The document describes an exercise called the "Red Bead Factory" used to demonstrate concepts from quality expert W. Edwards Deming. In the exercise, participants take on roles in a simulated factory producing beads, with some beads coming out red due to variation. The exercise shows how blaming individual workers is misguided when variation is due to systemic problems. It also illustrates how management should focus on understanding and reducing variation in the system rather than reacting to normal daily fluctuations in performance. Deming's teachings emphasize examining processes for improvement rather than blaming individuals for "special causes" outside their control.

1. The Real Lessons Of
Dr. Deming’s Red Bead Factory
@MarkGraban markgraban.com/redbead

2. Why Are We Here?
“To learn… and
to have fun!”

3. Key Management Questions
• How are we performing?
– Are we getting better or worse?
• What action should we take?
Some rights reserved by Marco Bellucci

5. Help Wanted – 6 Willing Workers
• Must be willing to put forth best efforts.
Continuation of job is dependent on
performance. Educational requirements
minimal. Experience in pouring beads is not
necessary.

6. Help Wanted – Inspector
• Must be able to distinguish red from white;
able to count to 20. Experience not necessary.

7. Help Wanted – Inspector General
• Must be able to distinguish red from white;
able to count to 20 and have neat
handwriting. Experience not necessary.
• Must have a loud voice.

8. Standardized Work
Account
Name:
White Bead Corporation CREATION DATE: 2/14/02
Process Location: Chicago IL CURRENT REVISION LEVEL: 3.1
Operator Process Type: Producing White Beads PREVIOUS REVISION DATE: 9/15/15
JOB GUIDANCE SHEET
PROCESS TYPE QUALITY/SAFETY
ORDER OF
PROCESS
JOB
STEP
DESCRIPTION OF
JOB CONTENT
Analysis Information
(Process Type & Estimated
Time)
DESCRIPTION OF
KEY QUALITY ("Q") AND
SAFETY("S") POINTS
CODE ESTIMATE WHAT WHY
1 1 Ensure paddle holes are empty of all beads I 2
1 2 Grasp the paddle by the handle. TL 2
Ensure holes are oriented
upwards.
Necessary for proper
capture of produced beads
1 3
Slide the paddle down into the beads until paddle is covered
with beads.
LD 4
1 4 Pick up paddle to 4 inches above the bead level. VA 5
1 5 Tilt paddle at a 47 degree angle to release excess beads. VA 5
Must be at precisely 47
degree angle.
Best utilizes gravity.
1 6 Withdraw paddle from container UL 3
Make sure one bead is in
each hole.
Production quota
2 7 Walk to Quality Control WK 5
Be careful to not spill bead
any beads.
2 8 Present to Quality Control for count of beads produced. I 10
3 9 Walk back to Production area. WK 5
4 10 Empty paddle back into bead container. RW 3

10. Discussion Questions
• What did we observe & learn?
• Who is responsible for quality?
• How could you fix the bead “system?”
• What is the impact of labeling some as
“below average?”
• What are some forms of “tampering?”’
• What could you do with the red beads?

11. Deming Said…
“The worker is not the
problem. The system is
the problem. If you
want to improve
performance, you must
work on the system.”

12. Deming Said…
“Management should be
working with the
supplier to reduce the
number of red beads.
Reduce lot-by-lot
variation. That is how
to get better numbers.”

13. Deming Said…
“94% of the
problems in
business are
systems driven
and only 6% are
people driven.”

14. X + [XY] = Red Beads
X = the worker effect
Y = the system effect

15. Deming Said…
“We have one equation
with two unknowns…
anyone who can solve a
single equation with two
unknowns is entitled to
judge people"

16. Workplace Red Beads
• What are “red beads” in our workplace?

17. http://www.bbc.co.uk/news/magazine-10729380

18. BBC Online Simulation
• “…in the calculator, every patient in every
hospital has exactly the same chance of dying
and every surgeon is equally good. This is to
show what chance alone can do, even when
the odds are the same all round.”

19. BBC Online Simulation
• The calculator shows 100 hospitals each
performing 100 operations
• The probability that a patient dies is initially fixed
at five in 100
• The government, meanwhile, says death rates 60%
worse than the norm are unacceptable (in red)
• So any hospital which has eight deaths or more out of
100 ops - when the expected average is only five - is in
trouble.
• We've assigned one hospital to you, with a box around
it - it could come out green or red.

