Ray Dalio, China, and W. Edwards Deming

Post on LinkedIn. 

Chinese-American Misunderstandings, Disputes, and Wars By Ray Dalio, June 18, 2018.

I certainly respect Ray Dalio’s success as an investor, hedge fund manager, and author.  In his article, he includes references from a “wise and high-ranking Chinese official” that compares and contrast the cultural, political and economic differences between the U.S. and China.

The best-kept secret in America is that our system was designed to be continuously improved in pursuit of “a more perfect Union.”  What the design has lacked is a method or operating system that we can “individually” and “collectively” apply in taking action that results in outcomes where everyone benefits or at least, are not any worse off in the long-term.  This “operating system” or paradigm, was discovered by Walther Shewhart and further developed by W. Edwards Deming.  How China reacts if and when we start to leverage the capability of this new operating system will be interesting to watch.

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Not so fake news

Two recent articles on Linkedin reinforce the need for a “better system” for a national discussion on various issues.

  • Why Facts Don’t Change Our Minds. New discoveries about the human mind show the limitations of reason. New Yorker magazine, By 

How to make a great country, better

The U.S. system of government is designed to be continually improved with the aim of “We the People” making progress toward “a more perfect Union.” The opportunity is to consider applying a proven method for reducing imperfection that will produce results where we all gain or, at least, are not any worse off.

“We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”Preamble to the U.S. Constitution

A problem with the word “perfect” is that the term can be used in a context where perfection can be perceived as being obtainable. The U.S. Founding Fathers were careful to prevent citizens from drawing this conclusion by using the phrase “more perfect.” Legendary football coach Vince Lombardi reinforced the “more perfect” theme in his statement: “Perfection is not attainable, but if we chase perfection we can catch excellence.”

A 2016 Gallup survey indicated that 89% of Americans believe in God or a universal spirit. Many of the Founding Fathers were influenced by the biblical philosophy that only God is perfect and that man is imperfect but is expected to improve. Consequently, it might be concluded that life is all about reducing imperfection.

W. Edwards Deming, who is the founding father of many effective quality improvement methods, concluded that if he was to reduce his message to just a few words, it all had to do with reducing variation. Reducing variation is synonymous with reducing imperfection. A description of variation in a context that supports the interrelationship between variation, perfection, excellence, and quality is as follows:

American Society for Quality: What Is the Law of Variation?

“In simple yet profound terms, variation represents the difference between an ideal and an actual situation.

An ideal represents a standard of perfection—the highest standard of excellence—that is uniquely defined by stakeholders, including direct customers, internal customers, suppliers, society, and shareholders. Excellence is synonymous with quality, and excellent quality results from doing the right things, in the right way.

The fact that we can strive for an ideal but never achieve it means that stakeholders always experience some variation from the perfect situations they envision. This, however, also makes improvement and progress possible. Reducing the variation stakeholders experience is the key to quality and continuous improvement.”

Ideals are derived from basic human needs. America’s ideals were identified in the Declaration of Independence:

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”

Deming concluded that, without knowledge of common and special cause variation, 95% of actions taken to improve a situation results in no improvement and can make things worse. Knowing the difference between common and special cause variation results in a higher success rate because it leads to improving systems. Further, it leads to knowledge through assessments to determine what worked, what did not work, and what might be done differently next time to successfully reduce variation. (Assess your knowledge of the variation paradigm.)

By implementing the methods proven to be effective in reducing variation, the United States has the potential to surpass and then sustain the economic boom and prosperity it experienced after WWII (1947-1977) when the country had a global competitive advantage. But as Deming often remarked: “It is not necessary to change. Survival is not mandatory.”

Despite the conclusion drawn by major media outlets such as FORTUNE magazine and U.S. News and World Report that Deming’s work represents one of the most fundamental improvements in business if not human history, Deming’s work is still virtually undiscovered.

When Deming described the scope of the needed transformation, he used the term metanoia, which he defined as “penitence, repentance, reorientation of one’s way of life, spiritual conversion.”Norman Todd elaborated on this premise in his paper Metanoia and Transformation II.

A Way Ahead

Perhaps if more leaders recognize the connection between imperfection and variation, they might become more aware of the connection between science and spirituality. This, in turn, might lead to the broader application of Deming’s teachings.

Leading this change will require that a critical mass of leaders embrace the new paradigm for Quality Leadership that will support a Vision for Transformation.

