Tqm: Evolution, Scope and Strategic Significance for Management Development

Tqm: Evolution, Scope and Strategic Significance for Management Development

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TQM: Evolution, Scope and Strategic Significance for Management Development R. A. DiPietro Montclair State University School of Business, Upper Montclair, New Jersey, USA The Evolution of Total Quality Management Any attempt at understanding TQM and applying it meaningfully in building a healthy market-driven organization requires an awareness of its evolution as an interdisciplinary model for managing organizations.

For the uninitiated and, to a lesser extent, those reasonably familiar with it, the semantic jungle of acronyms developed thus far can be so mindboggling as to inhibit successful utilization of what many view as the appropriate paradigm for the twenty-first century. From its earliest roots, developed by Walter Shewhart at Bell Laboratories in the early 1930s, through its application in 1941 at the US War Department by W.Edwards Deming (the author’s former Professor), on to its introduction to the Japanese in the 1950s by Deming and Joseph Juran (both proteges of Shewhart) and its finest applications by Dr Genichi Taguchi in the 1960s and 1970s, the movement has had its foundation firmly planted in the disciplines of statistics and operations research. Statistical quality control (SQC), a method of analysing deviations in manufactured materials, parts and products, soon expanded its scope to statistical process control (SPC), the analysis of deviations in production processes during manufacturing.This activity led to acceptable quality level (AQL) analysis which dictates the minimum number of parts that must comply with quality standards expressed as a percentage. These contributions led to the need for a larger frame of reference if sustainable competitive advantage was to be achieved through continuous improvement process (CIP), which searches for ever higher levels of quality by isolating sources of defects with the ultimate aim of zero defects. The Japanese call it Kaizen.

If this was to be more than an asymptotic exercise, the firm necessarily had to focus upstream in the production process inside as well as outside of the organization. The result was robust design, using Taguchi’s methods. Here, a discipline evolved for making designs “production proof” by building in tolerances for manufacturing variables that are known to be unavoidable. Taguchi’s statistical methods enhanced control charts through statistical plotting to help detect “process drift” or deviation, before it generates defects.

These charts help to spot inherent variations in manufacturing processes that designers must account for in achieving robust design. Evolution, Scope and Significance 11 Journal of Management Development, Vol. 12 No.

7, 1993, pp. 11-18, © MCB University Press, 0262-1711 Journal of Management Development 12,7 12 This climate of quality enhancement led to the realization that design and production had to work more closely on a continuous basis.Whether referred to as “Simultaneous” or “Parallel Engineering”, “Early manufacturing Involvement” or Ford Motors’ “Team Taurus”, successful producers of quality products and services began integrating suppliers along with wholesalers, retailers and “lead-user” customers downstream, at the earliest stages in the new product development process.

This integrated pull engineering helped make possible just-in-time inventory management, where suppliers deliver materials and parts at the moment a factory needs them, and thus eliminate costly inventories.From Statistics and Operations Research towards Accounting Marketing and Management Much has been written about the value

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of focusing on quality improvement in products and services as a means of maximizing bottom line productivity. Traditional wisdom has dictated that with higher quality comes higher cost and the price of the product (or service) consequently, escalates.

European quality, with its roots in craftsmanship and the guild system, prescribed “Quality at any Cost”.The Japanese, however, have demonstrated that with a focus on quality that is customer driven — quality functional deployment (QFD), a system that concentrates on quality improvements that are perceived by the customer as significant in selecting a vendor, renders the cost-benefit debate no longer a moot point. More dramatically, quality enhancement, when approached correctly, reduces real total cost. A widely accepted definition of quality is, quite simply, “an absence of variation from customer expectations”.In today’s more competitive value-driven environment, focus on the price-quality equation necessitates a move away from a “quality at any cost” mentality.

The traditional American approach to quality control has been inspection-oriented. According to David Kearns, former CEO of Xerox Corporation, drawing on research commissioned by the Business Round Table, of which he was a member, as much as one-third of the American workforce has been preoccupied with inspecting and correcting the work of the other two-thirds. John C.

