Total Quality Management: An Overview and Evolution, Study notes of Quality Management

Download Total Quality Management: An Overview and Evolution and more Study notes Quality Management in PDF only on Docsity! Part One The Development, Introduction and Sustaining of Total Quality Management (TQM) The purpose of part 1 is to introduce the reader to some of the fundamentals of TQM. It deals with how to introduce TQM into an organization and its sub- sequent development. Sustaining TQM is far from easy, and the final chapter examines issues to which attention needs to be given. It contains the following seven chapters: Chapter 1 – TQM: An Overview Chapter 2 – The Role of Management in TQM Chapter 3 – The Received Wisdom on TQM Chapter 4 – The Introduction of TQM Chapter 5 – A Framework for the Introduction of TQM Chapter 6 – Levels of TQM Adoption Chapter 7 – Sustaining TQM Chapter 1 examines the evolution of quality management (‘co-ordinated activ- ities to direct and control an organization with regard to quality’) from inspec- tion (‘conformity evaluation by observation and adjustment accompanied as appropriate by measurement, testing or gauging’) to quality control (‘part of qual- ity management focused on fulfilling quality requirements’) to quality assurance (‘part of quality management focused on providing confidence that quality requirements will be fulfilled’ (BS EN ISO 9000 (2000)) and finally to Total Quality Management (TQM). In describing this evolution a comparative ana- lysis is made of the essential difference between detection- and prevention-based approaches. The key elements of TQM are also discussed. TQM is not defined in BS EN ISO 9000 (2000) but, put simply, it is the mutual co-operation of everyone in an organization and associated business processes to produce value- for-money products and services which meet and, hopefully, exceed the needs and expectations of customers. Chapter 2 outlines the main reasons why senior management should become personally involved in TQM. It examines what they need to know about TQM MQC01 5/9/07 05:03 PM Page 1 2 Developing, Introducing and Sustaining TQM and what they need to do in terms of actions. The role of middle and first-line management is also key to putting in place the principles of TQM, and the activ- ities which they need to get involved with are discussed. Chapter 3 deals with the received wisdom on TQM. Quality management experts such as Crosby, Deming, Feigenbaum and Juran have had a considerable influence on the development of TQM throughout the world and their views and teachings are summarized in this chapter. The Japanese have had a profound influence on the understanding and development of TQM. Therefore, no book on TQM would be complete without some discussion of the way in which Japanese companies develop and manage the concept. The views of four influential Japanese experts (Imai, Ishikawa, Shingo and Taguchi) are explored and a sum- mary is provided of Japanese-style Total Quality. Chapter 4 deals with the introduction of TQM. It sets out by examining change and continuous improvement and deals with how the improvement process is triggered, which is usually in combination: the Chief Executive, competition, demanding customers and fresh-start situations. Following this, the chapter goes on to examine a range of approaches which can be followed in the introduction of TQM. Chapter 5 presents a framework to assist with the introduction of TQM. The material draws together a number of issues which need to be considered in its introduction and development. The structure of the framework consists of four main sections: organizing, using systems and techniques, measurement and feedback, and changing the culture. The framework has been used by a num- ber of organizations in both the public and private sectors and in manufactur- ing and service industries to introduce the basic elements and practices of TQM. Companies adopt and commit themselves to TQM in a variety of ways. Chapter 6 examines six different characteristics and behaviours which have been found to be typically demonstrated by organizations across the world. These six levels of TQM adoption can be used as an internal measure by which organizations can compare their standing and which help them review their performance. Most organizations will encounter problems and obstacles in the introduction and development of TQM. If they are aware of what these are, they can agree actions to steer around or minimize them. Chapter 7 explores some of the typ- ical problems in sustaining TQM. Also presented is an Audit Tool by which organ- izations can assess if they are experiencing the factors which can have a negative impact on the sustainability of TQM. Reference BS EN ISO 9000 (2000), Quality Management Systems: Fundamentals and Vocabulary. London: British Standards Institution. MQC01 5/9/07 05:03 PM Page 2 TQM: An Overview 5 ‘degree to which a set of inherent characteristics fulfils requirements’ (BS EN ISO 9000 (2000)). However, in today’s business world there is no single accepted definition of quality. Irrespective of the context in which it is used, it is usually meant to distinguish one organization, event, product, service, process, person, result, action, or communication from another. For the word to have the desired effect as intended by the user and to prevent any form of misunderstanding in the communication, the following points need to be considered: • The person using the word must have a clear and full understanding of its meaning. • The people/audience to whom the communication is directed should have a similar understanding of quality to the person making the communication. • Within an organization, to prevent confusion and ensure that everyone in each department and function is focused on the same objectives, there should be an agreed definition of quality. For example, Betz Dearborn Ltd. define quality as: ‘That which gives complete customer satisfaction’, and Rank Xerox (UK) as ‘Providing our customers, internal and external, with products and services that fully satisfy their negotiated requirements’. North-West Water Ltd. use the term ‘business quality’ and define this as: – Understanding and then satisfying customer requirements in order to improve our business results. – Continuously improving our behaviour and attitudes as well as our pro- cesses, products and services. – Ensuring that a customer focus is visible in all that we do. There are a number of ways or senses in which quality may be defined, some being broader than others but they all can be boiled down to either meeting requirements and specifications or satisfying and delighting the customer. These different definitions are now examined. Qualitative When the word quality is