Heres a situation where unleashing the chiefs (Chief Petty Officers, the senior non-commissioned officers in the navy), and ignoring the "zero defects" mentality turned around morale and performance on one of the U.S. Navys aircraft carriers. The USS John F Kennedy (CV 67) is one of the older carriers, having entered service in 1968. Although the navy spends billions each year to upgrade and refurbish its carrier fleet, when a ship is in service for over three decades, more things go wrong. In late 2001, the 80,000 ton ship underwent a major inspection, and over 5,000 things were found wrong. Many were minor, but it was an unacceptably large number. 

The ship underwent extensive work to clean up the problems, and install new computer equipment to use the ship as a test bed for networking within the ship and with others in the task force. But the many little problems remained. Morale was low and the ship still had a shabby demeanor. 

The main problem was that the chiefs had been misused. Years of zero defects thinking had forced officers to try and closely supervise what the chiefs were doing (which is supervising the sailors, which is what a chief is supposed to do) and, worst of all, take away some of their authority. Morale among the chiefs sank. Even though there was constant turnover among the hundreds of chiefs on the carrier (as new ones arrived via promotion or transfer, and others retired or left), an ugly atmosphere had been created and it persisted. Since the chiefs worked closely with the sailors, the low morale spread and became pervasive throughout the ship. Some of the division officers tried to improve matters with the chiefs they had working for them, but that did not change the glum atmosphere throughout the ship. Besides, most divisions on the ship only contained a few hundred sailors. It would require a captain to recognize the problem and do something to revitalize the 4,600 sailors on board. 

Captain Ron Henderson showed up in 2002 and soon realized what the problems were. He came up with a plan to give the chiefs back the authority and control that made them the backbone of the ships leadership. First, he let it be known that the chiefs would be responsible for the physical conditions on the ship, and they would have new authority to make it happen. Henderson established a Disciplinary Review Board, run by the chiefs, that would deal with sailors who were having disciplinary problems. While the legal punishments (losing pay, getting locked up in the brig for a while, or Court Martialed for even heavier punishment) could only be handed out by officers, the chiefs were explicitly told to issue punishments that were within their powers (extra work, especially unpleasant stuff like chipping paint and nasty cleaning jobs), preceded by a chewing out by a chief. If the sailor was a real hard case, the chiefs could send him (or her) up the line for officer grade punishments. All of a sudden, sailors, especially the bad actors, realized that the chiefs they worked with every day now had the explicit authority and means to make life very unpleasant for sailors who were not doing their job.

The captain also let it be known that the zero defects attitude was truly dead on the Big John. Although its now official policy in the U.S. Navy to ignore the zero defects mania that has paralyzed officers and petty officers for over a decade, there are still lingering effects. It was now up to the chiefs to decide who had truly screwed up, or was just trying hard and made an honest mistake. Captain Henderson let it be known that he considered honest mistakes part of the learning experience, and not a punishable offense (although a chief would probably still yell at you.)

In a few months, you could tell the difference. The ship was cleaner, morale was better and the division officers were relieved of a lot of the petty supervisory their jobs had acquired over the years. The Big John went on to win performance awards, and become known among sailors and chiefs in the fleet as a good ship.

Captain Henderson was nominated for promotion to admiral.