In the final episode of the series, Jacob Stoller and Andrew Stotz discuss the difference between typical companies using traditional management and more successful Deming-style companies. If productivity and performance are so much better, why do companies stick with traditional management? 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 discussion and conversation with Jacob Stoller, Shingo Prize winning author of The Lean CEO. And ladies and gentlemen, I just received my copy finally. Productivity Reimagined, it just arrived from Amazon. You can get it there. And that's the latest book that he's come out with. And this is exploring applying Lean and Deming Management Principles at the enterprise level. The topic for today is moving forward with productivity. Jacob, take it away.   0:00:41.7 Jacob Stoller: Oh, thank you, Andrew. Great to be here once again. Yeah. Moving forward. That's really Chapter 13. Whether you consider that, hopefully you consider 13 lucky as I think they do in Italy.   0:00:57.4 AS: We do in Thailand.   0:01:00.4 JS: Oh, really? Wonderful. Okay. Perfect. Anyway, so I wrote in the book, I sort of defined where we're trying to go by describing two companies; a typical company, and then the company that we would aspire to for maximum productivity. So I'm gonna read those, just to illustrate. "Company A follows traditional top-down management practices. Leaders determine how the work is to be done, and give orders to their staff accordingly. Individuals, functional groups and departments are treated as independent entities under centralized control. Pay and promotion are determined by individual performance according to a set of predetermined criteria. Employees are ranked and encouraged to compete with each other." So that's company A, your typical company, which probably comprises what percentage would you say? 90%? 95%?   0:02:03.8 AS: 97.9%   0:02:04.4 JS: Okay. Okay. Let's look at where we'd like to go from there. "Company B is managed as an interactive system where people and functional teams depend on each other. Supervisors aren't expected to have all the answers, and they rely on frontline workers to share their workplace knowledge and take an active role in improving their work processes. All employees know they are part of a team culture pursuing common goals and solving problems together to move the company forward." Okay, so that's really, that's where we wanna be. And the reason you would want to go there is because if you take those two companies and they have similar resources, similar markets, perhaps operating in similar region, company B will outproduce company A 10 times out of 10. It's a more productive model, and it's proven to work. So why don't people do it?   0:03:16.3 JS: Well, there's some thinking that gets in the way, some sort of systemic kinds of barriers that are out there. So even people who aspire to making a company better, and I think there are a lot of people out there that think that, but they run into these barriers, and I'm just gonna review them again because we've gone through them in some detail. But the myth of segmented success, that's the really kind of the exact opposite of a company as a system. It's this idea that all the parts are interchangeable. You can take a department, you can give each department separate goals, and they'll all make their goals and it'll all add up. That's the myth, of course. So the myth of segmented success. We have really stemming out of that the myth of the bottom line.   0:04:11.9 JS: And because of that segmented structure, we believe that we can use finance as a proxy for all the quantitative, all the accomplishments of all these different segments. It all adds up. It's arithmetic. We figure, so why not? We just take, everyone makes their numbers, and then they all make their numbers and they all celebrate together. That's the myth, of course. The bottom line doesn't tell you what's really going on in the company. The top-down knowledge myth they run into, and that's this whole idea that managers are supposed to know all the answers, and their job is to tell people what to do. And it's not just people with MBAs. It's people with degrees in psychology and maybe working in HR. It's engineers, it's any person with professional training, figures that they have not only the privilege, but a duty to actually tell people what to do. And if I'm not telling people what to do, I'm probably not doing my job and somebody's going to be looking over my shoulder. So a big fear around that.   0:05:31.6 JS: Myth number four is the myth of sticks and carrots. And this is this idea of Homo Economicus, the idea that people act in their own financial interest and it's perfectly predictable. Performance is down? Well, let's just pay them more or maybe we need some threats here. Maybe we need to threaten them, or maybe we need to get some competition. So somebody is gonna be a little bit worried looking over their shoulder that they might get fired. Fear is a big factor here, obviously. Finally, there's the myth of tech omnipotence. And this stems right from the myth of segmented success. This idea we can take a process and we can swap out technology, we can put in technology and swap out people. We can reduce head count by 5, 10, 15 people and put in a machine in its place. That's been the business case for technology for decades. And we still have a very strong belief in that. So that's kind of what we're stuck with, those myths. And we really have to crush those myths as we go along.   