

0:18:11.8 JD: Yeah. So in our strategic plan, we have 13 of these key metrics. And each of one of those could be its own challenge or direction, but they are divided up sort of roughly in like different department areas. And so some of 'em have to do with our fiscal responsibility raising funds and stuff like that. And there's a specific team that does that. And that would be different from like an academic team or a school-based team that was working on something like chronic absenteeism. So there is sort of a divide and conquer. The CEO maybe our superintendent are focused on all 13, but there are different teams that are actually running the experiments and working towards improving these things. And then there's someone like me that's sort of serving as the System of Profound Knowledge coach across multiple teams that are working on each of these key metrics basically. But in terms of where to start, I think that's a good segue. I mean, I think we've answered the question or we've said that basically that this strategic challenge answers the question, where's our organization going next? And I think one good... One simple way to start is to think of completing this sentence: Wouldn't it be great if we could dot, dot, dot.

0:19:37.0 JD: What is that thing or what are those things in your organization? It's, again, going back to it seeming nearly impossible, it's something we can't achieve with our current systems and processes. It's not easy, but not impossible. We think it's achievable even if we're not quite sure how we're gonna get there. It's something that's gonna be measurable. So we know if and when we get there. And another thing is that, especially when you're talking about, you were talking about like communication of these challenges across the organization, these challenges or directions are often expressed as some type of catchy statement. So just a quick statement that brings to mind this entire sort of area of work. And so I was kind of brainstorming because we've been talking about this chronic absenteeism example and I think we can just kind of keep that going throughout these episodes. So I was thinking of something like, every student every day, and then everybody knows that we think it's important for every student to be at school every day. And we're sort of working to get back to that post pandemic.

0:20:52.3 AS: Yeah. I was thinking, wouldn't it be great if every parent was fired up.

0:21:00.1 JD: Yes, absolutely.

0:21:01.2 AS: About every student every day. Like, that's the way I was just thinking about it 'cause I think that, and I just like the kids. I'm sure there's plenty of parents that say, I want my kids to get a good education and I want them to get more than what I got, but I can't reach it or I can't do it. I got too much on my plate. But if somehow they were a party to this.

0:21:26.1 JD: Yep. I think, similar to the students, I mean, I think parents absolutely can be a part of an effort where you work. And in fact almost have to be, especially 'cause we're a K-8 system and certainly at the very least at the K-5 level, kids are almost entirely dependent in most cases on parents getting them to school. So, certainly parents...

0:21:49.2 AS: What is the catchment area of your schools? Like what's the farthest?

0:21:57.8 JD: Yeah, we have pretty, because we don't have a specific geographic assigned area assigned to our school buildings, like a traditional public school district would typically. So we have much wider areas. So let's say, a 15 mile radius around a building would catch the vast majority of the kids that attend. So, yeah. Yep. Well, I think, let's look at an example. Let's look at chronic absenteeism as our focus here. So, I've mentioned, we've just updated our strategic plan it includes these 13 metrics, and there's this one focused on chronic absenteeism. And when we sort of outline the key metrics in the strategic plan, each metric has four pieces of information that we're listing explicitly right in the strategic plan. The voice of the process, the voice of the customer, the operational definition, and then some type of visualization of the data, basically.

0:23:04.4 JD: So those four things go with each of the metrics. So just as a refresher, a lot of people know this, and we've talked about this, but I think it's good to refresh. The voice of the process is the metric that tells us how we're currently performing. The voice of the customer is the direction or challenge we have set, so that's the step one. The operational definition for the metric puts communicable meaning into the concept and includes a method of measurement or test, as well as a set of criteria for judgment. So basically we wanna make it clear to anybody that's looking at chronic absenteeism, that they know exactly what it is we're measuring, and they could come up with that same measurement independently. And then the fourth thing is this visualization that illustrates the performance of the metric over time, because that time factor is really, really important. So I'll share my screen one last time so that people that are viewing this can see what this actually looks like in our strategic plan.

0:24:07.4 JD: And I'll kind of walk people through this visualization for those that are just listening. So you sort of see this chart over on the left or on top of the chart it says key metric three student success, chronic absenteeism rate. So that's the metric. The voice of the process is 52%. So that means that 52% of our kids are chronically absent and the voice of the customer is 5%. So that's that far off thing. That's six months or probably more like three years off that we're working towards. And we're not quite sure how we're gonna get there right now. And then we have the operational definition of the concept of chronic absenteeism. So this says "a student is considered chronically absent if they miss at least 10% of instructional time for any reason. Our chronic absenteeism rate is the percentage of students at United Schools who are considered chronically absent."

0:25:08.9 JD: Now, this particular definition was fairly simple because there's already a sort of a federal and state definition of chronic absenteeism. And then down below the operational definition, you have the data that we have thus far charted over time. So in this case, we only have three years of this particular type of data 'cause that's when it sort of started getting measured at the state level. And so the y axis is the chronic absenteeism rate, the x axis is the school year. So this chart has 2021/2022, 2022/2023, and 2023/2024 school year data. And you can see the data is fairly similar across those three years. Not too unexpected, but it's right around, 53%, 54% in the '21/'22 school year, maybe 52% in the '22/'23 school year. And then slightly less than 50%, let's say 48% of kids were chronically absent.

0:26:11.5 AS: Just outta curiosity, where was that before covid? Let's say 2018/2019.

0:26:17.9 JD: Yeah. Lower. Definitely lower. I think going back historically, if we had that data, I would guess, and I'm sort of guessing based on overall attendance rates compared to what overall attendance rates are and like what chronic absenteeism probably was, it was down probably closer to like high 20s, low 30s, that type of thing. And obviously a chronic absenteeism rate of 52% is very high. But when you look at even the school district buildings that are sort of around these schools, generally speaking, their chronic absenteeism rates are even higher. They're in the 60, even into the 70% range. And so not that this is like a comparison, but you can kind of get some context there that these rates are even higher in the neighborhood schools that are closest to our campuses.

0:27:16.7 AS: It would be a bit shocking for someone in Asia, like myself in Korea, Japan, China, Thailand, who's, it's a much different view of education. But just for the purposes, for someone who doesn't know much about what's happening in the US, what are these kids doing? Are they out working or are they at home?

0:27:40.6 JD: It's hard to know exactly. I think one thing is, is that in some cases, older siblings, like in our middle schools, are often taking care of younger siblings for various reasons. I think that can be a common way, but I think it's hard to just pin on one or two things. I think this is a very complex problem with lots of causal things, causal variables that are going into this. So I think that's why it's so important to study it in our context and try to figure out besides the things that we already know, like busing being inconsistent, those types of things. What else is it that's contributing to this? And so that's sort of what the process that we're starting now is trying to figure this out.

0:28:32.3 AS: And would you equate the voice, is voice of the customer equate it to target condition? Or is there a difference between that?

0:28:42.1 JD: Well, in this case, the way I'm framing it is like the voice of the customer is that direction or challenge, that's step one. So we had to, because this is an internal improvement goal, we decided for ourselves, like what do we think that vision, that purpose, that challenge is out there on the horizon that we're not sure how to get to, but we want to get to in the next two or three years. So I would equate those two things in this case.

0:29:07.1 AS: And who is the customer in the case of a school, how would you view that?

0:29:15.0 JD: Well, so that can be a little tricky based on how you're asking the question. Just from the point of who's the customer and the voice of the customer. Well, it's the leadership that set this like a customer with a capital C, that's the voice of the customer in terms of who's the customer of the school system it depends on exactly what aspect of the school system that you're talking about. But in general, our families and our students, are customers of the school system. But then so are the high schools that we feed our eighth graders into. Those are also customers of the system. But in terms of who the customer was that set this challenger direction, that was our senior sort of leadership team.

0:30:00.7 AS: Okay. And the voice of the process where we're looking at the 52% absenteeism rate, would you call that the current condition?

0:30:11.5 JD: Yes. Yes.

0:30:14.0 AS: So voice of the process, current condition, then you have to have some operational definitions so that we know what we're really talking about. And then a visualization that helps people see kind of where things are at.

0:30:28.3 JD: Yeah. And ideally we would have more data than this, but this is the data that we have. And you can actually see there's this note here 'cause right now it's just a run chart. It's just the data points with a central line running through. But there's this note that says the natural process limits are not included until we have at least five data points. And so we won't include the control limits until we have more data, basically.

0:30:50.4 AS: And for the person looking at this from outside, they're like, so wait a minute. You gotta wait a full year before you get that. But I guess there's a lot of data underneath this that is input data that will eventually drive this output.

0:31:07.8 JD: Yeah, I mean, I think what we do with any data like this that comes once a year, you have to find some proxies. So some proxy outcome data that maybe you're measuring on a every other week or maybe on a monthly basis. And then you have some process data that you're measuring, here's the things that we think will move the outcome needle, and are we doing those things? So you set up different types of measures, sort of intermediate outcome measures, process measures that are sort of measuring the different things that you're trying. And then usually a sort of a third component to that measurement system is a balancing measure where you're making sure that other things in your system aren't, [laughter] going astray because you're putting all your focus on this chronic absenteeism concept. So it's complicated. It can be complicated.

0:31:54.2 AS: It is. And in the area of education, you're under so many different constraints set by government. I was having fun in my mind imagining like when we were young, the Keystone cops, and they were kind of funny, crazy cops. But I was imagining getting an old ambulance with a flashing light and arriving at student's homes and saying, we gotta get you to school urgently. [laughter] And all the fun things that you probably can't do.

0:32:27.4 JD: Yeah. Yeah. Well, that as a brainstorm is not too far off from some of the things that we're thinking about as possibilities in terms of different forms of transportation, taking more control over the transportation where we can 'cause this is a service that's provided by the school district.

0:32:51.0 AS: One thing I did with Google Maps many years ago is I uploaded the zip code or address of my students, and so that I could see clusters of where they were. And then from those clusters, I started recommending, Hey, why don't the five of you guys form a group here and you're in the same area? And then that would help them to make a connection that they may not have made themselves.

0:33:24.9 JD: Yeah, that's a great idea. We have the geo mapping already. Yeah. We.

0:33:29.1 AS: And there's pods basically. So pods are out there of 50 students in this area. So when one has a problem you've got 20 of them that got a problem. If a bus doesn't arrive, is there a way we can get those 20 students communicating with each other and say, we want to get to school, how do we do?

0:33:50.0 JD: Yeah. We said we have some beginning of the year challenges right now with busing and we were making some calls to some of the families, and one really awesome grandma actually said, I'm gonna look into how much it costs to rent a bus and I'm gonna go round. And so that type of problem solving is certainly happening on the ground. It's how to sort of make that systematic and consistent. That's the tougher thing.

0:34:12.5 AS: Yeah. Exciting. Great one, and I look forward to the next one. I'm learning a lot and I know the listeners and viewers are learning a lot. Is there anything you would just add to wrap this one up?

0:34:25.6 JD: Yeah, I mean, I just a couple points maybe to bring it home on set the challenge, I think, one thing is we have to have this model to bridge a gap between current conditions and future aspirations. So that's this improvement model as a whole. There's always gonna be this gap between current conditions and our aspirations. And I mentioned this improvement model has this combination of scientific way of thinking and working to close the gap. And what we did in step one was ask where do we want to be in the long run? And this overall challenge that we set is really set at the sort of senior leader level, becomes a key priority. And I'm really thinking about this. If we can figure this out and some of the other key metrics, it's gonna really differentiate us from other schools. And so I think that's sort of those four or five things are the key frames for "set the challenge."

0:35:19.9 AS: Exciting. Well, I'm looking forward to the next one. Well, on behalf of everyone at the Deming Institute, I want to thank you again for this fun and interesting discussion and really opening up what you guys are doing there and the challenges that you're facing makes it even more real for the listeners and the viewers, and for the listeners and viewers, remember to go to deming.org to continue your journey. You can find John's book Win-Win W. Edwards Deming, the System of Profound Knowledge and the Science of Improving Schools on amazon.com. This is your host, Andrew Stotz, and I'm gonna leave you with one of my favorite quotes from Dr. Deming. People are entitled to joy in wo
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Pay Attention to the Choices: Misunderstanding Quality (Part 4)
19 ago· In Their Own Words
Continuing their discussion from part 3 of this series, Bill Bellows and Andrew Stotz talk more about acceptability versus desirability. In this episode, the discussion focuses on how you might choose between the two.

TRANSCRIPT

0:00:00.0 Andrew Stotz: My name is Andrew Stotz and I'll be your host as we continue our journey into the teachings of Dr. W. Edwards Deming. Today, I'm continuing my discussion with Bill Bellows, who has spent 31 years helping people apply Dr. Deming's ideas to become aware of how their thinking is holding them back from their biggest opportunities. Today is Episode 4 of the Misunderstanding Quality Series, and the title is Quality, Mind the Choices. Bill, take it away.

0:00:31.3 Bill Bellows: All right, Andrew, welcome. So podcast three, I think the title was Acceptability and Desirability. And one correction there, when I went back and looked at the transcript the concept of... At least the first person I heard tie together acceptability, desirability, at least in the Deming community, was a professor, Yoshida, Y-O-S-H-I-D-A. He was a PhD student of Dr. Deming, I believe at NYU but I mispronounced or misspelled his first name. I thought I've heard people refer to him as Kauro, perhaps spelled K-A-U-R-O, maybe that's his nickname, and maybe I just didn't remember properly but his proper first name is Kosaku, K-O-S-A-K-U and he at one point in time was in Greater Los Angeles at Cal State Dominguez Hills. And then I think sometime in the mid '90s, early '90s, last I heard he moved to Japan.

0:01:51.1 BB: I've never met him. I've watched videos of him, there's a classic presentation. I don't know if it's got, it might be online someplace of he did a guest lecture. There was a... Dr. Deming was speaking in Southern California and needed an emergency surgery, had a pacemaker put in, so this would've been '92 timeframe. And Professor Yoshida was called in to give a guest lecture. And that ended up being something that I think was sold eventually. The video, the lecture was sold by Claire Crawford Mason and so he is... I don't know how much of that is online, but anyways.

0:02:38.4 AS: Is Kauro, Kauro wasn't that the name of Kauro Ishikawa?

0:02:43.7 BB: That may be where I... Yes that was a Kauro. There's two Ishikawas. There's a father and the son and I... So I'm not sure if Kauro was the father or the son, but anyway correction there. In the first series we did, going back to '23, 2023, I mentioned the name Edgar Schein, but I don't believe I've mentioned his name in this series. So I wanted to throw that, introduce that in this series today and give some background on him for those who have not heard his name or not aware, did not listen to the first series and Edgar Schein, who passed away January of this year. He was an organizational theorist, organizational psychologist, spent the greater part of his career at MIT. And one of the concepts I really like about what he talked about is looking at an organization in terms of its artifacts. So if you walk around an organization, what do you see? What are the artifacts? That could be the colors, it could be the artwork on the wall, but the physical aspect of the organization Schein referred to as the artifacts. And what he also talked about is if you dig beneath the artifacts, they come from a set of beliefs, and then the beliefs come from a set of values.

0:04:23.9 BB: And again, the first series we did, I talked about Red Pen and Blue Pen Companies, and Me and We Organizations, and Last Straw and All Straw organizations. And those titles should make it easy for our listeners who are not aware to go back and find those. And what I talked about is, this imaginary trip report, if you visited a Deming organization, if we could think in terms of two simple organizations, a Deming organization, and a non-Deming organization in this very simple black and white model. And I had people think about the physical aspects of both, if they were to go visit both. What I then followed up on in our conversation is what you see physically comes from a set of beliefs. Now, they may not be articulated beliefs, what Schein would call espoused beliefs. And then you have what they really believe and I forget the term, I use this for that, but it comes from a set... But anyway, the physical comes from the beliefs, the beliefs come from the values.

0:05:39.0 BB: And part of the reason I bring that up for our listeners, and I'm thinking in terms of the people that have a responsibility in their respective organizations. They could be consultants, internal consultants, working in quality likely, given the focus of this series. First of all, you have to start where you are. But even added on, included in start where you are, is you have to start where your management is. So, if your management is tasking you with an improving scrap and rework, then that's what you better be talking about. Now, you don't have to be guiding your actions based on acceptability because the other aspect is scrap and rework are typically associated... Well, not typically, they are associated with acceptability. The lack of acceptability, acceptability is the idea that this is good, it is acceptable, it meets the requirements, defines...the quality requirements that are defined.

0:06:52.0 BB: If it's good, it is acceptable, if it's bad. There's two categories of bad, bad could be I have to throw it away, that's scrap, which means I can't recover it or rework, which means I can do something with it and perhaps salvage it. And so if your management is tasking you with improving scrap and rework, then first of all, where they're coming from, quite naturally, is acceptability. And why do I say that? Because everywhere I've gone, that is the deepest foundation of quality in every organization I've ever met, worked with, I have met people that work from whether it could be... Whether it's clients that I've worked with, whether it's students, my university classes. Acceptability, scrap, and rework, all go together. And, so if that's where your management is, then they're asking you to focus on improving acceptability.

0:08:05.6 BB: But, you may find it invaluable to shift your focus to desirability to improve acceptability. And that will be a focus, well I get into some of that tonight and others or today, and then on a future podcast later. But, I remember once upon a time at Rocketdyne, the executives were, the VP of Quality was task master asking for improvements to scrap and rework and also things called process capability indices, Cp’s and Cpk’s. And if you've heard of a Cp or a Cpk, great, if you haven't all I could say is I find them dangerous. I find them, well I say they're all about acceptability. And what makes it, reason I would encourage people to stay away from them because they appear to be desirability, but they're really acceptability.

