Ensuring High Quality and Productivity 2 Ensuring High Quality and Productivity If you forget the customer, nothing much else matters. —Anne Mulcahy, CEO, Xerox Corporation

Learning Objectives Describe the consequences suffered by organizations as a result of poor quality work. Compare product quality control and process control. Summarize techniques for quality control. Identify ways organizations measure their success in continuous quality improvement. Identify constraints on productivity. Describe how productivity and productivity improvements are measured. Identify ways productivity may be improved. Explain why employees have fears about productivity improvement and how supervisors can address those fears. See text page: 30

The Productivity Formula See Learning Objective 1: Describe the consequences suffered by organizations as a result of poor quality work. See text page: 31

Dimensions of Quality Performance Features Reliability Conformance Durability Serviceability Aesthetics Perceive quality See Learning Objective 1: Describe the consequences suffered by organizations as a result of poor quality work. See text page: 32

Consequences of Poor Quality Limited resources When the quality of an organization’s goods or services is poor, the whole organization suffers. The organization loses business and therefore revenues, and it also has more difficulty attracting other important resources. Higher costs Businesses spend billions of dollars each year on inspections, errors, rework, repairs, customer refunds, and other costs to find and correct mistakes. Attracting new customers costs several times more per customer than keeping existing customers satisfied. Quality programs may carry some start-up costs, but the cost of poor quality is higher. See Learning Objective 1: Describe the consequences suffered by organizations as a result of poor quality work. See text pages: 32-33

Types of Quality Control Product quality control An organization’s efforts to prevent or correct defects in its goods or services or to improve them in some way. Process quality control Quality control that focuses on ways to improve the product itself. See Learning Objective 2: Compare product quality control and process control. See text pages: 33-34

Methods for Improving Quality Control Statistical quality control Zero-defects approach Employee involvement approach Six sigma Total Quality Management See Learning Objective 3: Summarize techniques for quality control. See text page: 35-41

Quality Standards Malcolm Baldrige Quality Award ISO 9000 Benchmarking Leadership Strategic planning Customer and market focus Information and analysis Human resource focus Process management Business results ISO 9000 Benchmarking Delivering greater customer value See Learning Objective 4: Identify ways organizations measure their success in continuous quality improvement. See text page: 41

Guidelines for Quality Control See Learning Objective 4: Identify ways organizations measure their success in continuous quality improvement. See text page: 43

Productivity in the United States: Manufacturing Workers See Learning Objective 4: Identify ways organizations measure their success in continuous quality improvement. See text page: 45

Constraints on Productivity Management limitations Employee attitudes and skills Government regulations Union rules See Learning Objective 5: Identify constraints on productivity. See text pages: 45-47

Measuring Productivity The basic way to measure productivity is to divide outputs by inputs. To increase productivity, a supervisor needs to increase outputs, reduce inputs, or both. Quantity without quality does not boost productivity. See Learning Objective 6: Describe how productivity and productivity improvements are measured. See text pages: 47-49

Improving Productivity Do equal work at a lower cost, and increase output without a cost increase. Improve process quality so that employees work more efficiently and do not have to spend time correcting mistakes or defects. Understand the goals of quality programs and their own role in achieving those goals. Use their specific knowledge of the tasks and processes their teams perform to find unique ways to contribute to productivity. Use as many of these strategies as will work. Encourage and use employees’ ideas for saving money. See Learning Objective 7: Identify ways productivity may be improved. See text pages: 50-51

Improving Productivity (continued) Use budgets Review budget reports Observe employee use of resources Increase output Increase output without boosting costs Ensure the new output goals are reasonable Communicate new goals carefully Electronic monitoring See Learning Objective 7: Identify ways productivity may be improved. See text page: 51

Improving Productivity (continued) Improve methods Reengineering Process control techniques Kaizen Give employees more control over the way they work Design jobs to be interesting Reduce overhead Monitor work areas Eliminate unnecessary paperwork See Learning Objective 7: Identify ways productivity may be improved. See text pages: 51-53

Improving Productivity (continued) Minimize waste Reduce downtime Reduce detour behavior Use e-mail filtering software Set a good example Regulate or level the work flow Ensure adequate planning for the required work Work with others to examine and solve work-flow problems Use temporary employees during peak periods See Learning Objective 7: Identify ways productivity may be improved. See text pages: 53-54

The Costs of Uneven Work Flow See Learning Objective 7: Identify ways productivity may be improved. See text page: 54

Improving Productivity (continued) Install modern equipment Compute the payback period Find the average rate of return (ARR) Payback period = Cost of new equipment Savings per year See Learning Objective 7: Identify ways productivity may be improved. See text page: 55 Average rate of return = Average annual earnings or savings Amount invested (cost)

Improving Productivity (continued) Train and motivate employees Minimize tardiness, absenteeism, and turnover Employees tend to arrive late or not at all if they dislike their jobs or find them boring Absenteeism may be the first step to leaving the company High turnover is expensive, because the organization must recruit and train new employees See Learning Objective 7: Identify ways productivity may be improved. See text pages: 55-56

Employee Fears About Productivity Improvement Many employees believe that cost reductions can lead to less overtime pay, more difficult work, and even layoffs Supervisors must respond to employee fears Be prepared with information Present the information to the employees Allow employees to ask questions See Learning Objective 8: Explain why employees have fears about productivity improvement and how supervisors can address those fears. See text page: 57

Summary Poor-quality work gives an organization a negative image, which drives away customers and makes it harder to recruit superior employees and borrow money. Product quality control focuses on ways to improve the product. Process control focuses on how to do things in a way that results in higher quality. Techniques for quality control: Statistical quality control Zero-defects approach Employee involvement teams Six Sigma Total quality management See text pages: 58-59

Summary (continued) Supervisors and other managers should set, communicate, and enforce standards for quality control. Supervisors must identify constraints on productivity. Productivity is measured by dividing the amount of outputs by the amount of inputs. Two ways to improve productivity are to control quality and control costs. Supervisors should address employee concerns about productivity improvement. See text pages: 58-59