TOTAL QUALITY MANAGEMENT
Total Quality Management has a number of cornerstones including meeting customer requirements internally and externally, understanding processes, improvement tools and techniques, and teamwork. This module will help participants to implement TQM concepts and methods directly into any business.
At the end of this unit, students will be able to:
Students will be able to:
Ø Apply total quality management principles to practical situations
Ø Understand the issues in quality functional deployment in an organization
Ø Form quality organizational teams and lead quality initiatives
v TQM terminology
v Deming’s principles of TQM
v 14 steps to TQM
v The core of TQM Practice
v Quality Control
v Constant learning
Swift, Ross, Omachonu (1998) “Principles of Total Quality”, Second Edition..
§ Total Quality Management (third edition) by Dale H. Besterfield,
§ Total Quality Management: Text, Cases, and Reading, Third Edition -- by Joel E. Ross;
§ Quality Management: Introduction to Total Quality Management for Production, Processing, and Services (4th Edition) by David L. Goetsch, Stanley Davis
§ Beyond Total Quality Management: Toward The Emerging Paradigm by Greg Bounds,
§ CQI Server at Clemson University at their Department of Industrial Engineering, lists many Quality Management resources including Deming related sites.
§ The W.E. Deming Institute provides a plethora of information on Mr. Deming and his teachings.
§ Deming section of Quality.org site has more Deming links and the main site (Quality.org) has a large collection of categorized links to quality /engineering/management websites.
Mode of Assessment
The assessment for this course is out of 100 %, for which the students will be required to analyze a case study.
Total Quality Management
The Integration of quality in management
The Concept of TQM (do it right the first time)
There are many definitions of Total Quality Management (TQM) in the business field but they all lead to the same meaning. Large firms in the United States such as Xerox and Motorola (both winners of the Malcolm Baldrige National Quality Award) define TQM as “the integration of all functions and processes within an organization in order to achieve continuous improvement of the quality of goods and services. The goal is customer satisfaction” while the Japanese would simply define it as “doing things right the first time”. TQM is based on number of ideas. But it basically means thinking about quality in terms of all functions of the enterprise and is a start-to-finish process that integrates interrelated functions at all levels. It is a systems approach that considers every interaction between the various elements of the organization. Thus, the overall effectiveness of the system is higher than the sum of the individual outputs from the subsystems. The subsystems include all the organizational functions in the life cycle of a product, such as (1) design (2) planning, (3) production, (4) distribution, (5) field service.
The management subsystem also require integration, including (1) strategy with the customer focus (2) the tools of quality, and (3) employee involvement (the linking process that integrates the whole). The result is that any product, process, or service can be improved, and a successful organization is one that consciously seeks and exploits opportunities for improvement at all levels. The load-bearing structure is customer satisfaction. The key word is continuous improvement.
In May 1990 an international conference on quality management summarized the key issues and terminology related to TQM:
· The cost of quality as the measure of non-quality (not meeting customer requirement) and a measure of how the quality process is progressing.
· A cultural change that appreciates the primary need to meet customer requirements, implements a management philosophy that acknowledges this emphasis, encourages employee involvement, and embraces the ethic of continuous improvement.
· Enabling mechanism of change, including training and education, communications, recognition, management behaviour, teamwork, and customer satisfaction programs.
· Implementing TQM by defining the mission, identifying the output, identifying the customers, negotiating customer requirements and determining the activities required to fulfil those objectives.
WHAT IS TQM?
In the 1950s, the Japanese asked W. Edwards Deming, an American statistician and management theorist, to help them improve their war torn economy. By implementing Deming's principles of total quality management (TQM), Japan experienced dramatic economic growth. In the 1980s, when the United States began to see a reduction in its own world market share in relation to Japan, American business rediscovered Deming. Quality management experts, Joseph Juran and Philip Crosby, also contributed to the development of TQM theories, models, and tools. TQM is now practiced in all sectors business and industry including hospitality, as well as in government, the military, education, and in non-profit organizations.