used in a qualitative way, it is usually in a non-technical situation. BS EN ISO 9000 (2000) says that ‘the term “quality” can be used with adjectives such as poor, good or excellent’. The following are some examples of this: • In advertising slogans to assist in building an image and persuade buyers that its production and services are the best: Esso – Quality at Work; Hayfield Textiles – Committed to Quality; Kenco – Superior Quality; Philips Whirlpool – Brings Quality to Life; Thompson Tour Operations – Thompson Quality Makes the World of Difference. MQC01 5/9/07 05:03 PM Page 5 6 Developing, Introducing and Sustaining TQM • By television and radio commentators (a quality player, a quality goal, a quality try). • By directors and managers (quality performance, quality of communications). • By people, in general (quality product, top quality, high quality, original qual- ity, quality time, quality of communications, quality person, loss of quality, German quality, 100 per cent quality). It is frequently found that in such cases of ‘quality speak’ the context in which the word quality is used is highly subjective and in its strictest sense is being misused. For example, there is more than one high street shop which trades under the name of ‘Quality Seconds’, and some even advertise under the banner of ‘Top Quality Seconds’. There is even a company with the advertising slogan ‘Quality Part-Worn Tyres’ on the side of its vans. Quantitative The traditional quantitative term which is still used in some situations is accept- able quality level (AQL). This is defined in BS 4778 (1991) as: ‘When a continuing series of lots is considered, a quality level which for the purposes of sampling inspection is the limit of a satisfactory process’. This is when quality is paradoxically defined in terms of non-conforming parts per hundred (i.e. some defined degree of imperfection). An AQL is often imposed by a customer on its supplier in relation to a particular contract. In this type of situation the customer will inspect the incom- ing batch according to the appropriate sampling scheme. If more than the allowed number of defects are found in the sample the entire batch is returned to the supplier or the supplier can, at the request of the customer, sort out the con- forming from non-conforming product on the customer’s site. The employment of an AQL is also used by some companies under the mistaken belief that try- ing to eliminate all defects is too costly. The setting of an AQL by a company can work against a ‘right first time’ men- tality in its people as it appears to condone the production and delivery of non- conforming parts or services, suggesting that errors are acceptable to the organization. It is tantamount to planning for failure. For example, take a final product which is made up of 3,000 parts: if the standard set is a 1 per cent AQL, this would mean that the product is planned to contain 30 non-conforming parts. In reality there are likely to be many more because of the vagaries of the sampling used in the plan or scheme, whereby acceptance or rejection of the batch of product is decided. Another example of a quantitative measure is to measure processes using sig- mas (a sigma is a statistical indication of variation) and defects per million oppor- tunities (DPMO). A sigma is essentially a measuring device that is an indication MQC01 5/9/07 05:03 PM Page 6 TQM: An Overview 7 of how good a product or service is. The higher the sigma value the lower the number of defects. For example, 3 sigma equals 66,807 DPMO, while 6 sigma equals 3.4 DPMO (these values assume a normal distribution with a process shift of 1.5 sigma). The sigma level is a means of calibrating performance in relation to customer needs. The concept of six sigma (a quality improvement framework) has developed from its origins in Motorola in the 1980s as an approach to improving productivity and quality and reducing costs. Six sigma is the pursuit of perfection and rep- resents a complete way of tackling process improvement from a quantitative approach, involving many of the concepts, systems, tools and techniques described in this book. The six sigma concept is currently very popular as a busi- ness improvement approach. The key features include a significant training com- mitment in statistics and statistical tools, problem-solving methodology and framework, project management, a team-based project environment, people who can successfully carry out improvement projects (these are known as black belts and green belts, based on the martial arts hierarchy), leaders (master black belts) and project champions. Yet another example of a quantitative measure of quality are levels of service performance requirements; see the data in table 1.1. Uniformity of the product characteristics or delivery of a service around a nominal or target value If product or service dimensions are within the design specification or tolerance limits they are considered acceptable; conversely, if they are outside the spe- cification they are not acceptable (see figure 1.1). The difference between what is considered to be just inside or just outside the specification is marginal. It may also be questioned whether this step change between pass and fail has any scientific basis and validity. Table 1.1 Levels of service performance requirements Comparative Grade Billing queries: Written complaints: Billing metered measure % answered % answered customers: % read within 5 days within 10 days minus % unread Well above average A >95 >98 >99.4 Above average B 92–95 96–98 98.5–99.4 Average C 89–92 94–96 96.0–98.4 Below average D 86–89 92–94 93.0–95.9 Well below average E <86 <92 <93.0 Source: Office of Water Services (OFWAT) (1995/6). MQC01 5/9/07 05:03 PM Page 7 10 Developing, Introducing and Sustaining TQM from the confusion between quality and grade. Grade represents the addition of features and characteristics to satisfy the additional needs of customers and this clearly requires extra monies, but grade is different to quality. Fitness for purpose/use This is a standard definition of quality first used by Juran (Juran 1988; Juran and Godfrey 1999). Juran classifies ‘fitness for purpose/use’ into the categories of: quality of design, quality of conformance, abilities and field service. Focusing on fitness for use helps to prevent the over-specification of products and services. Over-specification can add greatly to costs and tends to militate against a right- first-time performance. How fit a product or service is for use obviously has to be judged by the purchaser, customer or user. Satisfying customer expectations and understanding their needs and future requirements A typical definition which reflects this aim is: ‘The attributes of a product and/or service which, as perceived by the customer, makes the product/service attrac- tive to them and gives them satisfaction.’ The focus of the definition is adding value to the product and/or service. Satisfying customers and creating customer enthusiasm through understand- ing their needs and future requirements is the crux of TQM, and all organiza- tions are dependent on having satisfied customers. TQM is all about customer orientation and many company missions are based entirely on satisfying customer perceptions. Customer requirements for quality are becoming stricter and more numerous, and there are increasing levels of intolerance of poor-quality goods and services and low levels of customer service and care. The customer is the major reason for an organization’s existence and customer loyalty and retention is perhaps the only measure of organizational success. In most situations customers have a choice: they need not place future orders with a supplier who does not perform as they expected or who they feel has deceived them. They will certainly not jeopardize their own business interest out of loyalty to a supplier whose prod- ucts and service fail to perform properly, and will simply go to a competitor. In the public sector the customer may not have the choice to go elsewhere; how- ever, they can go to litigation, write letters of complaint, cause disruption, and use elections to vote officials out of office. The aim of superior-performing companies is to become the supplier of choice to their customers and to ‘lock’ themselves into their customers’ mode of operation by becoming their sole sup- plier, and by adding value to their customers’ businesses by process improvement and cost-down activities. A number of countries have developed a customer MQC01 5/9/07 05:03 PM Page 10 TQM: An Overview 11 satisfaction index. The American index (see <www.theacsi.org>), for example, indi- cates satisfaction with the quality of goods and services in numerous industries. The superior-performing organizations go beyond satisfying their customers: they emphasize the need to delight them by giving them more than what is required in the contract; they also talk about winning customers and becoming infatuated with their customers. These organizations create a total experience for their customers, which is unique in relation to the offerings of competitors (which is called ‘the experience economy’, see Pine and Gilmore (1999)). The wisdom of this can be clearly understood when we consider the situation where a supplier has given more than the customer expected (e.g. an extra glass of wine on an aircraft; a sales assistant going out of their way to be courteous and helpful and providing very detailed information) and the warm feelings generated by this type of action. A customer-focused organization also puts considerable effort into anticipat- ing the future expectations of its customers (i.e. surprising quality), and, by work- ing with them in long-term relationships, helps them to define their future needs and expectations. They listen very closely to their customers and ‘real’ users of the product or service, in order to gain a clearer perspective on customer experiences. They aim to build quality into the product, service, system and/or process as upstream as is practicable. Excitement and loyalty are the words used to describe this situation. Those companies intent on satisfying customer needs and expectations will have in place a mechanism for facilitating a continuous two-way flow of information between themselves and their customers. There are a variety of means available to companies for them to assess issues such as: • How well they are meeting customer expectations • How well the brand is respected • What customers’ chief causes of concern are • What the main complaints are • What suggestions for improvements customers might have • How they might add value to the product and/or service • How well they act on what the customer says • The best means of differentiating themselves in the marketplace The trend is for increasing the level of contact with the customer. These ‘moments of truth’ (Carlzon 1987) occur far more frequently in commerce, public organizations, the Civil Service and service-type situations than in manufac- turing organizations. The means for increasing the level of customer contact include: • Customer workshops • Panels and clinics • Using ‘test’ consumers and mystery shoppers MQC01 5/9/07 05:03 PM Page 11 12 Developing, Introducing and Sustaining TQM • Focus groups • Customer interviews • Market research • Dealer information • Questionnaire surveys • Product reports • Trailing the service and/or product • Trade shows Customer complaints are one indication of customer satisfaction, and many organizations have a number of metrics measuring such complaints. BS 8600 (1999) provides guidance on how to develop an effective complaints manage- ment system in order to analyse and use complaints effectively. The rationale is that managing complaints in a positive manner can enhance customer percep- tions of an organization, increase lifetime sales and values and provide valuable market intelligence. Having listened to ‘customer voices’ an organization should put in place appro- priate strategy and actions for making the necessary changes and improvements. It is also important to clarify and identify the elements and characteristics of the product and service which the customer finds attractive. The service quality questionnaire (SERVQUAL) developed by Parasuraman et al. (1988) may be used to track these kinds of issues. This customer-required quality (i.e. their wants) should be translated into the language of internal needs and driven back through all levels in the organizational hierarchy. It is important that the requirements are put into terms that are measurable, realistic and achievable; the use of quality function deployment (QFD) is useful in this respect (for a detailed discussion of QFD, see chapter 17). Customer needs and requirements are for ever changing, and organizations have to live up to their customers’ expectations; they are never satisfied, even though the supplying organization may think they are. Why is Quality Important? To answer this question, just consider the unsatisfactory examples of product and/or quality service that you, the reader, have experienced, the bad feelings it gave, the resulting actions taken and the people you told about the experience and the outcome. Goodman et al. (2000), based on a range of studies carried out by TARP (Technical Assistance Research Programs), outline two arguments that are effective in selling quality to senior management. First, quality and service improvements can be directly and logically linked to enhanced revenue within one’s own company; and secondly, higher quality allows companies to obtain higher margins. MQC01 5/9/07 05:03 PM Page 12 TQM: An Overview 15 their perception of the quality from other parts of the world? and What are the dynamics underlying a consumer’s reasons for buying or not buying something produced in a foreign country?’ On a number of issues, this survey updates American attitudes expressed in the 1988 survey. Over 1,000 people in each country were questioned. A selection of summary highlights from the report are outlined below: • ‘Consumers in the US, Japan and West Germany in many respects are alike in terms of the attributes they consider important in determining the quality of the products they buy. For example, approximately one in five look to the brand name of a product. Durability is also important to at least 10 per cent of the consumers in each of the countries surveyed.’ • ‘Asked what factors are most important in influencing their decision to buy a product, price is the leading response in West Germany (64 per cent) and in the US (31 per cent). Performance (40 per cent) is most important among Japanese consumers, followed by price (36 per cent).’ • ‘A majority (61 per cent) of US consumers believe it is very important to US workers to produce high-quality products or service.’ • ‘Price and quality are the reasons given most frequently by American con- sumers for buying a product made in Japan or Germany.’ Views and roles of senior management 1 In 1992 ASQ commissioned the Gallup organization to study the nature of leadership for quality within American business organizations by surveying opinions of senior management in both large and small organizations. The objective was to explore their views concerning quality improvement and the role of directors with regard to quality. Some 684 executives were interviewed. The following is a summary of the main findings extracted from ASQ/ Gallup (1992). • ‘At least six in ten executives report that they have a great deal of personal leadership impact on customer focus and satisfaction, strategic quality planning, quality and operational results and financial results.’ • ‘Most executives believe management plays a greater role than the board in determining quality policy within their company.’ • ‘More than four in ten (45 per cent) report their board does discuss quality frequently.’ • ‘Four in ten (43 per cent) executives report their board reports on con- sumer satisfaction frequently, and almost as many (38 per cent) report the board reviews reports on customer retention or loyalty frequently.’ 2 The European Foundation for Quality Management (EFQM) contracted McKinsey and Company to survey the CEOs of the top 500 west European MQC01 5/9/07 05:03 PM Page 15 16 Developing, Introducing and Sustaining TQM corporations in relation to quality performance and the management of quality; 150 CEOs responded to the survey. The following are some of the main findings as reported by McKinsey and Company (1989). • Over 90 per cent of CEOs consider quality performance to be ‘critical’ for their corporation. • 60 per cent of CEOs said that quality performance had become a lot more important than before (late 1970s). • The four main reasons why quality is perceived to be important are: – Primary buying argument for the ultimate customer – Major means of reducing costs – Major means for improving flexibility/responsiveness – Major means for reducing throughput time. • The feasible improvement in gross margin on sales through improved quality performance was rated at an average of 17 per cent. • More than 85 per cent of the leading CEOs in Europe consider the man- agement of quality to be one of the top priorities for their corporations. 3 Lascelles and Dale (1990), reporting on a survey they carried out of 74 UK CEOs, say that ‘Almost all the respondents believe that product and service quality is an important factor in international competitiveness. More than half have come to this conclusion within the past four years.’ 4 Ahire and O’Shaughnessy (1998) conducted a large-scale survey of quality management practices at suppliers in the automotive industry, looking at such practices as top management commitment, customer focus, supplier quality management, design quality management, benchmarking, statistical process control, internal quality information usage, employee training, employee empowerment, employee involvement, and product quality. They conclude that: • ‘Firms with high top management commitment implement the other nine TQM implementation elements more rigorously than those with low top management commitment.’ • ‘In firms with high top management commitment, variations among the other nine TQM implementation constructs do not affect product qual- ity significantly.’ • ‘In firms with low top management commitment, four of the nine implementation constructs, namely, customer focus, empowerment, internal quality information usage, and supplier quality management are primary predictors of quality.’ Quality is not negotiable An order, contract or customer which is lost on the grounds of non-conforming product and/or service quality is much harder to regain than one lost on price MQC01 5/9/07 05:03 PM Page 16 TQM: An Overview 17 or delivery terms. In a number of cases the customer could be lost for ever; in simple terms the organization has been outsold by the competition. If you have any doubt about the truth of this statement just consider the num- ber of organizations that have gone out of business or lost a significant share of a market, and consider the reported reasons for them getting into that position. Quality is one of the factors which is not negotiable and in today’s business world the penalties for unsatisfactory product quality and poor service are likely to be punitive. Quality is all-pervasive There are a number of single-focus business initiatives which an organization may deploy to increase profit. However, with the improvements made by com- panies in their mode of operation, reduction in monopolies, government legis- lation, deregulation, changes in market share, mergers, takeovers, collaborative joint ventures, there is less distinction between companies than there was some years ago. TQM is a much broader concept than previous initiatives, encom- passing not only product, service and process improvements but those relating to costs and productivity and to people involvement and development. It also has the added advantage that it is totally focused on satisfying customer needs. A related issue is that organizations are often willing to pay more for what they perceive as a quality product; see the results of the ASQ/Gallup survey of 1992, as outlined in table 1.2. Quality increases productivity Cost, productivity