FUNDAMENTALS OF TOTAL QUALITY AND RATERS VIEW:The Concept of Quality

<< INTEGRATING PEOPLE AND PERFORMANCE THROUGH QUALITY MANAGEMENT

TOTAL QUALITY MANAGEMENT AND GLOBAL COMPETITIVE ADVANTAGE:Customer Focus >>

Total Quality Management MGT510

Lesson #04

FUNDAMENTALS OF TOTAL QUALITY AND RATERS VIEW

Total qualitya comprehensive, organization-wide effort to improve the quality of products and

serviceapplies not only to large manufacturers, but to small companies alike. All organizationlarge

and small, manufacturing and service, profit and not-for-profit-can benefit from applying the principles

of total quality.

During the 1990s, health care, government, and education began to pay increased attention to quality.

As more public and government attention focuses on the nation's health care system, its providers turn

toward quality as a means of achieving better performance and lower costs. One hospital, for example,

lowered its rate of post-surgical infections to less than one-fifth of the acceptable national norms

through the use of quality tools.

Although quality initiatives focused initially on reducing defects and errors in products and services

through the use of measurement, statistics, and other problem-solving tools, organizations began to

recognize that lasting improvement could not be accomplished without significant attention to the

quality of the management practices used on a daily basis. Managers began to realize that the

approaches they use to listen to customers and develop long-term relationships, develop strategy,

measure performance and analyze data, reward and train employees, design and deliver products and

services, and act as leaders in their organizations are the true enablers of quality, customer satisfaction,

and business results. In other words, they recognized that the "quality of management" is as important

as the "management of quality." As organizations began to integrate quality principles into their

management systems, the notion of total quality management, or TQM, became popular. Quality took

on a new meaning of organization-wide performance excellence rather than an engineering-based

technical discipline.

As quality principles have matured in organizations, attention to quality as "something new" has faded,

and the term "total quality management (TQM)," which was popular throughout the 1980s and early

1990s has all but fallen out of the business vernacular. Critics suggested that "TQM is as dead as a pet

rock" (Business Week, June 23, 1997, p. 47). Perhaps it is unfortunate that a three-letter acronym was

chosen to represent such as powerful management concept. It is equally unfortunate that people point to

the demise of faddish terminology as a generalization of the concepts themselves. Reasons for failure of

quality initiatives are rooted in organizational approaches and systems. As the editor of Quality Digest

put it: "No, TQM isn't dead. TQM failures just prove that bad management is still alive and kicking."

The most successful organizations have found that the fundamental principles of total quality are

essential to effective management practice, and continue to represent a sound approach for achieving

business success.

The real challenge today is to ensure that managers do not lose sight of the basic principles on which

quality management and performance excellence are based. The global marketplace and domestic and

international competition has made organizations around the world realize that their survival depends on

high quality. Many countries, such as Korea and China, are mounting national efforts to increase quality

awareness, including conferences, seminars, radio shows, school essay contests, and pamphlet

distribution. Spain and Brazil are encouraging the publication of quality books in their native language

to make them more accessible. These trends will only increase the level of competition in the future.

Even the tools used to achieve quality a decade ago are no longer sufficient to achieve the performance

levels necessary to compete in today's world. Many organizations are embracing highly sophisticated,

statistically based tools as part of popular "Six Sigma" initiatives. These require increased levels of

training and education for managers and frontline employees alike, as well as the development of

technical staff. As Tom Engibous, president and chief executive officer of Texas Instruments

commented on the present and future importance of quality in 1997: Quality will have to be everywhere,

integrated into all aspects of a winning organization.

Total Quality Management MGT510

The Concept of Quality

People define quality in many ways. Some think of quality as superiority or excellence, others view it as

a lack of manufacturing or service defects, still others think of quality as related to product features or

price. Followings are some of many ways to look at quality.

perfection

consistency

eliminating waste

speed of delivery

compliance with policies and procedures

providing a good, usable product

doing it right the first time

delighting or pleasing customers

total customers service and satisfaction6

Today most managers agree that the main reason to pursue quality is to satisfy customers. The

American National Standards Institute (ANSI) and the American Society for Quality (ASQ) define

quality as ""the totality of features and characteristics of a product or service that bears on its ability to

satisfy given needs." The view of quality as the satisfaction of customer needs is often called fitness for

use. In highly competitive markets, merely satisfying customer needs will not achieve success. To beat

the competition, organizations often must exceed customer expectations. Thus, one of the most popular

definitions of quality is meeting or exceeding customer expectations.

