By no means is it easy, or was the job complete, and transformation in the midst of growth is difficult, but without the System I do not believe we would have overcome these challenges. I attribute our success to the methods and theories developed by Deming.

Deming’s insight on complex social systems taught our management team to look at the company as a whole with a life of its own rather than as a loose collection of departments or individuals.

Deming’s theory is profound in its impact and amazing in its simplicity. As an American who taught these critical management theories to Japanese businesspeople after World War II, Deming quietly changed the world.

With these same theories and no natural resources except a motivated workforce along with committed leaders and managers, Japan developed the second largest economy in the world and a commitment to excellence and collective prosperity. Deming’s Theory of Profound Knowledge, his 14 Points for Management, and the practice of continual improvement are essential for any organization looking to compete successfully over the long-term.

In many ways, I believe that the current global economic crisis, especially as it is manifested in the United States, is the direct result of a departure from proven principles. What we are witnessing is the massive fallout that results from a systemic failure. Rather than functioning according to Deming’s principles and in accordance with the System of Profound Knowledge, individuals are striking out on their own and pursuing their own self-interests, in business and government, to the detriment of everyone.

Only by returning to the basics and the principles that have led to greatness can we ever hope to find a way out of the current crisis. The opportunities are tremendous. At Fort Ashford Funds, we are committed to helping our insurance and risk-related portfolio companies and the companies we invest in effectively pursue these opportunities through positive systemic transformation.

I looked at newer, “better” thinkers who led the successful companies like Coca-Cola, Dell, Toyota, General Electric, Microsoft, Wells Fargo, Berkshire Hathaway, and McDonalds to name a few. I looked at companies and approaches that were failing including Enron, Lotus, the Big Three Automakers, Apple (ok, Steve Jobs fixed that), and numerous Internet companies.

Through this review I became more impressed with the System of Profound Knowledge. What struck me most was the simplicity of the Deming approach and how it addressed all aspects of a business (and how the world worked).

The challenge was and continues to be the amount of work that is necessary to implement a ‘systems’ approach – it requires management to work hard and maintain a commitment to building long-term value instead of focusing on short-term incentives and rewards. It is humanistic and relies on cooperation. It also requires self-reflection, a commitment to ethical practices, and on-going learning instead of “instant pudding” solutions.

Up next: Putting principles into practice (next week’s first post). In the meantime, here’s wishing everyone a safe and happy  Memorial Day weekend!

The first step involved hiring two “experts” from Apt Leadership to train our senior management to allow us to better compete in the marketplace. The initial 4-day class introduction consisted of viewing endless hours of videos done in the 80s and early 90s by a slow talking, ancient guru by the name of W. Edwards Deming.

As I said last week, up until this point in time:

“I adopted management theories focused on individual recognition/punishment and altered my views based on the latest management book lauded through the business press. I believed working hard, relying on experts, tracking and monitoring tasks, managing personalities, upbeat slogans, and keeping positive would lead to success.` ~ from 5/15/09 blog entry, “My Initial Forays Into Management“

What started as a slow and painful snooze-fest quickly evolved into a radical reflection on my personal belief systems and management/life theories. During the 4-day process (some of which I missed), I began a personal transformation process as I gained insights into the ideas of Deming’s System of Profound Knowledge. It became apparent to me that Deming’s approach made more sense than the management theories I had developed on my own. In particular, the Red Bead Experiment led me to question many of my strongest beliefs in how to manage individuals and lead a company.

The change did not happen overnight. With these new insights, I began to reflect actively on my understanding of how to manage a business and recognized the shortcomings of my historical approaches to managing people. My basic assumption was if Deming’s System of Profound Knowledge is so good, how come nobody uses it? My interest in management theory grew intensely, the more I read, listened, pondered, and reviewed.

Next up: Back to school (later this week).

I adopted management theories focused on individual recognition/punishment and altered my views based on the latest management book lauded through the business press. I believed working hard, relying on experts, tracking and monitoring tasks, managing personalities, upbeat slogans, and keeping positive would lead to success.

In simple terms, I attributed my achievements to personal efforts instead of timing and depended upon others while attributing failures to the individuals involved even if they did not have a clear understanding of what was expected. I viewed my expertise as recruiting and building a team of top performers and setting them loose to do great things using management theories like MBOs, MBWA, Best Practices, and Benchmarking.

