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Quality lessons from America's Baldrige winners.

Over the last decade American business has lost worldwide market share in a number of major industries, including automobiles, computers, electronics, and textiles. In an effort to improve the overall competitiveness of U.S. industries, Congress created the Malcolm Baldrige Quality Award (MBQA) in 1987. Each year, up to two MBQAs can be given to applications in each of three categories: manufacturing, services, and small businesses.

This article is based on research conducted among the MBQA winners of recent years, using on-site visits, telephone interviews, and secondary data. In addition to such well-known firms as AT&T Universal Card Services (UCS), American Express, Cadillac, IBM, Motorola, Ritz-Carlton, and Xerox, data were gathered from such lesserknown firms as Globe Metallurgical, a Clevelandbased steel company; Marlow Industries, a manufacturer of thermoelectric coolers; Solectron, which assembles complex circuit boards and subsystems; and Zytec, which designs and manufacturers electronic power supplies. The result of these analyses is eight lessons that are universal among Baldrige winners and that are critical to the success of firms trying to become the best in their class.

Lesson 1: Formulate a Vision of Quality

At some point early in total quality management (TQM) planning, every Baldrige winner has formulated a vision of what it means by the word quality and has used this vision to guide its quality plan. Figure 1 provides the mission statements of three Baldrige winners as examples.

Lesson 2: Have Top Management Involved from the Start

Among MBQA companies, every top management is actively involved in the total quality effort. In some cases this has been more a result of operational necessity than of formal planning. Globe Metallurgical is a good example. In an effort to learn more about how to increase efficiency, the company president, Arden Sims, attended a week-long quality seminar, his first exposure to the TQM concepts. Having become aware of the benefits that these ideas could provide to a small steel firm that was fighting for its life, Sims began to implement total quality throughout the company.

Another example of top management involvement came as a result of a strike at Globe, which resulted in management and a group of hourly workers running the plant for two years. By the end of the second week, output was up 20 percent and informal personnel meetings had generated a host of ideas about how to streamline the production process. In one case, Globe workers would break up the metal after it had set in cooling molds, then transfer it to a storage area. Some of the managers who were doing this job suggested a change: Instead of first breaking up the metal, why not simply drop it into the trucks that would be hauling it away? The new approach worked and the company was able to save more than $300,000 annually as a result.

Lesson 3: Focus on Customer Needs

Baldrige winners focus on customer needs in a number of ways. The two most common are through data gathering and data analysis.

Data gathering includes surveys, telephone interviews, and face-to-face meetings. The most common of these is company-initiated surveys. Universal Card Services (UCS), for example, conducts customer executive panel surveys on a biannual basis. Solectron uses periodic surveys, executive visits, discussions with customers, benchmarking, and technology trend data analysis. Cadillac employs ongoing focus groups, product clinics, and surveys, as well as more than 2.5 million annual customer interviews.

When problems are detected, procedures are then developed for analyzing and resolving them. At Solectron, for example, the process includes: (1) entering the problem in a log book; (2) acknowledging to the customer that corrective action will be taken; and (3) implementing the step(s) necessary to resoNe the situation and satisfy the customer. The latter entails a number of actions:

* commitment on the part of the employee to get the matter resolved;

* empowerment of this person to take the actions that are judged necessary; and

* development of the most effective steps for judiciously resolving the issue.

Figure 2 details some of the steps taken by Motorola to deal with its customer satisfaction problems.

Lesson 4: Develop the Planning and Implementation Processes

Each of the MBQA firms in this study went about planning for total quality by first determining the objectives to be attained and then formulating a plan of action. Zytec, for example, set four specific objectives:

1. improve the quality of products and processes in order to become a six sigma company (3.5 defects per million units) by 1995;

2. reduce total cycle time;

3. improve service to the customer; and

4. use TQM criteria to improve overall operations.

With Motorola, the objectives, first formulated in 1987, were even more quantitatively based:

1. increase quality ten times by 1990;

2. increase quality 100 times by 1991;

3. be operating at six sigma by 1992; and

4. have all efforts focused on one fundamental objective: total customer satisfaction.

MBQA company planning is accompanied by a concerted effort to ensure that all departments in the organization are designed to efficiently attain the quality objectives. The larger the company, the more involved is this process.

In some cases, the companies created a quality office or designated a senior-level manager as the quality officer to spearhead the development of the necessary infrastructure. For example, Xerox's system group has a vice president of quality on the group staff and each of the five divisions in the system group has quality officers. Additionally, within each division there is another level of managers who are responsible (some on a part-time basis, some full-time) for quality implementation. These functional managers also form an implementation team that helps guide the process for the entire group.