Quality in Manufacturing

Well-developed quality systems have existed in manufacturing for some time. However, these systems

focused primarily on technical issues such as equipment reliability, inspections, defect measurement,

and process control. The transition to a customer-driven organization has caused fundamental changes

in manufacturing practices, changes that are particularly evident in areas such as product design, human

resource management, and supplier relations. Product design activities, for example, now closely

integrate marketing, engineering, and manufacturing operations. Human resource practices concentrate

on empowering workers to collect and analyze data, make critical operations decisions, and take

responsibility for continuous improvements, thereby moving the responsibility for quality from the

quality control department onto the factory floor. Suppliers have become partners in product design and

manufacturing efforts. Many of these efforts were stimulated by the automobile industry, which forced

their network of suppliers to improve quality.

Manufactured products have several quality dimensions including the following:

Performance: a product's primary operating characteristics.

Feature: the "bells and whistles" of a product.

Reliability: the probability of a product's surviving over a specified period of time under stated

conditions of use.

Conformance: the degree to which physical and performance characteristics of a product match

pre-established standards.

Durability: the amount of use one gets from a product before it physically deteriorates or until

replacement is preferable.

Serviceability: the ability to repair a product quickly and easily.

Aesthetics: how a product looks, feels, sounds, tastes, or smells.

Perceived quality: subjective assessment resulting from image, advertising, or brand names.

Most of these dimensions revolve around the design of the product.

Total Quality Management MGT510

Quality control in manufacturing is usually based on conformance, specifically conformance to

specifications. Specifications are targets and tolerances determined by designers of products and

services. Targets are the ideal values for which production strives; tolerances are acceptable deviations

from these ideal values. For example, a computer chip manufacturer might specify that the distance

between pins on a computer chip should be 0.095 + 0.005 inches. The value 0.090 and 0.100 would be

acceptable.

Quality in Services

Service can be defined as "any primary or complementary activity that does not directly produce a

physical productthat is, the non goods part of the transaction between buyer (customer) and seller

(provider)." A service might be as simple as handling a complaint or as complex as approving a home

mortgage. Service organizations include hotels; health, legal, engineering, and other professional

services; educational institutions; financial services; retailers; transportation; and public utilities.

Today services account for nearly 80 percent of the U.S., Singapore and Sweden workforce. The

importance of quality in services cannot be underestimated, as statistics from a variety of studies

reveals:

The average company never hears from more than 90 percent of its unhappy customers. For every

complaint it receives, the company has at least 25 customers with problems, about one-fourth of

which are serious.

Of the customers who make a complaint, more than half will do business again with that

organization is their complaint is resolved. If the customer feels that the complaint was resolved

quickly, this figure jumps to about 95 percent.

The average customer who has had a problem will tell nine or ten others about it. Customers who

have had complaints resolved satisfactorily will only tell about five others.

It costs six times more to get a new customer than to keep a current customer.

So why do many companies treat customers as commodities? In Japan the notion of customer is equated

with "honored guest." Service clearly should be at the forefront of a firm's priorities.

The service sector began to recognize the importance of quality several years after manufacturing had

done so. This can be attributed to the fact that service industries had not confronted the same aggressive

foreign competition that faced manufacturing. Another factor is the high turnover rate in service

industry jobs, which typically pay less than manufacturing jobs. Constantly changing personnel makes

establishing a culture for continuous improvement more difficult.

The production of services differs from manufacturing in many ways, and these differences have

important implications for managing quality. The most critical differences are:

Customer needs and performance standards are often difficult to identify and measure, primarily

because the customers define what they are, and each customer is different.

The production of services typically requires a higher degree of customization than does

manufacturing. Doctors, lawyers, insurance salespeople, and food-service employees must tailor

their services to individual customers. In manufacturing, the goal is uniformity.

The output of many service systems is intangible, whereas manufacturing produces tangible,

visible products. Manufacturing quality can be assessed against firm design specifications, but

service quality can only be assessed against customers' subjective, nebulous expectations and

past experiences. Manufactured goods can be recalled or replaced by the manufacturer, but poor

service can only be followed up by apologies and reparations.

Services are produced and consumed simultaneously, whereas manufactured goods are

produced prior to consumption. In addition, many services must be performed at the

Total Quality Management MGT510

convenience of the customer. Therefore, services cannot be stored, inventoried, or inspected

prior to delivery as manufactured goods are. Much more attention must therefore be paid to

training and building quality into the service as a means of quality assurance.