0:06:42.5 AS: You know, Jacob, I was just at a meeting yesterday with a very senior executive at a very large company in Thailand. And I was just talking to him, it's off the record, so we were just chatting, but he was talking about the challenges that they're facing, and I said, so how are your KPIs? And he said, KPIs are just killing us. They're causing us to be siloed. It's setting up competition in the company. People can't work together. And I asked him this question, like, what can you do about it? He says, not much. What am I gonna do? Remove the KPI system? No. We know...   0:07:31.1 JS: Isn't that interesting?   0:07:34.8 AS: That ultimately that's probably one of the best things that they could do and get people to work together. But it just, you know, he said something to me that just made me think about, for the listeners and the viewers out there who are running small and medium-sized businesses who feel disadvantaged so many times when they're fighting against the big giants...   0:07:53.6 JS: Yeah.   0:07:53.6 AS: Take comfort that you can change your business. But many of these big companies, they just can't. And they won't.   0:08:01.2 JS: Yeah.   0:08:03.5 AS: And they never will. So that's what's so great about these types of principles, both Lean, what you're talking about, Deming, is that if you're a business owner, it's a family business, it's your private business or a group of people that you have real control over the business, you can implement these things. And you can build your business to be great.   0:08:23.7 JS: That's interesting, Andrew. I've talked in my book, I've talked with some smaller manufacturers, and at least a couple of them have said they're getting refugees from large corporations. And he'll interview these people and say, well, I can't give you, you know, you won't have 500 people reporting to you or anything. And they say, I don't care. I said, I really, you know, I've had it with this corporate stuff, and they want to be part of a culture that makes a difference. And so that's maybe catching on. I mean, interesting that the gentleman you're talking with also recognized that.   0:09:00.3 AS: Yeah. And he's just as, his hands are tied in some ways. And, so, but that to me is hopeful for the rest of the businesses that can change. And the other thing I was, you know, I always end with my favorite quote from Dr. Deming, which is that people are entitled to joy in work. Yesterday I was speaking to about 75 students in my Ethics in Finance class, and it's the kickoff day. And so it's a real fun, and I talk about a bunch of things, but the one thing I said is that ever since I graduated from university, all I really wanted was a job that I enjoyed, at a place that I enjoyed doing it, with the people I enjoyed doing it with. That's all I wanted. I wanted joy in work and I got it because I walked away from the places and the people where it wasn't happening, and I walked towards the places where I had the opportunity to enjoy it. Of course it helps that I found my love, which is being a financial analyst. It's just, I understand that so well, but this is where I think I want us to think about hope and potential for happiness in work and all of that. And so I know you've got some more steps that you've got to help people. So maybe we move into that.   0:10:27.7 JS: Sure. Sure. Well, and it would be interesting, this gentleman you talked with, I wonder if he's visited any companies that we would admire that are using Deming principles, or maybe...   0:10:39.1 AS: Well, it may give it away, but this company in the past has fully implemented the teachings of Dr. Deming.   0:10:49.2 JS: Oh, really?   0:10:51.5 AS: But they had a changeover in management, and they completely walked away from this and implemented the KPI system.   0:11:00.9 JS: Yeah. Oh my. Isn't that something? Yeah, that happens. That happens for sure. And we've had, you know, in my last book, The Lean CEO, I found some people, number of companies had fallen off the ladder. And gosh, the Shingo Institute had a real problem with that. People were winning Shingo prizes and then they were falling off the ladder, and they changed their emphasis on criteria now, and now they really emphasize culture. You can't just follow the principles, but you really have to get the culture, and they really grill them on that. So, interesting. Interesting.   0:11:38.2 AS: Yeah.   0:11:41.0 JS: But the first step, the reason I asked you if they've visited anybody is really, I think if you're starting from scratch at company A, I think the first thing is to go visit companies.   0:11:48.6 AS: Yep.   0:11:49.5 JS: I mean, you've got to see what's going on in companies that are different to even appreciate what's possible. And it's...   0:12:00.6 AS: 'Cause it's inspiring.   