0:09:15.7 BB: We'll save that for later. But anyway you have to start where they are. So if people are asking for improvements in scrap and rework, then, instead of fighting them, you go with it. And then what we'll be talking about tonight is, is it worthwhile to shift? Well, what does it mean to improve acceptability and the difference between acceptability and desirability? And relative to the title tonight, Mind the Choices is being aware that there's a place for acceptability and there's a place for desirability. And going back to Yoshida in episode three, what I was referring to is, in presentations he was doing from the early '90s, maybe even going back to the '80s, he talked about Japanese companies are about desirability. So, he presented this model of acceptability and desirability. And then, his explanation of what makes Japanese companies, again, back in the '80s, Japanese companies were viewed as those setting the quality standards.

0:10:20.5 BB: And, he was trying to say that the way they're doing that is that they don't rely on acceptability as other companies in other countries do. They have a higher standard. And that's what I wanted to introduce in our last episode, Episode 3. And, what I wanted to do tonight in this Episode 4, is to put some, add some more to that. But, also reinforce I'm not saying that there's anything wrong with acceptability, it's a question of what does the organization need at that point of time? And, really it has to do with... Really, it has to do with how big a system you wanna look at. So if you're looking at something in isolation, which is, I mean, when you look at something and saying it's good or bad, that is the epitome of looking at something in isolation.

0:11:17.5 BB: You're looking at a pen and saying it's good. You're looking at the diameter of a hole and saying it's good. That is not looking at what goes in the hole, that is not looking at how the pen is being used. So by definition, that's what Ackoff would call analysis, which is looking inward. It's not what Ackoff would call synthesis, which is looking outward. And how far outward you look is all according... I mean you could look, it comes down to how big is the system. And I wanna introduce the name Shel Rovin, Sheldon was his full name. Shel was his nickname. I met Shel through Russ Ackoff in 2006. Shel was, he was in charge of the Chief Nursing Officer program, which was a two-week immersion program at the University of Pennsylvania.

0:12:14.5 BB: And he was doing that in the, 2003, 4, 5, timeframe when I met him. And Shel was a dentist by background. He was Dean of the School of Dentistry at University of Kentucky and University of Washington. And I met him through Russ and invited him to Rocketdyne on numerous occasions. And Shel spoke about relative to looking at a system, 'cause people talk about, well "Andrew, we've gotta look at the whole system," but how big is the system? And, so people say, well, systems thinkers look at the whole system. Well, how big is that? Is that 1,000 foot view? And people say, oh no, Bill, it's bigger than that. Is it a 10,000 foot view? Is it... How big is the system? Well, Shel's perspective, and the word I wanna introduce from Shel is relative to systems is boundarylessness.

0:13:12.7 BB: Say that a few times fast. 'Cause systems have no boundaries. So I'm sure our listeners... I'm sure you have heard, I don't if our listeners have all heard, Dr. Deming would say to executives, does your system include the future? He used to ask questions such as what business are you in? What business will you be in five years from now, 10 years from now? Well, why not 15 years from now? Why not 25 years from now? Native American Indians, associated with Native American Indians is the idea of looking at the seventh generation after you when you're making choices. And so what I would ask people is, well, why seven? Why not eight? Why not nine? Why not 10? I mean, within an organization, we could be working with our supplier to try to get across these quality ideas to our suppliers.

0:14:05.5 BB: Well, that's looking at the system. Well, wait a minute. Do our suppliers have suppliers? Yes. Do their suppliers have suppliers? And so relative to boundarylessness is this idea is when people start talking about the whole system, I don't know what "whole" means. What I'd rather look at is what size system are we looking at? That's a choice. That's a choice. So we could decide to look at our suppliers. We're gonna go one step, we're gonna look at procurement. Who do we buy from? Now, we may educate them and give them the responsibility of looking at their suppliers on... But that would be a way of managing quality. Likewise, we can look at the impact of our work on our customer and give them heads up as to how to look at the impact of their work on their customers. But that's looking at the system in an X, Y, Z, physical coordinate, add onto that, the time dimension. And so, again, all I wanna throw out there is that when it comes to making choices on acceptability, desirability, a lot of it has to do with how big is the system that we're looking at. Some everyday examples of acceptability.

0:15:23.5 BB: Again and what I wanna get across is, in part the difference to help people make choices. And so when we were on a vacation in Europe recently, I took a number of photos of people making choices. And,` when I travel, anywhere I travel, especially out of the country, I love walking into supermarkets just to see what they sell that perhaps is not sold in the States or in California. I know there are things you can't find in California that you can find on the East Coast. That's one thing. But I like going into supermarkets just to see what products are there. I mean, you can go to England and find in the refrigerator section, hard cider, apple cider, you know, alcoholic cider that I got exposed to going to a Deming conference in 2000. I've become a fan of it ever since. Well, in the States it's pretty hard to find hard cider, period. You go to England and you'll find, a dozen different brands and each brand may have a number of different types.

0:16:44.9 BB: And so that's, but anyway, relative to that when you walk into a supermarket, if you're looking at canned goods, or just look, well, looking at cider, we can look at this cider versus that cider. We treat a can as a can, whether it's buying tomato soup or cider, we treat all those cans as interchangeable, interchangeable parts. But when we go to into the bakery section, that's where I was taking photos in Amsterdam and I was watching people sort through the pastries. And yet what was laid out were a bunch of pastries of the same style. And yet people were, I want this one, I want that one.

0:17:26.0 BB: Well, part of acceptability is treating all those pastries as the same as we would treat all those cans of tomato soup as the same. Now relative to tomato soup I know you live with your mother, and I'm willing to bet your mom, early, early on when she took you to the supermarket, taught you how to buy canned goods, right? And she says "Andrew when you buy a can of something you pick it up, you're looking for dents," right?

0:17:55.1 AS: Mm.

0:17:56.0 BB: Because if it's dented, that's bad. And if it's not dented, that's good. I know my mother taught me that. So I know when it comes to buying canned good we look for dents. If dented, that's bad. If it's not dented, it's acceptable. But I don't see people sorting between cans of tomato soup made by the same manufacturer. They're just, we treat it as they're acceptable. Acceptable implies either one, the differences don't matter or I don't see differences.

0:18:33.0 BB: Desirability is, you wanna see a great example of desirability, go to the produce section and again, either watch people sort through pastries that are all acceptable, and yet they're looking for the biggest one, or... And when it comes to fruit, we're looking for the ripest banana, or maybe we're looking for bananas that are green because we're not gonna use them for a while. So acceptability, again, I'm trying to give everyday examples of acceptability is going in and saying, looking at all the fruit there, and just taking five peppers, whatever it is, and throwing them in the bag and saying, I need five 'cause my spouse said, go get five. And I throw them in the bag. And it could be time-wise, I don't have time to sort through them, or I quite frankly don't care that they're different. That's acceptability. So acceptability is either acknowledging they're different and saying, I don't care. Or...

0:19:29.6 AS: Seeing them as the same.

0:19:32.4 BB: Or pretending they're all the same. And I had a guy in class years ago, and I was asking about buying fruit and I was trying to use the example of we go into the supermarket. We sort through the oranges looking for the ripest one, and this guy says, well, I don't sort through the oranges. I said, well, how do you buy the oranges? I buy them by the bag. I said, do you sort between the bags? He says, no, I don't sort and his arms were crossed. I don't sort, I don't sort. So then I noticed that he had a ring on his left hand, a wedding ring on his left hand. So I said, I see you're wearing a wedding ring. And he said, yep. I said, did you sort?

0:20:15.2 AS: I don't sort.

0:20:15.3 BB: Meaning... I don't sort. And so when you're looking at things that meet all the requirements and saying there is no variation or the variation doesn't matter, that's acceptability, Andrew. When you look at all the things that meet requirements and you see them as being different and saying, I want this one, that's desirability. And so that could be, when it comes to selecting a spouse, when it comes to selecting an orange, when it comes to selecting a parking spot, in a university, you're looking for the, an ideal, the best professor for Thermodynamics II, and there's 10 professors the university says are acceptable. And you talk to classmates and you find out, oh, no, no, no, stay away from that one. What are you doing? You're sorting amongst things that meet requirements, that are acceptable and saying, that's not good enough for me in that situation.

0:21:17.2 BB: Well, what I wanna say then added to that is, this is not to say desirability is better than acceptability. It really comes down to is desirability worth the effort? Because when it comes to desirability, I am looking beyond, I'm looking at a bigger system. So I'm looking at the fruit in terms of how I'm using it. If I'm aware of that, I'm looking at the parking spots in terms of: I'm gonna be in the store for an hour and I want the most shade, or these parking spots have a little bit different distances between cars, and I want a spot with a little bit more width so somebody doesn't ding my car. So what I'm hoping is with these examples, people can appreciate that every day we make choices between acceptability and desirability.

0:22:11.3 BB: Every day we're making a decision based on saying, this is okay, code word for acceptable, or I'll take that one, that's desirability.

0:22:27.6 AS: That's quite a breakdown.

0:22:28.1 BB: Well, and the idea being... The other aspect of it is when you're choosing to say, I want... When you decide that acceptability is not worthwhile, my proposal it's because you're looking at a bigger system. You've got a bigger system in mind. You're not looking at that fruit in isolation. You are somehow saying, there's something about how I plan to use that, which is the reason for this decision. And then it gets into how big is the system that you're looking at? Are you looking at the person downstream of you at work, which that could be an internal customer. People used to use those terms. Are you looking at the person after them, two down from them, three down from them? And that gets into a choice. So what I would tell the folks I was mentoring at Rocketdyne is that they were designing things or going to see how they were used. And I'd say, first of all, nothing requires you to go see how that's used. Your job as a designer, whatever it is in engineering you design it, you give it to manufacturing. But you don't have to go downstairs and see how they're using it.

0:23:47.5 BB: I said, but if you do, you might learn a lot. And then they might say, "well, so I should go talk to the person who's first using it." Well that might be helpful. And then what about the person after that? Well, that might be helpful. And then what about the person after that? Well, that might be helpful. And I was trying to get across to them, we hire really bright people and if we just turn you down to don't look beyond, just deliver the thing, complete those drawings, do whatever it is, pass it to the next person. I said, the system may not require you to go look to see how it's used.

0:24:31.9 BB: But what Dr. Deming is proposing is, the better you understand how it's used, the better you can serve the system. But then you get into the question of how big is the system that you want to be thinking about? And there I would tell them that there's no right answer. I mean, you wanna be and this is what I would tell them is we hire really bright people and then we condition you to believe that it doesn't matter. What I'm proposing guided by Dr. Deming is that there's a possibility that it matters anywhere from a little to a lot, but you won't know unless you go look.

0:25:12.2 AS: Yeah. It's funny.

0:25:12.3 BB: And so what I wanna get... Go ahead Andrew.

0:25:14.4 AS: When I was a supervisor at Pepsi in Los Angeles at our Torrance factory, they asked me to help... Could I figure out how to quicken the pace with which we got 80 trucks or 100 trucks out the gate every morning because it mattered. If you got trucks out an hour late on the LA freeways, now you have overtime and all kinds of trouble. So, what I did is I climbed up... At 4:00 AM I climbed up on top of a building, one of our buildings.

0:25:54.1 BB: Wow.

0:25:54.9 AS: And I had a clipboard, which I always have. I have extra clipboards always with me, here's one right here. And I had paper and then I just observed, and I took a lot of notes. And what I was seeing was all these drivers were, they were checking their trucks and they were spending a lot of time with their trucks. So, after I observed it that morning, the next morning I went down and went around and I asked them, what are you doing? And they said, well I'm checking that the quantity that's on the paper is the quantity that's on the truck. And I said, how could that not be? And they said, the loaders at night don't fill it up right. So, the next night I went and talked to the loaders and I said, drivers are saying that you guys are making errors.

0:26:40.4 AS: No, we're not making any errors. Okay. So, now I gotta dig deeper into the loaders. And then I start to see, okay, the loaders are making errors. So, I went and talked to one loader and said, why are you making this error? He said, well, the production are supposed to put this particular Pepsi item in this spot. But they didn't, they put it in another and I got confused, but it's just 'cause it's normally always there. So, I go to talk to the manufacturer, hey guys come on, why did you put that stuff in the wrong spot? He said, well, sales told us to produce so much that we were overloaded. We didn't have any place to put all of this products. So, we had to basically put it anywhere we could as it's racing off the line and on and on.

0:27:27.9 AS: And then you start to realize like, okay, the system is bigger. Now I went and focused on the loaders and said, how do we make sure that when the loaders load that we can lock the truck and then tell the drivers, you must not open this truck. How do we build the trust between the loaders and the drivers that they're loaded correctly and that they can go, because the drivers don't want to get to San Bernardino or wherever they're going and find out, oh, I don't have what this particular customer wanted and it's supposed to be on here. So that's just a little bit of a picture of kind of a very narrow start that starts to bring in more of the system.

0:28:06.8 BB: Oh, yeah. Oh, that's a brilliant example. And also what you're talking about is a term we used the first series, which is the value of synchronicity. That those handoffs are smooth. And they disrupt...

0:28:26.7 AS: I love that word handoffs, by the way. I was just talking with a client of mine. We were talking about the core processes of the business. And I just now realize that what I was missing and what we were missing in our discussion was how do we make sure that the handoffs work.

0:28:43.6 BB: Well, then the other thing, again a concept you may recall from the first series is, I liken it... I think in terms of two types of handoffs. And, actually, I think in one of the first, maybe in the second episode we talked about this, is associated with acceptability. When I hand off to you something, my report, whatever it is I'm assigned to delivered to Andrew by 5 o'clock tomorrow, you look at it, you inspect it, and you're making sure before you accept it that it is acceptable, that it has all the content. And, if anything's missing a figure, a graph, a label, you send it back to me and then I go through and massage it and then send it off to you. And, part of acceptability is when you say, that's good, then the handoff we're talking about is physical.

0:29:51.6 BB: Right. I mean, there's nothing wrong with a physical handoff. I give it to you physically. And what you may recall me mentioning, I think, again likely episode 2, podcast 2 of this series is I would demonstrate this with people in the class. And I would say, if, if what I give you is not acceptable, what do you do? You give it back to me and you say it's incomplete. And then I go through, massage it. If I now give it to you and all the requirements have been met, it's acceptable. Now what happens? What do you say? And I would kid them and so now you say, thank you. But what I'd also point out is that part of acceptability in a non-Deming organization is the handoff is physical and mental. I mean, physical is: It is yours, not mine.

0:30:38.5 BB: Mental is that if you have trouble with how that fits into what you are doing with it, because that report does not exist in isolation, you're doing something with it. Right. So you're doing your things with it. Now we're looking at the system. And if in the system of you're using it, you have an issue and you come back to me, in non-Deming environment, acceptability is my way of saying "Andrew I'm not sure why we're having this conversation because what I gave you is acceptable." But in a Deming organization, the handoff is physical, but not mental. What does that mean? It means, I'm willing to learn from what you just said and the issues you're having. And now I'm beginning to wonder, there's two possibilities. Either one, what I gave you is not acceptable. There's something wrong with the inspection.

0:31:34.3 BB: Or two, what's missing is desirability, that there's some... What I give you is acceptable, but there's something about how it's, it's um, there's a degree of acceptability, and so instead of viewing it as it's good or it's bad, black and white. Now we're saying there's degrees of good. Desirability is degrees of good. And, so in a Deming environment, when I hand off to you and you have an issue with it, you come back the next day and say, "Bill, somehow this didn't get caught in the control chart." And I said, "well, let me take a look at it," and I may find there was something wrong with the inspection, or I may find that there's a degree of good I'm not giving you that I need to be giving you. So, that can either be an acceptability issue or a desirability issue. I'm willing to have that conversation with you in a Deming environment. So, in a Deming environment, the handoff is physical but not mental. And the learning, as you're demonstrating, the learning that comes from the ability to have those conversations, improves the system. That's a lot more work.

0:32:53.8 AS: So, if you were to sum it up, was that the sum up or would you add anything else to your summation of what you want people to take away from this discussion?

0:33:05.6 BB: Yeah, that's it. I'd like to say one is that there's, acceptability is fine. Choose acceptability, if that's all the situation demands then you've chosen that. But pay attention to how it's used, pay attention to the ramifications of that decision, which may show up an hour from now, may not show up until a year from now. And, the possibility that hiccup a year from now could be either it wasn't acceptable, in which case there's an inspection issue or it was acceptable, which means there's a degree of good, which means it's a desirability issue. And, that gets us into future conversations, talking about degrees of good and the whole idea of variation in things that are good. That's desirability, variation in things that are good.

0:33:57.6 AS: All right. Bill, on behalf of everyone at T he Deming Institute, I want to thank you again for this discussion. And for listeners, remember to go to deming.org to continue your journey. And if you wanna keep in touch with Bill, just find him on LinkedIn. He responds. This is your host, Andrew Stotz, and I'll leave you with one of my favorite quotes from Dr. Deming. "People are entitled to joy in work."
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5 Myths of Traditional Productivity: Boosting Lean with Deming (Part 1)
12 ago· In Their Own Words
In this new series, Jacob Stoller and Andrew Stotz discuss five major management and productivity myths and how Lean and Deming thinking solve them. This first episode offers an overview and Jacob shares his journey from traditional management to a better way.

Jacob Stoller is the author of The Lean CEO: Leading the Way to World-Class Excellence and Productivity Reimagined: Shattering Performance Myths to Achieve Sustainable Growth.

TRANSCRIPT

0:00:02.3 Andrew Stotz: My name is Andrew Stotz, and I'll be your host as we continue our journey into the teachings of Dr. W. Edwards Deming. Today, I'll be talking with Jacob Stoller, who is a journalist and Shingo prize-winning author of The Lean CEO, which provides a boardroom perspective of Lean initiatives. Now, he connected with Dr. Deming's criticism of command and control management and recently wrote Productivity Reimagined to explore the reasons why organizations fail to apply the Lean and Deming style of management at the enterprise level. Jacob, welcome to the show.