New Administration: Real Improvement This Time?

Throughout my federal career, I had the opportunity to work with and support many presidentially inspired “change initiatives,” with the expectation that change would result in what citizens would conclude is an improvement.

The past initiatives include zero-based budgeting, quality circles, total quality management, Federal Managers Financial Integrity Act (FMFIA), Baldrige Criteria for Performance Excellence, Corporate Information Management, Government Performance and Results Act (GPRA), business process reengineering, reinventing government, Six Sigma, and Lean.

Many of these programs have faded away. The initiatives supported by law (such as GPRA and FMFIA) are still on the books, but they certainly have not achieved their aims. Only the Baldrige program has successfully stayed the course since its inception in 1987.

I’m guardedly optimistic that government reform and improvement under the Trump Administration may have more success in bringing about and sustaining needed improvement.

Newt Gingrich and the Trump Administration

In the 2016 U.S. presidential election, voters voiced their demand for change. Veteran pollster and political strategist Patrick Caddell noted that this race represents another American revolution.

Trump supporters demand revolutionary change. Trump opponents are awaiting evidence that the new administration can make changes in one area without making things worse in others.

Success in achieving real improvement in a political climate that has been described as divisive and polarizing requires new approaches. Newt Gingrich, former Speaker of the U.S. House and advisor to President-elect Donald Trump, might be able to provide them.

When Gingrich was asked about a possible new role in the Trump administration, he remarked that he saw himself as more of a waste, fraud and abuse czar. In The Hill, Gingrich commented:

“I said I want to be the senior planner for the entire federal government, and I want a letter from you that says Newt Gingrich is authorized to go to any program in any department, examine it and report directly to the president.” 

In a follow-up question on the involvement of Gingrich, President-elect Trump stated that “Gingrich is going to be involved in our government.” However, The Washington Post reported that Gingrich intends to focus on “strategic planning” rather than run a federal department. Gingrich remarked:

I want to be free to network across the whole system and look at what we have to do to succeed.”

During his run for president in 2012, Gingrich signed a pledge to adopt Lean Six Sigma in government if elected. By signing the pledge, he promised to:

“eliminate spending deficits and start paying down the national debt by 2017 by deploying Lean Six Sigma waste reduction methods to detect and eliminate 25 percent of spending per year across the federal government.”

As I mentioned in a previous article at FedSmith.com, “Individual and System Performance – Pass or Fail?”, Lean Six Sigma methods and tools can improve efficiency. However, they are not sufficient to bring about the federal-level changes that are needed to positively impact the entire nation. A new quality paradigm is needed.

The New Quality Paradigm

From 1991-1993, Gingrich was a student of the world-renowned quality expert W. Edwards Deming. Deming’s contributions were recognized by U.S. News and World Report as one of the nine turning points in world history and by FORTUNE Magazine as among the greatest contributions in business history. Dr. Deming was also nominated for a Nobel Prize in Economics.

Gingrich met with Deming for about 60 hours over a three-year period to learn how Deming’s principles could be applied to support a quality transformation in America. Gingrich integrated what he learned from Deming in the sixth class (“Pillar Five, Quality as Defined by Deming”) of a 10-session college course titled “Renewing American Civilization.”

Excerpts from that college course have been compiled into the book Readings in Renewing American Civilization (New York: McGraw-Hill, 1993). On page 107, Gingrich defines “The New Quality Paradigm” as follows:

“What Deming offers is the beginning of a new paradigm and a framework for management within it.

His aim is to improve the quality of life and economic situation of all. Some may quibble with the aim, but there are no viable alternatives. Because of interdependencies, everyone will eventually lose unless all can win.

Furthermore, ensuring that everyone wins is not a matter of taking from the rich to give to the poor, i.e., redistributing the outcomes of the process. Rather, it is of working on today’s process so that everyone can get better results tomorrow.

The job is to improve the ability of each and every individual and organization to create value for themselves and for the society that nurtures them.”

New Standard for Quality Leadership

Successful application of “The New Quality Paradigm” requires the application of a new standard for quality leadership derived from the contributions of Walter A. Shewhart and W. Edwards Deming.

Deming concluded that working to achieve optimal levels of performance is all about reducing variation from the ideal. Deming also reinforced that the failure to understand variation results in situations where the majority of not all in some cases, of changes, result in no improvement. This observation was certainly validated by my experiences with change within the government.