0:12:00.7 JS: It's not only inspiring, but you see things that you wouldn't expect to see. And I think what they said, what these folks have told me over and over again is that what you see is you actually feel it. There's a culture in there, there's a kind of an atmosphere when you walk in the door. And that's what really wows people. I hear that over and over again. So you have to feel that, you can't write that down, or you can't explain that in a talk. So I think that's really the first step. And fortunately, companies that have gone through these transformations are happy to welcome people to come visit, because it helps them reinforce their culture as well. So it's a reinforcing kind of thing. I think after you've done that, gone the rounds a bit, that's when you really need to assess where you are and what you wanna be. And I think there has to be some honest criticism about the kind of company you are. I don't know if you wanna call it soul-searching, but there's not a realization that we don't wanna go on as we were, you're really not gonna do much. So that's, I think, critically important. You're smiling. Do you have a story there?   0:13:20.8 AS: No, but I'm just, you know, it makes sense. It makes sense. I did actually, you know, in Thailand there was a company that I saw in the newspaper many years ago that it came out in the newspaper that they won the Deming Prize from Japan, from the Union of Scientists in Japan. And so I just called the company and I said, congratulations. And they said, great, thank you. And then I said, and I talked to the CEO of the company, and then I said, could I bring my staff from my coffee, you know, management team from the coffee business to come and see you guys? And he said, yeah. And that started a lifelong friendship with a guy named Srini, who was the guy who won that. He passed away about a year or two ago. And I featured him in my book on Transform Your Business with Dr. Deming's 14 Points. But the idea is...   0:14:11.0 JS: Oh yeah...   0:14:12.7 AS: Go out and...   0:14:14.0 JS: I love that book.   0:14:16.2 AS: Explore and see it, see what's out there.   0:14:16.3 JS: Yeah. For sure.   0:14:17.5 AS: Because you also, when you go out and explore, you also find out, hey, we're pretty good at some of these things and there's things that we're doing well, you know?   0:14:23.5 JS: Of course, of course. So once you've assessed your state, I think it's very, very important, even before you start talking to your people, 'cause it's gonna be a transformation, you're gonna demand an awful lot from your people, you've really got to know where you're going, and you have to establish a vision. And companies have different ways of doing that. But the one thing I would emphasize is that it's gotta be a vision with substance. And I think Dr. Deming would say, by what method? [laughter] You say where you're going. Right? So, for example, a hospital. I saw a hospital that did a very good job of that, establishing a vision, and they wanted to be the safest and most compassionate hospital in their region. They said, well, what would that look like?   0:15:13.3 JS: And they looked at, well, okay, safety would obviously be big. There would be fiscal responsibility. Wait time is a big issue in healthcare, be no waiting. I think there may have been one more as well. But anyway, they established these kinds of what I would call aspirational goals. It's where we, really where we want to be, and it's gotta be something that inspires employees, right? You wanna be a compassionate, safe place for patients to come. I mean, that's what people want. So then what they do is they took it a level down, and they said, okay, well, if we're going to have an exemplary safety record, what would that look like? How would we measure it? And they have safe... The health organizations have safety statistics. So, they have an institution, that third party organization that would report on the numbers, so they could set some targets according to that. And then they go down even further. They say, okay, safety. What are the things that we need to do? What are some of our weaknesses? So they say, well, patient falls was one of them. They have things like medication error, hospital acquired illnesses. So all this goes under the idea of no harm to patients, right?   0:16:44.0 AS: Yeah.   0:16:45.3 JS: All goes together. So, they then started to work on the most pressing one. You know, work on targets, do projects together, PDSA kinds of projects. And they chipped away at it and eventually with a number of projects, they were very successful. But I think the key, of course, is that problems in workplaces and hospitals, maybe especially, are very granular in lots and lots of things, so you need all hands on deck. But they were very, very successful at getting a very high rating just through these efforts. So, that's...   [overlapping conversation]   0:17:28.8 AS: Yeah, the vision with substance is a great one because I think lots of visions are flaky, and we've been working on the vision for Coffee Works, for my company, and that is we supply coffee to every leading brand in Thailand. And that's something that we can visualize, the employees can visualize, they can also see who we don't serve. And also when we lose a customer that's a leading brand, we can say we messed up, but when your contract's up with our competitor, we're gonna be back because we supply every leading brand in Thailand.   