Additional definition of TQM according to (Jurow & Barnard, 1993) is "a system of continuous improvement employing participative management and centred on the needs of customers". Key components of TQM are employee involvement and training, problem-solving teams, statistical methods, long-term goals and thinking, and recognition that the system, not people, produces inefficiencies. The hospitality and services industry can benefit from TQM in three ways:
The hospitality industry should focus on providing the best services possible, and be willing to change to serve its customers. To determine if changes need to be made, a manager might ask: What are our niche markets? What do the customers come in for? How can I look at the efficiency of my organization? How do we serve the current customers that exist today? First learn about the customer, then solve the problems.
14 STEPS TO TOTAL QUALITY MANAGEMENT
Based on his work with Japanese managers and others, Deming (1986; Walton, 1986) outlined 14 steps that managers in any type of organization can take to implement a total quality management program.
1. Create constancy of purpose for improvement of product and service. Constancy of purpose requires innovation, investment in research and education, continuous improvement of product and service, maintenance of equipment, furniture and fixtures, and new aids to production.
2. Adopt the new philosophy. Management must undergo a transformation and begin to believe in quality products and services.
3. Cease dependence on mass inspection. Inspect products and services only enough to be able to identify ways to improve the process.
4. End the practice of awarding business on price tag alone. The lowest priced goods are not always the highest quality; choose a supplier based on its record of improvement and then make a long-term commitment to it.
5. Improve constantly and forever the system of product and service. Improvement is not a one-time effort; management is responsible for leading the organization into the practice of continual improvement in quality and productivity.
6. Institute training and retraining. Workers need to know how to do their jobs correctly even if they need to learn new skills.
7. Institute leadership. Leadership is the job of management. Managers have the responsibility to discover the barriers that prevent staff from taking pride in what they do. The staff will know what those barriers are.
8. Drive out fear, people often fear reprisal if they "make waves" at work. Managers need to create an environment where workers can express concerns with confidence.
9. Break down barriers between staff areas. Managers should promote teamwork by helping staff in different areas/departments work together. Fostering interrelationships among departments encourages higher quality decision-making.
10. Eliminate slogans, exhortations, and targets for the workforce. Using slogans alone, without an investigation into the processes of the workplace, can be offensive to workers because they imply that a better job could be done. Managers need to learn real ways of motivating people in their organizations.
11. Eliminate numerical quotas. Quotas impede quality more than any other working condition; they leave no room for improvement. Workers need the flexibility to give customers the level of service they need.
12. Remove barriers to pride of workmanship. Give workers respect and feedback about how they are doing their jobs.
13. Institute a vigorous program of education and retraining. With continuous improvement, job descriptions will change. As a result, employees need to be educated and retrained so they will be successful at new job responsibilities.
14. Take action to accomplish the transformation. Management must work as a team to carry out the previous 13 steps.
TQM begins with strategic decision, a decision that can only be made by top management. That decision simply put is the decision to compete as world class company. Total quality concentrates on quality performance in every facets of the business and the primary strategy is to achieve and maintain competitive advantage. The pervasive role that quality plays in strategic planning can best be understood by examining the components of strategy:
· Product/market scope
· Competitive edge (differentiation)
· Supporting policies
· Organizational culture
Study and understand in ever greater depth of the process of production or service that you are delivering is essential. Deming's 85/15 rule: 85% of a worker's effectiveness is determined by the system he works within, only 15% by his own skill. To break down your system into meaningful blocks for analysis, consider your "internal customers" of processes.
The Concept of Process
Everything is a process. Whether you fill out an application, or take a morning shower or driving from point from home to work, everything you do has a pattern of process. A process then is a series of activities or steps used to transform input(s) into output(s). TQM calls for evaluation of the total system, not just the sub-systems. Managers must have a clear view of the over all process before they examine the various elements in the process (sub-system). The purpose of understanding the system as hole and the sub-systems is to be able to pin point problems that may occur that result in quality problems in out put. Your understanding of the system also allow you improve or change the elements in the system to enhance the over all quality.