Motorola also has adopted a formal approach to organizing. Some of the specific steps the firm has taken include: (1) forming sector and corporate quality directors and councils; (2) requiring all sectors, groups, and staffs to submit ongoing quality improvement plans; (3) setting up an internal corporate-wide quality system review and assigning the job of administering this activity to the Motorola Corporate Qualit) Council (MCQC); and (4) integrating quality goals into both long-run plans (five-year) and short-run plans (yearly, quarterly, monthly).

The MCQC also has the task of administering the CEO quality award established by the company. This council is charged with being the catalyst in bringing about quality improvements in all areas of operations. Some of the specific objectives assigned to the MCQC include:

1. Develop and recommend a quality and reliability policy to corporate management for implementation.

2. Participate in the development of overall corporate quality plans and programs.

3. Develop and implement quality education and training programs for all personnel.

4. Develop quality measurement systems that provide management with an accurate status of the company's quality performance.

The implementation and control steps for achieving total quality are commonly determined at the same time the plan is formulated. At Westinghouse's Commercial Nuclear Fuel Division, for example, a quality council sets goals for the division and monitors and reports progress. The firm also uses eight key measures, called pulse points, to assess performance. Examples include fuel reliability, error-free documentation, and first-time through yield of manufactured components.

At Federal Express, quality performance is measured in terms of 12 service quality indicators (SQIs). Each SQI item is weighted on a scale of 1 to 10. Damaged packages, lost packages, and missed pickups all have a weight of 10 because they have greater impact on customer satisfaction than any of the other indicators. Some of those with a weight of 5 include packages that lack or have lost their identifying labels, packages that are delivered after the commitment date, and customer complaints that have been reopened because they were not satisfactorily resolved. Each of the 12 sQIs is tracked on a daily basis and overall performance is reported for each day.

Lesson 5: Train Employees to Use SPC Tools

In most cases, statistical process control (SPC) training begins by first teaching the method to the personnel and then giving them the opportunity to apply it in the workplace. This is followed by (a) a discussion of the results and (b) assistance and advice in dealing with any problems or issues that arise when using the technique. In addition, if the company is providing a course or series of programs on SPC tools, the early sessions address simple applications while the later ones cover more sophisticated tools and techniques.

At Zytec, for example, the first six sessions introduce such basic tools as data collection, sampling theory, graphing, Pareto analysis, and cause-and-effect analysis. The other six sessions cover topics such as scatter diagrams, frequency distributions, variable control charts, attribute control charts, process capability studies, and ways in which to pick and choose the right technique for handling a particular job-related problem.

While the technical training receives a great deal of time, the concept of "tool box" is perhaps even more critical. This session is designed to help participants systematically choose the best problem-solving tools for the matter under study. The heart of this process is the PDCA cycle, illustrated in Figure 3. In explaining the PDCA process, five steps are given primary consideration, along with the key questions that need to be asked in each case:

1. Define theproblem. What is being processed? What are the quality characteristics of the product? What are the major issues? What does a flow charting of the product or process reveal?

2. Formulate the hypothesis. What is causing the problem? What does an analysis of past data reveal?

3. Test the hypothesis. What are the causeand-effect relationships? What is the process doing now?

4. Introduce the change What needs to be done? In what order should these changes be carried out? How much time will be needed?

5. Evaluate the results. Did things work as expected? What data support this evaluation? How can these results be used to continue 1ooping into the process by going back to an earlier step and taking a fresh look at things?

Another key tool box concept is to identify the problem-solving tools that are most likely to answer critical questions. Here is an example provided by the Zytec Corporation:
In answering this question...     Use this SPC tool
What goes on in the activity?     Flow chart
What are the big problems?        Pareto chart
What are the causes?              Cause/effect diagram
What do past data show?           Histogram
What are the cause/effect         Scatter plot
relationships?
What do current data show?        Control charts



Lesson 6: Empower Employees

Empowerment is the authority to personally take control and make decisions. Baldrige companies invest a great deal of time and effort in teaching and encouraging their personnel to become more personally involved and to use their empowered authority to get things done. Solectron, for example, gives its line workers the authority to stop the production line at any time they feel it necessary. Customer service employees at the firm have full authority to return or replace products without having to get an OK from their boss. Meanwhile, engineers and sales representatives are trained to deal effectively with customers and make whatever decisions are needed to meet the needs of these buyers.