During the final years of my career (2011-2014), I wrote a series of articles in FedSmith.com on the need for change and how better methods could be applied to improve the efficiencies and effectiveness of the political system and the administration of its policies, laws, and regulations.

A Way Ahead

The U.S. political system was designed to be continually improved through changes that result in “a more perfect union.” As Gingrich so eloquently expressed, a new paradigm is needed to achieve the types of results where everyone gains or is, at least, not any worse off. This requires the application of a new standard of quality leadership. Leading this transformation in a political climate that is divisive and polarizing has to be considered one of the ultimate challenges—but it is a challenge that the American people will expect to be met.

The mid-term elections in 2018 will provide citizens with the opportunity to provide feedback on the direction and to determine if they are any better off in 2018 than they were in 2016.

Quality Leadership and the U.S. Constitution

Preserving the ‘genius’ of the Constitution  by David Keene – The Washington Times – Monday, September 12, 2016

The success of the American Republic is directly traceable to the wisdom and work of the 55 men who gathered in Philadelphia in 1787 to draft a constitution designed not so much to empower government, but to limit that power. Forrest McDonald,...

The U.S. Constitution was designed on four components of change that the world-renowned quality expert W. Edwards Deming labeled as a System of Profound Knowledge (SoPK).

These components include an understanding of the human behavior that influences motivation (psychology), action (systems), feedback (variation) and learning (knowledge).

The Constitution identifies “top management” as the citizenry and assigns “We the People” the responsibility to work towards the ideal of a “more perfect union.”

Quality Leadership is all about reducing variation from the ideal.  

Book Review: The Coming Jobs War

Book: Jim Clifton, Chairman, and CEO of Gallup, The Coming Jobs War: What every leader must know about the future of job creation:

  • Definitive leadership strategy for fixing the American economy, drawn from Gallup’s unmatched global polling and written by the company’s chairman.
  • What everyone in the world wants is a good job. “This is one of the most important discoveries Gallup has ever made,” says the company’s Chairman, Jim Clifton.
  • In The Coming Jobs War, Clifton makes the bold assertion that job creation and successful entrepreneurship are the world’s most pressing issues right now, outpacing runaway government spending, environmental degradation and even the threat of global terrorism.

I liked the focus on the importance and impact of creating “good” jobs and that we are in a global competition (war). In addition to surveys, I also liked the fact that he identified a target for GDP growth rate at 5%  to help assess progress:

  • GDP is the sum of all production and spending in one country in one year.
  • America needs 5% GDP growth to maintain it’s leadership of the free world.
  • America goes broke when its GDP falls, and jobs can’t be found. A country goes broke one company at a time and then one city at a time. It grinds down. And it’s happening now.”
  • Less GDP growth also means that the United States won’t have the money to afford its national entitlements – Social Security, Medicare, Medicaid …
  • America’s only real solution — and keep in mind, this is true for every country too — is to expand the size of the GDP pie. That means job growth.
  • Very few Americans are aware that small and medium-sized businesses are responsible for most of the jobs in America.
  • The fact is that the rich tax base depends primarily on companies with fewer that 500 employees and even more so on companies with fewer than 100 employees.

Good Jobs

  • Clearly, having a good job is worth more than a paycheck. If you have a great job — one with unlimited growth opportunity, a manager who is interested in your development, and that gives you a sense of mission and purpose — you have about the best life you can have at this time in human history.  Conversely, being unhappily out of work for six moths – or even more deadly, being out of work for 18 months or more — is about the worst life you can have, anywhere in the world.

Businesses, Corporations, Organizations

  • Gallup has determined that 28% of the American workforce is “engaged,” another 53% is “not engaged” and a staggering “19%” is “actively disengaged.”
  • Customer engagement is the better predictor of sales and growth.
  • American businesses need to have the highest customer engagement scores in the world because when they do, they win the hearts and minds of all U.S. customers. And then, slowly but surely they will win the hearts and minds of all global customers.

W. Edwards Deming made similar assessments to Clifton/Gallup on the importance of customers (the most important part of the production line) and the need for organizations to develop a culture that embraces continuous improvement.

Deming described the improvement cycle as a “chain reaction” —  If you improve quality by doing the right things as defined by customers, costs decrease, productivity improves, increase market share, stay in business and provide jobs and more jobs.

