Total quality of management 9788131700228, 9781282768789, 1282768786, 9788131761564, 8131761568

Table of contents :
Cover......Page 1
Total Quality of Management......Page 4
Copyright......Page 5
Contents......Page 6
Preface......Page 8
The Need For Total of Quality of Management......Page 14
Part I: Philosophies and Concepts......Page 22
Significance Of Quality......Page 24
Evolution Of Quality......Page 26
Quality of Interpersonal Relationships......Page 28
Quality in Transport and Communication......Page 29
Quality of Our Environment......Page 30
Quality of Whatever We Do......Page 31
Quality of Thinking......Page 32
Envisioning......Page 33
Discipline in All Walks of Life......Page 34
Nationalistic Fervour......Page 35
Some Common Definitions Of Quality From The Industry......Page 36
Economic Compulsions Towards Quality......Page 39
Obstacles To Quality......Page 41
Quality Deployment......Page 42
Summarizing Total Quality......Page 43
Synopsis of Philosophy,Concepts and Implementation Principles......Page 46
Responsibility Towards the Nation and Society......Page 47
The New Economic Age......Page 48
Quality: The Principal Strategy......Page 49
People Orientation through Training and Education......Page 50
Education......Page 51
Customer Loyalty......Page 52
Management Responsibility Towards Quality......Page 53
Loss Function......Page 54
Significance of Intangibles......Page 55
Statistical Techniques......Page 56
Suppliers......Page 57
Continuous Improvement......Page 58
Profit......Page 59
The Concept of Internal Customers......Page 60
Measurement......Page 61
The Cost of Quality......Page 62
Scope and Macro-Strategy......Page 63
Ishikawa’s Recommendations......Page 64
Masaaki Imai and Kaizen......Page 68
Tom Peter’s Further Prescribes Twelve Steps to Quality Management......Page 69
Crosby’s Fourteen-Step Quality Improvement Programme......Page 71
Comparison Of Quality Philosophies......Page 74
Definition of Quality......Page 76
Measurement of Quality......Page 77
Management Commitment......Page 78
Strategic Approach......Page 79
Setting Goals......Page 80
Problem Solving......Page 81
Education and Training......Page 82
Structure......Page 83
Notes......Page 84
Profound Knowledge Is Knowledge Universal to All Businesses......Page 85
No Nation Need Be Poor......Page 86
Variation......Page 90
Causes of Variation......Page 93
Financial Control......Page 99
Relevance of Variation to Total Quality Management......Page 101
Understanding The Loss Function......Page 102
‘Pdca’ Cycle......Page 104
Benchmarking......Page 108
The Tools Used in Benchmarking......Page 110
Deadly Diseases......Page 111
A Few Other Foundational Concepts Of Tqm......Page 115
Vision......Page 118
Purpose......Page 121
Mission......Page 124
Values......Page 126
Culture......Page 129
Learning Organization......Page 131
Environment......Page 134
Constructing A Total Quality Culture......Page 138
Notes......Page 143
Information Management......Page 144
Knowledge Management......Page 145
Proactive Role Of Trade-Unions......Page 147
Additional Points On Shaping The Culture......Page 149
Part II: Macro Strategy for the Implementation of TQM......Page 154
The Kingpin: Customer......Page 156
Impact Of Market Forces On The Customer......Page 158
Direct customers......Page 160
Auxiliary Customers......Page 161
Determining Customer Needs......Page 164
Classification of Customer Needs......Page 166
Techniques to Determine Customer Needs......Page 168
Translating Customer Needs......Page 170
Service......Page 172
Customer Relationship Management......Page 176
Objective of Relationships......Page 177
Strategy......Page 178
Methodology......Page 180
Conclusion......Page 181
The Concepts Behind Process Orientation......Page 182
Definition of ‘Process’......Page 183
Relationship between Business Processes and Quality......Page 185
Synopsis of the Approaches Advocated by Eminent Theorists......Page 189
ISO 9000 and Process Orientation......Page 192
Some Elementary Cultural Aspects of Process Orientation......Page 193
Continuous Process Improvement......Page 194
Cultural Requirement to Institutionalise......Page 196
Measures of Continuous Improvement......Page 197
Total Productive Maintenance......Page 198
Concepts and Strategy......Page 200
Conclusion......Page 202
Kaizen......Page 203
Definition......Page 205
Conceptual Framework......Page 206
Overview Of Taguchi Methods To Quality Improvements......Page 211
The Signal-to-Noise Ratio......Page 212
Summary......Page 213
BPR Questions the Relevance of Traditional Business Processes......Page 214
Synopsis of Principles of BPR......Page 215
Characteristics of Typical Re-engineered Processes......Page 216
Supply Chain Management......Page 221
Paradigm Shift: Organizing Inputs for Quality......Page 222
Sourcing Policy......Page 223
Innovation as Business Imperative......Page 224
Measurement......Page 226
Overview Of the Basics Of Statistical Techniques Used As TQM Tools......Page 231
Population......Page 232
Variance......Page 235
Normal Distribution......Page 236
Relevance Of Data And Data Collection......Page 237
Frequency Distribution......Page 238
Measures Of Variation......Page 242
Types Of Control Charts......Page 245
Is the Process Capable?......Page 246
Control Chart for Attributes......Page 247
SPC Planning......Page 248
Overview Of The Principles Of Six Sigma......Page 249
Conceptual Backdrop......Page 263
Leveraging People Potential......Page 268
Enabling And Enhancing Self-Esteem......Page 273
Education And Training......Page 277
House-keeping and 5-’s’......Page 283
Seiton......Page 284
Conclusion......Page 285
Leadership......Page 286
The Deadly Venom Of Fear......Page 287
Management By Objectives......Page 290
Quota or Work Standards......Page 292
Recognition And Reward......Page 294
Suggestion Schemes......Page 297
Exhortations......Page 301
Performance Appraisal System or Annual Merit RatingSystem......Page 302
Bureaucracy And Hassles......Page 306
Re-orientation For Top Management’s Policy AndStrategy......Page 310
Notes......Page 314
Quality Economics: A Paradigm Shift......Page 315
Profit and its Place in TQM......Page 321
‘Profit’ as Conceptualized in TQM or TQOM......Page 322
Profit as Driven by Traditional Financial Management System......Page 323
Deployment of TQM Philosophy for Enduring Profit......Page 325
Driving by the Rear-View Mirror......Page 330
Cost Of Quality/Cost Of Poor Quality......Page 331
Units of Measure of Product Deficiencies......Page 332
Categories of Quality-Related Costs......Page 333
Quality Cost Measurement Bases......Page 334
Quality Improvement Through Strategy of Installing ‘Cost of Quality’ Program......Page 337
Importance of ‘Prevention’ in Quality Costs......Page 338
Pareto Analysis......Page 339
Applications of Quality Costs......Page 340
Notes......Page 341
Part III: Tools, Techniques and Strategic Enablers......Page 342
Brainstorming......Page 344
Storyboarding......Page 345
The Power Of the Question ‘Why?’......Page 347
5w And 2h......Page 349
Other Checklists......Page 350
A Combination Tool For Problem Selection......Page 353
Structure Tree......Page 356
Process Flow Diagram......Page 358
Histogram......Page 362
Precautions......Page 363
Pareto Diagram......Page 364
Cause-And-Effect Diagram......Page 365
Means of On-line Process Control......Page 367
An Important Tool that Aids Management to Institutionalise Continuous Process Improvement......Page 368
Graphs......Page 370
Scatter Diagram......Page 371
The New Seven Management Tools......Page 373
Design Of Experiments......Page 377
Quality Policy Deployment......Page 381
Quality Functional Deployment......Page 384
Taguchi’s Design Of Experiments......Page 387
Hoshin Planning......Page 391
ISO 9000/9001 Standards......Page 394
ISO 14000......Page 399
Implementation and Operation......Page 400
Deming Prize......Page 401
Malcolm Baldrige National Quality Award......Page 405
European Quality Award......Page 409
The CIII-EXIM Excellence Awards......Page 411
Balanced Score Card......Page 413
Note......Page 416
Part IV: Few Cases and Quotes......Page 418
A Company Song Written by the Chairman of theCompany......Page 420
Some Inspiring Quotes In Public Domain......Page 421
A Few Crisp One-liners and Combined Vision & MissionStatements......Page 422
Investing More in Human Resources Gives ManifoldReturns Over Time......Page 424
Once Beyond the Embryonic Stage, the Company Belongs More to the Employees or Society than to the Entrepreneur Or Owner......Page 425
Gaining Insight Through Experiential Learning......Page 426
Profit Alone Cannot Be The Mission Of A Company......Page 427
Quality Function Deployment (QFD)—Now anIndispensable Tool!......Page 429
‘Passionate’ Commitment at General Electric......Page 430
Notes......Page 432
Materials Required for the Experiment......Page 433
Conclusion......Page 434
Attaining goals by detrimental means!......Page 436
Fallacy Of Performance Appraisal System......Page 437
Traps Of The Reward System......Page 438
Collective Expectation......Page 440
Leadership and Involvement: Prerequisites for Transformation......Page 441
People Orientation Is Not A Myth......Page 443
Notes......Page 444
Hypocrisy......Page 445
Scenario A......Page 446
Scenario B......Page 447
Fuzzy Focus......Page 448
Meteoric Rise And Abrupt Fall......Page 450
Notes......Page 452
Epilogue......Page 454
Ten Commandments for Leaders, Businessmen and Top Management......Page 455
Bibliography......Page 458
Index......Page 462

