UK Deming Newsletter 1#7a: Jim MacIngvale special 2 June 2000 (please share)

[UK Deming Newsletter <editor@WED.Waitrose.com>]

 UK DEMING NEWSLETTER                                       ISSN: 1470-5672
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          Volume 1, Issue No. 7a            2 June 2000
          Subscribers: ~280          total circulation ~950
          Copyright İ 2000    
          Editor: Alan Mossman  alan@TCBltd.waitrose.com
          -----------------------------------------------------
          do share with like minded friends and colleagues
          for permission to reprint please contact copyright holder direct
          -----------------------------------------------------
The PURPOSE of this occasional Newsletter is to maintain and build the 
network among Dr Deming's fans in the UK and to support Deming style 
thinking and transformation in our organisations.
          -----------------------------------------------------
>>Contents                                       feedback@WED.waitrose.com
     
My apologies for the glitch at the top of UKDN 6.  I have rewritten the 
production flowchart and included a double check to try to prevent repetition.

>>===============articles@WED.waitrose.com
At last year's Deming Forum Jim McIngvale gave a spirited account 
of the progress he has made with the support of Deming's ideas in 
his retail business.   Jim's talk was accompanied by a dynamic 
powerpoint presentation that he prepared with his son James.  It is
unfortunate that powerpoint does not translate into e-mail, but here 
at least is what Jim said.  Prof Henry Neave did the hard bit of 
transcribing [thanks Henry];  all I have done is to run it through a US 
English spell checker in deference to the speaker.  So a big thankyou 
to Jim for permission to include this in UKDN.

It is perhaps appropriate that I am writing this in Nigeria where the
results of commission based pay are manifest in poor roads, telephones,
and a host of other ways.  CBP exists here in a very extreme form -- 
bribery and related forms of corruption.  As Alfie Kohn says, people 
do what they need to do to get the reward and in the process they lose 
sight of the purpose.  But there is another way and Jim's experience 
in the retail furniture business is great testimony to this.


>    Jim McIngvale

BDA Forum 1999
İ Jim McIngvale 2000

....  I would like to let you know that I will be talking today in this 
Texas drawl, and I will be speaking in gusts of up to 1000 words a 
minute.  So please try to keep up with me.

The nature of my talk is: how to be successful with hard work and 
dedication and application of Dr Deming's methods.  What I am 
about to say in the next hour is my point of view, my view of the 
world, and it certainly has worked for myself and Gallery Furniture.

But before I launch into this semi-brilliant dissertation, I want to give 
you some of my less illustrious background, so hopefully you will 
know where I am not coming from.

You see, I was doing real well about 20 short years ago.  I was 28 
years old.  I was living at home with my folks in Dallas, Texas where 
I grew up.  And I had kind of a menial job: I was stacking groceries, 
making about three bucks an hour.  Now there's nothing wrong with 
stacking groceries, nothing wrong with making minimum wage.  But I 
kind of thought that with my college education and my background 
maybe I should be doing something a little better than that.  Anyway, 
I had a bad attitude.  The convenience store I was working at - it was 
located in a rough neighborhood there in Northeast Dallas - was 
called a "Stop-and-Rob".

And one day the boss walked in, and looked over at me and said: 
"Son," he said, "Son, you've got a bad attitude." And I said: "Uh-huh, 
Sir.  Yes Sir, I know it Sir.  I'm trying to change." He said: "Well, Son, 
I'm going to help you change." And the thoughts raced in my mind: 
How is this man going to help me change?  A raise, a promotion, 
what's he going to do for me?  I said: "Sir, that's great.  How are you 
going to help me change?" And he said: "Boy, you're fired." I said "Oh 
no", and I went home that night to my folks' house, and went into a 
depression for several weeks.  You see, I felt sorry for myself.  I felt 
like I was a victim of circumstances.