and quality improvements are complementary and not altern- ative objectives. Managers sometimes say that they do not have the time and Table 1.2 Customers willing to pay for quality Industry type Number of customers Number of customers willing to pay more unwilling to pay extra for a quality product for better quality Clothing/textiles 135 5 Furniture 74 4 TV/audio 66 6 Home 55 4 Automotive 36 10 Source: ASQ/Gallup (1992) MQC01 5/9/07 05:03 PM Page 17 20 Developing, Introducing and Sustaining TQM • 81 per cent of the companies provide a higher salary to turnover ratio than their peers. • 74 per cent of the organizations remunerate their employees above the median for the industry. • 65 per cent of the organizations produce above-median profit per employee for their industry. • 62 per cent of the organizations have a higher net asset turnover than their peer group. The authors also go on to say that ‘Four of the nine measures are marginally below the median for their industry but this is to be expected as quality becomes institutionalized and more widespread.’ Easton and Jarrell (1998) have undertaken an extremely thorough study which has examined the impact of TQM on financial performance for a sample of 108 firms. The impact of TQM has been assessed by examining the unexpected changes in financial performance for a five-year period following the introduction of TQM. Easton and Jarrell (1998) conclude that ‘The findings indicate that performance, measured by both accounting variables and stock returns, is improved for the firms adopting TQM. The improvement is consistently stronger for firms with more advanced TQM.’ Another very thorough study is that undertaken by Hendricks and Singhal (1996) in America, which began in 1991. They have measured the effects of TQM on long-term business performance. The study sample comprised nearly 600 award- winners (e.g. MBNQA, State Quality Awards and Supplier Awards) and compared their performance with that of similar companies that had not won such an award. The study found that it required a long time period to establish the link between TQM and financial performance because of its evolutionary nature. For the implementation period which started six years before a company won an award, they found no difference between award-winners and non-award-winners. The following are some of the key results from the post-implementation period: • Winners experienced a 91 per cent increase in operating income compared with their respective controls (43 per cent). • Winners gained a 69 per cent increase in sales compared with their controls (32 per cent) and attained a 79 per cent increase in total assets compared with the respective controls (37 per cent). • Winners increased their employees by 23 per cent compared with their respec- tive controls (7 per cent). • Over the five-year study period the award-winners outperformed the S&P 500 index by 34 per cent. In the X Factor Report (British Quality Foundation 1999) the award sub- missions from 14 European and UK quality/business excellence award-winning MQC01 5/9/07 05:03 PM Page 20 TQM: An Overview 21 companies were analysed regarding financial performance. The results were examined for (1) three-year trends and sustained good performance; (2) five- year trends and sustained excellent performance; and (3) favourable comparisons with set targets. Strong positive trends and/or sustained excellent performance over three years were demonstrated by over 70 per cent of the companies using three main financial measures: • Revenue growth • Operating profit • Return on assets Other financial measures against which these role-model companies performed well over three and five years and against targets/benchmarks, included: • Cashflow • Liquidity • Debtor days • Shareholder funds George (2002) reports on the Q-100 index, which was established in 1998. This is based on investments in American-based organizations which are using TQM. The search for such companies is undertaken by the Malcolm Baldrige National Quality Award criteria. The Q-100 consists of approximately 100 of the 500 S&P companies, which are weighted and diversified to align them with the weightings and sectors in the S&P 500. Among the findings reported by George (2002) are: From September 30th, 1998 to December 31st, 2001 the Q-100 returned 26.97 per cent compared with the S and P 500 return of 17.59 per cent. A $10,000 investment in both indices on September 30th, 1998 would have grown to $12,697 for the Q-100 on the last day of 2001, compared with $11,759 for the S and P 500. Perhaps the best-known quality/financial metric is the ‘Baldrige Index’. This is a fictitious stock fund made up of publicly traded US companies that have received the MBNQA during the years 1993 to 2002. The US Commerce Department’s National Institute of Technology (NIST) invested a hypothetical $1,000 in each of the whole company winners and the parent companies of 18 subsidiary winners. They also made the same investment in the S&P 500 index at the same time. The investments have been tracked from the first business day of the month following the announcement of the award receipts through to 1 December 2003. NIST (2006) reported that the award winners outperformed the S&P 500 by more than 6.5 to 1, until December 2001. The two following years of the study showed that the Baldrige Index underperformed the S&P 500. MQC01 5/9/07 05:03 PM Page 21 22 Developing, Introducing and Sustaining TQM The cost of non-quality is high Based on a variety of companies, industries and situations, the cost of quality (or to be more precise the cost of not getting it right the first time) ranges from 5 to 25 per cent of an organization’s annual sales turnover in manufacturing or annual operating costs in service-type situations; see chapter 9 and Dale and Plunkett (1999) for details. An organization should compare its profit-to-sales turnover ratio to that of its quality costs-to-sales turnover ratio in order to gain an indication of the importance of product and service quality to corporate profitability. A study by Halevy and Naveh (2000), found that some 30 per cent of Israel’s national product ‘is wasted due to poor quality of planning and workmanship’. A related cost issue is that of product liability, which is concerned with the legal liability of a manufacturer or supplier of goods for personal injuries or damage to property suffered as a result of a product which is defective and unsafe; see European Commission Directive (1985). A powerful example of the cost and implications of the failure to get a product right is provided by Wilks (1999): In July this year General Motors was fined a record $4.9 billion following a crash in 1993 which seriously burned six people involved in a rear