S4 E5 - Richard Steele - Navigating Cultural Shifts with Deming's Philosophy

In this episode of the Profound Podcast, I engage in an insightful conversation with Richard Steele, founder and president of Peeker Services. We explore his journey from rebuilding locomotives to embracing W. Edwards Deming's principles, leading to a radical change in his company's management practices, particularly around performance appraisals and bonus systems. Steele shares transformative moments, like presenting his new pay program to the Detroit Deming study group, including Dr. Deming himself, and the eventual transition of his company into an employee-owned structure. The dialogue delves into the practical applications of Deming's theories in the workplace, the power of collective problem-solving, and the importance of fostering a culture of learning and adaptation. Finally, we take a look at some of Dick's critiques of Deming's Journey to Profound Knowledge.

Steele's narrative demonstrates a successful integration of system thinking and the profound impact of shifting from traditional merit pay to a more inclusive and equitable model, redefining quality and performance metrics within his organization.

Richard's LinkedIn can be found here:
https://www.linkedin.com/in/richard-steele-6586477/

Transcript

John Willis: [00:00:00] Hey, this is John Willis. We're going to do another profound podcast. You know, I've gotten to meet a few people that had been working with Deming long before I even heard about the guy. And and just another sort of great person to chat about, you know, sort of old world, new world, right.

Or DevOps and all that stuff. But to get the perspective of you know, we had Dennis Surgent, you know, on, we've had Bill Bellows, and now Richard Steele. Richard, it's good to have you on the podcast. Well, 

Richard Steele: I'm glad to be here. 

John Willis: It's always fun. Why don't you go ahead and introduce yourself, your background 

Richard Steele: and all. 

 Okay. I'm Dick Steele. I was the founder and president of Peaker Services. We started in June of 1971 to rebuild locomotives and the diesel engine that goes into a locomotive. Started with the proverbial, two car garage and three [00:01:00] trucks and. And I got two of my friends to go with me and we started rebuilding diesel engines and doing the troubleshooting for Detroit Edison, Detroit Edison had 57 of these things in emergency service operation.

We, we took care of all that. And after 17 years of doing performance appraisals on very good friends of mine went to a Deming conference, and this was in 1988, August of 1988, and I said, you know, I'm having trouble with these performance appraisals. Can you give me a hand with them? He says, well, just stop it.

It's a bad idea. 

John Willis: That was Dr. Deming, 

Richard Steele: huh? That was the Dr. Deming conference, and, so, on the Monday, we got back from, these are four day seminars, and the Monday we got back, I, we used to have Monday morning meetings with the, with the whole group, and there were probably [00:02:00] oh, 15 employees at that point, something like that, and I said, we're gonna, we're not gonna have performance appraisals anymore.

Yay! Yay! Everybody's screaming, oh, wait a minute. How am I going to get bonus? I said, I don't know. We're going to have to figure that out. So we put together a team, a cross section, three guys from the office and well, myself and two other guys from the office and and five from the shop, including one guy that's only been there for a couple of weeks, he was just lost.

He's what, what's going on. And we worked for about three years to put together our pay program. And how we how we divvy up bonus money and things like that. And I 

John Willis: think the part that you probably couldn't, didn't tell my wrote back because then he would have said, there are no bonuses either.

Richard Steele: Yeah, no, we, you know, I want to [00:03:00] sit. Okay. Actually. And about that same time, I think in September Ron Mullen had started the, Detroit Deming study group, which we still have going, but Ron started it and after, after we, you know put this PAITH program together I presented it to our, the Deming study group in Detroit and Dr.

Deming sitting in the front row. Oh, wow. I talk about being scared. Yeah. But in the end he said You know, I see a resemblance in that, in that talk. I said, beg your pardon, but I see something that I've been trying to present then, and that like what you presented. So I was thrown got a. Got a letter from him, which I keep it [00:04:00] in a state, things like that, 

John Willis: because like the thing, you know, when I first read out of the crisis, right.

And it almost felt like, you know, I've, I've built a lot of software companies and, you know, and I've always, you know, like I, I. You've heard a little bit of my background about falling in love with them Deming and buyer beware. It's a treacherous path by becoming a Deming fan because you'll just constantly just be obsessed with learning, which is actually a great thing.

But the 1 part that I struggled with a lot early on with. You know, some of the stuff, once I got over this sort of the basics, then I got a little deeper and where he basically sort of, you know, and you know, the whole idea of individual bonuses and individual commissions and all that stuff, right. You know, he was, you know, sort of very negative and, and, and and it was hard for me to, to like, I tried to compartmentalize that because, you know, like any company, but like.

