What Can We Learn from Deming? Can the Mortgage Business Learn Something from the Principles That Helped Japan Become a Master Global Competitor in Electronics and Automotive Manufacturing?

Article excerpt

W. Edwards Deming is the person most often credited with converting the label "Made in Japan" from one denoting junk to one meaning quality. At the request of Gen. Douglas MacArthur, in his role as supreme commander of Allied forces in the Southwest Pacific theater, Deming brought his management concepts to Japan. [??] Over a period of several months in 1950, virtually every leader of Japanese industry attended one of Deming's conferences. At these conferences, attendees learned how to use statistical concepts to measure output, analyze root causes, improve efficiencies and control gains. Many of his concepts are well-known tools to the Six Sigma practitioner. [??] The Japanese so appreciated Deming's contributions that they named their highest quality award after him. The Deming Prize is akin to the Malcolm Baldrige National Quality Award, awarded by the president of the United States to American companies that best epitomize quality products or services. [??] In 1960, Deming also was awarded The Order of the Sacred Treasures, second class. He was the first American to win such an honor. It was awarded by the prime minister of Japan, Nobusuke Kishi, acting on behalf of Emperor Hirohito.

Yet in America, Deming was not appreciated in the same way. As a result, the principles he taught to Japan cost American workers thousands of jobs as the Japanese became the recognized world leaders in industrial production. It wasn't until the early 1980s that American industrialists caught on to his teachings.

Formal quality programs such as Total Quality Management (TQM), Six Sigma and LEAN are largely based upon Deming's teachings.

Over the span of a couple of decades, and after seeing hundreds of companies succeed or fail, Deming published his "14 points"--which have become the bedrock foundation for hundreds of successful companies such as Motorola Inc., General Electric Co., Boeing and Texas Instruments Inc. Collectively, these 14 points have become known as the Deming Method.

The question posed by this article is what can we in the real estate finance industry learn from Deming? Are his 14 points relevant to the transactional world we live in? This author responds with a resounding "yes."

Deming's 14-point method

Point One: Create Consistency of Purpose

Management has two sets of problems--those of today and those of tomorrow. We're all too familiar with the problems of today: budget, time frames, employee issues, reports and the like. However, a company focused only on today's issues will not be a leader in innovation, research or continuous improvement.

The proven path to creating consistency of purpose is to clearly define your company's purpose through a published set of value statements (sometimes called a mission statement, core values, design statements or company objectives).

However, defining your mission is only the first step. Leaders must breathe life into the statements so they become not just one more thing to do, but how you do everything. According to Jack Welch, former chief executive officer of General Electric, "Good business leaders create a vision, articulate the vision, passionately own the vision and relentlessly drive it to completion."

Point Two: Adopt a New Philosophy

The new philosophy Deming was referring to is an emphasis on quality as a way of making more money. Philip B. Crosby, in his 1979 bestseller Quality Is Free: The Art of Making Quality Certain, points out that the cost of doing something right once is cheaper than having to rework something.

Although our industry is less affected by the cost of machine failure and waste, the costs of errors in our business in terms of dollars, reputation, settling customer complaints, rework and potential litigation are higher than the cost of producing a quality service initially. Simply stated, the lack of well-defined processes capable of producing high-quality output on the first try increases costs. …