end car collision. The severity of their injuries – some suffered 60 per cent burns – was put down to design fault in placing the petrol tank too close to the rear bumper. The victims’ lawyers discovered that an internal GM study had highlighted this danger and that the manufacturer had known ‘for years’ that this model was potentially unsafe. To alter the design would have cost the company $8.59 per car. Customer is king In today’s markets, customer requirements are becoming increasingly more rigorous and their expectations of the product and/or service in terms of con- formance, reliability, dependability, durability, interchangeability, performance, features, appearance, serviceability, user-friendliness, safety, and environmental friend- liness is also increasing. These days many superior-performing companies talk in terms of being ‘customer-obsessed’. At the same time, it is likely that the com- petition will also be improving and, in addition, new and low-cost competitors may emerge in the marketplace. Consequently there is a need for continuous improvement in all operations of a business, involving everyone in the company. The organization which claims that it has achieved TQM will be overtaken by the competition. Once the process of continuous improvement has been halted, under the mistaken belief that TQM has been achieved, it is much harder to restart and gain the initiative on the competition, (see figure 1.3). This is why TQM should always be referred to as a process and not a programme. MQC01 5/9/07 05:03 PM Page 22 TQM: An Overview 25 out by dedicated staff employed specifically for the purpose, or by self-inspection of those responsible for a process. Materials, components, paperwork, forms, products and goods which do not conform to specification may be scrapped, reworked, modified or passed on concession. In some cases inspection is used to grade the finished product as, for example, in the production of cultured pearls. The system is an after-the-event screening process with no prevention content other than, perhaps, identification of suppliers, operations, or workers, who are producing non-conforming products/services. There is an emphasis on reac- tive quick-fix corrective actions and the thinking is department-based. Simple inspection-based systems are usually wholly in-house and do not directly involve suppliers or customers in any integrated way. Quality control Part of quality management focused on fulfilling quality requirements. (BS EN ISO 9000 (2000)) Under a system of quality control one might expect, for example, to find in place detailed product and performance specifications, a paperwork and procedures control system, raw material and intermediate-stage product-testing and report- ing activities, logging of elementary process performance data, and feedback of process information to appropriate personnel and suppliers. With quality con- trol there will have been some development from the basic inspection activity in terms of sophistication of methods and systems, self-inspection by approved operators, use of information and the tools and techniques which are employed. While the main mechanism for preventing off-specification products and services from being delivered to customers is screening inspection, quality control measures lead to greater process control and a lower incidence of non-conformance. Those organizations whose approach to the management of quality is based on inspection and quality control are operating in a detection-type mode (i.e. finding and fixing mistakes). What is detection? In a detection or ‘firefighting’ environment, the emphasis is on the product, pro- cedures and/or service deliverables and the downstream producing and delivery processes; it is about getting rid of the bad things after they have taken place. Considerable effort is expended on after-the-event inspecting, troubleshooting, checking, and testing of the product and/or service and providing reactive ‘quick fixes’ in a bid to ensure that only conforming products and services are delivered to the customer. In this approach, there is a lack of creative and systematic work activity, with planning and improvements being neglected and defects being identified late in the process, with all the financial implications of this in terms MQC01 5/9/07 05:03 PM Page 25 26 Developing, Introducing and Sustaining TQM of the working capital employed. Detection will not improve quality but only highlight when it is not present, and sometimes it does not even manage to do this. Problems in the process are not removed but contained, and are likely to come back. Inspection is the primary means of control in a ‘policeman’- or ‘goalkeeper’-type role and thereby a ‘producing’ versus ‘checking’ situation is encouraged, leading to confusion over people’s responsibilities for quality – ‘Can I, the producer, get my deliverables past the checker?’ It also leads to the belief that non-conformances are due to the product/service not being inspected enough and also that operators, not the system, are the sole cause of the problem. A question which organizations operating in this mode must answer is: does the checking of work by inspectors affect an operator’s pride in the job? The production–inspection relationship is vividly described by McKenzie (1989). With a detection approach to quality, non-conforming ‘products’ (products are considered in their widest sense) are culled, sorted and graded, and deci- sions made on concessions, rework, reblending, repair, downgrading, scrap, and disposal. It is not unusual to find products going through this cycle more than once. While a detection-type system may prevent non-conforming product, services and paperwork from being delivered to the customer (internal or exter- nal), it does not prevent them being made. Indeed, it is questionable whether such a system does in fact find and remove all non-conforming products and services. Physical and mental fatigue decreases the efficiency of inspection and it is commonly claimed that, at best, 100 per cent inspection is only 80 per cent effective. It is often found that with a detection approach the customer also inspects the incoming product/service; thus the customer becomes a part of the organ- ization’s quality control system. In this type of approach a non-conforming product must be made and a ser- vice delivered before the process can be adjusted; this is inherently inefficient in that it creates waste in all its various forms: all the action is ‘after the event’ and backward-looking. The emphasis is on ‘today’s events’, with little attempt to learn from the lessons of the current problem or crisis. It should not be forgotten that the scrap, rework, retesting, reblending, etc. are extra efforts, and represent