And after about three weeks, I woke up kinda early one Sunday 
morning there in my folks' house, and stumbled into the room where 
the television was.  And I turned the television on.  And there was a 
religious program on that Sunday morning.  Now, I didn't really want 
to look at any religion out of the television, but the preacher was 
preaching a message.  He was a famous American evangelist.  I'd like 
to tell everybody here today that a miracle happened that Sunday 
morning.  You see, the miracle was, that Sunday morning: that 
evangelist was not asking for any money! But he was preaching a 
message, and the message was that the greatest challenge that we all 
have from our Creator is to use our talents.  He said: "Get up, go to 
work, and make something out of your life."

So I decided to do that, and I went out the next day and I got a job in 
a small furniture store there in Dallas.  And I found a niche in life.  I 
found something I was good at: I was good at retailing and working 
with customers.  And after about 19 months I began to dream of 
maybe having my own store.  I didn't want to set up there in Dallas 
where I grew up at, because my boss had taught me the business - he 
was my mentor.  So I asked him in late 1980 where it would be a 
good place to start a furniture store somewhere in Texas other than in 
Dallas.  He said: "Kid, I understand Houston is a boom town: try 
Houston." And my brother George at that time was in Houston in the 
real estate business.  So he spent about three or four weeks looking, 
and he got me a location.  He called me up one night and we finalized 
the deal.

And that night I went out to dinner with my girlfriend; her name was 
Linda.  She'd grown up through all my ups and downs.  She got in the 
car that night, and I was all excited.  I said: "Linda, I've got great 
news for you tonight." She said: "What's that, Mac?" I said: "We're 
going to move to Houston; we're going to get into the furniture 
business." She said: "There ain't no way." I said: "Linda, you don't 
understand something.  We're going to move to Houston, get into the 
furniture business.  We might just do well, we might make some 
money." She said: "Look, Mac, you don't understand something.  All 
my friends live here in Dallas.  I went to school here, I've got a good 
job.  I'm not moving to Houston, I'm not getting into the furniture 
business with you."

Well, I had learned that, if you're going to be successful in business 
and in life, above all you have to be persistent, never give up.  So I 
kept asking her that night, and asking her and asking her.  Finally, 
about II o'clock, I asked her about the 40th time, and she got very 
frustrated with me.  She slammed her hand down on the dashboard 
and said: "I'll tell you what, Mac." She said: "I'll move to Houston, I'll 
get into the furniture business with you.  But you're going to have to 
marry me first." And I got to thinking - this woman has put me on a 
difficult decision.  But then I came up with what I considered to be an 
entrepreneurial brainstorm.  I thought to myself: Where else can I get 
an employee this cheap?   I said: "You got a deal."

We moved to Houston in April 1981 to start this business.  We only 
had $5000.  But we had a dream, we had a lot of desire.  We did 
fairly well the first couple of years.  In 1981 we did a million dollars 
of sales volume.  In 1982 we did two million dollars in sales volume.  
And our marketing strategy those first two years was very simple.  
Strictly we appealed to all those people that were moving to Houston 
to get jobs in the booming oil and gas business back then.

But then in January of 1983 the boom in the retail business in Houston 
turned into a giant bust, and the bottom fell out of the market.  And 
overnight oar sales went from $50000 a week down to about $5000 a 
week, and we were just about ready to go broke.  We had no backup 
capital, no bank loans, no investors, nowhere to turn to.

I knew that if we were going to save the business we had to start 
advertising on television, appealing to a broader spectrum of the 
market.  So in February of 1983 1 made a leap of

Faith.  I took the last $10000 that we had and I bet the entire 
company on television advertising.  I bought $5000 worth of TV spots 
on two independent television stations there in Houston.  I took my 
money, I shoved it in the middle of the table, we bet the entire 
company on television advertising.  However, before I could start 
running those television spots, I had to make three 30-second 
commercials that we could rotate on the airwaves.  So I went into a 
little television station in Houston late one night in February 1983.  
>From I 1.00 at night to 2.00 in the morning they charged me $500 for 
three hours worth of production time, and my goal that night was to 
make three TV spots.  Well, I got in front of those television cameras.  
I was totally intimidated, and I just froze up, and I started stuttering 
and stammering, and I couldn't come up with the punch line.  And it 
got to be 1.00, and by 2.00 my three hours was up and still I hadn't 
even made one 30-second TV spot.  And the producer got very 
frustrated.  He said: "Mac, you've got one more take; if you blow this 
you're going to lose your $500 investment."

