Session 4 - Objective - Understanding The Deming System of Profound Knowledge - Ples

Operations & Process Management Loyola University
Course Focus
MBA Operations & Process Management
Session 4- Objective – Understanding Introduction to

Systems of Profound Knowledge (Deming).ples
Instructor: Ron Schulingkamp Sc.D., M.Q.M., M.B.

Office hours: By appointment Phone: 390-3888
Email: rcschuli@loyno.edu or
RonSchulingkamp@gmail.com
Rev. 01 Page 1
Do We Need to Improve?
Why are we last, for decades?
2018 U.S. News (again) ranks Louisiana as the
worst state in the country
https://www.usnews.com/news/best-states/louisiana
• Health Care NATIONAL RANK #47
• Education NATIONAL RANK #49
• Economy NATIONAL RANK #44
• Opportunity NATIONAL RANK #50
• Infrastructure NATIONAL RANK #44
• Crime & Corrections NATIONAL RANK #48
• Fiscal Stability NATIONAL RANK #48
• Quality of Life NATIONAL RANK #42
• Natural Environment #49
Rev. 01 Page 2
Creating & Operating High-Performing

Organizations for Leaders
Do We Need to Improve (Change)?

• People don't resist change. They resist being
changed. -Peter Senge
• You never change things by fighting the existing
reality. To change something, build a new model
that makes the existing model obsolete. -R.
Buckminster Fuller
• It is not necessary to change. Survival is not
mandatory. -W. Edwards Deming
• There is nothing wrong with change, if it is in the
right direction. -Winston Churchill
Rev. 01 Page 3
Do We Need to Improve (Change)?

Gordon Ramsay's 24 Hours To Hell & Back
Season 1 Episode 2
https://www.youtube.com/watch?v=DXguulpu-l4
Rev. 01 Page 4
Creating & Operating High-Performing

Organizations for Leaders
Drivers that are a MUST for high-performance
• A “Learning Organization” - Performance
Improvement System and Knowledge Management
System.
(Peter Senge and W.E. Deming - SoPK)
• A “Culture” that supports high-performance,
learning & open, honest two-way communications.
• Measurable Mission
• Core values aligned with Strategy and
Management Decisions
• TRUST in Leadership and Workforce
Rev. 01 Page 5
Baldrige Core Values and Concepts

• Systems perspective
• Visionary leadership
• Customer-focused excellence
• Valuing people - 33% of U.S. Workers are
Engaged
• Gallup report, Gallup found that disengaged
employees cost the country somewhere
between $450 and $550 billion each year.
https://news.gallup.com/reports/199961/7.aspx
• Organizational learning and agility
Rev. 01 Page 6
Baldrige Core Values and Concepts

• Focus on success
• Managing for innovation – Innovation System
• Management by fact - Decision Making
System
• Societal responsibility - Support of the
community (support of government, education,
improvement of community, environment,
quality of life)
• Ethics and transparency (see TRUST)
• Delivering value and results
Rev. 01 Page 7
U.S. State Performance Excellence Programs

Louisiana Quality Foundation
Louisiana Performance Excellence Award Ceremony
Louisiana Governor's Mansion Woman’s Hospital
Tuesday, June 5, 2018 Baton Rouge, Louisiana
Louisiana Public Health Institute 6:00 pm to 8:00 pm
The Alliance for Performance
Excellence is a non-profit organization
dedicated to enhancing the growth
and sustainability of Baldrige focused
programs in states and U.S. territories.
Our Lady of Lourdes Regional (except Mississippi and Virgin Islands) Natchitoches Regional
Medical Center Lafayette, Louisiana Medical Center
Rev. 01 Page 8
Solutions to Organizational Complex Challenges

