McGraw-Hill/Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 13 The Quality Imperative

13-2 The Quality Imperative The quality challenge is faced by most companies: –Consumers demand quality products and services –Providing them requires a workforce that is: Talented Committed Empowered

13-3 The Quality Imperative Joseph Jablonski writes in Implementing Total Quality Management: –This is a cooperative form of doing business –It relies on the talents and capabilities of labor and management to improve quality This definition implies three essential ingredients: –Participative leadership –Continuous process improvement –The use of groups

13-4 The Quality Imperative Quality movement philosophy: –The people closest to the work have the experience and knowledge to come up with the best solutions Ren McPherson, former president of Dana Corp., points out that: –The expert is the person who is performing the job

13-5 W. Edwards Deming The influence of W. Edwards Deming was critical in the quality movement –Was recruited to help prepare a census in 1950 –Ended up restructuring the Japanese economy –Presented “The Virtues of Quality Control as a Manufacturing Philosophy,” to JUSE –The Japanese applied his ideas, and he became a legend The Deming Prize has been awarded for out- standing achievement in quality control ever since

13-6 W. Edwards Deming Results of Deming’s influence: –People at the production level were taught the statistical techniques of quality control –They were then delegated the task and the power to organize their work so product quality could be improved –Management was convinced of the necessity for personal involvement and commitment to quality

13-7 W. Edwards Deming Deming produced a simple flow diagram to illustrate his concept of a quality system –The diagram is found in almost every Japanese corporation today Deming taught that: –The more quality is built in, the less a product costs over time –It is important to design a good system and process To demonstrate the idea, he developed the “Red Bead Experiment”

13-8 Red Bead Experiment Objective: to show how a poorly managed system leads to defects and poor quality Lessons: –Merit raises and punishment are given for what the system does –Defects are in the system and workers have little to do with it –Management is trying to control people instead of transforming a flawed system and then managing it

13-9 W. Edwards Deming Deming’s message to the Japanese was quality –Japanese manufacturers listened and learned –They became profitable, well managed, and competitive Improving quality creates a chain reaction: –It ends with the creation of more jobs

13-10 The Deming Chain Reaction Improving Quality and Its Benefits

13-11 W. Edwards Deming American organizations have followed the example of Japanese companies, including: –General Electric –Motorola –Ford Motor Company –The U.S. Army, Navy, and Air Force

13-12 W. Edwards Deming Employees are a source of innovation and money- saving ideas –Boeing: Achieved a 180-degree turnaround in quality Cut production time by 80% Increased productivity from $200,000 per employee to $327,000 –UBS PaineWebber: Generated 19% more revenues and 9% more in assets

13-13 The Deming Way 14 points for a successful workplace: –Create consistency and continuity of purpose –Set high standards –Eliminate dependence on mass inspection for quality –Reduce the number of suppliers –Recognize that there are two sources of quality problems –Improve job training –Provide a higher level of supervision

13-14 The Deming Way –Break down barriers between departments –Stamp out fear by encouraging open, two-way communication –Abolish numerical goals and slogans –Use statistical methods –Remove barriers to pride of work –Institute a program of education and training –Define management’s commitment to quality and productivity

13-15 Roots of the Quality Movement Frederick W. Taylor wrote Principles of Scientific Management: –Father of modern management and industrial engineering principle –Developed the first monetary incentive system –His principles and incentive system became the basis for a worldwide scientific management movement

13-16 Frederick W. Taylor Basic principles of scientific management: –Develop a science for each element of a job that replaces the old rule-of-thumb method –Scientifically select, train, teach, and develop the worker –Cooperate with employees to ensure that all work is done according to the principles of science –Divide the work and responsibility between management and employee

13-17 Frederick W. Taylor Taylor has been criticized for advocating an extreme division of labor –In the early 1900s, it was logical and participative Taylor advocated: –A systematic approach to problem solving –Cooperation between labor and management –Training of employees –A fair reward system –Proper assumption of responsibility With modification, these principles apply to the enlightened leadership practices of today

