When private equity is invited into a business, the owner-operators are ready to hear suggestions on how to improve. New comments by the Private Equity team will be anticipated and absorbed. This power to influence is one of PE's main differentiators from the public market financing where faceless investors have little impact on strategy or operational priorities.
Deming believed that a system (business) cannot understand itself without help from outside the system, because prior experiences will bias objectivity, preventing critical analysis of the organization. Critical self-examination is difficult without impartial analysis from outside the organization. Also, insiders can rarely serve as hostile critics who speak frankly without fear of reprisals.
According to Deming, the journey from the prevailing management style to quality requires the understanding of systems. A system is composed of interrelated components. Quality is the optimization of performance of the components relative to the goal or aim of the system. Individual components of the system will reinforce, not compete with each of the other components of the system to accomplish the aim of the system.
Surprisingly, a lack of clearly defined purpose is common in U.S. organizations, particularly long-range purpose. Short-term thinking, quarterly and annual performance evaluations, and bottom line thinking forces attention to quick-fix solutions. Even if long-range plans exist, prevailing short-term thinking distracts from long-term behavior toward real solutions.
Quality is a systematic process:
- First, establish the aim: vision, mission, goals or constancy of purpose of the
- system. According to Deming, without aim, there is no system (Identity).
- Identify the components
- Map the processes
- Examine the interrelationships of the components within the system (relationships).
- Constantly improve on the processes of the system (Information/Learning/Knowledge.)
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