costs over and above what has been budgeted and which ultimately will result in a reduction of bottom-line profit. Figure 1.5, taken from the Ford Motor Company three-day statistical process control course notes (1985), is a schematic illustration of a detection-type system. An environment in which the emphasis is on making good non-conformance rather than preventing it from arising in the first place is not ideal for engen- dering team spirit, co-operation and a good climate for work. The focus tends to be on switching the blame to others, people making themselves ‘fireproof’, not being prepared to accept responsibility and ownership, and taking disciplinary action against people who make mistakes. In general, this behaviour and attitude emanate from middle management and quickly spread downwards through all levels of the organizational hierarchy. MQC01 5/9/07 05:03 PM Page 26 TQM: An Overview 27 Organizations operating in a detection manner are often preoccupied with the survival of their business and little concerned with making improvements. Quality assurance Finding and solving a problem after a non-conformance has been created is not an effective route towards eliminating the root cause of a problem. A last- ing and continuous improvement in quality can only be achieved by directing organizational efforts towards planning and preventing problems from occurring at source. This concept leads to the third stage of quality management develop- ment, which is quality assurance: Part of quality management focused on providing confidence that quality require- ments will be fulfilled. (BS EN ISO 9000 (2000)) Examples of additional features acquired when progressing from quality con- trol to quality assurance are, for example, a comprehensive quality management system to increase uniformity and conformity, use of the seven quality control tools (histogram, check sheet, Pareto analysis, cause-and-effect diagram, graphs, control chart and scatter diagram), statistical process control, failure mode and effects analysis (FMEA), and the gathering and use of quality costs. The quality systems and practices are likely to have met, as a minimum, the requirements of the BS EN ISO 9001 (2000). Above all one would expect to see a shift in emphasis from mere detection towards prevention of non-conformances. In short, Figure 1.5 A detection-based quality system Source: Ford Motor Company (1985) Information about performance Action on the output Equipment People Material Method Environment O U T P U T MQC01 5/9/07 05:03 PM Page 27 30 Developing, Introducing and Sustaining TQM There are many interpretations and definitions of TQM. Put simply, TQM is the mutual co-operation of everyone in an organization and associated business processes to produce value-for-money products and services which meet and hope- fully exceed the needs and expectations of customers. TQM is both a philo- sophy and a set of guiding principles for managing an organization to the benefit of all stakeholders. The eight quality management principles are defined in BS EN ISO 9000 (2000) as: • Customer focus. Organizations depend on their customers and therefore should understand current and future customer needs, meet customer requirements and strive to exceed customer expectations. • Leadership. Leaders establish unity of purpose and direction of the organiza- tion. They should create and maintain the internal environment in which people can become fully involved in achieving the organization’s objectives. • Involvement of people. People at all levels are the essence of an organization and their full involvement enables their abilities to be used for the organiza- tion’s benefit. • Process approach. A desired result is achieved more efficiently when activities and related resources are managed as a process. • System approach to management. Identifying, understanding and managing interrelated processes as a system contributes to the organization’s effectiveness and efficiency in achieving its objective. • Continual improvement. Continual improvement of the organization’s over- all performance should be a permanent objective of the organization. • Factual approach to decision-making. Effective decisions are based on the analysis of data and information. • Mutually beneficial supplier relationships. An organization and its suppliers are interdependent and a mutually beneficial relationship enhances the ability of both to create value. The Key Elements of TQM Despite the divergence of views on what constitutes TQM, there are a number of key elements in the various definitions which are now summarized. Other chapters will provide more detail of these elements. Commitment and leadership of the chief executive officer Without the total demonstrated commitment of the chief executive officer and his or her immediate executives and other senior managers, nothing much will happen and anything that does will not be permanent. They have to take charge MQC01 5/9/07 05:03 PM Page 30 TQM: An Overview 31 personally, lead the process, provide direction, and exercise forceful leadership, including dealing with those employees who block improvement and impetus. However, while some specific actions are required to give TQM a focus, as quickly as possible it must be seen as the style of management and the natural way of operating a business. Planning and organization Planning and organization feature in a number of facets of the improvement process, including: • Developing a clear long-term strategy for TQM which is integrated with other strategies such as information technology, production/operations and human resources and also with the business plans of the organization. • Deployment of the policies through all stages of the organizational hierarchy with objectives, targets, projects and resources agreed with those responsible for ensuring that the policies are turned from words into actions (see chapter 8). • Building product and service quality into designs and processes. • Developing prevention-based activities (e.g. mistake-proofing devices). • Putting quality assurance procedures into place which facilitate closed-loop corrective action. • Planning the approach to be taken to the effective use of quality systems, procedures and tools and techniques, in the context of the overall strategy. • Developing the organization and infrastructure to support the improvement activities. This includes allocating the necessary resources to support them. While it is recommended that some form of steering activity should be set up to provide direction and support and make people responsible for co-ordinating and facilitating improvement, the infrastructure should not be seen as separate from the management structure. • Pursuing standardization, systematization