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Total quality: a strategy for organizational transformation.

TOTAL QUALITY: A Strategy For Organizational Transformation

TOTAL QUALITY is an idea whose time has come. The conviction that it is better and cheaper to provide products and services right the first time, popularized by Philip Crosby in his 1980 book "Quality is Free,(1) and reinforced in a most practical sense by Japanese electronic and automotive companies has been used by some leading companies to transform themselves in a quite remarkable way. For example, Hewlett Packard, an early convert, has used Total Quality Management to generate some impressive results: * They have reduced defects by a

factor of ten * In the decade to 1989 they saved

$600 million in warranty costs * By improving accuracy in the

invoicing process they reduced

accounts receivable by $200

million * Work-in-process inventory was

cut by $500 million * Hewlett Packard are now

broadening their program out in

a drive to accelerate product

development cycles

Total Quality, properly applied, can generate impressive results, but what is it and what does "properly applied" mean? In this series of three articles I hope to answer those questions and to lay out an approach that allows any company large or small, manufacturing or service to achieve the kind of results that Hewlett Packard has achieved.

The key to understanding Total Quality is to realize that companies like Hewlett Packard have moved well beyond manufacturing based concepts like zero defects. They have changed the whole way that they run their organization and with it their corporate culture. They have recognized that there is a fundamentally different and better way to run a business and it is called Total Quality. It is about reorienting your total organization toward meeting customer needs in the most effective way.

Change on this scale is a job for the CEO. Many executives pay lipservice to the concept but, failing to understand its power, delegate the job of developing and implementing a program to a junior level in the manufacturing organization. This is a proven recipe for failure. There is probably no one route to success but the most successful programs recognize that different businesses require different approaches based on their customer needs and the processes that supply them.

The Four Types of Quality

Our efforts to understand what made TQ programs successful led us to develop the idea of four different types of Quality that were appropriate for four different kinds of business process. In this context a "process" is a series of action steps that transform inputs into an output. Any business can be broken up this way although it's sometimes difficult to conceptualize because of our conventional view of business as being built up of functions.

The four kinds of business process are defined by the repetitiveness of the process and its closeness to customers (rate of feedback). Four examples of the four kinds of process include: * Manufacturing; typically highly

repetitive but at a distance from

the customer (slow feedback).

Bureaucratic processes would

also fall into this category. * Front desk service of a hotel;

also repetitive but with very fast

feedback from customers. * Advertising development; this

process has a unique output

but, typically, fairly high

feedback. Producing consulting

recommendations is similar but

has an even higher rate of

feedback. * Strategic decision making;

clearly the output of the process

is unique but the rate of

feedback is low. It may be many

years before the impact of the

decision is apparent.

These four types of quality are important for two reasons. In the first instance they provide a key guideline on where to start your TQ process. They also determine the kinds of actions that will be necessary to improve those processes.

Starting in the right place is critical. Total Quality programs are difficult to implement and require high levels of time, commitment and energy. If you can't show at least some results relatively quickly (and by that I mean within a year) it is very difficult to maintain momentum. We have found that in any business there are typically only a few processes that deliver outputs that really matter to customers, and therefore which generate competitive advantage. We call them key business processes (KBP's). We have also found that typically they cluster in one of the quadrants of our process matrix. For example in the electronics business what matters most to customers is the performance and reliability of the product, properties which are supplied primarily by the manufacturing processes. We call this a type 1 business.

In consumer service industries such as hotels and airlines the KBP's typically fall in our upper left quadrant. These are type 2 businesses. In a packaged goods company consumers judge quality by evaluating a complex mixture of functional and emotional benefits of the product with the balance often well toward the emotional. In these cases the brand positioning, advertising and other marketing processes will be much more significant than others. Packaged goods is a type 3 business. In type 4 businesses the KBP's are strategic. In heavy chemicals for example what really matters in the business may be the decision on whether or not to build a new plant that will increase world supply by a significant margin.

We have found that starting with the key business processes will generate results that matter. This in turn will keep momentum in your program.

Finding The Culture Influencers

There is another good reason to start in the right place. We have found that in most organizations the people who most influence the corporate culture work in and around the key business processes. For example, the marketing department is usually the key culture influencer in a packaged goods company. As we shall see later the Total Quality process requires significant changes in corporate culture and it is a pretty significant bonus to get maximum impact in both the cultural and business results areas. This is especially true if one considers the synergy between the two. Results accelerate culture change and the change in culture facilitates further results.

Analysis of successful and unsuccessful companies shows that starting in the right place is crucial. We have found that companies who have made the mistake of starting on non-critical processes have typically had disappointing results. While it is a temptation to start with the relatively easy rather than the important, it is a temptation that should be resisted.

Applying To The Four Types

The second important aspect of the four types of quality is that it provides a guide as to how to apply TQ principles. Directionally, one wants to develop controllable business processes that meet customer needs. This is much easier to do if you are close to the customer and have a highly repetitive process. In other words one goal of a TQ program is to move the key business processes towards the top left hand quadrant of our quality matrix. To do this one must decrease distance to the customer and make processes more repetitive.

The first is most often accomplished by the "internal customer" concept; the idea that the next person in the process is your "customer" and that you are accountable for supplying him with a quality product. It's a simple and powerful idea and it works. Anyone who is not convinced of this should get hold of a copy of the video "The Customer is Always Dwight"(2) which has the advantage of being funny as well as informative.

Increasing repetitiveness and, therefore, controllability in processes is a less well understood and practiced idea. Traditional approaches to Total Quality here stressed specification and conformance to requirements to the point where many people believe that it is not possible to apply Total Quality to our type 3 and 4 processes. We know from experience that this is not true. One can use a wide variety of techniques from "flight checklists" to detailed process and output specifications to improve the quality of output of so-called creative processes. We have successfully applied this approach to the format, structure and style of consulting reports for example, though naturally the content of each is unique. One of our clients has applied the same kind of thinking to the development of advertising somewhat to the chagrin of brand managers who feel that they should be free to develop their own process. What one is, in effect, doing is capturing the accumulated knowledge, wisdom and talent of the organization and ensuring that as much as possible of it is applied to the process every time. Those familiar with the development of expert systems (artificial intelligence) will recognize the similarity between the two ideas. We hope in the near future to experiment with AI technology in this area.

A Historical Perspective

It's interesting to note that Total Quality as a practical management tool has followed a historical migration through our four types of quality. The earliest and most striking successes have been in type 1 companies (Hewlett Packard, Milliken) followed by type 2 (Four Seasons, SAS) and most recently by type 3 (Unilever, Rubbermaid, A.T. Kearney). I have not yet found an example of a successful TQ program in a type 4 company. It was this historical evolution, in fact that initially led us to the idea of the four types of quality.

In the next article in this series I will deal with five critical elements that the most successful Total Quality companies have incorporated in their programs; process management, customer focus, waste elimination, employee empowerment and continuous improvement.

Notes:

(1)Crosby, P.: Quality is Free: New York 1980 (2)The Customer is Always Dwight, available from International TeleFilm; Toronto Montreal and Vancouver

John Gilks leads the Total Quality practice of A.T. Kearney management consultants in Toronto. He is particularly interested in applying TQ principles to consumer goods and professional services and is currently working with clients in North America and Europe.
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Author:Gilks, John
Publication:Canadian Manager
Date:Mar 22, 1990
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