The Origins of Lean: The Deming System of Profound Knowledge

By: Virginia Shram

March 21, 2022

The four overlapping aspects of Deming's System of Profound Knowledge

Manufacturers-in-the-know praise Taichi Ohno and Eiji Toyoda for inventing the revolutionary Toyota Production System, but did you know that the origins of lean production go back even further?

Cue William Edwards Deming: a statistician, professor, and management guru of the mid-20th century. He condensed his knowledge of electrical engineering and mathematical physics into a leadership strategy that inspired practical lean manufacturing in Japan and North America.

In fact, the Japanese post-war economic boom — and particularly the extensive production network at Toyota — used Deming’s research as inspiration, drawing on leadership speeches and statistical insights Deming gave in the 1950s.

Perhaps his biggest contribution to management systems is the 14 Key Principles

Let’s break down the Deming System’s daunting 14 points and provide some clarity, because for a system this influential (and with such a promising name), it really has withstood the industrial tests of time.

Who Was William Edwards Deming?

black-and-white photograph of William Edwards Deming

William Edwards Deming was an electrical engineer and statistician in the mid-20th century. He was instrumental in developing management and statistical techniques to determine levels of quality control in manufacturing. Aside from working with the US Library of Congress, including other governmental industrial projects, he provided structure for both Ford Motor Company and Mazda.

He was a prolific researcher and businessman, and his sampling techniques are still used today by organizations like the US Department of Labor Statistics and Department of the Census.

What is the System of Profound Knowledge?

Deming’s System of Profound Knowledge is a lofty title for such an intuitive collection of workplace boundaries. The System is a combination of 4 elements:

Appreciate a System

“Appreciation” here means knowledge, respect, and trust of the intimate workings of an entire system. Leaders should know every individual action and corresponding trigger within the production line in order to have a full view of the workflow.

Understand Variation

There are two types of variation: special, and normal. “Normal” variation is the slight differences in output that still lie within the bounds of quality control. “Special” variation is any deviation from controlled output that lies outside of the system’s regulated quality control. It is critical to recognize the markers of both types of variation, so as to properly assess quality control situations and the root of the variation problem at hand.

Theory of Knowledge

Adopting and understanding the “theory of knowledge” means understanding how knowledge itself is amassed and tested against new and changing conditions. By recognizing the methods of educational quality control over fact and fiction in manufacturing, you are able to apply that knowledge to perfecting your own individual industrial system while knowing that it is a stable and reasonable foundation of thought and research.

Understand Psychology

Getting to know what motivates people and what makes them tick is absolutely necessary for a leader who wants to tune into their workforce to motivate and support workers.

continuous improvement

What are Deming's 14 Points for Management?

Arguably the most famous of Deming’s management principles is the “14 Points for Management” listed below. We’ve summarized each step for easy comprehension, so don’t let the long list of best practices fool you: some are dead easy to implement once you understand their purpose in continuous improvement.

1. Consistency of purposeful improvement

Not only should you have a plan for moving forward, but you should check that each stage of the plan’s development is consistent with the rest. There should be a constant, prominent purpose in your business that everyone understands and pursues.

2. Adopt a new philosophy of leadership based on the new economy

Your leadership style should evolve with your business and the industry you’re in; don’t get stuck in an old-fashioned leadership rut just because it worked at one point.

3. Eliminate dependence on inspection by focusing first on quality

Instead of having to check each item post-production for proper quality control, invest in the easier option of fine-tuning the machinery throughout the production process, thus leading to fewer defects overall.

4. Build long-term supplier relationships rather than deal-hopping

Sure, you can save a few thousand — maybe even ten times that amount — by playing the field of suppliers for the best monetary deal. But when the prices inevitably shift with the greater industry’s supply and demand, and you switch to another, cheaper supplier, say goodbye to any long lasting professional partnership, and any reputational bonus that came with the association.

5. Continuous improvement

Anything and everything can and should be improved! Look forward innovatively with this kind of optimism towards your system processes and workflow.

6. Institute job training programs

By offering on-the-job training and education programs, you are investing in your individual workers’ happiness and success while at the same time investing in your workforce as a unit. Employees can find their niche within the company and greater job satisfaction with it.

7. Institute leadership by supervising management as well as production workers

This step warns about letting managers have individual and full control over their own teams, because it can easily lead to an unfair set of standards between white-collar and blue-collar workers.

8. Drive out fear of failure

Communicate enthusiasm and optimism, yes, but also make sure to allow room for growth and failure, or else people will be too fearful of imagined consequences to take justified risks.