At the Ritz-Carlton hotel chain, employees are authorized to spend up to $2,000 to handle a problem. This is usually more than sufficient to resolve such common occurrences as bringing a guest who just checked in with a cold a pot of herbal tea and some aspirin, or mailing a shirt to a guest who accidentally left the item in the room and then checked out.

At UCS, employees are put into teams that meet and plan strategies to reduce a list of "Ten Most Wanted" items. As each problem on the list is resolved, it is removed and another "Top 10" problem is put in its place. Thus there is a continual list of issues and problems that need resolution, and employees are encouraged to accept responsibility for formulating solutions. In fact, all employees are empowered to make decisions that will reduce costs and increase customer delight (one of the company's primary objectives), thus helping UCS maintain its reputation as one of the best customer service-driven firms in the country.

Lesson 7: Recognize and Reward Employees

Recognition and rewards take a number of different forms. They can include financial rewards, days off, vacation trips, choice parking spots (typically for a week or a month), pictures placed on the "Employee of the Month" wall, and names added to a prominently displayed plaque of distinguished employees.

Each of the companies in this research had its own recognition system, although a handful of characteristics typify all of their efforts:

1. Recognition is always positive and is given to those actions that have resulted in success.

2. Recognition is offered openly and tends to be publicized throughout the company or division.

3. Recognition is carefully tailored to the needs of the people so that everyone is motivated to pursue the reward.

4. Rewards are given soon after they have been earned.

5. The relationship between the achievement and the reward is clearly understood by the personnel.

Lesson 8: Make Continuous Improvement an Ongoing Challenge

All the firms in this study share a common desire for continuous improvement. What is particularly interesting is that the continuous improvement process is typically viewed as incremental and additive rather than explosive and earth-shattering. It is characterized more by "rapid inching" than by dramatic, revolutionary progress.

MBQA winners use a variety of continuous improvement tools. Two of the most popular are benchmarking and six sigma. In some instances these two tools are used in tandem, though this is not a requirement for their application.

Benchmarking is the process of comparing a company's current performance with that of organizations judged to be "best in the class." A wide number of sources are used in benchmarking, from well-run internal operations to those of competitors and other outsiders with processes that can be directly copied or modified. IBM Rochester, for example, used more than a half dozen major benchmarking sources in creating the AS/400 minicomputer, which turned out to be the most successful computer launch in the history of the firm. They included Xerox, from which it learned about the benchmarking process in general; Motorola, which provided information regarding the use of six sigma; IBM Raleigh, which had a world-class defect prevention process; IBM Manassas, which had outstanding hardware process documentation; 3M, which provided information that helped improve the plants resource manufacturing planning capability; Hewlett-Packard, which provided insights regarding the effective use of service representatives; several Japanese firms, from which the company learned a great deal about just-in-time inventory; and NorthwTest Airlines, whose nickel plating waste treatment process proved invaluable in building the AS/400.

Where possible, benchmarking is done on a quantitative basis by measuring the number of defective parts per million (ppm). This error rate is always presented in terms of "sigma," which is the total number of defects per unit as a percentage of the total number of opportunities for defects per unit. Simply stated, the higher the sigma, the fewer the number of errors the firm has per million parts. For example, at three sigma, the error rate is 66,810 ppm; at four sigma, this drops to 6,210 ppm; at five sigma it is 233 ppm; and at six sigma it is 3.4 ppm. As a company moves from three sigma to four sigma, quality improves by a factor of more than 10. From four sigma to five sigma, quality improves by a factor of almost 30, and from five to six sigma the improvement factor is almost 70 times. In fact, at six sigma there are virtually no errors.

Baldrige firms are interested in benchmarking their current performance and trying to reach six sigma for two major reasons. First, increased quality helps the firm develop a reputation and gain market share. Second, increased quality sharply drives down costs and increases profits. For example, Motorola has found that operating at four sigma will use up more than 10 percent of sales dollars on internal and external repair costs, whereas operating at six sigma will use up less than 1 percent.

These eight lessons are critical to organizations that want to become world-class competitors or best in their field of operation. Although a host of steps must be undertaken in carrying out each lesson, five major points summarize how MBQA firms have developed a quality edge:

1. Total quality begins at the top and must be carried out with a well-formulated plan.

2. The most important person in the entire TQM process is the customer; all efforts must be directed toward meeting this individual's needs.

3. Training, empowerment, and rewards are critical to preparing employees to meet the TQM challenge.

4. Tools and techniques such as statistical process control methods and benchmarking are important in helping everyone involved in the TQM process carry out the job.

5. Total quality is a continuing challenge, with each success constituting a battle that has been won in a never-ending war.