The lifeblood of a lot of companies, [00:05:00] particularly software sales, is sales. And I've always had this sort of like, I, you know, I like to pay my software sales people more money than they can possibly make because the more money they're making, the more money I'm making. But it took me a while to really get, sort of figure out that sort of moving away from sort of individual commissions and bonuses to a systems approach.

And it sounds like, I don't know if you were already in there, or was that something you learned? 

Richard Steele: No, that that came from, from Deming and then just working it out with the group at the shop. Okay. I don't, I, I did very little of this by myself, except telling everybody we're gonna change, you know, how we do things.

And we have essentially tried to eliminate merit pay, right? The shop now we have bonuses and they're individual. But they're by formula and the formula is your years of service and your rate of pay as [00:06:00] the numerator and the denominator is the the total of everybody's rate of pay and did you get the sense 

John Willis: that Deming was okay with that sort of model or 

Richard Steele: yeah, it doesn't meritocracy associated 

John Willis: with it.

Okay. Got it. Got it. Yeah. Yeah. I knew like you have to have some form of bonus or compensation, right? You know, cause that's, yeah, 

Richard Steele: you, you pay people, we have some meritocracy in the fact that if we're doing better than another, another company you know, we'll, we'll, we'll, we'll be successful. Right. And the guys will be successful along with us.

And I, I, I buy into that. And, and, you know, as a result of all that now, 52 years later, actually it was, wasn't quite that long. But 40 years later, we turned the company into an ESOP where the employees own the entire company. And so now [00:07:00] when, when they retire, they get the value of the stock that they have and they stock all the time and it's divvied up among everybody in the company.

So. I don't, I don't, I don't get any of that. I'm, I'm, you know, I sold my, all my stuff to the ESOP on my shares. Oh, cool. So, 

John Willis: and you mentioned Ron Moen and I, I, you know, I Dennis Sergent, like that's how we met. He, you know, I w I was just sort of rambling on LinkedIn about, man, I wish I could have met this guy.

You know, he just seemed that he, You know, like, you know, like, you know, like, as somebody who's like, really admiring what Deming's talking about and then start reading some of the stuff Ramon was talking about, I'm like, this guy just seems like an extension of me learning about, and it, and he filled in a lot of blanks for me too, so did you get to work with him a little bit, or?

Richard Steele: With Ron? Yeah. No, well, Ron passed away here, 

John Willis: but. No, I know, I know, I know, but when he was, when he was, he was alive, I 

Richard Steele: mean. [00:08:00] Oh, yeah, he was on our, he was one of our board of directors. Okay, okay, cool. So he was, he was, he was with us for quite a few years. Okay. And actually Bill Bellows kind of took his place when, when Ron stepped down and Bill came in and became director of the company.

Oh, okay. 

John Willis: Oh, so Bill was director of your company. Yeah. Okay. He's on our court. Okay. All right. Yeah. I didn't realize that. I knew he, he was at It's a small group. Okay. Okay. There you go. I'll go. And, and I mean, so you, you had some interesting Deming stories, you know, like you some of the seminars you, you know, what was some of the, anything interesting you can tell us about like any interactions with him? 

Richard Steele: Well, the, the, the biggest thing was when he. Agreed with what we were doing for the pay thing, but, you know, I, I, I got to have dinner with him several times because I was friends with Ed Baker, Dr. Baker worked for Ford and he organized [00:09:00] the the comings and goings of Dr. Deming at Ford. So when we would have our, our Deming study group meetings, we, we would have them on an evening when Dr.

Deming was going to be. In town working with one of them and we'd have them at the hotel where Dr. Deming was staying. Okay. So it made it very, very attractive for him to come to our meetings. And he came to virtually all of them. And I was, you know, having dinner with him one night and he said, you know, he ordered ice cream for, for dessert.

And, you know, now at this point he's 91, maybe 82 at this time. And I said you know, is that good for you? And he just hoped, you know, he he thought that was fine for him. Yeah, 

John Willis: yeah. That was good. I guess if you get to 91 or [00:10:00] 92, right, and you're, you're still, I don't, you know, like it just, it sounded like you know, he worked right until like the last couple of weeks before he passed away.

