"THE BUSINESS OF BUSINESS IS PEOPLE"

Today I want to talk to you about reaffirming quality. By that I mean breathing new fire and spirit into the quality movement.

According to an old Chinese proverb, whom the gods would destroy, they first condemn to 30 years of success.

As part of the quality movement inspired by W. Edwards Deming, we have been "condemned" to 30 years of success.

Over the past several decades -- and in the last decade, most particularly -- some of the ideas that are central to our movement have gained widespread acceptance throughout the corporate world. In the process, they have gone from being revolutionary in their content to being perceived as part of the conventional wisdom.

As you all know, one of Deming's 14 points is to "eliminate slogans." Nonetheless, it is a sad fact that many of us in the quality movement have been guilty of sloganeering.

Scott Adams, the creator of Dilbert, captured the problem in a recent cartoon where a job applicant takes an interviewer to task over the use of the word "empowerment."

As the job applicant says, "If you could really make decisions on your own it would never occur to you to invent a phrase for it."

But if we have sometimes been guilty of sloganeering, we have other problems as well in trying to communicate an effective quality message.

The biggest of those problems -- to my way of thinking -- is that some people in the business consulting field have drawn some ideas and concepts from Deming, while discarding others. The total effect of this has been to distort ... to dehumanize ... and, I fear, to detract from the quality movement.

I am thinking, in particular, of the re-engineering movement - or at least some expressions of it.

Re-engineering is sometimes presented as a kind of turbo-charged version of Deming -- promising fast and dramatic results. In fact, exponents of re-engineeering are sometimes critical of Deming and TQM as offering too much of a gradualist approach to change and improvement.

Re-engineering -- often done with the help of outside consultants -- is very much of a top-down phenomenon. Re-engineering seeks breakthroughs, not by enhancing existing processes, but by creating new and wholly different processes. Because it has often been associated with radical downsizing, re-engineering has become almost a code word for pushing up profits by pushing people off the payroll and out the door.

In all of this, there is much that is contrary to the thinking of Deming -- and, indeed, to the whole concept of quality, as I see it.

Dr. Deming took a holistic approach to quality ... and a holistic approach to management. As he saw it, improvements in quality led to improvements in productivity, which in turn led to lower prices, greater market share, and future growth.

In his view of the world, the interests of the employees and the shareholders were complementary, rather than antiethical.

Deming was highly explicitly on this point. In "Out of the Crisis," he stated, and I quote, "The job of management is inseparable from the welfare of the company....Management must declare a policy for the future, to stay in business and to provide jobs for their people, and more jobs."

According to Deming, loss of market, and resulting unemployment, were seldom, if ever, foreordained or inevitable. They were management-made.

In Deming's view, the problem was never people in the sense of the multitude of people working for an organization. It was always management.

Re-engineering turns that view of the world upside-down and inside-out. When a company is "re-engineered," it seems that it is the people who are to blame for bad performance, while management is presumed to have all the answers.

This reminds me of a line in a Berrolt Brecht play, where one of the characters says, "The people have lost the confidence of their leaders. They must be punished."

Ladies and gentlemen, quality is not something that comes about as a result of all-powerful leaders punishing their people for failing to follow.

Quality presupposes integrity -- integrity that is present at all levels in an organization.

There is no better or fuller description of the meaning of quality than that offered by Max DePree, the chief executive of Herman Miller, Inc., which is perennially ranked at the top of the list of the most admired companies in its category in the annual Fortune magazine survey. In his book, "Leadership Is An Art," Depree wrote:

"When we talk about quality, we are talking about the quality of product and service. But we are also talking about the quality of our relationships and the quality of our communications and the quality of our promises to each other. And so, it is reasonable to think about quality in terms of truth and integrity."

Looked at in those terms, quality is a good thing, and in and of itself. In addition -- as Deming pointed out -- quality is efficient -- in a way that mere power can never be.

Consider a story that is told of Joseph Stalin. At the height of the terror in Russia, Lenin's widow -- a revered figure in the Communist Party -- attempted to criticize some of Stalin's actions. Stalin brought her to heel with the magnificent threat -- "If you don't shut up, we'll make somebody else Lenin's widow."

