ASQ Orange Empire November 1, 2013

1. A Strategic Look at Deming’s System of Profound Knowledge ASQ Orange EmpireNovember 1, 2013 Dr. Phillip R RosenkrantzProfessor Emeritus, Cal Poly Pomona

2. Quality Contributions to Strategic Planning Leadership aspects (Deming SPK & Baldrige Award)Systems thinking (Not ingrained in strategic planning) Tools for analyzing SWOT and including VOC

3. Outline Part 1 - Overview of Dr. Deming’s Teachings and Impact Part 2 – Primer on Traditional Strategic Planning Part 3 – Integration of Quality Tools with Examples Ex. 1 - Affinity Process – SWOT Analysis Ex. 2 - Affinity Process – Plan Implementation Ex. 3 - Affinity Process – Trend Analysis Ex. 4 - Kaizen for Management – Marketing Campaign Ex. 5 - QFD – Stakeholder Review of Strategic Plan Objective – Show how systems and stakeholder driven quality tools can be used in strategic planning

4. Part 1 - History of Quality and Overview of Dr. Deming’s Teachings and Impact - Dr. W. Edwards Deming Is known as the Father of the Japanese Post-war Industrial revival and was regarded by many as the leading quality guru in the United States.

5. Dr. W. Edwards Deming • In addition to his other education, Dr. Deming studied under Walter Shewhart who introduced SPC. • Dr. Deming worked with census data for the U.S. Government. • During WWII he was asked to implement SPC and Acceptance Sampling for the defense industry. • After WWII American management went back to their former inspection-based methods.

6. Reviving Japan Deming was invited to Japan around 1950 by Japanese industrial leaders and engineers. He guided them on how to implement quality control. Awarded Second Order of the Sacred Treasure Japanese scientists and engineers named the famed Deming Prize after him.

7. Out of the Crisis • Due to popular demand Deming conducted an intensive four-day seminar for managers and educators across the country • Deming published an explanation of his philosophies and concepts for managers in 1986 in his book: Out of the Crisis • Deming’s first book expounded on some of these concepts as well titled: The New Economics (1984, 2000)

8. Deming’s 14 points for Management • The 14 points are the basis for transformation of American industry. • Not simply a matter of solving problems • Management is responsible for creating the culture and improving the systems they operate with. • The 14 points apply to all organizations.

9. Deming’s 14 Points for Management 1. Create constancy of purpose 2. Adopt philosophy of prevention 3. Cease mass inspection 4. Select a few suppliers based on quality 5. Constantly improve system and workers 6. Institute worker training 7. Instill leadership among supervisors 8. Eliminate fear among employees 9. Eliminate barriers between departments 10. Eliminate slogans 11. Remove numerical quotas 12. Enhance worker pride 13. Institute vigorous training 14. Take action

10. Deming’s Seven Deadly Diseases of Management • Lack of constancy of purpose • Emphasis on short-term profits • Evaluation by performance, merit rating, or annual review of performance • Mobility of management • Running a company on visible figures alone • Excessive medical costs • Excessive costs of warranty, fueled by lawyers who work for contingency fees

11. Deming’s System of Profound Knowledge • Deming advocated that all managers need to have what he called a System of Profound Knowledge, consisting of four parts: • Appreciation of a system: understanding the overall processes involving suppliers, producers, and customers (or recipients) of goods and services. • Knowledge of variation: the range and causes of variation in quality, and use of statistical sampling in measurements. • Theory of knowledge: the concepts explaining knowledge and the limits of what can be known. • Knowledge of psychology: concepts of human nature.

