Driving Out Fear: The Hidden Risk

W. Edward Deming was an American statistician, management consultant, and professor credited  with influencing the Toyota Production System (TPS) and lean manufacturing (subjects which will be explored on this blog at some point). Along with the Plan-Do-Check-Act cycle and advocacy for statistical quality control (e.g. control charts), Deming developed his 14 key management principles. In this post we will explore #8, “Drive out Fear”.

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“Drive out fear, so that everyone may work effectively for the company”

– W.Edward Deming

I found myself pondering this concept most recently while reading “A Random Walk Down Wall Street” by B.G. Malkiel.  A book first published ~40 years ago which explores the efficient market hypothesis, wisdom or lack thereof of investment gurus, and the madness of crowds in great detail.  In his book, Malkiel discussed the work of Kahnemann & Tversky (critics of the efficient market hypothesis) whose behavioral experiments discovered that people are extremely loss averse and in situations where loss was assured, individuals exhibit risk-seeking behavior. One such example is provided below:

Consider the below options for yourself:

Option 1: Guaranteed loss of $750

Option 2: 75% chance of a $1000 loss & 25% change of no loss

When faced with the two options provided above, Kahnemann & Tversky found that  90% of subjects selected option #2, despite the fact that the expected value of both decisions is the same. How could this concept apply to organizations?

In organizations where individuals are held “accountable”, often a euphemism for a perform or “you’re fired” management philosophy, individuals are put in situations where loss may be assured. Based on the work of Kahnemann & Tversky it is the tendency of the vast majority of people to exhibit risk seeking behavior. In the world of business this may result in shipment of nonconforming product, hiding injuries, violation of environmental laws & policies, etc.

In my own experience I’ve witnessed individuals “manipulating” on-time delivery numbers, supervisors aborting lengthy processes early to meet delivery commitments,  and overriding safety features to reduce cycle times. One organization had a philosophy uttered jokingly by employees on the production floor, “Ship it! We’ll worry about it when it comes back”. As a young engineer I found myself chastising the individuals while seemingly oblivious to the fact that the behavior was human nature and a response to the management system.

For years, quality professionals have been focused on developing detailed “processes”  to the point of annoying everyone within the organization. The switch of ISO 9001(Quality Management System used across many countries & industries as the minimum requirements of a quality management system) from process thinking to risk based thinking has quality professionals around the world preparing SIPOC’s (Supplier-Input-Process-Output-Customer) diagrams and performing FMEA (failure modes and effects analysis) activities throughout their organizations in an attempt to map out organizational risk. I find myself wondering how we eliminate the greatest risk, FEAR in our organizations?

 

“Well, 99% of things done in the world good or bad is to pay a mortgage”

-Nick Naylor, Thank You for Smoking

References:

W. Edward Deming: https://asq.org/about-asq/honorary-members/deming

14 Points for Total Quality Management: http://asq.org/learn-about-quality/total-quality-management/overview/deming-points.html

“A Random Walk Down Wall Street”: https://www.amazon.com/Random-Walk-Down-Wall-Street/dp/0393330338

ISO 9000: https://en.wikipedia.org/wiki/ISO_9000

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One thought on “Driving Out Fear: The Hidden Risk

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  1. Great delivery of the message (really well written!). It may be semantics, but my vantage point is that fear is not the root cause of risk, yet merely a force that will always exists on varying levels, that motivates action that is either good or bad, regardless of its existence. Fear itself does not alter the course, it is the expectation(s) bestowed upon (appreciated by) the organization that actually steer the outcome. Does fear exist in the most Demming-esque plants in America: I would guess that it absolutely does, but instead drives a favorable outcome, albeit it effects the output to a far lesser extent. The human emotion of fear will always exist (on some level or capacity): the fear of failing is no different in a bad plant or in a good plant. Sure in the “Demming plant” you have a dynamic system where all the emphasis is placed in the right areas and the right levers are pulled and one person’s decisions has less potential impact: but that plant is still run by humans, and fear is still there (even if it’s just the fear of not meeting our own personal expectation(s) of performance). So from maybe an off-in-the weeds purist standpoint (and really who am I to challenge anything Demming said?), I would at least suggest that Demming would have made this easier for me to understand if he put it into context (and maybe he did somewhere outside this high-level guide).

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