13-18 The Human Relations School In the early 1920s, Elton Mayo, Fritz Roethlisberger, and researchers at Harvard University conducted a series of studies: –The goal was to determine how environmental conditions affect employee productivity –They discovered that social factors and group norms influence productivity more than: Physical conditions Money Discipline Job security

13-19 The Human Relations School In 1939: –Roethlisberger, summarized the findings of the Hawthorn studies in Management and the Worker In the 50s and 60s: –Maslow and McGregor reinforced the human relations school of thought with: The hierarchy of needs Theory X, Theory Y

13-20 The Human Relations School Rensis Likert proposed four systems of management Chris Argyris integrated the individual and the organization Frederick Herzberg suggested the motivation hygiene theory –These figures set the stage for many participative management experiences in the U.S. and abroad

13-21 Participative Management Experiments Early pioneers of participative management include: –Texas Instruments –AT&T –General Foods –Proctor and Gamble –Harwood Manufacturing –Lincoln Electric Company These companies are famous for their innovative approaches to employee relations

13-22 Participative Management Experiments The participative management experiments of the 1950s and 60s closely resemble the employee empowerment and quality improvement practices of today

13-23 Participative Management Experiments Texas Instruments –Work simplification training to solve manufacturing problems and improve productivity AT&T –Job enrichment programs to increase motivation and employee output General Foods –Designed a plant around a team concept Proctor & Gamble –Developed a concept of group work

13-24 Participative Management Experiments Factors common to successful experiments: –Management attitudes were positive –Employees were viewed as assets –Workers were given increased scope and control –Workers felt the projects were important and doable –Training in human relations, problem-solving, and decision-making was provided –Opportunities for advancement were provided –Productivity and morale increased

13-25 Quality Synthesis Classicist vs. Behaviorist: –No one best way to manage in a complex environment –Some good in both points of view The quality movement joined both of these views –Combined participative leadership with a problem-solving orientation –Was fervently employed by the Japanese, who outstripped competitors and set new standards of quality

13-26 Quality Synthesis The philosophy behind TQM and CQI is both hard and soft –Hard—based on scientific management –Soft—concerned with the human side of work Balance between the two helps account for acceptance by a broad spectrum of managers

13-27 Quality Synthesis Quality improvement satisfies management classicists: –Focuses on quality goals and problem-solving tools and methods –“Hard-nosed” managers are drawn to the “end product” benefits of better products and services

13-28 Quality Synthesis Quality improvement satisfies the behaviorists: –Focuses on employee empowerment, personal growth, and group process techniques –“Soft-hearted” managers are pleased with the “in-process” benefits of: Improved morale Quality of work life The experience of community

13-29 Quality Synthesis

13-30 Quality Initiatives Background: –Systematic final inspection is referred to as “inspecting in quality” –Prevention-based strategies are known as “building in quality”

13-31 Quality Initiatives Results: –Companies that adopted quality management practices achieved: Better employee relations Higher productivity Greater customer satisfaction Increased market share Improved profitability

13-32 Quality Initiatives Common features that contributed to improved performance: –Meeting customer needs became a first priority –Senior management built values into company operations –All employees were trained, empowered, and involved in improving quality and reducing costs –Systematic processes were integrated throughout the organization to foster continuous improvement

13-33 Quality Initiatives Additional notes: –Quality management is useful for both small and large companies –It works with service companies as well as manufacturers –No company reaped benefits immediately; on average it took about 2 1/2 years –Management allowed enough time for results to be achieved rather than emphasizing short-term gains

13-34 Quality Initiatives Specific Findings: –U.S. companies can improve performance through quality efforts: Better employee relations Improved quality and lower cost Greater customer satisfaction

13-35 Financial Benefits of Improving Quality Business Week report: –Describes financial impact of quality improvement efforts: Total quality management (TQM) pays off TQM award-winners posted 37% higher sales and 44% fatter stock prices Award winners have outperformed Standard & Poor’s 500 stock index by over 100%

13-36 Financial Benefits of Improving Quality The implicit value of the quality movement is in this saying: If you always do what you have always done, you will always get what you have always gotten.