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U.S. COMPANIES MOVE SLOWLY TOWARDS IMPLEMENTATION OF QUALITY PRACTICES; FORECAST DRAMATIC CHANGES BY MID-1990s: INTERNATIONAL QUALITY STUDY

U.S. COMPANIES MOVE SLOWLY TOWARDS IMPLEMENTATION OF QUALITY PRACTICES; FORECAST DRAMATIC CHANGES BY MID-1990s: INTERNATIONAL QUALITY STUDY
 NEW YORK, May 14 /PRNewswire/ -- U.S. companies know the issues and language of quality management, but they have not moved rapidly in implementing fundamental improvements. The pace of change must increase, and in order to implement quality practices quickly, it is essential that U.S. companies focus on a few strategic actions to ensure competitiveness in the '90s. This is a key conclusion of the International Quality Study(SM) (IQS(SM)), the broadest and most in- depth study of international quality management practices yet attempted.
 The study, a collaboration between Ernst & Young and the American Quality Foundation, researched past and current quality management practices and future plans at nearly 600 representative companies and organizations in four industries: automotive, banking, computers and peripherals (excluding software), and acute care hospitals.
 Four leading industrial countries were chosen: Canada, Germany, Japan and the United States. The IQS provides significant insights into quality practices by looking at changes over time. It found U.S. companies saying they are going to make quality management improvements across the board in the future.
 "For American companies, the message is clear," said Terrence R. Ozan, partner and U.S. director of Ernst & Young's Performance Improvement consulting practice. "If U.S. companies are going to achieve the lasting gains they want from quality practices, they need to focus on actually making a few key improvement changes, rather than trying to do everything all at once."
 Americans Expect Big Future Increases in
 Utilization of Quality Practices
 Examples include:
 -- The percentage of computer companies that plan to focus their use of technology on meeting customer expectations is expected to more than double, from 20 percent currently to almost 50 percent in three years.
 -- Currently, only 20 percent of automotive companies almost always include customers in design teams; 43 percent expect to do so in three years.
 -- Today, 28 percent of employees in the banking industry regularly attend quality meetings. This is expected to rise to 52 percent in three years.
 -- Today, less than 10 percent of a hospital's medical staff fully understand its strategic plan. American hospital executives expect this figure to rise to 58 percent in three years.
 "These optimistic forecasts by American companies hold true across virtually every key quality indicator," declared Joshua Hammond, president of the American Quality Foundation. "If American business can actually deliver on these promises, it would make a sensational transformation."
 Manufacturing Companies: More Focus on Customers,
 Little on Suppliers
 Manufacturing companies in the countries studied show different means of using feedback from external audiences, including customers and suppliers. The Germans and Japanese, for example, frequently consider customer complaints. In the United States and Canada, the percentage of computer and automotive companies the almost always use cross-functional teams to develop new products that include the customer is expected to double.
 "There have been positive developments," said Stephen L. Yearout, Ernst & Young partner and U.S. director of operations and quality management. "We shouldn't forget, however, that in the computer industry, for example, the Germans and Japanese expect that the percentage of companies placing 'major importance' on customer complaints as a quality measure will rise from 60 percent to around 80 percent in three years. Over the same period, American and Canadian companies will only go from 30 percent currently to 40 percent in the future. This suggests a large gap will continue to exist."
 In addition, these companies are sending mixed messages to another external audience, their suppliers. On the one hand, they claim to be working toward closer relationships with their suppliers. Yet, that relationship does not include the critical process of identifying new products. The percentage of manufacturing (computer and automotive) companies where suppliers almost always play a prominent role in identifying opportunities for new products stands at less than 5 percent today and is not expected to significantly increase in the future. "With speed-to-market as a make-or-break issue in the manufacturing industries," said AQF's Hammond, "U.S. companies need to look closely at lost opportunities in their supplier relationships."
 Health Care and Banking Relatively New
 to Quality Management
 Awareness and utilization of quality management tools in health care and banking are generally lower than in the manufacturing industries studied. However, these service industries plan to make large strides in the next three years, especially in the United States and Canada. The use of formal quality tools, such as business process improvement, flowcharting, and cause-and-effect analysis, will more than double in those countries.
 Hospitals will focus increasingly on defining who the customer is and meeting customer needs. This is particularly true of the use of nonclinical technology, which will be given an expanded role in satisfying customers. In the United States, the percentage of hospitals citing "satisfying customer expectations" as a primary reason for non-clinical technology application will rise to almost 50 percent from 17 percent currently.
 In banking, quality management has focused heavily on quality control. In the future, banks are orienting themselves towards the core relationship with the customer. The use of so-called "relationship training," for example, now used in only 10 percent of U.S. banks, will spread to 73 percent of the industry.
 Compensating Management for Quality
 "There is a wide variety of quality management practices and quality structures available," said Ozan. "The study helps us focus on those that really matter -- how much quality practices are becoming habits rather than just expressions of enthusiasm. To a great degree, it depends on the extent to which senior management and employees are rewarded for quality."
 The study shows a shifting basis for assessing senior management performance related to their compensation. In three years, according to the study, companies will assign virtually as much importance to quality as profitability. Moreover, respondents in all industries expect that team performance and organizational quality will be, along with profitability, the dominant criteria for assessing senior management performance.
 Said AQF President Hammond, "This is an excellent goal. Because U.S. companies have placed great importance on short-term profitability in the past, measuring and rewarding executives for quality and performance over time will be a tremendous challenge."
 The four industry studies in the International Quality Study were compiled on the basis of lengthy questionnaires completed at nearly 600 companies and organizations. The differences in the survey populations cited below reflect the different compositions of the selected industry sectors in each country.
 Banks 93 respondents
 Acute care hospitals 241 respondents
 Automotive/primary component manufacturers 134 respondents
 Computer/peripheral equipment companies 116 respondents
 A review of the study methodology is attached to each report.
 Ernst & Young is the leading international professional services firm, with 67,000 people in more than 600 cities in over 100 countries, including over 20,000 people in more than 100 U.S. cities.
 The American Quality Foundation is an independent, nonprofit, New York-based think tank addressing national public and economic issues related to quality and productivity, and identifying long-term management needs relative to these issues.
 -0- 5/14/92
 /NOTE TO EDITORS: Findings of the International Quality Study are contained in four industry-specific reports (banks, acute care hospitals, automotive/primary component manufacturers, and computer/peripheral equipment companies.) Each report costs $35. Anyone wishing to purchase one or more of the reports should call the American Society for Quality Control at 1-800-248-1946. Or they can write to the ASQC, P.O. Box 3066, Milwaukee, WI 53201-3066/
 /CONTACT: Howard Bailen of Ernst & Young, 212-773-6148; or Anne Leader of Edelman Public Relations, 212-704-8117, for Ernst & Young/ CO: ST: IN: CPR AUT FIN HEA SU: ECO


GK-AH -- NY044 -- 0225 05/14/92 12:14 EDT
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