So I made the first 25 seconds of my 30-second pitch.  And I had the 
day's receipts in my pocket.  Out of sheer frustration I pulled the 
money out of my pocket and I said: "And Gallery Furniture will save 
you money".  By the way, I was using dollars, not pounds.  And the 
production manager said: "That's enough - let's go home." But, 
anyway, I took that TV spot and we correlated into a successful 
business.  And here I am 18 years later, and the sales last year at 
Gallery Furniture were $100m.  We still only have one store, never 
borrowed any money, never had a bank loan, never had any 
investors.  And one of the things I am most proud of is the fact that 
the last ten years in a row my television ads have been voted by the 
marketing students there at the University of Houston as the worst 
television ads in Houston.

But I'm here today to talk about our transformation using the Deming 
management method.  So, here we go.  Ready to roll.

Gallery Furniture.  I think any business has to have a unique selling 
feature.  In other words, what is it that this company does that the 
other companies can't do, won't do, or are unable to do, that gives 
them an advantage over their competitors?  When I first started in the 
furniture business in Houston, I noticed that, in almost every store in 
Houston, when you bought a piece of furniture, the quickest you 
could get it was two weeks and more than likely six or eight weeks.  
And I looked at a lot of successful companies there in the United 
States, people like Federal Express, Walmart, United Parcel Systems, 
Southwest Airlines: people that were doing things better, faster, and 
cheaper.  So from Day 1 we decided our unique selling feature at 
Gallery Furniture would be immediate delivery.  Customers buy 
furniture at our store, and we deliver it within three or four hours.

We had a customer buying furniture a couple of Saturdays ago.  It 
was a very unusual situation.  Her house had burned down.  She 
came in and bought $46000 worth of furniture on a Saturday night.  It 
was 7.00 when we finished typing the ticket.  She lived about 60 
miles from our store, and by Saturday night at I 1.00 we had 
delivered the furniture - the 60 miles, all $46000 worth of it - 
delivered it, set it up in her house, and we were gone.  That's what we 
do.  Our unique selling feature at Gallery Furniture is immediate 
delivery.

I think, if we are going to be successful in business, we all have to ask 
ourselves this question: Would the customer miss this company if it 
was to go out of business tomorrow?

I think: Yes, they would miss us at Gallery Furniture because of our 
unique selling feature -- immediate delivery.

But the thing that survived the company through its first eight or nine 
years, in spite of all my management mistakes, was my marketing 
strategy: which is quite brilliant.  Let me tell you what it is: Late to 
bed, early to rise, work like hell, and advertise!

Now, I was taught management at the University of Texas.  And we 
had a very conventional management structure - that's the way I was 
taught.  We had somebody at the top issuing all the orders, coming 
down throughout the Organization.  And we did fairly well the first 
four or five years.  But then, as the business got bigger toward the end 
of the 1980s and 1990, we lurched from one crisis to the next We 
made the same mistake over and over and over again.  I knew there 
had to be a better way, and I was searching for a better way.

The first thing I did as far as quality was concerned: I went to a 
conference with a guy named Philip Crosby down in Orlando, 
Florida.  He had written a book called Quality is Free.  I read that 
book and it talked about Zero Defects, and I got all excited about it.  
That was the management flavor for the month.  The problem with 
Zero Defects is, to my way of thinking, it meant that you had to do 
things right all the time.  And that's certainly an impossibility.  So I 
was very frustrated.

