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Is your company serious about improving quality?

I was at a conference recently where several presenters proposed that in the next 100 years we will need to increase the gross national product of the world by 30 times. Well, that's as good a number as any, I guess (at least it shows they put some thought into it), but can you imagine what it means to Corporate America? Thirty times more beryllium, 30 times more copper, 30 times more coal. How are we going to orchestrate such a change?

Motorola is presently a $10-billion corporation. Applying the 30-times philosophy to our company means that, given a growth rate of 15 percent a year, in just 25 years we could be doing $320 billion of business annually. I don't think that's so farfetched. With new technologies and other creative ways of working being discovered every day, some gigantic changes in growth are achievable.

And what will we be doing with our $320 billion in 25 years? We will be investing around the world, helping to lead the U.S.'s global growth. And the key to accomplishing this, I believe, is concentrating on quality.

Motorola's quality push:

If we make a corporate commitment to raising our expectation levels for quality-not just a few changes here and there, but in orders of magnitude-in as few as three years we will see a difference.

First, we will reduce waste. Then our resources can be husbanded and used more practically.

We will speed up our production, which means we can save time. At Motorola, we've realized that we can change our cycle times by huge amounts. Not just 5 or 10 percent. In fact, we hardly take a serious interest in making a change that results in less than a 50-percent improvement. For instance, we can take an order at 9:00 a.m. for one of our pagers and have the product at the shipping dock an hour and 40 minutes later. Before we installed our improved electronics and production systems, it took 44 days.

I admit that not every process is going to change quite that much, but when Motorola decided to reach for total, perfect quality, all of these improvements became wealth-creating phenomena. And this wealth turns into seed and savings for investment globally. U.S. leverage worldwide is absolutely essential to this.

One strategy that promotes this attitude is vying for the Malcolm Baldrige National Quality Award. The Baldrige Award, established by Congress and signed into law by the President in 1987, rewards companies for achieving high standards of quality. Motorola earned the first Baldrige Award ever given to a large company.

Because the criteria to win the award is based on such sound management philosophy, I have recommended to President Bush that competing for it should be a national policy for private-sector institutions of a certain size. If that recommendation should ever be implemented, by 1994 the growth rate of the GNP would increase by at least .5 percent and possibly 1 percent.

Why? Because manufacturers like Motorola will have to put more money into research and development, to think of new ways of doing things, to buy tools and equipment-all economic multipliers. Service companies will do similarly. And, as we demand more, our suppliers will work to provide more. Each of us will start to do something for the other. The multiplier effect will spiral up, and the growth rate of the GNP will be raised to a point where it will stay, as long as we have this expectation of quality.

It's happening to Motorola. It's happening to our suppliers. And it will happen to the country if we adopt as policy the criteria for winning the Baldrige Award.

Your own checklist:

What's your role as a financial executive in improving quality at your company? First, improve the quality of the performance within your department. Remember, you can accomplish expectation levels in every kind of activity. At our company, we started out by saying, let's improve our performance 10 times. We did that in two and a half years instead of five. Then we said, let's improve it five more times, and we did that. Eventually, it became relatively easy. Today, we have incremental goals of improving ourselves 100 times more. In the 1970s, setting these performance objectives was unthinkable. In the 1990s, I assure you, they can be done.

Second, impress upon your company the cost of poor quality. That means quantifying it somehow. Estimates say that some ordinary institutions are presently spending up to 40 percent of their sales dollars unnecessarily, as a result of poor quality and insufficient quality controls. At Motorola, we've been at quality improvement for 11 years, and I'm convinced that, of our $10 billion, between 10 and 20 percent still is spent unnecessarily.

Third, and most important, use your imagination. Why didn't the accounting and financial people at Motorola help drive the process that got the pager to the shipping dock in one hour and 40 minutes? They didn't stretch their imaginations. This is especially applicable to the services industry, where global competitors like the Japanese threaten to dominate. Japanese companies employ a quality-assurance strategy that will merit the lead competitive position if we don't establish our own quality strategy.

I see the possibility for a remarkable marriage between the financial community and the engineers, production people, retailers, and service people-in whatever type of business-in which all contribute to an improvement in quality that opens up competitive opportunities for the U.S. around the world. But each of our companies has to have the perseverance to make it happen,

Twice the surprises:

In our industry, the last 50 years have been full of surprises. Television, computers, transistors, fiber-optic cable. And virtually no companies that would have been the forerunners in those businesses years ago exist today in those businesses, if they exist at all. Why? A failure to adapt.

What's the future? Twice as many surprises. But surprises mean opportunities. And, if twice as many innovations like transistors and fiber-optic cable are going to occur in my business, how many will occur in yours?

If we don't change our culture in terms of quality, the vast majority of the institutions existing today won't thrive in the year 2040. I can virtually assure you that our company will be there, because I can envision what my associates will be doing in the year 2040. I may not know the specifics, but I know they'll be working on very exciting projects, because the possibilities are there. It's just a question of whether companies will have the cultural motivation to anticipate and commit to them and to embrace quality improvement as a means of exploring those possibilities.
COPYRIGHT 1991 Financial Executives International
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Copyright 1991, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Special Global Report
Author:Galvin, Robert W.
Publication:Financial Executive
Date:Jan 1, 1991
Previous Article:The cost of not investing in new technology.
Next Article:What to expect of investing in the '90s.

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