Your organization should be aligned with The Global
Excellence Model (GEM) Council https://www.nist.gov/baldrige/how-baldrige-
works/baldrige-community/international-award-programs
Focus on designing theory and best practice based

learning organizations that achieve a state of
sustainable excellence.
European Foundation for Quality Management
Rev. 01 Page 9
Global Excellence Model Council

https://www.nist.gov/baldrige/how-baldrige-works/baldrige-community/international-award-programs
• The Global Excellence Model (GEM) Council consists of

organizations that are recognized globally as the
guardians of premier excellence models and award
programs in their geographic regions.
• Maintaining a leading-edge position on excellence models
• Sensing business trends and external factors that impact
the excellence models
• Creating a global fraternity in the field of excellence
• Coordinating and sharing specific excellence award
activities
• Agreeing on consistent public communications on
organizational excellence
Rev. 01 Page 10
Solutions to Organizational Challenges

Then-Secretary of Commerce
Malcolm Baldrige was an advocate The European Foundation for
of quality management as a key to Quality Management, EFQM,
U.S. prosperity and sustainability. was founded in October 1989
After he died in a rodeo accident in when the CEO/Presidents of 67
July 1987, Congress named the European companies subscribed
Award in recognition of his to our Policy Document and
contributions. declared their commitment to
NIST - Baldrige Performance achieving EFQM mission and
Excellence Framework vision.
Used by over 50,000 organizations around the world
Rev. 01 Page 11
Global Application of Excellence

Model
Tata Business Excellence Model
•India – TaTa Group
https://www.youtube.com/watch?v=rE1b7pb1BYQ
• The way for excellence and Leadership

Development http://www.tata.com/video/VideoPreview/tata-
group-business-excellence-model
• A unique model and its holistic method -

As custodian of the famed Tata Business
Excellence Model (TBEM), the Tata
Business Excellence Group (TBExG) has
been helping over 100 Tata companies
achieve global benchmarks in different
operational spheres.
http://www.tata.com/article/inside/tata-group-tata-business-excellence
Rev. 01 Page 12
Changing Workforce
Baldrige is a Changing Politics 9.7 Billion
Transformational Changing Standards
Humans
Framework
for Changing Technology
High-Performing Changing Resources
Organizations
Changing Customer Current World
Population
Expectations
Changing Economy
Changing Values
Rev. 01 Page 13
Based on Complex
Integrated Systems
Framework
---------------------------
Not Traditional
Organizational Chart
of Functional
Departments
http://www.baldrige21.com/Baldrige%20Model.html
Rev. 01 Page 14
Rev. 01 March 10 and 11, 2014 Page 15

http://www.baldrige21.com/Baldrige%20Model.html
Introduction to the History of

Quality and Performance Improvement
• The Industrial Revolution and the evolution of the
scientific method were part of this story of the human
evolution and set the stage for a climate to develop that
fostered continuous quality improvement through
learning and development.
• Frederick Taylor’s “Scientific Management” strategies
separated planning from execution, standardization and
improved working conditions for that time propelled an
increase in productivity.
• Henry Ford adopted Taylor’s methodology in 1913
with the design and operation the Highland Park car
plant in Detroit to produce the Model T.
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• Shewhart cycle—1939. Move for linear to circular
mental model.
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• Deming wheel—1950 depiction

• Based on Shewhart cycle
1. Design the product (with appropriate tests).

2. Make the product and test in the production line and
in the laboratory.
3. Sell the product.
4. Test the product in service and through market
research. Find out what users think about it and why
nonusers have not bought it. (Research)
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Based on Shewhart cycle
• Japanese executives redesigned the Deming wheel presented in
the 1950 seminars into the Plan–Do–Check–Act (PDCA) cycle.
Relationship between the Deming wheel and the PDCA cycle.
1. Design = Plan Product design corresponds to the planning phase

of management.
2. Production = Do Production corresponds to doing, making or
working on the product that was designed.
3. Sales = Check Sales figures confirm whether the customer is
satisfied.
4. Research = Act If a complaint is filed, it must be incorporated
into the planning phase and action taken in the
next round of efforts
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Based on Shewhart cycle
• Japanese executives redesigned the Deming wheel

presented in the 1950 seminars into the Plan–Do–
Check–Act (PDCA) cycle. Relationship between the
Deming wheel and the PDCA cycle.
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• Shewhart cycle: Deming -1986, Deming redefined his
original cycle form 1950 to a Plan–Do–Study-Act (PDSA)
cycle to focus on the aspect of studying the variation,
system and information needed for planning and
decision making.
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• PDSA cycle: Deming – 1993
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Performance Excellence
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The Deming System of Profound

