Maintenance Required

WHAT IS THE cost to your organization of a

disengaged workforce? If you measured the level of

employee engagement in your organization and it mirrored

the results of a 2013 Gallup survey report, “State of the

American Workplace: Employee Engagement Insights

for U.S. Business Leaders,”1 the costs in terms of lost

productivity, customer satisfaction and employee morale

could be substantial.

Gallup’s ongoing study of the American workplace from

2010 to 2012 found about 30% of employees are engaged at

work, 50% are not engaged and 20% are actively disengaged.

In 50 Words Or Less • Productivity, customer

satisfaction and employ-ee morale suffer when a workforce is disengaged and not committed to the organization.

• W. Edwards Deming’s 14 points and system of profound knowledge can help organizations overcome the manage-ment practices causing this disengagement, and provide a method to support a culture of employee engagement.

Deming’s management method can help you increase employee engagementby Joseph F. Castellano, Harper A. Roehm and Carol M. Shaw

April 2016 • QP 15

COST OF QUALITY

QP • www.qualityprogress.com16

Gallup defines engaged employees as those

who work with passion and feel connected to

their organizations. They drive innovation and are

committed to the organization’s success. Those

employees who aren’t engaged are essentially just

showing up for work—putting in their time, so to

speak—and not energetic or passionate about their

work. They are there to collect a paycheck.

More disturbing, the 20% who are actively disen-

gaged are not only unhappy at work, but also acting

out that unhappiness by trying to undermine the orga-

nization. According to Gallup, these high levels of dis-

engagement, about 70%, are costing the U.S. economy

between $450 billion to $550 billion annually.2

Look to DemingAny organization can look to W. Edwards Deming and

his management method for help in finding answers

to overcome this disengagement. The starting point in

dealing with a lack of employee engagement is to de-

termine the causes.

Deming often spoke about the role of management

in designing and improving the system. Management

is responsible for the system. Employees are simply

working in the system that management has designed.

If employees are not engaged in their work, it is man-

agement’s responsibility to examine its management

methods and the way it has designed the system.

Deming believed employees wanted to take pride

and joy in their work, and that it was management’s

responsibility to create the kind of culture where that

could happen. He called for a transformation in the

way leaders think, act and manage. In short, he called

for new management methods that, if understood and

correctly used, would allow those who work in a sys-

tem to do their best work.

Deming’s management method can not only help re-

move the causes of disengagement, but also can help

create an organizational culture that can enhance em-

ployee engagement.

Management method Deming’s philosophy of management and his manage-

ment methods are embodied in his now famous 14

points4 and system of profound knowledge (SoPK).3

See Table 2 for Deming’s 14 points.

Deming’s SoPK is composed of four interrelated

and interdependent components:

1. Appreciation for a system.

2. Knowledge about variation.

3. The theory of knowledge.

4. Psychology.

Deming believed his 14 points for management fol-

lowed naturally from an understanding and application

of the SoPK.5 Taken together, we believe his SoPK and

14 points provide a management method that supports

a culture of employee engagement.

Applying each element of Deming’s SoPK and the

appropriate 14 points that follow from each element

can address many of the management issues respon-

sible for low levels of employee engagement.

Appreciation for a systemAppreciation for and understanding of a system are

recognition that an organization is composed of in-

terdependent and interconnected processes that must

work together to accomplish some aim.

Deming noted a system must have an aim, and he of-

ten spoke and wrote about the need for everyone in an

organization to understand his or her job relative to the

system’s aim. Just as important, the greater the degree

of interdependence between the components in a sys-

tem, the greater the need becomes for communication

Gallup’s 12 statements / TABLE 1

1. I know what is expected of me at work.

2. I have the materials and equipment I need to do my work right.

3. At work, I have the opportunity to do what I do best every day.

4. In the last seven days, I have received recognition or praise for doing good work.

5. My supervisor, or someone at work, seems to care about me as a person.

6. There is someone at work who encourages my development.

7. At work, my opinions seem to count.

8. The mission or purpose of my company makes me feel my job is important.

9. My associates or fellow employees are committed to doing quality work.

10. I have a best friend at work.

11. In the last six months, someone at work has talked to me about my progress.

12. This last year, I have had opportunities at work to learn and grow.

Source: Gallup, “State of the American Workplace: Employee Engagement Insights for U.S. Business Leaders,” 2013, p. 19, http://tinyurl.com/gallup-report-workplace. The report highlights findings from Gallup’s ongoing study of the American workplace from 2010 to 2012.