Then, as you’ll read next week, I began a transformation process that ultimately impacted everything I thought I knew about business management and more!

Next up: My journey of discovery begins (next week’s first post).

W. Edwards Deming (photo used with permission from W. Edwards Deming Institute)

Each individual’s belief system is unique — influenced by his or her education and experience. My belief system is strongly influenced by my understanding of W. Edwards Deming ideas and teachings, particularly his System of Profound Knowledge.

I believe leaders must learn that to compete effectively, they must cooperate. Incentive compensation, management by objectives, annual evaluations, and individual goals create a culture of competition and fear instead of cooperation and harmony.

Deming’s System of Profound Knowledge is designed to transform an organization into an organic whole, where departments and individuals function effectively and efficiently as a single entity. I encourage everyone in business management to study Deming’s theories as explained in his book, The New Economics.

Next up: My initial forays into management (later this week).

Deming’s ideas emerged from his experiences as a boy growing up on the Wyoming frontier in the early 1900s. He observed the benefits of cooperation amongst the farmers and continual improvement of farming practices taught by the U.S. Department of Agriculture. Later he would remind students the West was won by townspeople working together at barn-raisings and quilting bees… not by loner cowboys.

Here at Fort Ashford Funds, we believe to thrive, a company must create an environment with a spirit of cooperation and camaraderie – a community in which people pursue continual improvement of themselves and the various business processes they follow for the greater good of the organization. Motivation should come from within, from caring not fearing.

“Long-term commitment to new learning and new philosophy is required of any management that seeks transformation. The timid and the fainthearted, and the people that expect quick results, are doomed to disappointment.” From Out of the Crisis by W. Edwards Deming.

Management’s role is to develop accurate predictions and guide and manage a business to ensure the future of the organization and its stakeholders. Deming’s System of Profound Knowledge provides management with the vision and tools for transforming and developing businesses seeking a long-term competitive advantage.

At Fort Ashford, we embrace Deming’s ideas, in theory and practice, and seek to practice and develop our understanding of how they can be combined with the best and brightest new ideas for the insurance and risk-related marketplaces. We feel communicating our vision and educating our partners on the principles that drive our practices is key to our mutual success.

Over the coming weeks and months, I will be posting regularly to this blog to introduce readers to my understanding of Deming’s principles, their practical application in business and private equity funding, and how they have and continue to evolve in my mind influenced by my exposure to other ideas as well as my own management experiences, observations, and insights.

I invite you to join me on this journey of discovery and evolution as we explore and test my understandings, reveal opportunities that arise out of honest examination, and identify other resources that were helpful in my own personal and professional development.

I also encourage you to post your own observations, insights, and commentary in the form of comments to assist in forming what I hope becomes a collaborative community from which the best business management principles and practices are born.

Flexible fuel vehicles (FFVs) and plug-in hybrid electric vehicles (PHEVs) boost the supply-to-demand ratio by giving consumers access to a greater supply of fuels (ethanol, methanol, gas, and electricity) while slashing oil consumption. The net effect would be a more reliable and affordable supply of fuels. A PHEV, for example, could run 20-60 miles on a single charge for 1-3 cents per mile and then switch to flex fuel (say 80 percent alcohol-based, 20 percent gas) to achieve nearly 500 miles per gallon of gas.

The opportunity to turn the production of fuel over to producers (from farming and waste products) is uniquely attractive to America’s entrepreneurial sensibilities. Doing so affords a chance for Asia and the Americas to change the financial dynamics of their economies and begins to shift the political and economic power of energy back into the hands of producers, which here in the U.S. means millions of new jobs and an additional quarter trillion dollars a year pumped into our own economy. As a result, consumers would be able to vary the fuel mixture at the pump to get the most affordable mix based on current prices of oil, ethanol, and methanol, and entrepreneurs—not big government—would be in a position to jumpstart and reform our economy.

Please do as I have: Contact your elected representatives in Washington, D.C., and ask them to support the Open Fuel Standards Act., The Act, which would require 50 percent of new cars sold in the United States by 2012, and 80 percent by 2015, to be flex fuel vehicles, is scheduled to be reintroduced in the 111th Congress within the next 30 days .