Customers often are involved in the service process and present while it is being performed,

whereas manufacturing is performed away from the customer. For example, customers of a

quick-service restaurant pace their own orders, carry their food to the table, and are expected to

clear the table when they have finished eating.

Services are generally labor intensive, whereas manufacturing is more capital intensive. The

quality of human interaction is a vital factor for services that involve human contact. For

example, the quality of hospital care depends heavily on interactions among the patients, nurses,

doctors, and other medical staff. Hence, the behavior and morale of service employees is critical

in delivering a quality service experience.

Many service organizations must handle very large numbers of customer transactions. For

example, on a given business day, the National Bank of Pakistan might process more than 5.5

million transactions for 7.5 million customer through 1,600 branches and more than 3,500

banking machines, and TCS or Fed Ex might handle more than 1.5 million shipments across the

globe. Such large volumes increase the opportunity for error.

These differences have made it difficult for many service organizations to apply total quality principles.

Many service organization have well-developed quality assurance systems. Most of them, however, are

based on manufacturing analogies and tend to be more product-oriented than service-oriented. Many of

the key dimensions of product quality apply to services. For instance, "on time arrival" for an airline is a

measure of service performance; frequent flyer awards and "business class" sections represent features.

A typical hotel's quality assurance systems focus on technical specifications such as properly made-up

rooms. However, service organizations have special requirements that manufacturing systems cannot

fulfill. The most important dimensions of service quality include the following; you may remember the

most important ones by RATER:

Reliability: How much reliable is the service provider?

Accessibility and convenience: Is the service easy to obtain?

Timeliness: Will a service be performed when promised?

Completeness: Are all items in the order included?

Consistency: Are services delivered in the same fashion for every customer, and every time for the

same customer?

Tangibility: after the service is over, is there any thing to take home to remind the service

experience?

Empathy or Courtesy: Do frontline employees greet each customer cheerfully?

Responsiveness: Can service personnel react quickly and resolve unexpected problems?

Service organizations must look beyond product orientation and pay significant attention to customer

transactions and employee behavior. Several points that service organizations should consider are as

follows:

The quality characteristics that a firm should control may not be the obvious ones. Customer

perceptions are critical although it may be difficult to define what the customer wants. For example,

speed of service is an important quality characteristic, yet perceptions of speed may differ

significantly among different service organization and customers. Marketing and consumer research

can play a significant role.

Behavior is a quality characteristic. The quality of human interaction is vital in every transaction

that involves human contact. For example, banks have found that the friendliness of tellers is a

principal factor in retaining depositors.

Image is a major factor in shaping customer expectations of a service and in setting standards by

which customers evaluate that service. A breakdown in image can be as harmful as a breakdown in

Total Quality Management MGT510

delivery of the service itself. Top management is responsible for shaping and guiding the image that

the firm projects.

Establishing and measuring service levels may be difficult. Service standards, particularly those

relating to human behavior, are often set judgmentally and are hard to measure. In manufacturing, it

is easy to quantify output, scrap, and rework. Customer attitudes and employee competence are not

as easily measured.

Quality control activity may be required at times or in places where supervision and control

personnel are not present. Often work must be performed at the convenience of the customer. This

calls for more training of employees and self-management.

These issues suggest that the approach to managing quality in services differs from that used in

manufacturing. However, manufacturing can be seen as a set of interrelated services, not only between

the company and the ultimate consumer, but within the organization. Manufacturing is a customer of

product design; assembly is a customer of manufacturing; sales are a customer of packaging and

distribution. If quality is meeting and exceeding customer expectations, then manufacturing takes on a

new meaning, far beyond product orientation. Total quality provides the umbrella under which everyone

in the organization can strive to create customer satisfaction.

Quality in ICT Sector

Quality in IT and IS was taken seriously only after SW Engineering principles were established. SWE

Institute at CM University developed the CMM levels to indicate the maturity levels of an organization

taking care of RATER along with issues of Configuration Management, Verification and Validation

issues along with Scalability and Reusability issues.