Richard Steele: He was, he was vital, you know, that whole time. Yeah, one time when I sat down, I think it was probably for dinner than other time. He said, well, how's it, how's the real railroad business? And I said, Whoa, I said, I'm impressed. But then again, I know what you do too. Yeah. So it was, it was fun. Through Bill Scherkenbach.

John Willis: Scherkenbach. No, you know, funny that you said that. So I didn't meet any of these people, but, you know, and Doris Quinn, I got to interview her and she's a chapter in my book and she called them the giants, you know, like she said, you know, and she was sent to like the four days with Deming. She didn't even really know who Deming was.

And, and then, you know, that she got invited to a dinner with all the giants, Ed Berker, and she lists them on Scherkenbach and all these. But she said they were the, [00:11:00] you know, the, the, the giants, I think she called them. So the, of this car, 

Richard Steele: Well, we'll work for Ford at this time. This is before he went to general motors. 

And you know, I'm, you know, reading, you know, out of the crisis and I think it's chapter 16 out of the crisis was Deming's talked about this director of statistical methodology. And so I, I went and. Got Ed or Bill Scherkenbach's book, because I knew he worked for Ford. And that's close to where I am.

And then it said, Novi, Michigan. And it turns out that Bill Scherkenbach lived in Novi, which is real close. So I, I found his phone number and called him and said, you know, would you be interested in being our director of statistical methodology? Well, Bill's making big bucks at that time, didn't have any time for.

You know, for peak of services, but he said, you know, one of our [00:12:00] guys might be able to might be interested in working with you. Like I'm named a bill craft. And so bill craft came out and became our director of statistical methodology. And bill and I met for breakfast at a at a waffle house in Ann Arbor, Michigan seven 30, every Sunday morning.

For about five years with only taking the time off to, you know, one of us on vacation or something like that, but we went over, you know, his books and how we could incorporate them into the company. So it was it was a massive effort, but it was fun. You know, we're learning every week and well, let's try this and stuff like that, but couldn't have done it without him either.

A whole bunch of 

John Willis: it. And, and so it, you know, just for, [00:13:00] for people like, one of the things that a lot of us who are coming to Deming without industrial backgrounds or sort of industrial engineering or sort of, you know, pure engineering and not software engineering you know, we struggle, you know, you were on that book club a little bit.

I was sort of forewarning everybody, like one of the hard parts is going to be people trying to, you know, really try to understand the whole you know, not just control charts, but, you know, I think Ron Moen. Set, this is where I learned it from Ron Moen, but like Deming would call it analytical statistics, right?

But it's the, you know, it's sort of the common cause, special cause, it's the, you know, what's in the process and not process. So when you were sort of bringing in that gentleman to help you understand sort of statistics and how it applies to your business, what were some of the things that like the aha moments as you sort of 

Richard Steele: progressed?

Well, actually We didn't spend as much time on the statistics of [00:14:00] it run charts are, are good, but the, the power of Deming is not in the statistics. I don't think it's in the, the people side of, of this whole problem that we have. And that's, that's what we were working on you know, most of the time really what I use.

Control chart for it. It's a lot in my mind to like, I would say if somebody came into my office with a problem, you know, some something's happening, you know, by the time I stand up, I have to decide if I'm going to treat this as a special cause or a common cause. Because I think that is, that is key. Now if you have the statistics and the run charts, that's pretty easy to do.

But for most of the difficult decisions, you're not going to have any numbers at all for that. And you still have to make this [00:15:00] decision. And Getting comfortable with that sort of a program was, was, was a task for me. 

John Willis: So it was more about that, that, that, can you mention his name again? Cause I forgot the gentleman that you worked five years with.

Bill Kraft. So did Bill Kraft, even though he was sort of a, he was introduced to you as somebody, as a statistics person, you think most of the things you talked about was trying to understand the people problems? 

Richard Steele: Oh, I, I think so. Yeah. But how that, how the statistics relate to the people problems too.

Okay. And, and, you know, how we put there now, I had another woman PhD psychologist that came in and helped a whole bunch with a lot, a lot of the things that we were doing. Also we went back to What we called our performance appraisals, but, you know, they didn't, they didn't tie to money or anything like that, but they tied to learning and how we would meet and [00:16:00] every month, you know, the folks that reported to me, we would meet and we would go over what they'd done and we would chart, you know, if it was a sales guy, he would come in and we'd have charts on sales.

And then we would get on the same side of the table and look at this chart and say, no, how can we make this chart look better for the company? And he could bring in anybody that he wanted inside or outside the company because, and I could too, because the idea was, let's do this together that causes something good to happen to the company.