Citation preview

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of Total Quality Management

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of Total Quality Management

Tapan K. Bose

Delhi z Chennai z Chandigarh

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Assistant Production Editor: Barun Kumar Sarkar Compositor: Arete Publishing Pvt. Ltd. Printer: Copyright © 2011 Dorling Kindersley (India) Pvt. Ltd. This book is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, resold, hired out, or otherwise circulated without the publisher’s prior written consent in any form of binding or cover other than that in which it is published and without a similar condition including this condition being imposed on the subsequent purchaser and without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the prior written permission of both the copyright owner and the publisher of this book. Published by Dorling Kindersley (India) Pvt. Ltd., licensees of Pearson Education in South Asia. ISBN 978-81-317-0022-8 10 9 8 7 6 5 4 3 2 1 Head Office: 7th Floor, Knowledge Boulevard, A-8(A), Sector-62, Noida 201309, India Registered Office: 11 Community Centre, Panchsheel Park, New Delhi 110 017, India

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Contents Preface Introduction

vii xiii

Part I: Philosophies and Concepts 1. Perspective of Total Quality 2. Synopsis of Philosophy, Concepts and Implementation Principles 3. Key Foundational Concepts 4. Envisioning Transformation 5. Shaping TQM Culture

1 3 25 64 97 123

Part II: Macro Strategy for the Implementation of TQM 6. Market Orientation 7. Process Orientation 8. People Orientation 9. Prosperity Orientation

133 135 161 242 294

Part III: Tools, Techniques and Strategic Enablers 10. Basic Decision-making and Problem-solving Tools 11. Seven QC Tools 12. Management Tools and Techniques 13. Strategic Enablers

321 323 341 352 373

Part IV: Few Cases and Quotes 14. Dare to Dream 15. Fruits of Profound Knowledge 16. Pioneering Initiatives 17. People Orientation—A Myth? 18. Management of Change 19. Mirage

397 399 403 408 412 419 424

Epilogue Bibliography Index

433 437 441

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Preface otal Quality of Management is perhaps the most crying need in Indian context particularly in the stupendous task of nation building. One need not look for some magic mantra to bestow this trait of management to all at helm of affairs in business and governance. It is simple and straightforward: dedicated deployment of TQM and unwavering commitment towards sustaining is the definitive indicator of Total Quality of Management in place. The relevance of TQM is as strong even today as it was few decades earlier – it is not an obsolete philosophy. It is sad that despite the commendable efforts by CII (Confederation of Indian Industries) and other professional bodies the core principles of TQM philosophy have not taken deep roots in India. This is a great paradox particularly when one wonders that the core philosophy of TQM is almost a carbon copy of the values scripted in old Indian philosophies. It is unfortunate that most professionals/consultants do not take holistic view of TQM, they may have not cared to delve deep into the ideal role of top management/businessmen as outlined in the TQM philosophy. Treating or limiting the scope of TQM as a quality management system only focused towards quality of product and services to satisfy the customer is absolutely contrary to the immense possibilities and scope of TQM. Sadly many professionals/consultants do not take holistic view of TQM, they may have not cared to delve deep into the ideal role of top management/businessmen as outlined in the TQM philosophy. Treating or limiting the scope of TQM as a quality management system only focused towards quality of product and services to satisfy the customers are absolutely contrary to the immense possibilities and scope of TQM. Dr. Kaoru Ishikawa, the eminent Japanese quality guru, had gone to the extent of saying that the irrational behavior of industry and society could be corrected by judicious implementation of TQM. According to him application of the philosophy could accomplish revitalization of industry and affect a thought revolution in management. He ardently felt that adoption of TQM by all nations could contribute to the peace and prosperity of the world for a long time to come.1 It is a paradox that countries like China, South Korea, Malaysia, and few others who won their independence almost at the same time as India, or even much later has marched ahead of us in developing their economy, and improving the living standard of their people. It is not a myth that Japan was the first country that really

