(2023-04-24) Chin The Deming Paradox The Human Costs Of Operational Rigour

Cedric Chin: The Deming Paradox: The Human Costs of Operational Rigour. This is an investigative note, and only nominally part of the Becoming Data Driven in Business series.

the tricky thing about his (W. Edwards Deming) work is that it goes far beyond the data tools he helped introduce to the practice of business — and in many cases, seem in direct opposition to the ideas I’ve talked about in the past couple of essays.

I’m writing about Deming’s overall philosophy here because of a fundamental tension I’ve noticed the more I’ve dug into his work: the data tools and statistical methods he popularised can and have been used to produce amazing business outcomes with horrible human costs

But the man himself espouses a philosophy that is deeply humanistic in nature

consider the response that many of my Big Tech friends have had when I explained that I was digging into the source methods for Amazon’s operational rigour: “That’s nice.” they’d retort, “And cool if you get it to work for you. But Amazon has a funny way of sucking the soul out of everyone I know who has worked there.”

“Is that not the price of excellence?” a friend said

Deming’s influence is largest in Japan. Perhaps they’re operationally rigorous, wonderful places to work? I don’t know enough to say, but I intend to find out.

the systems that results from these tools sometimes result in crushing pressure for the individuals executing within the system.

He wrote that common sense tells us to rank children, employees, students, and teams

He worked hard to help people to see the irrelevance, limitations, and the cost of these major myths entrenched in society

Deming argues that many of his ideas — those same ideas that we’ve discussed in this series — lead quite naturally to his human-centric conclusions.

Rating and grading is analogous to inspection of parts in the factory. Inspection is after the fact, after the parts are produced. Therefore it does not improve the process that produced the parts; it does not prevent defects from occurring

How Effective is this Deming Stuff, Really?

there is a famous Western company that has adopted Deming’s business philosophy wholesale. That company is Koch Industries, and reading about Deming in Christopher Leonard’s Kochland was perhaps the first indication to me that this entire Deming thing wasn’t some odd management cult from an obscure business guru.

it has been ridiculously successful at business

system has had no small part to play in that

Koch, Honda, Toyota and Sony makes for more than three instances where Deming’s ideas have led to operationally excellent businesses. So, yes, I do believe that Deming’s ideas work.

I’d like for you to get a taste of what that means with an excerpt from Chapter 6 of Kochland below

Charles Koch became fixated on Deming, and he set out to apply Deming’s methods across Koch Industries

Deming’s passion was for making better products, or, more accurately, for creating a system that could make better products,” the journalist David Halberstam wrote.

Dubose was determined to make the shipping barges turn a profit. He knew he had one tool to help him do this: the charts of W. Edwards Deming.

The first matter of business that Dubose focused on was keeping costs down. Fuel was the largest cost the barges incurred

Of all the charts he learned to make, he found that by far the most useful was called a run chart.

A run chart broke down all the costs that a barge would incur. It had a separate category for each cost: groceries, fuel, maintenance, ship damage, and supplies. The run chart allowed you to track these costs as they shifted from month to month

Dubose was taught to look for cost spikes. The reason was simple: you figured out what caused costs to spike, and you avoided it. Then you figured out what caused costs to fall, and you replicated it.

The critical part came next. Dubose printed run charts for each vessel and posted them in the skippers’ cabins. Each skipper could then see for themselves where they were running up costs and where they were saving money. Dubose turned each skipper into his own manager.

Then Dubose went further. He started tracking the profits and losses for each barge. This made each skipper a small-business owner and each barge a small business.

“It got to the point where the boats were competing against each other. I was just sitting back like a big old Cheshire cat in a tree,” Dubose said.

His profit margin reached 33 percent.

Leonard documents how Koch’s dedication to Deming’s ideas eventually led the company into several sticky situations, not the least being targeted in a Senate Investigation for oil theft in 1988, a direct result of immense internal pressure on employees as part of its continuous improvement program. Charles Koch later changed the company’s operating playbook to have 100% regulatory compliance, 100% of the time.