What the Automakers Forgot

U.S. automakers are in trouble.  They…and the rest of us…have forgotten the basic principles of a master who taught them the basic principles of continual improvement:I’m talking about W. Edwards Deming.  Deming worked with the Japanese automakers after WW II and caught the eye of Ford Motor Company.  Today, it seems the automakers have forgotten these principles, which are related in his classic book with the appropriate title Out of the Crisis.  Small business owners too can benefit from a review of Deming’s principles.

Deming warned against the Seven Deadly Diseases (also known as the “Seven Wastes”):

1. Lack of constancy of purpose.
2. Emphasis on short-term profits.
3. Evaluation by performance, merit rating, or annual review of performance.
4. Mobility of management.
5. Running a company on visible figures alone.
6. Excessive medical costs.
7. Excessive costs of warranty, fueled by lawyers who work for contingency fees.

It seems businesses  all have forgotten about these diseases.  Big business and small, we have:

• Sacrificed long-term improvement for short-term returns for shareholders
• Shuffled management rather like football coaches, hoping for those short-term victories
• Relied on business “heros” (quotes deliberate) to lead us (think Gates, Buffett, and many more)

Deming was also ahead of his time in warning against “excessive medical costs” and “excessive costs of warranty” (by which I believe he meant costs of taking everything to court, which people in the U.S. love to do).  And I didn’t make up that part about the lawyers, folks.

One more point: Ford Motor Company brought Deming back from Japan to help them improve quality and become more competitive.  Yes, that is the same Ford Motor Company that declined a bailout when the other two U.S. automakers accepted.

It wouldn’t hurt for the other two U.S. automakers – and all businesses, large and small – to go back and read Deming and consider what he was saying.

Image source: Newscom