0:18:08.0 JS: Right, right.   0:18:10.3 AS: So, substance, vision. Yep.   0:18:13.3 JS: Yeah, definitely. Yeah. And I guess you share that, been sharing that kind of vision with your people for a long time, right?   0:18:18.3 AS: Yep.   0:18:21.6 JS: But I mean, would you say, how important would you say vision is? I mean...   0:18:23.2 AS: I think it's critical. And I think that part of what happens is that many companies start with a vision, and then they get, it's just so easy to get distracted. And there's so many, you know, business just grows complex, and then all of a sudden you feel like, we can do all of this, we can do this, we can do that, we can do this, we can do that. The best book on this is Good Strategy Bad Strategy by Richard Rumelt. And he talks a lot about what are bad strategies, and he talks about these fluffy visions that really don't help anybody. And so getting a vision with substance, I think is critical.   0:18:58.0 JS: Okay. So we got our vision, it's got real teeth. It's something that we can stand in front of our people and say, here's what we're going to do. And they won't say, oh, this is just another flavor of the month. They'll realize that we're serious and we're gonna do this. The next step, number four, is building trust. And that's extremely important. And one of the manufacturer actually told me a wonderful story about this. He was working in a very... Had a plant in a very rough neighborhood in Baltimore. And when he took over that plant as a general manager, there was terrible culture. People were... He said there was racism and there were just people quitting all the time. And just walking out the door, not showing up to work. You know, the workers hated management.   0:19:56.7 JS: So this guy went in onto the shop floors. I'm your new general manager. And he said he spent the first three or four months just talking to them about their lives. You know, he was committed to the Lean methodology, but he didn't talk about methods, how we're gonna do things different. He just found out what's important to these people. And a lot of 'em were financially strapped. They were in poor neighborhoods. So the direction was really how to make this company more profitable so we can pay you more. And that was kind of a guiding vision and remarkably successful how it did. How he won the people over. And I think there's so many people out there asking people to do things. And, you know, you really have to... Takes a lot of trust. I mean, you're gonna say, I'm gonna admit when I've made a mistake, I'm not gonna cover it up and you're not gonna fire me. You know, that's never happened. So...   0:21:02.9 AS: And I can tell you, for the listeners and the viewers out there, here's a good inspiring movie to get you an idea of thinking about how to get out on the shop floor and understand from the inside what's happening in the business. And the movie came out in 1980, and it's called Brubaker by Robert Redford. And it's the story of a new prisoner warden.   0:21:25.2 JS: Oh, I never saw it.   0:21:27.0 AS: Yeah. Prison warden who goes in as a prisoner, and the governor of the state has sent him in as a prisoner. And so he lives a prisoner's life for, I don't know how long it was, a week, a couple weeks, a month, until eventually he, you know, reveals himself and then takes over. And then he knew all the corruption and all the problems and all the issues, and he went about solving 'em. It's an inspiring movie.   0:21:54.2 JS: Yeah. And more recently, there was a program, I've seen a couple of episodes of Undercover CEO, you know, where CEO actually goes into the workplace in disguise and flips burgers or whatever. And then discovers what's really going on in the company.   0:22:09.2 AS: Yeah, that's a great. That's probably even more applicable.   0:22:11.2 JS: Yeah. Right. So building trust is just... It's very personal. And from that point, you start to make changes. But those changes... My favorite examples, I don't know if this is a general rule, but some of the best examples I've seen are working on safety. You work on safety because improving processes to make them safer is actually kind of like a gateway drug to doing continuous improvement, right? You start to understand what processes are, but first of all, people are improving the process in their own interest.   