We were a very sales-driven company back then - we still are.  The 
heart and soul of our business is our employees, of course, but most 
especially our salespeople.  We had salespeople who were 
commission-compensated because that's the way I thought would get 
the best productivity out of the salespeople.  We had a system that 
created winners and losers.

In our commission-based sales structure for the first eight or nine 
years at Gallery Furniture, we had a weekly quota the salespeople 
had to meet.  They had to do $7000 a week in furniture sales and 
$400 a week in chemical add-on sales to get a 10% commission of 
$700 a week.  Most of them, if they did that, would make anywhere 
from $700 to $1000 a week.  However, if they didn't make that quota 
on a weekly basis (the week ran from Friday to the following 
Thursday night) - if they only did $6000 that week (because their son 
was ill and they had to take off a couple of days or whatever) they 
became a loser, and they only made 5% commission or $300 a week.  
Obviously this created a lot of anxiety, and the focus of all the 
salespeople, because of the way the system was set up, was to make 
that quota every single week.  However, as I was to learn from Dr 
Deming, this was judging performance using arbitrary goals, which 
fostered short-term thinking - the only thing they cared about was: 
Did I make my quota this week?  Misguided focus.  The focus was 
not at all on the customer.  The focus was: How much money can I 
make off this customer?  They would prejudge every customer before 
they walked in the door based on the type of car they drove in on.  If 
they drove up in a big Mercedes, they'd get a lot of service.  If they 
arrived in an old Ford Taurus, they wouldn't get any.

It created a lot of internal conflict.  What type of internal conflict?  
Well, the salespeople hated having new salespeople hired on the 
floor, because they felt like it would cut into their commission.  They 
felt like if there were only 50 salespeople they could sell more than if 
there were 60 or 70.  And so they made it very difficult for the new 
salespeople to hang on; they would try intentionally to run them off 
the floor, because they perceived these people as a threat to their 
income.  I'll never forget, one new guy came in one day, and he had his 
lunch in a paper bag, and left it in the back of the break-room.  And 
they went back and put a whole load of Cayenne Peppers throughout 
his lunch, trying to run him off.  So it created a lot of internal conflict.

Also, judging performance using arbitrary goals fostered a giant 
amount of fudging of the figures.  If the week ended on Thursday and 
the salesperson had his figure for the week, he would call off all the 
Thursday night deliveries he had and postpone them till the Friday or 
Saturday to give him a good start to the next week.  It didn't matter 
that the customer didn't like this.  All that mattered was: Whatıs 
good for me as far as my income is concerned?  And, if they had a 
short week where they hadn't made their quota, it was not unusual at 
all on Thursday night for salespeople to have as much as two or three 
thousand dollars worth of furniture that was going to be delivered in 
two or three weeks delivered to their garage so that they could say 
they got it on the week's quota.

It was a very bad system.  It also caused greater fear in the 
workplace.  The fear came from a ranking.  We ranked all of our 
salespeople: I thought that was the way to do it.  At one point we 
had as many as 100 salespeople there.  And we'd rank them at the 
end of every month from I to 100.  The top 10 people were viewed as 
superstars and the other 90 as losers.  We almost went to the level of 
firing the bottom 10 every month to get rid of these people.

It was only at a Deming seminar that I got a blinding flash of the 
obvious.  At my first Deming seminar I learned that, in any 
distribution of people, half will be below average.

To say the least, we were on a roller-coaster of highs and lows.  We 
would have a great month one month and a very poor one the next.  
After the poor month we would start another flavor-of-the-month 
program, another round of firings of the below-average performers, 
another new sales contest, more incentives - and it all caused more 
problems for the business.  Dr Deming calls this tampering and, 
believe me, I did lots of it.

The salespeople working there had one mentality.  And that was: 
"Everything other than sales is not my job." They spent most of their 
time between customers - and there was a lot of time between 
customers back then, because we had nothing near the customer flow 
then as we do now - they would spend most of the time between 
customers either reading or looking at girlie magazines or figuring their 
commission.  It was not a good use of human resources.

