Summary of “Out of the Crisis” by W. Edwards Deming (1982)

Operations and Supply Chain Management Process Improvement

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Introduction

W. Edwards Deming’s “Out of the Crisis,” published in 1982, is a seminal work in the field of Process Improvement and quality management. The book is largely a critique of the way businesses and governments in the United States were operating and offers a comprehensive framework for improving quality and productivity. Deming’s philosophy is centered around a systemic approach to management, emphasizing continuous improvement and the reduction of variability. The book lays the groundwork for what became known as Total Quality Management (TQM), and it introduces Deming’s famous 14 Points for Management, which are focal to his teachings.

1. Deming’s 14 Points for Management

Create constancy of purpose for improving products and services.
Action: Develop a long-term vision for your organization that prioritizes quality improvement over short-term gains.
Example: A manufacturing firm should invest in better machinery and training programs, rather than cutting costs in quality control to boost quarterly profits.
Adopt the new philosophy.
Action: Embrace the mindset that quality improvement is essential for survival. Implement training and development programs to instill this philosophy at all levels.
Example: A retailer might implement a mandatory training program on customer service and quality management for all employees.
Cease dependence on inspection to achieve quality.
Action: Focus on building quality into the process rather than relying on inspections to catch defects.
Example: An automotive manufacturer could engineer better components and assembly processes to reduce the occurrence of faults rather than relying on rigorous end-of-line inspections.
End the practice of awarding business on the basis of price tag alone.
Action: Establish long-term relationships with fewer suppliers and prioritize quality and partnership over cost.
Example: A tech company could establish partnerships with a few key suppliers who are committed to defect-free deliveries and continuous improvement.
Improve constantly and forever every process for planning, production, and service.
Action: Implement continuous improvement initiatives across all departments. Utilize techniques such as Plan-Do-Check-Act (PDCA).
Example: A service organization can regularly review and refine customer feedback processes to enhance service delivery.
Institute training on the job.
Action: Develop robust training programs that are an integral part of the job.
Example: A logistics company might provide ongoing training for staff to use new warehouse management software effectively.
Adopt and institute leadership.
Action: Encourage managers to lead through innovation and quality improvement rather than through control and supervision.
Example: A healthcare organization could train its leaders to mentor their teams on quality and process improvement techniques.
Drive out fear.
Action: Create an environment where employees feel safe to express ideas and concerns.
Example: An assembly plant could implement regular town hall meetings where workers can voice concerns without fear of retribution.
Break down barriers between staff areas.
Action: Foster a culture of cross-departmental collaboration and communication.
Example: A software company might implement regular cross-functional team workshops to enhance collaboration between developers and customer service teams.
Eliminate slogans, exhortations, and targets for the workforce.
- Action: Replace arbitrary slogans and numerical targets with a deeper focus on quality processes and training.
- Example: Rather than pushing slogans like “Zero Defects,” a manufacturer should focus on training programs to teach employees how to achieve quality in their work processes.
Eliminate numerical quotas for the workforce and numerical goals for management.
- Action: Remove quotas and instead provide resources and training to improve processes.
- Example: A call center might eliminate call handling time targets and instead focus on training staff to resolve customer issues more effectively.
Remove barriers that rob people of pride of workmanship.
- Action: Encourage employees to take pride in their work by giving them ownership and responsibility.
- Example: A furniture manufacturer could create a system where workers sign their work, taking personal responsibility for its quality.
Institute a vigorous program of education and self-improvement for everyone.
- Action: Establish continuous learning opportunities for all employees.
- Example: A financial services company could offer courses on new regulations, financial products, and customer service techniques.
Put everybody in the company to work accomplishing the transformation.
- Action: Involve every single employee in the mission of continual improvement.
- **Example: A hospital could create committees that include staff from various departments to work on quality improvement projects.

2. Reducing Variability

One of Deming’s core beliefs is the reduction of variability in processes to enhance quality. Variability leads to inconsistency, which is detrimental to quality outcomes.

Action: Implement Statistical Process Control (SPC) to monitor and control variability.
Example: A food processing company could use SPC charts to monitor the temperature of food items during processing to ensure consistent quality and safety standards.

Deming emphasizes understanding the difference between common cause and special cause variations. Common cause variability is inherent in the process, while special cause variability is due to specific, identifiable sources.

Action: Educate management and staff on identifying and addressing special cause variability separately from common cause variability.
Example: In a textile factory, if a machine consistently produces defects at a certain time of day, investigate and fix the unique cause, like a machine malfunction during shift changes.

3. System Thinking

Deming advocates for a holistic view of an organization as a system, where every part affects the others. This systemic thinking is crucial for understanding interrelationships and dependencies.

Action: Encourage systems thinking and training across all levels of the organization.
**Example: In an educational institution, link the performance of administrative staff, teachers, and infrastructure services, understanding that each impacts student outcomes.

Deming often uses the “Red Bead Experiment” to illustrate systemic issues. This experiment shows that even with the best intentions, without a systemic approach, individual efforts may be futile.

Action: Incorporate systemic problem-solving exercises like the Red Bead Experiment in training programs.
**Example: A retail chain might use similar illustrative experiments during management training to highlight the importance of systems thinking.

4. Knowledge and Theory

Deming stresses the importance of knowledge and theory for effective management. He posits that managers should have foundational knowledge of statistical methods, psychology, and theory of knowledge.

Action: Provide education in statistical and systemic thinking to managers.
**Example: A large corporation could mandate courses in statistical quality control and process improvement tools for all mid-level and senior managers.

Additionally, Deming encourages managers to study the Theory of Knowledge—the understanding that management practices should be based on evidence and theory, not just experience and intuition.

Action: Cultivate a learning culture that bases decisions on data, theory, and evidence.
**Example: A restaurant chain could base menu changes on thorough customer feedback analysis and culinary trends, rather than just managerial intuition.

5. The Role of Leadership

Deming redefines the role of leaders from being mere supervisors to being transformative leaders who inspire and facilitate change.

Action: Develop leaders who are coaches and mentors.
**Example: In a consulting firm, train partners to support their teams’ professional development and well-being, beyond meeting client targets.

Deming also argues against appraisal systems that pit employees against each other. He promotes intrinsic motivation and pride in workmanship over external rewards and ratings.

Action: Eliminate individual performance appraisals and implement team-based performance reviews focusing on collective goals.
**Example: A software development company might replace annual individual reviews with project retrospectives where the entire team evaluates how to improve collaboratively.

Conclusion

“Out of the Crisis” by W. Edwards Deming remains a cornerstone in the field of Process Improvement and quality management. By focusing on Deming’s 14 Points for Management, reducing variability, fostering systems thinking, emphasizing knowledge, and redefining leadership roles, organizations can transform their approach to quality and achieve sustained improvements. Implementing Deming’s teachings requires a cultural shift towards continuous improvement, collective responsibility, and data-driven decision-making.

Operations and Supply Chain Management Process Improvement