Principles of Total Quality

A definition of total quality was endorsed in 1992 by the chairs and CEOs of nine major U.S.

corporations in cooperation with deans of business and engineering departments of major universities,

and recognized consultants:

Total Quality (TQ) is a people-focused management system that aims at continual increase in customer

satisfaction at continually lower real cost. TQ is a total system approach (not a separate area or program)

and an integral part of high-level strategy; it works horizontally across functions and departments,

involves all employees, top to bottom, and extends backward and forward to include the supply chain

and the customer chain. TQ stresses learning and adaptation to continual change as keys to

organizational success.

The foundation of total quality is philosophical: TQ includes systems, methods, and tools. The systems

permit change; the philosophy stays the same. TQ is anchored in values that stress the dignity of the

individual and the power of community action.

There probably are as many different approaches to TQ as there are businesses. However, most share

some basic elements: (1) customer focus, (2) a process orientation, (3) continuous improvement and

learning, (4) empowerment and teamwork, (5) management by fact, and (6) leadership and strategic

planning.

Customer Focus

The customer is the judge of quality. Understanding customer needs, both current and future, and

keeping pace with changing markets requires effective strategies for listening to and learning from

customers, measuring their satisfaction relative to competitors, and building relationships, Customer

needsparticularly differences among key customer groups must be linked closely to an

Total Quality Management MGT510

organization's strategic planning, product design, process improvement, and workforce training

activities. Satisfaction and dissatisfaction information are important because understanding them leads

to the right improvements that can create satisfied customers who reward the company with loyalty,

repeat business, and positive referrals. Creating satisfied customers includes prompt and effective

response and solutions to their needs and desires as well as building and maintaining good relationships.

A business can achieve success only by understanding and fulfilling the needs of customers. From a

total quality perspective, all strategic decisions a company makes are "customer-driven." In other

words, the company shows constant sensitivity to emerging customer and market requirements. This

requires an awareness of developments in technology and rapid and flexible response to customer and

market needs.

Customer-driven firms measure the factors that drive customer satisfaction. A company close to its

customer knows what the customer wants, how the customer uses its products, and anticipates the needs

that the customer may not even by able to express. It also continually develops new techniques to obtain

customer feedback. Customer opinion surveys and focus groups can help companies understand

customer requirements and values. Some companies require their sales and marketing executives to meet

with random group of key customers on a regular basis. Other companies bring customers and suppliers

into internal product design and development meetings.

A firm also must recognize that internal customersthe recipients of any work output, such as the next

department in a manufacturing process or the order-picker who receives instructions from an order entry

clerk are as important in assuring quality as are external customers who purchase the product. Failure

to meet the needs of internal customers will likely affect external customers. Employees must view

themselves as customers of some employees and suppliers to others. Employees who view themselves as

both customers of and suppliers to other employees understand how their work links to the final product.

After all, the responsibility of any supplier is to understand and meet customer requirements in the most

efficient and effective manner possible.

Customer focus extends beyond the consumer and internal relationships, however. Society represents an

important customer of business. A world-class company, by definition, is an exemplary corporate

citizen. Business ethics, public health and safety measures, concern for the environment, and sharing

quality-related information in the company'' business and geographic communities are required. In

addition, company supportwithin reasonable limits of its resourcesof national, industry, trade, and

community activities and the sharing of nonproprietary quality-related information demonstrate far-

reaching benefits.

Customers may be of following types:

External Customer

Internal Customer

Investor Customer

Social or Society Customer

Process Orientation

The traditional way of viewing an organization is by surveying the vertical dimension by keeping an

eye on an organization chart. However, work gets done (or fails to get done) horizontally or cross-

functionally, not hierarchically. A process is a sequence of activities that is intended to achieve some

result. According to AT&T, a process is how work creates value for customers. We typically think of

processes in the context of production: the collection of activities and operations involved in

transforming inputs-physical facilities, materials, capital, equipment, people, and energy-into outputs-

products and services. Common types of production processes include machining, mixing, assembly,

filling orders, or approving loans. However, nearly every major activity within an organization involves

a process that crosses traditional organizational boundaries. For example, an order fulfillment process

might involve a salesperson placing the order; a marketing representative entering it on the company'

Total Quality Management MGT510

computer system; a credit check by finance; picking, packaging, and shipping by distribution and

logistics personnel; invoicing by finance; and installation by field service engineers. A process

perspective links all necessary activities together and increases one's understanding of the entire system,

rather than focusing on only a small part. Many of the greatest opportunities for improving

organizational performance lie in the organizational interfaces those spaces between the boxes on an

organization chart.