And at that point I came to the realization that, unless things 
changed,, they would probably stay the same or more than likely get 
worse.  This business was so frustrating to me.  I spent half of my 
time arguing, settling commission arguments between salespeople.  
The other half of my time I spent putting out one fire after another 
after we disappointed the customers.

So in August of 1990 I was looking for a better way to run the 
business.  I attended a life-changing event: that was my first four-day 
seminar taught by Dr Deming at the Sheraton Airport Hotel in 
Houston.

Now, I only stayed for three out of those four days that time because 
his concepts of cooperation and win-win were so radical and off-
center to me.  I had grown up in a world of competition: I win, you 
lose - beat the other guy.  I had grown up in a world of incentives.  I 
had grown up in a world of building superstar mentality.  However, I 
knew in my heart that he was right, and that he was certainly on to 
something.

I went to two more Deming four-day seminars in the fall of 1990 and 
then one in January of 1991 in California.  And, at the urging of Dr 
Deming and of Dr Edward Baker who at that time worked for the 
Ford Motor Company, we decided in March of 1991 to do away with 
our commission scheme, and pay all the salespeople salary based 
upon their years of service to the business.  We consulted a late 20th 
century philosopher about this change, and he said it was indeed a 
"Radical move, Dude".

Dr Deming taught me to see the Organization as a system.  As Mr 
Scholtes talked about today, the entire Organization is a system: we 
got furniture products from our suppliers, we added value to them, 
we distributed them to our customers, we got feedback from the 
customers on what they liked and didn't like, and started all over 
again.

We started to see the business as a system, asking ourselves 
internally in the business: "What can I do for you to make your job 
easier, and what can you do for me?" We wanted all the employees 
to come up to the level of being improvement project players.

When we made the change from commission to salary, a lot of the 
hotshot salespeople who were making lots of money left; they didn't 
want to be part of this new thing.  And my friends in the furniture 
business from across the United States told me that I was crazy to do 
this: it had never been done before.  And they told me that paying 
people salary without incentives was a certain way to ruin the 
business, and would be the ruination of Gallery Furniture.

However I believed in what Dr Deming said, and we decided we 
would indeed give it a go and see if we could make it work.  We 
decided, if we were going to build the business, we had to identify 
customers' needs and concerns.  Before the Deming transformation, 
we had a team of three or four professional furniture buyers who 
would go to all the furniture markets.  In between, they would sit at 
their desks and read computer flows, and try to figure out how much 
furniture to order each week.  They felt like it was beneath them as 
professional furniture buyers to ever go on the sales-floor and talk to 
customers.  And they didn't treat the salespeople well at all: they 
thought it was beneath them to even talk to the salespeople.  
However, after the Deming transformation, we took all those people - 
some of them left, some of them stayed with us - and put them on the 
sales-floor so that they could listen to the voice of the customer every 
single day and get feedback from the customers on what the customer 
wanted to buy.  This made a tremendous difference as we started to 
identify customers' needs and concerns.  And people started to 
perform in harmony like members of a symphony orchestra.

Dr Deming taught me to create the business where we had 100 
winners, not ten out of 100, but all hundred salespeople felt like 
outstanding people, felt like winners.

He taught me about quality.  The quality of our product, our service 
to our customers - that's what we're selling, the service and the 
furniture - is the direct result of: 
_ how well the different parts of the Organization work together, 
_ how well the salespeople work with the people in data-processing 
who were typing the customers' tickets, 
_ how well the people answered the phone and told the customer 
when their delivery would be made, 
_ how professional the delivery people were when they got to the 
customer's home.

Before, we had contract delivery people.  And when they got to a 
lady's home - she was an elderly lady, and she wanted them to move 
her sofa out from her living room to the garage, they would charge her 
an extra $20 to do that.  But now that all the delivery people were 
paid salary rather than incentive pay, they would do that just to help 
the lady out - which was the right thing to do in the first place.