The Seven Basic Quality Control Tools
In 1971, an English translation of Dr. Ishikawa’s book entitled Guide to Quality Control was published to introduce quality control techniques and practices to the workers of Japan. This book has been widely used and is still a valuable resource when using the seven basic tools he described:
1. Check sheet (forms that are used to systematically collect data of study)
2. Graphs (are visual displays of data that are used to organize and summarize data)
3. Histograms (type of par chart that visually displays the variability of a product or service)
4. Pareto charts (the 80/20 principle)
5. Cause-and-effect diagrams (the primary purpose of the cause-and-effect diagrams diagram is to show the relationship between a given effect and all identified causes of that effect. There are typically several major causes for any given effect, thus the diagram assist in (a) gathering and organizing possible effects (b) reaching a common understanding of the problem (c) exposing gaps in existing knowledge (d) ranking the most probable causes and (e) studying each cause).
6. Control charts (is a special type of run chart with limits, it shows the amount and nature of variation in the process over time).
The essence of benchmarking is the continuous process of comparing a company’s strategy, products, and processes with those of world leaders and best-in-class organizations in order to learn how they achieve excellence and then setting out to match and even surpass it. For many companies, benchmarking has become a key component of their TQM programs. The justification lies partly in the question: “why re-invent the wheel if I can learn from someone who has already done it?” The benchmarking process is more than a means of gathering data on how well a company performing against others in and out side the industry. It is a method of identifying new ideas and new ways of improving processes and hence meeting customers expectations. Cycle time reduction and cost are but two process improvements that can result. The ultimate objective is process improvement that meets the attributes of customer expectation. This improvement of course, should meet both strategic and operational needs.
A properly designed and implemented benchmarking program will take a total system by examining the company’s role in the supply chain, looking upstream at the suppliers and downstream at the distribution channels. How competitive are suppliers in the world market and how well are they integrated into the company’s own core business-process, product design, demand forecasting, product planning, and order fulfilment.
Just In Time or (JIT) is a great concept developed by Toyota company of Japan. It is essential part of the tools used by managers to control quality and manage process efficiency as the new basis of competition in many industries is time-based. This means that the focus is on reducing lead time by speeding up the design of new products or responding more quickly to customer demand for existing products. JIT II, a customer-supplier partnership concept pioneered at Bose Corporation and now practiced by major companies and their suppliers, can aid in cutting both design and response lead time. This is done through system integration, a basic process strategy of time-based competition.
By definition, system integration seeks ways to improve coordination between various departments or functional areas. The practice of JIT II links engineering, planning, and purchasing departments and bridges the inter-organization gap between customer and supplier. System integration is achieved because sequential processes are no longer separated by functional or organizational walls.
“JIT II Purchasing”
In a JIT II relationship, a supplier's sales representative works full-time in a customer firm while being paid by the supplier. The customer serves as the host organization, and the supplier representative-referred to as an in-plant representative, or "in-plant"--functions as an employee of the customer's purchasing department, attending planning meetings and determining material needs. The in-plant is then authorized to purchase materials from the supplier for the customer.
In conventional JIT purchasing, customers and suppliers conduct themselves as partners rather than as adversaries. These partnerships provide long-term contracts to single-source suppliers. In return for the cumulative volume of business, the customer receives frequent deliveries in small quantities of high-quality goods. Benefits reported by JIT purchasing customers include improved communication between customer and supplier and the reduction of lead times, on-hand inventories, space needed for storage, and paperwork.
The partnership practice is continued by JIT II participants. But with JIT II purchasing, the benefits are enhanced and additional benefits are gained as a direct result of the nature of the partnership. Because the supplier representatives are full-time employees of their customers, they have ready access to information that can be used to reduce lead times. This close working relationship has profoundly influenced (1) the administration of the purchasing function, (2) logistics, (3) concurrent engineering and value analysis, and (4) material stores and support services. In each of these cases, the lead time reductions attributed to JIT II partnerships are greater than those with conventional JIT.
