How Do Franchise Systems Succeed ? Deming and His 14 Points

Posted on 01. Feb, 2010 by in Franchising, Management Philosophy

Having worked in the franchise industry for over 25 years, I learned a lot of things. Most of those you won’t find addressed in Entrepreneur Magazine or by the IFA.

Franchise systems come in many shapes and sizes. Long term success doesn’t come in the form of more franchise sales. Insightful management and development of franchise systems is achieved via the adoption of certain philosophies, and many of those are counter to what pundits or experts claims. This is not only true for franchising, its true for many businesses and industries.

To understand the core philosophies that can drive a franchise system to greatness, one should become familiar with Dr. W. Edwards Deming, known as the father of the Japanese post-war industrial revival. He was regarded by many as the leading management guru in the United States. He passed on in 1993.

Trained as a statistician, his expertise was used during World War II to assist the United States in its effort to improve the quality of war materials. He was invited to Japan at the end of World War II by Japanese industrial leaders and engineers. They asked Deming how long it would take to shift the perception of the world from the existing paradigm that Japan produced cheap, shoddy imitations to one of producing innovative quality products.

Dr. Deming told the group that if they would follow his directions, they could achieve the desired outcome in five years. Few of the leaders believed him. But they were ashamed to say so and would be embarrassed if they failed to follow his suggestions. As Dr. Deming told it, “They surprised me and did it in four years.”

He was invited back to Japan time after time where he became a revered counselor. For his efforts he was awarded the Second Order of the Sacred Treasure by the former Emperor Hirohito. Japanese scientists and engineers named the famed Deming Prize after him. It is bestowed on organizations that apply and achieve stringent quality-performance criteria.

Deming’s business philosophy is summarized in his famous “14 Points,” listed below. These points have inspired significant changes among a number of leading US companies striving to compete in the world’s increasingly competitive environment. The 14 Points pose a challenge for many firms to figure out how to apply them in a meaningful way that will result in continual improvement. The essence of the 14 points are a good thing to ponder when evaluating the long term viability and management practices of any franchise system.

His work is outlined in two books: Out of the Crisis and The New Economics, in which he spells out his System of Profound Knowledge.

Condensation of the 14 Points for Management

The following is excerpted from Chapter 2 of Out of the Crisis by W. Edwards Deming:

The 14 points for management (Out of the Crisis, Ch.2) in industry, education and government follow naturally as application of this outside knowledge, for transformation from the present Western style of management to one of optimization.

Origin of the 14 points.

The 14 points are the basis for transformation of American industry. It will not suffice merely to solve problems, big or little. Adoption and action on the 14 points are a signal that the management intend to stay in business and aim to protect investors and jobs. Such a system formed the basis for lessons for top management in Japan in 1950 and in subsequent years (see pp. 1-6 and the Appendix).

The 14 points apply anywhere, to small organizations as well as to large ones, to the service industry as well as to manufacturing. They apply to a division within a company.

The 14 points.

1. Create constancy of purpose toward improvement of product and service, with the aim to become competitive and to stay in business, and to provide jobs.
2. Adopt the new philosophy. We are in a new economic age. Western management must awaken to the challenge, must learn their responsibilities, and take on leadership for change.
3. Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place.
4. End the practice of awarding business on the basis of price tag. Instead, minimize total cost. Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust.
5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.
6. Institute training on the job.
7. Institute leadership (see Point 12 and Ch. 8). The aim of supervision should be to help people and machines and gadgets to do a better job. Supervision of management is in need of overhaul, as well as supervision of production workers.
8. Drive out fear, so that everyone may work effectively for the company (see Ch. 3).
9. Break down barriers between departments. People in research, design, sales, and production must work as a team, to foresee problems of production and in use that may be encountered with the product or service.
10. Eliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force.

* Eliminate work standards (quotas) on the factory floor. Substitute leadership.
* Eliminate management by objective. Eliminate management by numbers, numerical goals. Substitute leadership.

11. Remove barriers that rob the hourly worker of his right to pride of workmanship. The responsibility of supervisors must be changed from sheer numbers to quality.
12. Remove barriers that rob people in management and in engineering of their right to pride of workmanship. This means, inter alia, abolishment of the annual or merit rating and of management by objective (see Ch. 3).
13. Institute a vigorous program of education and self-improvement.
14. Put everybody in the company to work to accomplish the transformation. The transformation is everybody’s job.

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