0:22:50.8 AS: Yep.   0:22:52.2 JS: So you get them very good at making these changes, proposing changes, speaking out, pointing out when other people are not following safety guidelines. Understanding that something has to stop when safety is not there. No, you build on the trust you created and you start to change the culture around that. So that's number five. So you notice I've gone five steps and we haven't introduced any methods or anything. You know, it's...   0:23:23.8 AS: What I noticed from those first five is that they're really all things that senior management need to do before they go out with all their exciting new ideas and start training people and start really bringing that out in a much more aggressive way.   0:23:41.5 JS: Exactly. So really step six is train and transform. And that's when we do all the... That's when we draw the diagrams, and that's when we start the PDSA training or the Kaizen events or whichever type of transformation you're doing. That's when we start to train the workforce and we start to undergo the transformation. So that's all the work, but the transforming work. But we've done enormous preparation before we get there. And I think that's what I've seen is the best way to do it. So we train and transform, and then of course we have to remove barriers as they come. So it might be removing some aspects of the accounting system because they might be holding us back. So you run into the barriers and you take on those barriers as you run into them and you build momentum.   0:24:36.3 AS: Yep.   0:24:38.6 JS: So step seven really is you're building this momentum and you raise the bar. You've done something and now you raise your standards and continue to raise them. And that leads you to a continually improving organization where you're always expecting to get better. People have a joy in work because they know that they're part of making something better. And you continue raising the bar 'cause people like a challenge.   0:25:07.9 AS: Yep.   0:25:08.5 JS: As long as it's a safe environment and as long as it's a team kind of self-supporting workplace. So finally we get to share and learn. So we've gone full circle. You know, you've got... You've gone through a transformation, you're proud of your work, and you start to open the door to visitors because that's where you really reinforce the culture. And, I don't know, you have... You say you have visitors at the coffee place?   0:25:45.9 AS: Yeah. I mean, for me, I just love going to companies that do like to share and learn. And I like to do that too. We get students, a lot of times it'll be like executive MBA students coming to Thailand and others that I'll bring out to the factory, so to get them to see how we do things. But I just personally love to... Well, it's great when you go out to a place, and there's a lot of factories in Thailand for sure where you can just see that they have a vision of what they're doing and they clearly communicate it. I had a company that I saw in the financial data many years ago when I was an analyst that really did something very odd, which was their cash conversion cycle was negative. Normally it's a positive thing for a manufacturing company 'cause they have a lot of inventory and accounts receivable and the like.   0:26:34.9 AS: And so I went out and I met with the CEO and then I said, how did you do this? He said, it took us five years, but we brought our inventory down to seven days of inventory. And how did you do it? And he took me out on the factory floor to meet all the different people doing it. And he said, I put people in teams and they work together and they try to figure out how do we reduce the inventory here? I help them see the overhead cost that's coming from the executives so they could calculate a P&L and understand like, how can they make their section, you know, better? And then he had some of the guys come and speak and explain what they were doing, some of the supervisors and managers on the shop floor. And I was like, wow, this was impressive. So love that sharing and learning.   0:27:22.7 JS: Yeah. No, it's great. And I've had wonderful visits where people are so excited about their work that you think, wow. And of course that means they're really, really productive. I mean, they just... They're doing it because they love it and it's... You can't compare with that kind of creativity that you get from that. So I guess that I'd like to talk a little about the competitive advantages here of taking this journey and, you know, that's the whole point. Productivity becomes your competitive advantage. You outproduce other companies with similar resources. And I believe that the way the world is changing right now, that competitive advantage for company B type companies is going to grow as things... And I have four reasons I cite for that.   0:28:21.0 JS: Reason one is flexibility, adaptability, agility, whatever you wanna call it. You know, we're going with manufacturing and services too much more into high mix, low volume type scenarios. So the mass production machinery approach has just become less and less relevant to manufacturing and also with services as well because it's not... It's less a ones size fits all kinda world. That's one very strong reason. The ability to hire talent. You know, we're just starting to see that. You know, people don't wanna work for these corporations that they feel don't have purpose. And couple of manufacturers actually told me, and this is in the US, I don't know how that compares with Thailand, but in the US he said there's a real crisis not just 'cause people maybe don't have jobs, but because people don't have purpose in their work, so people go home depressed, they take drugs and they've done medical studies on this.   0:29:30.3 JS: You know, if you don't have purpose in your work and you're doing something even though you know it's dumb and you're doing it anyway, just, you know, because to please the boss or whatever, that places huge stress on people. And there are actually medical... They've done medical studies on that, people who work in those kinds of jobs, on the negative effects. So anyway, I think getting the best talent, I hear that more and more anyone I talk to, and I think that's gonna be more and more of a factor. There's a whole deglobalization process going on right now. A lot of reshoring here in North America. People, you know, companies really realizing that sort of the fallacy of having these very, very long supply chains. So it's all about now shortening that supply chain, having immediate suppliers that are close.   