Quality & Business Performance
The quality to performance relationship and market share has been studied in depth by the Strategic Planning Institute of Cambridge, Massachusetts in the U.S. The conclusion, based on performance data of about 3000 strategic business units, is unequivocal:
“One factor above all others (quality) drives market share. And when superior quality and large market share are both present, profitability is virtually guaranteed. There is no doubt that relative perceived quality and profitability are strongly related. Whether the profit measure is return on sales or return on investments, businesses with superior product or service offering clearly outperform those with inferior quality”
Quality Function Deployment
The first formal use of quality function deployment (QFD) can be traced to the Kobe Shipyard of Mitsubishi Heavy Industries, Ltd of Japan in 1972. The over al objective of QFD is to “improve (reduce) the product development cycle while improving quality and delivering the product at lower cost” QFD is driven by the voice of customer, which is customer requirements expressed in the customer’s own words. Two major components make up the heart of QFD:
Quality Improvement Stories
Quality Improvement (QI), stories is a step-by-step guide for problem solving or (process) improvement. It is called story because it organize the work a team does in such a way that a story is told. It tells who the team is, when and why it got together, where and what it worked on, and how it solved its problem. A QI story follows several basic steps for solving problem as follows:
All levels of the organization must be involved, starting with full commitment at the top. Eliminate organizational and physical barriers to teamwork. Eliminate performance ratings. Emphasize stability and constancy of effort -- steady small gains rather than disruptive crash programs. Avoid unsettling changes without involving whole team. Involve suppliers, help them with Quality management. Involve your clients, get their feedback and ideas. Send your staff to both (suppliers and clients) to learn. Spread profits to workers as a team (but eliminate merit pay for short term performance). Enlist pride of workers in improving the system; empower people to take charge of work environment, safety issues, etc. Encourage pride of workmanship in delivering the product. Finally: spread what you have learned to the community.
These components are developed through a process of strategy formulation.
What will it cost to improve quality? What will it cost to not improve quality? These are basic questions that managers need to ask as they focus on the bottom line and strategic decisions. The cost of quality has been defined in a number of ways, some of which include:
· At 3M corporation quality cost equals actual cost minus no failure cost. That is, the cost of quality is the difference between the actual cost of making and selling the product/service and the cost if there were no failures during manufacture or use and no possibility of failure.
· Quality costs usually are defined as cost incurred because poor quality may or does exist.
· The cost of not meeting the customer’s requirements, the cost of doing things wrong
· All activities that are carried out that are not needed directly to support departmental (quality) objectives are considered the cost of quality.
· In extreme situations, reducing the quality of product or the service may cause going out of business.
Quality cost information can be used in a number of ways:
1. To identify profit opportunities
2. to make capital budgeting and other investment decisions
3. To improve purchasing and supplier-related costs
4. To identify waste in activities
5. To identify redundancy
6. To establish strategic goals
7. To identify quality problems
8. As a management tool for comparative measures of efficiency and to strategically allocate resources
9. As an objective performance appraisal measure
Marks 100 %
Date of Submission 31 March 2005
How to Turn Customer Satisfaction into Profits and Growth
There is growing evidence that we are witnessing a shift away from blind consumerism, and marketers can do something to smooth the transition. The bottom-line pressure of always delivering more earnings – more than the previous quarter and year – can lead to misallocation of resources in the long term. Seeking to grow is fundamentally a good objective if the underlying economics can support it, meaning productivity improvements and technological breakthroughs, and if the expectations of customers, as human beings, keep being satisfied.
Unfortunately, it is not always the case. In some markets, such as the US and the UK, the pharmacy, restaurant, and video store businesses, for instance, have largely consolidated from mom-and-pop shops to large standardized chains. Economically, consolidation seems to make sense since it initially brought customers a broader choice at lower prices thanks to economies of scale; and sometimes a predictably good customer experience, e.g., McDonald's and Burger King, Barnes & Noble and Borders, and Starbucks.
Too often, however, consolidation meant that unmotivated, low-wage workers replaced devoted shop-owners; ignorance replaced knowledge and know-how; and assembly line processes cadenced by injunctions such as "next in line" and "proceed to the exit" replaced the humanity of neighborly relationships.
A poor quality of service has indeed often become the price to be paid when an industry over-consolidates. We all have witnessed unpleasant situations from the check-out employees chatting with their colleagues or hanging on the phone while "serving" their customers, to employees of local chain restaurants who still don't recognize regular patrons, to pharmacists who mechanically request their patients to come back hours later without even reading the prescriptions. Clearly, the best CRM software (Customer Relationship Management) will remain worthless if basic behaviors keep being ignored. If there is something positive, it is that marketers have the authority to improve this situation. They may not have the source of the problem under their control (who does?), but they do have ownership of the powerful "voice of the customer."
