Manage Costs, Variation, and Waste – Mind the Choices

Post by Bill Bellows, Deputy Director, The Deming Institute.

As noted in my June 26th post, “It Depends…”, when asked in February 1990 about the trend towards reducing the number of levels of management in organizations, Dr. Deming answered, in his usual Socratic fashion: “Why have more levels than you need?”

Now, consider what Socratic questions might have followed these questions:

“Dr. Deming, what do you think about the recent trend toward reducing variation in our processes?”, or

“Dr. Deming, what do you think about the recent trend toward reducing the waste in our operations?”, or

“Dr. Deming, what do you think about the recent trend toward standardizing our operations?”

I would anticipate Dr. Deming approaching each of these questions with an understanding of the nature of organizational dynamics. In each case, he could suggest the need for understanding the nature of the systemic behaviors.  He could suggest the value of having neither more nor less than necessary.  As with the title of his book, his proposal offers a new economics, one in which the focus is on the relationships between the elements of the system and not the elements taken separately.   As a real-life example, Dr. Deming often shared a story of how an employee’s travel costs were reduced by the travel department by requiring same day travel.  But, the need for the employee to awake at 3am to prepare for a 6am flight from Chicago to New York left her too tired to make productive use of her day.   Instead of reducing costs, variation, or even waste, a more systemic approach might be to manage costs, variation and waste and provide the appropriate levels throughout the system. He could also remind us that what appears to be waste (hotel expenses) to one observer may not appear as such to another (the traveler).   As with a whale or an organization, what might appear to be fat or waste to one observer, could be an essential ingredient to the long-term survival of the system.

Likewise, instead of a widespread effort to standardize processes within an organization, one might ask which processes should be standardized and which should be non-standard?  For example, should language and software be standardized across an organization, including its supplier base, as well as sub-tier suppliers?   A coffee shop could have three or more sizes of coffee cups, yet have one lid size that fits each cup.  A hospital could have uniforms for nurses that differ from those for doctors and staff members, thereby making it easier for patients and their families to identify the help they need.   While there’s a place for standardization, there is also a systemic limit to what is economically and operationally viable.

The degree to which the system “works together” can be enhanced with a better understanding of Dr. Deming’s theory, his “System of Profound Knowledge,”   consisting of the four parts below, and their interrelationships;

  1. Appreciation for a system
  2. Knowledge about variation
  3. Theory of knowledge
  4. Psychology

In combining these bodies of knowledge, Deming’s theory offers a holistic appreciation of organizations that includes systems thinking, linked to variation management, linked to a theory of knowledge, further linked to an understanding of people. Twenty-seven years later, I’m reminded every day of my first impressions of Dr. Deming and how his theory for improving our understanding of life continues to transform countless lives.


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