And you know, we'd spend an hour, hour and a half, whatever it took. And you, you get to know the people because there was no, there was no adversarial relationship. It was congenial, right? We're together on this. And [00:17:00] and it was vol for Mo for the most part. It was voluntary for the guys. You know, we'd, we'd spend some time to do this and that to me was a big breakthrough.

You know, I'd gone to where, you know, I would have sleepless nights because I was doing performance appraisals on, you know, one, one guy was the best man on his wedding and I'm doing performance appraisals on it. And and that, that just drove me crazy. And so this, this turned out to be much better where, where we were working together on making the company a better, better place.

Yeah. 

John Willis: No, I was on a call this morning with a couple of people and we were talking about, you know, Deming came up and, you know, this idea that, you know. You know, the, the, somebody, like, some people are not motivated, right, in their job, right, or, you know, like, sort of, like, most of the people who are learners are very motivated, like, you know, people that, sort of, I work with are usually people that are very excited about, so they're in a position where they get to learn a lot, and [00:18:00] they continue to, to grow, and, and I, you know, like, It is no sort of genius on my part, but I'm like that, you know, you know, Deming would probably say if you have an employee who is, you know, sort of not enthused about their job, it's more likely the job or the, the system that's causing that, you know, that, you know, I mean, there are some bad eggs, but in general, you know, the default position would be, it's not the person, it's the system.

Richard Steele: Well I, I take issue with that sometimes, because if you have a person and it's still all about learning, you know, if it's, if it's, if it's a system problem, let's work with the system. If it's, if it's an individual problem, same thing. What can we learn from this? Because it's a matter of going forward.

Where will we, you know, two, three years from now, you know, can we, can we know this person might not fit, you know, we had, we had one guy that. He did a lot more [00:19:00] talking than he did wrenching and and we'd have, you know, standup meetings out in the shop and he'd be talking about something. I don't know.

And when, when that would happen, the guys would kind of throw a a roll of duct tape back and forth, like they're going to shut him up, you know. And so I, I brought him in to the office and I said, well, you know, now what, what do you want to do? What, what would you like to do? And he said, well, I'd like to work for Northwest airlines, you know, in Detroit back when there was a Northwest airline.

I said, well, take a day off and go see if you can get a job with them. You know, if that's what you want to do. Go try it out. I said, well, we'll, we'll give you a time off. You can just go down and do that. And he came back and he says, yeah, he said, they'd offer me a job. And and I think I'd like to take it.

He said, but the problem is they don't offer health insurance for six [00:20:00] months and I've got a wife and two kids. I said, if that's what you want to do, I said, we'll cover your, your insurance. But the thing is. It wasn't so much about him is I want everybody else in the company to know that you have, you have, you have a future here if you want it.

And so I didn't want them to be afraid to, you know, come to me and say, I'd rather do something else. Right. You know, I want them to feel comfortable about that. So we can get, so we can get the learning. More easily transmitted into the company. That's right. 

John Willis: You sort of eliminate the the noise if you will.

Yeah I think the only point I was trying to make there is there's definitely people that I think the mistake that a lot of leaders and managers or different people make is They assume it's the person before they even think about the system, and that's where we fall into those cognitive traps, right?

But if you 

Richard Steele: start with what can we learn, and what is an [00:21:00] efficient way to learn, then you split it up into special and common cause. I 

John Willis: agree. I think what can we learn is really good. I always try 

Richard Steele: to That's the key. I go back to the learning part of it, and I think Deming taught it. The first words that came out of his mouth When he did a four day seminar was, why are we here?

And then he'd answer the question, we're here to learn, have fun and make a difference. And I think he meant that, why are we here on this earth? And if you take it that way, then, okay, now what can we do? What can schools do to make learning fun and make a difference on it? Yeah. 

John Willis: All right. So, I mean, that 

Richard Steele: changes the focus.

John Willis: I, I kind of joked, I like, I would have loved to met him, but I think he probably would have yelled at me a few times. So because I would ask him 

Richard Steele: a few questions. Not if you were 

John Willis: curious. No, I know. That's what he was saying the other day. He said that [00:22:00] if you were if you were curious, he, he, he honed in on that and was, 

Richard Steele: yeah.