12. Management is responsible for the system and for managing processes with continuous improvement. Manage change, not results. • Management needs to understand the difference between common cause variation and assignable cause variation and manage accordingly • Best efforts are not good enough. Need continuous improvement based on theory and knowledge. • Cooperation—not competition. Management needs to understand people and how to lead them. Essential Deming It’s About Leadership & Transformation

13. What Does Strategic Planning Mean to You? • Articulated Plan: Mission, Vision, SWOT (Strengths, Weaknesses, Opportunities, Threats), Goals, Plans • Strategic Differentiation - Market data, Customer feedback, Environmental Scan (Internal & External) • Three levels: Strategic, Tactical, Operational • Organizational Engagement - Goals cascaded to operator level • Organizational Transformation - Quarterly reviews and appropriate training

14. Environmental Scan • Complete prior to vision and mission objectives • External Scan • Threats and Opportunities • Internal Scan • Strengths and Weaknesses

15. Modifications and Improvements to SP Using Quality Tools • Baldrige Criteria • Leadership, planning, process control, and customer satisfaction and feedback are evaluated and rated. • The Learning Organization (Senge) • Shared vision is crucial for long run success • Affinity Diagram/Interrelationship Diagraph • Use for problems, trends, SWOT analysis for root cause analysis, driving trends, strategic goals

16. Modifications and Improvements (cont’d) • Quality Function Deployment • Ultimate approach for identifying the “voice of the customer” and designing an efficient system around their requirements. Many variations. • Lean/Six Sigma/Total Quality Management • a.k.a. Continuous Quality Improvement.- Useful tools if leadership is supportive and understands what is going on.

17. CEO Attitudes and Motivations: Are they Different for High-Performing Organizations? ASQ Journal of Quality Management, 2012 Milan D. Larson, John R. Latham, Charles A. Appleby, Carl L. Harshman

18. Introduction • Findings of an exploratory study that compared the motivations and attitudes of CEOs from MBNQA winning companies to: • Successful CEO’s of non-MBNQA winners • Average employees • Is there a difference between Baldrige recipient leaders and non-Baldrige recipient leaders? • What are the most effective method to institutionalize leadership development?

19. Introduction (cont’d) • Other than anecdotal stories, not much is known about leading through a transformational process • Employees become cynical and lose motivation because of inconsistencies with the top leaders’ behavior • To sustain positive direction leaders must demonstrate consistent behaviors that will lead a successful transformation • Study was aimed at understanding the attitudes and behaviors of successful transformation leaders

20. Research Questions • Do top leaders that achieve Baldrige Award Recognition somehow differ in motivation and attitudes than non-Baldrige transition leaders? (Early research on leadership was focused on traits and personality characteristics) • Which factors are different compared to other effective leaders? • How do these motivational and attitude factors effect leading the journey to performance excellence?

21. Findings and Results • Identified 35 key variables from over 200 variables studied • The 35 key variables were organized into five categories • Leader behavior • Leader approaches • Forces of change • Culture • The individual leader

22. Findings and Results Evolution – more likely to drive continuous improvement Focus on Systems – strongly motivated to work on systems and processes Sole Responsibility – Less likely to think sole responsibility is important Focus on the Past – Studied the past to make better decisions in the future Focus on Information – strongly motivated to work with facts and knowledge Tolerance – More intolerant of people who are not on board with the transformation Six areas where there was significant difference between Baldrige CEOs and non-Baldridge CEOs

23. Strategic thinking permeates all the major differences • Strong alignment and confirmation of Deming and the System of Profound Knowledge as well as other systems thinkers like Peter Senge • Quality tools can be used to enhance the strategic planning process Conclusions and Potential Applications

24. Affinity Diagram and Interrelationship Diagraph (Cross Impact Matrix) • Very useful quality tool for root cause analysis during problem solving. • While not often taught, this process is very effective to use during strategic planning • SWOT Analysis • Underlying problems for implementing SP • Underlying trends (from external scan?) that affect SP

25. Affinity/Interrelationship Process • Through stakeholders or research, identify problems and put on post-it notes. • Organize notes into major categories and sub categories. Try to get the under 20 sub-categories. Under 15 is better. • With participation from stake holders, evaluate each pair of problems in the sub category to see how much one problem impacts or contributes to the other. Score impact using a rubric.

