Note by Barbara Rice
Master of Accountancy Program
University of South Florida, Fall 2000
The main point of this article is that the key to effective management is an understanding of the theory of variation.
There are seven key points related to variation.
1. All variation has a cause.
2. According to Joiner and Gaudard, there are four main types of causes: common, special, tampering, and structural variation.
3. It is critical to distinguish between the four types and react appropriately.
4. Timely data is crucial to recognizing special causes.
5. All data is relevant for dealing with common causes.
6. A system is stable when all variation is from common causes and unstable when some variation is from special causes.
7. Using statistical analysis and control limits helps measure system variation.
An understanding and use of the theory of variation must start at the top of an organization, not on the factory floor.
Deming's theory of variation applies to people as well as production.
Management's job is to optimize the organization so that it benefits all stakeholders.
Deming's 14 points - paraphrased.
1. Strive for constant innovation and improvement.
2. Adopt a new philosophy.
3. Quit depending on inspection and, instead, require statistical evidence of quality.
4. Quit awarding business on the basis of price only.
5. Improve constantly the systems of production and service.
6. Use effective and consistent training.
7. Improve leadership by selecting those who support the goals of the company.
8. Drive out fear and create a climate for innovation.
9. Break down barriers to communication.
10. Eliminate posters and slogans.
11. Eliminate work standards and Management by Objectives.
12. Remove barriers to the right of pride in workmanship.
13. Institute a vigorous education and self-improvement program.
14. Get everyone busy working for these changes.
Old Chinese proverb, "Whom the gods would destroy, they first condemn to 30 years of success."
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