Deming's System of Organizational Knowledge

Understanding How Your Organization Works

Deming's System of Organizational Knowledge - Understanding How Your Organization Works

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Make sure that every team in your organization works in harmony.

Imagine that your team is responsible for one part of a major project, and you've pulled out all the stops to finish it. Trouble is, the project has stalled because another team, with different priorities, hasn't completed its own section of the work.

It's a frustrating, maddening, but all too familiar situation – one that often arises when teams work in isolation, or don't fully understand how their objectives relate to those of other departments.

This is where Deming's System of Organizational Knowledge can be useful. It encourages you to think about your organization as a whole, so that you can pursue your team's goals in a way that is consistent with your organization's overall objectives.

In this article, we explore how Deming's model can help you to increase productivity, lead your team more effectively, and reduce competition or conflict between departments.

What Is Deming's System of Organizational Knowledge?

Deming's System of Organizational Knowledge (also known as Deming's System of Profound Knowledge) was created by Professor W. Edwards Deming, and published in his 1993 book, "The New Economics for Industry, Government, Education."

It enables you to understand how your actions, and those of your team, affect other parts of your organization, and how this impacts your organization's overall performance.

The model makes it clear that if an organization is to grow and improve, all of its component parts must work together toward a common purpose.

Deming's framework consists of four interrelated areas, as shown in Figure 1, below.

Figure 1 – Deming's System of Organizational Knowledge.

Deming's System of Organizational Knowledge

Headings reprinted from pages 92-115 of The New Economics for Industry, Government & Education, second edition. © 2000 Massachusetts Institute of Technology, by permission of MIT Press.

The four areas are:

  1. The Organizational System. This is the way in which all of the individuals, teams and departments in your organization work together to meet the organization's common aims.
  2. Impact of Variation. These are the variations and inconsistencies that affect your organization's performance. These could include manufacturing defects, mistakes, or unexpected changes in output, for example.
  3. Theory of Knowledge. This is how the different parts of your organization use information, observation and forecasting to make decisions and effect change.
  4. Psychology. This relates to the reasons why people act and work in the way that they do within your organization. Deming's theory states that people are motivated by intrinsic factors such as job satisfaction and a sense of belonging, so it's important to understand what “makes them tick.”

How to Use the Model

When you apply this model to your team or organization, remember that the four areas are interlinked. Change in any one area will likely affect the other three.

For example, a decision made in one part of your business (theory of knowledge), might lead to a change in processes (organizational system). Staff may then feel more positive about their work (psychology), which improves the quality of their output (variation).

Let's look at each area in more detail.

1. The Organizational System

Start your analysis by building your understanding of your organization and the teams and processes within it.

Use organization charts, Flow Charts, and Swim Lane Diagrams to examine the relationships between the various departments and teams, and how they depend on one another. You'll be better able to support other teams once you understand this interdependence.

Next, turn your attention to any other elements that underpin your organization's activities, such as your suppliers, customers, shareholders, and so on. You need to understand the role that each one plays in enabling your team and your organization to meet their goals.

Also, take a fresh look at your organization's Mission Statements and Vision Statements. A thorough understanding of your organization's ultimate aims can enable you and your team to work toward them without undermining the actions of other teams. Our articles, Management by Objectives and Team Charters, can help you to do this.

2. Impact of Variation

Here, you need to examine the variations and inconsistencies that occur in your team, and understand how they affect other parts of the system.

Sometimes, for example, your team will produce exceptionally high-quality work, or finish projects earlier than planned. Other times, its work might be below the usual standard, or it may deliver projects late. You may have occasional issues with quality control, or variations caused by changes in the other areas of Deming's model (system, knowledge and psychology).

List the variations that you observe in your team's work, and use the information you gathered in the previous step to analyze the knock-on effects of these variations on other teams, and on the organziation as a whole.


It may be useful to review your processes, so that you can minimize or eliminate variations within your team. Use tools such as FMEA, the Theory of Constraints, and Kaizen to do this. You can also use Pareto Analysis to identify the variations that have the biggest impact.

Next, look at the variations that happen in other parts of your organization. (If these aren't obvious, arrange meetings with key people in each department to find out more.)

When you've identified these variations, consider how they affect your team, and whether you need to change the way that your team works to compensate for them.

3. Theory of Knowledge

In this component, you need to develop your understanding of how your organization shares and uses knowledge to make decisions, to effect change, and to reach its objectives. The way that your organization uses knowledge should be consistent with those objectives.

For example, a company that sells travel insurance online may use web analytics to plan its marketing strategy, and a retail business might use its knowledge of consumer trends to move into a new market.

To do this, consider how you use knowledge and make decisions in your own team:

  • Are you using the available knowledge effectively, and making decisions that align with your organization's overall objectives?
  • Do you gather information and manage knowledge effectively, so that you can seize opportunities and manage potential threats?
  • Does the way in which you make decisions affect other teams' objectives, or could you share knowledge more effectively?
  • Do you have a system in place for learning from complaints and feedback?

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4. Psychology

The final element is to understand the people in your organization: how and why they think and act as they do.

Start with your own team. As your understanding of your team members' motivation increases, you'll be better able to reward them appropriately, and to get the best from them.

Then, explore what motivates the other teams in your organization. This will help you to build better relationships with other departments, and to understand how their objectives fit with your own, and those of your organization.

Also, find out how people in your organization learn and process new information. This can make your communication more effective. For example, would other managers prefer to be updated via email, rather than in a weekly meeting? Do some team members only need verbal instructions, rather than a written brief, when they begin a new project?

It's also important to think about how changes in other areas of your organization could affect your team members. For example, a key staff member leaving another team could have a negative effect on your own team's morale.

Understanding the four areas of Deming's model, and how they are linked together, enables you to see the "big picture" of your organization. You'll make better decisions as a result.


See our article on the McKinsey 7-S Framework for another approach to aligning all of the different elements in your organization.

Key Points

The Deming System of Organizational Knowledge was created by W. Edwards Deming and published in his 1993 book, "The New Economics for Industry, Government, Education."

The purpose of the model is to increase your understanding of your organization as a whole, and to align your team's goals with those of your organization.

To apply the model, think about the four interrelated areas of your organization:

  1. The Organizational System.
  2. Impact of Variation.
  3. Theory of Knowledge.
  4. Psychology.

Understanding these factors, and how they all fit together, can help you to lead your team more effectively.