The Deming System of Profound Knowledge

The following is an excerpt from Chapter 4 of The New Economics, second edition by W. Edwards Deming:

The prevailing style of management must undergo transformation. A system can not understand itself. The transformation requires a view from outside. The aim of this chapter is to provide an outside view-a lens-that I call a system of profound knowledge. It provides a map of theory by which to understand the organizations that we work in.

The first step is transformation of the individual. This transformation is discontinuous. It comes from understanding of the system of profound knowledge. The individual, transformed, will perceive new meaning to his life, to events, to numbers, to interactions between people.

Once the individual understands the system of profound knowledge, he will apply its principles in every kind of relationship with other people. He will have a basis for judgment of his own decisions and for transformation of the organizations that he belongs to. The individual, once transformed, will:

Set an example
Be a good listener, but will not compromise
Continually teach other people
Help people to pull away from their current practice and beliefs and move into the new philosophy without a feeling of guilt about the past
The layout of profound knowledge appears here in four parts, all related to each other:

Appreciation for a system
Knowledge about variation
Theory of knowledge
Psychology
One need not be eminent in any part nor in all four parts in order to understand it and to apply it. The 14 points for management (Out of the Crisis, Ch. 2) in industry, education, and government follow naturally as application of this outside knowledge, for transformation from the present style of Western management to one of optimization.

The various segments of the system of profound knowledge proposed here can not be separated. They interact with each other. Thus, knowledge of psychology is incomplete without knowledge of variation.

A manager of people needs to understand that all people are different. This is not ranking people. He needs to understand that the performance of anyone is governed largely by the system that he works in, the responsibility of management. A psychologist that possesses even a crude understanding of variation as will be learned in the experiment with the Red Beads (Ch. 7) could no longer participate in refinement of a plan for ranking people.

Further illustrations of entwinement of psychology and use of the theory of variation (statistical theory) are boundless. For example, the number of defective items that an inspector finds depends on the size of the work load presented to him (documented by Harold F. Dodge in the Bell Telephone Laboratories around 1926). An inspector, careful not to penalize anybody unjustly, may pass an item that is just outside the borderline (Out of the Crisis, p. 266). The inspector in the illustration on page 265 of the same book, to save the jobs of 300 people, held the proportion of defective items below 10 per cent. She was in fear for their jobs.

A teacher, not wishing to penalize anyone unjustly, will pass a pupil that is barely below the requirement for a passing grade.

Fear invites wrong figures. Bearers of bad news fare badly. To keep his job, anyone may present to his boss only good news.

A committee appointed by the President of a company will report what the President wishes to hear. Would they dare report otherwise?

An individual may inadvertently seek to cast a halo about himself. He may report to an interviewer in a study of readership that he reads the New York Times, when actually this morning he bought and read a tabloid.

Statistical calculations and predictions based on warped figures may lead to confusion, frustration, and wrong decisions.