MASON/MASON: Geared for happiness

COMMENTARY:

A surprising and ultimately happy ending to the controversial auto industry bailout may be possible.

A positive outcome requires the proven management ideas of a former U.S. Census Bureau employee, W. Edwards Deming. The current discussion about bankruptcy reorganization, curbs on executive compensation and payment of dividends - even replacement of top management and director - won’t save the carmakers or help America.

The Detroit Three will soon run through a cash infusion because they are not competitive in the longer run even if relieved of their pension liabilities and union contracts. American carmakers need help not only to build the right cars but also to build cars the right way.

Toyota and other Japanese export companies credit Dr. Deming with teaching them “to work smarter, not harder.”

“Now more than ever, we need to remember Deming’s teachings: simply put, quality first and follow through with the honest practice of developing quality products and quality people,” is how Shoichiro Toyoda, chairman and former president of Toyota, explained it. Translated: make products of continually improving quality and everything else - increasing market share, cost reductions, and growing profits - will follow.

Ironically, Toyota’s management philosophy has deep American roots. Dr. Deming, who died in 1993, lived quietly on Butterworth Street N.W. in Washington, D.C., for more than 50 years.

He began to develop his management ideas as a boy on the Wyoming frontier in the early 1900s as he observed the benefits of continual improvement of farming practices taught to his neighbors by the U.S. Department of Agriculture’s extension service. This government-sponsored education in best farming practices allowed America to become the world’s leading producer of food and fiber and was the basis of our successful economy. Deming would later speak of the cooperation among the townspeople at barn-raisings and quilting bees rather than the Hollywood myth of loner cowboys shooting each other and Indians to settle the West.

Deming liked to tell how the Great Western Sugar Com. would take newspaper ads to advise the farmers when to plant, thin and harvest their sugar beets so they would get the best crop. This led him to advise Toyota to work with their suppliers and customers rather than go for the lowest price or highest profit.

If GM, Ford and Chrysler were enabled to anticipate, design and produce continually improving cars that people want to buy - a basic tenet of Deming’s ideas - the industry could not only become profitable but it could be a leader in helping more American businesses, schools, government agencies and hospitals to adopt this “working smarter” philosophy.

This could be similar to how the Department of Agricultural Extension Service helped the farmers. “Working smarter” requires understanding and managing organizations as complex social systems. Management’s focus is the relationships among cooperating workers, managers and departments. As Dr. Deming was fond of saying: “Then the design department won’t design a car that production can’t make and the marketing department can’t sell.”

Continual improvement of how the work is done yields more effective, efficient and profitable results in a rapidly changing, competitive market. Toyota is said to receive more than 1 million suggestions each year from its workers and acts on more than 90 percent of them.

Using Deming-Toyota methods numerous American hospitals, schools, and companies from Harley-Davidson and Hillerich & Bradsby’s Louisville Slugger baseball bat factory to 20 SSM Hospitals in the Midwest and 40 southwestern Pennsylvania hospitals have dramatically reduced costs and improved products and services over the last 25 years.

Although divisions of each of the American auto companies have implemented many of these ideas, but managements interested in short-term profits never followed through. Instead, they lobbied Congress for relaxed fuel efficiency standards. Deming’s philosophy of continual improvement seems almost unpatriotic in the land of “If it ain’t broke, don’t fix it.”

The near-term challenge is twofold: Build fuel-efficient, hybrid-electric cars while continually improving the way they are built. There is no other way to survive in the global market.

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