Today when we talk of modern management principles, they are generally the post second world war principles which started in United States in late forties but got prominence only in early fifties when they got implemented in post war resurrection of Japan. Only after the change in management principles turned Japan from an Industrial dwarf (pre-war) to an industrial giant, these principles got worldwide prominence and acceptance and soon were applied in the industries and organizations throughout the world. The beauty of these principles is that they are not organization specific. They can apply equally to an auto industry as well as a coffee shop. When we talk of these revolutionary principles and techniques, three names and their theories and techniques are mainly referred to even after six decades. They are;

• Josef M. Juran
• Edward Deming
• Kaoru Ishikawa

However before we start talking about the three stalwarts of the modern management principles, it is imperative to note that these gentlemen made these remarkable achievements by implementing the revolutionary principles and theories developed by the greatest socio economic scientist and political scientist, mathematician and philosopher of the 19^th -20^th century; Vilfredo Pareto.

Vilfredo Pareto, popularly known as Pareto along with his principles and techniques was a man of such a multi-dimensional expertise that it requires volumes to describe his achievements and research publications. However today we will limit our talk to his studies and subsequent principles which relate to the later days revolution in management theories and techniques.

Pareto born 1848 – 1923 was a civil engineer by profession. He got engineering degree in 1870 and started his engineering profession but due to his research and analytical works in socio economic and management fields, soon(1886) he was teaching economics and management at the University of Florence and later years in Switzerland till the end of his life.

Pareto’s thesis in his civil engineering degree course was ‘The Fundamental Principles of Equilibrium in Solid Bodies’. Soon after his graduation Pareto started his owns study of ‘State of Equilibrium in the Distribution of Wealth in Italian Society’. In his study, Pareto deviated from the prevailing principle of carrying on analyses based upon popularly accepted figures in the Data institutions. He started his works by collecting actual data from various cities of Italy and Switzerland. His research paper completely changed the popular paradox of the wealth distribution in the society. His research and publications were wide and exhaustive; mainly on economic reforms, government role in various institutions, power wealth theory (political power transforming into accumulation of wealth), social problems etc. However we would rather limit our discussion on Pareto’s basic principles later applied in modern management principles and made quality improvement of organizations so technical and simple.

Pareto first discovered that 80% of the land in Italy belongs to 20% of people. This led to famous Pareto Distribution which is also called today as 80-20 principle. Later Pareto published that every malice and problem of a society conforms to the 80-20 pattern.

Without discussing more about Pareto and his research and achievements, which were mainly in socio-economic field, we will now start our discussion on how the Pareto Distribution (especially famous Pareto curve) were implemented in the modern management principles especially those implemented in Japan in early 50s.

After devastation in Second world war Japan’s elders decided to focus on economic growth instead of trying to become military power. Pre-war Japan’s industries had a reputation of poor quality and cheap but unreliable products. Famous term Japanese doll was popularly used for any fragile and unreliable material. European Industrial giants like England, Germany, Italy, had completely overshadowed the reputation of Japan’s industrial products. Japan’s elders knew that without a revolutionary change in the reputation of their industrial products, they cannot put the country on her feet. Japanese decided that in spite of nuclear bombing of Hiroshima and Nagasaki, their only respite is to shed the grievances against USA because due to General McArthur’s efforts Japanese were coming in contact with many expert Americans who were sympathetic to japan. In early 50s Japanese came in contact with two Americans who by that time were already famous because of their research, publication and successful implementation of modern management principles and techniques. They were Josef M. Juran and Dr. Edwards Deming. Japan begged them for their services and these are the two gentlemen who are responsible for the rise of Japan from an industrial dwarf to an industrial giant. We will now talk about these two gentlemen and their principles.

Josef M. Juran

It was Josef M. Juran popularly known as Juran, who was the first to implement Pareto principles in his profession.

• Statistics through actual data collection, later changed by Juran as data sampling when the data was too large.
• Pareto 80-20 principle.

Juran (1904 – 2008) was a Jewish Romanian American Electrical Engineer by profession. Later in his career he studied Pareto principles very keenly and found out that without properly analyzing the root cause or the major problem or problems in an organization, the management may be taking actions which may cost more and yield less results. He made his own study of various industrial and social behaviour in the light of pareto’s 80-20 principles and developed the famous Pareto curve which even today is used as a prime tool for eliminating the impediments towards the progress of an organization.

Later study and data collection in the fields of individual interest revealed many more examples.

