W. Edwards Deming’s 14 Points: Point # 11

Point 11: “Eliminate Numerical Quotas” (A Personal View)

Dr. Deming is no stranger to controversy, and perhaps never more so than in his articulation of Point #11. Performance driven management has become conventional wisdom, coming into considerable conflict with the Deming management method.

Deming very much opposed management’s habit of setting arbitrary production quotas for workers. One form of such quotas is often referred to as “piecework” – where the worker is paid by the piece that is turned out or produced.

Deming argued, of course, that pursuit of arbitrary quantity goals had nothing whatsoever to do with the quality of output. Indeed, in the pursuit of quantity, the worker would routinely sacrifice quality, taking short-cuts along the way. This would in turn lead to rework, rejects, and demoralization. He talks, for example, about the airline reservations clerk who has a quota of 25 customer calls per hour to process. What happens if her customers on a given day have some difficult problems? What happens if customers are slow in providing information? Her job then becomes taking 25 calls per day rather than satisfying the customer. Risky stuff.

While it may be true that piecwork and its relatives are less common in western manufacturing processes than they were in the mid-20th century (we tend to rely more on technology to perform the mundane tasks than we did 50 years ago), the practice remains ubiquitous in SE Asia and other low labour cost jurisdictions. Further, it still permeates many North American businesses within the business processes themselves.

There is a lot of truth to the old chestnut “that which gets measured gets done.” This saying has been attributed variously to Peter Drucker, Tom Peters, Vince Lombardi, and even Albert Einstein. Regardless, it is the basic principle behind the concept of Performance Driven Management.

As a former high performance athlete, and a coach, I understand the value of measurement. Metrics are indispensable. But they need to be used judiciously. Management, like the athletic coach, needs to take care that they do not become an end in and of themselves. What good is it to run a world record time in training, if you are unable to capture the gold medal in competition?

Managing by Spreadsheet

I once worked as a Manager for a large retailer and distributor. Candidates had to pass an intelligence test (top 5% of the general population) to be considered for a position in this firm. This was because their distribution and procurement systems were exceedingly complex, and only the very intelligent, they argued, could hope to understand them.

It turned out that the procurement system was based upon a broad network of Excel and Access databases and tools, which attempted to articulate the myriad rules and regulations required to run the business. The Director was one of the authors of the “system”, and was its fiercest defender.

One such tool was called the “buyout”. A supplier would come to us with a price reduction proposal (limited time offer) or an announcement that the supplier’s prices were about to rise. The buyout was an Excel-based tool which allowed us to quantify the appropriate purchase.

I could go on for hours about my philosophical opposition to the concept of forward-buys, but I will leave that for another day. Suffice it to say that it violated every principle that I have come to hold dear in the field of inventory management. I underline the word management purposefully. Nevertheless, it became our task as a team of inventory analysts, to churn out as many buyout spreadsheets as possible. Believe me, the buyout opportunities flowed like water over Niagara Falls.

Analysts were prohibited from challenging the credibility of the process.

Considering metrics like inventory turns was a waste of time.

Flowing products through the supply chain was never a consideration.

The process was deemed to be infallible.

Constraints such as warehouse capacity were ignored.

Speed was essential. Speed trumped quality every time.

All energies were directed at inputting the parameters correctly, forwarding the spreadsheet for approval, and doing these tasks quickly.

What a waste if human talent. The analysts effectively became pieceworkers where the rate of output was of paramount importance, where critical thought was of little value, and where suggestions for improvement were discouraged on the strongest terms.

Search not only within your production operations, but also within your business processes for examples of piecework. Are your employees producing great work? Or are they churning out numbers for their own sake?

The Performance Incentive: A Contrarian’s View

I recently engaged in a discussion where the moderator encouraged participants to express their views on bonus payouts for performance.

If a company is hell-bent on using performance incentives, it is a requirement that the goals be clear and unambiguous. SMART = Specific, Measurable, Attainable, Relevant, Timed (I understand there are slight variations on this definition).

I have, however, completely lost faith in bonus payouts. I have come to believe that there are many executives and organizations who, in their articulation of the bonus criteria, violate the SMART principle. The goals can be set so high that they are unattainable. The rules can change in the middle of the game, and the beleagured employee is powerless to protest. Forces come into play that are completely beyond the control of the individual and yet the impact the metric.

The bonus can encourage destructive behavior as an individual is urged to pursue his or her own best interests at the expense of those around him, including the health of the company. Total Quality demands a holistic perspective. Finally, management can be downright unethical in their use of the bonus incentive as a carrot dangling over the head of the donkey – a treat which the beast will never enjoy.

We have, after all, heard many examples in recent years of the Executive teams of major corporations who stand at the precipice of financial oblivion, while concurrently awarding themselves handsome bonus payouts. Oftimes, the CEO is paid millions to reduce headcount (i.e. fire innocent employees), and by doing so he guts the character of the organization.

We all have learned over the past 30 years, at least, that a business is a vast web of interconnected activities and forces. Running a business as a collection of functional silos fails to deliver optimal performance. We correctly stress cross-functional communication and collaborative planning. We encourage our teams to take informed risks, sharing both the accolades and the blame.

It seems to me that paying a fair wage in the first place, accompanied by an attractive benefits package, is better in the long term, and is the only way to encourage the holistic approach that we desire.

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