0:00:37.8 Jacob Stoller: Well, thank you, Andrew. It's great to be here.

0:00:40.5 AS: Yeah it was actually really fun to talk to you before we even turned on the recorder to kind of really help people understand where you come from and why you are here. So maybe you can just explain a little bit of your journey of how you got to this point in relation to Deming.

0:00:58.2 JS: Okay, well, interestingly, I started out in sales. I was a corporate sales rep selling services and software and all that kind of high-tech stuff. And I did that for quite a while. But what I liked best about corporate sales was the dialogue that I had with customers, being able to talk to people and ask questions and explore topics. So fortunately, I was able to turn that into a career. I left that profession about 2001 and became a writer, journalist, did research projects, gave talks, did some training, did all the things I wanted to do. And through that, I discovered Lean by accident. And that, I think, wasn't probably till about 2010. And I was writing for a magazine, and someone told me to write about this Lean thing. What is it? And I started to ask questions and talk to people and eventually discovered this wonderful way of running companies. I was totally impressed, not just with how efficient they were and all that, but how they treated people. I thought, this is, boy, I would have liked to have worked at some of these companies.

0:02:14.6 AS: And for someone who's never even heard, let's just imagine someone's never heard the word Lean. What does that mean anyway? And what did it mean when you first saw it and after you really became an expert in it? What does it mean to you now?

0:02:28.4 JS: Well, I thought it was going to be super high tech. That's what I first thought. As a matter of fact, when I went to Japan to actually see it firsthand, I was expecting just flashing screens and everything. And of course, it was a very different thing. It was a lot of people, very, very people-oriented environment, people talking to each other, lots of communication. So I thought, wow. And I started to learn that it was really all about people. And so that was a gradual transformation for me. But it was very rewarding to see the human side of this. So that led me, really led me to some writing. I started working with some lean organizations like the Kaizen Institute, and I started doing writing for them, writing newsletters. I also wrote, helped Misaki Yumi the late Misaki Yumi, a very well-known Lean promoter, write the new edition of his latest book. And I did all the case studies for that. And I also helped various other initiatives. But the main thing was that I decided to write my own book, and that was The Lean CEO.

0:03:57.2 JS: And what I was interested in at the time was I saw that people doing Lean were running into all this resistance, and I was interested in exploring that a little more. And I thought, well, the people that really understand that will be the CEOs because they'll been there. They've been in the boardroom discussions. So that's how The Lean CEO came to be. And in that process, I was asking questions about management and the various practices. Now, I was expecting that there would be a sort of a standard executive playbook for Lean. That was my hypothesis, I guess. And it would have been really nice, very, very easy to write the book and neat and tidy and all that, but it didn't work out that way. They were all different. They all had different ideas. And interestingly, a lot of the thinking that went into their work, actually, they had learned before they even discovered Lean. That had been stuff that they believed in. They learned about teamwork early on, so they were somehow predisposed towards the people side of Lean. So I was really fascinated by that. But my conclusion really was that there was no one way to implement Lean, that there were just many, many different variations on it.

0:05:20.5 JS: And that's when I became and started to discover that there was a lot of the thinking that made these people successful at leading Lean outside of the Lean community. And that's where I started to get interested in some other. How the tech sector was handling change, how the sustainability people doing sustainability projects were handling change. And one speaker that spoke out loud and clearly to me was Dr. Deming, because Dr. Deming understood the fundamentals behind the thinking. I think that makes Lean successful. He understood what was wrong with conventional management and the barriers that people were running into. So, Andrew, I don't know if you remember, but the 1980s, everybody was talking about this ABC show, If Japan Can, Why Can't We? And here we are looking at a productivity crisis. I mean the US was their crown jewels in the US industry had been trounced by the Japanese. They were being outproduced two to one, right? I mean, and so this was recognized as a crisis. It was an election issue at the time. And I, they got Dr. Deming on television and they asked him what are we doing wrong? And Deming was very clear.

0:06:51.1 JS: He said you're not going to learn this, you're not going to be able to imitate the Japanese, and you're not going to learn a few production tricks. You've got to fundamentally change the way you manage. So that was a very, very strong message that I picked up when I was writing that book. And what's wrong with conventional management? What's wrong with command and control management? And why does it not why does it create companies that are so wasteful and do such a bad job at being productive?

0:07:22.6 AS: And as a devil's advocate, if I think about a Lean a company that's trying to adopt Lean, what I would assume was that at the management level, the objective of management is really to reduce resources, to reduce, if you could reduce the cost of electricity, your profit margin would go up. If you could reduce the raw materials that you have in your production process, your profits would go up, as an example, and the value of your business would go up. So how could there be any resistance to a young engineer that's picked up Lean and is bringing it through the organization? It's a little bit odd to think why would there be resistance to that?

0:08:04.1 JS: Well, the resistance is that people are used to doing what they're doing, for one thing. And Dr. Deming has identified with his knowledge of complex adaptive systems a fatal flaw in the hierarchical structures that corporations are run by. You see, if you're using corporate logic, you assume that every department and every work group is like an independent component and that if each component functions as intended and according to measured objectives, then the corporation will succeed. And Deming said that that is completely false, and he had the evidence to prove that. So what people are resisting is not that, people aren't resisting the idea of reducing costs and being efficient, but they're measuring efficiency in the wrong way. They're measuring efficiency of independent assets. And they say if these independent components produce efficiently, then the sum of the total will have an efficient corporation. But that's not true. That's only true according to 17th century logic. If you follow Newton and Newton's laws, that seems to be the case. And it's intuitively, we do tend to think that way. But if you're running a company, a company is not a simple system. It's a complex adaptive system.

0:09:38.7 JS: And it's the interdependence of all these entities and all these components that determine the success of your company. And that's what Deming was trying to teach, and that's what people didn't want to hear.

0:09:50.7 AS: So if I hear you correctly, the first thing is kind of the first wall that someone would come to at the board level or at the management level is just trying to overcome inertia. This is the way we do things. Why do we need to change? It takes effort to change. And then the second thing you're talking about is the lack of systems thinking, thinking that if we could just optimize every part, we're going to get the optimal output of this system. They didn't understand that, as you said, it's a complex adaptive system, that it's much more difficult than just saying, everybody do your best. Is there any other resistance that you saw? So the inertia is number one that I saw. The second one is a lack of systems thinking. Is there any other things that you discovered as you were working on The Lean CEO?

0:10:38.3 JS: Oh, yeah. Well, there's the elephant in the room. And this is that most large corporations anyway are focused on short-term shareholder value. Right. And the way to make your short-term numbers is not to be productive. It's not to invest in good long-term strategies to develop a long-term competitive advantage. It's to make your quarterly numbers. And that can be manipulated fairly easily. Well, maybe not easily, but it can be manipulated by creating perceptions about value, about market value and that sort of thing.

0:11:17.3 AS: And even more, even more than manipulated, it's just that if you don't follow, if all you do is just try to hit numbers on a quarterly basis, you're losing your focus on the long term.

0:11:27.1 JS: Absolutely. And there was a study, and this goes way back to 2005, but it said that corporate CEOs would sacrifice or 74% would sacrifice a long-term profitable initiative to make their quarterly numbers. They would throw it out the window. I think, if anything, that was 2005. I would think if anything, things have gotten worse since then. So we're actually talking about a slice of companies that really do want to be productive, where long-term productivity is their strategy. And that is, a lot of these are privately owned companies, manufacturers, and perhaps, there's some smattering of public companies that are doing this kind of thing, but it's rare.

0:12:24.7 AS: So let's just. So what we've been talking about is kind of the wall that you started to see, the ceiling that was Lean had a challenge, or Deming's teachings had a challenge, and that was this, overcoming the inertia, the lack of systems thinking, and this focus on short-term quality, sorry quarterly numbers. And very few companies were able to really focus on long-term goals of being productive. Now, maybe you can just take a moment to explain how your newest book, your latest book, then took what you saw from a Lean CEO and Deming and then brought it to another level.

0:13:07.8 JS: Okay, well, I interviewed about 60 people, and it's interesting. I thought it might be fairly easy, I would say. What are the basic myths? What do people get wrong? Usually, these are people that are pretty smart about Lean stuff, and people found that surprisingly hard to answer. And I think that was because a lot of these people I talked to had already been practicing this approach for a long time, so they really had to think about it. So it took some digging and a lot of interviews, but I found the thread was in five sort of primary areas, and one was the systems thinking, the pyramid that we talked about.

0:13:50.4 JS: That Deming so articulately talked about. Also, and then the other myths, I think, are somewhat derivative of that. But there's finance. The myth that the bottom line tells you what you need to know about the productivity of your company and it doesn't show up in the finances. So I did a chapter about that. The notion that the boss knows best, and that's not just the boss, it's also professionals. This idea of professional knowledge. Someone can go to school, learn how to tell people what to do, and that will accurately create the right procedures, the right kind of work.

0:14:32.6 JS: And when people follow directions from professionals, they will be the most productive. So that's a myth. Myth number four is the myth that people are motivated by sticks and carrots. And psychologists have disproved this about 70 years ago, I guess, but people still, if you look at compensation plans and you look at the way companies are managed and you look at structures, it's still assumed that people are going to be motivated by externals, by threats and rewards. So we talk about that and some companies that have dealt with that one. And then finally, there's this myth of tech omnipotence. We tend to have way more optimism about technology than is warranted, and we're seeing a lot of that in AI now. We're seeing a lot of disappointment with things not turning out the way people expected. So I really explored those five myths and how they stymie productivity and how companies can build a strategy around count.. what's the word I want? Counterattacking those myths or whatever.

0:15:45.5 AS: And then for the person who reads it, what is the outcome? So once they understand these risks, like number one, you mentioned about the pyramid and not understanding systems thinking. You mentioned number two about finance, you mentioned number three, about the professional or the boss knows best. And number four, people are motivated by sticks and carrots. And number five, tech omnipotence. Once they understand those myths, where do they go from there? How can they then apply that into their life and their work?

0:16:16.2 JS: Well, I suggest that they go into companies that are actually successful at dispelling these myths. You got to see it. But I have a last chapter, a long chapter, but I provide a sort of a roadmap for moving in. But there is really no alternative. If you want to build long-term productivity, there is no alternative to continuous improvement because you're just going to have to keep improving. And Dr. Deming explained that very well in terms of variation. It's always going to be there, and you're always going to have to be dealing with it. So you're going to have to create a culture, and it's going to be people-based. I don't care what kind of technology you have, long-term productivity gain is going to have to come from building the culture in your company.

0:17:10.1 AS: And I want to wrap up our discussion about this just so the audience understands. When you say productivity reimagined, what do you mean by the word productivity?

0:17:23.5 JS: Productivity is customarily just used as sort of a ratio. You know, people say, "Oh, yeah, I'll just take the total sales and divide it by the number of employees" or something like that. So it's seen as a sort of an indicator rather than something that you have to actually do. Right? That's something you have to actually pursue in a direct sort of way. And another, I'll make another side point, is economists like to say that take the GDP and divide it by the number of worker hours or whatever and say that's productivity. But it really, you know when you, the US government website defines productivity as increasing output with a given set of inputs. So from time A to time B, you've got to actually make more with what you have. And that's these indicators that people use for productivity don't reflect that at all. So you've really gotta... Productivity is not that easy to measure, and there's some, actually, some qualitative sides of it, right? I mean, if I'm making, say, ballpoint pens, and let's suppose I increase the production by 10% using the equivalent amount of materials and all the machinery.

0:18:51.9 JS: Well, that's great, but what if the quality goes down? You know, I haven't really gained anything. So it's kind of tricky to measure productivity. You have to get right down there in the processes to understand it. And so I would tell the finance people that it's inside that black box. You have to be in, understand what's going on inside that black box of operations to really understand whether, which direction your productivity is going.

0:19:20.2 AS: Okay. So if I hear that right, I think a lot of us could get lost in some sort of ratios or something like that and think about a measure. But in fact, what you're talking about is to really do productivity right, it sounds like you also really have to understand trade-offs. If you cut in a particular area, that's going to cause another problem, and that's going to...you may not be able to get more out of your existing resources. In addition, it's going to require work because you're organizing your company in a certain way to get a certain level of output with the inputs that you have. But in order to get a much higher level of that, you've got to rethink: How do I get the maximum out of this organization, which is a real challenge.

0:20:09.8 JS: Well, I think this is where this is, you know, it depends on how you do it, right? I mean, you can do it in a siloed way, which says, I have a quality department, I have an operations department, I have a maintenance department. And you can invest in all these and play around with your investments and see what works out. Or you can get into the process, and you can, by really, really understanding the process and letting people in the process improve it. That's where you get Deming's magic chain reaction, which is that you improve quality, and then your efficiency is going to improve and your costs are going to go down. But that's only if you're looking at productivity in a very broad way. It's not looking at quality in terms of the tolerances that I made on my grinding or whatever I'm doing. It's about the quality of the processes themselves. Right? So Deming was looking at quality with a big Q that encapsulates a lot of things.

0:21:16.0 AS: Well, I think what, what's, this is very interesting. And I know we're going to have a series that we're going to start doing, going through more detail of what you've discovered and what you want to share. So I'm really looking forward to that. And so, I appreciate this introductory discussion. And Jacob, on behalf of everyone at the Deming Institute, I want to thank you again for this discussion and for listeners, remember to go to deming.org to continue your journey. You can find Jacob's book, Productivity Reimagined, at jacobstoller.com. This is your host, Andrew Stotz. And I'm going to leave you with one of my favorite quotes from Dr. Deming: "People are entitled to joy in work."
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Building an Improvement Model: Path for Improvement (Part 1)
5 ago· In Their Own Words
In this new series, John Dues and Andrew Stotz discuss John's model for improvement. This episode includes an overview of the model and how John uses it for goal-setting and planning in his school.

0:00:02.4 Andrew Stotz: My name is Andrew Stotz and I'll be your host as we continue our journey into the teachings of Dr. W. Edwards Deming. Today, I'm continuing my discussion with John Dues, who is part of the new generation of educators striving to apply Dr. Deming's principles to unleash student joy in learning. The topic for today is building an improvement model. John, take it away.

0:00:24.8 John Dues: It's good to be back, Andrew. Yeah, so we sort of wrapped up this last series. We had a six-part series on organizational goal setting. And we, if you remember, we talked through those four conditions that are important for organizational goal setting, especially healthy goal setting, where before we set a goal, we understand sort of how capable our system is. We understand how our data is varying within our system. We are looking at our system and seeing if it's stable or unstable. And then, of course, we want to have a method for how we go about improving. And so you kind of have to have an understanding of those four conditions before you set a goal.

0:01:03.6 JD: And I thought sort of as an extension of that, or possibly a new series, we could kind of take a look at an improvement model that would help us sort of better set ambitious goals. Because when we did those four conditions, it kind of leaves you wondering, well, how ambitious should my goals be? Should I still do stretch goals, those types of things? And I think this improvement model that we're building here at United Schools sort of addresses that. And it's something we're building.

0:01:34.4 JD: And so I think the listeners kind of get like a little bit of behind the scenes on what it looks like now. I think we'll see a version of it. And perhaps through this dialogue, through the series, we'll even think about ways to improve it.

0:01:48.4 AS: Can I ask you a question about that?

0:01:49.6 JD: Sure.

0:01:50.0 AS: One of the things, I do a lot of lectures on corporate strategy and workshops, and the lingo gets so confusing, vision, mission, values, and all kinds of different ways that people refer to things. But when I talk to my clients and my students, I oftentimes just tell them a vision is a long-term goal. And it could be a five-year or a 10-year goal. And because it's long-term, it's a little bit more of a vision as opposed to, you can see it very clearly. Like my goal is to get an A in this particular class, this particular semester. Whereas what I try to say is, a vision is: I want to be in the top of that mountain. And I want us all to be at the top of that mountain in five years. And I kind of interchangeably call that a long-term goal and a vision. And I'm just curious what your thoughts are on long-term versus short and medium as we go into this discussion.

0:02:53.8 JD: Yeah. I think as we get into the model, we'll actually see both of those things, sort of a long-term sort of goal, sort of a more intermediate thing, and then how you work back and forth between those two things. So I think that's a good segue.

0:03:08.4 AS: Let's get in it.

0:03:08.4 JD: Yeah. And so just maybe just a few other things about the model before we get right into it. So one thing to know I've come to appreciate is when when I say a model, I just mean something visually representative that helps us understand and communicate how we think things should be functioning in reality. So when I say improvement model, I'm actually like talking about a diagram on a piece of paper that you can put in front of everybody on your team. So everybody has an understanding for how you're approaching goal setting in this case.

0:03:38.1 AS: Would you call it an improvement visualization? Or what's the difference between what you mean by model and like something that I would call, let's say, a visualization?

0:03:49.5 JD: Yeah, I'd say it's a type of visualization when I say model.

0:03:52.8 AS: Okay. Excellent.

0:03:53.8 JD: Yeah, that's what I'm talking about. And I think you'll see it when we get into the model that definitely there's credit due to Mike Rother and his concept of Improvement Kata because this model heavily borrows from the work that he's done, if you're familiar with that four-step Improvement Kata process.

0:04:15.1 AS: Yeah. Very.

0:04:19.7 JD: But anytime, whatever the thing is that you call like key performance metrics, key metrics, whatever you call that thing that we all set in our organizations, there's always this gap between what we want and what we're currently getting. And this model gives us the scientific way of thinking and working to close basically that gap. In this world, the gap between the voice of the process and the voice of the customer, how do we close that gap? So that's sort of what the model is addressing. So I'll share my screen so you can see that and anybody that's watching can see what the model looks like. And I'll just kind of leave that up as I'm talking about it, put it in slideshow.