0:30:23.9 JS: I mean, that's the only way you're gonna get your inventory turns down to 50 or whatever your friend was talking about. Right? And finally on climate change, that's getting tougher and tougher to deal with. And it's not just about governments not acting, but it's going to be scarcity of resources. It's going to be having to run businesses in difficult climate circumstances. It's gonna be government regulation. It's going to be whether people will come and work for companies that aren't making... Doing their bit to combat this. So those four reasons, I think that's a competitive advantage that's going to grow. And I think it's urgent that corporations act, and Dr. Deming warned that there'd be a crisis coming if companies kept running the way they were, and the crisis is here. We've arrived and, you know, the statistics are terrible. Don't have to bore you with those, but, you know, it's a very rough world and we need, obviously governments will have to act, but we need better companies. Now... Sorry, go ahead.   0:31:48.2 AS: I was... Yeah, that's why he entitled this book Out of the Crisis 'cause there was a crisis then, and the fact is there's still, and it's so many things are harder too particularly in the US with reshoring and that type of thing because education has been decimated also in the US so it's very hard to bring back, you know, engineering prowess and things like that, so. Yep.   0:32:14.1 JS: Yeah, for sure. So I... My sort of wrap up comment would be, answer to your question, not really a question, but your title, you talked about boosting Lean with Deming. So, you know, when we chat about this, but you know what, I was thinking about this, what as a person who wrote about Lean initially and then took a much deeper dive into Deming, what does Deming add, from my perspective? And what excites me the most about Dr. Deming is that I think he was less interested in maybe methods and more interested in fundamental truths. I mean, he really, I think put forward what are really fundamental truths about people, about the physical world and about how people in the physical world interact. And these are, like I say, this is not slogans or anything like this, this is science. I mean, these are proven scientific principles and I think those principles underline any method you use. You know, if you're really following that. And I'm not a Deming scholar enough to be able to say that that's what he meant by profound knowledge. But when you use the term profound knowledge, that's what that means to me. It means just a very fundamental knowledge of the way things work.   0:33:49.8 AS: Yeah. Well, it's exciting to think about how we can learn from what you've written about and what you've talked about. So ladies and gentlemen, the book is Productivity Reimagined: Shattering Performance Myths to Achieve Sustainable Growth. And I've really enjoyed our time, Jacob, to go through all the different myths and to hear the way you look at things which is coming from your direction originally, the Lean direction, and then bringing that thinking together with the teachings of Dr. Deming. So I just wanna thank you and give you the last word. If you'd like to wrap up for the listeners and the viewers to say, what's the main message you wanna get, want them to get out of all the... Out of the book and out of all of our discussion? How would you wrap it up?   0:34:45.4 JS: I would wrap it up by saying, let's look for those fundamental truths. You know, let's not look for slogans, let's not look for techniques. Let's look at what's really true about humans, about the physical world, and let's build our future based on that.   0:35:04.2 AS: Well, Jacob, on behalf of everyone at the Deming Institute, I wanna thank you again for this discussion right now and the prior discussions about each part of your book and the myths and the like. 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."

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."

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."

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.

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.  

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.  

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."

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."

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."  

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."