9. Break down interdepartmental barriers for better, out-of-the-box problem solving

It’s great to specialize work teams, but also make sure to facilitate cross-departmental projects and meetings so that everyone can benefit from a new perspective.

10. Replace work standards and quotas with leadership on the factory floor, and make sure management avoids leading by mere objective or numbers alone

Whether it’s daily, monthly, even annual quotas — Deming doesn’t like ‘em. Strict numerical standards increase fear of retribution within the workforce, which goes against issue #8.

11. Invest in hourly workers' pride of their own workmanship

Regularly praise and reward employees for the direct product of their efforts so that they can take pride in themselves and their skill as applied to the company.

12. Remove bureaucratic barriers in management by eliminating annual merit or objective ratings

Annual ratings for management focus more on convincing upper management of departmental success rather than accurately or critically evaluating the state of a team’s resources and performance. Lead through understanding vision, not by tallying wins and losses.

13. Institute "vigorous" educational and self-improvement programs

These “vigorous” programs are more in line with what would nowadays be educational subsidies or grants for relevant business programs, or paid time off to pursue certifications, for a couple examples. These programs are less dependent on tasks and titles and more oriented to employee satisfaction and health.

14. The transformation is everybody's job

Everybody bears the team’s responsibility, and that also means everybody succeeds when working together in pursuit of a common goal.

How Can We Apply These Historical Methods Nowadays?

The beauty of Deming’s System of Profound Knowledge is that it doesn’t tie itself to historical absolutes, like a specific kind of machinery or an IoT-related technology that has varying relevance over time.

Each step of the 14 points for management is applicable to modern manufacturing in some way.

As you probably picked up, Deming emphasizes a certain style of leadership rather than quotas as a marker of a business’ success. Before you write off the more psychological of his 14 management steps, pause to think of the dramatic effect that a positive collective attitude can have on your leadership style.

Plan Do Check Act Cycle

Plan-Do-Check-Act or Plan-Do-Study-Act Cycle?

Deming was an early friend and proponent of Walter A. Shewhart and his research on statistical process control. Deming built his system of management on the principles of statistical process control, referring to Shewhart’s findings as “The Shewhart Cycle for Continuous Learning and Improvement.” The name never really stuck, however, and the Shewhart Cycle became more commonly known as the PDCA Cycle, or Plan-Do-Check-Act Cycle.

Deming simultaneously developed a Cycle based on Shewhart’s research, called the PDSA Cycle, or Plan-Do-Check-Study Cycle. It’s a historical quibble that Deming never invented the PDCA Cycle, only the PDSA Cycle (the latter was published towards the end of Deming’s life, in 1993).

Regardless of which Cycle you use, they are both fundamentally based on the scientific method and on building logically sound bases of knowledge.

Deming's Seven Deadly Diseases

Deming’s 14 management points too many to deal with?

No problem — Deming’s got you covered with a halved list of deadly “diseases” to avoid. This methodology, as well as being shorter, is a lot catchier, too.

1. Inconsistent purpose

Be clear, be direct, and make sure everyone in the company is aware of their own purpose within the team vision.

2. Short-term profit-driven

Avoiding long-term strategy will mean your business will fluctuate dangerously with seasonal supply and demand, and leads to a volatile production cycle.

3. Eliminate performance metrics based on performance or annual objectives

Skip the quotas! Make sure employees are driven by the work that they are doing instead of because of a big stick looming overhead.

4. Management mobility

Too much mobility among management is an indication that the purpose of the company isn’t being communicated to the people meant to organize it. Moreover, lower level employees are denied an opportunity to build long-lasting mentor relationships in order to progress along their careers, and so will look elsewhere for that support.

5. Operating from visible figures alone

Just because you’re in the red doesn’t mean you’re failing, and just because you have a certain revenue doesn’t mean one area of your business is an accident waiting to happen.

6. Excessive medical costs

Of course it’s necessary for most businesses to cover medical expenses in the case of on-the-job injury, but bankruptcy through medical costs isn’t the fault of the potential victim, it’s the fault of management for not adequately providing safety standards in the first place. Beware when this number becomes too high, because it is an indication of improper task and safety standardization in the first place.

7. Excessive legal costs

Same with the above, excessive legal costs are a direct drain of resources as well as an indication that some not-so-straightforward corners might have been cut in a way that compromises your business’ longevity and reputation.

Lean Production of the Future

In adopting Deming’s approach to management, feel free to use as many of his guidelines that make sense to you in your industrial niche. In doing this, you are investing in your own personalized style of management that best follows his #2 rule: create a new management philosophy that best meets the current world. Your own lean methodological approach will help guide you in today’s global market as your team navigates its capabilities and incremental progress.

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