0:05:08.7 AS: Great. We can see that now.

0:05:14.6 JD: Great. So we can just start by just kind of giving an overview, especially for those people who are listening, but you can kind of picture like a path going up a mountain and that path has twists and turns. It has obstacles. In this particular diagram or model, there's rocks in the way of the path. There's a water hazard, there's trees in the way, there's a roadblock. And as you go, it's kind of strange because you're working your way up. And I'll explain this all as we go through it kind of one step at a time. But as you're working from left to right in the model, this four-step improvement model, you have a team over on the left. This team's working on a goal that you're setting. And then over on the left, you actually have step two, which is grasp the current condition. And then you have this big crack in the path that's called the threshold of knowledge. And I'll talk about what that is.

0:06:11.1 JD: And sort of the next step is actually step four, experiment to overcome obstacles as you're working left to right. You go further up this path, up this mountain. And number three, the step three is establish your next target condition. And then when you get all the way up the mountain and you have this challenge or direction. So that's what you were just talking about. So what's that long-term thing that you're trying to accomplish? We call that a challenge or direction. So the steps that you're taking actually chronologically are you're going to do number one first.

0:06:43.2 JD: You're going to set that challenge or direction, but it actually is the thing that you're working toward. That's the sort of beginning with the end in mind. So that's why it's way up on the mountain, but you're going to do that first. And the next thing you're going to do is go all the way back down to the start of the path and grasp whatever that current condition is in your organization. And then you're going to run experiments on the way to trying to get to the next sort of intermediate step, that next target condition. So four steps, and then you have this team working on it.

0:07:16.8 AS: Which I would say for the traditional American style, as from my perspective, it can be a bit confusing because you're starting with number one at the farthest point away instead of closest to you. Then you're going to come to number two. From a timeline perspective, it feels like you're kind of zigzagging back and forth in your thinking.

0:07:38.8 JD: Yep. You definitely are. And it takes a little bit to wrap your head around it, but we'll kind of work through this piece by piece. So let's start with the team. So you have these people on the left-hand side of this diagram. There's sort of three different groups within that team. And we've talked about this a number of times, but remember that there's this key concept when you're going to take a thinking systems or a systems view of an organization. That you have to have these three different groups of people. You have to have the people that are working on the system, the people that are working in the system, and then from Dr. Deming's perspective, you have to have somebody that has profound knowledge, has that lens. So again, someone from the outside that has profound knowledge. And then in our case, the people working in the system, generally speaking, are the students. And then you have to have the managers that have the authority to work on the system. So in our system, that would be teachers and school leaders. But this model is not specific to educational organizations. You could translate this to any other type of organization.

0:08:50.4 JD: So if we were a hospital, then perhaps the people working in the system, depending on the improvement project, could be nurses. And then the managers that have the authority to work on the system, maybe the hospital management team. And then someone from outside with profound knowledge could be either someone internally that has familiarity with the System of Profound Knowledge or someone that they bring in externally, like a consultant to help out. So the point is, is that, again, this team, whoever's working in the system is going to differ by the organizational sector that you're working in. But it translates in the system basically.

0:09:31.0 AS: It's interesting that I've seen this type of diagram or concept about work on the system, work in the system and a System of Profound Knowledge coach. But it just kind of clicked for me to think about it. It obviously, like when I work with a company, I'm working with the owners and the top management. And when I do that, we're working on the system.

0:09:58.5 JD: Yep.

0:10:00.2 AS: And I have the knowledge of the System of Profound Lnowledge. So I'm coaching them about the system. And then within the system, they have the employees who are executing on what they're trying to improve and do, but it just perfectly explains it. So I love that diagram.

0:10:17.8 JD: Yeah. And I have the same experience. And I think we've mentioned on this podcast before that in my world, we often have school or district-based improvement teams. And it's typically leaders of the organization, sometimes teachers, but almost never is it students working in the system that are a part of, or, providing significant input into the improvement. So, I think if you can combine, in our case, students working in the system, because they have things that they can identify in terms of how they experience the system that are different than the people that work on the system. And then having that third group that, or that person that has that outside profound knowledge, if you put all the three of those things together, I think you have a much better chance to improve. But I think in schools, that's probably never happening. I'm assuming that's the same in other industries as well.

0:11:08.3 AS: And this also explains why when Dr. Deming would see slogans and things like that, encouraging the workers to do better and higher quality, he was like, they don't have the authority to change the system.

0:11:22.5 JD: Right.

0:11:24.1 AS: And what you've said is the group that's working on the system has the authority or the ability to change the system.

0:11:35.4 JD: Yeah. This is one...the makeup of this team that's using this four-step process, that's one innovation that we've done to this model that would be different from the Improvement Kata. So in the Improvement Kata, there's just coach and learner. Usually sometimes there's a coach of the coach, a coach and a learner, depending on how it's represented, but this is in my view, an innovation where you have the work on the system group, the work in the system group, and then the System of Profound Knowledge coach. I haven't seen that in this model.

0:12:07.4 AS: And could that be because when Mike Rother was writing his book, he was particularly referring to Toyota.

0:12:18.7 JD: Could be. Could be.

0:12:19.5 AS: Where the workers have more authority to impact the system. Whereas in the typical American system, the worker doesn't really have the authority to stop the production line or something like that to the extent of the Japanese. So interesting point.

0:12:36.1 JD: Yeah, that's a really good point. My understanding of Mike Rother's work is he sort of derived this improvement model by watching, observing, working with Toyota over a very long period of time. So that very well could be the case. Cool. So we have the team, so let's go to step one, that's the challenge or direction. And I really like that because again, when we did that six part series on Goal Setting is Often an Act of Desperation, one thing that I did think was missing was like, well, still as an organization, we want to move forward. We want to improve. We want to be ambitious in how we're setting our goals, but I don't think that fully came through in the four conditions. And so I think layering this model on top of the four conditions really helps because I think it is important to be ambitious, especially when we're talking about like a mission driven organization, we need to be setting ambitious targets for student learning, coming to school, those types of things.

0:13:39.6 JD: So really what we're doing in step one of the model is we're asking the question, where do we want to be in the long run? So this is a long term goal. This is a longer range goal that would differentiate us from other schools if we achieved it. But currently when we think about this goal, it actually seems nearly impossible because it's so far from where we are currently performing. We don't know how we're going to get there. So an example in my world is, schools have been paying much closer attention to chronic absenteeism, which is when a student misses 10% or more of the school year. And those numbers basically skyrocketed towards the end of the pandemic and then for the last several years. So that's something we're focusing on as an organization. So our chronic absenteeism rate is really high, like 52%, something like that over the last several years. And we want to get that down to 5%. So there's this huge gap.

0:14:53.6 AS: That's a huge move.

0:14:54.5 JD: Huge gap, order of magnitude, right? To go from 52%, that's the voice of the process. That's what's actually happening. And the voice of the customer, what we want is 5%. And we really don't know how to get there. And that's going to be the case at the point where you're at step one, but you're doing that first. You're setting that challenge or direction. And that really is something that needs to be set, in my view, at the leadership level, at the management level. So, that's step one.

0:15:22.9 AS: And you just said something that's interesting is we really don't know how to get there.

0:15:25.6 JD: And we really don't know...

0:15:26.9 AS: I mean, if we knew how to get there, we'd probably be there.

0:15:28.6 JD: Yeah. Yep. Yep. So that's step one. That's why if you're able to view the model and you're watching the podcast and you can see the video, that's why number one happens first, even though it's on the far right hand in the upper right hand corner at the top of the mountain in the model.

0:15:45.8 AS: And is there a reason why it's a relatively vague thing, right? Challenge or direction.

0:15:54.0 JD: Yeah.

0:15:55.5 AS: Why is it vague as opposed to specific target, goal or saying something like that?

0:16:03.7 JD: Yeah. I mean, I think, I like challenge or direction. One, it fits on the page. And it sort of conveys that it's going to be a challenge. And it also, if you're going to work in this way to achieve something like that, that it's actually setting the direction of the organization, the direction that the organization is moving toward. So.

0:16:24.0 AS: In other words, is it acknowledging that we really won't, we really don't know that target. We think we know it, we see that mountain, but as we go closer to it, we want to go in that direction, but as we get closer, it'll become more clear exactly where we're going to be or want to be.

0:16:44.7 JD: Well, I think this would be something that... I think in my view, we're still learning. But when we set that challenge or direction, I guess I could see some circumstances where we would come off that, but I think we kind of want to set it in a way that really pushes us. Right. So I'd be, I mean, I think you could learn some things that would say, okay, maybe that wasn't the exact right number to set, but I'd also be careful about just adjusting it because it's hard.

0:17:13.2 AS: Okay. So you mentioned 5%.

0:17:17.9 JD: Yeah.

0:17:19.1 AS: Would that be, would you state it as achieve 5%?

0:17:25.9 JD: Yeah. 5% or less of our students are chronically absent.

0:17:30.4 AS: Okay. Keep going. I don't want to slow it down. But listeners may get it faster than I do. I'm a little bit slow and I have a lot of questions as we go along.

0:17:37.0 JD: No, no. And I think what we could do in future episodes is dig into each of the steps a little bit more too, and use this as an overview session.

0:17:46.9 AS: Yep.

0:17:48.3 JD: So that was step one. So now what's going to happen in step two, you're going to come all the way back down. Now you're at the very start of the path.

0:17:56.6 AS: Back to reality.

0:18:00.6 JD: Back to reality, step two. And the first thing you have to do, okay, we've set the target, this very challenging direction we want to head into because it's the right thing to do. The next thing we're going to do is grasp the current condition. And so in step two of the model, we're going to ask, where are we now? So we know the long-term goal and now we need to study the current process and how it operates basically. So basically this study represents our current knowledge threshold about the process. And then it's going to contribute to how we define the next target condition we've set that sort of intermediate step on the way to the challenge. And so a lot of that six-part series on goal setting is often an act of desperation, a lot of that learning is right here at what we're doing at step two, because we're creating a process behavior chart in a lot of cases, and understanding how our data is performing over time in this particular area. That's what grasping the current condition means.

0:19:02.6 JD: So part of it, it's a data thing. So in this chronic absenteeism example, what I'm gonna do is I know where I want to be. Now I need to understand where are we historically. And then also as a part of grasping the current condition, I may wanna do some things like interview students and families that are chronically absent, then sort of dig into why that is. Interview teachers about why they think that is. There's a number of things that you could do at this step on the ground where the work happens to grasp the current condition. And I think there can be a sort of quantitative component to that and a qualitative component to that. Also, we sort of understand like how are things actually working on the ground that contribute to us not being where we want to in this particular area.

0:19:56.7 JD: So that's step two. That's what we're gonna do next. After we've set the challenge or direction, we wanna sort of understand the situation on the ground, grasp the current condition. And then next what we're gonna do is step three, which is establish your next target condition. So in step three of the model, we ask where do we want to be next? So we know we can't make this leap, from 52% to, 'cause we wanna decrease it down to 5%. We know we're not, that's too big a step that we're just gonna get there somehow magically. So our target condition, then it's our next goal, usually within a time bound, achieve by date. In Mike Rother's work, he suggests something on a pretty short term scale. Something like one week or one month. So something like chronic absenteeism, I think one month would be sort of where I would set the next target condition. Just having experience with something like attendance rates.

0:21:07.0 JD: And at this point we don't exactly know how we'll achieve the next target condition, but it also, it doesn't feel as impossible as the challenge. So it's a step towards the challenge. So we're gonna do that next. So we set the big challenge that may take us three years to get to. Then we understand the current conditions on the ground and we use that knowledge to set our next target condition. So that's step three. And then the fourth step is we're gonna experiment to overcome obstacles.

0:21:45.9 AS: And before you go to fourth, let me just ask a question about establish your next target condition. One of the things that's missing from that, obviously is, you know, coming from a different perspective, is that when we say, all right, here's where we want to be, and let's go back to reality, and here's where we are. Sometimes, when people work like myself and others, work with people who say, okay, let's map out all the steps to get to that vision. What are the next five things we have to do? Whereas here you're saying, let's focus on the next target condition rather than the next five.

0:22:25.4 JD: Yep. And keep in mind when I say establish the next target condition, what I literally mean is what's our next intermediate goal that we're gonna shoot for? So if we're trying to get all the way down to 5% from 52, remember decrease is good in this case, establish my next target condition, maybe over the next month, I wanna see if I can get that from 52% down to 35% or down to 40%. Part of what I would look at when I set that next target condition is what did the variation look like when I was charting in step two? So the magnitude of that variation will give me some indication of what would be a reasonable sort of next step target for step three basically.

0:23:11.9 AS: And maybe just explain for those people not familiar with Mike Rother's work and, you know, terminology that you're using, why do you say establish your next target condition?

0:23:28.0 JD: I think, I don't know. I think that, you know, really what I mean is just establish the next target, establish the next intermediate goal, basically. Now, I think using the word condition is because when you think about something like chronic absenteeism, there's conditions that probably contribute to that and part of that condition may be the things that you wanna work on. So I kind of think of like, you know, 'cause when you look at step four, you're gonna experiment. So you're creating a new set of realities, a new set of conditions in your organization. And so sort of that coincides with the metric that you're shooting for. So it's not just the metrics, it's also like what are the conditions surrounding that metric. If that makes sense.

0:24:15.8 AS: Yep.

0:24:16.9 JD: Cool. And then step four then is experiment to overcome obstacles. So basically in step four of the model, we move toward the target condition with experiments. And by experiments, what I'm talking about is Plan, Do, Study, Act cycles or PDSA cycles, which uncover obstacles we'll need to work on. So the path, and that's the path in the model is windy 'cause it's this path to the target condition is not gonna be straight line, but it's gonna require this rapid learning to move in that direction basically. And so let's say we've set that next target condition to be one month from now, that's what we're shooting for. And we're gonna run a series of experiments. Maybe it's four one-week PSDA cycles, maybe it's two, two week PSDA cycles. Maybe it's one one month cycle. It depends on sort of the nature of the Plan, Do Study, Act cycle. But running these cycles where we make a plan, including a prediction, run the experiment, and then study what happens and see if it's moving us in the direction of the target condition.

0:25:40.0 JD: And so in that way, we're rapidly learning what it's gonna take to hit that next target condition. And the other important part of this, you'll see in between the grasping of the current condition at step two and running those experiments, there's this huge fault line, this huge crack in the path that you can't just jump over. And it's kinda labeled there, it says Threshold of Knowledge. And basically it's the point at which you have no facts and data to go on. That's the threshold of knowledge. There's always a threshold of knowledge. And so to see further beyond that threshold of knowledge, that's where you conduct your next experiment.

0:26:28.7 AS: Interesting.

0:26:29.8 JD: So because you, like you were saying, we wanna outline these five steps that we're gonna do. So with chronic absenteeism, I read somewhere a Harvard study where if you text parents what a kid's attendance rate is on a regular basis, they're then more likely to come to school on a frequent basis. So you could see where a school system would spend all this money to get a texting system, maybe even allocate a person or a half of a FTE of a person to run this system. And they faithfully implement this texting system, and it has no impact at their school to impact those chronic, because it had nothing to do with what the actual problem was in that context. And you've spent all this money. And that was just a hypothetical.

0:27:21.2 AS: And you could have done a pilot test of 10 parents or 20 and done it manually and sent out some messages and just tested a little bit.

0:27:31.1 JD: Yeah. You run a test with 10 chronically absent kids. Just to see if you can improve their attendance for a week. And maybe you learn something or for a month and maybe you learn something. And then if the early evidence is pointing in the right direction, then you can run that experiment with more kids or for a longer period of time or under slightly different conditions. Those types of things.

0:27:54.6 AS: So an example that I would say in relation to this for one of my clients is that we've identified that they need to get a higher gross profit margin.

0:28:04.7 JD: Okay.

0:28:05.5 JD: And their gross profit margin is about 23%. And I know that the average is about 30 in the industry. And so my work with them is how are we gonna get that profit margin to be 30 or 35%? 35 would be showing that you've really got pricing power because of something that we've done. And so, I'm pounding away that we've gotta improve this, but you know what? We don't have data to understand the current condition. And this week we've... It's taken us about a couple months to pull that data together. But now we have absolutely comprehensive data that my team has calculated on the profitability of every product, the profitability of every customer, and the profitability of every process. We know the capacity utilization of each part of the production process. So now we have the knowledge that we didn't have before that's gonna, that once get, digest this knowledge, it's gonna give us the indication of what to do next. Which is it's gonna be shut down a particular production process or increase price there. We may lose customers, but it's not worth doing it at this low price or so, but without that knowledge, we're just, it's a dream.

0:29:21.4 JD: Yeah. It sounds like you guys have done step one and step two in that process.

0:29:28.0 AS: Yeah. Which is exciting. 'Cause now Friday's meeting is gonna be about, all right, how do we take this huge amount of data and effort that we've put in and now it's time to come up with what are the steps that we're gonna take?

0:29:40.4 JD: Yeah. And I think even just in that situation, even just acknowledging that there's the threshold of knowledge. Even just getting people to acknowledge that in a room that they actually don't know what's gonna happen. That's the power of the PDSA because it makes you predict, okay, you say this thing is gonna work and when you put in this plan in place, this is your prediction. And then when you come back next week and it doesn't work, then you have to explain that, you know, it's not a gotcha, but it very quickly makes you think in a different way.

0:30:13.0 AS: It keeps a record so someone has gone back, well, I didn't think it was gonna work, you know, for sure.