T

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viii PREFACE leveraged the power of TQM for miraculous economic resurrection after the devastation of World War II. It is a shame that despite the Indian economy being one of the largest in the world, and impressive growth rate of Indian industry in recent times the country is still struggling to provide basic necessities of life to its vast majority of people. Our lopsided planning and resource deployment has failed to register any significant mark in human development endeavor, as a matter of fact the indices of human development are amongst the lowest in the world, India continues to remain as one of the poorest countries of the world. The generated wealth has enriched the richness of the businessmen and politicians, swelled the ranks of urban middle-class and had only trickle down effect on the bulk of the remaining population–India has world’s largest number of people living below the poverty line. The gigantic complex problems of India require radical yet simple solutions: leveraging principles of TQM enable to achieve radical transformation of our polity and management to lead national resurrection. As a country we universally failed to imbibe and implement TQM philosophy and guidelines, which is not alien at all to values and ethics found in our ancient scriptures. Most top management personnel and professionals knowingly or unknowingly interpreted TQM as merely quality initiative for product and services whereas in actuality TQM interventions are principally aimed for radical transformation of outlook and philosophy of the way the business or governance is being carried out today or as per the traditional systems. The profound knowledge that one gains from in-depth study of TQM philosophy clearly stipulates that real benefit of TQM cannot be reaped unless there is total quality of management. It is the outlook and characteristics of the politicians, businessmen, professionals, and bureaucrats that make critical difference. In order to remove all ambiguity in interpretation of TQM, this book has been titled as Total Quality of Management, to ensure the right emphasis of the philosophy. Many misinterpret the recent high growth rate of Indian economy as coming of age of Indian management. Nothing can be more travesty of reality. By and large the form of Indian management might have changed but the feudal psyche of Indian businessmen and professionals continue to dominate. It is sad that Indian bureaucracy and corruption is despised internationally while hypocrisy and sycophancy has become the hallmark of Indian management. Talking TQM (or similar interventions) has become a fad for most management, and a vehicle to gain public recognition. In most Indian companies, including India based multinationals, TQM and allied initiatives are more of a routine or HRM driven organizational development initiatives that may give some peripheral or fringe benefits. Barring few exceptions, such efforts of TQM continue to be superficial. Real benefits continue to remain elusive, and will continue to be so unless the quality of management is instituted. Of course, there are odd success stories even in India. Infosys, Sunderam, Tata, ITC are among the few of Indian companies whose purpose of journey perhaps can be equated to journey focused towards TQM; the most important thing is that they are still learning from their journey and are in serious business of institutionalizing

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PREFACE ix total quality of management. It is most unfortunate that such examples are so few; the overall picture remains disheartening. Contrary to belief of certain industrialists or top management professionals impressive growth does not necessarily mean that the organization has qualified to be called a TQM company, nor use of certain TQM initiative/technique as a strategic tool giving some immediate benefit does not mean that the organization has acquired TQM culture. Sustainable growth and prosperity does not happen in isolation. It is the consequence and fruit of long drawn process of institutionalizing and leveraging several key factors like unshakeable intent to serve the customers (people), focused commitment to meet its obligations towards stakeholders and society, educating and upgrading people's inherent ability, process improvements, and deployment of the other core principles and tools of TQM. The growth strategy of making the future secure must be continued to be implemented despite short-term allurements and ever-changing hostile socio-economic environment. These are all management functions and responsibilities. Successful planning and implementation of these management functions squarely depends on the total quality of management. The principles are applicable to any type business, organization or institution. It is high time to understand the relevance and widespread implications of total quality of management. TQM is a powerful yet simple philosophy, which if practiced properly will ensure total quality of management, and make quality leaders and followers who in their respective fields will initiate and implement right steps. Quality of management in organizations and institutes will in turn contribute towards national resurrection. There should be renewed movement to adopt the TQM way in national planning and governance as the traditional planning and management systems have failed to deliver, and the Chinese and other models may not be feasible in India because of the unique characteristics and diversity of problems in India. Application of TQM in our school and education institutions will result in improvement of education standards and turn out responsible future politicians, professionals, and citizens. Similarly application of TQM philosophy in government and public sectors will increase overall efficiency, will be able to trim government deficit and eliminate waste in the government and public sectors. And above all institutionalization the use of TQM in education, business, and political arena will definitely make quality people and leaders who will then make a really ‘shining India’. This book is not like the normal off-the-shelf book on TQM; rather it attempts to present a bigger picture to the readers. The title of Total Quality of Management brings out a totally new perspective of about the role of top management. The emphasis is on radical change through transformation that demands strict adherence to the principles of total quality management exemplified by total quality of management. Throughout the book there is direct or underlining subtle advocacy of total quality of management for bureaucrats and political leaders for the larger cause of nation building. Alongside further studies this book should facilitate professionals giving up some of the traditional percepts or dogma on how to run business, and embark upon institutionalizing the principles of TQM and move on to achieve a state of total quality of management. Bureaucrats, politicians and

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x PREFACE trade union leaders will find enough material to reflect on their ideal role to build the nation. Further, it should inspire an individual to embrace total quality as a way of life. These and the comprehensive presentation of the philosophy are the major value additions of the book.

Structure of the Book Care has been taken to present an integrated and holistic overview of the different TQM/ Quality philosophies, macro-strategies for deployment, and key tools, techniques and enablers for implementation. For orderly structure and ease of reference the book has been divided into four Parts as outlined in the following figure:

Supporting Tools and Techniques

Cases

Macro strategy or Missions

Philosophy and Core Concepts

Stories, Excerpts, Quotes

Part I deals with perceptions, philosophies, and foundational concepts. Part II includes chapters dealing with macro strategies for effective deployment. Part III gives brief overview of the unique tools, techniques, and enablers required for effective deployment. Part IV contains supporting cases and quotes. Experience shows that top management and most practicing professionals are somewhat apprehensive of overdose of statistical or mathematical treatments. In order that the readers are not put off with the book having too much of statistical and mathematical treatments, care has been taken to deal the subjects in lucid and interesting way. Professionals entrusted with implementation of statistical techniques, six sigma, balance scorecard, cost of quality, etc. have to have adequate exposure through training and reading appropriate books on the subjects. The book has made a departure from conventional practice of providing case studies and exercises at the end of each chapter. Instead simple cases, stories, excerpts,

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PREFACE xi poems, and quotes have been included in Part IV of the book. Readers should be able to gain profound knowledge or insight if they can debate or mull over the issues involved in the cases, or can relate the case situations or findings to the various concepts or strategies covered in Part I and Part II of this book. Further, the cases alongwith few stories, excerpts, and quotes should help clarity, comprehension and provide motivation. If the entrepreneurs and top management professionals decide consciously to shed off the age-old feudal-psyche and take total quality seriously, they are in reality taking off on a ride that will transform not only the whole corporate culture but also the nation itself. If Japan has done it despite its debacle in World War II, the Koreans have just done it, and now if the Chinese are on the way becoming super power in world economy and sports arena, why can’t India and other developing nations?

Note 1. Kaoru Ishikawa, What Is Quality Control? The Japanese Way (New Jersey, Prentice-Hall, 1985), pp. ix, 3, 11, 25, 105.

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Introduction OF THE NEED FOR TOTAL QUALITY

MANAGEMENT

ost significant profound knowledge, ‘Any country with enough people and with good management need not be poor’ need to be oft reemphasized to counteract all round despondency and doubt about our capabilities to uplift the living conditions of our millions to an acceptable level. While passing on the aforesaid profound knowledge, W. Edwards Deming, the internationally renowned management consultant and philosopher, had lamented that it is a problem to find good management. No other theoretical or philosophical discourse is necessary for our politician, businessmen & bureaucrats to understand the vital need of total quality of management for nation building activities. While we can justifiably be proud of India’s stellar performance in GDP growth, the galloping inequity has created a lopsided social structure having islands of affluence amidst a sea of poverty. The names of few our industrialists appear in the list of world’s richest men yet paradoxically India has the largest number of people below sustenance level. As a nation, we face today a multi-dimensional challenge to chart an inclusive growth path that will transform the lives of almost a third of our billion populations living at the margin and it is only then India will become an economic super-power in reality. The economic progress and individual achievements of handful of businessmen are too insignificant against the Himalayan task facing the nation—the country needs to surge ahead by unleashing the untapped potential of its people and create a modern vibrant country. It is a stupendous task analogous to rising of Phoenix from its ashes. For this noble and ardent task we require total quality of management in governance and business. The creation of wealth is the only way of addressing the formidable challenges of economic and consequent social transformation. Deming has categorically said, ‘Abundance of natural resources is not a requirement for prosperity. The wealth of a nation depends on its people, management, and government, more than on its natural resources.’1 That this was not a theoretical concept or exhortation by Deming, is well established by the resurrection of Japanese industry and economy after the World War II. It has shown to the world what the commitment and ‘will’

