Deming's Point #10 as Applied to the Insurance Industry

The 14 points of Dr. Edwards Deming are intended for transformation of American industry. We have more than sufficient evidence of similar transformation in Japan with the competitive successes of that country's automotive and high-tech industries. Efforts within individual U.S. organizations, e.g., General Electric, Motorola, Ford (when Donald Peterson was CEO), and others are evident in this country. The question is: Can the U.S. insurance industry be transformed in a similar manner?

This overall IRMI series is intended to motivate leaders within our industry to take their company to the next level of excellence to out-compete others and, as Dr. Deming puts it, "to stay in business and aim to protect investors and jobs." What's fascinating about this challenge is the notion—according to Dr. Deming—that although CEO endorsement is key, these principles can also be applied to a division within a company. He also comments that they can be applied to small companies or agencies as well as to large ones.

I'll close with a suggestion on how you can lead your own organization to learn more about these principles and adopt them effectively. But first, here's Point #10:

Eliminate slogans, exhortations, and targets for the workforce.

Revolutionary comment, wouldn't you say? Have you heard this admonition from any others? Probably not. That's one of the very refreshing aspects of "Quality," as defined and described by Dr. Deming. His "stuff" is still all too original. Moreover, as is typical of his principles, there's much more to be learned beneath these surface comments.

The message here is profound yet understandable the more you think about it. It's also more understandable the more you "drill down" to learn about his teachings. What he's telling us in this instance is this:

When management promotes slogans to "do it right the first time" or "take pride in your work" or Reliance Insurance Company's "Paper Free by '83," management is putting the onus on all employees to achieve zero defects, quality, increased productivity, etc. by, working harder and trying harder. Dr. Deming believed such efforts to be misplaced and undermine not only these objectives but employees' morale and respect for their leaders. This is because the onus really rests with management.

Does this imply all posters are "bad medicine"? Not at all. Dr. Deming comments on page 69 of his classic, Out of the Crisis:

Posters that explain to everyone … what the management is doing month by month to (for example) purchase better quality of incoming materials from fewer suppliers, better maintenance, or to provide better training, or statistical aids and better supervision to improve quality and productivity, not by working harder but by working smarter, would be a totally different story: they would boost morale. People would then understand that the management is taking some responsibility for hang-ups and defects and is trying to remove obstacles. I have not yet seen any such posters.

Have you seen any such posters? Like Dr. Deming, I haven't either.

Management has the obligation and, if you will, the duty to create systems in which these positive outcomes can be accomplished. If systems are not designed to permit employees to work within stable processes to accomplish their expected roles, how can they possibly do so? If employees try to initiate changes in the system on their own, such "tampering" typically will only make the situation worse.

Management's responsibility then is to continuously improve systems and to eliminate any "special cause variation." Such variation is detected through control charts and other appropriate statistical methodologies. When was the last time in the insurance industry that you observed a run chart that was converted into a control chart—with appropriate management response based on what the control chart data communicate?

I recently received a response from an IRMI reader, Charles Cohon, who has applied these principles—including control charts—to the selling process. His book, The Sales Force, was published recently by the Manufacturers' Agents National Association (MANA). Chapters 6 and 8 illustrate the use of these Dr. Deming principles and practices for salespeople. It's recommended reading—especially his sales analogy to Deming's red bead experiment. (These chapters are posted as a free download at www.cohon.com.)

As an insurance broker for 46 years, I can identify with the issues raised by Mr. Cohon—and how conventional posters and exhortations from sales managers and CEOs can work at cross-purposes to accomplish outcomes everyone wants to see.

Additional information, solutions, and Deming principles are available from the Institutes' (AICPCU/IIA www.theinstitutes.org) Associate in Insurance Services program (AIS-25). This program has a combined text and workbook. CEOs should start the process by mastering these skill sets—and mindsets—to transform their organization … beginning with its senior management team.

The new perspectives of systems thinking, a system of profound knowledge, and other benefits will not occur overnight, as these do not constitute a quick fix. However, they do constitute a strategic fix—and isn't that one of any CEO's (or a branch manager's) principal responsibilities?