In Deming's red beads example, employees have no control over their performance. What does this experiment have to do with a situation in the real world, where employees' performance is a function both of their ability/effort and random factors? What managerial insights can one obtain from this example?

In Deming's red beads experiment, an employee selects beads at random from a box containing a certain percentage of red beads and a higher percentage of white beads. Their performance is measured based on the number of red beads drawn. But since the employee has no control over the ratio of beads and the drawing itself, their performance is not a result of ability or effort, but purely random factors.

In the real world, employees' performance is a result of various factors, such as skillset, ability, effort, team dynamics, workplace culture, and more. However, it is also subject to several random factors (unforeseen circumstances, economic changes, etc.). In some cases, managers may not be able to differentiate between the factors influencing an employee's performance fully. Deming's experiment can be seen as a reminder of the role randomness plays and the need for understanding the various factors impacting performance rather than attributing it solely to the employees' abilities.

From Deming's red beads experiment, we can derive the following managerial insights: 1. Recognize the role of randomness: Managers should be aware of and acknowledge the impact random factors can have on employees' performance, and not attribute all successes or failures solely to the individual effort. 2. Focus on the system: Deming often emphasized the importance of improving the system that employees work in. Instead of blaming employees when results are undesirable, managers should analyze the system to find areas of improvement that can enhance overall performance. 3. Foster a learning environment: Encourage employees to learn from their experiences, both successes and failures, without fear of blame. This can help in continuous improvement, leading to better performance in the long run. 4. Use relevant performance metrics: Ensure that the performance metrics used actually reflect the responsibilities and objectives of the employees and are tied to factors that employees have control over. This would promote a fairer evaluation process and motivate employees to improve their performance in meaningful ways.