• 80% of a stock is filled with 20% of the products.
• 80% of the profit is achieved with 20% of customers.
• 80% of the wealth is owned by 20% of the persons.
• 20% of the reasons are responsible for 80% of the disease.
• 80% of traffic pollution is produced by 20% of the vehicle
• 80% of customer complaints are about the same 20% of your projects, products or services.

This may slightly vary from country to country or organization to organization; 70-30, 90-10, but still it is popularly called Pareto Principle or 80-20 principle.

Juran developed the principle of ‘Vital Few & Trivial Many’ that a high level of efficiency (80%) can be achieved with limited means (20%). But if a management issued orders to actions on ad hoc basis and not based upon detailed study and data collection, it is just possible that after taking 80% of action (investing more money, man hours and resources) you achieve only 20% of benefit and yet there may be celebrations that the set targets have been achieved.

Juran publication on “Cost of poor quality” was based upon hard realities but was not much welcomed in corporate sector. Any corporate, if registered a profit less than what was targeted, it was considered a loss and the popular solution was to reduce the cost; meaning reduce the quality. Juran cautioned the corporates that once the effect of poor quality is registered in the market and your competitors have steps in, it takes a considerable cost and time to come out of the negative effect.

The first edition of Juran’s Quality Control Handbook in 1951 attracted the attention of Japanese Union of Scientists and Engineers (JUSE) and on their invitation he moved to Japan in 1954. Juran worked on the principle of quality of the end project and described the ‘Cost of Poor Quality”. Juran’s publication ‘Juran Trilogy ‘mainly focused on Quality planning, Quality control and quality improvement. Juran is widely credited for adding human dimension to quality management; pushing for education and training of managers. However his suggestion that top and middle managers need training was not welcomed, rather despised in the USA corporates.

One example of Pareto Curve is put up below. The subject is Pre-requisites of country’s Economic/Industrial Growth

If instead of considering the vital few they are busy in making industrial zones and inviting FDI, we know, what are the chances of success.

Another example of Pareto curve with respect to Public Health is as below.

You keep on making hospitals and they will never be enough. You keep on making medical colleges and there will never be enough doctors to tackle the ever increasing health problems. But instead you invest on providing the citizens with safe potable water and crack down on food adulteration and industrial waste polluting air and water, probably the present nos. of hospitals and medical colleges will be adequate.

The successful use of the Pareto principle was applied in late 50s when Datsun and Toyota of Japan decided to manufacture trucks. Advised by Juran they made survey in all the countries where they wanted to sell their trucks. They talked to the transporters of various countries and the result of the survey was stunning. Majority of the users wanted small trucks (pickups). Those days if you want to carry your sofa set or a refrigerator you will either hire a donkey cart or a 10 Ton truck. But 1 Ton pickup was high on public demand as shown on Pareto Curve. We all know what a revolutionary product was a small pickup.

Every organization has to generate its own Pareto curve based upon its goals, resources and working culture.

Dr. Edwards Deming

It is worth mentioning that Pareto’s’s 80-20 principle, Juran and Ishikawa’s works mainly created the necessary tools to analyse and prioritize the problems but the man who changed the complexion of modern management was Dr. Deming.

Dr. Edwards Deming popularly known as Deming (1900 – 1993) was the main factor behind the successful industrial revolution of Japan and latter his management principles got acceptance in every organization around the world.

Deming was also an electrical engineer by profession but due to his prowess in mathematics, developed the sampling techniques which were used first time during the 1940 U.S. Census, formulating the Deming-Stephen Algorithm for Iterative Proportional fitting in the process. In 1947 Deming was involved in early planning for the 1951 Japanese Census as requested by US Army then occupying Japan. There the Japanese learned about Deming’s expertise in quality control techniques and thus Deming was invited by the Japanese Union of Scientists and Engineers to teach them statistical control for the reconstruction of Japan. Today Demin’s quality circle principles are adopted throughout the world in small as well as large organizations.

We will go through the major Deming principle.

• Create communication to all employees a statement of the aims and purpose of the company. Don’t forget that if top management failed to formulate and enforce a policy of the company then each manager will follow his own policy and the company will have 10 different policies if there are 10 middle managers (department heads)
• Adapt to the new philosophy of the day; industries and economics are always changing.
• Build quality into product throughout production
• End the practice of awarding business on the basis of price tag alone; instead, try a long-term relationship based on established loyalty and trust.
• Work to constantly improve quality and productivity
• Institute on-the-job (in house) training
• Teach and institute leadership to improve all job function.
• Drive out fear, create trust
• Strive to reduce intradepartmental conflicts.
• Remove barriers that rob people of pride and ownership
• Educate with self-improvement programmes.

