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The organization chart places the chief executive officer at the top. The Deming Flow Diagram places the customer at the end. In the organization chart, focus is on the information flows: reports up, orders down. In the systems view, the focus is on the production flow of taking in resources, transforming them and ultimately delivering some product or service of value to a customer. The systems view emphasizes:

Exhibit 4: The Deming Flow Diagram

Processes begin with suppliers and end with customers. That’s with, not at. The old view sees the organizational boundaries ending with those lowest on the organization chart. Customer and suppliers exist outside of the organization. But the new view of the organization is quite different. Customers don’t exist outside the system, they are part of it. Trying to understand an organization without considering the customer is like riding a bicycle without any wheels. The view may be pleasant, even informative, but it is not likely to take you anywhere. Customers are part of the system because they determine the purpose of the system and pay for the results. Suppliers, too, are part of the system. Suppliers, after all, provide the organization with what it needs to function – the raw materials upon which the transformation process will be based.

Customer as opposed to hierarchically driven. The old view sees the organization as driven by the positional power of the CEO. To answer why anyone does anything in the organization, one only has to look at the organization chart to understand: “Because that is what my boss told me to do.” But the new view places the customer at the ‘end,’ representing the purpose or aim of the system itself. Improvement is driven by customer needs and requirements. Product or service flows to the customer, who in turn provides cash to the organization in return for the value received. This is reinvested in product design and development using customer research to guide the reinvestment activity. The cycle repeats again and again, meaning improvement is a continuous process driven by the need to increase value to the customer.

Interdependency determines performance. The old view emphasizes independence and individual effort. Increasing performance means targeting the specific problem area and raising the performance standards. But the new view emphasizes the flow of production traveling across departments, divisions and individual jobs. What happens in production affects sales, marketing decisions impact manufacturing and so on. Performance, therefore, comes from how the components of the system or process are designed and put together. Functional independence is recognized for what it is, a myth. To improve performance, we shift our focus from the individual boxes to the system or process that is actually producing value for the customer.

It is tempting to say this new view represented by the Deming flow diagram defines a radically different picture of what organizations are, and how to improve their performance. And to be sure, much of what the systems approach proposes is a very different way of thinking about organizations. But is the foundation of the approach really so new? Haven’t we known all along that what is really important is producing quality products and services to customers and getting cash in return? Haven’t we always known that maximizing the productivity of production is a key to success? And haven’t we always known that doing so is more important than maintaining the paper flows up and down the organization?

I suspect we have. Perhaps we just lost sight of what’s important, blinded by the image of the organization chart and its corresponding philosophy of independence.