Note by Barbara Rice
Master of Accountancy Program
University of South Florida, Fall 2000
Deming Main Page |
Quality Related Main Page | SPC Main Page
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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Related summaries:
Albright, T. L. and H. Roth. 1992. The measurement of quality costs: An alternative paradigm. Accounting Horizons (June): 15-27. (Summary).
Albright, T. L. and H. P. Roth. 1994. Managing quality through the quality loss function. Journal of Cost Management (Winter): 20-37. (Summary).
Anderson, S. W. and K. Sedatole. 1998. Designing quality into products: The use of accounting data in new product development. Accounting Horizons (September): 213-233. (Summary).
Deming, W. E. 1993. The New Economics For Industry, Government & Education. Massachusetts Institute of Technology Center for Advanced Engineering Study. (Summary).
Kim, M. W. and W. M. Liao. 1994. Estimating hidden quality costs with quality loss functions. Accounting Horizons (March): 8-18. (Summary).
Martin, J. R. Not dated. Chapter 3: Cost Behavior Analysis & Statistical Process Control - Part II. Management Accounting: Concepts, Techniques & Controversial Issues. Management And Accounting Web. Chapter3PartII.htm
Martin, J. R. Not dated. Deming's Theory of Profound Knowledge. Management And Accounting Web. DemingExhibit.htm
Martin, J. R. Not dated. Illustration of common cause vs. special cause variation. Management And Accounting Web. DogInYard.htm
Martin, J. R. Not dated. What is the red bead experiment? Management And Accounting Web. DemingsRedbeads.htm
Roth, H. P. and T. L. Albright. 1994. What are the costs of variability? Management Accounting (June): 51- 55. (Summary).
Sedatole, K. L. 2003. The effect of measurement alternatives on a nonfinancial quality measure's forward-looking properties. The Accounting Review (April): 555-580. (Summary).
Stevens, T. 1994. Dr. Deming: Management today does not know what its job is. Industry Week (January 17): 21, 24, 26, 28. (Summary).
Taguchi, G. and D. Clausing. 1990. Robust quality. Harvard Business Review (January-February): 67-75. (Summary).