Deming Management Method and GSPI, Part II

Reading Mary Walton’s The Deming Management Method (1986), I can’t help but wonder whether the Deming method is applicable to Global Steel Philippines. W. Edwards Deming, the genius who revitalized Japanese industry from 1950s, was rediscovered in America only in 1980. To show their appreciation, the Japanese established in 1951 the Deming Prize—a silver medal engraved with a profile of Dr. Deming—given in two major categories: to an individual for accomplishments in statistical theory and to companies for accomplishments in statistical application. The award was established from proceeds from his published lectures. Dr. Deming refused to accept the proceeds for personal use. This post continues the previous blog on Mary Walton’s The Deming Management Method (1986). Dr. Deming’s work was a Japanese sensation in 1950s and rediscovered in America only in 1980s. He said: “Western Management, having abandoned the responsibility of leadership depends on reports. … People are the most important asset of any company. … Failure to understand people is the devastation of western management.” The devastation was brought by the Deadly Diseases of western management. Is this western phenomena also true to GSPI? The Points, Diseases, and Obstacles constitute a broad prescription for reform. Each company must work out its own adaptation, suitable to its corporate culture.

Corollary to the Fourteen Points, the Deming Management Method acknowledges The Deadly Diseases:

Lack of constancy of purpose “A company that is without a constancy of purpose has no long-range plans for staying in business. Management is insecure, and so are employees. … When employees are working for a company that is investing for the future, they will feel more secure and less likely to look for jobs in companies that appear more promising.”

Annotations: There are persistent talks that GSPI would exist only until 2010, based on the provision for the BOI-registered enterprise exempted from the payment of income taxes reckoned from the scheduled start of commercial operations with a pioneer status for six (6) years. Notwithstanding the fact that GSPI, however, has yet to be declared by DTI as commercially operating. Even with a succession of company-sponsored press releases through TeamAsia, such as the first-ever export to Brazil, or letters of appreciation from its China customers, a number of steel industry players have criticized the company’s lack of product quality and volume. Of course, nobody can deny that GSPI announced in March 2007 its plan for the very first blast furnace in the Philippines. True, the latter is in line with its long-range plan for GSPI, but announcement is futile if other typical components of a blast furnace have yet to even be included in a non-existing blueprint.

Emphasis on short-term profits “Looking to increase the quarterly dividend undermines quality and productivity. … [It] is fed by fear of unfriendly takeover or buyout. … At the same time, the relentless drive for paper profits has diverted attention and resources away from the difficult job of transforming the productive base.”

Annotations: What profit? Like other Global Steel Holdings Limited [GSHL] subsidiaries, GSPI had repeatedly declared that it is losing every month for five years since its inception. If Money is no object, then why the constant reminder that the company is losing? If there are no profits, how come the mother company, GSHL, is investing millions in other subsidiaries and not in GSPI? If synergy requires parts working together to produce an effect greater than the sum of their individual effects, then what is GSPI’s role if its working capital is being sourced through in-house generation to sustain its own operations?

Evaluation by performance, merit rating, or annual review of performance “Teamwork is destroyed, rivalry is nurtured. Performance ratings build fear, and leave people bitter, despondent, and beaten. … Performance evaluations encourage short-term performance at the expense of long-term planning. … The result is a company composed of prima donnas of sparring fiefdoms. People work for themselves, not the company. … They also increase reliance on numbers, a tendency to consider only evidence that can be counted.”

Annotations: Although GSPI has yet to institute a corporate-wide performance appraisal for ALL employees, monthly production performance evaluations are done regularly. GSPI production performance are even benchmarked and gauged versus existing standards in other GSHL subsidiaries, irrespective of the overt differences in plant configurations and equipment specifications. A constant challenge, moreover, is issued that if other subsidiaries could do it, then GSPI should exert considerable efforts to attain the corporate standards. … There were presentations, such as the one entitled: Our Journey to Business Excellence in December 2004, which specified Annual Business Plans and Corporate Objectives transformed into various departments’ Key Performance Indicators [KPIs] as well as individuals’ Key Result Areas [KRAs], both of which would be specific, measurable, agreed upon, realistic, and time-bound targets. The management even hired an expat-expert on Performance Management System [PMS], who after three years was repatriated but by 2008, the same appraisal is only applied to Heads of Department. Also, some Annual Business Plans are guided only by instructions from the highest echelons of management and not based on reality.

Mobility of Management “Job-hopping managers never understand the companies that they work for and are never there long enough to follow through on long-term changes that are necessary for quality and productivity.”

Annotations: The longest staying expatriates at GSPI have been with the company for almost five years. The original twenty-six expatriates came to the Philippines in December 2003. Only two of them remained today. All the others have resigned or repatriated as millionaires, and were subsequently replaced by expatriates of the same caliber or self-perceived expertise. In the span of five years, a considerable number of expats have also been assigned to various positions other than the ones they were originally hired for. Some are even sporting several hats that are seemingly inconsistent with any typical organizational structure. The most glaring of all is the centralized quality division which handles both mills: Hot-Rolling and Cold-Rolling. Complaints of Cold-Rolling as the customer regarding Hot-Rolling as a supplier of raw materials to the latter is decided by one and the same person! Is this a visible sign of expat-experts’ multi-tasking expertise or sole mastery of almost all management functions? I wonder what breakthroughs have been contributed by these expatriates to GSPI that they have been awarded high-paying salaries and perks far beyond the financial capability of the subsidiary. Some of them boldly claimed that they were directly paid by GSHL, the mother company, but why would local employees’ salaries be delayed whenever there were expatriates going home for a vacation or repatriated?

Running a company on visible figures alone. “The most important figures are unknown and unknowable—the multiplier effect of a happy customer, for example, or the gains in quality that result from ridding a company of the Deadly Diseases.”

Annotations: Cost reduction is the most prominent of all the visible figures. For months, management directives to reduce costs in all aspects of GSPI’s operation were constantly passed from top to bottom. But unfortunately, the top is not leading the reduction: remember the purchase of CSKA Sofia? … GSPI even instituted the No-Scheduled Work scheme, to save the company money to be paid for work on such days, and also the Compensatory Leaves for work rendered on Rest Days and Holidays and even for the equivalent night premiums. The multiplier effect of such schemes have never been appropriately studied or analyzed. … GSPI also publicized a series of certifications, literally—praise releases—from its satisfied customers, but not dared to address root causes of quality concerns of its prospective customers. At times, these are conveniently brushed off as obloquies, idle talks, or malicious rumors!

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Notes:

Walton, Mary (1986). The Deming Management Method. New York: Perigee, 1986. pp. 33-88. back to text

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