And he knew. Yeah, I could see that. you were. If you were a call 

John Willis: maker, yeah, we might have been buds, you know so another thing that I wanted to talk with you about is so, you know, I I met you through Dennis and then and then I was honored that you have, you, you run probably the most, the longest and what is it, 30 years you guys have been running a Deming book club.

About 35 

Richard Steele: years ago, and he has a book club, but it's kind of turned into a book club now. Okay, 

John Willis: all right, so it was a discussion group, but I, you know, you, he pinged me and then you pinged me and said, hey, we're gonna, we're gonna go ahead and cover your book, which I was like, this is awesome, right? And and then one of the things you did real early on is you did a real deep analysis of my book, which I, I totally appreciate, especially as an author, it's always, It's really interesting to you know, have different people at different levels of [00:23:00] the way they read your book.

Some people read it real quickly, and I got no complaints either way, right? We all read what we have to read and what we want to read. But then some people really deep dive, and so you did a real deep dive on the book, and it was, you know, really awesome. And maybe I maybe think really hard about a lot of questions, you know, and some of them I wouldn't, I'd like to kind of go through some of those for, for the listeners so they know that there are, were some errors in our mission.

 Nothing blatant, but there was a couple of things you caught that like, I think I was being a little lazy and, and then there's some good questions that like, I'm not sure, you know, I mean, you may be right. I may be right. But you want to go through a few of those. 

Richard Steele: Oh, well, we can, but that was, that was what I, I liked so much about your, your book.

You have some things that would come off the internet, you know, some understandings of Deming and what we try and do in the study group is when we review something like this. And if you have a question or comment about [00:24:00] it, try and go back to one of Deming's books and say, this is what Deming says about that.

So that we don't get into the work of training worker. And which is what the internet seems to be all about. There's a whole bunch of things like that. Well now, what can we learn from this? And make it easier for other people to maybe pick up on this. Yeah, and 

John Willis: I think, I'll kick it off because I think, you know, one of the things you caught right off the bat was when I listed the system of profound knowledge, you know, I called it theory of variation and theory of psychology.

And and you know, and I had seen that a hundreds of times written that way. And you're right. It was an internet thing and it was sort of burned in my brain and I liked the idea of theory, but then when you pointed that out, I realized I went back to the, you know, I went back to new economics and sure as heck it's, it's, you know, theory of knowledge, it's Understanding variation, and it just says [00:25:00] psychology, and it's the first time he references it in four bullets. 

And you know, I've got theory of knowledge, and I've got appreciation of system right. But, but yeah, so that was a little bit of like falling into the internet trap on, you know, at some point whenever I can get the errata to update, we'll get that one right. But 

Richard Steele: the learning, but the learning from that is because, you know, you have a deviation from what Deming says, why did he not say the theory of 

John Willis: I think that's a brilliant question, right?

Richard Steele: And the same with psychology. You know, and that's where that's where the learning comes in. And our group has not has not completely answered the question of why not the theory of variation now, psychology. I think I think we pretty well nailed that there. Thousands. Yeah, that would be a 

John Willis: very, you know, the thing that's come up with some other people that I've talked to people who sort of like me, you know, you know, I think a lot [00:26:00] of people like look at sort of lean and they look at Toyota.

And then if they really want to keep questioning, like, is there anything behind that? And sometimes wind up going all the way back to Deming. So there's this gentleman who worked at eBay and he he made a real, I love this he said he questioned why Deming didn't call it theory of systems. So, and I, that's always stuck with me a little bit, because that one, I get why you wouldn't call it theory of psychology, I mean, it's debatable on variation, because I think variation is very wide and horizontal as well but, but to me it would have been, I, I think as theory goes, it would, it seemed to me that would have been a good one to.

The question, 

Richard Steele: I think you have to go back to, you know, what is a theory and some things just are, they're not, they're not theories. I think, you know, and theory has, has to do with prediction. Right. And I think, I think you just say, well, [00:27:00] this is how we organize things. It's, it's probably not a theory and that's kind of where we're going with theory of variation.

We just, we accept that, that this is, this is how man has organized this. And I think we accept that. And so. You can, you can put a system together any way you want to and, and it's kind of a model. It's not a theory of a model. It's what you're calling a system at this point. That'd be, that'd be a darn good question.

Maybe I'll put 

John Willis: that. Yeah, I really feel. I mean, again, you can, I mean, theory of knowledge is quite clear, right? Because that is epistemology. It is we, you know, we understand the background. That's that 1, that 1, like, check it off the box. Right? You know, I, it, it, it. It made me think pretty hard. And then when you sort of brought up that question again, it reminded me of that question when that gentleman asked me why I thought he didn't call it theory of systems.

