Deming had it right 60 years ago

Still continuing my reading on Agile Project Management and ran across W. Edward Deming’s famous “Fourteen Principles of Management” again (for the hundredth time it seems). I read through the principles again and was amazed, as always, at how applicable these principles are in the modern world, even though they were conceived more than 60 years ago.

As I read through the principles, I found myself continuously going back to Principle #4, which reads:

End the practice of awarding business on the basis of price tag. Instead minimize total cost. Move towards a single supplier for any one item, on a long term relationship of loyalty and trust.

Although this principle is targeted at the ‘buying’ side of an organization, it can easily be transformed to the ‘selling’ side of an organization. My transformation of Deming’s Principle #4 as applied to the “Sell” side:

  • Don’t compete on price alone. Show your client the value of your product/service. Build a long term relationship based on mutual trust and loyalty.

If a salesperson (or consultant) were able to build a relationship based on trust with their client(s), the client(s) will continue to come back to that salesperson/consultant for additional business regardless of whether they are the ‘low cost’ provider. I truly believe that a person who uses trust based selling techniques and builds real relationships with their clients will find themselves in a much better situation than those organizations who try to sell their services based on being the ‘low cost’ provider.

Of course, there are those organizations that only award contracts based on price and really don’t care to have a relationship with their suppliers. I’ve worked with organizations like this and I cannot think of a single organization that has awarded a contract based on the lowest price and has not suffered in the end. Whether it is poor quality, delays or some other issues, there always seemed to be a problem when dealing with the ‘low cost’ provider.

Take a look at the rest of Deming’s 14 principles at Ends of the Earth: Deming’s 14 Points & 7 Deadly Diseases of Management.

4 responses to “Deming had it right 60 years ago”

  1. Charles H. Green Avatar

    Eric, thanks for this post. How timely to go back to the basics of Deming, particularly at a time when arms-length, “objective” contracting is at an all-time high. These days there are clients who seem to feel that “trusted relationships” between seller and buyer are code words for cozy, illicit, price-fixing agreements. They find their natural allies in those who preach the cost-cutting value of increasing reliance on contracts, and of kicking things to purchasing.

    There’s nothing wrong per se with buying through purchasing, but the motives for going there are often suspect. (And, by the way, it makes for a very tough job for purchasing to deliver on–“find the low-cost provider and make sure they’ve got high quality.”).

    I think it’s worth noting your comment that “I cannot think of a single organization that has awarded a contract based on the lowest price and has not suffered in the end.” I’m not sure I have either; certainly it’s rare in any case. And therein lies a lesson.

  2. Eric Brown Avatar

    You are welcome Charles. It always amazes me to be able to go back to some of the ‘original thinkers’ and realize how relevant their ideas still are today.

  3. Eric Brown Avatar

    John – Thanks for the comment. I agree that we don’t need new “fancy” ideas…just execute better.

    Great blog BTW.