26. Affinity/Interrelationship Process (cont’d) • Row totals indicate degree to which a problem drives other problems • Column totals indicate the degree to which a problem is influenced by other problems • Row minus Column Totals are ranked from highest to lowest. Highest ranks suggest that the problem is a root cause problem. Lower rank indicates a resulting problem. • Root cause problems are probably what should be addressed with the highest priority.

27. Sample Problem related to Team Projects:Major Category - External Factors Physical Issues Other pressing issues Other class needs Restricted access to resources Inadequate/Non-working software No way for multiple people to input Meeting place Instructor Too picky Not enough instructions Guidelines unclear Impractical expectations

28. Problems with Team Projects:Major Category - People Personal issues Lack of knowledge/ understanding Absenteeism Surface learning Not working on weaknesses Mental problems Physical problems/illness Lifestyle issues Procrastination Motivation Lack of respect for each other Members failing to perform Blame game Unequal motivation/dedication People not “on-board” Apathy/lack of interest Compatibility Differing opinions Personality conflicts Closed-minded members Personal relationships interfering with professionalism Misunderstanding of team roles Knowledge not uniform Too many team members Communications Failure to communicate Team doesn’t prioritize Not rehearsing as a whole team Work not checked What did professor want? Final product that is legitimate Time not used constructively Schedule conflicts for meeting together Lack of concentration during meetings Forgetting meeting info People who don’t speak up

29. Problems with Team Projects:Major Category - Organizing Leadership Lack of a good team leader No leader to control the quality of work People just following one person Someone takes over and does too much Missing/bad leadership Final Project Inadequate research Not enough data Working too fast and making errors Not enough collaboration Last minute work going unchecked Slides have too much information Not enough information/examples Material does not relate to project Too many details in presentation Spelling errors Not practicing Not reviewing work prior to submission Completing Work Disorganized Wrong objective Equal distribution of work Record keeping is minimal/missing Not enough time Not scheduling Not following the schedule Poor time management Bad training Individuals not prepared Distractions/downtime Being stuck on one part Bad data collection Tampering with data Underutilizing strengths Not following procedures

30. Example of problems inhibiting success of student projects

31. Developed lists of: • Strengths • Weaknesses • Opportunities • Threats • Took top 5 or so of each and developed cross-impact matrix for affinity process • Assessed impact of each SWOT item on all others • Ranked Row-Column Totals to illuminate critical Threats and Weaknesses or Highest Potential Strengths & Opportunities Example 1 Private School Strategic Planning

32. Example 1 – Cross Impact Matric used for SWOT Analysis

33. Use Results to Develop Strategic Goals • Top four driving SWOT items • New facilities (Opportunity) • Leased facilities (Threat of loss) • Staff development (Opportunity) • Facilities (Weakness)

34. Strategic Goal #1 - Facilities • Short-term goals: Plan for separate sites for K-6 and 7-12 grades. Develop system for maintenance and repair of the facilities • Long-term goals: Provide grass fields for the students. Create an on-site gymnasium for both K-6 and 7-12 sites • Recommendations: Develop a Facilities committee. This committee will address maintenance, repairs, and expansion issues under the direction of the Superintendent.

35. Strategic Goal #5 – Faculty & Staff Development • Short-term goals: Develop strong relationships with local college teacher programs. Continue to nurture the supportive relationship between the Administration and the staff. • Intermediate goal: Mentoring/coaching for newly hired teachers • Long-term goal: Endowment finance faculty/staff development • Recommendations: Institute on-site, biannual, faculty development training and annual, staff training. Invite faculty to apply for additional off-site training opportunities through applying for Faculty Development Grant funds.