20. The Results
“The calculator seems
to show fatal
incompetence or
maybe even - let's
speculate what goes
through the public
mind - murder at one,
medical genius at
another.”

21. Blaming the System
• 10. Eliminate slogans, exhortations, and targets for
the workforce 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
workforce.
– Deming’s “14 Points for the Transformation of
Management”

22. Deming Said
“Management should be
working with the supplier
to reduce the number of
red beads. Reduce lot-by-
lot variation. That is how
to get better numbers.”

23. “Disappointing Results”

24. An SPC Chart View
0
25
50
75
100
125
150
175
200
225
250
275
300
325
350
375
400
425
450
475
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Minutes
ED Arrival to Admission
CMS Top Decile = 175 minutes
CMS Median = 277 then to 269 minutes

25. The Wrong Questions
• “Why was performance bad yesterday?
• “Why were we worse than our goal
yesterday?”
• Don’t ask for a “special cause” explanation
when you have common cause variation

26. An SPC Chart View
0
25
50
75
100
125
150
175
200
225
250
275
300
325
350
375
400
425
450
475
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Minutes
ED Arrival to Admission
CMS Top Decile = 175 minutes
CMS Median = 277 then to 269 minutes
?
What was
different this day?

27. 0
10
20
30
40
50
60 3/1/07
3/2/07
3/3/07
3/4/07
3/5/07
3/6/07
3/7/07
3/8/07
3/9/07
3/10/07
3/11/07
3/12/07
A Cycle of Blame and Praise
Kick
Butt
KB
KB
Praise
Team
PT
PT
GOAL
Lab TAT – Daily Average

28. Over Explaining a Stable System
• Above / below budget (but stable system)
– “Why are we over budget this month?”
• Daily productivity
– Lots of time wasted on 0.07% over goal
• IMPROVE the SYSTEM
– “Why is the system not meeting the goal?”
– It’s not “what went wrong today?”
• It’s the same things that went wrong other times

29. Were We Helping?
• This system was in control, but not meeting
management/customer specifications
• “Demanding” 30 minute performance will lead to:
– Distorting the data
– Distorting the system
– Improving the system

30. Can We Predict the Future?

31. Deming Said
“What is the purpose of
management? Not to play
games but to use numbers
so we can plan and predict
the future.”

32. Improving a Stable System
• What went wrong yesterday or last month?
• Or… why is our system stable, yet not meeting
goals?
• What can we do to improve the system?

33. Red / Green Charts
http://www.leanblog.org/RYG

34. Red / Green Charts with SPC
http://www.leanblog.org/RYG

35. Red / Green / Yellow
http://www.leanblog.org/RYG

36. Two Kinds of Mistakes
1. To react to an outcome as if it came from a
special cause when actually it came from
common causes of variation.
2. To treat an outcome as if it came from
common causes of variation, when it actually
came from a special cause

37. “Obviously overall, we’re doing quite well,
but this week, we were below our number.”

38. Reacting to Special Causes
• Can we identify what was different in that
time period?
– There’s a small chance there was no difference
• Can we:
– Prevent reoccurrence? (bad outlier)
– Make that a permanent change? (good outlier)

39. Deeper Thinking
• Is it fair to blame the bead game foreman?
• Where has application of “understanding
variation” not been applied?
• Other “real” lessons of the bead factory?
• Understanding and managing variation when
you don’t have figures (behaviors)

40. W. E. Deming, The New Economics, p. 36
“Somehow the theory for transformation has been applied mostly on the shop floor.
Everyone knows about the statistical control of quality. This is important, but the
shop floor is only a small part of the total. The most important application of the
principles of statistical control of quality, by which I mean knowledge about common
causes and special causes, is in the management of people.”

41. Quick Recap
• Don’t blame individuals for performance
variation that’s actually due to the system
• Don’t ask for “special cause” explanations
when the chart shows “common cause”
variation

42. Mark Graban, President, Constancy, Inc.
www.MarkGraban.com/redbead
mark@markgraban.com
Blog: www.LeanBlog.org
Twitter @MarkGraban
Q&A