The Seven Deadly Diseases: #2: Emphasis on Short-Term Profits

[FVoehl@aol.com]

In my post last week, I discussed Deadly Disease #1: Inconsistency of 
Purpose.  This week I will cover a short summary of Deadly Disease #2: 
Emphasis on Short-Term Profit.  Dr, Deming called the Seven Deadly Diseases 
"a later awakening. I learn.  May I not learn?"

As Mary Walton so eloquently points out in The Deming Management Method, 
today's corporations are controlled by financial wizards and lawyers who 
manipulate the numbers but do not make substantial changes in production and 
quality.  They are subservient to the stockholders, who depend upon them for 
the production of--not products and services--but ever-increasing quarterly 
dividends.

Thus, it is common practice today for companies to ship products on the last 
day of the month or quarter, without proper regard for the quality of what 
they ship.  In fact, Dr. Deming stated that in many cases they ship defective 
products in order to meet the quota.  American management's emphasis on 
short-term profit isfueled by fear of an unfriendly takeover or leveraged 
buyout.  "Where is the Securities and Exchange Commission?', he would say.  
He called this form of profiteering paper profits, and pointed out that it 
has diverted attention and resources away from the job at hand--transforming 
the production base.

Even where long-range plans exist, they are frequently neglected because of 
so-called emergencies.  Often, company policies that are essentially 
frivolous take up much time of the top-level management, such as policies on 
attendance and promptness.  In a healthy organizational state, focused on 
long-term vision and goals, these would not be issues, but in nexy-quarter 
profits-only mentality, they are often the needed smokescreen for poor 
management.  Our problems are different was pure baloney, he would say: "This 
is just an excuse!"

Deming had an ally in Harvard Professor Robert Reich who wrote that paper 
entreprenurialism was both the cause and consequence of America's faltering 
economy.  Paper profits were the only ones easily Available to the 
professional managers who sat isolated on top of organizations that are 
designed for a form of production that is no longer appropriate to America's 
place in the world economy.  At the same time, the relentless drive for paper 
profits has diverted attention and resources away from strengthening the 
production base. (The Atlantic, March 1983).

"Must American management be forever subject to such plunder?  Paper profits 
do not make a bigger pie.  They give you a bigger piece, but you take it from 
somewhere else.  It doesn't help society."  (The Deming Management Method).

Frank Voehl (FVoehl@aol.com)