The New Economics for Industry, Government, Education | W. Edwards Deming

Summary of: The New Economics for Industry, Government, Education
By: W. Edwards Deming


In ‘The New Economics for Industry, Government, Education’, W. Edwards Deming delves into the challenges faced by the United States and its shifting economy, emphasizing the importance of education and innovation in today’s rapidly changing world. Deming underlines the necessity of a profound transformation in the present management style, introducing four key pillars of profound knowledge: appreciation for systems, knowledge of variation, knowledge theory, and psychology. This summary will offer valuable insights into Deming’s vision for a new, cooperative approach to management and education that fosters continual growth and learning.

North America’s Economic Decline

Once the leader in worldwide manufacturing, the US now receives a failing grade in trade balance. While other industrialized nations’ manufacturing took a hit from WWII, North America emerged relatively unscathed. However, the country’s slide in manufacturing has continued for thirty years, primarily driven by a growing preference for imports, including agricultural products. The solution requires a shift towards knowledge-based specialization, which will create specialized products and services. This shift necessitates a culture of learning, and North America must develop an educational mindset to adapt to the changing manufacturing landscape.

Defining Your Business

To succeed in business, it’s no longer enough to ask what business you’re in. You must constantly anticipate the needs of your customers, innovate, and exceed their expectations. The present style of management is a modern invention, and zero defects don’t guarantee success. The litany of efforts to improve quality, such as automation, merit awards, and quality control programs, duck the essential responsibility of management. Company presidents must give plant managers authority and involve them in product design to define quality and push for innovation.

The Importance of a Clear Objective

A system comprises interconnected parts that work together to achieve a common goal. For a system to be effective, it requires a clear objective that everyone understands. Management’s responsibility is to ensure that the system’s components function harmoniously to attain the set goal. The leader’s duty is to promote the objective’s dissemination among all members. A company’s interdependent parts must be well-managed to ensure optimal performance. The breakdown of any system, as seen with the U.S. air transportation, public education, and traffic system, can cause chaos when it no longer functions as a whole.

Profound Knowledge in Management

Leading today’s organizations requires a transformational management approach based on profound knowledge. This knowledge is “profound” because it changes one’s perception and understanding, making him/her an effective role model, listener, and teacher. The transformational process requires an outside view of organizational activities, and profound knowledge has four fundamental concepts.

First, there is appreciation for systems. Interdependence is essential, and to understand interdependence will require communication, cooperation, and teamwork. The failure of managers to comprehend interdependence is the reason why management by objective (MBO) does not always work.

Second, there is knowledge of variation. Variation is inevitable but predictable. When the output of a process is stable, even with variation, it becomes controllable. Management makes a classic error by overreacting to outcomes when they are part of the normal variation process.

Third, there is knowledge theory. Managers must predict. They must be aware that all predictions are subject to error, and the theory holds as long as the prediction is accurate. Leaders must revise a theory that no longer holds.

Lastly, there is psychology. Understanding people and their behavior is key to carry out a manager’s most important task. They must understand their subordinates.

A leader’s main job is to transform the organization into a better one. This process requires profound knowledge and a transformational approach. Leaders should inspire others to share their vision and execute them. This approach requires cooperation rather than competition, which leads to fear, defensiveness, and humiliation. The merit system, incentive pay, and numerical goals that do not attach to productive methods of achieving them destroy institutions. Leaders must guide people to transform systems that create individual against individual. The elimination of unnecessary paperwork is part of that transformational process, and more importantly, there must be a change in our perception and understanding.

The Misguided Ways of Managing

The prevailing management style in today’s workforce is akin to a prison that inhibits human interactions and creates a divide between winners and losers. The focus should instead be on optimizing the system and creating a cooperative environment that maximizes overall performance. Competition should be replaced with cooperation, as it better builds character and supports human nature. The current reward system employed by many organizations squeezes intrinsic motivation and creates fear, leading to a seek for external rather than internal satisfaction. To effect real change and transformation in management, it is imperative to adopt profound knowledge from outside the system. This can be achieved by shifting the focus from the individual to the system, optimizing its productivity and making everyone a winner.

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