M

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xiv INTRODUCTION of top management can do despite the unprecedented devastation caused by World War II. The Japanese industrialists and top management professionals with, the proactive support of the government charted a new transformation process taught by Deming, teachings of Juran added the momentum to the process. The Japanese renaissance lends credence what a quality leadership can accomplish. Neither the continuing abject poverty level and stark social disparity is socially, morally or politically acceptable nor it is good for long-term interest of the business and political system. It is also a sad commentary of our development model. Unless tackled with visionary zeal to reverse the trend, this volatile situation could lead to unprecedented upheaval, and anarchy. Business Corporations draw heavily on societal resources, and therefore logically the social charter for business should be ‘commitment beyond the market and profit.’ It is a pity that many businessmen are not aware of the critical role they play in nation building. Many may raise their eyebrows but the fact remains that entrepreneur and businessmen are the ultimate custodians of the possibilities of civilization. Even in ancient times the critical role of the businessmen was recognized, the ancient Indian scriptures had acknowledged that those who are creators of wealth deserve the greatest respect of their communities. Corporate social responsibility can no longer be treated as an optional matter. Hence the business and professional managers have to expand their horizon of lateral thinking so that ‘changes’, ‘imperatives’ and ‘problems’ can be viewed in correct perspective. Leaders have to stretch their mind, and extend their ‘quality management thinking’ beyond its traditional focus on quality and productivity to every element of business and governance—indeed to every aspect of planning, decision-making, execution, monitoring, and course correction. Eradicating poverty & raising the standard of living to an acceptable level through creation and distribution of wealth has to be the vision and purpose of all political parties and business activities. Ensuring consistency and constancy of purpose will be a great challenge and an acid test for total quality of management. There is no need to discover or reinvent new or complex mantras, simple principles of TQM if imbibed and applied with dedication patience will lead us the way. TQM is no longer a new philosophy; the relevance of TQM is as strong even today as it was three decades earlier. The common perception about the definition and scope of TQM (Total quality management) is about a quality system that would ensure enhancement of competitiveness through continuous improvement of product/service quality carried out systematically through various quality management systems, tools and enablers. However, the underlying core principle of TQM philosophy is to bring enduring success to businesses or organizations, create more wealth and jobs which will enhance the living standards of the people and thus contributing to the nation building efforts. Mere focus on product and service quality will give cosmetic changes only as real improvement can come through the applying TQM principles in all spheres, particularly in government, business and educational fields. Dr Kaoru Ishikawa, the eminent Japanese Quality guru had felt that application of TQM principles could instill a thought revolution in management.2 One, who is conversant with the core

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INTRODUCTION xv of Indian philosophy, must be wondering if the core philosophy of TQM is a carbon copy of the values scripted in old Indian philosophies. The total quality of management will remain elusive unless the ‘thought revolution’ contained in TQM philosophy takes root at the highest level comprising of politicians, upper echelons of civil service, industrialists and top management. TQM cannot be implanted by an executive order; the philosophy has to be embraced by the owners/top management who should lead and oversee the deployment of new philosophy across the organization. True to the spirit of the adage ‘Quality begins with self’ top management need to undertake its own self education and reorient behavioral and working style so as to become ardent disciple of TQM philosophy as required for successful implementation of the basic principles of TQM. The intrinsic significance of TQM is that it can facilitate paradigm shift of top management’s mindset making it aware of its responsibilities and obligations now and in the future towards its customers, stakeholders and society at large. It is important to bear in mind that quality of management will only remain as a futile concept unless there is a paradigm shift and well-directed conscious effort towards to attaining this state. It is a well-established fact that the quality conscious nations are the winners. It must be comprehended that directions, and the outcome of political policies, governance and management processes impact all areas of public and business life. Mere proclamation or fixation of ‘intent’ of development or quality is not good enough. The ‘intent’ has to be backed up by visible commitment of leadership towards declared policy, quality of implementation and productivity of the resources employed. Leadership or management decisions and actions must address the problems and challenges in totality and pass through tests against all political /business odds and lure of populist short-term gains. This would establish the credibility of leadership/management; people will no longer be cynical and skeptical about the real intention of leaders or top management and will have no fear or hesitation to participate in development or quality initiatives. Leaders/top management must not shirk its responsibility to lead the people in the management of change, guide all institutions/functions to work smarter to improve quality of performance, and thus putting the nation/organization on the rails of prosperity. This requires lot of character, courage, uprightness, innovativeness, dedication and patience. Transformation if achieved will certainly certify the total quality of management. The basic cause of industrial sickness and consequential unemployment is solely due to failure of top management to manage. Dr Deming had minced no words to state the harsh reality that ‘loss of market and the resulting unemployment are not foreordained, they are not inevitable—they are man-made.’3 These are the results of management callousness, inefficiency, selfishness, and lack of foresight. It is unethical or mere hypocrisy to blame people or employees for the ills of society or poor quality of product and services. The hard fact is that formulation and implementation of policies of all key areas are responsibilities of leaders, industrialists and top management. It is an established fact that it is the quality of people at helm of affairs that really impacts the quality of life of people at large. Tom Peters,

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xvi INTRODUCTION the American management consultant has said, ‘The chief job of the top management or leader, at all levels, is to oversee the dismantling of dysfunctional old truths and to prepare people and organization to deal with—to love, to develop affection for change per se, as innovations are proposed, tested, rejected, modified and adopted.’4 An enlightened leadership or top management will foresee the need for change, it won’t wait till the country/business is on the brink of disaster or rattled by fierce global economic/competitive pressures. Whatever may be condition, perhaps it never too late but leaders/management must realize that the national/corporate character and health can only be revitalized through total quality of management. Today most businessmen and professionals realize that ‘Change’ is inevitable, yet management of change seem to be eluding all. Management of change is not about cosmetic changes, nor it is about some sort of reconstruction or revision. The issue is about radical change, but radical change requires transformation of style of management, which requires long-term commitment to learn and deployment of new philosophy. Traditional management style, systems, or tools will not bring about radical change. Our political and business leaders have to learn lessons from their Japanese counterparts. The new reality ‘flourish or perish’ must be comprehended by professionals’— mediocrity will ultimately have no place. At the ‘organizational’ level the role of top management is to ensure deployment of TQM systems and tools that promote real cooperation and collaborative effort between different functions and departments, solve operational problems, and become competitive. The resultant organized harmony is the initial manifestation of total quality of management, generating a synergistic force that will pro-actively tackle ‘change’. Breaking the shackles of ‘routines, and stimulation of creativity and innovation is a complex imperative of different dimensions that secure the future of the organization on a strong pedestal. Enduring success at this intricate challenge is the ultimate manifestation of total quality of management. The primary need is of total quality approach in strategic planning, coordination and execution that will tap, develop, and leverage inherent potential of its employees to optimize company’s capabilities, operational efficiency, and data gathering, effective communication and reach with customers, employees, and business partners. Even the quality information, and effective feedback mechanism must be planned and monitored for their efficacy; it is total quality of every activity, and all personnel that matters. Top management has to ensure and monitor deployment of TQM philosophy across the organization and play the role of a catalyst and above all be epitome of total quality. There lies the significance of total quality of management. Ironically most professionals, even in developed countries, prefer to construct customer focused quality culture rather than people and society focused quality culture. Therefore they run after fads that they think will give immediate, tangible benefits of quality, and impact the bottom line positively. They do not hesitate to adopt certain strategies contrary to TQM philosophy camouflaged as professional approach; quite often some policies impinge on the fundamental human values.

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INTRODUCTION xvii This happens as because managers often cannot withstand the business or environmental pressures, loose sight of their own declared vision, and do not hesitate to compromise on the quality management programmes initiated by management itself. The total quality of management is to them a foolish sentimental or theoretical issue! Again, there are many professionals who confuse total quality with quality management system and initiatives, quality control, quality assurance or with inspection functions; they view quality as merely a technical feature or management system connected with products and specific services. Egotism or a peculiar hierarchical syndrome leads many managers to believe that it is for others to make quality, or quality problem arises only at lower levels of society or organization. Such managers and professionals disdainfully ignore the basic responsibility of management towards quality and quality culture. They consider quality as system as opposed to culture. They disregard a vital phenomenon that managerial behavior, action and inactions ‘on all fronts’ impact or influence quality culture. Total quality of management shuns been fanatic, rather it operates quite flexibly to absorb and integrate different new tools or enablers that have the capability to deliver the objective/s envisaged to ensure consistency and constancy of purpose. Compatibility with TQM philosophy is the main criteria. Enlightened management has no hesitancy in including and integrating Six Sigma, ‘Balance Score Card’, or the processes to win Deming Prize or Malcolm Baldrige/EFQM/ National quality awards in the repertoire of effective TQM tools and enablers as proper utilization of these tools and enablers is an important step towards total quality of management. It is an unfortunate fact that most top management professionals, especially chief Executive Officers, have no real interest or grasp of total quality—be it quality of product, services or management. It appears that their primary interest and concern hovers around profit, sales, manipulating industrial relation, investment in plant and equipment, financial manipulation, political maneuvering, etc. They have little or no time for quality—they fail to realize that in today’s context the relevance of total quality of management has become very great, and often critical. The ground reality is that hardly there is inner urge or urgency amongst entrepreneurs and top management professionals to imbibe and live the core principles of TQM. They think that these are ideological issues, and they are least bothered as the business is doing well, and they are making money! And often they exploit company’s sickness to extract more money out of the system and make money for selves. Often top management’s credibility is lost due to hypocritical proclamation of taking TQM as religion while their behavior, activities, and interests are in grim contradiction of public stance. Some run after short cuts to excellence making compromises. Ultimately the employees, stakeholders and the world at large come to know of this game of playing to the gallery. Talking TQM as a religion is cheap, but walking the talk requires total transformation of the individual as well as of the management of the organization. Conviction, commitment, doggedness and courage of top management are essential to implant the TQM culture across the organization.

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xviii INTRODUCTION The job of management is inseparable from the prosperity of the company, and welfare of the society in which it carries out its business. Ensuring this consistency and constancy of purpose is first and foremost prerequisite to total quality of management. According to Dr Deming, the management guru who helped Japanese revival, ‘Performance of management should be measured by potential to stay in business, to protect investment, to ensure future dividends and jobs through improvement of product and service for the future, not by quarterly dividend.’5 A real professional will not compromise the ‘Future’ to the lure of short-term or windfall profits; in case compromise is inevitable a good management will strike a fine balance of trade-offs between the problems today and the opportunities tomorrow to ensure that the future is not compromised. The political and social leaders, industrialists, entrepreneurs, top and senior managers, wield positional power at society and organizations. The philosophy and consequential activities of these important persons impact lives of people and overall quality of life. The entrepreneurial ingenuity and risk taking is no doubt a laudable critical input, but the fruition i.e. subsequent growth, stability, and prosperity is depended on the total quality of management. A greedy entrepreneur or a selfish and careerist professional focusing and manipulating on short-term profit can ruin the industry or business. A power hungry money laundering politician in reality exploits the misery and poverty of people, he is deluding them when he talks of vision, mission, purpose, and values. Inept politicians also blame environment and extraneous factors for lack of progress or not fulfilling promises. Such people are either oblivious of their own role and responsibilities, or simply they don’t care. They feel home with the traditional hierarchical way of management that focuses on shot-term quick results, treat ‘people’ as just cog in the wheel, and consider the axiom ‘responsibility towards society’ as mere ornamental camouflage meant for public consumption. Paradigm shift and transformation of such people is a necessary prerequisite to have real (not superficial) progress towards eradicating poverty of teeming millions, and raise the standard of living to acceptable standards. Mere exhortation and talk won’t do, management has to walk the talk. Here lies the significance of total quality of management. Legal stipulations to comply with CSR (corporate social responsibility) will end up as a necessary business evil like say ISO 9000 or ISO 14000. Unless the social obligations are imbued with passion and inner urge, the whole CSR compliance becomes a ritual effort yielding only fringe benefits. There is no denying of the fact that current breed of new generation businessmen, entrepreneurs, and professionals are either formally educated in professional management or are exposed to modern management theories, and by and large are aware of the imperatives of the current and impending business scenario. Yet the paradigm shift unfortunately remains incomplete mostly because of certain deep-rooted undesirable social and cultural malaise. TQM envisions, and charters an inclusive growth path for organizational prosperity, satisfaction of all stakeholders, and fulfillment of obligations towards society. Total quality of management institutionalizes this continual transformation. The feudal psyche, egotism and greed to grab all for self has been the stumbling block in letting TQM principles take a deep cultural root. Disregard for societal

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INTRODUCTION xix obligation, a bane of Indian society, has unfortunately permeated in our organizations and institutions. It may be an oversimplification to state that the aforesaid are the basic reasons why despite the acclaimed richness the Indian Philosophy, the Indian businessmen and professionals have failed to leverage TQM for organizational and societal transformation. The country is still struggling to provide basic necessities of life to its vast majority of people; the talk of ‘India shining’ or ‘India becoming super power’ despite its exhortation connotation should not be allowed to blur our focus from our principal task. Concerted effort for institutionalization of total quality of management is perhaps the only way to make the politicians, businessmen, and all other people who matter not only conscious of their obligations but induce them to discharge their solemn responsibilities towards the society and nation. There is no denying of the fact that current breed of new generation businessmen, entrepreneurs, and professionals are either formally educated in professional management or are exposed to modern management theories, and by and large are aware of the imperatives of the current and impending business scenario. Yet the paradigm shift unfortunately remains incomplete mostly because of certain deeprooted undesirable social and cultural malaise. If the entrepreneurs and top management professionals decide consciously to shed off the age-old feudal-psyche and take total quality consciously and seriously, they are in reality taking off on a ride that will transform not only the whole corporate culture but also the nation itself. If Japan has done it despite its debacle in World War II, the Koreans have just done it, and now if the Chinese are on the way becoming super power in world economy and sports arena, why cant India and other developing nations? The ‘leapfrog’ continuous improvement of the developed nations and some emerging industrial powers like China and Korea have left the other developing countries including India far behind—the gap as regards to economic and social development has alarmingly increased. Many professionals, politicians, sections of media quite often behave akin to ‘frog in the well’ syndrome. We do not educate our people about our exact position in the comity of nations while we go gaga over some odd exceptional achievements by some individual businessmen being listed in top ten wealthiest people in world or some odd leverage buyout of large multinationals by Indian corporate houses. It is a shame that we carry the largest number of people below poverty line, our Human Development Index is one of the lowest in the world, and what can be more disgraceful than India being rated as one of the most corrupt country in the world. Does it not call for total quality of management in our governance and business? Total quality of management lays the foundation of a road map to organizational prosperity to build up national character and resolve to make significant contribution in eradicating poverty and raising the quality of life. The country needs leapfrog growth that would positively impact all sections of society, particularly those below poverty line; the clarion call is for massive and deliberate public-private partnership initiative. What is required today is an integrated quality approach so that people at the helm of the government, government controlled institutions and private organizations play their quality roles and pursue total