This last idea is particulary important because it emphasizes that TQM is not just a major element of business strategy. Unlike quality circles, which are often abandoned after their goals are attained, total quality is a pervasive and ongoing objective. This idea is cleverly reinforced by Zytec, which wraps up its Baldrige presentation with the following story about continuous improvement:
      Every morning in Africa,
       a gazelle wakes up.
       It knows it must outrun
          the fastest lion,
        or it will be killed.

       Every morning in Africa,
          a lion wakes up.
       It knows it must run faster
         than the slowest gazelle,
            or it will starve.

         It doesn't matter whether
       you're a lion or a gazelle--
         when the sun comes up,
       you'd better be running.


References

Roy Bauer, Emilio Collar, and Victor Tang, The Silverlake Project (New York: Oxford University Press, 1992).

Joan Koob Cannie and Donald Caplin, Keeping Customers for Life (New York: American Management Association, 1991).

Thomas H. Davenport, Process Innovation (Cambridge: Harvard University Press, 1993).

Lloyd Dobyns and Clare Crawford-Mason, Quality, or Else (Boston: Houghton-Mifflin, 1990).

Richard M. Hodgetts, Blueprints for Continuous Improvement (New York: American Management Association, 1993).

J.M. Juran, Juran on Leadship for Quality (New York: Free Press, 1989).

Fred Luthans, Richard M. Hodgetts, and Sang Lee, "New Paradigm Organizations: From Total Quality to Learning to World Class ," Organizational Dynamics, Winter 1994, pp. 5-19.

Fred Luthans, Sang Lee, and Richard M. Hodgetts, "Total Quality Management: Implications for Central and Eastern Europe," Organizational Dynamics, Spring 1992, pp. 42-55.

Christopher Meyer, Fast Cycle Time (New York: Free Press, 1993).

Lee Tom Perry, Randall G. Stott, and W. Norman Smallwood, Real-Time Strategy (New York: John Wiley & Sons, 1993).

Warren H. Schmidt and Jerome P. Finnigan, The Race Without a Finish Line (San Francisco: Jossey-Bass, 1992).

Richard J. Schonberger, Japanese Manufacturing Techniques (New York: Free Press, 1982).

Richard J. Schonberger, Building a Chain of Customers (New York: Free Press, 1990).

Richard M. Hodgetts is a professor of strategic management at Florida International University in Miami.

Figure 1

Vision of Quality: Three Examples

Cadillac

The Mission of the Cadillac Motor Car Company is to engineer, produce, and market the world's finest automobiles known for uncompromised levels of distinctivehess, comfort, convenience, and refined performance. Through its people, who are its strength, Cadillac will continuously improve the quality of its products and services to meet or exceed customer expectations and succeed as a profitable business.

Motorola

Dedication to quality is a way of life at our company, so much so that it goes far beyond rhetorical slogans. Our ongoing program of continued improvement reaches out for change, refinement, and even revolution in our pursuit of quality excellence.

It is the objective of Motorola, Inc., to produce and provide products and services of the highest quality. In its activities, Motorola will pursue goals aimed at the achievement of quality excellence. These results will be derived from the dedicated efforts of each employe in conjunction with supportive participation from management at all levels of the corporation.

Zytec

Zytec is a company that competes on value; is market driven; provides superior quality and service; builds strong relationships with its customers; anti provides technical excellence in its products.

Figure 2

Motorola's Five Steps for Recovery from a Bad Situation

1. Apology. Recovery absolutely demands some acknowledgment of error immediately following a breakdown in service. Apology is more powerful when it is in the first person. "We're sorry" lacks sincerity.

2. Urgent Reinstatement. A sense of urgency is vital even when things are going smoothly. When applied to recovery, it is crucial! Your customer must believe that you are doing everything possible to restore balance without delay.

3. Empathy. Expressing compassion may be the mother lode of all service gold. It is the expression of "I can identify with what has happened." The customer feels heard, affirmed, and cared about.

4. Symbolic Atonement. A gesture of contrition clearly says, "We want to make it up to you." The gesture is the symbol that makes this tactic work. It demonstrates a guarantee that it is on "us" at no charge.

5. Follow-up. This may or may not be critical to quality service when the customer is only mildly annoyed. However, it is unequivocally important if the customer has been a victim. It provides a sense of closure and affirm the authenticity of your recovery response.

Source: Motorola Corporation.
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Title Annotation:Malcolm Balrige Quality Award
Author:Hodgetts, Richard M.
Publication:Business Horizons
Date:Jul 1, 1994
Words:3571
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