When customer satisfaction is at stake, the mantra is that big business attitude must give way to a small business mentality where front-line associates treat customers with dignity. It is more a long term reform than a quick revolution, and it is totally within the control of management. Armed with the power of analytical tools, marketers can indeed raise that challenge of turning around a company's culture, as did star customer advocate Horst Schulze, the long time president of the Ritz- Carlton who recently stepped down.
"It is perfectly feasible to reconcile bottom-line imperatives with customer satisfaction"
We only have to go back to the 1980s to remember that the hotel industry was, in the German-accented words of Schulze "a lousy lot." The industry as a whole was caught in a vicious circle: hotel personnel were paid a pittance, benefits were largely inexistent, and hiring processes were of limited value. Turnover within the industry was high, as employees were glad to get a few more cents per hour elsewhere if they could.
Consequently, management refused to invest in training and career development, since people would leave anyway. Of course, it was well known that there was tangible value in marketing management and generally in showing respect for the customer. However, many insiders also concluded that "our industry is different" and therefore common sense did not apply in their realm. Schulze proved them wrong.
Today, the hotel industry can boast of a huge transformation, essentially led by one entrepreneurial leader who demonstrated that, even in the tough-minded hotel industry, a customer revolution could be successfully implemented. The current Ritz-Carlton Hotel Company was founded in 1983 with the purchase of the historical Ritz-Carlton of Boston and the rights to its brand name. (It is now an independent division of Marriott International.) While competing against nearly 10 hotel groups, it grew into managing 45 hotels on five continents, and became the only two-time recipient of the Malcolm Baldrige National Quality Award in the service category. Several studies show that organizations receiving this kind of quality awards show long-lasting improvements in areas such as stock price return, operating income and sales.
The Ritz-Carlton's 22,000 professionals are “Ladies and Gentlemen Serving Ladies and Gentlemen” and over 85 percent of them are front-line associates who apply a simple but nonetheless fundamental approach to quality service: a warm and sincere greeting; using the customer's name if possible; a constant anticipation of the customer's needs; and a warm goodbye, again using the customer's name when possible.
Against all odds, the company has broken the old vicious circle of low salary and high turnover by wrapping all its processes – including recruiting and training (250 hours for first-year front-line associates) around its customers, by offering opportunities for professional development, and by encouraging personnel to advance within the organization.
"There are 1,071 potential instances for a problem to arise ... more than a manager's gut feeling could possibly handle"
In 1999, more than 80 percent of guests surveyed claimed to be "extremely satisfied." The company adept of Total Quality Management, sets today a target of "defect-free" experience for its guests, patiently charting progress toward elimination of all customer problems. It is a massive challenge for a service company, as it has to deliver every day, regardless of mood and morale fluctuations, and without the possibility of using inventory to smooth the spikes.
The Ritz-Carlton is detail-oriented in its approach: procedures for quality improvement and problem solving are developed and documented, data is systematically gathered and analyzed, standards are set for all processes, and points at which errors may occur are identified. The company has thus found out that there are 1,071 potential instances for a problem to arise during interactions with Meeting Event Planners. It is more than a manager's gut feeling could possibly handle, which underlies the importance of a methodical approach.
As a result of addressing these problems, in 1998, over 80 percent of Meeting Planners reported that they were "extremely satisfied" with their overall experience, up from fewer than 70 percent a year earlier.
The Ritz-Carlton demonstrates that it is perfectly feasible to reconcile bottom-line imperatives with customer satisfaction. Their gigantic size, however, leaves huge niches opened to small focused competitors. As Ritz-Carlton, Four Seasons, Peninsula, St. Regis, and Inter-Continental favor global expansion over distinctive customer experiences, independent "hotels de charme" across Europe, for instance, thrive on being differentiated, cozy, and dedicated to their customers' well being with the personal touch that makes us human.
In sum, big or small, in any market or industry, we all can make shareholders happy by being Ladies and Gentlemen serving Ladies and Gentlemen.