Deming had realized that unless revolutionary changes are made in the culture of the management, industries and organizations cannot cope up with growing challenges.

The basic change Deming brought in the management was completely contrary to the pre-war principle. He stated that the most precious asset for any organization is its employees. Instead of always keeping the employees under threat of losing their job (a pre-war popular management principle), they should have faith in maintaining employment if remain loyal and productive as well as improve and adapt to the changes in the company’s culture.

Deming stated that majority (85%) of a worker’s effectiveness is determined by the environment (created by top management) and only minimally by his own skill. Deming always stressed in the improvement of management and the environment of an organization.

Employees should be regularly monitored about their performance, their skills, strength and weaknesses.

Their weaknesses be reduced through in-house training.

Those who are on decision making position should be appraised of the Company’s principles and leadership qualities be generated into them through regular lectures and training.

The most important factor is relation between employees especially intra- department relations.

In order to generate ownership of the company in the employees, Deming suggested the theory of Quality Circle. Quality circle is mainly instrumental in generating real data of problems and subsequent suggestion (through brainstorming) by the employees.

In a Quality circle or circles (more than one quality circle can operate at a time in an organization) 5 to 9 employees of different category engineers/ draftsmen/ Clerks form one group. Each group (quality circle) be given one task to discuss and each employee (regardless of his status) should be allowed to express his views freely without the fear of being ridiculed by the seniors. If head of department is also a member, he will never talk in the meeting but note down the views of others. However when he prepares the final report to the management he will write the conclusive outcome of the group discussion along with his own views.

Quality Circle meetings should be during office hours with tea and snacks provided by the management.

Allowing the staff (especially the lower staff) to talk on company problems would create a sense of ownership in them. Ridiculing a staff in front of others steals away part of his efficiency (without the employee actually noticing it himself) and the employer is the actual loser.

Deming insists that if you praise an employee, do it in front of all. If you want to reprimand a staff, give him a private meeting. If a staff is failing to improve, discuss his failures and shortcomings in a private session, explain all his weaknesses, ask him to improve, If he is stubborn he should be told either to improve or leave. Bad and stubborn staff not only spoil others, but also dishearten the good employees as well as destroy the culture of the company. Employees who do not mix with others and are short tempered should not be encouraged. Deming always stated that first thing to study and improve is the culture of the company. Once decided it should be made a guideline for every employee to follow.

Deming also asks the Management to constantly monitor the Company’s performance, efficiency and reputation and set targets to improve in all fields. Deming’s famous zero error theory became very famous in the Industrial management. He asked Toyota what is the error percentage which is within acceptable limit. Toyota said 2%. Deming stated that without going into your data records, I can say that your failures are between 1.5% and 1.9%, a matter of celebration. Make it 1% and you will get errors between 0.5% and 0.9%. Astonishingly this really happened in Toyota industries. However this did not happen just by reducing acceptable error percentage. Deming and Toyota called a meeting of all mangers and asked them to study the sections which had registered more than 0.5% of error. Gave them 45 days, to come with full study and recommendations to reduce the error percentage. After hours of brainstorming a new policy was announced and error percentage was successfully achieved below 1%.

The question is why Deming could not bring these changes in American Industries. It was all because American business and industries at that time were dominated by whites who were not prepared to involve the workers especially coloured race in the management. American business culture was the same as rest of the world ‘Whim of the owner’.

Ford motors were the first American company to seek help from Deming. In 1981 Ford’s sales were plummeting. To Ford’s surprise Deming did not talk of quality. He talked about management telling Ford that Management actions are responsible for 85% of the problems in developing better cars.

Following Deming’s techniques by 1986 Ford was the most profitable American Auto company.

Deming stated that experience alone is worthless. If a person does not improve his knowledge with years he will remain useless even after years of experience.

Deming made a principle to train top management only. He used to say that top management only is responsible for any good or bad of a company. Top management have to formulate the culture of a company and ensure that the culture is implemented by the middle management.

Demining never talked without data. He used to say “ In God we trust all others must bring data”.

Dr. Kaoru Ishikawa

Deming’s Quality Circle and Juran’s Pareto Curve techniques were further polished and strengthened by the great idea of Dr. Kaoru Ishikawa through famous Ishikawa Diagram popularly known as Fishbone Digram also as Cause and Effect Diagram.