Day, DuPont’s manager of world class manufacturing, states that in an inspection-oriented plant, more than half of all workers are somehow involved in detecting and reworking rejects. The total investment in this process can account for 20 to 35 per cent of production costs, and in extreme cases 50 per cent[1]. These observable realities in no way assist in estimating the hidden costs associated with lost customers due to the inconvenience, irritation and frustration they traditionally experience in warranty and service activities.

Customer satisfaction researchers have estimated that the costs of attracting new customers, runs to three to five times more than keeping existing ones. A satisfied customer tells up to 12 other people about a company and its product/service mix; a dissatisfied customer, as many as 25 friends and associates. In today’s more cynical time-conscious environment where advertising is ignored or technologically “zipped and zapped” away (through remote ontrol and fast-forward VCR tape recorders), the most effective forces in moving a customer through the adoption process are in order of importance: personal experience, recommendations from a “trusted friend” and documented research findings from government, university or other respected sources. These factors served to energize the evolution towards focusing on quality and service as the primary vehicle in achieving sustainable competitive advantage, which added more than new sentiments and terminology to the arena.

All functional areas of industry, as well as the academic disciplines associated with them, were drawn into the process.The need to concentrate on what we measure and how we measure it, finally, are bringing marketing, management information systems and accounting into an effective troika, so necessary in complementing R and operations management. Strategic planning and management training and development, follow as the centrepiece in the evolution of TQM. With respect to cost accounting, the discipline traditionally focused on direct labour cost, which throughout the past 75 years accounted for 65

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to 70 per cent of total production costs (today direct labour costs fluctuate from 10 to 20 per cent and soon may be 3 to 5 per cent) [2].Conventional cost management systems attached no value to such things as re-working defective products or bottlenecks that impede the order processing system and its strategic significance to cycle time (the time from order input to customer delivery)[3,4,5]. This transition in how goods and services are produced and delivered has profoundly affected the manner in which stockholders evaluate profit making firms and stakeholders evaluate non-profit social systems, from hospitals and universities to federal state and local governments.

As noted above, this customer-driven focus has led to marketing’s emphasis on total customer service (TCS) as a more relevant or at least more congruent acronym, with bottom line profitability, than TQM. This semantic conflict adds little assistance to the educator or the practitioner’s ability to influence behaviour in students or employees in building healthier, more efficient, as well as effective organizational systems. Comparisons of TQM with Traditional Schools of Management Thought On the most pessimistic side, some hardened cynics, i. e. cademics and practitioners (who have had bad experiences with false starts or poorlyimplemented TQM programmes) view the model as just another ingredient in the “alphabet soup” of what is in and what is out in management thought. At the other end of the spectrum, TQM conceivably may be viewed as a “grand unification theory” and an appropriate paradigm in forging the healthy marketdriven organization of the twenty-first century. As TQM emerged from its roots in statistical quality and process control, its development in the Japanese management system displayed many of the characteristics found in classic scientific management.

The Japanese meticulous attention to each minute activity and process, with an eye to continuous improvement (Kaizen), is reminiscent of the detailed micro analyses of Frederick W. Taylor and Frank and Lillian Gilbraith in their quest for efficiency through scientific observation and methodology. Evolution, Scope and Significance 13 Journal of Management Development 12,7 14 Manifestations of the neo-classical human relations model surfaced quickly out of necessity for the Japanese.

Lacking our powerful collegiate business educational system, coupled with the economic clout of the American corporate establishment, they did not have armies of qualified industrial engineers and MBAs in production management and quality control. The Japanese were thus forced to enlarge and enrich the role played by workers and operators. They eagerly grasped classic human relations techniques such as job rotation, enlargement and enrichment, expanding the range and depth in job descriptions with a vigour unseen in American management systems.Quality circles eschewed by their American inventors, earned the status of “paean” in William Ouchi’s Theory Z — the Japanese integration of classic and human relations schools[6]. The world has seen more change and information in the past 45 years than all of prior recorded history. Today, a biologic/organic model would appear more relevant than the mechanistic bureaucratic structure of earlier more stable, predictive environments in which the classical paradigm evolved. With a clearer understanding of what TQM stresses, the systems school of management seems an appropriate parallel.

