The W. Edwards Deming Institute Blog

Dr. Deming Video: Managing the Organization as a System

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In this short video clip from The Deming Library (volume 14 – Understanding Profound Knowledge) Dr. Deming discusses the importance of understanding the inter-dependence within a system. This idea is fairly easy to accept. But to manage in a way that focuses on improving the entire system instead of improving sub-processes within a system independently is something many organizations fail to do.

It is fairly easy to appreciate that optimizing components within a system can easily create problems for the overall system. But it is hard to accept that we have to manage the entire organization in a coordinated way instead of just assigning responsibility for certain areas to executives and holding them accountable for optimizing their areas.

The component sub-processes are necessary but not sufficient of themselves to accomplish the aim of the system.

Management of the system therefore requires knowledge of the inter-relationships between all the sub-processes within the system and of everybody that works in it.

By understanding a system one may be able to predict the consequences of a change.

The greater the inter-dependance between sub-processes the greater be the need for communication and cooperation.

Management’s job is to optimize the system.

It would be poor management to, for example, optimize sales, anything to sell; or to optimize manufacturing, spend all their energy on manufacturing. This would be sub-optimization [of the system] causing loss. All these activities should be coordinated to optimize the whole system.


Some organizations succeed at thinking and managing while putting the organization as a system above the individual components but most do not. The 14 points offer advice on practices that make optimizing the system difficult and what should be done to succeed. When individual bonuses and annual performance reviews are part of the management system it is much easier to break up the system and assign pieces to people and hold them accountable for those pieces.

Thinking about how actions will impact the whole system is quite challenging when that hasn’t been how things are done. I believe once people develop an understanding of the organization and appreciate how inter-related the aspects of the organization are thinking in this way is no more difficult. But getting the organization so it has the capability to do so, often is a significant challenge.

As you manage in this way over time it makes management much easier. You eliminate a great deal of fire fighting. You install mistake proofing (which also limits fire fighting). You know the organization better and better predict the results of actions (and again reduce the need for fire fighting). And there are many many more such benefits.

Related: Deming 101: Understanding SystemsDistorting the System, Distorting the Data or Improving the SystemPeople are Part of the Management System
Eliminate Sales Commissions: Reject Theory X Management and Embrace Systems Thinking


Categorised as: Dr. Deming, systems thinking, video


2 Comments

  1. […] “A company could put a top man at every position and be swallowed by a competitor with people only half as good, but who are working together.” W. Edwards Deming […]

  2. […] Dr. Deming discusses the interdependence of business in: Managing the Organization as a System. […]

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