Knowledge® (SoPK)
• As first articulated in the late 1980s and early
1990s, Dr. Deming’s System of Profound
Knowledge provides a highly integrated
framework of thought and action for any leader
wishing to transform an organization operating
under the prevailing system of management into
a thriving, systemically focused organization.
His book, The New Economics, presents a
detailed explanation of his System of Profound
Knowledge. https://deming.org/explore/so-pk
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Nothing New, except…

• Profound Knowledge contained a complex
integration of:
– Systems Theory
– Variation
– Theory of Knowledge
– Appreciation of Psychology
• Those topics had long been around, but the
interactions and depth made his approach very
different.
• A framework into which to buss all learning
• The interactions become critical. No one addressed
the interactions. We will later.
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Knowledge® (SoPK)
• What we need is cooperation and transformation
to a new style of management. The route to
transformation is what I call Profound
Knowledge. - W. Edwards Deming
• Is the culmination of Dr. W. Edwards Deming’s
lifelong efforts to define a comprehensive theory
of management which embraces his 14 Points for
Management and acknowledges the deadly
diseases he offered as symptoms of poor
management.
• https://deming.org/explore/so-pk
Rev. 01 Page 27

Knowledge® (SoPK)
• Dr. Deming’s holistic approach to leadership and

management ties together seminal theories in
four interrelated areas: appreciation for a
system, knowledge of variation, theory of
knowledge and psychology. The System of
Profound Knowledge promotes transformation
through an essential outside “lens” which can
benefit anyone and any organization. In chapter 4
of The New Economics, https://deming.org/explore/so-pk
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Knowledge® (SoPK)
• W. Edwards Deming had a simple definition for
“QUALIY” which is “Quality is doing things
right the first time.”
• Deming had a more complex definition, which
suggests a product or service is of high quality if
“(1) customers perceive good value for their
purchases, (2) remain loyal in their purchases, (3)
urge others to buy the product or service, and (4)
transfer those sentiments to other products or
services from the same company.”
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Knowledge® (SoPK)
• W. Edwards Deming's approach to quality

challenged LEADERSHIP, for he asserted
that management is responsible for 85% of all
quality problems: management defines and
controls processes, policies, personnel practices,
equipment, facilities and supplies; therefore,
management must take the lead for quality
Rev. 01 Page 30

Knowledge® (SoPK)
• Theories, facts, and assumptions about
causation impact the components of the system.
• The operating of the system is determined by
definitions of aspects of each component.
• Executives assess the systems based on
assumptions of the proper operating expectations.
• The system sets limitations and parameters on
what is accepted as “facts.” Components of the
system determine what can be measured.
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Knowledge® (SoPK)
• Why are THEROIES important and
CRITICAL to business decisions?
• A theory presents a systematic way of
understanding events, behaviors and/or
situations.
• A theory is a set of interrelated concepts,
definitions, and propositions that explains or
predicts events or situations by specifying
relations among variables.
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Knowledge® (SoPK)
• What is a "fact" and what is a "theory?" A fact
is a confirmed observation. The general public
(and even some scientists) use the word "fact" to
imply capital T "Truth": unchanging agreement.
• In science, facts, like theories, may change: it was
once a fact (for about 10 years) that Homo sapiens
had 48 chromosomes. But other observations were
confirmed and explanations found for the
erroneous observations, and now we know that
there are 46.
Rev. 01 Page 33

Knowledge® (SoPK)
• In general, though, in science we treat facts as
statements we don't need to test and question
anymore, but rather can use as givens to build
more complex understandings.
• A theory, in science, is a logical construct of
facts and hypotheses that attempts to explain a
natural phenomenon. It is an explanation, not a
guess or hunch that one can casually disregard.
Theory formation-explanation-is the goal of
science, and nothing we do is more important.
Rev. 01 Page 34