The point here is that any system built on coercion and control, such as Stalinist Russia, impedes the flow of critical information (in both senses of the word "critical"). And that is not the only disadvantage of coercive versus cooperative systems.

Sydney Pollack, the Academy award winning film direction, was eloquent in expressing some of the limitations of authority in speaking to management guru Warren Bennis. Pollack noted:

"Up to a point, I think you can lead out of fear, intimidation, as awful as that sounds. There is a lot of leadership that comes out of fear, dependence, and guilt. But the problem is that you're creating obedience with a residue of resentment. If you want to make a physics analogy, you're moving through the medium, but you're creating a lot of drag, a lot of backwash."

If I were living in a monastery in Tibet, in charge of the monastery's TQM program, I might consider advocating quality solely on the basis of it being a good thing. However, since I work for a large corporation that is very much in the business of making money, I advocate quality programs and people-centered policies on the basis that they contribute not just to attitudes and morale but also -- very importantly -- to improving the bottom line and winning new business.

Unlike re-engineering, which begins by discarding existing processes, Total Quality Management follows a path of engaging people at all levels in continually enhancing the processes that determine the flow of work. That will succeed if, and only if, people buy into the need for improvement ... and the opportunity to make it.

In recent years, the idea of Kaizen, striving for a large number of incremental improvements, has taken something of a back seat to the idea of making big one-time breakthroughs through superior innovation and creativity.

Deming believed that both Kaizen and breakthroughs (big one-time improvements in products and processes) are very important.

The trick, then, is not choosing between the one or the other, but learning how to pursue both at once. A good place to begin is in recognizing that creativity exists in all people --- in all levels of an organization.

Here is another area where I believe the re-engineering tends to be both de-humanizing and destructive in its thinking. It has embraced the idea of a few Nietzchian supermen who determine all real change and progress.

But innovative or creative thinking is something that goes on all the time in a dynamic organization. It is a terrible (though common) mistake to think of creativity and imagination as the exclusive province of the gifted few.

There is a growing body of research showing that creativity is almost universally present in people -- at least in childhood. The pre-school years have been described as a kind of golden age of creativity, when every child sparkles with artistry and innovative problem-solving skills. Young children paint in bold and daring strokes. They are able to master two or more languages with little difficulty.

After that, however, with exposure to more structure and discipline, and with more peer group pressure, a kind of rot sets in, and most of us grow into artistically stunted adults. It starts with school and it gets a whole lot worse (as the characters in Dilbert would see it) as one enters corporate life. As part of the maturation process, as we advance in our analytic skills -- or what is sometimes called linear thinking -- all but a few of us become markedly weaker on the artistic or creative side -- in so-called non-linear thinking.

No less a genius than Pablo Picasso paid homage to the creativity that we all being with. At an exhibition of children's work, he observed: "When I was their age, I could draw like Raphael, but it has taken me a whole lifetime to learn to draw like them."

In a similar vein, Albert Einstein was acutely aware of parallels between his thought patterns and those of children. He told one interviewer:

"How did it come to pass that I was the one to develop the theory of relativity? The reason, I think, is that a normal adult never stops to think about problems of space and time. These are things which he has thought of as a child. But my intellectual development was retarded, as a result of which I began to wonder about space and time only when I had already grown up. Naturally I could go deeper into the problem than a child with normal abilities."

If creativity is something that can be un-learned, it is also something that can be re-learned. It can be exhumed -- from the slag heap of institutional thinking -- and brought back to life, with careful nurturing.

That is something we have tried --- and are trying to do --- at McDonnell Douglas. Through integrated product teams -- spanning various disciplines and disregarding hierarchical rank -- we are endeavoring to capture more of the creativity, imagination, and motivation of all of our people.

I could cite a number of examples where we have achieved extraordinary progress through the work of ordinary people released from the constraint of ordinary expectations.

To cite just one example: Thanks to the work of integrated product teams, the new E/F Super Hornet version of our F/A-l8-- due to enter service with the Navy before the turn of the century -- is able to provide 40% more range, greater versatility, and more firepower than earlier versions of the Hornet, at a fraction of the cost of a new program.