April 2016 • QP 17

and cooperation between them.6

Many of Deming’s 14 points follow

logically from understanding a system.

For example, point No. 8, drive out fear,

recognizes that if people are to work ef-

fectively and together—in effect, to be-

come engaged with their work and one

another—a culture of fear and intimida-

tion would inhibit employee engagement.

In point No. 9, Deming also called for

breaking down barriers between people

and departments so employees can work

together to meet the needs of customers

in producing quality products and ser-

vices.

Appreciation for a system and an un-

derstanding of points No. 8 and 9 also pro-

vide a compelling case for Deming’s belief

that creating a culture of internal competi-

tion is detrimental to the goal of optimiz-

ing the system.

He believed the goal of each compo-

nent of the system was to work toward

optimization of the overall system and not

its independent benefit. Creating a culture

of internal competition through manage-

ment by objectives (MBO) and merit-pay

systems tied to MBO was viewed as con-

trary to an understanding of the goal of

system optimization.7

Deming was openly critical of MBO

as practiced by most organizations and

its use in merit-pay systems because he

believed it was impossible to separate an

individual’s contribution to some result

from the effects the system had on that

result.8

Attempts to assign credit or blame

to employees through these merit-pay

systems demonstrated, in Deming’s view, a failure to

understand a system. Internal competition, fear and

barriers to cooperation that would result from these

management methods could certainly damage efforts

to foster a culture of engagement.

Table 1 lists the 12 statements used in the Gallup

report. Statements one, two and eight speak directly

to Deming’s points about ensuring that each employee

understands his or her job relative to the aim of the

system, and that it is management’s responsibility to

design the system so all employees have the opportu-

nity to do their work with pride and joy.

In short, not understanding your work or what is ex-

pected—as well as not having the necessary resources

to do the work correctly—is clearly detrimental to not

only the system, but also to the level of your commit-

ment or engagement to the work and the organization.

Finally, statement eight—“The mission or purpose

COST OF QUALITY

1. Create constancy of purpose toward improvement of product and service, with the aim to become competitive and to stay in business, and to provide jobs.

2. Adopt the new philosophy. We are in a new economic age. Western management must awaken to the challenge, must learn their responsibilities, and take on leadership for change.

3. 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.

4. End the practice of awarding business on the basis of price tag. Instead, minimize total cost. Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust.

5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.

6. Institute training on the job.

7. Institute leadership (see Point 12 and chapter 8). 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.

8. Drive out fear, so that everyone may work effectively for the company (see chapter 3).

9. Break down barriers between departments. People in research, design, sales, and production must work as a team, to foresee problems of production and in use that may be encountered with the product or service.

10. Eliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force.

• Eliminate work standards (quotas) on the factory floor. Substitute leadership.

• Eliminate management by objective. Eliminate management by numbers, numerical goals. Substitute leadership.

11. Remove barriers that rob the hourly worker of his right to pride of workmanship. The responsibility of supervisors must be changed from sheer numbers to quality.

12. Remove barriers that rob people in management and in engineering of their right to pride of workmanship. This means, inter alia, abolishment of the annual or merit rating and of management by objective (see chapter 3).

13. Institute a vigorous program of education and self-improvement.

14. Put everybody in the company to work to accomplish the transformation. The transformation is everybody’s job.

Source: W. Edwards Deming, Out of the Crisis, Massachusetts Institute of Technology Press, 1986.

