Ensuring Quality and Productivity If you forget the customer, nothing much else matters. —Anne Mulcahy, CEO, Xerox Corporation Chapter 2 Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Learning Objectives 1.Describe the consequences suffered by organizations as a result of poor-quality work. 2.Compare product quality control and process control. 3.Summarize techniques for quality control. 4.Identify ways organizations measure their success in continuous quality improvement. 5.Identify constraints on productivity. 2-2

Learning Objectives (cont.) 6.Describe how productivity and productivity improvements are measured. 7.Identify ways productivity may be improved. 8.Explain why employees have fears about productivity improvement and how supervisors can address those fears. 2-3

Ensuring High Quality and Productivity Productivity –The amount of results (output) an organization gets for a given amount of inputs 2-4

Dimensions of Quality 2-5

Consequences of Poor Quality Limited resources –When the quality of an organization’s goods or services is poor, the whole organization suffers. The organization has more difficulty attracting other important resources. 2-6

Consequences of Poor Quality 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. 2-7

Types of Quality Control Quality control –An organization’s efforts to prevent or correct defects in its goods or services or to improve them in some way 2-8

Methods for Improving Quality 2-9

Chart Used for Statistical Process Control 2-10

Steps for an Employee Improvement Team 1. Identify quality problems related to the employees’ areas of responsibility. 2. Select the problems to focus on first. 3. Analyze the problem to identify its causes. 4. Identify possible solutions and select one to recommend to management. 2-11

FIGURE 2.5 Characteristics of Successful Employee Involvement Teams 2-12

Total Quality Management Philip Crosby believed an organization should be “injected” with Integrity Systems that measure quality Communications about progress and achievements Operations that educate suppliers and employees in delivering quality and Policies supporting the organization’s commitment to quality. 2-13

Total Quality Management Edward Deming –to achieve product quality, the organization must continually improve not only the product’s design but also the process of producing it. Joseph Juran –management should seek to maintain and improve quality through efforts on two levels: the organization as a whole and individual departments in the organization. 2-14

Quality Standards Malcolm Baldrige National Quality Award –an annual award administered by the U.S. Commerce Department’s National Institute of Standards and Technology (NIST) and given to the organization that shows the highest quality performance as measured by seven categories 2-15

Quality Standards 1. Leadership 2. Strategic planning 3. Customer and market focus 4. Measurement, analysis, and knowledge management 5. Human resource focus 6. Process management 7. Results 2-16

Quality Standards ISO 9000 –a series of standards adopted by the International Organization for Standardization to spell out acceptable criteria for quality systems Benchmarking –Identifying the top performer of a process, then learning and carrying out the top performer’s practices 2-17

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Constraints on Productivity Management limitations Employee attitudes and skills Government regulations Union rules 2-19

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. 2-20

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. Use their specific knowledge of the tasks and processes their teams perform to find unique ways to contribute to productivity. Encourage and use employees’ ideas for saving money. 2-21

Improving Productivity 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 2-22

Improving Productivity Improve methods –Reengineering –Process control techniques –Give employees more control over the way they work –Design jobs to be interesting Reduce overhead –Monitor work areas –Eliminate unnecessary paperwork 2-23

Improving Productivity Minimize waste –Reduce downtime –Reduce detour behavior –Use filtering software –Set a good example 2-24

Improving Productivity 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 2-25

Improving Productivity Minimize waste –Reduce downtime –Reduce detour behavior –Use 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 2-26

FIGURE 2.11 The Costs of Uneven Work Flow 2-27

Improving Productivity Install modern equipment –Compute the payback period –Find the average rate of return (ARR) Payback period = Cost of new equipment Savings per year Average rate of return = Average annual earnings or savings Amount invested (cost) 2-28

Improving Productivity 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 2-29

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 2-30