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xx INTRODUCTION quality management principles linking organizational growth with the national priorities, particularly the improvement on human development indices. Mankind has seen successful culmination of such experiment in post-war Japanese revival. But the task of Indian renaissance is much more challenging, it calls for a sincere concerted effort for the deployment of TQM principles and tools in the political, industrial, social and economic fields and dogged persistence with them. The crucial requirement is the total quality of management for the politicians, bureaucrats, businessmen and professionals. This complete approach of total quality in all spheres can only be realized through total quality of management. Insertion of the two-letter word ‘of’ after ‘Total Quality’ in the title ‘Total Quality Management’ restores the missing link and endorses the right thrust and perspective to reorient the fundamental behavioral, attitudinal and policy changes for management of change as well as implementing TQM holistically.

Notes 1. W. Edwards Deming, Out of the Crisis (Chennai: Productivity and Quality Publishing, 1992), p. 6. 2. Kaoru Ishikawa, What Is Total Quality Control? The Japanese Way (New Jersey: Prentice-Hall, 1985), p. 104. 3. W. Edwards Deming, Out of the Crisis, p. ix. 4. Tom Peters, Thriving in Chaos (New York: Alfred A. Knopf, 1988), p. 388. 5. W. Edwards Deming, Out of the Crisis, p. ix.

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I

P A R T

Philosophies and Concepts

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CHAPTER

Perspective of Total Quality his chapter leads to a quest of total quality, and its significance in implementing and sustaining total quality management philosophy. Making total quality a way of personal and professional life is a challenging mission. Superior quality is established not merely by technological, aesthetical, or service edges but on the basis of some distinctive quality characteristics. Comprehending quality in totality involves complete understanding of tangible and intangible quality aspects of all connected things and this process can be termed as Total Quality approach.

T

SIGNIFICANCE OF QUALITY Everybody wants quality, one hardly come across someone who does not want quality! From a newborn that yearns for comfort, warmth, mother’s milk, a serene environment and adequate sleep, to a dying man who craves for care and comforting hope, everybody wants quality! Hardly one comes across someone who does not want ‘quality’; quality cannot be delinked from our whole being. The quality of inputs that we receive and the environment we live in certainly has an impact on our behaviour and well being. Even the quality of our mundane morning chores has an effect on our mood and work through the rest of the day. It is difficult to compile the complete list of quality characteristics; intelligence, loyalty, colour, feeling, size, weight, etc. are different facets of quality. The dictionary meaning of the word ‘total’ is ‘something which is complete, comprising the whole, affecting or including everything, absolute or unqualified.’ However, the word ‘quality’ is difficult to define comprehensively. That is because everybody has his or her own notion of quality. Quality is a perception generated by sensory feelings and judgmental opinion. It is not abstract and no intellectual calibre is required to recognize or appreciate distinguishing quality features. Quality means different things to different people and also varies with time. It is a policy and a philosophy. It also signifies moral and aesthetic values. Quality is reflected in our character and behaviour. Giving service to others is quality and meeting his needs is the yardstick of quality. Quality is evolving and progressive. All religions stress basic human values that are also essential to the philosophy of Total Quality Management (TQM). In TQM philosophy ‘quality equals profit’. In

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4 PHILOSOPHIES AND CONCEPTS order to understand this dictum, the conventional idea that quality is costly and depresses profit margins, must be discarded. Unfortunately, many take quality for granted while some only give importance to it because of its technical or economical necessity, and worse, some consider the word mere jargon. Often, when receiving goods and services people expect nothing less than top-class quality, but when the same people are required to provide quality, all sorts of difficulties and excuses block the road. The mute point is often forgotten that all our actions impact something or somebody other. The perception of the receiver about the impact may be termed a quality; it could of tangible or intangible things or both. Constructing and sustaining quality are much more difficult than defining it. Unfortunately many take quality for granted while some give importance only because of its technical or economical necessity and some consider it as mere jargon. When providing services to others, the yardstick of quality is whether or not one meets their needs. The word ‘quality’ does not signify ‘best’ in an absolute sense; it means the best under certain conditions. Quality cannot be achieved by merely fulfilling the given specifications, as it is also dependent on other factors, such as satisfying the customer’s sensory requirements. Though it is difficult to measure sensory feelings, as they vary from person to person, ‘customer satisfaction’ is often used as the yardstick to measure quality. A so-called quality product or service, even after meeting all the given specifications, may still not be treated as a quality offering if other quality aspects like presentation, installation, customer care, after service, etc. are not up to the mark. Quality is also a perception. In the customer’s perspective, quality is what he perceives and believes in and that which makes him happy. Here, the perception of the receiver matters the most, hence the adage, ‘the customer is always right’; in customer’s perspective quality is what he sees, perceives and believes it is and that makes him happy. However, a customer’s need is ever changing with the changing world. Yesterday’s quality has become backdated and tomorrow’s requirements may altogether be different. Therefore ‘quality’ should be such that it succeeds in satisfying changing needs. Besides being the beholder’s delight and the provider’s pride at a micro level, quality must bring in prosperity and raise the standard of living at a macro level. Another important feature of quality in today’s competitive world is cost effectiveness. Society cannot afford to stop at one particular grade or standard of quality, nor restrict the scope of quality. It will keep enlarging its scope and touch new standards. In the final analysis, irrespective of different perspectives, ‘quality’ is a moving target. Box 1.1 Summary: Significance of Quality z z z

z

Quality is so simple—yet difficult to comprehend and implement. Quality means different things to different people and also varies with time. Quality is a policy and philosophy. It is also moral and aesthetic. Quality reflects in our character and behaviour. Giving service to others is quality and meeting their needs is the yardstick of quality.

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PERSPECTIVE OF TOTAL QUALITY 5

z z

z

z z

z

Customer’s delight is the main criterion of quality. Quality is interlinked with our existence and ever changing with the quality of life. It is therefore evolving and progressive. Quality does not mean higher cost of production or selling price. It must be cost effective—a win-win situation both for customer and manufacturer/ service provider. Quality equals profit. The higher the quality, the higher is the profit margin. Our economic progress is linked with quality. We have to keep pace with progress. Quality conscious nations are winners. ‘Quality of people’ sustains quality while ‘quality of management’ drives quality.