A pivotal differentiator between TQM and

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the classical mode is its focus on processes as opposed to the more rigid “functional focus” espoused by the practitioner/theoretician, Alfred Sloan. If we can safely characterize TQM’s driving force, it is harmonization — i. e. emphasis on linkages, interfaces, tangency points and, more specifically, Rensis Likert’s liaison or linking pin theory. In today’s post-industrial era, information and its effective communication are the clarion call of the “intelligent” (alternatively of “competitive”) corporation.This harmonization, nurtured and encouraged through a corporate culture characterized by trust, built on candour and forthrightness, is the essence of organizational health.

This climate makes, more probable, effective strategic formulation and implementation through the cultivation of external, as well as internal, sub-system cohesion, so vital to competitiveness in any industrial dynamic. The modem situational or contingency model has earned deserved credence as an appropriate descriptor given the degree of change and uncertainty we are faced with today.Here again, parallels with TQM are readily apparent.

Understandably, frustration is often manifest by students and practitioners alike, with respect to a model of management thought built on — “it depends”. However, the subtleties and nuances in an analyst’s approach to any complex multi-faceted phenomenon such as organizational competitiveness, is certainly applicable to understanding and applying TQM appropriately. To reiterate, attempts to apply quality improvement across the board, or in a mass production sense, have often been found to have little correlation with bottom line profitability[7].Only when efforts to improve quality from the customer’s perspective are in place does the Japanese concept of quality functional development defend TQM as the driver of long-term profit maximization. This customer-driven focus to quality centres on the evolution of each market in terms of the core product (primary benefits), the tangible product (features and their advantages) and the augmented product (after-sales service, relationship marketing and imagery), i. e. turning employees into associates, and thereby transforming customers into clients.

In this process, the more competitive companies design into the product only those features that are clearly important advantages to the customer, and promote them effectively as benefits (FAB Analysis). TQM’s Strategic Implications for Academic and Corporate Training and Development: Past, Present and Future From a chronological perspective, this section must necessarily begin with initiatives forged by many of the finest world class companies, several of which are respected by small and mid-sized social systems.Many giant American corporations were smug, arrogant and elitist with respect to their strategic plans (both tactical and operational) in the decades immediately following the post Second World War era.

Similarly, during the last two decades most business, and many engineering schools, have remained self-satisfied with their market share of the educational training and development pie. Driven by lack of competitiveness with respect o core competence and process capability development, the more entrepreneurial American companies have recognized the gap which has existed between academic curricula and their relevancy to practitioners. Harvard professor and present Secretary of Labour, Robert Reich, has made an impassioned plea to corporations to view their human resource as the strategic competitive resource it is, in a global village, where dollars,

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resources and technology cross economic borders with all the alacrity implicit in a post-industrial era.Most companies with a modicum of vision realize that they — not governmental or academic institutions — must play a primary role in training and developing their workforce, at least in the short run.

According to the National Association of Manufacturers, four out of ten of their members report employee deficiencies in mathematics, reading and technical skills, which in turn bodes serious problems in attempts at upgrading factories and increasing productivity. Bureau of Labour Statistics figures demonstrate that nearly two-thirds of the workforce in the year 2005 are already on the job.The American Society for Training and Development indicates that 90 per cent of annual training dollars (which totals $30 billion) is spent by a meagre 0. 5 per cent (only 15,000 employers) who still use antiquated methods of training. Additionally, most of the educational budgets are shifted to manager and executives on the developmental track, short changing cross-functional, job skills-related training. Historically, in good times, financially successful corporate giants mass produced and mass administered training and development to the newly indoctrinated junior executive class.

In cyclical fashion, they would then cut back their human-resource development efforts “across the board” in recessionary periods. Today’s more effective corporate training programmes (as most small and mid-sized company training budgets mandate) deliver instruction only when needed, utilizing classroom, satellite TV and individualized computer program devices. The essential realism inherent in these industrial, corporate and job specific characterizations, make the more traditional and technologically currentEvolution, Scope and Significance 15 Journal of Management Development 12,7 16 academic human resource training tools infinitely more effective. The training is by nature, interactive and succinct, melding group projects, “hands-on” case, analyses and simulated role playing. Among the finest formal corporate training and development illustrations is Motorola University, an amalgam of laboratories and computer equipped classrooms which present 102,000 days of training to employees, suppliers and customers at its three regional “campuses”.The programme employs no professional educators, relying instead on an assemblage of training and development consultants drawn from the ranks of engineers, scientists and former management practitioners who encourage, guide and coach rather than simply lecture at people. Motorola invests 3.

6 per cent of its payroll on human resource development. This is concisely represented in the sentiments of Bill Wiggenhorn, head of the programme. “When you buy a piece of equipment you set aside a percentage for maintenance, shouldn’t you do the same for people”[8].Moreover, the company estimates that every dollar it invests on training, returns $30 in productivity gains within three years (i. e. present value, one of the more sacrosanct criteria in the capital investment literature).

Over the past six years the company has reduced cost by $3. 3 billion. This reduction has been driven by focusing the attention of employees on simplifying processes and reducing waste through training (rather than the downsizing so apparent in the last decade).One of the most tangible, highly visible symbols an employee can more readily interpret is the corporation’s willingness to invest developmental costs, as a measure of its trust in, and perceived value of, the individual. Most of Motorola’s courses are of

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a technical and specific cross-functional nature, but the philosophic underpinnings of this developmental system recognize the strategic importance of the company’s training in soft skills, as in “co-operation and communication”.

Traditional academic educational experiences have been remiss with respect to collaborative problem-solving and team building exercises, perceiving them in the extenuate as cheating! As posited earlier in this article, “doing the right things right”, in the words of Edwin L. Artzt, Chairman and CEO of Proctor & Gamble, grows out of a process that guides “what is counted and how we count it”. Expressed alternatively, — “In America, what gets measured, recognized and rewarded, gets done”! TQM can only achieve its potential realization if its fundamental assumptions are recognized, measured and rewarded.In the highest preferment, it promises an “intrapreneurial” workforce which culls and manifests the benefits of hugeness without losing the responsive and resilient characteristics of the smaller entrepreneurial systems, so enamoured today.

To effectuate this vision, top management, in close co-ordination with the human-resource management function, must necessarily provide an open, candid environment of trust, crossfunctional skills, training and development (both vertical and horizontal deployment in America’s Baldrige Award terminology), and access to relevant information.The 1990 Total Quality Management Forum, composed of business leaders, academic deans and administrators of top business and engineering schools, heard John Pepper, President of Proctor & Gamble, describe TQM as having created the most lasting cultural change in his company’s approach to business in 27 years. In an April 1991 address to the American Assembly of Collegiate Schools of Business, Dr Robert Kaplan discussed the joint perspectives of business leaders and deans of business and engineering schools.The theme of the address suggested that the key to success in the 1990s and beyond will involve the transition in leadershipfroma controlling to a learning organizational culture, based on a nurturing, coaching leadership style. Paraphrasing Ray Stata, CEO of Analog Devices and founder and Chair of the Centre for Quality Management, he suggests that TQM at its most essential level is a collection of tools and methods that enhance individual and team learning. Thus, it is a means to an end, rather than an end in itself.

Additionally, its most important aspect is excellent diagnostic and measuring systems. Surveying the nation’s top 20 business schools, Kaplan asked for the curricula and, specifically, what degree of coverage, quality received in their courses. Most of the schools include quality in their introductory operations management courses to the extent of a “12 per cent solution”, i. e. in a course that ranges from 15 to 30 classes, somewhere between two and four sessions deal with quality.Averaging across all of the schools surveyed, about 12 per cent of the sessions in an introductory operations management course are devoted to quality. Several schools are making major changes in their offerings, collaborating on occasion with corporate training systems such as Motorola’s.

In addition to the operations management courses, in business school curricula, some initiatives are being taken by marketing faculties who recognize that one of the instrumentalities by which we measurably effectuate the marketing concept, is customer service.A few schools even have marketing and

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operations management’s faculty “team teaching”, as a course. Do business faculties require pain as a pre-condition for change? While their enrolments are still high and alumni grants and tuitions are providing cash flows, storm signals abound. Many companies in addition to Motorola, i. e. Westinghouse, GE and AT, are increasingly choosing to educate their executives internally rather than sending them to MBA programmes or distillates of the same, commonly referred to as Executive MBA programmes under the rubric of “new and improved”.

On another front, European business schools, not burdened by traditional university standards, feel sufficiently confident to market themselves as viable alternatives using more current tools and techniques that have a practitioner focus. In summary, TQM appears to result in lower costs with higher quality products and services, which are more responsive to customer needs. TQM emphasizes continual improvement through understanding and improving systems. This “systems approach” translates into closer ties between suppliers and customers both inside and outside the organization.

TQM integrates everyone in this social system through a process focus, in achieving superior results. Each person is given the opportunity to maximize his or her contribution to business health. Results from TQM applications in some of our most highly visible companies, range from a 50 per cent reduction in time of marketing new Evolution, Scope and Significance 17 Journal of Management Development 12,7 18 products, to a 75 per cent improvement in errors in shipping, to a strident $1.

5 billion savings on scrap and rework over the past five years[9].As with most areas of strategic planning, implementation is all too often the weak link in the process. And so it is, in the attempt to achieve sustainable competitive advantage through quality, service and customer satisfaction. If human resource management, training and development are not utilized as the primary instrument in achieving this goal, corporate culture statements, CEO pontifications and corporate memoranda will ring platitudinous and hollow, as they should. References 1.

Port, 0., “The Quality Imperative”, Business Week, 25 October 1992, pp. 7-16. 2. Drucker, P. F.

“The Emerging Theory of Manufacturing”, Harvard Business Review, Paperback Series No. 90080, 1991, pp. 94-102. 3. Cooper, R.

and Kaplan, R., “Profit Priorities from Activity-based Costing”, Harvard Business Review, May-June 1991, pp. 130-35. 4. Shapiro, B.

, Rangan, V. and Sviokla, J., “Staple Yourself to an Order”, Harvard Busines Review, July-August 1992, pp. 113-122. 5. Kaplan, R.

J. and Norton, D. P.

, “The Balanced Scorecard: Measures that Drive Performance”, Harvard Business Review, January-February 1992, pp. 71-9. 6. Adler, P.

S., “Time & Motion Regained”, Harvard Business Review, January-February 1993, pp. 7-108. 7. Sims, A.

C., “Does the Baldrige Award really Work? “, Harvard Business Review, JanuaryFebruary 1992, pp. 126-47. 8. Henkof, R.

, “Companies that Train the Best”, Fortune, 22 March 1992, pp. 62-74. 9. Total Quality Forum — Chief Executive Officers of American Express, Ford Motor Co.

, Motorola Inc., Xerox Corp., The P Co. and IBM — “An Open Letter: TQM on the Campus”, Harvard Business Review, November-December 1991, pp.

94-5. F u r t h e r Reading Chase, R. B. and Garvin, D. A.

, “The Service Factory”, Harvard Business Review, July-August 1989, pp. 30-8.Farnham, A., “The Trust Gap”, Fortune, 4 December 1989, pp. 56-74. Garvin, D.

A., “How the Baldrige Award Really Works”, Harvard Business Review, NovemberDecember 1991, pp. 80-93.

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McKenna, R., “Marketing is Everything”, Harvard Business Review, January-February 1991, pp. 65-79.

Nevins, M. T., Summe, G. L.

and Uttal, B., “Commercializing Technology: What the Best Companies Do”, Harvard Business Review, May-June 1990, pp. 154-63.

Prahalad, C. K. and Hamel, G., “The Core Competence of the Corporation”, Harvard Business Review, May-June 1990, pp. 79-91.

Schneider, A. J. “TQM and the Financial Function”, Journal of Business Strategy, SeptemberOctober 1992, pp. 21-5. Stalk, G., Evans, P.

and Shulman, L. E.,”Competing on Capabilities: The New Rules of Corporate Strategy”, Harvard Business Review, March-April 1992, pp. 57-69. Stalk, G., “Time, the Next Source of Competitive Advantage”, Harvard Business Review, JulyAugust 1989, pp.

19-29. Stewart, T. A.

, “Brace for Japan’s Hot New Strategy”, Fortune, 21 September 1992, pp. 62-74. Taguchi, G. and Clausing, D., “Robust Quality”, Harvard Business Review, January-February 1990, pp.

65-75.

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