Knowledge of Variation

First published in LinkedIn 31 Oct 2014

Deming’s SoPK is a four-part way of thinking and managing useful to any leader who aims to transform its business so that it may be prosperous and may create an environment where its employees will thrive.

The SoPK is made of these four components: appreciation for a system, knowledge of variation, a theory of knowledge and how to gain it, and human psychology.

In this posting I will introduce Knowledge of Variation:

Do things vary or stay the same? For example, did it take you today the same time as yesterday to go from home to work? Do the same number of customers call your support number with problems every week? Is your sales volume the same month after month?

We experience variation continually, sometimes we want to avoid a negative situation while other times we would like to repeat a positive outcome. How to do this?

Deming proposes that the work of management is to increase the performance of its organizations through knowledge of variation; in particular which variation must be responded to and which should be ignored, as managers can harm performance when making the wrong decision.

But how to tell when to act and when not to?

Building on the seminal work of Walter Shewhart, Deming distinguishes two types of variation: that which is the natural result of an organization’s structure and functioning, that is, the system itself, and a different type of variation which results from a special cause that can be pinpointed through observation.

The natural type of variation, due to “common causes” intrinsic to the system produce the errors, defects and rework observed most days and which are predictable within a certain range. On the other hand, the other type of variation comes as a surprise to the worker or manager and is due to “special causes” that happen less frequently but have a large effect, such as an epidemic disease, a change in the quality of supplies, the start of a new procedure, and other factors outside the system.

There is a simple tool, an inspection report invented by Shewhart in 1924 now called the control chart, which can tell anybody with great clarity when there is trouble due to special causes of variation. See the first control chart below.

Armed with knowledge of which variation is significant, managers can react properly to everyday variations, taking corrective action when needed and leaving the system alone at other times. Without this knowledge, well-intended managers may disrupt a well-operating organization and lower its performance.

ShewhartsFirstControlChartShewhart suggests that this point indicates trouble, that is, it is outside control limits.

 
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