36. Example 2 – Strategic Plan Implementation • Small produce company had just completed a week-long off-site retreat with executive team to update their strategic plan • I was asked to help them determine what problems they might have in implementing their plan • Used the affinity process and identified 14 problem areas (sub-categories) • Used a matrix to determine the top-two problems that could prevent them from implementing their SP

37. Example 2 – Strategic Plan Implementation Affinity Results • Ranked Item #1 – Language barrier between workers and management (would inhibit the ability of management and workers to communicate, work on problem solving teams, etc.) • Ranked Item #2 – Lack of mathematical skills of workforce (inhibit use of SPC and other tools for process improvement) • Executive team agreed the results were valid and confirmed what many had suspected all along.

38. Example 2 – Strategic Plan Implementation Action Plans • Language barrier – • Immediately started Berlitz classes two mornings per week for management. • Planned to offer English classes for operators. • Math skills – • Tested workers who believed they had good math skills. Promoted three to in-process-monitors in the quality department to develop them. • Planned to hire a community college instructor to teach math to employees.

39. Example 3 – Trend Analysis for Strategic Planning in Higher Ed • Trend Analysis • Top 20 Trends in Higher Education • Cross Impact Matrix • Driving Trends • Resulting Trends • Root Cause Trends

40. Cross Impact Matrix Development • Research produced trends common to higher education. • Cross impact matrix would produce information that could be used by each institution depending on vision, mission, and institutional external and internal scan data.

41. Cross Impact Matrix of Trends • A cross impact matrix was constructed using the top twenty trends from six major areas. • Some trends are positive and some trends are negative • Each trend was paired with every other trend to assess whether or not that trend had positive or negative impact, as viewed by the participaing group. • A 20x20 matrix was created.

42. Matrix Scoring • Scoring was based on the following (row trend impact on column trend): +2 Major Positive impact +1 Positive impact 0 Negligible impact -1 Negative impact -2 Major Negative impact

43. Matrix Summary • Row totals and column totals were computed from the matrix and rankings determined. • The interpretations are very helpful in assessing the impact of trends for SWOT analysis, needs analysis, and other aspects of strategic planning.

44. Top 20 Trends in Higher Education • Increasingly unprepared students • Increase adult learners / professional programs • Expanded learning environment / partnerships • Increase in computer technology • Increase distance learning • Increase demand for computer literacy • Outcomes assessment • Decreasing funding • Affirmative action • Increase competition from private sector

45. Top 20 Trends in Higher Education (cont’d) • Increase in immigration/demand • Increase of language diversity • Increase of ethnic diversity • Increasing demand for higher education • Increase in class disparity • Increasing demands on curriculum • Increasing criticism of tenure • Increase in attack on shared governance • Aging faculty/ increasing retirement age • Decrease in liberal studies

46. Row Totals – Trend drivers • Strong Positive - Trend has a strong positive multiplying effect on other trends. Consideration should be given to proactive strategies and support: • Outcomes Assessment (18) • Expanded Learning Environment / Partnerships (17) • Increased use of Distance Learning (8)

47. Row Totals – Trend drivers • Strong Negative: Strong negative multiplying effect. Consider strategies to protect against or eliminate effects. • Decrease in funding (-23) • Increase in unprepared students (-20) • Increased immigration/demand (-13) • Increase in ethnic diversity (-12) • Aging faculty/Incr. retirement age (-10)

48. Summary of Trend Driver Analysis • Decreased funding and more students with special needs will tax higher education. • An aging faculty will continue to tie up funds that could be used for younger faculty. • Outcomes assessment will help streamline delivery of education, improve quality, and address the needs of a more diverse clientele. • Small gains will be made with strategic partners.

49. Row minus Column Totals – Root Cause Trends • A measure of the root cause or underlying effect of the trend. • Be proactive in planning for negative trends. • Taking advantage of positive trends to the extent possible.

50. Root Cause Trends (Row – Column) • High Negative • Increasing immigration/demand (-13) • Increase in unprepared students (-11) • Increasing ethnic diversity (-10) • Aging Faculty/Increasing retirement age (-9)