Some firms added internal positions that today would be called performance or internal auditors, but most seemed to have relied on a few prominent consultants in the field. Few service industries (a term not coined until the 1990s) seem to have adopted these methods. The major breakthrough for the application of statistical methods to productivity came with Deming's early work that propounded the need to separate controllable sources of error from uncontrollable or random sources of error. First adopted in Japan and later sweeping the manufacturing industries throughout the world, Deming's Total Quality Management approach changed managerial output, which led to development number two.
2. Creation of peer review groups, quality circles. Deming urged the creation of quality teams, sometimes called tiger teams, made up of production workers to discover and conquer controllable sources of error and introduce running improvements in production in the process he christened continual improvement. As organizations successfully implemented such teams, the relationship between workers and managers changed to one of greater perceived interdependence and respect. In most cases, this change did not affect the executives and senior management of the organizations. Implementation in the service sector lagged 30 to 40 years behind implementation in the manufacturing sector, primarily because of perceived problems in quantitatively measuring production, performance, and improvement. This phase 2, along with phases 3 through 5, represent the emergence of the team as the central work unit in organizations. .
3. Change in overall culture. At a far slower pace than the introduction of teams on the production floor or in work units of a service industry, the overall culture of various organizations has changed. As team members gained greater autonomy, respect, importance, and value to the firm, greater efforts were made to retain them, leading to such innovations as banded salary systems and market basket approaches to improved fringe benefits.
