Using Deming’s Management Ideas at an Auto Repair Company for the Last 30 Years

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Louis Altazan, President of AGCO Automotive Corporation discusses the success AGCO has had applying Deming’s management system to their service organization (car repair). Listen to the podcast.

Auto repair is basically finding root cause. If you don’t find the root cause, the problem is going to come back. You can’t just go in and make a [band-aid ] repair. This [Deming’s ideas] sort of went to the same exact type of philosophy. That is why it made a big impact with me.

I like how he states this. In some systems failure to address the root cause is less obvious than in auto repair. Inside a business there are often so many factors and influences on outcomes that you can find the problems created by root causes popping up all over the place and sometimes it isn’t very obvious at all that they are related.

Once I started reading Deming and understanding I was the problem; thats when things really started to change for me. The first thing I did was call and shop meeting and I actually apologized to everyone there… “everything I did, I didn’t do out of malice, I did out of ignorance. And I promise you this is going to change.”

After that things started to really get a lot better. Of course it took years to get to a point I wanted it to be. We started working on the 14 points pretty much immediately, to the degree we could. We would concentrate on one for awhile and when we thought we had it sort of under control we would move to another and went through all 14 and started again doing PDSAs…

It is nice to listen to people that have been on the journey of improving management for a long time talk about their experience. In the podcast, Louis, mentions that he made changes as best he understood the ideas at the time but as he went to seminars and studied more he learned his original understanding was flawed and so the organization had to make adjustments.

This is one of those truths that is often ignored. People are going to make the best decisions they can but especially when they are new to these ideas it isn’t easy to understand everything and see exactly how to adapt the concepts inside there organization. People must make their best judgements and move forward and then keep continually improving.

He also discusses how the system in many auto repair shops creates incentives for people to put their pay above providing the customer service. Often car repair shops pay employees what amounts to a piece rate. There are prices and times set for various tasks and employees make more by doing work that bills more and by doing work more quickly. It isn’t so surprising when some of them will seek to maximize their income rather than do the best for the customer.

They addressed that issue by moving everyone to a salary. And, not surprisingly, there were grumbling that doing so was mainly to save money on pay. What Louis did was set the salary at the average of the last 2 years pay +10%, which people were very happy with (though some left because they wanted to stay on that old system).

Related: Deming Auto Repair (2008 post)AGCO created a web site on the Deming’s management ideasDeming Podcast with Fred Wambier and Kelly Allan On Applying Deming’s Ideas at Finishing TechnologyBob Browne Discusses His Experience Applying Deming’s Ideas as a CEO


Louis also discussed how the Deming management system is just that – a system. When companies want to adopt only some of the ideas but not others, it will likely fail. The whole system works together. When you try to drive a car but only want 2 or 3 of the wheels and not the others it likely isn’t going to be very successful.

Books Louis recommends: SPC at the Esquire Club, The Leader’s Handbook and a couple of others before Deming’s last two books: The New Economics, Out of the Crisis.

Two nice anecdotes from the podcast:

  1. Once again we are listening to the 30 year journey of a company that started the transformation based on listening to “If Japan Can, Why Can’t We.” It really is amazing how much difference that broadcast made.
  2. He mentions he was surprised when Dr. Deming answered his own phone. This is another story repeated often. Cecil Killian (Dr. Deming’s assistant for 39 years and author of The World of W. Edwards Deming) often answered his phone, but Dr. Deming did also if he was in the office.

The USA health care system also sets what about to piece rate charges for consultations and service delivery. In the real world you often find challenging circumstances. The USA health care system payers (Medicare, insurance companies…) don’t want to be overcharged so they try to come up with solutions which can seem sensible when viewed in a certain light.

The problem is that nearly any solution within a system that can’t rely on trust (which is I think a fact today) has weaknesses and can be abused. But the problems of a piece rate solution are the same today as 100 years ago. And we have those problems in our health care system. Within an organization you can build up trust. The state of the health care system in the USA today is very very far away from one where relying on trust-based solutions is wise.

There are degrees to which that can be done, but there also are real issues with fraud at the macro level that are sustained and significant. The solutions have to deal with the fact that such actions are likely to be part of the health care system today and tomorrow.

Thankfully addressing these issues within most organization is much easier. To a significant extent the larger the organization gets the greater the challenges become. Though they can be managed, it still is a challenge.

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1 Response

  1. Allen Lee Scott says:

    A down to earth, easy to understand, brilliant podcast and implementation of Deming, I learned so much and deeply thank all involved.

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