The quality of the company, Gallery Furniture, is certainly dependent 
on how well the different people work together.  And we started to 
work on getting a different profile of salesperson.  We wanted people 
who would cooperate and could work together.  In the old days we 
were looking for racehorse-type used-car salesman.  That was the 
best commission profile - a racehorse-type used-car salesman.  
Nowadays we look for a totally different profile: weıre looking for 
turtles with a fast twitch.

Dr Deming taught us how to work with the system and manage the 
white spaces, increase the number of positive interactions between 
people and groups, and create more cooperation.  We were looking 
for people who could get along with each other, who could work 
together, who liked retailing because of the joy of working with 
customers, who didn't focus all day on how much money they were 
going to make.  He talked to us about managing the white space, 
increasing the number of positive interactions between people and 
dependence.

And he taught us the aim of the system, the system being a network 
of interdependent components that work together to accomplish the 
aim of the system.  'Me aim of our system was real simple: to please 
customers, sell furniture, produce income.  Thatıs the only reason we 
were there.

And he talked about system management.  A system, the Gallery 
Furniture system, must be managed.  It will not manage itself.  Left to 
themselves, components become selfish, competitive.  The secret is 
cooperation between components toward the aim of Gallery 
Furniture.

We spent lots of time, and we still do, talking about the vision and 
the aim of the company.  The aim is to please customers, sell 
furniture, produce income.  We molded the entire Organization after 
we made the Deming transformation to face the customer.  And we 
asked ourselves every single day, all day long: Would the customer 
pay me for what I am currently doing?  If not, why are we doing it?

We're interested in customers.  Most businesses our size, $100m, 
would have four or five people in an accounts-payable department.  
We don't have an accounts-payable department.  When we get a 
shipment of furniture or whatever we're buying from our supplier, we 
pay cash on delivery for all of it.  The reason is that, that way, one 
person does the entire amount of payables and the other people in 
the Organization, all 249 of them, can work with the customer.  We 
don't have to match up the invoices three weeks later.  We get all the 
employees having daily contact with the customer, and we spend our 
time on revenue-generating activities, and all that starts and ends 
with the customer.  What else is there?

As Peter talked about earlier, I have disciplined myself and the 
Organization to focus on the critical few issues, not the trivial many.  
And the critical few issues are: pleasing customers, selling furniture, 
producing income, getting the whole group to work together as a 
system to delight customers.

Before, in the 1980s, we managed the business with chimneys of 
excellence.  Every department had a quota and a budget, and they 
were expected to stand up by themselves.  We had the sales 
department, we had the pickup department, the data-processing, the 
receiving, the delivery department, the back office.  And every one of 
them had their own little chimney of excellence.  They would never 
talk to the other departments; they were almost in competition with 
each other.  Dr Deming taught me this was the wrong way for the 
company to function.  There was no optimization of the whole, no 
way to best serve the customer.  So, for example, it was not unusual 
for those salespeople to make a sale at 10.00 at night and promise 
the customer we would be there before midnight.  There's no way we 
could sell the furniture by 10.00, pull it, prepare it, inspect it, and get 
there before midnight.  They didn't care because they were gone.  But 
the delivery people would stay up until 2.00 in the morning.

Dr Deming said that we should "Improve constantly and forever the 
system of production and service, and improve quality and 
productivity, and thus constantly decrease costs".  That's what we 
are trying to do.  And "Break down the barriers between the 
departments.  People in Research, Design, Sales and Production must 
work together as a team to perceive problems in production and in 
use that may be encountered with the product or the service." For 
example, in the furniture business in the United States, they keep 
making the furniture bigger and bigger and bigger.  We have lots of 
sofas now that are as long as 103 inches.  And the people in Sales 
have to talk to the people in Delivery and then they have to talk to 
the customers to see if this giant sofa is going to go in their home.  
Nothing's more frustrating to a customer than to buy this sofa, and 
when we try to get it in their house we can't get it in: we tear up their 
wall, we tear up the sofa; nobody's happy.  But unless the 
salespeople talk to the people that are doing the delivery where they 
see the business from a more holistic standpoint, they never know.