Knowledge® (SoPK)
• People (researchers) create management theories
rely upon observation and mathematics in order to
construct a model for business activities.
• Using theories is better than guessing! Theories
provide a model for guidance and decision-making
improving the like hood of achieving successful
outcomes.
• So what theories you use in your business for
leadership, strategy, customer relationship,
analysis, knowledge management, workforce
engagement, and operations?.
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Knowledge® (SoPK)
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Preliminary Comments
• Many people have wondered why Deming and his
disciples succeeded in their consulting work.
• Executives are frustrated because businesses
succeed at the rate of random error.
– Tremendous turnover
– Constant failure
• Critics of business attack the salaries of executives,
even though many (most?) fail.
• Why do some executives succeed, while others
fail?
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More Preliminary Comments

• An unabashed approach here—a fire hose
• Mastery requires dedication
– Requirements of success are known.
– Requirements of failure are known.
– Survival is optional.
• Most executives willfully destroy their companies
rather than change.
– Change at the organizational level
– Change at the personal level
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Deming’s System of Profound

Knowledge
• Deming was quick to recognize that leaders knew
the buzzwords and could babble about concepts but
lacked the expertise and complexity needed to fix
their systems.
• He selected the word “profound” to indicate a level of
substance needed beyond superficial understanding.
• Profound Knowledge requires understanding the
elegance emerging from complexity.
• Deming’s work always succeeded until he left, then
often fell apart when residential leaders took over.
Rev. 01 Page 39
Systems Theory
• All phenomena are linked together.
• Interconnectivity in organizations affect the
outcomes more than direct effects.
• Silo departments and academic knowledge force
people away from addressing interconnectivity.
• Most organizations are characterized by
“random acts of improvements,” in which many
parts of the organization undo or cancel actions
of other parts of the organization.
Rev. 01 Page 40
Variation
• All systems have variation.
• Eliminating or at least reducing variation is key
to success, reducing costs and increasing
satisfaction. Uncontrolled variation is evil.
• Errors, defects, waste, complaints, repairs,
warranty claims, bad invoices, inspection and
other non-value adding activities arise from
variation.
• Successful executives master variation and view
every system and process through the eye of
variation.
Rev. 01 Page 41

Knowledge® (SoPK)
Knowledge About Variation
• Are the variations you're looking at in the data
set part of the system, part of a specific
cause within the system, or part of some error
outside of the system? You cannot possibly
have an answer to this question unless you
have an understanding of the different types
of causes of variation. There are two basic
types of causes for variation.
Rev. 01 Page 42

Knowledge® (SoPK)
• Common Cause - Common causes of variation result
from within-system structures and can be predicted
with probabilities. When you're looking at variation
with a common cause, most likely it is something that
is consistent, and does not have statistically significant
value that can be traced to a specific historical event.
• Special Cause - Variation with a special cause is
variation that occurs unexpectedly. The variation from
a special cause can come after a change in the system
(with or without realization that a change has occurred),
and special cause variation cannot be predicted.
Rev. 01 Page 43
Variation
• Variation is the difference between an
observed event and a standard or norm.
• What type of variation arises from a single or
small set of causes that are not part of the
event or process and can be traced and identified
and then implemented or eliminated?
a) Random variation
b) Assignable variation or Special Cause
c) Inverse variation
d) Inductive variation
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Control Charts
Rev. 01 Page 45
Control Charts
Rev. 01 Page 46
Control Charts
Rev. 01 Page 47
Knowledge
• Executives must have a personal standard for
accepting information as “facts.” Careers are
made and lost on information.
• No “fact” is true.
• Nothing is known with certainty.
• Executives must be comfortable with the
fallibility of their knowledge.
• Continuous improvement and refinement is
necessary for career success. Never being
satisfied with current knowledge.
Rev. 01 Page 48
Psychology
• People impact systems.
• People are a moral responsibility of executives.
• Executives must appreciate the differences in
people and the extent to which those
differences affect the organization.
• To influence people, information must be
delivered in a format amenable for reception.
• Work teams must be composed systematically
and carefully to maximize performance by
combining workers with different complements
of talent.
Rev. 01 Page 49
Conclusion
• All organizations are complex systems.
• That complexity must be addressed by executives.
• Most executives are unable to address the
complexity. We have only started with the
complexity. More later
• Toolkits for addressing complexity help.
• The vast majority of people are too lazy to do the
hard work needed for success.
• “No substitute for leadership”—no truer words.
• Survival is optional.
Rev. 01 Page 50
Why Systems Thinking?