0:30:18.8 JD: Well, right. And it's usually very like, some of the things that I found in that is when people are off on their predictions, it's very mundane things that they didn't account for. We're in student recruitment season and we set a goal for the number of calls we're gonna make to prospective families. And then hypothetically a recruitment director could fall short and it's like, well what happened? It's like, well, oh, the two part-time people that we had, I forgot they are actually out two days last week right? And so it's usually things like that are actually getting in the way of us accomplishing these grand targets that we have set.

0:31:05.5 AS: By the way, where does the threshold of knowledge fit? We've got number one challenge or direction, number two, grasp the current condition. It's after the grasp the current condition that we come to the threshold of knowledge.

0:31:17.7 JD: Yeah. Because, well, we have somewhat of an understanding of the condition on the ground, but we don't know what's gonna improve it until we run the experiments. So we start running the experiments and we try to sort of narrow that knowledge gap basically. And this is sort of the final part is basically like what do you do when you get to that experiment and when you hit that target condition, when you reach that by the achieve-by date, well now there's a new condition and you repeat the four steps because you haven't reached the challenge or the direction. You just met that sort of intermediate goal. And you basically keep running this four step cycle until that learned long-term challenge is achieved.

0:32:12.5 AS: Okay. Great. So we've got the establish your next condition down where it could be one week, it could be one month, in some cases it could be longer, but it's really our next intermediate goal. Where do we wanna go next? What's the next right step?

0:32:28.5 JD: Yeah. Well, so you go back to step two 'cause you're not gonna change the challenge or direction. Now there's a new set of conditions 'cause you've moved ahead, right? And now you're gonna go back and say, okay, what are the current conditions like? And now we're gonna, okay, let's say we move from 52% to 42%. Now we go back and sort of understand the experiments from that last cycle. And we're gonna set that next target condition. So maybe now we wanna get it down to 25%. And we're gonna run another round of experiments in a certain amount of time to see if it hits that next target condition. And basically you're just gonna keep doing this over and over again. That's really the continual improvement model that we're operating under.

0:33:22.7 AS: So how would we wrap this up?

0:33:24.4 JD: So the big thing for me is, you sort of have to have a model to bridge that gap between current conditions and future aspirations. Beause there's always a gap between those two things. And what this model does is it gives us a scientific way of thinking and working to close this gap. It's a more powerful model than I've ever sort of seen anywhere. And then literally you put it on a piece of paper like this and then you have to explain it to people over and over and over. And then you have to actually do it with people. So we're actually doing this, getting people excited about running PDSAs. And the most important thing is that the challenge or direction, especially for leaders that are listening to this, you don't stand on this mountaintop and set it and then say, go do it. That's why this team aspect is so important. We're setting this challenge or direction as a team, and then we're working together on the ground. Putting that work in, running those experiments to try to bring this thing about, is a completely different way of working. It's not an accountability system, it's an improvement system.

0:34:39.4 AS: Yeah. That's a great overview of this system that you guys are applying and it's exciting to learn more. So I wanna thank you on behalf of everyone at The Deming Institute, John. And I thought the discussion was very interesting myself. And for listeners, remember to go to deming.org to continue your journey. You can find John's book win-win W. Edwards Deming, the System of Profound Knowledge and the Science of Improving Schools on amazon.com. This is your host, Andrew Stotz, and I wanna leave you with one of my favorite quotes from Dr. Deming. "People are entitled to joy in work."
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Acceptability VS Desirability: Misunderstanding Quality (Part 3)
29 jul· In Their Own Words
Is reaching A+ quality always the right answer? What happens when you consider factors that are part of the system, and not just the product in isolation? In this episode, Bill Bellows and Andrew Stotz discuss acceptability versus desirability in the quality realm.

TRANSCRIPT

0:00:02.5 Andrew Stotz: My name is Andrew Stotz and I'll be your host as we continue our journey into the teachings of Dr. W. Edwards Deming. Today, I'm continuing my discussion with Bill Bellows, who has spent 31 years helping people apply Dr. Deming's ideas to become aware of how their thinking is holding them back from their biggest opportunities. Today's episode, episode three, is Acceptability and Desirability. Bill, take it away.

0:00:28.1 Bill Bellows: Thank you, Andrew, and welcome back to our listeners.

0:00:30.7 AS: Oh, yeah.

0:00:31.4 BB: Hey, do you know how long we've been doing these podcasts?

0:00:36.6 AS: No.

0:00:40.8 BB: We started... Our very first podcast was Valentine's Day 2023. I was gonna say 2013. 2023, so roughly 17 months of podcast, Andrew.

0:00:53.4 AS: That was our first date, huh?

0:00:55.0 BB: Our first date was Valentine's Day 2023.

0:00:58.9 AS: All right. Don't tell your wife.

[laughter]

0:01:03.1 BB: All right. And so along the way, I've shared reflections from my first exposures to Dr. Deming, as well as my first exposures to Genichi Taguchi. Talked about Edward de Bono, Tom Johnson, others, mentors, Bill Cooper, Phil Monroe, Gipsie Ranney was a great mentor. Last week, Andrew, while on vacation in New England with my wife, I visited for a day my 85-year-old graduate school advisor who I worked with for ten years, Bob Mayle, who lives in, I would say, the farthest reaches of Maine, a place called Roque Bluffs. Roque Bluffs. How's that for... That could be North Dakota. Roque Bluffs. He's in what they call Down East Maine. He's recently got a flip phone. He's very proud. He's got like a Motorola 1985 vintage flip phone. Anyway, he's cool, he's cool. He's...

0:02:15.9 AS: I'm just looking at that place on the map, and looks incredible.

0:02:19.0 BB: Oh, yeah. He's uh, until he got the phone, he was off the grid. We correspond by letters. He's no internet, no email. And he has electricity, lives in about an 800 square-foot, one-floor bungalow with his wife. This is the third time we've visited him. Every time we go up, we spend one day getting there, one day driving home from where my in-laws live in New York. And then one day with him, and the day ends with going to the nearby fisherman's place. He buys us fresh lobster and we take care of them. [chuckle]

0:03:01.3 AS: Yeah, my sister lives in Kennebunk, so when I go back to the US, I'm...

0:03:08.8 BB: Yeah, Kennebunk is maybe 4 hours away on that same coast.

0:03:15.3 AS: I'm just looking at the guide and map book for Roque Bluffs' State Park, and it says, "a beautiful setting with oceanfront beach, freshwater pond, and hiking trails."

0:03:25.9 BB: Yeah, he's got 10 acres... No, he's got, I think, 20, 25 acres of property. Sadly, he's slowly going blind. He has macular degeneration. But, boy, for a guy who's slowly going blind, he and I went for a walk around his property for a couple hours, and it's around and around... He's holding branches from hitting me, I'm holding branches from hitting him and there's... Let alone the terrain going up and down, you gotta step up and over around the rocks and the pine needles and all. And it was great. It was great. The week before, we were close to Lake George, which is a 32-mile lake in Upstate New York. And what was neat was we went on a three-hour tour, boat ride. And on that lake, there are 30 some islands of various sizes, many of them owned by the state, a number of them owned privately. Within the first hour, we're going by and he points to the island on the left and he says it was purchased in the late '30s by Irving Langmuir. Yeah, so he says, "Irving Langmuir," and I thought, I know that name from Dr. Deming. That name is referenced in The New Economics.

0:04:49.1 BB: In fact, at the opening of Chapter Five of The New Economics, the title is 'Leadership.' Every chapter begins with a quote, right? Chapter Five quote is, "You cannot plan to make a discovery," so says Irving Langmuir. So what is... The guy's describing this island purchased back in the late '30s by Langmuir for like $5,000. I think it's... I don't know if he still owns it, if it's owned by a nonprofit. It's not developed. It's privately held. I'm trying, I wrote to Langmuir's grandson who did a documentary about him. He was a Nobel Prize-winning physicist from GE's R&D center in Schenectady, New York, which is a couple hours south of there. But I'm certain, and I was looking for it earlier, I know I heard of him, of Irving Langmuir through Dr. Deming. And I believe in his lectures, Deming talked about Langmuir's emphasis on having fun at work, having fun. And so I gotta go back and check on that, but I did some research after the day, and sure enough came across some old videos, black and white videos that Langmuir produced for a local television station, talking about his... There's like show and tell with him in the laboratory. And in there, he talks about joy and work and all that.

0:06:33.5 BB: So I'm thinking, that's pretty cool. So I'm waiting to hear from his grandson. And ideally, I can have a conversation with his grandson, introduce him to Kevin and talk about Deming's work and the connection. Who knows what comes out of that? Who knows? Maybe an interview opportunity with you and Irving Langmuir's grandson. So, anyway.

0:06:52.7 AS: Fantastic.

0:06:54.7 BB: But going back to what I mentioned earlier in my background in association with Deming and whatnot, and Taguchi, and I offer these comments to reinforce that while my interests in quality were initially all things Taguchi, and then largely Deming, and it wasn't long before I stopped, stepped back and an old friend from Rocketdyne 20 some years ago started focusing on thinking about thinking, which he later called InThinking. And it's what others would call awareness of our... Well, we called it... Rudy called it, better awareness of our thinking patterns, otherwise known as paradigms, mental models. We just like the way of explaining it in terms of becoming more aware of our thinking patterns. And I say that because... And what I'm presenting relative to quality in this series, a whole lot of what I'm focusing on is thinking about thinking relative to quality.

0:07:58.8 BB: And so last time, we talked about the eight dimensions of quality from David Garvin, and one of them was acceptability. And that is this notion in quality, alive and well today, Phil Crosby has created this focus on achieving zero defects. Everything meets the requirements, that gets us into the realm, everything is good. Dr. Deming and his red bead experiments talked about red beads and white beads. The white beads is what we're striving for. All the beads are good. The red beads represent defects, things we don't want. And that's this... Thinking wise, that's a thinking pattern of "things are good or bad." Well, then we can have high quality, low quality and quality. But at Rocketdyne, when I started referring to that as category thinking, putting things into categories, but in the world of quality, there's only two categories, Andrew: good and bad. This either meets requirements or it doesn't. And if it's good, then we're allowed to pass it on to the next person. If we pass it on and it's not good, then they're going to send it back to us and say, "Uh-uh, you didn't meet all the requirements." And what I used to do in class, I would take something, a pen or something, and I would go to someone in the seminar and I'd say, "If I hand this to you and it doesn't meet requirements, what are you going to say?" You're gonna say, "I'm not going to take it. It hasn't met the requirements."

0:09:36.4 BB: And I would say you're right. All the I's are not dotted, all the T's are not crossed, I'm not taking it. Then I would take it back and I'd say, "Okay, now what if I go off and dot all those I's and cross all those T's?" Then I would hand them the pen or whatever the thing was, and I'd say, "If all those things have been met," now we're talking acceptability. "Now, what do you say?" I said, "Can you reject it?" "No." I say, "So what do you say now that all those things... If you're aware that all those requirements have been met, in the world of quality, it is as good, now what do you say?" And they look at me and they're like, "What do I say?" I say, "Now you say, thank you." But what I also do is one more time... And I would play this out to people, I'd say, "Okay, Andrew, one more time. I hand you the pen, Andrew, all the requirements are met. And what do you say?" And you say, "Thank you." And I say, "What else just happened when you took it?"

0:10:45.4 AS: You accepted it.

0:10:47.3 BB: Yes. And I say, "And what does that mean?" "I don't know. What does that mean?" I said, "It means if you call me the next day and say, I've got a problem with this, you know what I'm going to say, Andrew?"

0:10:58.5 AS: "You accepted it."

0:11:01.5 BB: Right. And so, what acceptability means is don't call me later and complain. [laughter] So, I get a photo of you accepting it, you're smiling. So if you call me back the next day and say, "I've got a problem with this," I'd say, "No, no, no." So acceptability as a mental model is this idea that once you accept it, there's no coming back. If you reveal to me issues with it later, I deny all that. I'd say, I don't know what your problem with Andrew... It must be a problem on your end, because what I delivered to you is good. And if it is good, then there can't be any problems associated with it. So, if there are problems, have to be on your end, because defect-free, everything good, implies, ain't no problems, ain't no issues with it. I'm thinking of that Disney song, trouble-free mentality, Hakuna Matata.

[chuckle]

0:12:04.5 BB: But now I go back to the title, Acceptability and Desirability. One of Dr. Deming's Ph.D. students, Kauro [actually, Kosaku] Yoshida, he used to teach at Cal State Dominguez Hills back in the '80s, and I think sometime in the '90s, he went to Japan. I don't know if he was born and raised in Japan, but he was one of Dr. Deming's Ph.D. students, I believe, at NYU. Anyway, I know he's a Ph.D. student of Dr. Deming, he would do guest lectures in Dr. Deming's four-day seminars in and around Los Angeles. And, Yoshida is known for this saying that Americans are all about acceptability meets requirements, and the Japanese are about desirability. And what is that? Well, it's more than meeting requirements. And, I wanna get into more detail on that in future episodes. But for now, we could say acceptability is meeting requirements. In a binary world, it can be really hard to think of, if everything's met requirements, how do I do better than that? How do I continue to improve if everything meets requirements? Well, one clue, and I'll give a clue, is what I shared with the senior most ranking NASA executive responsible for quality.

0:13:46.4 BB: And this goes back to 2002 timeframe. And we had done some amazing things with desirability at Rocketdyne, which. is more than meeting requirements. And the Vice President of Quality at Rocketdyne knew this guy at NASA headquarters, and he says, "You should go show him what we're doing." So I called him up a week in advance of going out there. I had made the date, but I figured if I'm going to go all the way out there, a week in advance, I called him up just to make sure he knew I was coming. And he said something like, "What are we going to talk about?" He said something like, "We're going to talk about that Lean or Six Sigma stuff?" And I said, "No, more than that." And I think I described it as, we're going to challenge the model of interchangeable parts. And he's like, "Okay, so what does that mean?" So the explanation I gave him is I said, "What letter grade is required for everything that NASA purchases from any contractor? What letter grade is ostensibly in the contract? What letter grade? A, B, C, D. What letter grade is in the contract?" And he says, "Well, A+."

[laughter]

0:15:01.2 BB: And I said, "A+ is not the requirement." And he's like, "Well, what do you mean?" I said, "It's a pass-fail system." That's what acceptability is, Andrew. Acceptability is something is either good or bad, and if it's bad, you won't accept it. But if it's good, if I dot all the I's and cross all the T's, you will take it. It has met all the requirements. And that gets into what I talked about in the first podcast series of what I used to call the first question of quality management. Does this quality characteristic, does the thrust of this engine, does the roughness of this surface, does the diameter of this hole, does the pH of this bath meet requirements? And there's only two answers to that question, yes or no. And if yes is acceptable, and if no, that's unacceptable. And so I pointed out to him, much to his chagrin, is that the letter grade requirement is not A+, it's D- or better. [chuckle] And so as a preview of we'll get into in a future podcast, acceptability could be, acceptability is passing. And this guy was really shocked. I said, "Procurement at NASA is a pass-fail system."

0:16:21.9 BB: Every element of anything which is in that system purchased by NASA, everything in there today meets a set of requirements, is subject to a set of requirements which are met on a pass-fail basis. They're either, yes, it either meets requirements, acceptable, or not. That's NASA's, the quality system used by every NASA contractor I'm aware of. Boeing's advanced quality system is good parts and bad parts. Balls and strikes. And so again, for our viewers, acceptability is a pass-fail system. And what Yoshida... You can be thinking about what Yoshida's talked about, is Japanese companies. And again, I think it's foolish to think of all Japanese companies, but back in the '80s, that's really the way it came across, is all Japanese companies really have this figured out, and all American companies don't. I think that's naive. But nonetheless, what he's talking about is shifting from a pass-fail system, that's acceptability, to, let's say, letter grades of A's or B's. That would be more like desirability, is that it's not just passing, but an A grade or a B grade or a C grade. So that's, in round terms, a preview of Yoshida... A sense of, for this episode, of what I mean by acceptability and desirability.

0:17:54.7 BB: In the first podcast which was posted the other day, I made reference to, instead of achieving acceptability, now I can use that term, instead of achieving zero defects as the goal, in the world of acceptability, once we continuously improve and achieve acceptability, now everything is passing, not failing. This is in a world of what I refer to as category thinking, putting things in categories. In the world of black and white, black is one category, white is a category. You got two categories, good and bad. If everything meets requirements, how do you continuously improve if everything is good? Well, part of the challenge is realize that everything is good has variation in terms... Now we could talk about the not all letter grade A, and so we could focus on the things that are not A's and ask the question, is an A worthwhile or not? But what I was saying in the first podcast is my admiration for Dr. Deming's work uniquely... And Dr. Deming was inspired towards this end by Dr. Taguchi, and he gave great credit to that in Chapter Ten of The New Economics. And what I don't see in Lean nor Six Sigma, nor Lean/Six Sigma, nor Operational Excellence, what I don't see anywhere outside of Dr. Deming's work or Dr. Taguchi's work is anything in quality which is more than acceptability.

0:19:32.0 BB: It's all black and white. Again, Boeing's Advanced Quality System is good parts and bad parts. Now, again, I'm not suggesting that there's anything wrong with that. And I would also suggest in a Deming-based organization there may be characteristics for which all we need is that they're good. We don't need to know how good they are, we don't need to know the letter grade. And why is that? Because maybe it's not worth the trouble to discern more than that. And this is where I use the analogy of balls and strikes or kicking the ball into the net. If you've got an open net... That's Euro Cup soccer. There's no reason to be precisely placing the ball. All you want to do is get it into the net. And that's an area of zero defects, maybe all that is worthwhile, but there could be other situations where I want the ball in a very particular location in the strike zone. That's more of this desirability sense. So I want to clarify for those who listened to the first podcast, is what I'm inferring is I'm not aware of any quality management system, any management system in which, inspired by Dr. Deming and Taguchi, we have the ability to ask the question, is acceptability all that is required?

