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Total quality management in the private sector: Lockheed Austin.

Delilah Salinas, an electronics assembler in the manufacturing shop at the Austin Lockheed facility, points to a bar chart that illustrates the number of hours it takes to produce aerospace hardware known in the industry as "shipsets." Salinas describes the project as a cable modification program for the C-141 aircraft and outlines the changes she and her teammates have implemented that have reduced the time it takes to produce a shipset by nearly 40 percent.

Three years ago Lockheed Austin recharted its strategic and tactical directions in an effort to stay competitive in the changing U.S. aerospace business. Before that time, employees like Salinas were not likely to be tapped as subject matter experts on the production cycle time of a product. "The work teams--not the supervisor--establish the groups' goals and then work to achieve them within the boundaries that we set," says Don Cantler, Salinas' manager, now referred to in the culturally correct vernacular as functional team leader. "The number one boundary, of course, is to make a profit within the overall constraints of the budget. As a result of a high degree of employee involvement and management functioning primarily as boundary setters, the actual cost per shipset has come down significantly."

This cultural and organizational retooling--which Lockheed Austin refers to as team-based total quality management (TQM)--is a radical departure from traditional aerospace hierarchies. Successful implementation mandates a high degree of employee involvement and leadership behavioral change. For Lockheed Austin the transforming of employees' perception of their ownership in the enterprise and of management's role in the process proved, at times, a painful process. Ultimately however, this change has resulted in dramatic improvements in productivity and reduced overhead costs in nearly every facet of the 1,500-person enterprise in southeast Austin.

The shrinking Defense Department budget and historic changes in the global political climate signaled the long-forecasted beginning of a new era for U.S. aerospace contractors. Having already weathered some early storms in military program cutbacks, Lockheed Austin was poised for a new tack. In 1989 Lockheed Missiles & Space Company's Michael Mazaika, the new general manager, immediately put into motion an ambitious plan to "flatten the organizational structure and redistribute accountability, authority, and responsibility to the worker closest to the work and the customer," all basic tenets of a team-based TQM structure.

From the California company, Mazaika brought with him a headquarters-endorsed quid pro quo charter to improve Lockheed Austin's profitability and to effect various changes in the traditional manufacturing, engineering, and business systems processes. The leadership of the 22,000-person workforce in California saw an opportunity in the relatively smaller-scale Austin operation to develop process improvement models that could be applied later at Lockheed California.

Critical to the success of Lockheed Austin's culture change was securing consensus from all elements of the organization, particularly employees represented by Lodge 2720 of the International Association of Machinists and Aerospace Workers (IAM&AW). In July 1990, Lockheed Austin management and District Lodge 776 of the IAM&AW crafted an agreement outlining a joint partnership that was to become the basis for all TQM initiatives involving employees represented by the IAM&AW. A six-person joint committee, consisting of representatives from the bargaining unit and management, reviews TQM initiatives that affect bargaining unit employees. Not only was this committee instrumental in addressing and resolving initial employee involvement concerns expressed by the IAM&AW, it has also been a catalyst for implementing process improvements in operations throughout the plant.

The collective hard work of all Lockheed Austin employees has paid off. According to Frank Reuter, director of Total Quality Management Programs, "In the three years we have been actively measuring effectiveness of our TQM initiatives we have seen results in the whole spectrum of areas: reduced overhead costs, reduced cycle time, increased customer satisfaction, improved employee morale, and most importantly, repeat business and new contracts. By going beyond 'paying lip service' in focusing on our internal and external customers' expectations and empowering teams to streamline and improve their work processes, we are significantly improving our competitiveness." Indeed, Reuter and his Lockheed colleagues attribute two recent contract wins totaling nearly $75 million to the company's TQM initiatives.

While process improvement methods "chart" well in traditionally measured disciplines such as manufacturing and engineering, identifying and qualifying process improvements in "softer" administrative disciplines within the company proved more challenging. For example, Jeff Jeffrey, who as a project team leader in Lockheed's marketing department, is responsible for compiling the company's annual strategic plan, often found himself at cross purposes with the producer of a parallel document, the annual five-year financial forecast. "The strategic plan is supposed to provide the basis for the financial forecast," Jeffrey explains. "The financial data are supposed to provide the feedback mechanism to 'recalibrate' the strategic plan throughout the year as financial forecasts become reality."

By collaborating, Jeffrey and various marketing and finance personnel were able to identify numerous process improvements that yielded an annual cost savings of $75,000. The improved accuracy, traceability, and credibility of both documents also resulted in greatly improved cross-functional work team relationships and greater customer satisfaction.

These team-based TQM successes also earned Lockheed Austin a position as one of seven finalists for the prestigious Austin Quality Award, which is modeled after the internationally recognized Malcolm Baldridge Award. Although Lockheed did not win the award, it was singled out by the Austin Quality Council for a "Significant Merit Award."

The uncertainty underlying future defense and nonmilitary government budgets all but guarantees a smaller market and the accompanying downsizing of personnel. Lockheed Austin likely will not be immune from these realities. Mazaika summarizes, "For the most part, our people have embraced the TQM concepts, challenged the old systems, and exploited the successes as well as the failures. Our results have greatly enhanced our 'survivability quotient' for the 90s."

Sylvia Simpson Public Relations Manager Lockheed Austin
COPYRIGHT 1992 University of Texas at Austin, Bureau of Business Research
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Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Simpson, Sylvia
Publication:Texas Business Review
Date:Dec 1, 1992
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