Systems thinking offers a valuable new perspective
on our most persistent organizational problems
and our role in them.
One of the major points that systems thinking makes is
that everything-and everyone-is interconnected in
an infinitely complex network of systems. When we
begin to see the world and one another-through this
“lens," we start seeing our circumstances in a new
light, taking more responsibility for our own role in
problems, and identifying more effective ways of
addressing recurring difficulties.
Rev. 01 Page 51
Systems
• Welcome to the world of systems and
systems thinking! You may be asking
yourself, Why is it important to explore
systems?
• One reason is that we live in and are
influenced by systems all around us, from
the natural environment to health care,
education, government, and family and
organizational life.
Rev. 01 Page 52
WHAT is A SYSTEM?
A system is a group of interacting, interrelated,
or interdependent components that form a
complex and unified whole. A system's
components can be physical objects that you
can touch, such as the various parts that make
up a car. The components can also be
intangible, such as processes; relationships;
company policies; information flows;
interpersonal interactions; and internal states
of mind such as feelings, values, and beliefs.
Rev. 01 Page 53
Defining Characteristics of
Systems
Systems have several essential
characteristics:
1. A system's parts must all be present for
the system to carry out its purpose
optimally.
2. A system's parts must be arranged in a
specific way for the system to carry out its
purpose
Rev. 01 Page 54
Defining Characteristics of
Systems
Systems have several essential

characteristics:
3. Systems have specific purposes within
larger systems.
4. Systems maintain their stability through
fluctuations and adjustments.
Rev. 01 Page 55
Systems Feedback
Systems have several essential characteristics:

5. Systems have feedback
• Feedback is the transmission and return of
information.
• The most important feature of feedback is that
it provides the catalyst for a change in
behavior.
Rev. 01 Page 56
Systems Stability
Systems achieve stability through the

interactions, feedback, and adjustments
that continually circulate among the
system parts, and between the system and
its environment.
Rev. 01 Page 57
Feedback and Temporal Effect

It may take a long time before the feedback
is returned, so an observer would have
trouble identifying the action that prompted
the feedback.
For example, if you sunbathed a lot in your
teens, you may develop skin problems after
age 40-but because so much time passed
between the two events, you may not
recognize the connection between them.
Rev. 01 Page 58
Events, Patterns, Structure, Mental Models
The Iceberg Model for Systems Thinkers

https://www.youtube.com/watch?v=9I5YvLm5KXI
Rev. 01 Page 59
EVENTS, PATTERNS, STRUCTURE

In reading all this information, you may be
wondering what actually gives rise to systems.
Systems are built on structures that leave
evidence of their presence, like fingerprints or
tire marks, even if you can't see them. Structure
is the overall way in which the system
components are interrelated-the organization of
a system. Because structure is defined by the
interrelationships of a system's parts, and not
the parts themselves, structure is invisible.
Rev. 01 Page 60
Structure
Rev. 01 Page 61
Structural Level Thinking

• Here's where the real power of structural-level
thinking comes in: Actions taken at this level
are creative, because they help you to shape
a different future, the future that you want.
Does this mean that high-leverage actions can
be found only at the structural level? No-
leverage is a relative concept, not an absolute.
Our ability to influence the future increases as
we move from event-level to pattern-level to
structural-level thinking
Rev. 01 Page 62
Levels of Thinking
Rev. 01 Page 63
The Principles of
Systems Thinking
In general, systems thinking is
characterized by these principles:
1. thinking of the "big picture“
2. balancing short-term and long-term
perspectives
3. recognizing the dynamic, complex, and
interdependent nature of systems
4. taking into account both measurable and
non measurable factors
Rev. 01 Page 64
The Principles of
Systems Thinking
In general, systems thinking is
characterized by these principles:
5. Remembering that we are all part of the
systems in which we function
6. We each influence those systems even as
we are being influenced by them
Rev. 01 Page 65
Systems Thinking
Unintended consequences. Sometimes the

