By the 1970s, Japanese companies had a reputation for high quality and were taking market share from American companies, but Deming’s teachings were virtually unknown in his own country. It was not until 1980 that America became aware of Deming when his work was described in an NBC documentary titled If Japan Can, Why Can’t We? 1 By then, Deming was eighty years old and the producer of the show originally assumed he was dead. 2
In 1982, Deming’s book was published and later retitled Out of Crisis, in 1986. 3 It was aimed at explaining his system to American manufacturers and the American public. In the book, Deming described fourteen principles of management to guide the implementation of his philosophy. Some of them were challenges to Western managers and very different from the thinking that was prevalent at the time. In brief, they are as follows:
- Create constancy of purpose toward improvement of product and service.
- Adopt a new philosophy. We are in a new economic age. Western management must awaken to the challenge, learn their responsibilities, and take on leadership for a change.
- Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place.
- End the practice of awarding business on the basis of price tag. Instead, minimize cost. Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust.
- Improve constantly and forever the system of production and service to improve quality and productivity and thus constantly decrease costs.
- Institute training on the job.
- Institute leadership. The aim of supervision should be to help people and machines and gadgets to do a better job. Supervision of management is in need of overhaul, as well as supervision of production workers.
- Drive out fear, so that everyone may work effectively for the company.
- Break down barriers between departments.
- Eliminate slogans, exhortations, and targets for the workforce asking for zero defects and new levels of productivity.
- Eliminate work standards (quotas) on the factory floor. Substitute leadership.
- Remove barriers that rob the hourly worker of his right to pride of workmanship.
- Institute a vigorous program of education and self-improvement.
- Put everybody in the company to work to accomplish the transformation. The transformation is everybody’s job.
Between 1979 and 1982, Ford Motor Company lost $3 billion, and they were looking for solutions to their problems. They chose to apply Deming’s approach to develop the new Taurus-Sable model and by 1986 had become the most profitable American auto company. 4
Ford adopted a Japanese approach to quality known in America as total quality management (TQM). TQM in Japan has four major components:
- Kaizen. Improvement must involve all members of a company. 5
- Atarimae hinshitsu. Make things work the way they are supposed to work. 6
- Kansei. Learn from the way a user applies the product to make improvements. 7
- Miryokuteki hinshitsu. Things should have an aesthetic quality and be pleasing to use. 8
According to Peter B. Petersen, 9 TQM differs from the Deming approach in four fundamental ways:
- The Deming approach represents one philosophy that is used in its entirety or not at all. In contrast, TQM can be tailored to a particular environment.
- Both agree that a long-term commitment is required by top management. However, Deming would drop clients if they started to wane, while TQM consultants were less demanding.
- Deming insists on constancy of purpose, while TQM adapts to the situation, which results in lack of constancy.
- Deming requires adoption of his principles of profound knowledge, while TQM lacks this unified philosophy.
Many poorly qualified consulting firms provided training in TQM to American companies. The approach worked in some cases but not in others where it was applied superficially, and the movement’s credibility was diminished.
Another approach to quality management in the United States was formulated at Motorola in 1986 and was named Six Sigma (6σ). The Six Sigma practices were based on Deming’s work, TQM, and others and had similarities regarding continuous efforts at improvement involving everyone at the company. It emphasized a clear focus on achieving quantifiable financial returns from any Six Sigma project. To determine the financial return on a quality initiative, the cost of quality (COQ) must be determined. The cost of quality has two parts: the cost of prevention and the cost of failure (or nonconformance). The cost of quality is the difference between the additional money spent on prevention and the corresponding reduction in the cost of failure.
- Cost of prevention
- Cost of conformance. Cost to improve quality
- Cost of appraisal. Cost to measure and evaluate quality
- Cost of failure
- Internal costs. Repairing bad parts before shipment or retooling a manufacturing line to reduce failures
- External costs. Managing returns, lawsuits, product recalls
Six Sigma identified individuals as experts in quality and awarded titles like Champion and Master Black Belt. The name Six Sigma refers to a process that has six standard deviations from the mean to either control limit that would ensure virtually zero defects. (In practice, the Six Sigma approach allows for a 1.5 sigma drift, so it is really a 4.5 sigma standard that allows approximately 3.4 defects per million products.) This approach was adopted by Jack Welch at General Electric with great success. By the late 1990s, about two-thirds of the top five hundred companies in the United States had begun Six Sigma projects, including Ford, which had allowed its quality programs to slip. To provide encouragement and a consistent standard, the U.S. government created the Malcolm Baldrige National Quality Award in 1987 to encourage companies to improve quality; the award was named for Malcolm Baldrige who was the U.S. secretary of commerce from 1981 to 1987. 10 The criteria used to determine award winners are as follows:
- Leadership of senior executives
- Strategic planning
- Customer and market focus
- Measurement, analysis, and knowledge management
- Workforce focus
- Process management
- Results
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