Continuous Improvement and Learning

Continuous improvement is part of the management of all systems and processes. Achieving the highest

levels of performance requires a well-defined and well-executed approach to continuous improvement

and learning. "Continuous improvement" refers to both incremental and "breakthrough" improvement.

Improvement and learning need to be embedded in the way an organization operates. This means they

should be a regular part of daily work, seek to eliminate problems at their source, and be driven by

opportunities to do better as well as by problems that need to be corrected. Improvements may be of

several types:

· Enhancing value to the customer through new and improved products and services;

· Improving productivity and operational performance through better work processes and reductions

in errors, defects, and waste; and

· Improving flexibility, responsiveness, and cycle time performance.

Management by Fact

Organizations needs performance measures for three reasons:

To lead the entire organization in a particular direction; that is, to drive strategies and organizational

change,

To manage the resources needed to travel in this direction by evaluating the effectiveness of action

plans, and

To operate the processes that make the organization work and continuously improve.21

Data and information support analysis at all organizational levels. The types of information and how it

is disseminated and aligned with organizational levels are equally vital to success. At the work level,

data provide real-time information to identify assignable reasons for variation, determine root causes,

and take corrective action as needed. This might require lean communication a channel consisting of

bulletins, computerized quality reports, and digital readouts of part dimensions to provide immediate

information on what is happening and how things are progressing. At the process level, operational

performance data such as yields, cycle times, and productivity measures help manager determine

whether they are doing the right job, whether they are using resources effectively, and whether they are

improving. Information at this level generally is aggregated; for example daily or weekly scrap reports,

customer complaint data obtained from customer service representatives or monthly sales and cost

figures faxed in from field offices. At the organization level, quality and operational performance data

from all areas of the firm, along with relevant financial, market, human resources, and supplier data,

form the basis for strategic planning and decision making. Such information is highly aggregated and

obtained from many different sources throughout the organization.

A company should select performance measures and indicator that best represent the factor that lead to

improved customer, operational, and financial performance. These typically include

Customer satisfaction,

Product and service performance,

Market assessments,

Competitive comparisons,

Total Quality Management MGT510

Supplier performance,

Employee performance, and

Cost and financial performance.

A comprehensive set of measures and indicators tied to customer and company performance

requirements provides a clear basis for aligning all activities of the company with its goals.

Leadership and Strategic Planning

Leadership for quality is the responsibility of top management. Senior leadership must set directions;

create a customer orientation, clear quality values, and high expectations that address the needs of all

stakeholders; and build them into the way the company operates. Senior leaders need to commit to the

development of the entire workforce and should encourage participation, learning, innovation, and

creativity throughout the organization. Reinforcement of the values and expectations requires the

substantial personal commitment and involvement of senior management. Through their personal roles

in planning, reviewing company quality performance, and recognizing employees for quality

achievement, the senior leaders serve as role models, reinforcing the values and encouraging leadership

throughout the organization.

If commitment to quality is not a priority, any initiative is doomed to failure. Lip service to quality

improvement is the kiss of death. Many companies have a corporate quality council made up of top

executives and managers, which sets quality policy and reviews performance goals within the company.

Quality should be a major factor in strategic planning and competitive analysis processes.

Many of the management principles and practices required in a TQ environment may be contrary to

long-standing practice. Top managers, ideally starting with the CEO, must be the organization's TQ

leaders. The CEO should be the focal point providing broad perspectives and vision, encouragement,

and recognition. The leader must be determined to establish TQ initiatives and committed to sustain TQ

activities through daily actions in order to overcome employees' inevitable resistance to change.

Unfortunately, many organizations do not have the commitment and leadership of their top managers.

This does not mean that these organizations cannot develop a quality focus. Improved quality can be

fostered through the strong leadership of middle managers and the involvement of the workforce. In

many cases, this is where quality begins. In the long run, however, an organization cannot sustain

quality initiatives without strong top management leadership.

Achieving quality and market leadership requires a strong future orientation and a willingness to make

long-term commitments to key stakeholders-customers, employees, suppliers, stockholders, the public,

and the community. Strategic business planning should be the driver for quality excellence throughout

the organization and needs to anticipate many changes, such as customer's expectations, new business

and partnering opportunities, the global and electronic marketplaces, technological developments, new

customer segments, evolving regulatory requirements, community / societal expectations, and strategic

changes by competitors. Plans, strategies, and resource allocations need to reflect these influences.

Improvements do not happen overnight. The success of market penetration by Japanese manufacturers

evolved over several decades.

Table of Contents: