Introduction to Quality and Performance Excellence Chapter 1 Introduction to Quality and Performance Excellence

Defining Quality Perfection Fast delivery Providing a good, usable product Consistency Eliminating waste Doing it right the first time Delighting or pleasing customers Total customer service and satisfaction Compliance with policies and procedures

Formal Definitions of Quality The totality of features and characteristics of a product or service that bears on its ability to satisfy given needs – American Society for Quality Fitness for use Meeting or exceeding customer expectations Conformance to specifications

Performance Excellence An integrated approach to organizational performance management that results in delivery of ever-improving value to customers and stakeholders, contributing to organizational sustainability, improvement of overall organizational effectiveness and capabilities, and organizational and personal learning.

Importance of Quality THE buzzword among business in the 1980s and 1990s Quality problems still abound in many industries, such as automotive Consumer expectations are high “We’ve made dependence on the quality of our technology a part of life” – Joseph Juran

History of Quality Assurance (1 of 3) Skilled craftsmanship during Middle Ages Industrial Revolution: rise of inspection and separate quality departments Early 20th Century: statistical methods at Bell System Quality control during World War II Post-war Japan: evolution of quality management

History of Quality Assurance (2 of 3) Quality awareness in U.S. manufacturing industry during 1980s: from “Little Q” to “Big Q” - Total Quality Management Malcolm Baldrige National Quality Award (1987) Disappointments and criticism

History of Quality Assurance (3 of 3) Emergence of quality management in service industries, government, health care, and education Evolution of Six Sigma Current and future challenge: maintain commitment to performance excellence

Quality Dimensions in Manufacturing Performance – primary operating characteristics Features – “bells and whistles” Reliability – probability of operating for specific time and conditions of use Conformance – degree to which characteristics match standards Durability - amount of use before deterioration or replacement Serviceability – speed, courtesy, and competence of repair Aesthetics – look, feel, sound, taste, smell

Quality Dimensions in Services Time – how much time must a customer wait? Timeliness – will a service be performed when promised? Completeness – Are all items in the order included? Courtesy – do frontline employees greet each customer cheerfully? Consistency – are services delivered in the same fashion for every customer, and every time for the same customer? Accessibility and convenience – is the service easy to obtain?

Differences Between Manufacturing and Services Customer needs and performance standards are often difficult to identify and measure The production of services typically requires a higher degree of customization The output of many service systems is intangible Services are produced and consumed simultaneously Customers often are involved in the service process and present while it is being performed Services are generally labor intensive Many service organizations must handle very large numbers of customer transactions.

New Frontiers of Quality Health care Education Government Not-for-Profits

Deming Philosophy The Deming philosophy focuses on continual improvements in product and service quality by reducing uncertainty and variability in design, manufacturing, and service processes, driven by the leadership of top management.

Deming Chain Reaction Improve quality Costs decrease Productivity improves Increase market share with better quality and lower prices Stay in business Provide jobs and more jobs

Deming’s System of Profound Knowledge Appreciation for a system Understanding variation Theory of knowledge Psychology

Systems Most organizational processes are cross-functional Parts of a system must work together Every system must have a purpose Management must optimize the system as a whole

Variation Many sources of uncontrollable variation exist in any process Excessive variation results in product failures, unhappy customers, and unnecessary costs Statistical methods can be used to identify and quantify variation to help understand it and lead to improvements

Theory of Knowledge Knowledge is not possible without theory Experience alone does not establish a theory, it only describes Theory shows cause-and-effect relationships that can be used for prediction

Psychology People are motivated intrinsically and extrinsically; intrinsic motivation is the most powerful Fear is demotivating Managers should develop pride and joy in work

Deming’s 14 Points (Abridged) (1 of 2) 1. Create and publish a company mission statement and commit to it. 2. Learn the new philosophy. 3. Understand the purpose of inspection. 4. End business practices driven by price alone. 5. Constantly improve system of production and service. 6. Institute training. 7. Teach and institute leadership. 8. Drive out fear and create trust.

Deming’s 14 Points (2 of 2) 9. Optimize team and individual efforts. 10. Eliminate exhortations for work force. 11. Eliminate numerical quotas and M.B.O. Focus on improvement. 12. Remove barriers that rob people of pride of workmanship. 13. Encourage education and self-improvement. 14. Take action to accomplish the transformation. www.deming.org

Juran Philosophy Juran proposed a simple definition of quality: “fitness for use.” This definition of quality suggests that it should be viewed from both external and internal perspectives; that is, quality is related to “(1) product performance that results in customer satisfaction; (2) freedom from product deficiencies, which avoids customer dissatisfaction.”

Juran’s Quality Trilogy Quality planning Quality control Quality improvement www.juran.com

Quality is free . . . Crosby Philosophy “Quality is free. It’s not a gift, but it is free. What costs money are the unquality things -- all the actions that involve not doing jobs right the first time.”

Crosby’s Absolutes of Quality Management Quality means conformance to requirements Problems are functional in nature There is no optimum level of defects Cost of quality is the only useful measurement Zero defects is the only performance standard www.philipcrosby.com

Principles of Total Quality Customer and stakeholder focus Process orientation Continuous improvement and learning Employee engagement and teamwork Management by fact Visionary leadership and a strategic orientation

Customer and Stakeholder Focus Customer is principal judge of quality Organizations must first understand customers’ needs and expectations in order to meet and exceed them Organizations must build relationships with customers Customers are internal and external

Process Orientation A process is a sequence of activities that is intended to achieve some result

Cross-functional Perspective

Continuous Improvement and Learning Incremental and breakthrough improvement Products and services Work processes Flexibility, responsiveness, and cycle time Learning – why changes are successful through feedback between practices and results

Learning Cycle Planning Execution of plans Assessment of progress Revision of plans based upon assessment findings

Employee Engagement and Teamwork Engagement – workers have a strong emotional bond to their organization, are actively involved in and committed to their work, feel that their jobs are important, know that their opinions and ideas have value, and often go beyond their immediate responsibilities for the good of the organization Teamwork must exist vertically, horizontally, and interorganizationally

Management by Fact Organizations need good performance measures to drive strategies and change, manage resources, and continuously improve Data and information support analysis at all levels Typical measures: customer, product and service, market, competitive comparisons, supplier, employee, cost and financial

Visionary Leadership and a Strategic Orientation Leadership is the responsibility of top management Senior leaders should be role models for the entire organization Leaders must make long-term commitments to key stakeholders Quality should drive strategic plans

TQ and Agency Theory Agency relationship: a concept in which one party (the principal) engages another party (the agent) to perform work Key assumption: individuals in agency relationships are utility maximizers and will always take actions to enhance their self-interests.

Contrast With TQ (1 OF 2) TQ views the management system as one based on social and human values, whereas agency theory is based on an economic perspective that removes people from the equation. Agency theory propounds the belief that people are self-interested and opportunistic and that their rights are conditional and proportional to the value they add to the organization. TQ suggests that people are also motivated by interests other than self, and that people have an innate right to be respected.

Contrast With TQ (2 OF 2) Agency theory assumes an inherent conflict of goals between agents and principals, and that agent goals are aligned with principal goals through formal contracts. In TQ, everyone in the organization shares common goals and a continuous improvement philosophy, and goals are aligned through adoption of TQ practices and culture. TQ takes a long-term perspective based on continuous improvement, whereas agency theory focuses on short-term achievement of the contract between the principal and agent. TQ leaders provide a quality vision and play a strategic role in the organization; leaders in agency theory develop control mechanisms and engage in monitoring.

TQ and Organizational Models