Because I mean, you could think [00:28:00] about not so much prediction, but you could think about as, am I constantly sort of questioning what I know about a system, right? And it says that I don't really know what the system is. So I have to kind of, in that small glimpse, I could see the possibility of thinking as 

Richard Steele: a theory.

But you, you get to put the system together however you want it, you know, that, that's your model No, but, but, but then isn't, there's another system outside of that, and there's a system outside of that, and there's a system outside of that, right? So even if you think you put together, 

But that's, that's what we put together, you know, it doesn't have to be that way.

We just put it together and accept that's, that's, that's the way it is. I, I accept that's the way it is too, but I don't, I don't think of that as a theory. Okay. 

John Willis: Yeah. No, I mean, I don't, I don't know. I'm just, I'm just trying to think. I'm just saying that any system you think you have, there's a, there's an envelope of a system beyond that.

And there's a system beyond that, right? [00:29:00] Like, you might have a system for building diesel engines, but then you have a system that includes your customer. Your customer includes a system that includes their customer.

Richard Steele: That's going to be one of my questions for the weekend. 

John Willis: That'd be good. That'd be really good. What were some of the other, there were some other questions you had about that in the book that I thought were, that really made me think pretty hard about like, Let me go 

Richard Steele: back and have some, 

You had started chapter three. Oh, yes. Yeah. Our systems, we make an inspector, which, if applied to baking toast, where the excessive You burn, I'll scrape. And that was quoted by Joseph. I, I, I don't think Dr ever said that. I don't think he'd find that in his book or his but it, but it was, but was darn close to that.

Yeah. That was more the when Claire Crawford Mason did those video tapes. 

John Willis: Yeah, there's some interesting [00:30:00] overlap between like some quotes that, that are attributed through to Deming through Claire Cr Mason. And so I do think there's a, but I thought I got the, the, the toast thing from from directly from Deming.

The, there, the, 

Richard Steele: now he, he talked about scraping toes, but, Oh, the verbiage that you used wasn't, wasn't what he Oh, okay. Fair enough. Fair enough. Okay. And then like we talked about strata strata vari, right? What a great, you know, example of what Deming was trying to eliminate. You know, he said, you know, he broke this thing.

Talk about blaming the worker. Yeah, yeah, probably. Yeah. Yeah. Talking. And then he says something about put your anger into that, that violin, the new one he's going to make. Yeah. How would you like a violin made by somebody that was angry? [00:31:00] Yeah, yeah, yeah, yeah. I don't know if you can do that. So those are 

John Willis: Well, I think, yeah, I mean, no, I agree.

And I think one of the things I think you, the way I took some of your comments about that, and this is sort of the trade off, right? I'm trying to sort of, I'm trying to evolve. the reader's understanding of this profound knowledge idea. And so you know, there were really sort of two choices at that point.

I could have, in fact, I just got some of the reviews that I wished I would went deeper into the examples of profound knowledge. You know, I think the last part of it was pretty heavy on it, but in the early chapters, I was really just trying to set the, like, here's how he was evolving and hear the sort of antidote stories.

that sort of leads you up to it. So that has all the anti patterns in it. And at that point, I think it could have been a good opportunity to explain how those were anti patterns from a demiastore. But I wanted to [00:32:00] make this sort of strong point that Like, you're going to see this later, and you will recognize that that was an anti pattern.

So, I don't know if I 

Richard Steele: succeeded in that or not, but. Then there was something else there too. Nothing, nothing but absolute perfection would do. Right. Which 

John Willis: is like, like, I think, you know, like, I feel pretty good that I made clear that there is no such thing as perfection or zero defects or zero, right? Like, in other words, and so that was, it was clearly where quality was and where quality, by the time you get to sure.

And, you know, in his sort of version of quality and then sort of Deming's, like, taking the torch from Schuett's work, right, that it changes from perfection to interchangeable parts to go, no go to tolerance levels. Right to, you know, to sort of understanding variation, right? That there will be variation.

There'll be no perfect violin. There'll be no, but [00:33:00] again, it's easy. Those violins are worth millions of dollars. 

Richard Steele: That's right. You know, then you get value into the whole thing, too. How do you, how do you, how do you, how do you work value into a quality program, too? So, yeah, it's, it's a, it's a, it's a big deal. 

