PUTTIN' COLOGNE ON THE RICKSHAW

Back in the 1980s Ford Motor Co. had a marketing slogan, “Quality Is Job One.” Catchy slogan; however in the final analysis it did little to raise the quality of Ford’s cars. For that matter all American cars of 1980s and 90s vintage were junk and thus there’s no doubt why the Japanese auto makers soon took center stage in car quality and thus sales. Ford’s car quality, and that of the rest of American auto industry, really didn’t see any improvement until the 2000s.

For the Japanese their preeminence was spawned by the work of people like W. Edwards Deming (1900 – 1993), an American statistician, professor, author, lecturer and consultant, who is best known for his work in Japan from 1950 onward, where he taught Japan’s top management how to improve design and product quality, through the application of statistical methods. The rest is history regarding the quality of Japanese cars.

For American car makers it really wasn’t until they had lagged so far behind that they were on the verge of going out of business that they finally got a clue; that buyers wanted quality products not just cheap throw-aways. It wasn’t until faced with bankruptcy that they finally realized that quality really is job one.

Why did the Japanese seems to “get it” while the American car industry didn’t? Well for starters the Japanese had Deming. Deming preached what is now known as The Deming Philosophy, which simply states;

• When organizations focus primarily on quality, defined by the following ratio;

Quality = Results of work efforts / Total costs

              Then quality tends to increase and costs fall over time.

• However, when organizations focus primarily on costs, costs tend to rise and quality declines over time

With the help of Deming the Japanese focused on the first path, focusing their attentions on product quality and they reaped the rewards, not only in the quality of their products but in the market share they captured. If Deming’s principle is right then their resultant declining costs, coupled with increased market share, meant in the final analysis that they were making more money. More money allowed more investment in Quality and the cycle continues, thus increasing quality = increased profits. What’s really important to grasp here is that increased profits happened even after making short-term investments in quality; investments which seemed to fly in the face of reporting increased short-term profits.

It’s so simple it would appear to be a no-brainer, however when we look at the American business mentality that’s still around today, we find something that defies logic. In American (and many other countries) the primary focus of management is on costs, not quality. As I write in my book, Puttin’ Cologne on the Rickshaw, these are the companies that try to “shrink their way to greatness.” These are the companies that, in the interest of cost savings, are constantly and routinely having lay-offs−trying to shrink into greatness. In the end, these are the companies that (as Seth Godin describes) are on a “relentless race to the bottom.” So in the end companies with this mentality get exactly what they create. And the funny and sad part is they didn’t get it in the 1980s, the 90s, the 2000s and they don’t get it now. Why doesn’t the rest of American business learn from Deming and the auto industry?

It’s because this financial (cost) obsession is truly a pandemic from which most modern organizations suffer. In his August 2011 article “Harpagon’s Miseries,” Giancarlo Livraghi calls this obsession, “Harpagon’s Syndrome.’  The syndrome is derived from the main character, Harpagon in the play L’Avare (English; The Miser), a 1668 five-act satirical comedy by French playwright Molière.

In the play, Harpagon is a wealthy, money-mad old widower. He loves money more than reputation, honor, or virtue, and spends his time watching and guarding over it. It’s what destroys his relationships with the world. Fearful of being robbed and killed for his wealth, he buries his money in his garden. As for the real treasures−his children−he marginalizes and dominates them. He deprives them of independence by denying them money. The best way to describe Harpagon’s condition is that he’s in such a constant state of fretting about his money that he becomes a tyrant. He commands absolute obedience of those around him and fences in his world to protect himself.

Organizations also suffer from Harpagon Syndrome and do the same fretting about the financial condition of their business. As we know, modern business is completely motivated by the short-term monetary measures that the market requires of them, so they fret about short-term profits and will do whatever it takes to maximize them−which usually equates to being in constant cost-cutting mode. And, of course, we know most companies only know how to cut costs by laying-off people. Organizations infected with this condition become unbending in their belief that what they’re doing, and the processes they have in place will guarantee their success. As those processes fail to provide the necessary results, Harpagon’s Syndrome worsens. It’s this syndrome that determines whether an organization is being led, or being ruled.

You might say you can’t blame them, the market requires the constant profit growth, but as the auto industry has shown, there’s another path to achieve this that’s not that well-trodden. If companies would only focus first (job one) on the quality of their products and services they would come out further ahead in the long run. And I have to add here that “quality of the product” doesn’t just pertain to quality workmanship of the people producing the product−it also means “quality of product design.” Quality starts with how the product is designed and this is where the time and money investments need to be made if an organization truly wants revenue and profit growth. Without that, all the “lean manufacturing” and “six-sigma” initiatives won’t help a company achieve what the Japanese have.

In my book Puttin’ Cologne on the Rickshaw, I lampoon the “metrics mentality’ of modern business. Modern business measures everything to the n^th degree, however meaningless it might be to the long-run health of the organization. Of course, the majority of metrics on the list are all related to “costs.” What’s interesting however is despite the laser focus on costs; the costs many businesses typically don’t pay attention to are the “costs of quality.” This is not the cost to produce a better product or service, it’s the cost incurred when not building a quality product (rework, repair, customer returns, lost business, reputation, pride, etc.).

When quality is high there is a corresponding reduction in the cost of quality. Thus this is ultimately the only metric that makes a difference and the most important cost to measure. Businesses need to focus their attention on designing quality products instead of chasing cost as if it were a commodity. Cost is a “result” of how business is conducted not an entity onto itself. The Deming Philosophy is just as pertinent in today’s business environment as it was in the 1980s.