Having said this, let me go a step beyond and address the need for creativity of the highest order -- meaning the kind of creativity that resulted in the discovery of penicillin, the polio vaccine, or the computer chip.

Clearly, there is more than one kind of innovation. There is the kind we have already discussed -- that expands the envelope of an existing product or an existing concept.

But there is another kind of innovation -- which not only builds upon previous innovations, but also, in some important way, departs from them.

Breakthrough thinking of this kind often depends more on individual output than on group or team work. After all, a brain is a unitary thing. Sometimes it does its best work in an informal environment where there are no committees or task forces ... where people, working on their own, are free to experiment and to think the unthinkable. Dr. Deming often referred to Bell Labs as such a place.

At McDonnell Douglas, we have encouraged that kind of thinking at our Phantom Works advanced R & D facility in St. Louis.

Just a few weeks ago, some of the top officials in NASA were in St. Louis for the rollout of an experimental aircraft, called the X-36, which was designed and developed at the Phantom Works. This aircraft -- which has no horizontal or vertical tail and a severely shortened wing structure -- may truly change the shape of things to come in future aircraft. It is extraordinarily light and agile. Its design represents the kind of radical simplicity which is characteristic of breakthrough thinking.

There is no single answer to the question of how to encourage breakthrough thinking in the midst of large and all-too-often cumbersome organizations.

Clearly, there are some areas where empowerment is appropriate and others where it is not. For instance, you would not want to rely on empowered teams -- given the freedom to ignore established procedures and processes -- to install nuclear devices on a submarine.

Management must use common sense and good judgment in striking a balance between the need to let go in some areas and the need to exercise oversight in others.

On the topic of striking a balance between the one and the other, I read an interesting article entitled "TQM, Reengineering, and the Edge of Chaos," in a recent issue of Quality Progress magazine. I would urge all of you to read it.

As defined by the author -- Lawrence Leach, the head of a consulting firm in Idaho Falls -- "the edge of chaos" is "a constantly shifting battle zone between stagnation and anarchy." For most purposes, this is where you want your organization to be ... because systems that are too stable will die as the environment evolves, while systems that are too chaotic will tend to self-destruct.

One set of forces (the need for order and control) pulls every business toward stagnation, while another set of forces (the need for growth and creativity) drives it toward disintegration.

Deming's philosophy allows organizations to alter their control systems to avoid attraction either to disintegration or ossification.

"TQM provides both sets of forces needed to keep a company together," he writes, "Continual improvement provides the force to drive the system toward disequilibrium, while other aspects of TQM -- such as constancy of purpose, managing the business as a system, and joy in work -- provide the restraining forces to keep the organization together."

By building in a process of continual improvement, Dr. Deming's philosophy makes change the norm within an organization. People who learn how to change their organization in small steps gain the confidence and skill to succeed at larger changes.

At the outset of this talk, I noted that many of us in the quality movement have been guilty of resorting to slogans. Without a doubt, one of the reasons Deming bothered to include the elimination of slogans in his 14 points is the fact that he was espousing a profoundly humanistic approach to achieving improvement and creativity in the workplace. He did not want people to become the slaves of any theory -- his own included.

Deming concluded every seminar with the same five words, saying, "I have done my best."

It is up to each of us to do our best in reaffirming quality within our own organizations.

To do that, there are three things that we must do very well.

First, we have to promote the understanding that quality makes good sense from a business perspective. To be understood ... and to be persuasive ... we must speak in the language of business, plainly and clearly.

Second, we must continue to emphasize the need for incremental improvements as well as breakthrough achievements. Total Quality is a journey, not a destination. Like many journeys, it is a journey that carries the hope of self-renewal without self-destruction.

And last, we must never forget that the real bottom line is people. At the end of the day, the success of failure of a business depends on management's ability to harness the willing participation and creativity of people.

Now ... perhaps more than ever ... the business of business is people. That is an awesome responsibility ... and for all of us in this room ... an inspiring challenge.