We decided we would have to "Institute leadership.  The aim of 
leadership should be to help people and machines and gadgets to do 
a better job.  Leadership of management is in need of overhaul as well 
as leadership of production workers." The problem with the entire 
business started with me, it started at the top.  And I have learned 
over the years that people look to the leader, they look to their boss.  
How I say "Hello" to somebody when I walk in has a profound effect 
on these people.  I must lead from the front; I must set a good 
example for these people.  That's why, when customers walk into the 
store, my office is at the front desk.  I work Saturdays and Sundays 
and nights and holidays because, if I ask the rest of the employees to 
do it, if I'm going to be a leader then I need to lead from the front, not 
from the rear.

Dr Deming said that optimization is "the process of orchestrating the 
efforts of all components toward the achievement of the stated aim".  
We have everybody in that business going in one direction because the 
train moves a lot faster if you're all pulling in the same direction.  Our 
direction is real simple: please customers, sell furniture, produce 
income.  That's what we're in this for.

Now, all this Deming stuff is fine in theory.  However, what about the 
bottom line?  Does Gallery Furniture indeed walk the walk and talk 
the talk that I'm espousing up here today?

When we made the switch from commission to salary in 1991, we 
decided to allow all the full-time employees in the business share in 
the progress of the company.  So we have a quarterly profit-sharing, 
gain-sharing meeting where we go over the goals of the company, how 
we are doing, how we are treating our customers, every quarter.  In 
our profit-sharing program that we instituted after we adopted the 
Deming philosophy, 5% of all store-profits every quarter gets divided 
equally among all the employees, regardless of their job-title.  
Somebody might be the senior salesperson, and the other person 
might be a warehouse person, but they all get the profit-sharing 
divided equally.  We're trying to recognize the fact that everybody 
has an important role in our singular task of delighting customers: 
sales, managers, receiving people, delivery people.  And we also do 
something called a gain-sharing program, where 20% of our company 
profit gains (in other words the profit gains if we do better first 
quarter 1999 versus first quarter 1998) also goes to the employees in 
the form of long-term type of retirement benefit.

The bottom line.  Since 1993 we have put into those two accounts for 
the employees $6.6m, over and above the better-than-average salary 
the people at Gallery Furniture make.

And if you subscribe to the theory that success is measured by 
results, here's our results.  In 1991, when we started the Deming 
process, we were doing about $30m in sales.  1998:  our sales were 
right at $100m, and this year we're on track to do about $120m.  If 
success is measured by results, we've indeed been successful using Dr 
Deming's quality improvement methods.

The core, the heart of Gallery Furniture still, as it was in the 1980s, is 
the salespeople.  They're the people that, when the rubber hits the 
road, have the most dealing with the customers.  In 1989, what did 
the salespeople do?  They did sales.  Everything else was "It's not my 
job", and they wouldn't do it.  What do the salespeople do now?  
They do sales, they do inventory control, they move the furniture in 
the store, housekeeping, supervise the playground, display the room 
full of furniture.  They do multitudinous tasks.  And you know what?  
When they do different tasks, the job is not as boring to them and 
they get energized more often.

Demingıs Theorem No. 1: We're ruined by best efforts.  I never 
worked as hard in my life as I did from 1981 to 1989, and 1990, and 
1991.  But I was being ruined by my best efforts, because I could have 
been working smarter; instead, I was working harder.

Deming's Theorem No.  2: Does anybody give a hoot about profit?  
Believe me, we're not in this for altruistic reasons.  The reason we are 
using the Deming process is because it is a better form of capitalism.  
We are able to make more money that way, and benefit the 
community more, and benefit our employees, and benefit the bottom 
line of the company.

