Deming’s 7 Deadly Diseases

Summer is always a chance to catch up with the classics. So apart from studying Competitive Advantage (more on this on a later post), I came across Deming’s “Out of the Crisis” where he mentions the 7 Deadly Diseases of management (via Curious Cat):

1. Lack of constancy of purpose
2. Emphasis on short term profits (Overreaction to short term variation is harmful to long term success. With such focus on relatively unimportant short term results focus on constancy of purpose is next to impossible.)
3. Evaluation of performance, merit rating or annual review
4. Mobility of top management (too much turnover causes numerous problems)
5. Running a company on visible figures alone (many important factors are “unknown and unknowable.”
6. Excessive medical costs
7. Excessive legal damage awards swelled by lawyers working on contingency fees

One can see that the first 5 form a chain of incompetence. High turnover (4) makes management short sighted (2) and running the company on visible numbers alone (P&L) (5), which in turn leads to a lack of constancy of purpose (1). The latter is I believe the ultimate sin: without clear purpose there can be no strategy, and this leads to a company that pursues divergent goals at the same time: low cost position, top quality, differentiation. Usually, this leads to mediocre performance and below average returns (e.g. Grundig in the home electronics industry – which went from iconic high quality brand to jack-of-all-trades failure).

What is interesting, is the fact that the path to mediocrity  is quality > low cost, rather than the other way round:

The company either loses its actual quality advantage and is forced to compete on cost, or the product becomes a commodity so there is no perceived quality advantage. The company tries to compete on cost but usually is not equipped adequately (manufacturing- and culturewise).

It seems that in order to achieve constancy of purpose a long view is essential. But with high turnover this can be elusive…