I just came across a recent article on Deming in the Harvard Business Review by Joshua Macht, titled: The Management Thinker We Should Never Have Forgotten.  Macht states that “Toward the end of his life, Deming began to theorize as to why his ideas were never fully embraced. He was 90 when he wrote the following to Peter Senge (who recounted the correspondence in his influential The Fifth Discipline):”

Our prevailing system of management has destroyed our people. People are born with intrinsic motivation, self-respect, dignity, curiosity to learn, joy in learning. The forces of destruction begin with toddlers — a prize for the best Halloween costume, grades in school, gold stars — and on up through the university. On the job, people, teams, and divisions are ranked, reward for the top, punishment for the bottom. Management by objectives, quotas, incentive pay, business plans, put together separately, division by division, cause further loss, unknown and unknowable.

Clifton’s book also identifies quite a few strategies that could be applied at the community level to include the critical role of entrepreneurs, innovators, inventors, tribal leaders, super mentors, and local leaders.  The critical importance of entrepreneurs is that they provide  “successful business models” and that “the business model really is everything.” pg. 84.

In support of creating good jobs, Clifton also identified the importance of needed first steps (pg. 169-177) that include law and order, food and shelter, key institutions, mobility and communication, youth development, job climate, and job enhancement. This includes the needed community infrastructure to support good jobs, e.g., it takes a community.

He states: “The feat these leaders have to pull off is doubling their entrepreneurial energy by aligning all their local forces.”  ”They succeed by declaring all-out war.”  Pg. 65.

Deming did not have a successful business model, but there are Deming based models that I have used with success that may support the needed alignment to double entrepreneurial energy.

The Baldrige criteria for performance excellence is another proven framework that supports continuous improvement.  The Criteria is available for businesses, non-profits to include government, health care, and education.  I expressed my advocacy for application of the criteria for improving the quality of government service in my article “A Government Program That Has Withstood the Test of Time” that was referenced in the Blogrige post:  Would the Founding Fathers Have Embraced Baldrige?

In the 8-Step Process for Leading change, the first step is to “Create a sense of urgency.” A sense of urgency is needed to challenge the acceptance of the status quo. Clifton created a sense of urgency through a “declaration of war”  and reinforcing what the situation will be like if we do not improve and support the changes needed to achieve the 5% GDP rate.  There  would very likely be a correlation between a group’s actions and results with the group’s sense of urgency.

In my community, for instance, the issue of kids hunger motivated a volunteer group to successfully address the issue by providing food that could be taken home in backpacks and supporting more summer food programs to help ensure that no child was without food during the summer break from school.

I think any group can develop a sense of urgency by identifying the adverse impact on people and the community when people lack access to what Abraham Maslow identified in the hierarchy of needs.  Clifton identifies the needs in the “Gallup Path to Global WellBeing” (pg.169).

The aim of the U.S system of government as identified in the preamble to the Constitution was to form a “more perfect union.”

A “more perfect community” would include people working together to reduce imperfections also commonly referred to as continuous improvement.  In the words of Vince Lombardi, perfection is not possible, but if we chase perfection, we can catch excellence.

Clifton reinforces that winning the war on jobs has to be led at the local level.

W. Edwards Deming and Politics

The work of W. Edwards Deming was recognized by U.S News and World Report as one of the nine hidden turning points in world history and by FORTUNE Magazine as among the greatest contributions in business history.  

Although Deming’s work was nominated for the Nobel Prize in Economics, his theories have been largely ignored by the major political parties, their representatives, and the voters.

Application of Deming’s theories on macroeconomics provides the “science” that support outcomes where everyone gains or at least, are not any worse off.

On Trade for example, who gains and who loses? For those that are harmed, how effective are mitigation strategies? And, once the Trade policies are implemented, how fast will the needed changes be identified and addressed?

U.S. politics represent a zero-sum game – some win and some lose.  Take healthcare, for example; Republicans use numbers to make the case that the Affordable Care Act is a disaster (lose), and Democrats use the numbers to reinforce the good (win) news.  If the expectation is that change will result in improvement for all, when will the zero-sum approach ever be effective or sustainable?

On a politician that embraces Deming’s work, they would be grabbing the proverbial tail of a hungry tiger.  The tiger represents the expectations of We the People for “more perfect” outcomes.  When you let go of the tiger’s tail, things continue to get worse for everyone.

Quality Leadership feeds the tiger, but you still need to hold on to the tail. 🙂