and simplification of work instruc- tions, procedures and systems. Using tools and techniques To support and develop a process of continuous improvement an organization will need to use a selection of tools and techniques within a problem-solving approach. Without the effective employment and mix of tools and techniques it will be difficult to solve problems. The tools and techniques should be used to facilitate improvement and be integrated into the routine operation of the business. The organ- ization should develop a route map for the tools and techniques which it intends to apply. The use of tools and techniques as the means will help to get the pro- cess of improvement started: employees use them feel involved and that they are MQC01 5/9/07 05:03 PM Page 31 32 Developing, Introducing and Sustaining TQM making a contribution, quality awareness is enhanced, behaviour and attitude change starts to happen, and projects are brought to a satisfactory conclusion. Education and training Employees, from top to bottom of an organization, should be provided with the right level and standard of education and training to ensure that their general awareness and understanding of quality management concepts, skills, competencies, and attitudes are appropriate and suited to the continuous improvement philo- sophy; it also provides a common language throughout the business. A formal programme of education and training needs to be planned and provided on a timely and regular basis to enable people to cope with increasingly complex problems. It should suit the operational conditions of the business: is training done in a cascade mode (everyone is given the same basic training within a set time-frame) or is an infusion mode (training provided as a gradual progression to functions and departments on a need-to-know basis) more suitable? This pro- gramme should be viewed as an investment in developing the ability and know- ledge of people and helping them realize their potential. Without training it is difficult to solve problems, and, without education, behaviour and attitude change will not take place. The training programme must also focus on helping managers think through what improvements are achievable in their areas of respon- sibility. It also has to be recognized that not all employees will have received and acquired adequate levels of education. The structure of the training pro- gramme may incorporate some updating of basic educational skills in numeracy and literacy, but it must promote continuing education and self-development. In this way, the latent potential of many employees will be released and the best use of every person’s ability achieved. Involvement There must be a commitment and structure to the development of employees, with recognition that they are an asset which appreciates over time. All available means, from suggestion schemes to various forms of teamwork, must be considered for achieving broad employee interest, participation and contribution in the improvement process; management must be prepared to share informa- tion and some of their powers and responsibilities and loosen the reins. This also involves seeking and listening carefully to the views of employees and acting upon their suggestions. Part of the approach to TQM is to ensure that everyone has a clear understanding of what is required of them, how their processes relate to the business as a whole and how their internal customers are dependent upon them. The more people who understand the business and what is going on around MQC01 5/9/07 05:03 PM Page 32 TQM: An Overview 35 • Senior management’s commitment is vital in order to gain credibility, assure continuity and establish longevity of the process. They need to think deeply about the subject and commit to it the necessary resources. Managers must also place more emphasis on leadership and create an environment in which people can develop and apply, to full potential, all their skills. • Planning should have a 10-year horizon in order to ensure that the prin- ciples of TQM are firmly rooted in the culture of the organization. Patience and tenacity are key virtues. • Quality objectives and strategies must be developed and deployed down through the organizational hierarchy, along with agreeing goals for improvement. • The improvement process needs to be integrated with other organizational improvement initiatives and business strategies. • A multi-disciplinary TQM steering committee chaired by the chief executive must be established and appropriate infrastructure established to support the improvement process. It is important that this infrastructure is integrated into the existing structure. • At the outset the main quality problems must be identified and tackled by the senior management team – ‘lead by example’. Systems and techniques • The quality management system must be well documented, provide direc- tion and feedback and be audited internally on a regular and effective basis. • The day-to-day control and assurance activity must be separated from the improvement process. • There must be a dedication to removing basic causes of errors and wastage. • At the design stage all potential non-conformances must be identified and eliminated. • A system by which all staff can raise those problems which prevent them turn- ing in an error-free performance should be in place. • It should be recognized that tools, techniques, systems, and packages are used at different stages in different organizations in their development of TQM. • The timing of the introduction of a particular tool, technique, system or pack- age is crucial to its success. • Mistake-proofing of operations should be investigated. • Statistical methods should be used. Measurement and feedback • It should be recognized that customer satisfaction is a business issue and that all processes should work towards satisfying the customer. MQC01 5/9/07 05:03 PM Page 35 36 Developing, Introducing and Sustaining TQM • All available means must be used to determine customer requirements and develop systems and procedures to assess conformance. • It should be easy for the internal and external customer to complain. Ensure that all customer complaints are picked up and analysed, and that there is appropriate feedback. • The attitude that ‘the next process/person is the customer’ must be encouraged. • Measures of customer satisfaction and quality indicators for all internal departments must be developed. • Regular self-assessment of the progress being made with quality improvement against the criteria of the Malcolm Baldrige National Quality Award for Performance Excellence (2005) and the EFQM excellence model (2006), or a similar model should be carried out. 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