EVOLUTION OF QUALITY The concept of quality is as old as life itself, the evolution of quality is linked with the struggle of mankind to raise the standard of living. The first couple on the Mother Earth struggled to cope with life itself and strived for better living, tools, food, roof over the head etc. and was in reality looking for convenient ways of tackling the odds—which is simply meant search for ‘quality’. Thus, progress of civilization is intimately linked with quality, and some core quality values had become universal despite human habitat had spread across the earth. On the moral, ethical and cultural front the ancient Greek, Indian, Chinese and other epics of old civilization show a great qualitative approach. The spread and influence of business over the time has seen advent of quality standardization in certain areas like input materials, products, and services related to domestic, industrial, agricultural, commercial and other institutional consumption. Yet, in this modern and new millennium different countries and races continue to have perceptional variances over quality especially on moral, ethical, and social issues though some core quality values are universal and eternal. Some examples of excellence in quality from the good old days are Eiffel Tower, Leaning tower of Pisa, the Taj Mahal and the rustfree iron pillar at the Kutub Minar, Delhi. All this bears testimony that even our ancestors had the knowledge, skill and aesthetic sense for quality. Quality was as important in yesteryear as it is today, and as it will be tomorrow. The early stages of civilization were the most difficult stage for evolution of quality as there were all sorts of odds. Early inhabitants had to invent things, organize community living, decide on code of conduct, and fight battles against nature and other habitants of earth. The struggle for existence itself meant search for ‘quality’ in all aspects of living. The invention of igniting the ‘fire’ made a qualitative difference to life at that time; so did the invention various tools. Human beings learned to grow crops and domesticate animals for farming. Social, occupational and trading values got distinctive characteristics (quality) during this stage of agrarian economy. Other than agricultural produce the rural artisans supplied the daily necessities, and the societal strata or recognition was accorded as per the occupational trade or expertise. The individual artisan handled all aspects of producing goods, i.e. arranging/purchasing raw materials, processing, inspecting

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6 PHILOSOPHIES AND CONCEPTS and delivering—some times the individual had to make efforts for selling and had to solve problems the customer encountered. The good interpersonal relationship with the customer helped him determining customer requirements. He had a sense of ‘purpose’ and pride in delivering quality consistently. Overtime his family members also joined and as a group they tackled successfully all facets of business. Their greatest pleasure and self-esteem was derived from the exploitation of their own hidden potential. The current ‘Change Management’ philosophy has rediscovered this concept and adapted the same in team working, quality circles, group manufacturing ‘cells’ etc. The essentialities of identifying customer needs, good customer relationship, realizing the immense inherent talent of people, involvement of people, cross-functional team working, etc. has their roots in the early ways of rudimentary management. This early period of management lasted till the advent of industrial revolution. Post-Industrial revolution era was characterized by mass-production and monopoly market impacting the work-culture and quality of social life. The concept of ‘product-out’ virtually robbed the customers/consumers of multiple choice, price negotiation, delivery preference, and preferred quality. The mass production systems split the job to tiny tasks which different workmen completed based on standards developed by time and motion study, thus the workmen were relegated to just a cog in the wheel denying human dignity and discounting their inherent talent. Further, on the plea of hastening the production process the self-checking system in which workmen took pride gave way to inspection-dominated system, the workmen were made accountable for the specified numbers in the allotted time. Such entrenched inspection-dominated culture actually hid the real quality and cost issues. In essence, achieving numerical goals and short-term profits were the principal focus with quality getting a back seat. More automation was aimed maximizing profit often at the expense of product quality and shoddy service. The consequential effect of apathy towards quality and non-recognition of human talent boomeranged when competition surfaced in the horizon in early 60’s. The western business world, more particularly American industry, which virtually got accustomed to monopolistic market situation, started losing out to the competitive products of Japan, which adopted the new doctrine of customer focus. Quality was the strategic tool of this new doctrine. The world now took notice of this new business ‘mantra’—QUALITY! The malice of inspection-dominated culture had adverse impact on society particularly in developing countries. The cancerous effect ‘inspector-raj’ (inspection dominated culture and administration popularly known in India) spread to all areas of governance, trade and business and society. Widespread corruption has become a permanent-set curse to Indian society. Ideology and value based politics quietly gave way to muscle and money power politics to manipulate and sway the vote bank. Shameless flouting of business and public ethics turned ‘Quality’ as an ornamental dictum nice to use as public exhortation. Late 60’s saw improved business opportunities due to dismantling of imperialism, and monopolistic businesses loosing their ground fast due to increasing competitive market pressures. ‘Quality’ became the new winning strategy. During this phase

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PERSPECTIVE OF TOTAL QUALITY 7 management had to focus willy-nilly on quality improvement, and perforce had to involve people in quality improvement initiatives. The ‘service sector’ also had to take a new approach of considering the service as product and had to offer valueadded quality services. The consumers and customers started getting the benefits of quality, and the economy also got a fillip during this era of competition and globalization. Ranks of middle class swelled with accompanying marked improvement in their standard of living, but the problem of abject living conditions of the masses in developing countries still remained a major concern. In the new millennium the impact of Internet, e-commerce, digital technology, emerging nano-technology, etc. is revolutionary yet quality continues to remain the principal driver. Many new facets to quality have been added and will continue to emerge as more and more new technologies are commercialized. Recent research and commercialization efforts in various fields of medicine, biotechnology, space exploration, and other fields augur well for mankind. Hopefully the benefits will help to eradicate poverty and raise the standard of living of common man throughout the world. Evolution of quality will continue. No doubt that in this materialistic age some of the eternal quality values have got lost, but luckily TQM philosophy has rediscovered many such values as relevant and critical in the area of governance and business. Continued evolution of quality in the new millennium brings new hope to humanity for emancipation from poverty of a large number of underprivileged across the world.

QUALITY OF WHAT? What does quality refer to, or of what is it an attribute? It is difficult to give a comprehensive answer to this innocuous question. A few facets of quality described below constitute the basics.

Quality in Thought and Contemplation Seeds of quality, to begin with, are sown in our thought-pattern that breeds the necessity and urge for quality. Quality does not occur by accident; if we do not aspire to, we cannot achieve it. It is a value constructed by contemplation and perspicacity, and thereafter produced with labour like clay moulded by desires. A person’s habits of respecting others, conforming to the code of conduct, upholding the dignity of labour are all manifestations of quality in his thought. However, quality as a notion is very delicate and brittle and the slightest distortion in the thought-pattern can mar it.

Quality of Interpersonal Relationships A healthy and productive human relation between all those involved is critical for quality. Tense family relationships and strained relations with employees have a demoralizing effect on the quality of life and can affect the quality of a person’s

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8 PHILOSOPHIES AND CONCEPTS output. Relationships like partnerships with associates and stakeholders are key elements in successful business. Intangible qualities like courtesy, concern and care are crucial in personal and business relations.

Quality of the Articles Used The type of articles and materials used often indicates a person’s taste, outlook and zest for quality. Many unfortunately compromise on the quality of these articles not realizing that this is a penny-wise and pound-foolish policy. A person or an organization that compromises with the quality of inputs cannot be relied upon to consistently supply quality products and services, whereas on the other hand, the use of articles of appropriate quality confirms a just and disciplined character representing dependability and reliability.