connection is simple-the problem plaguing
us today is an unintended consequence of a
solution we implemented yesterday
Rev. 01 Page 66
Drifting Goals
• The “Drifting Goals" archetype
states that a gap between a goal
and an actual condition can be
resolved in two ways:
• by taking corrective action to
achieve
• the goal, or by lowering the
goal.
Rev. 01 Page 67
Escalation
• The “Escalation" archetype occurs when one
party's actions are perceived by another party to
be a threat, and the second party responds in a
similar manner, further increasing the threat.
• Example: Negative Focused Political Rhetoric
Rev. 01 Page 68
Systems Theory – Peter Senge
The Value of Communication and Systems

Theory
Based on the view of the Observer
A. Viewed from the U.S.
1. Terrorist Attacks –
2. Threat To Americans –
3. Need to Respond Militarily
Ron
Rev. 01 Page 69
Schulingkamp

The Value of Communication and Systems
Theory
B. Viewed from Iraq, Iran, Syria, the Moslem
World
1. U.S. Military Activity
2. Perceived Aggressiveness of U.S.
3. Terrorists Recruits
Ron
Rev. 01 Page 70
Schulingkamp

Terrorist Attacks
1. Do you understand
Terrorists you are in a System? Threat To
Recruits Americans
2. How do you change or
break the System?
Perceived Need to Respond

Aggressiveness Militarily
of U.S.
U.S. Military Activity
Ron
Rev. 01 Page 71
Schulingkamp
72 Operations & Process Management Loyola University
Malcolm Baldrige Criteria for Performance

Excellence
Discussion
“We cannot solve the problems that we have created -
with the same thinking that created them.“ - Albert
Einstein
Rev. 01 Page 72

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Operations & Process Management Loyola University

Session 4- Objective – Understanding Introduction to

Instructor: Ron Schulingkamp Sc.D., M.Q.M., M.B.

Creating & Operating High-Performing

Do We Need to Improve (Change)?

Do We Need to Improve (Change)?

Creating & Operating High-Performing

Baldrige Core Values and Concepts

Drivers that are a MUST for high-performance

Baldrige Core Values and Concepts

Drivers that are a MUST for high-performance

U.S. State Performance Excellence Programs

Solutions to Organizational Complex Challenges

Focus on designing theory and best practice based

European Foundation for Quality Management

Global Excellence Model Council

• The Global Excellence Model (GEM) Council consists of

Solutions to Organizational Challenges

Global Application of Excellence

• The way for excellence and Leadership

• A unique model and its holistic method -

Rev. 01 March 10 and 11, 2014 Page 15

Introduction to the History of

Introduction to the History of

Introduction to the History of

• Deming wheel—1950 depiction

1. Design the product (with appropriate tests).

Introduction to the History of

1. Design = Plan Product design corresponds to the planning phase

Introduction to the History of

• Japanese executives redesigned the Deming wheel

Introduction to the History of

Introduction to the History of

• PDSA cycle: Deming – 1993

The Deming System of Profound

Nothing New, except…

The Deming System of Profound

The Deming System of Profound

• Dr. Deming’s holistic approach to leadership and

The Deming System of Profound

The Deming System of Profound

• W. Edwards Deming's approach to quality

The Deming System of Profound

The Deming System of Profound

The Deming System of Profound

The Deming System of Profound

The Deming System of Profound

The Deming System of Profound

More Preliminary Comments

Deming’s System of Profound

The Deming System of Profound

The Deming System of Profound

Why Systems Thinking?

Systems have several essential

Systems have several essential characteristics:

Systems achieve stability through the

Feedback and Temporal Effect

Events, Patterns, Structure, Mental Models

The Iceberg Model for Systems Thinkers

EVENTS, PATTERNS, STRUCTURE

Structural Level Thinking

Unintended consequences. Sometimes the

Systems Theory – Peter Senge

The Value of Communication and Systems

Systems Theory – Peter Senge

Systems Theory – Peter Senge