Deming’s 14 points of management / TABLE 2

QP • www.qualityprogress.com18

of my company makes me feel my job is important”—

speaks directly to the importance Deming placed on

each employee understanding the aim of the system

they were working in and knowing how the role and

purpose of their work contributed to the accomplish-

ment of the aims and goals of the organization.

Knowledge about variationDeming said there would always be variation among

people, processes, output, product and service. The

important question is what the variation is trying to tell

us about the process and the people who worked in it.

The only way to properly interpret this variation is

by using statistical process control charts, or what Don

Wheeler referred to as process behavior charts.9 The

two sources of variation indicated by these charts—

common cause and special cause (these are Deming’s

terms, but Wheeler used the words “noise” and “sig-

nals”)—can identify whether a process is in statistical

control.

If a process is stable—all variation is just noise—it

has a definable capability. Deming told us such processes

allow us to predict the variation to be expected in the

future. Costs, performance, quality and quantity are all

predictable.10 For processes that are not in statistical

control and, hence, are unstable—signals are present—

no such definable capability exists. The performance of

these processes is therefore unpredictable.11

How does an understanding of variation—a concept

rooted in statistics—relate to employee engagement?

Deming said the management of people is different be-

tween the stable and unstable states. Confusion on the

part of management between these two states would,

in Deming’s words, lead to calamity.12

Perhaps his dire prediction was based on the pre-

vailing management practice of assigning blame to

workers for failure to achieve numerical goals and tar-

gets that are so often a part of management’s efforts

to use MBO as a way to motivate and incentivize em-

ployees.

MBO, as used by many organizations, is a method

for ranking employees and creating competition among

people. Deming believed such employee ranking is a

failure to understand variation.

Furthermore, he said such ranking demoralizes

employees and is a farce.13 Clearly in point No. 10 of his

14 points, Deming was warning management to stop

blaming employees for the failure to achieve numerical

goals and targets. In fact, in point No. 12, he specifically

called for the abolishment of the merit pay system and

MBO because they were applied in ways that clearly

pointed to a failure to understand variation.

One of MBO’s major failures, according to Deming,

is that management is unable to separate any result

from the portion attributable to the employee and the

portion attributable to the system. The inevitable re-

sult of this failure is to blame employees for poor per-

formance. The consequence of this misguided blame

definitely takes its toll on the engagement level.

Knowledge of psychologyDeming said psychology helps us understand people,

their circumstances and the interactions that occur

among groups in any organization. He cautioned man-

agement to recognize that people are different from

one another, and these differences are important to

understand.14

He warned about the overuse of extrinsic sources of

motivation (that is, merit pay, bonuses and other forms

of monetary compensation) and the detrimental effect

they could have on intrinsic motivation—the motiva-

tion that came from within as a result of doing some

work or task for the sheer pleasure one would experi-

ence from the work itself.

Deming’s views on motivation were premised on

the belief that most people want to do a good job, and

they wanted to take pride and joy in their work. It was

the job of management to create the kinds of systems

and culture that would permit employees to be able to

do their best. We believe he was speaking about the im-

portant role an organization’s culture plays in fostering

intrinsic motivation, which leads not only to pride and

joy in work, but also increased engagement.

Many of the 14 points already mentioned relate to

the issue of understanding psychology, as well as state-

ments four and five in the Gallup survey. Both state-

ments highlight the importance of recognition and ac-

knowledgement of a person’s work as a way to show

respect for the individual and the beneficial effects

such recognition can have on an employee’s intrinsic

motivation and, hence, level of engagement.

Theory of knowledgeDeming believed the theory of knowledge helps us to

understand that management in any form is prediction,

and rational prediction required a theory. Theories

April 2016 • QP 19

build knowledge through the formulation of theory

and through a systematic revision and extension of

theory based on a comparison of our predictions with

observations.15 Without theory, we would have nothing

to learn and nothing to revise. In short, knowledge is

built on theory.16

The plan-do-study-act (PDSA) cycle can be applied

to the theory of knowledge as a way to increase em-

ployee engagement. While Deming referred to this

cycle as the Shewhart cycle, Toyota refers to it even

today as the Deming cycle.17

The steps in the cycle are straightforward:

• You plan a change or test aimed at some improve-

ment or solution to a problem. The planning pro-

cess usually begins by formulating a theory of im-

provement or solution to a problem.