0:20:55.7 BB: And it could be for a lot of what we do, acceptability is not a bad place to be. But I'm proposing that as a choice, that we've thought about it and said, "You know what? In this situation, it's not worth, economically, the extra effort. And so let's put the extra effort into the things where it really matters." And if it doesn't... So use desirability where it makes sense, use acceptability elsewhere. Right now, what I see going on in organizations unaware of Dr. Deming's work, again, Dr. Taguchi's work, is that they're really blindly focusing on acceptability. And I think what we're going to get into is, I think there's confusion in desirability. But again, I want to keep that for a later episode. Now, people will say, "Well, Bill, the Six Sigma people are about desirability." No, the Six Sigma people have found a new way to define acceptability. And I'll give you one other fun story. When I taught at Northwestern's Kellogg Business School back in the late '90s, and I would start these seminars off by saying, "We're going to look at quality management practices, past, present, future." And so one year, I said, "So what quality management practices are you aware of?" And again, these are students that have worked in industry for five or six years.

0:22:17.6 BB: They've worked at GM, they worked at General Electric, they worked for Coca Cola, banking. These are sharp, sharp people. But you got into the program having worked somewhere in the world, in industry, so they came in with experience. And so they would say, zero defect quality is a quality management practice. And I'd say, "Okay, so where'd that come from?" And again, this is the late '90s. They were aware of the term, zero defects. They didn't know it was Philip Crosby, who I learned yesterday was... His undergraduate degree is from a school of podiatry. I don't know if he was a podiatrist, but he had an undergraduate... A degree in podiatry, somebody pointed out to me. Okay, fine. But Philip Crosby, his big thing was pushing for zero defects. And you can go to the American Society for Quality website to learn more about him. Philip Crosby is the acceptability paradigm. So, students would bring him up and I'd say, "Okay, so what about present? What about present?" And somebody said, "Six Sigma Quality." So I said, "So what do you know about Six Sigma Quality?" And somebody said," Cpk’s of 2.00." And I said, "So what's... " again, in a future episode, we could talk about Cpk’s."

0:23:48.5 AS: But I said to the guy, "Well, what's the defect rate for Six Sigma... For Cpk's or Six Sigma Quality or Cpk's of 2?" And very matter of factly, he says, "3.4 defects per million." So I said, "How does that compare to Phil Crosby's quality goal from 1962? Here we are, 1997, and he's talking about Motorola and Six Sigma Quality, a defect goal of 3.4 defects per million. And I said, "How does that compare to Phil Crosby's quality goal of zero defects in 1962?" And the guy says... [chuckle] So cool, he says, "Well, maybe zero is not worth achieving." 'Cause again, zero was the goal in 1962. Six Sigma sets the goal for 3.4 per million. Not zero, 3.4, to which this guy says... And I thought it was so cool, he says, "Well, maybe zero is not worth achieving." So, there. Well, my response was, "Well, what makes 3.4 the magic number for every process in every company around the world? So, what about that?" To which the response was crickets. But what I want to point out is we're still talking about zero... I mean 3.4 is like striving towards zero and admitting some. It is another way of looking at acceptability. It is... And again, and people claim it's really about desirability. I think, well, there's some confusion in desirability and my hope in this episode is to clear up some of that misunderstanding in acceptability as well as in desirability. And they... Let me just throw that out.

0:25:58.1 AS: Yeah, there's two things that I want to say, and the first one is what he should have replied is, for those older people listening or viewing that can remember the movie, Mr. Mom with Michael Keaton, I think it was. And he should have replied, "220, 221, whatever it takes." And he should have said, "Well, yeah, 3.4, 3.5, 3.6. It's could be around there."

0:26:27.5 BB: Well, the other thing is, why we're on that is... And I think this is... I'm really glad you brought that up, is, what I would push back on the Lean and the Six Sigma, those striving for zero defects or Cpk's of 2 or whatever they are is, how much money are we going to spend to achieve a Cpk of 2, a zero defects? And again, what I said and... Well, actually, when I posted on LinkedIn yesterday, "I'm okay with a quality goal of 3.4 defects per million." What I'm proposing is, instead of blindly saying zero defects is the goal and stop, or I want Cpk’s of 1.33 or whatever they are everywhere in the organization, in terms of the economics of variation or the new economics, is how much money are we going to spend to achieve zero or 3.4 or whatever it is? And, is it worth the return on the investment? And this is where Dr. Taguchi's loss function comes in.

0:27:49.2 BB: And so what I'm proposing, inspired by Genichi Taguchi and W. Edwards Deming is, let's be thinking more about what is... Let's not blindly stop at zero, but if we choose to stop at zero, it's an economic choice that it's not worth the money at this time in comparison to other things we could be working on to improve this quality characteristic and that we've chosen to be here... Because what I don't want people to think is what Dr. Deming and Taguchi are talking about is we can spend any amount of money to achieve any quality goal without thinking of the consequences, nor thinking about, how does this goal on this thing in isolation, not make things bad elsewhere. So we have to be thinking about a quality goal, whether it's worth achieving and will that achievement be in concert with other goals and what we're doing there? That's what I'd like people thinking about as a result of this podcast tonight.

0:28:56.0 AS: And I think I have a good way of wrapping this up, and that is going back to Dr. Deming's first of his 14 Points, which is, create constancy of purpose towards improvement of product and service with the aim to become competitive, to stay in business, and to provide jobs. And I think that what that... I link that to what you're saying with the idea that we're trying to improve our products and services constantly. We're not trying to improve one process. And also, to become competitive in the market means we're improving the right things because we will become more competitive if we are hitting what the client wants and appreciates. And so... Yeah.

0:29:46.3 BB: But with regard to... Absolutely with regard to our customers, absolutely with regard to how it affects different aspects of our company, that we don't get head over heels in one aspect of our company and lose elsewhere, that we don't deliver A+ products to the customer in a losing way, meaning that the A+ is great for you, but financially, we can't afford currently... Now, again, there may be a moment where it's worthwhile to achieve the A... We know we can achieve the A+, but we may not know how to do it financially. We may have the technology to achieve that number. Now, we have to figure out, is, how can we do it in an economically advantaged way, not just for you, the customer, but for us. Otherwise, we're losing money by delivering desirability. So it's gotta work for us, for you, but it's also understanding how that improvement... That improvement of that product within your overall system might not be worthwhile to your customer, in which case we're providing a... The classic...

0:31:18.8 AS: You're not becoming competitive then.

0:31:21.8 BB: The better buggy whip. But that gets into looking at things as a system. And this is... What's invaluable is, all of this is covered with a grasp of the System of Profound Knowledge. The challenge is not to look at goals in isolation. And even I've seen people at Lean conferences quote Dr. Deming and his constancy of purpose and I thought, well, you can have a... A non-Deming company has a constancy of purpose. [chuckle] The only question is, what is the purpose? [laughter] And that's when I thought, a constancy of purpose on a focus on acceptability is good provided all of your competitors are likewise focusing on acceptability. So I just be... I just am fascinated to find people taking Deming's 14 Points one at a time, out of context, and just saying, "Well, Dr. Deming said this." Well, there we go again. [laughter]

0:32:29.9 AS: Bill, on behalf of everyone at The Deming Institute, I want to thank you again for this discussion. For listeners, remember to go to deming.org to continue your journey. If you want to keep in touch with Bill, just find him on LinkedIn. This is your host, Andrew Stotz. And I'll leave you with one of my favorite quotes from Dr. Deming, "People are entitled to joy in work."
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8 Dimensions of Quality: Misunderstanding Quality (Part 2)
8 jul· In Their Own Words
In this episode, Bill Bellows and Andrew Stotz discuss David Garvin's 8 Dimensions of Quality and how they apply in the Deming world. Bill references this article by Garvin: https://hbr.org/1987/11/competing-on-the-eight-dimensions-of-quality

TRANSCRIPT

0:00:02.4 Andrew Stotz: My name is Andrew Stotz, and I'll be your host as we continue our journey into the teachings of Dr. W. Edwards Deming. Today, I'm continuing my discussion with Bill Bellows, who has spent 31 years helping people apply Dr. Deming's ideas to become aware of how their thinking is holding them back from their biggest opportunities. This is the Misunderstanding Quality series, episode two, The Eight Dimensions of Quality. Bill, take it away.

0:00:30.4 Bill Bellows: Welcome back, Andrew. Great to see you again. All right, episode two, we're moving right along. So in episode one, which the title I proposed, waiting to see what comes out, the title I proposed was, Quality, Back to the Start. And that was inspired by some lyrics from Coldplay. Anyway, but this is a, it's going back to my start in quality and last time I mentioned discovering Taguchi's work long before I discovered Dr. Deming. In fact, Gipsie Ranney, who is the first president of the Deming Institute, the nonprofit formed by Dr. Deming and his family just before he passed away, and Gipsie became the first president and was on the board when I was on the board for many years. And I spoke with her nearly every day, either driving to work or driving home. And once, she calls me up and she says, "Bill," that was her Tennessee accent, "Bill."

0:01:50.5 BB: She says, "It says on The Deming Institute webpage that you infused Dr. Taguchi's work into Dr. Deming's work," something like that, that I... Something like I infused or introduced or I brought Taguchi's work into Deming's work, and I said, "Yes." I said, "Yeah, that sounds familiar." She says, "Isn't it the other way around?" That I brought Deming's work into Taguchi's work. And I said, "No, Gipsie," I said, "It depends on your starting point. And my starting point was Dr. Taguchi." But I thought it was so cool. She says, "Bill don't you have it? Don't you... " She is like, "Isn't it the other way around?" I said, "No, to me, it was all things Taguchi, then I discovered Dr. Deming." But I was thinking earlier before the podcast, and I walked around putting together how, what I wanna talk about tonight. And I thought, when I discovered Taguchi's work, I looked at everything in terms of an application of Dr. Taguchi's ideas.

0:03:29.7 AS: And one question about Taguchi for those people that don't know him and understand a little bit about him, was he... If I think about where Dr. Deming got at the end of his life, it was about a whole system, the System of Profound Knowledge and a comprehensive way of looking at things. Was Taguchi similar in that way or was he focused in on a couple different areas where he really made his contribution?

0:04:03.9 BB: Narrower than Dr. Deming's work. I mean, if we look at... And thank you for that... If we look at Dr. Deming's work in terms of the System of Profound Knowledge, the elements of systems psychology, variation, theory of knowledge, Taguchi's work is a lot about variation and a lot about systems. And not systems in the sense of Russ Ackoff systems thinking, but variation in the sense of where's the variation coming from looking upstream, what are the causes of that variation that create variation in that product, in that service?

0:04:50.9 BB: And then coupled with that is that, how is that variation impacting elsewhere in the system? So here I am receiving sources of variation. So what I deliver it to you has variation because of what's upstream of me and Taguchi's looking at that coupled with how is that variation impacting you? So those are the systems side, the variation side. Now, is there anything in Deming, in Taguchi's work about psychology and what happens when you're labelling workers and performance appraisals and, no, not at all.

0:05:37.6 AS: Okay, got it.

0:05:38.4 BB: Is there anything in there about theory of knowledge, how do we know that what we know is so? No, but there's a depth of work in variation which compliments very much so what Dr. Deming was doing. So anyway, so no. And so I discovered Taguchi's work, and I mentioned that in the first episode. I discovered his work, became fascinated with it, started looking at his ideas in terms of managing variation to achieve incredible... I mean, improved uniformity to the extent that it's worthwhile to achieve. So we were not striving for the ultimate uniformity, it's just the idea that we can manage the uniformity. And if we... And we'll look at this in more detail later, but for our audience now, if you think of a distribution of the variation in the performance of a product or a service, and you think in terms of... It doesn't have to be a bell-shaped distribution, but you have a distribution and it has an average and it has variation.

0:06:50.4 BB: What Dr. Taguchi's work is about in terms of a very brief, succinct point here in episode two is how might we change the shape of that distribution? How might we make it narrower, if that's a worthwhile adventure? It may be worthwhile to make it wider, not just narrower, but in both cases, we're changing the shape of the distribution and changing the location. So Taguchi's work, Taguchi's Methods, driven by variation comes to me, variation impacts you is how do I change the shape and location of that distribution? So on a regular basis, as I became more fascinated with that, I started thinking about, well, how might I apply Taguchi's ideas to these things that I encountered every day? Well, prior to that before discovering Taguchi's work, when I was a facilitator in problem solving and decision making training, I did the same thing, Andrew.

0:07:52.4 BB: I started looking at, oh, is this a problem? Is this a decision? Is this a situation that needs to be appraised? And so prior to that, what I was thinking about is when I was just a heat transfer analyst working on my Ph.D., I didn't look at how the heat transfer stuff affected all these other aspects of my lives. I didn't think about it when I went into a supermarket, but there was something about the problem solving and decision making that just infatuated me. And I would look at, oh, is Andrew talking about a decision or is Andrew talking about a problem? So I started hearing things. And so when I went into Taguchi's work, it was the same thing. And then shifting into Deming's work, it's the same thing. And I've... There's nothing else that I've studied that I look at things through those lenses. Anyway, so in studying, getting exposed to Taguchi, I mentioned that I had some time away from work, I went out on medical for some reasons and went and bought a book, a bunch of books.

0:09:02.4 BB: And one of the books I bought by David Garvin had come out in 1987, is entitled "The Eight Dimensions of Quality." There's a Harvard Business Review article that I wanna reference in this episode, and I'll put a link to the article. It's a free link. And so when you hear people talk about a quality product or a quality service or quality healthcare. We think in terms of it's quality as things, it's either good quality or bad quality or high quality, or somebody calls it low quality, or we just say it's a quality product. But what does that mean? So what I find is very loosely, we think in terms of categories of quality, good, bad, high, low. What we'll look at in a future episode is what would happen if we thought about quality on a continuum, which I believe Taguchi's work really demonstrates vividly as well as Dr. Deming's work.

0:10:07.4 BB: But even to back up before we talk about the eight dimensions of quality, I wanted to give some background on the word quality. The word quality, and this comes from an article and I'll put a link to this article, I wrote it for the Lean Management Journal a number of years ago, the word quality has Latin roots, beginning as qualitas, T-A-S, coined by the Roman philosopher and statesman, Marcus Tullius Cicero. He later became an adversary of this bad guy named Mark Antony. You've heard of him. Feared by Antony, this guy was feared by Antony because his power of speech led, you know what it led to, Andrew, his power of speech?

0:10:54.5 AS: What?

0:10:54.6 BB: His beheading.

0:10:55.8 AS: Oh my goodness.

0:10:56.5 BB: So for those of you with great powers of speech, watch out for your Mark Antony. But meanwhile, he introduced fellow Romans to the vocabulary of qualitas, quantitas, quantity, humanitas, humanities, essentia, which is, essence, he also is credited with an extensive list of expressions that translate into English today. Difference, infinity, science, morale. Cicero spoke of qualitas with his peers when focusing on the essential nature, character or property of an object. And this is kind of interesting. I mean, you can count how many apples do we have. And again, he came up with the term quantitas for quantity, but he is also talking about the essence of the apples. That's the quality word. And then 2000 years later when writing "The New Economics", Dr. Deming provided his definition and a little bit different.

0:12:05.3 BB: He says, "The problem anywhere is quality. What is quality?" Says the good doctor, "A product or service possesses quality if it helps somebody, it enjoys a good and sustainable market." And I said in the article, "As with Cicero, Deming saw quality as a property." And then some other background on quality before I talk about Garvin, "long after Cicero and well before Deming, quality as a property was a responsibility of guilds." Guilds. I mean, now we have writers guilds, we have actors guilds, and it's kind of cool that these guilds still exist and they are associations of artisans who control the practice of their craft, each with a revered trademark. So here in Los Angeles, we have writers guilds, actors guilds. They were organized as professional societies, just like unions.

0:13:00.2 BB: And these fraternities were developed, and within these fraternities they created standards for high quality. All right. So what is this quality management stuff from David Garvin? So this article was written 37 years ago and reviewing it for tonight's episode and I thought it fit in really, really well. I was reminded of... First time I read this article, 1989, I knew a lot about... Well, I knew, I was excited about Taguchi as I knew a lot about Taguchi, didn't know a lot about Dr. Deming. So I'm now reviewing it years later with a much deeper, broader Deming perspective than at that time. But I do believe, and I would encourage the listeners to get ahold of the article, look at it, if you wanna go into more depth, there's Garvin's book. And doing some research for tonight, I found out that he passed away in 2017, seven or so years ago.

0:14:04.6 BB: He was, I guess from, most of his career and education he was at the Harvard Business School, very well respected there. And so in the article it talks about, again, this, 1987, that's the era of Total Quality Management. That's the era in which Dr. Deming was attracting 2000 people to go to his seminars. 1987 is two years before Six Sigma Quality, two years before “The Machine That Changed The World.” And in the article, he says, "Part of the problem, of course, is that Japanese and European competition have intensified. Not many companies tried to make quality programs work even as they implemented them." This is back when quality was an era of quality circles. He says, "In my view, most of the principles about quality were narrow in scope. They were designed as purely defensive measures to preempt failures or eliminate defects, eliminate red beads."

0:15:10.3 BB: "What managers need now is an aggressive strategy to gain and hold markets with high quality," there we go again, "as a competitive linchpin." All right. So in the article, he has some interesting explanations of... Highlights. In the book is more depth. He talks about Joseph Juran, "Juran's Quality Handbook". Juran observed that quality could be understood in terms of avoidable and unavoidable costs. Dr. Deming talked about the economics. The New Economics, right? But Juran is looking at avoidable, unavailable costs resulting from defects in product failures. That's very traditional quality today. The latter associated with prevention, inspection, sampling, sorting, quality control. And so this is what I found fascinating, is 37 years later, this is still the heavy sense of what quality is all about. Avoiding failure, avoiding defects.