We had a decision to make in 1991 when Dr Deming and Dr Baker 
asked me to switch those salespeople from commission to salary.  it 
was a bet-the-company type of decision.  We could keep going the 
way we were and get quick returns - we were making money back 
then - or we could choose the Deming method for long-term 
prosperity.  We chose the Deming method.  And here's what 
happened.

We were able to improve the quality of our services and our products 
to our customers.  No longer, when I went in the grocery store and 
saw one of our customers, did I have to hear a horror story from them 
about how their delivery went.  We were able to decrease costs, 
improve productivity.  When we went from commission to salary, the 
sales per employee went through the roof We were able to decrease 
our prices to sell better-quality furniture to our customers at lower 
prices.  Some of our prices right now in 1999 are lower than they were 
in 1989.

We were able to increase the size of the market, not only for ourselves 
but for our competitors as well.  Dr Deming says that you have to 
have good competitors, and we certainly have some good ones.  We 
were able to stay in business to provide jobs and get a return on 
investment - the Deming chain reaction.

When we do the Deming process, we also work very hard every day 
on what's called the Plan-Do-Check-Act.  Plan a test or a change 
aimed at improvement; Do it on a small scale; Check what the results 
say; Adopt the change, abandon, or run through the cycle.  We are 
trying to continuously improve the furniture store.

In the old way, the way we ran the business in the 1980s, we were 
worried about quantity; today we worry about quality.  The old way 
was competition among all the salespeople; today it's cooperation.  
The way the system works now is that, if a customer walks in and is 
greeted by a salesman who reminds her of her ex-husband, he will 
give up that customer to somebody who is not so offensive to her, 
and will make the sale.  Before, we never had a chance to make a sale 
like that because they wouldn't give it up for fear of losing the 
commission.  Before, it was: I win, you lose.  Now it is win-win.  
Before, it was: Please the boss.  Now the company is focused on 
pleasing the customer, because, in the end, the boss is the customer.  
They're the ones writing the pay-checks.  Before, when a problem 
happened, it was scapegoating: who's to blame?  Now, when a 
problem happens, we try to improve the system so that we can work 
that problem out of the system for ever.

Before, everything was status quo.  Now we understand variation.  
One of the things that bothers me a little bit about our customers is - 
it's amazing, as Peter talked about this morning - customers don't 
understand variation.  So many of our customers expect the furniture, 
when we deliver it to be absolutely perfect because they don't know 
anything about variation.  I can't tell you how many customers meet 
our delivery trucks at the kerb at night and immediately take a 
flashlight and start going over the furniture to try to see any 
imperfections.  One of our delivery people's tongue slipped the other 
day: He said: "Ma'am, did you inspect your husband with a flashlight 
before you married him?"

The old way was individually-oriented; now it's team-oriented.  The 
old way we had these salespeople, they were not satisfied: they all 
wanted to make a million dollars a year.  We had entrepreneurs.  
Now we have people who value security more and long-term 
stability.  And, believe me, those people are a whole lot better at our 
job of retailing.  Before, we would inspect the performance; now we 
inspect team-effort.  Before, it was command-and-control type of 
management; now we try to be more compassionate, more caring and 
understand that people do a good job if given the chance.  Before, it 
was short-term thinking.  How much did we sell today?  Now it's 
long-term thinking.  Before, people could complete their education; 
now it's life-long learning.  Before, we feared change.  Now we 
embrace change - we rehearse it's the only way we're going to get 
better.  In the 1980s, my idea of business was that the way to solve 
any problems was to ride into town like John Wayne, the lone-ranger 
cowboy, and solve all the problems by yourself.  Dr Deming taught 
me a better way.  He taught me that, if we are going to raise the barn, 
we need to raise the barn together.


The transcript continues in UKDN #7b with Jim's description of his
personal managerial thinking.


               
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