And I think you, did you touch on Taguchi? I did 

John Willis: not cover Taguchi in the in the book and I, I, you know, I was somewhat familiar Taguchi. Now I've done two, I've done now four podcasts with Bill Bellows. And so what happened was I heard him talking about Taguchi on the Deming Institute podcast.

And he doesn't really go deeply he talks about like in his experience and he talks about his But I wanted to really just drill in on and it was going to be one podcast It turned out to be like 90 minutes So we turned it into two two podcasts But I got him to drill in very deep on Taguchi and and then you know what deming?

Said about [00:34:00] Taguchi and and yeah, so I think Taguchi is the a beautiful extension of deming's ideas 

Richard Steele: It, it, it, it explains a lot. Yeah. And I think it explains why, Deming called his second book economics. You know, it's an economics book on, on how to build a company. It doesn't, doesn't say quality.

It says economics on that. And to Gucci has a great explanation of where you want to spend your time, you know you know, depending on, on what the variation is and what the Gucci loss function is. It'll, it'll tell you, you know, or, or you can be efficient in, in learning, but it's all right here again, it's always on learning.

John Willis: Yeah, no, I think you're right. And that, you know, so Bill was really good about using some really good analogies of, you know, that like, you know, so you think about the tolerance, you know, he called it, I'm sure you heard it. It's like it's sort of black and white, you know, it's type one or type two [00:35:00] type one is, is it.

Within spec type two, then is like, you know, is, you know, what is the loss? Like, what is the sort of, you know, what is the sort of, you know, as he sort of hands you hand off what you've done to the next sort of downstream component or, or, receiver, you know, what is the loss function? And then ultimately lost.

I think to reach his quote is lost to society in 

Richard Steele: general. Yeah. I think Deming was talking. I'd have to go back and check this again, but I think Deming talked about something. Could be too good. Yeah, you could just reduce quality to where you can't afford it. 

John Willis: Well, I mean, that's the, that's where pragmatism came from basically, right?

Like the, they, like the, the, the Saunders you know, the his, you know, he was trying to make the perfect pendulum. Yeah. And he realized there was a, you know, there was basically the, you, you could go forever. I mean, that's the physicist, 

Richard Steele: right? Like the physicist 

John Willis: gets [00:36:00] that. Very well, right? That, like, that you can see, you can keep cutting this in half, or the mathematician, you could be cutting this number in half forever, right?

It's infinite. 

Richard Steele: Exactly. Yeah. Yeah. So that's, you know, that's, that's where the understanding of, of variation comes, and the managing of variation, too. 

John Willis: Or the misunderstanding of variation becomes, you know, to me that was, the light bulb finally went off when I understood it's not about reducing variation, it's about understanding variation, particularly not misunderstanding 

Richard Steele: variation.

Yeah, and managing, managing it. Yeah, that's right, right, knowing 

John Willis: when, you know, when 

Richard Steele: something, yeah. And even within the Deming community there are some people that swear it, and, and Deming said, there's some statements where Deming says. My philosophy is reducing variation and and that kind of, I think it's taken out [00:37:00] of context.

Doesn't, you know, in a lot of times when you're in a manufacturing environment, that's exactly what you want to do. You know, that's how you learn, but you 

John Willis: certainly want to reduce variation. I mean, I think Bill Bellows had said it almost, I'm sort of paraphrasing, but he thinks that if Deming could have a redo on an answer, he would say managing variation 

Richard Steele: as opposed to, I think if you look at, at, at all of his work, right.

He, he would, he would take that back. 

John Willis: Yeah. You certainly want to reduce variation, but like, again, it's not about maniacal reduction of variation, right? Because that is the diminishing, the point of diminishing returns, right? It is about 

Richard Steele: Well, I'm not convinced you always want to reduce variation. Right. 

John Willis: No, that's what I'm saying.

Yeah, I agree. I saw that, I mean, that's where both Taguchi comes in and pragmatism comes in. Pragmatism comes in first, and then Taguchi, which is like, what's the loss function? It's less about, is it between these two points of our control limit or spec? And it's [00:38:00] more about sort of, as you move away from the center, 

Richard Steele: what's the loss?

Right. Exactly. What can you tolerate? I use it as a loss function. The way I explain it, kind of, is a car running down a road. And you know, in the middle of the road, you're in pretty good shape. One foot, either side, not a big deal. You start getting off on the side of the road, maybe you get some gravel, you can get some A little bit of wear on you, you know, on the car, you know, chips or something like that, further, you get more stuff like that.

If you come to a bridge, so it's, it's time sensitive to it's where you are. It doesn't, it's not static. Right. You come pretty close to the center of that or you're going to take your rear view mirror off, you know, more loss, right. Things like that. That's how I look at the, the Taguchi loss function. Yeah, it's situational.

It doesn't, it's not static at all. 

John Willis: And, [00:39:00] and, you know, again, Bill did a really good job of sort of describing it as, you know you know, like, he, he uses the example, like, if you're building something at home, you're both the supplier and consumer, you know, if you built, you know, but, but. In, you know, in the sort of the, the industrial setting or in the, in the workplace, whatever, you know, like what is, what is good for you may not be good for your consumer, right?

And it's the loss function, right? Is the, what's the effect of that? And I thought that was really good. Did you ever do the do anything with the red bead game? The red bead experiment. Yeah. 

Richard Steele: Experiment. You know, I hate to say it, but I, I've never gotten that much out of it. Okay. I hate, hate to say that because you know, you know, I, I know what it's about and, right, right. 

Matter of fact I was taking a class one time and they were gonna do that. So I was one of the willing workers. [00:40:00] Okay. And when it, you know, when I pulled the paddle out, I, you know, went over to the inspector to get the number. And I put a 20 bill on top of that and I said, you don't see any errors.

Oh, that's 

John Willis: hilarious. Oh, that's great. Oh, that's a great story by itself. You know. 

Richard Steele: But the thing is, and unfortunately, this person didn't 

John Willis: go along with it. Oh, no. Oh, they didn't, no. 

Richard Steele: The thing is, it would have, it would have shown special cause. 

John Willis: Yeah, no, I love it. I love it. 

Richard Steele: That's what I wanted to, wanted to show.

I wasn't going to give him 20 bucks. Yeah, yeah. I love that. It was fun to do that. Because it shows what the red bead experiment can be, you know, but there are variations in the red beads and there are variations in the white beads, too. Right, right, right. 

John Willis: That's a 

Richard Steele: great story. You learn from that, the difference between mechanical sampling and random sampling.

So what 

John Willis: do you focus [00:41:00] on these days, Dick? What's 

Richard Steele: your sort of you know, I'm the chairman of the board of our company, but We're, we're, we're, the CEO is Ian Bradbury and Ian, Ian was a very good friend of Dr. Deming's. Oh, okay. Dr. Deming went to his kids birthday parties. Oh, wow. And that's how I met Ian, was through the Deming Study Group.

Okay. And I, I listened to him present several times. Brilliant guy, PhD statistician. And then when he came to work for us, he went and got a master's in business. And so he's, he's, he's very good. And he's been, he's been with our company for 25 plus years. And and just doing, doing a great job over there.

So I'm the, I'm the chairman, but I don't have any day to day operations, but we do talk [00:42:00] about. How much money we're going to put into the pay system. That was one of the last big discussions and what we used to do, you know, back when I was the president, the CEO, and, you know, getting people to stay there, you know you can't just have a fun place to work, which I hope it is.

But you still have, you people still have to have a reasonable rate of pay too. Yep. Oh, yeah. Yeah. And so that was one of the big discussions at the board meeting. Every, every once in a while, we'll get into a good discussion. That's awesome. 

John Willis: Well, good man. It's great to I'm glad you've been joining the book club on Fridays and you know, try to get there on time for your next book club.

 The evenings are a little tough for me, but I, I really enjoy your book club because it's like a really great group of people that you know, have a lot a lot of history and background and it keeps us, you know, I'm [00:43:00] not a young person, but But in terms of the deming world, I guess i'm young is that it keeps us honest as we try to learn deming You know and really try to 

Richard Steele: understand don't think i'm going to make it this front.

I think it would be on an airplane Okay. All right. I think los angeles this this friday, but all right Our last call oh he was yeah Oh, 

John Willis: my goodness. Oh, my goodness. Wow. Oh, my goodness. Wow. Yeah, that's that's I'll make sure I won't miss the next one for sure. All right. Well, good. This is great. I enjoyed it.

Hope you enjoyed it. 

Richard Steele: Oh, this was this was fun. I, you know, it, it's all about learning. Yeah, I 

John Willis: know. I get it. I get it. You're pretty consistent about that. And I totally agree. So, 

Richard Steele: and how I explain what I understand about it. Yeah. Yeah. 

John Willis: Brilliant. All right, then.