2. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 1 Philosophies and Frameworks

3. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 2 Chapter objectives  W. Edwards Deming – understand his 14 points and Theory of Profound Knowledge  Joseph M. Juran and Philip B. Crosby – brief comparison with Deming  Baldrige Awards – the basics  ISO 9000:2000 – value of certification  Six Sigma – introduction to concept

4. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 3 Deming 1900-1993 Visited Japan after WWII to develop census – discovered that top management there wanted to listen

5. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 4 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

6. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 5 Sundarm-Clayton example  First Indian company to win Deming Prize for Overseas Companies  Discovered 90% market share is no guarantee against competition  Defensive strategies inferior to long- range focus on excellence

7. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 6 Deming’s System of Profound Knowledge  Appreciation for a system  Understanding variation  Theory of knowledge  Psychology

8. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 7 Systems  Impact of what you do elsewhere in the system  Across functional boundaries  Example – receiving poor quality metal causes machine jams and wasted labor time  Management must optimize the system as a whole

9. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 8 Variation  Variation results in defective products and defective process  But modern manufacturing has greatly reduced variation due to machines – problem now is human  The language of statistics must become what everyone in the organization uses to communicate

10. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 9 Theory of Knowledge  There is no knowledge without interpretation – note current nonsense surrounding approval of Justice Sotomaier (spelling?) – no law professors were interviewed – why?  Cannot use statistical equations without understanding – what in the process must we measure? Outliers – when has the mean really changed?

11. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 10 Psychology  People learn in different ways and at different speeds (applies to us!)  Pay is not a motivator – when joy in work becomes secondary to getting good ratings, we are in serious trouble.

12. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 11 Deming’s 14 Points (Abridged) (1 of 2) 1. Create a vision 2. Learn the new philosophy. 3. Understand inspection. 4. Stop making decisions purely on cost 5. Improve constantly. 6. Institute training. 7. Institute leadership. 8. Drive out fear.

13. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 12 Deming’s 14 Points (2 of 2) 9. Optimize efforts of teams. 10. Eliminate exhortations. 11. Eliminate numerical quotas and M.B.O. 12. Remove barriers to pride in workmanship. 13. Encourage education and self-improvement. 14. Take action. (the 15 th point – retrain) www.deming.org

14. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 13 Deming’s 14 Points (Details) Create a vision Business should not exist just to make money. Top management must show commitment – this is where effective leadership begins

15. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 14 Deming’s 14 Points (details) ) Learn the new philosophy. Quota-driven production will not work in today’s global business environment.

16. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 15 Deming’s 14 Points (details) Understand inspection. Statistical tools can be used to control processes and eliminate mass inspection.

17. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 16 Deming’s 14 Points (details) Stop making decisions purely on cost Poor quality materials cause problems both in the process and with product warranty “common sense” approach is to switch suppliers every time someone offers a cheaper deal – this increases variation and ends up costing money Supply chain management today – strong partnerships.

18. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 17 Improve constantly Understand customer needs – continual market surveys Train employees to use tools for improvement effectively Deming’s 14 points (details)

19. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 18 Deming’s 14 Points (details) Institute training – example – Honda of America in Marysville Ohio – all employees start out on the production floor, regardless of classification.

20. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 19 Deming’s 14 Points (details) Institute leadership. In many companies supervisors know little about the job of the worker Good supervisors are coaches

21. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 20 Deming’s 14 Points (details) Drive out fear. Fear of failure Fear of relinquishing control (management) Fear of change Workers afraid to report quality problems Note applicability to teaching

22. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 21 Deming’s 14 Points Optimize efforts of teams. Biggest barrier in the U.S. to team efforts is distrust between unions and management.

23. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 22 Deming’s 14 Points Eliminate exhortations. Variation stemming from design in the system is fault of management, not workers Often worker efforts to fix the problem makes things even worse. Statistical thinking is required.

24. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 23 Deming’s 14 Points ) Eliminate numerical quotas and M.B.O. Management goals, e.g. increase sales by 5% next year, have no meaning without a method to achieve them, Management must focus on continuous improvement, not short-term goals. This is radical – MBO was thought to be sophisticated SMART goals must be modified by these observations wwwdig.org

25. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 24 Juran’s Quality Trilogy  Quality planning  Quality control  Quality improvement www.juran.com

26. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 25 Key Idea 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.”

27. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 26 Phillip B. Crosby Quality is free... “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.”

28. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 27 Philip B. Crosby 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

29. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 28 A.V. Feigenbaum  Three Steps to Quality  Quality Leadership, with a strong focus on planning  Modern Quality Technology, involving the entire work force  Organizational Commitment, supported by continuous training and motivation

30. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 29 Kaoru Ishikawa  Instrumental in developing Japanese quality strategy  Influenced participative approaches involving all workers  Advocated the use of simple visual tools and statistical techniques

31. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 30 Genichi Taguchi  Pioneered a new perspective on quality based on the economic value of being on target and reducing variation and dispelling the traditional view of conformance to specifications: No LossLoss Tolerance 0.5000.5200.480

32. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 31 Malcolm Baldrige National Quality Award  Help improve quality in U.S. companies  Recognize achievements of excellent firms and provide examples to others  Establish criteria for evaluating quality efforts  Provide guidance for other American companies Malcolm Baldrige, former U.S. Secretary of Commerce

33. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 32 Criteria for Performance Excellence  Leadership  Strategic Planning  Customer and Market Focus  Measurement, Analysis, and Knowledge Management  Human Resource Focus  Process Management  Business Results Baldrige Award trophy

34. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 33 The Baldrige Framework – A Systems Perspective 4 Measurement, Analysis, and Knowledge Management 5 Human Resource Focus 3 Customer & Market Focus 2 Strategic Planning 1 Leadership 6 Process Management Organizational Profile: Environment, Relationships, and Challenges 7 Business Results

35. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 34 Key Idea The Baldrige criteria define both an integrated infrastructure and a set of fundamental practices for a high- performance management system.

36. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 35 Criteria Evolution (1 of 2)  From quality assurance and strategic quality planning to a focus on process management and overall strategic planning  From a focus on current customers to a focus on current and future customers and markets  From human resource utilization to human resource development and management  From supplier quality to supplier partnerships

37. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 36 Criteria Evolution (2 of 2)  From individual quality improvement activities to cycles of evaluation and improvement in all key areas  From data analysis of quality efforts to an aggregate, integrated organizational level review of key company data  From results that focus on limited financial performance to a focus on a composite of business results, including customer satisfaction and financial, product, service, and strategic performance

38. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 37 Key Idea Approaches that organizations use to address the Baldrige criteria requirements need not be formal or complex, and can easily be implemented by small businesses.

39. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 38 Receive Applications Judges Select for Consensus Review? Judges Select for Site Visit Review? Stage 1 Independent Review Stage 2 Consensus Review Stage 3 Site Visit Review Stage 4 Judges Recommend Award Recipients to NIST Director/DOC Feedback report to applicant Feedback report to applicant Feedback report to applicant No Baldrige Award Evaluation Process

40. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 39 Self Assessment A primary goal of the Baldrige program is to encourage many organizations to improve on their own by equipping them with a standard template for measuring their performance and their progress toward performance excellence. Boeing Airlift & Tanker Programs – 1998 recipient

41. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 40 Deming Prize  Instituted 1951 by Union of Japanese Scientists and Engineers (JUSE)  Several categories including prizes for individuals, factories, small companies, and Deming application prize  American company winners include Florida Power & Light and AT&T Power Systems Division

42. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 41 Other Quality Awards  European Quality Award  Canadian Awards for Business Excellence  Australian Business Excellence Award  Chinese National Quality Award (New)

43. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 42 ISO 9000:2000  Quality system standards adopted by International Organization for Standardization in 1987; revised in 1994 and 2000  Technical specifications and criteria to be used as rules, guidelines, or definitions of characteristics to ensure that materials, products, processes, and services are fit for their purpose.

44. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 43 Key Idea ISO 9000 defines quality system standards, based on the premise that certain generic characteristics of management practices can be standardized, and that a well-designed, well-implemented, and carefully managed quality system provides confidence that the out-puts will meet customer expectations and requirements.

45. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 44 Objectives of ISO Standards  Achieve, maintain, and continuously improve product quality  Improve quality of operations to continually meet customers’ and stakeholders’ needs  Provide confidence to internal management and other employees that quality system requirements are being fulfilled  Provide confidence to customers and other stakeholders that quality requirements are being achieved

46. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 45 Structure of ISO 9000 Standards  21 elements organized into four major sections:  Management Responsibility  Resource Management  Product Realization  Measurement, Analysis, and Improvement

47. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 46 ISO 9000:2000 Quality Management Principles 1. Customer Focus 2. Leadership 3. Involvement of People 4. Process Approach 5. System Approach to Management 6. Continual Improvement 7. Factual Approach to Decision Making 8. Mutually Beneficial Supplier Relationships

48. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 47 Key Idea ISO 9000 provides a set of good basic practices for initiating a quality system, and is an excellent starting point for companies with no formal quality assurance program.

49. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 48 Six Sigma  Based on a statistical measure that equates to 3.4 or fewer errors or defects per million opportunities  Pioneered by Motorola in the mid-1980s and popularized by the success of General Electric

50. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 49 Key Idea Six Sigma can be described as a business improvement approach that seeks to find and eliminate causes of defects and errors in manufacturing and service processes by focusing on outputs that are critical to customers and a clear financial return for the organization.

51. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 50 Key Concepts of Six Sigma (1 of 2)  Think in terms of key business processes, customer requirements, and overall strategic objectives.  Focus on corporate sponsors responsible for championing projects, support team activities, help to overcome resistance to change, and obtaining resources.  Emphasize such quantifiable measures as defects per million opportunities (dpmo) that can be applied to all parts of an organization

52. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 51 Key Concepts of Six Sigma (2 of 2)  Ensure that appropriate metrics are identified early and focus on business results, thereby providing incentives and accountability.  Provide extensive training followed by project team deployment  Create highly qualified process improvement experts (“green belts,” “black belts,” and “master black belts”) who can apply improvement tools and lead teams.  Set stretch objectives for improvement.

53. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 52 Key Idea Although different, Baldrige and Six Sigma are highly compatible and can each have a place in the management system of a successful organization.