Performance Excellence Process
Baldrige Workshops
Global Insights Archive
Management Text You'll Ever Need
by Craig A. Anderson
Performance & Results
October 1999

Ongoing professional growth is one of the earmarks of the effective executive. To
that end, we will periodically highlight books, articles, magazines, or other
publications, on-line or off, that we believe offer significant value to Performance
& Results readers. Our first review looks at Out of the Crisis by W. Edwards
Deming (MIT Press, 1982, ISBN 0-911379-01-0), a book that laid the foundation
for much of the total quality management movement that has transformed
American industry over the last two decades. I strongly recommend this book to
anyone interested in developing a deeper, more competent understanding of
management and leadership.

I was fortunate enough to have discovered the ideas and work of Dr. Deming in
1990, three years before his death in November 1993, and was able to attend
several of his famous seminars and workshops. Today, as a practicing
management consultant, I still find myself reaching constantly for my dog-eared
copy of Out of the Crisis (OOTC), Deming's seminal work. OOTC is not an easy
read, nor is it a book that lends itself to a one-time passthrough. Rather, it is a
book that offers a lifetime of wisdom in each chapter. I am still startled on a
regular basis with the clarity--the genius, really--of Deming's insights into the
nature of people working together in organizations.

Deming states the aim of the book as "transformation of the style of American
management," which "requires a whole new structure, from foundation upward."
OOTC is the blueprint for this new structure of management.

Deming describes a set of principles for how a manager should approach work in
a modern organization. The principles are based on a rigorous, statistically based
understanding of "variation," what causes it, and how it is misinterpreted by
managers--with all sorts of catastrophic consequences for the organization, its
employees, and its customers.

Understanding variation is key to understanding Deming. We all work in systems,
all systems have a certain capability to achieve their aim, and all systems contain
variation. The competent manager understands the nature and sources of this
variation and responds accordingly. For example, half of all employees will be
below average in any organization, and half will be above average. Most
organizations work to devise ever more intricate rating and appraisal processes
and procedures in an effort to stratify the workforce. And guess what? Half the
workforce will be below average next year. And the year after.

Instead of participating in these nonproductive games, Deming contends,
managers should work to improve the system in which people work. Aims should
be clarified, tools, skills, and training should be provided as needed, barriers to
pride of workmanship should be abolished, and an atmosphere of trust and
sharing of information should be built.

Errors will inevitably occur. A deadline will be missed. A product will be defective.
Output will be down. The knee-jerk response is to pinpoint blame and seek
"accountability." This is not a solution. Again, the key is statistical understanding:
What is the significance of the error? Deming draws a sharp distinction between
"common cause" and "special cause" variations. Common-cause variations are
those that occur predictably within a stable system, and do not warrant special
attention. Special-cause variations are incidents where the system provided an
outcome beyond the statistical boundaries of what is expected, and thus require
management attention.

Deming's premise is that managers spend too much of their time tracking down
the sources of normally occurring variation in a system at the expense of thinking
how to improve the overall performance of the system. This problem tends to be
compounded when managers "tamper" with the system--making a series of
short-term "improvements"--without full knowledge of the underlying systemic root
causes of variation and without a disciplined approach for planning, testing, and
implementing changes to a system.

Deming provides a wealth of statistical evidence that tampering actually
decreases system performance and diminishes the organization's ability to
achieve its aims. He believes that managers, by virtue of their authority and
access to resources, are overwhelmingly responsible for the performance of a
system, and thus are obliged to seek out and obtain the knowledge they need to
do their jobs.

Ultimately, what makes OOTC unique among the mountain of management
literature is Deming's sheer depth of intellect and knowledge. Deming was well
into his 80s when he wrote the book, at the peak of his professional career, and a
good 50 years after he had already been recognized as one of the world's leading
applied statisticians. In Out of the Crisis, Deming blends his knowledge of
statistical theory with a lifetime's worth of observations of how people work
together in a system to create a framework that will continue to inspire and
motivate managers for years to come.