Dr. Kaoru Ishikawa (1915-1989) was also an engineer by profession (Applied Chemistry) graduated in 1939. He joined JUSE and presented this principle in early 60s and soon it was widely accepted throughout the world as the most powerful tool for brainstorming.

A thick line is drawn on a paper. All members are invited to discuss various reason (on one subject at a time) which are impeding the improvement in that field and all causes noted. In the end the group will be able to identify the actual problem or problems impeding the improvement thus a task set for future. The above example is about losing clients by not fulfilling the commitments; dates and quality. Employees were allowed to freely express their views even when some of them talked about food quality and incompetent staff. Regardless all comments were recorded. Ultimately, the fault was in the policy of top management.

An example of the successful usage of the Ishikawa Diagram was reported by an electronic industry of Japan where girls were assembling and soldering electronic circuit boards.

They found their failure ratio quite high. They started analysing data. Surprisingly the failures were not the work of one or few employees but almost every employee registered failures. Company knew that the employees are all highly skilled. Further data analysis showed that most of the failures were work done in the afternoon.

Through brainstorming using Ishikawa diagram they found out that the monotony of the work and constant body posture was making them sluggish and tired. Body was sending negative signals to brain effecting their concentration.

On experts advise the company started a practice that after each 2 hours of work, the employees were taken in a bright hall and made pity exercise for 10 minutes. The result was stunning; zero failure.

As Deming says that techniques change, the market changes and so should change the culture of a company. For this it is imperative to follow a regular analysis of the company culture in the background of changing market climate in order to meet the ever challenging behavior of the market.

This is worth mentioning that the three gentlemen who started with the resurrection of Japanese industries in mid- fifties were responsible for Japan to be accepted by 1971-72 as the world leader of industrial quality.

Eric Berne’s Transactional Analysis

In mid 1950s Eric Berne published his work on human transactional analysis and developed the famous PAC (Parent, Adult, Child) theory. However Eric Berne was not a management specialist. His field was human behavior. Later management specialists realized that management is all about human behavior, right action in right time. From late 70s Eric Berne’s PAC theory or transactional analysis was taught in almost all management institutions.

Child Receives instruction

Adult Gives instructions to his juniors and receives from his seniors

Parent Gives instruction and receives feed -back and reports.

The management problem is when the above three do not act how they are expected to act. In order to make things simple, I will give example of an Architecture Engineering Design & Supervision company.

• A child is a fresh graduate from university and is posted in a junior position somewhere on a project. He is expected to learn from his juniors as well as his seniors. He is not supposed to produce anything. Instead the company is investing in him so that after 4-5 years he becomes productive. However the engineer is an university topper and back of his mind he thinks the company has not done justice with him by placing on such a junior position. He does not give any respect let alone listen to his foreman. He even considers his seniors as inferior to him because they do not have academic excellence like him. Such an engineer will remain stagnant with his knowledge.
• An adult is let us consider, an engineer with 10-15 years of experience. He takes decisions on normal affairs. In case of disputes or bigger problems, he refers to his senior such as department head. However if the person has not developed leadership quality, he will never take any decision himself. He will involve his senior always with the intention that in case of a failure the blame will go to his senior. Playing safe will encourage him to believe that if he does not take a decision, he will never be blamed for any failure.
• Worst happen when a parent (top management) person does not live up to his responsibilities. Let us consider an architect who is best of all. He has brought lot of praise and business for the company. So the management wants to reward him and promote him on the position of general manager. His responsibilities are now completely different. He has to meet the clients, prepare report on his studies of clientage requirement, culture and hurdles in ministries, cost vs. efficiency. He has to coordinate with different departments and fix targets.

However back on his mind, he knows that it was his prowess in the field of architecture design which got him praise and promotion. So he keeps on interfering in the design of all architects and keeps on giving them suggestions and amending their designs. His suggestions may be valuable, but he has no time for his actual job so he keeps on fighting with the clients and also with the department heads by making commitments not coordinated with department heads.

I will blame more to the top management who failed to pass this notion to him that from the day of his promotion, his performance will be evaluated based on his achievements on his new responsibilities.

One more publication of Eric Berne is widely applied in management trainee. It is;

What do you say

Effect of what you say depends;

Actual words 7%

The way words are delivered 38%

Facial expression 55%

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M.Fakhar Mahmood

Electrical Engineer by profession