• You carry out—or do—the plan or the test, prefer-

ably on a small scale.

• You study the results to find out what was learned

or perhaps what went wrong.

• Finally, you act on the results by adopting the

change, revising it or perhaps even discarding it.

What you are engaged in is a systematic process for

building knowledge through the application and test-

ing of your theories through the PDSA cycle.18

Points No. 6 and 13 of Deming’s 14 points flow from

an understanding of the theory of knowledge and

speak directly to the need to invest in the training and

education of your employees. These points also relate

directly to statements six and 12 in the Gallup survey.

More importantly, they send a message to employ-

ees that they are respected and valued. What better

way to increase the engagement of your employees

than by communicating to them through the PDSA cy-

cle the important role they play through their involve-

ment in improvement and problem-solving activities?

Overcoming disengagementWe began this article by asking, “What is the cost to

your organization of a disengaged workforce?” While

Deming often said the most important figures needed

by management are unknown and unknowable, few

would argue that the potential losses caused by signifi-

cant levels of employee disengagement are incredibly

important.

Culture eats strategic plans for lunch.19 A culture

characterized by high levels of employee disengagement

can have devastating effects on a organization’s ability

to implement and execute a successful strategy.

As is often the case, however, the visible signs of

employee disengagement—that is, poor morale, cus-

tomer complaints and poor quality—are often just the

tip of the iceberg.

Hidden from view are the management practices

and methods responsible for the disengagement. Dem-

ing’s management methods can be used to overcome

many of the management practices and methods caus-

ing this disengagement. QP

REFERENCES AND NOTES1. Gallup, “State of the American Workplace: Employee Engagement Insights

for U.S. Business Leaders,” 2013, http://tinyurl.com/gallup-report-work-place.

2. Ibid.3. W. Edwards Deming first outlined his 14 points for management in Out of

the Crisis, Massachusetts Institute of Technology (MIT) Press, 1986.4. W. Edwards Deming, New Economics for Industry, Government, and Educa-

tion, second edition, MIT Press, 2000. In this work, first published in 1991, Deming developed his system of profound knowledge.

5. Ibid, pp. 92-93. 6. Ibid, pp. 95-96.7. Ibid, p. 97.8. Ibid, pp. 24-26.9. Don Wheeler, Understanding Variation: The Key to Managing Chaos, Statisti-

cal Process Control Press, 2000.10. Deming, New Economics for Industry, Government, and Education, see

reference 4, pp. 98-99.11. See Wheeler, Understanding Variation: The Key to Managing Chaos, refer-

ence 9, for further explanation of variation.12. Deming, New Economics for Industry, Government, and Education, see

reference 4, p. 100.13. Ibid, pp. 25-26.14. Ibid, pp. 107-108.15. Ibid, pp. 101-102.16. Ibid, p. 103.17. Jeffery K. Liker, The Toyota Way, McGraw Hill, 2004, p. 24 and p. 265.18. Deming, New Economics for Industry, Government, and Education, refer-

ence 4, pp. 132-133.19. This statement is often attributed to management guru Peter Drucker, but

there is conflicting information on its origin.

COST OF QUALITY

JOSEPH F. CASTELLANO is an accounting professor at the University of Dayton in Ohio. He holds a doctor-ate in accounting from St. Louis University and is a member of ASQ.

HARPER A. ROEHM is a retired accounting professor emeritus at the University of Dayton. He holds a doctorate in managerial accounting from Florida State University. Roehm is an ASQ-certified quality auditor.

CAROL M. SHAW is professor emeritus at the school of engineering at the University of Dayton. She has a master’s degree in chemistry from the University of Dayton and is a member of ASQ.