0:16:18.3 BB: Then he talks about Total Quality Control coming from Armand Feigenbaum, who was a big name in the '80s. Again Dr. Deming's work kind of created this big quality movement but it wasn't just Dr. Deming people discovered, they discovered Philip Crosby in a Zero Defects advocacy, Feigenbaum, Juran, sometime later. Again, mid '80s, Dr. Taguchi's name started to be heard. All right. And then the reliability. All right. Now I wanna get into the... Oh, here's, this is good. "In 1961, the Martin Corporation, Martin Company was building Pershing missiles for the US Army. The design of the missile was sound, but Martin found that it could maintain high quality only through massive inspection programs."

0:17:13.0 BB: You know what Dr. Deming would say about inspection? It's after the fact. Sorting the good ones from the bad ones after the fact. No prevention there. But Martin found that it could only do it with inspection. And decided to offer... Again, this is 1961, and this is still the solution today, decided to offer workers incentives to lower the defect rate. And in December, 1961, delivered a Pershing missile to Cape Canaveral with zero discrepancies. Buoyed by this success, Martin's general manager in Florida accepted a challenge issued by the Army's missile command to deliver the first Pershing missile one month ahead of schedule. He went even further, he promised that the missile would be perfect. Perfect. You know what that means, Andrew?

0:18:12.3 AS: Tell us.

0:18:12.8 BB: All good, not bad.

0:18:14.9 AS: All good, not bad.

0:18:15.9 BB: He promised missile would be perfect with no hardware problems or document errors, and that all equipment would be fully operational 10 days after delivering. And so what was neat in going back to this is we still have this mindset that quality is about things being good, not bad. What is bad we call that scrap, we call that rework. That's alive and well today.

0:18:45.0 AS: The proclamations are interesting when you listen to what he's saying, when you're quoting that.

0:18:52.4 BB: Yeah, no, and I remember, 'cause again, I read this recently for the first time in 37 years and I'm going through it. And at the time I was thinking, "Wow, wow, wow, this is a really big deal. This is a really big deal." Now I look at it and say, "This is what we're still talking about today, 37 years later." The absence of defects is the essence of quality. All right. But so I would highly recommend the article. Now we get into what he proposes as eight critical dimensions of quality that can serve as a framework for strategic analysis. And I think even in a Deming environment, I think it's... I think what's really cool about this is it provides a broad view of quality that I think Deming's work fits in very well to, Dr. Taguchi's work fits in very well to, and I think covers a lot of what people call quality. So the first dimension he talks about is performance.

0:20:01.4 BB: And he says, "Of course, performance refers to a product's primary operating characteristics." He says, "For an automobile, performance would include traits like acceleration, handling, cruising speed. For a television, sound and picture clarity." He says "A power shovel in the excavation business that excavates 100 cubic yards per hour will outperform one that excavates 10 cubic yards per hour." So the capacity, that could be miles per gallon, carrying capacity, the resolution of the pixels, that's what he calls performance. Okay. Features is the second dimension of quality. Examples include free drinks on an airplane, but not if you're flying a number of airlines they charge you for those drinks, permanent press cycles on a washing machine, automatic tuners on a color television set. A number of people in our audience won't know what those are, bells and whistles. Features are bells and whistles.

0:21:17.2 BB: There was a time people would say the number of cup holders in your automobile, a feature could be intermittent wipers. So these are features. So again, I mean, so performance is kind of cool. What is the capacity, is it 100 horsepower, 200 horsepower, that's performance. Features, bells and whistles. Okay. Fine. Reliability, now we're talking. The dimension represents the probability of a product malfunctioning or failing within a specified period of time. So your car breaking down, are you gonna drive to work every day and one morning you're gonna go out and it's... That's a reliability issue. Okay. That's... When I think about reliability, that's a Taguchi thing, that's a Deming thing. And looking at time between failures, okay, fine. Reliability comes down to... And if importance for the impact of downtime, if you're looking at engines not working and you're sitting at the gate, that's a reliability issue. The reliability is, it can be repaired, but it's gonna take some time, perhaps. Conformance. All right.

0:22:40.4 AS: Is number four, right?

0:22:42.2 BB: This is number four, a related dimension of quality is conformance or the degree to which a product's design and operating characteristics meet established standards. "This dimension owes to the importance of traditional approaches," it says, "to quality pioneers such as Juran." All products and services involve specifications of some sort. When new designs or models are developed, dimensions are set for parts or purity, these specifications are normally expressed as a target or a center. Now it's starting to sound a little bit like Dr. Taguchi's work, an ideal value, deviance from the center within a specified range. But this approach equates good quality with operating inside the tolerance band. There is little interest in whether the specifications have been met exactly. For the most part, dispersion within specifications is ignored. Ignored. That's balls and strikes, Andrew, balls and strikes.

0:23:51.2 BB: As long as the ball is somewhere in the strike zone, as long as the characteristic is somewhere within requirements, conformance, this gets into what I talk about in terms of the question number one of quality management. Has the requirement been met, the requirement for the performance, the dimension, is it within requirements? And there's only two answers, yes or no. That's conformance. I used to think that the American Society for Quality might be better known as the American Society for the Preservation of Conformance. I find there's a lot of conformance thinking. I'm reminded of, I'm a member of the American Society for Quality as I'm on the Deming Medal Committee, so I have to be a member of ASQ. So I get a daily or every other day newsletter with comments and conformance is a big part of the conversation. Good parts and bad parts, scrap and rework. All right.

0:25:02.3 BB: Conformance is number four. And it's not to say there isn't a place for the conformance, but conformance is then again different from what Dr. Taguchi is talking about. All right. Durability, the measure of a product life. Durability has both economic and technical dimensions. Durability is how long does it work before I throw it away? So reliability is about, I can repair it. Okay. And that's an inconvenience. Durability is like light bulbs. It runs and runs or a refrigerator and someone says, "Well, it’s time for a new one." That's a durability issue. Okay. Durability is the amount of use you get before you haul it off to the junkyard. That's durability. Okay. Serviceability. And back in the '60s, now I'm dating myself, there would be commercials for... I don't know which television brand, but what they talked about is, and these would be commercials. Commercials on television as to "our TV is easy to repair." And I thought, is that a good thing?

[laughter]

0:26:22.4 AS: Is that a foreboding?

0:26:24.4 BB: Yeah. And so... But again, the last couple of days I had to fix the sprinkler system in the backyard. And here in California we have, everybody has a sprinkler system. In the East Coast, people have above ground sprinkler systems. Here, they're all below ground. You don't have to worry about the lines freezing, at least in Los Angeles. And so anyway, one of the valves broke and I thought I was gonna buy a new one and take some of the parts from the new one to put it into the old one. And that didn't quite work. And so meaning to say, serviceability on the design was awful. I couldn't service it.

0:27:11.5 BB: I had to replace the whole damn thing, which was a lot more work than I was expecting. Anyway, however they designed it, serviceability didn't seem to be a consideration in the... That's dimension number six. Again, not to say there's anything wrong with thinking about serviceability. In terms of... Yeah. Okay, I'll leave it with that. Okay, serviceability. Number seven, aesthetics. The final two dimensions of quality are the most subjective, aesthetics, how a product looks, feels, sounds, taste, or smells is clearly a matter of personal judgment. Nevertheless, there seem to be patterns, a rich and full flavor aroma.

0:28:01.0 BB: That's got nothing to do with Dr. Taguchi's work. I mean, you can go off and do market research, find out what is the most appealing flavor, the most appealing taste, the most appealing aroma. And this is what I used to tell students is, and once you understand that or that vivid color that attracts the customer, then you could use Dr. Taguchi's work for, how can I reliably, predictably recreate, week after week, day by day, car by car, that aroma, that flavor, but Taguchi's work is not gonna tell you what it is. And then the last dimension of quality, you ready, Andrew?

0:28:45.8 AS: Give it to me, Bill.

0:28:47.7 BB: Perceived quality. "Consumers do not always have complete information on a product's attributes and direct measure is maybe their only basis. A product's durability can seldom be observed." And so we talk about perceptions of quality. Again, this is 1987, he says, "For this reason, Honda, which makes cars in Marysville, Ohio, and Sony, which builds color TVs have been reluctant to publicize that their products..." Ready? "Are made in America." Because the perception in 1987 is we want them to be made in Japan. And then we could talk about the perception of Cadillac quality, the perception of Jaguar quality.

0:29:35.7 BB: My father's gas station back in the early '70s, it was a block away from the nearby hospital. So a lot of our customers were doctors and they came in in their Cadillacs and Mercedes. And it was just a lot of fun. It was pretty cool. And one doctor against all of his peers' recommendations bought a Jaguar XJ12, V12, 12 cylinders, and they told him again and again, they said, "It'll spend more time in the shop than you driving it." No, no, no, he had to have one, he had to have one. And sure enough, it spent most of the time in the shop, but I got to drive it now and then, which was pretty cool. But that's perceived quality.

0:30:27.5 BB: So I just wanted to, in this episode, throughout those eight dimensions of quality. Again, I encourage our listeners, viewers, I think to get a broader sense of quality before you just look at quality from Dr. Deming's perspective, quality from anyone else's. I think that Garvin has done a really good job covering eight bases, if I can use that term, of quality. And then what I think is neat is to look at which of these tie into Deming's work, which of these tie into Dr. Taguchi's work? And that's what I wanted to cover in this episode.

0:31:01.8 AS: Fantastic. Well, let's just review that for the listeners and the viewers out there, eight dimensions. The first one is performance, the second one is features, the third one is reliability, the fourth one is conformance, the fifth one is durability, the sixth one is serviceability, the seventh one is aesthetics, how it feels and all that, and then the eighth one is perceived quality. Woah, that was...

0:31:29.4 BB: All about... Yeah. And it is reputation. You either have a great reputation or not.

0:31:38.3 AS: All right. Well, Bill, on behalf of everyone at the Deming Institute, I want to thank you again for this discussion. For listeners, remember to go to deming.org to continue your journey. And if you wanna keep in touch with Bill, just find him on LinkedIn. This is your host, Andrew Stotz, and I'll leave you with one of my favorite quotes from Dr. Deming, "People are entitled to joy in work."
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Quality, Back to the Start! Misunderstanding Quality (Part 1)
1 jul· In Their Own Words
Where did your "quality journey" start? In this first episode of a new series on quality, Bill Bellows shares his "origin story," the evolution of his thinking, and why the Deming philosophy is unique.

TRANSCRIPT

0:00:02.3 Andrew Stotz: My name is Andrew Stotz, and I'll be your host as we continue our journey in the teachings of Dr. W Edwards Deming. Today, I'm continuing my discussion with Bill Bellows, who has spent 31 years helping people apply Dr. Deming's ideas to become aware of how their thinking is holding them back from their biggest opportunities. This is a new series called Misunderstanding Quality, and the topic for today is Quality Management, what century are we in? Bill, take it away.

0:00:35.7 Bill Bellows: Thank you, Andrew. [chuckle] All right.

0:00:39.5 AS: Exciting. I'm excited to hear what you've got going on in your mind about this Misunderstanding Quality.

0:00:45.6 BB: Well, first let me say that whether you're new to quality or looking for ideas on quality and quality management, quality improvement, quality management, the aim I have in mind for this podcast series is to improve your ability to manage quality through deepening your appreciation of the Deming philosophy and how to apply it. But specifically, a focus on quality, time after time, which is where most people heard about Deming, was through Quality, Productivity and Competitive Position. For example, the title of his first book. And relative to the title, what came to mind is an anecdote shared with me by two mentors that both spent a good deal of time with Dr. Deming. The first, Gipsie Ranney, who was a professor of statistics at University of Tennessee when she met Dr. Deming, went on to become a senior statistical consultant to GM and the first president of the Deming Institute, when Dr. Deming and his family, shortly before he died, formed a nonprofit called The Deming Institute. Gipsie and I used to speak literally every day, driving to work, driving home, we... "What's up, what's up?" And we always... It was so cool. I wish I had the recordings. Anyway, she once shared that she once asked Dr. Deming, "What do they learn in your seminars? What do attendees learn in your seminars?" To which she said Dr. Deming said, "I know what I said, I don't know what they heard."

[laughter]

0:02:26.0 BB: And along those lines, in the same timeframe, Bill Cooper who just turned 90, he and my wife share a birthday. Not the same year. Bill turned 90 last November and he was senior civilian at the US Navy's aircraft overhaul facility in San Diego, known as North Island. So as aircraft carriers are coming into San Diego, which is like the... I think they call it... It's like the headquarters of the Pacific Fleet. So as aircraft carriers are coming back, planes for which the repair work cannot be done on the carriers fly off to North Island. And Bill was in charge of, he said, some 5,000 civilians. And his peer on the military side, Phil Monroe was in charge of all the military people, and they got exposed to Dr. Deming's work in the early '80s, went off, left there, became Deming consultants. Anyway, Bill said he once asked Dr. Demings, says, "What percent of the attendees of your seminars walk away really understanding what you said?" And he said... Bill said Dr. Deming said, "A small percentage."

[laughter]

0:03:44.0 BB: And so what I had in mind in this series is... One is, what makes it hard to understand what Dr. Deming is talking about? And so for the listeners, what I'm hoping we can help you understand, what might be some invisible challenges that you're having in your organizations trying to explain this to others. So maybe you think your understanding is pretty good, but like Dr. Deming, maybe people are having a hard time understanding what you're saying. And I know what it's like to be in a room, presenting to people. And I had that same experience. I had one Rocketdyne executive... Rocketdyne was sold a few times. Every time it got sold, our Deming transformation efforts got set back a few years. So when the latest management team came in six, seven years ago, I met with one of the very top people, was explaining... Trying to explain to him for the first time what we had accomplished with some, I thought, absolutely amazing work by managing variation as a system. And he said something like, "So are people rejecting what you're saying?" And I said, "No, that's not it." He says, "So they're accepting what you're saying?" I said, "Well... " he said, "What's the problem?" I said, "What they accepted is not what I said." [laughter]

0:05:19.5 BB: I said, we're not in disagreement, but what they think they heard is... And that's when I found that I've experienced that. So anyway, so I wanted to get some background. So my first exposure to quality circles, and this is like... So I was living in this parallel universe, a heat transfer engineer working on rocket engines, and Quality comes into the organization. And unbeknownst to me, there's this quality movement going on, inspired by Dr. Deming, and we're on this wave. I had no idea. All I know is all of a sudden, we got Quality Circles, quality teams, every department...

0:06:03.8 AS: What year was that, roughly?

0:06:06.1 BB: 1984.

0:06:08.9 AS: Okay.

0:06:10.5 BB: Yeah. And I remember a book I was... I remember there was a pamphlet... You mentioned that. The company was AVCO, A-V-C-O, the Aviation Corporation, which is nearly as old as the Boeing Company. So it was one of the... So, Boeing gets into airplanes, the Wright Brothers get into airplanes, people are... Investors getting in, and AVCO, A-V-C-O, was formed by someone you likely heard of, Averill Harriman, major Wall Street guy at the time. And so anyway, I remember there being an AVCO book on quality circles. As you mentioned, I remember seeing that. And I remember just going along for the ride. I'm new to corporations, I'm just a subject matter expert in gas turbine heat transfer, and we're going to the... We got these things called quality circles, whatever. And I remember our department formed... Our department was a team, we had goals, and I remember going to these quality meetings, and let's say the goal would be that we read an article about heat transfer or something. I was just kind of fumbling with this thing called quality circles.

0:07:28.6 BB: But I remember, looking over the shoulder of the department secretary with a IBM Selectric typewriter, and this is before PCs, so we're using IBM 3270, dumb terminals. And I remember being over near the secretary, Kathy, and she's typing away the weekly activity reports, Friday morning kind of thing. And on a routine basis, I'd be over there and she'd be typing along. And then on the very last page, under the title, "Quality Circles," she would type in "Quality Circles are progressing as planned." [chuckle] 'Cause then these would be distributed to people in the department. So I'm watching her now create the next original. And it dawns on me, two things. One is, it's the very last topic in the meeting, in the weekly minutes, and two is it's the same damn thing every time, "Quality Circles are on plan." And I remember saying to her, "Why don't we just have that printed into the stationary?" [laughter]

0:08:39.5 BB: This is before I knew... For me, quality was just a seven-letter word. I don't know. So this is my exposure. And I remember thinking one of the quality goals we're thinking of in our department is... I think somebody even really brought this up, is we're gonna answer the phone by the second ring. That's gonna be our quality goal. And then, I remember we're negotiating for cleaning services. The floors were a mess. Tile floors, they were just a mess. And I remember in our department, we were lobbying to get better janitorial services, have the things cleaned more often. And next thing, we're negotiating with the VP of Engineering relative to, "Well, if your quality circles are on track, then I'll think about that." And it was just like... So it's some really ugly memories [chuckle] of this whole quality thing.

0:09:34.3 BB: But then I got into... I mentioned on the very first of our previous podcast, getting involved as a problem solving decision-making facilitator. I was hanging out with the HR training people, they had some... Their director of training, our director of training was a very astute guy and he was... I'm convinced, having met many people in that role, he knew what was going on. He knew a lot of the names in quality, not so... He knew of Deming's name, he knew of De Bono's name, Kepner-Tregoe, but he seemed to know his stuff. He's a fun guy to be with. And so, that's likely where I first heard Deming's name and that first book would've been Quality, Productivity and Competitive Position, which is... It's almost impenetrable, but I can remember at some point looking at that.

