2. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 1 Chapter 3 Philosophies and Frameworks

3. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 2 Leaders in the Quality Revolution  W. Edwards Deming  Joseph M. Juran  Philip B. Crosby  Armand V. Feigenbaum  Kaoru Ishikawa  Genichi Taguchi

4. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 3 Who’s Who? a b c Deming ____ Juran ____ Crosby ____

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 Key Idea 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.

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  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

9. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 8 Key Idea The aim of any system should be for all stakeholders—stockholders, employees, customers, community, and the environment—to benefit over the long term.

10. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 9 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

11. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 10 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

12. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 11 Psychology  People are motivated intrinsically and extrinsically; intrinsic motivation is the most powerful  Fear is demotivating  Managers should develop pride and joy in work

13. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 12 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.

14. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 13 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

15. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 14 Juran’s Quality Trilogy  Quality planning  Quality control  Quality improvement www.juran.com

16. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 15 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.”

17. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 16 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.”

18. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 17 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

19. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 18 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

20. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 19 Kaoru Ishikawa  Instrumental in developing Japanese quality strategy  Influenced participative approaches involving all workers  Advocated the use of simple visual tools and statistical techniques

21. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 20 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

22. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 21 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

23. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 22 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

24. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 23 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

25. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 24 Key Idea The Baldrige criteria define both an integrated infrastructure and a set of fundamental practices for a high- performance management system.

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

27. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 26 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

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

29. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 28 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

30. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 29 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

31. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 30 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

32. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 31 Other Quality Awards  European Quality Award  Canadian Awards for Business Excellence  Australian Business Excellence Award  Chinese National Quality Award (New)

33. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 32 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.

34. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 33 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.

35. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 34 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

36. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 35 Structure of ISO 9000 Standards  21 elements organized into four major sections:  Management Responsibility  Resource Management  Product Realization  Measurement, Analysis, and Improvement

37. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 36 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

38. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 37 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.

39. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 38 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

40. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 39 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.

41. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 40 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

42. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 41 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.

43. MANAGING FOR QUALITY AND PERFORMANCE EXCELLENCE, 7e, © 2008 Thomson Higher Education Publishing 42 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.