0:10:29.7 BB: But anyway, but in the fall of '87, I started being assigned a taskforce as helping... 'cause now I'm a problem-solving facilitator. But I still don't know... I don't know what quality is. All I know is I get invited to help solve problems. And we were looking at a very bad wear problem, these gears wearing each other out, enormous visibility to the Pentagon, because the tank engines we were making, 120 a month, were being shipped to the tank plant. And then, these tanks with these engines were being sent... The majority of them, sent to Europe. And they were the frontline of defense in Western Europe. This is the Cold War, Andrew.

0:11:17.4 AS: Right.

0:11:19.2 BB: And so the problem that came up was that a couple of these tanks had these gears wear through each other within 50 hours. And I've never been on such a high visibility taskforce because the Generals concern was that every one of those tanks was likely to not operate. And that might be the opportunity for the "Russki's" to launch World War III, because, what a great time, the tanks... If they knew these tanks weren't working. So it was a lot of stress, a lot of pressure. And after months of slow progress, the Army said, "Hey, why don't you guys go look at this Taguchi thing. The transmission people from General Motors who make the tank transmission, anytime they have a snafu like this, they use this Taguchi stuff." So I got assigned the action to go look at that. And I remember, this is pre-internet. And somehow, I did a literature search. I remember it was through something called Nerac, N-E-R-A-C. And out comes these pages. And the thing on Taguchi was... So first of all, who is this Taguchi guy?

0:12:29.0 BB: What is this quality stuff? I don't know. I'm a problem solving guy. And then I remember the first article on reference to Taguchi says, "Quality is the minimum of loss imparted to society by a product after a shipment to the customer." And I thought, "What does that mean?" So I don't know what... I mean, minimum of... I'm thinking... And I thought, "This can't be anything." So anyway, went out to General Motors and got exposed to what they were doing, and a few years later, realized it wasn't exactly Taguchi, but it was... There's some nuances there. But anyway, they exposed me to Design of Experiments and what's known as fractional factorial testing. And coupled with shifting how we look at the measurement process, we solved this problem within weeks, a problem that had been going on for months. So then I got excited about... This Taguchi thing's kind of cool. I'm liking this. And it was a lot more exciting than what I was doing. And I thought, "I think I wanna do this." So the following year, I went to the Taguchi conference. So we had the application and I was so excited, Andrew, that I was turned down for funding. The Army would have paid for me to go to this conference, 'cause the Army, by that point, had invited me to work on at least two problems.

0:13:54.4 BB: Once we solved the first one, when problems came up, the Army literally turned to the program management people at Lycoming and said, "Do a Taguchi study, get Bill Bellows involved." So I was walking on water. I thought it was kind of cool. So I wanted to go to this Taguchi conference, and it was turned down. And they said, "It's not your job." So I told my boss when they told me it was gonna be turned down, I said, "I'm going to this conference." I said, "Whether the company pays for it or not, I am going." So I drove 14 hours each way to Detroit. And in the room are all the US experts on Taguchi's ideas at the time. I didn't know who Deming was at the time. I still didn't know what quality was, but I walked outta there thinking, "This is what I wanna do." And then, where I'm getting to is, a few months later, I was gonna go out on medical I had surgery planned.

0:14:53.1 BB: I was gonna be out for about two months. So my wife and I lived in New Haven, maybe 10 miles north of Yale. And I remember going to the... Again, this is pre-Amazon. I mean, talk about dating ourselves. What century are we in? So I remember going with my wife to the Yale bookstore, the Yale co-op bookstore, and every book they had on quality, I bought. And I'm gonna sit home for two months and read all these books. And I remember buying books. I'm pretty sure I got books about Deming, some about Taguchi, some by Phil Crosby about Zero Defects. Six Sigma Quality entry was a year away.

0:15:35.7 BB: And so I sat down... I got out of the hospital, I'm resting at home, sitting on the couch every day and reading, and also calling the Taguchi people that I had met, I think, at the previous conference. I met some big names. So I'm reading the books, calling them up. And again, these are like my personal professors. And I remember saying to a few of them... What blew me away, and I don't... It somehow dawned on me, I was naive. In the world of engineering, we use... Most of my exposure, at least in heat transfer, we use the same terms the same way. We talk about radiation heat transfer, conduction heat transfer, convection heat transfer. So many of the terms are the same terms, so we can have a conversation. So I'm thinking the same thing applies in quality, that we're all like the heat transfer people. It's easy to communicate 'cause we got the same models. We're using the same words the same way. Then I started thinking, I'm no longer... And this is a real shock. I'm no longer thinking we're using the same words the same way, hence my introduction to misunderstanding quality, [laughter] or I would say, the beginning of a journey to better understand the... I think there are incredible opportunities for people in quality organizations, or people that wanna get into quality.

0:17:08.3 BB: I think it's an ideal opportunity to introduce Deming's ideas. And I say that because everybody else is doing their own thing. Engineering's off designing, Manufacturing's off producing, and Quality has an incredible opportunity to bring together Deming's sense of a systems view of quality. Nobody else has that charter. So my hope is in our conversations, we can help people that are trying to do some things, whether it's jumpstart their continuous improvement program or get their quality program out of what it currently is. In fact...

0:17:52.4 AS: By the way, I wanna...

0:17:55.9 BB: Go ahead, go ahead.

0:17:56.0 AS: I wanna ask a question about that, because what you've mentioned is interesting, that the systems aspect... Is that unique? Would you say that's unique to Deming? I mean, if we think about Taguchi and I think about the Taguchi Method, I'm thinking about a really powerful tool for understanding variation. But explain what you mean by that.

0:18:24.0 BB: A couple of things come to mind when you ask that question. One is the predominant explanation of quality. And if we have time, I wanna talk about that. The term quality, "qualitas," comes from Cicero, a Roman in ancient times. But by and large, in manufacturing, in corporate quality, in corporations, the operational definition, what do we mean by quality? This thing is... What are Quality organizations doing? And what I find they're doing is calling balls and strikes. They're looking at a given quality characteristics, whether it's the fuel economy of an engine, of a gas turbine engine, the performance, the thrust level of a rocket engine, the diameter of a hole, and asking, "Does that characteristic of surface roughness diameter, does it meet a set of requirements?"

0:19:30.4 BB: And the requirements are typically set... There's a lower one and an upper one. We don't say the meeting is gonna start at 10 o'clock, because if you understand variation, we can't get exactly 10. We can't get exactly 1.00 inch thickness for the plate, for the hole diameter. So then, we define quality. Typically, this is what people do in organizations. This is what I... I didn't know anything about this until I started... Well, what are quality people doing? They're asking, "Does this thing meet requirements?"

0:20:07.4 BB: And even towards that end, I remember asking a... I had a coworker who's a quality engineer, I've got many friends who are quality engineers, and this one guy came into a class one day that I was doing, and he's just beating his head against the wall over... I said, "What's...what have you been doing lately." He says, "All I'm doing Bill is dispositioning hardware, dispositioning hardware," which translates to trying to find out why something doesn't meet requirements and coming up with a corrective action, or buying it as is. So either changing the requirements or explaining why we can use it as is. But he's just like, "That's all I'm doing lately. I'm just getting overwhelmed with all this." So I said, "Well, what if overnight, by some miracle, you were to come in, and beginning first thing tomorrow morning, everything meets requirements." And that's the goal of quality in most organizations, is that everything meets requirements. So I said, "If everything beginning tomorrow morning, through some overnight miracle, meets requirements, hence forth, how would your life change?" He says, "I wouldn't have a job." [laughter]

0:21:26.9 BB: I said, "What other changes would you begin to see throughout the day, the coming days?" He says, "My boss's job wouldn't exist." I said, "Okay, keep going, keep going." He says, "Well, the whole organization will have no reason to exist." [laughter] And that's not farfetched. And I throw that out, the challenge to our listeners is, seriously, if everything in the organization beginning tomorrow morning met requirements through some... Dr. Deming would say as you know, by what method? Let's say the method exists, what would change? Now, I'm not saying these people necessarily get laid off. Maybe they get moved elsewhere. Maybe we set our sights higher and try to do things we've never done before, 'cause now everything's gonna be a home run. But that's what I find in corporations, I think, a very extremely commonplace 21st century Andrew explanation of quality is, "Does it meet requirements?" And that goes... And this whole idea of setting requirements, setting a lower and an upper, allowing for variation, that goes back to the early 1700s. And I've also read that it might go back even longer in China. We were talking earlier about China.

0:22:58.2 BB: And so if it goes back longer, all the better. And the point being, fast forward to today, that's largely where we are today, in this early 1700s. Does it meet requirements? Yes or no? And what Dr. Deming is talking about is not acceptability. First of all, he would say there's a place for acceptability. There's a place for meeting requirements, maybe based on the circumstances, all that matters is that it meets requirements. So if you're a pitcher and you're throwing a ball and the batter can't hit the ball, and as long as it's somewhere in the strike zone, or if you're kicking the ball into the net in a football match or otherwise known as soccer in the States, maybe the goalkeeper's so bad, all you gotta do is... They'll jump out of the way.

0:23:49.7 BB: Now, on the other hand, there may be a different batter or a different goalkeeper where you've gotta go where they aren't. And that gets into understanding variation and where we are in meeting requirements matters. And what I find is most organizations I've ever interacted with, and this is through Rocketdyne, as owned by Boeing, going to many different divisions of Boeing around the country, doing seminars across England, across New Zealand, university classes and university lectures, hundreds of them. I've never come across... With rare exception have I ever come across anyone who says, "Bill, in our organization, quality is more like what Dr. Deming is talking about." Meaning, "We are doing more than meeting requirements, we are focusing on where the ball is placed in the strike zone, where the ball is placed in the net, and we specialize in that because we have seen great advantage." Most people I present this to don't even know that's a possibility, don't even know it's anything to lobby for.

0:25:12.0 BB: And so to that I'd say, whether you're looking at Operational Excellence, which is kind of a hybrid of Lean and Six Sigma or Six Sigma alone, or Lean alone, everything I've studied in all of those go back to the question of quality being... Quality's defined Phil Crosby-wise, which is striving for zero defects, striving for everything meeting requirements, and then we're done. And when I joined The Deming Institute, part of my excitement was helping the organization differentiate Dr. Deming's ideas over these other quality management ideas and other management ideas as uniquely positioned to differentiate, to understand that there's an opport... There are incredible opportunities for realizing that everything that meets requirements is not the same. And how do we put a value on that? And one is, the better we understand that, the better we can minimize scrap and rework problems if we're paying attention to where we are, if the process is in control, if we can use that concept from variation. And then simultaneously, another...

0:26:35.7 BB: There's two opportunities. One is, I think the better we manage variation, the less likely we're gonna have scrap and rework. Wouldn't that be great? And two is that that buys us time to think about... 'cause now that we're not in that constant firefighting mode, now we can start to think about how to manage variation of the system and to improve how things integrate. And we did both of those at Rocketdyne. But I've yet to find many organizations who say, "Been there, done that. Been there, done that."

0:27:12.1 AS: So, if we think about the takeaways for someone listening or watching this, you've talked about Misunderstanding Quality, you've talked about everything meet requirements, you've talked about, what century are we in? So, what should they take back to their business from this discussion that can give them a foundation of a starting point of this series and what you're saying on this point? What do you want them to take away?

0:27:40.3 BB: First, I would say I wouldn't necessarily go tell anybody about this yet. [laughter] I'd say, "Hmm, this Deming stuff. There's something to this. What I'm hearing from Bill is there's something here that I can't get elsewhere." You can listen to our prior sessions. There's 22 of them. We're gonna be adding new aspects to that...

0:28:07.9 AS: Okay. So, let's talk about that for a second. So, learn on your own first. Maybe it's a personal transformation. Start with that?

0:28:09.9 BB: Yes.

0:28:14.8 AS: Okay.

0:28:16.1 BB: Absolutely... Yes, absolutely...

0:28:18.1 AS: What would be number two that you want them to get away from this?

0:28:22.9 BB: Well, my advice is, you're not crazy that there's things about the Deming philosophy that are unique, that are... I think so much... There's a lot of people excited by what Dr. Deming's offering. I think there's more than meets the eye. I mean...

0:28:46.1 AS: Okay, so let's talk about that for a second. So, there's unique things about Deming, and one of them that you talked about is the systems thinking?

0:28:54.6 BB: Yeah. I mean, imagine... What I liken it to, instead of zero defects being the goal, which is what most organizations are striving for, and their quality systems are about, "We wanna get zero defects over here, over here, over here." We're juggling all these places, trying to get to zero defects all over the place. What if they saw zero defects as not the destination, but the starting point? That, to really understand continual improvement, zero defects is not the goal. Imagine that as the starting point. At least, imagine the ability to go across that apparent finish line and realize... Or the analogy I would use is, go through the door called "zero defects is the end," and realize there's a lot more, there's so much more to do when you start to look at things with a Deming view. And so, instead of thinking, we're striving for zero defects and then we're done, to me, that's the starting point to really begin to appreciate what it means to look at systems.

0:30:07.7 AS: Okay. So we've got, start with your own personal transformation and learn the material, and understand that there's some unique things about the Deming teachings, in particular, systems. And understand that... I kind of visualized while you were talking, a person walking along with no knowledge of many things, but they're inquisitive, and what they find is a wrench. And then they start to find that there's ways to use this wrench in their daily life. And then later, they find that there's other tools like a screwdriver. And all of a sudden, they found this world of tools, and now they have this amazing toolbox. But then all of a sudden, they meet someone that's taking those tools and creating a car, or a this, or a that. And then they realize, maybe the tool has gotta be the starting point, or is a starting point. But what the tools can create and what additional tools can create is so much bigger than just that first wrench that you picked up.

0:31:14.2 BB: It's the appreciation. And I'm glad you brought those points up. Dr. Deming talks about tools and techniques. A control chart is a tool. A run chart is a tool. Design of Experiments are... These are tools. And so that's a tool. A technique is, how do we create a control chart? That's a technique. What I try to do with audiences, whether it's clients or university classes or whatever, is help them differentiate. Tools and techniques are about improving efficiency, doing things well. Doing something faster or cheaper... What's unique to Dr. Deming is not the tools you'll find him talking about, but the concepts he's talking about, and the idea of looking at things as a system. Dr. Deming defines quality, and it can be obtuse for people. I find it fascinating. He says, "Product or service possesses quality if it helps someone and enjoys a sustainable market." So, traditional quality is me throwing the ball to you, Andrew, or passing a football or basketball, whatever it is, and judging the quality of the pass when the ball leaves my hand. And we say, "That was a good pass."

0:32:49.9 BB: What Dr. Deming's talking about is, it's a good pass, just as if it's a good conversation, if you can hear what I say, we can go back and forth. And so, Deming's perspective on quality is not what's good for me, the producer, but it's how well does it fit you that I'm delivering something that matches... That we're synchronous, that... It has to be good for you, not just me checking off and saying, "This is good, this is good, this is good. Boom." That it's not good until you say it's good. That's a different view. It's the same thing as, "Well, I told you." Then you say, "Well, I didn't hear it." I says, "Well, then why don't you have your ears checked?" [laughter] Dr. Deming's talking about, it's not a conversation if you can't hear it. And so, when he's explaining to Bill Cooper and Gipsie that people are having a hard time, he was struggling to improve that 'cause he knew that when you begin to understand that what you're saying is not heard, Deming understood it was his obligation to try harder. And part of the Deming philosophy is understanding that it's not just me throwing it and saying, "There it is." It's listening for the feedback as to, "Did it make sense?" So, quality in that arena is a mutual phenomenon, not unilaterally my thing.

0:34:16.7 AS: Okay.

0:34:17.8 BB: And I would welcome anyone, as we've done in the past, to reach out if there are questions, comments, observation you'd like to share, and we can use that feedback in future sessions.

0:34:30.6 AS: Fantastic. Well, that's an excellent kickoff. And let's end with the idea that quality is a mutual phenomenon. I think that's a good statement. So Bill, on behalf of everyone at The Deming Institute, I want to thank you again for this discussion. And for listeners, remember to go to deming.org to continue your journey. And if you want to keep in touch with Bill, just find him on LinkedIn. This is your host, Andrew Stotz, and I'll leave you with one of my favorite quotes from Dr. Deming, "People are entitled to joy in work."
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Episódios

Worse Than a Thief: Misunderstanding Quality (Part 9)

Define the Problem: Path for Improvement (Part 5)

Beyond Looking Good: Misunderstanding Quality (Part 8)

See the System: Path for Improvement (Part 4)

Frame the Challenge: Path for Improvement (Part 3)

Paradigms of Variation: Misunderstanding Quality (Part 7)

Myth of Tech Omnipotence: Boosting Lean with Deming (Part 6)

Myth of Sticks and Carrots: Boosting Lean with Deming (Part 5)

Top-Down Knowledge Myth: Boosting Lean with Deming (Part 4)

Category and Continuum Thinking: Misunderstanding Quality (Part 6)

Myth of the Bottom Line: Boosting Lean with Deming (Part 3)

The Myth of Segmented Success: Boosting Lean with Deming (Part 2)

The Red Bead Experiment: Misunderstanding Quality (Part 5)

Setting the Challenge: Path for Improvement (Part 2)

Pay Attention to the Choices: Misunderstanding Quality (Part 4)

5 Myths of Traditional Productivity: Boosting Lean with Deming (Part 1)

Building an Improvement Model: Path for Improvement (Part 1)

Acceptability VS Desirability: Misunderstanding Quality (Part 3)

8 Dimensions of Quality: Misunderstanding Quality (Part 2)

Quality, Back to the Start! Misunderstanding Quality (Part 1)