Quality of the Product Collectively or individually we create, produce or deliver products or services that impact others (consumers) and anything that impact others should be of appropriate quality. In this competitive era where there is hardly any product differentiation the quality of our products and services is the only means to gain a competitive edge over others, and the product itself certifies our character. Therefore, other qualitative aspects like packaging, presentation, delivery, courtesy and promptness must accompany our product.

Quality of Services Services are being marketed today as products, and with this, the differentiation between services and products starts blurring. Quality of service has become a critical component since service has become a major sector of industry, throwing up new opportunities for growth. Distinction in service and consequent success are rooted in the ability to sustain the quality of the services being offered, which should have both promptness and reliability. To achieve this, the right attitude and mentality are needed in the service provider, which set the tone of the workculture, help reduce wastage and yield higher productivity.

Quality in Transport and Communication A modern economy cannot thrive without an excellent transport and communication system. Building and improving on the transport and communication infrastructure is a critical consideration for new investments. Since communication is essential to governance, business and social life, its quality is so important. The everincreasing dependence of services like weather forecasting, disaster management, agriculture, trucking, just in time delivery and the like on communication and information technology have raised the bar of quality in these areas. Improved response time and reduced transport times are critical to modern business. Timely

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PERSPECTIVE OF TOTAL QUALITY 9 and proper communication with employees and stakeholders reduces misunderstanding and improves productivity and business efficacy. Hence, the quality of communication is very crucial.

Quality of Infrastructure Quality of infrastructure directly and indirectly affects the overall quality of life. It should not be left to chance. Rather a concerted effort is required to ensure the right quality with appropriate investments in infrastructure.

Quality of Governance and Community Services The impact of effective government, quasi-government and community services on the overall economy and society is self-evident. Without a secure law and order situation, essential services like garbage clearance and road repair, and an effective legislature, no society can function.

Quality of Civic Discipline Civic discipline is one of the critical elements to the development of a sense of quality. Efforts to attain quality cannot be supported and sustained if there is no sense of quality in the basic norms of community living. Small but crucial things like consideration for others, keeping public places clean by throwing garbage in the designated places, not disturbing the neighbourhood peace, forming queues in banks or at ticket counters, etc. are important. Bad habits stemming from cultural influences and history or from poor economic conditions and a reduced sense of stakeholdership can be corrected with education, discipline and by creating a suitable environment.

Quality in Housekeeping One cannot expect quality from those who can’t keep their own houses tidy and clean. The mindset, which ensures consistent quality, is aided by habit and routines that maintain quality. Housekeeping instils the discipline essential for quality. Keeping files in order, maintaining a clean workplace, creating and maintaining proper locations for all materials, etc. are minor habits that lead to quality. Safety is another aspect that is to be given due attention. Kitchens and toilets should be kept clean. Untidy kitchens and dirty latrines in households or offices show that the people working or living there are apathetic towards hygiene, indifferent to the needs of others and uncaring about good quality.

Quality of Our Environment The quality of an environment is directly proportional to the attitudes to quality of the people inhabiting it. The quality of our political and business leadership

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10 PHILOSOPHIES AND CONCEPTS affects the quality of our environment to a large extent. Some societies pay scant respect to human dignity or civic discipline whereas some enforce civic sense in their members in a bid to create a quality environment. However, regardless of cultural or geographical disposition, the common factors that spoil the quality of an environment are hypocrisy, corruption, bureaucratic delays, illiteracy, hierarchical egotism and disregard for human dignity. An organization must have an environment of belonging where employees can share and implement their ideas without fear. If there is an atmosphere of fear, the employees will hesitate to report defects and shortcomings as they will be reluctant to be the bearers of bad news. If quality is not on the top of the agenda of management meetings, it will never be a serious issue in an employee’s mind. A large number of top-management professionals do not realize that a great deal of dedication, meticulous planning and patience is required to create or improve the quality of the work-environment. Where the main aim is to make profit, improving the quality of products or services is believed to cost extra money and does not get priority. In a quantity-driven culture everyone has specific roles—managers work to preserve and promote the company’s interests and workers to follow instructions. In the worse cases, the decision-makers or executives are convinced they understand the needs of the customers and workers, but are oblivious to ill-maintained equipment, lousy housekeeping, smelly toilets, dirty cafeteria, cobwebs on walls, disorganized inventory, high decibel levels, lack of enthusiasm and drooping shoulders. Similarly a good family environment ensures well-groomed children and happiness among the members of the family. Irresponsible parents who engage themselves in acts of poor quality forget the duties of parenthood. It is very difficult to imbibe good values in a family atmosphere where the children see these values being trampled. In a wider perspective, poor infrastructure, sluggish civic amenities, inefficient municipal services, frequent political disturbances, hostile trade unions, corrupt trade practices, poor medical services, pollution, etc. are the signs of an inadequate government that breeds a culture of compromise in quality. Imbibing and implementing the core universal values of quality irrespective of divergent political views and interests among the stakeholders can only create a quality environment.

Quality of Management The quality of management is very crucial as it has a cascading effect on the quality of all things impacted directly or indirectly by management decisions. The quality of products and services produced reflects the attitude and intention of the management. Similarly, the quality-consciousness of a head of household, efficiency in managing the family chores and other activities has an impact on the quality of family life and the upbringing of children.

Quality of Whatever We Do Our ability and character reflect in whatever we do; hence they ought to be of good quality. We must understand the fine distinction between doing right things and

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PERSPECTIVE OF TOTAL QUALITY 11 doing things right. Doing right things is quality, while in doing things right one may do unquality things right. Even our leisure activities like reading, dining out, our choices of entertainment reflect our quality-characteristics. In some spheres of activity quality can be measured by exterior criteria while in others self-satisfaction is the only yardstick. A conscious effort to achieve quality in whatever we do instils a proactive paradigm for quality.

Quality of Self Quality begins with self and then embraces all. Many ignore this elementary fact. The individuals make up a society, and they are part and parcel of processes involving any human activity. Therefore the quality of the basic unit of a society i.e. the ‘individual’ is important. An individual who does not care for quality should have no moral right to expect quality from others. Quality of people is the most critical element in building an organization, society or country. An individual who does not care for quality has no moral right to expect quality from others. It is important that people who wield influence or power, or hold managerial or leadership positions should individually and collective take initiatives for making quality people to take the nation to new heights.

DISCIPLINES OF QUALITY To excel in Quality implies that quality has to be the way of life and all aspects and activities of life must embrace quality. The famous scientist and philosopher Einstein had stated that only human task is to make good easy and bad difficult. This is a simple, beautiful and all pervasive meaning of quality. The dictum ‘good doesn’t play dice’ implies that one cannot leave quality to chance. However, it is easily said than done, it calls for cultivating certain basic disciplines of quality that need to be updated and upgraded according to the demands of unique environment and changing time.

Quality of Thinking The well being of human society has always depended on good thinking, and will continue to do so despite ever increasing impact of science and technology in our life. Thinking is the only skill that will never become obsolete but the bewildering question is how the quality of thinking can be tuned up to meet the demands of changing time? All our actions are triggered by human brain, which in turn is impacted by our thinking. Thinking is intimately connected with our perceptions or paradigms as we call it. Paradigm is source from which our attitudes and behavior flow. The paradigm or perception is the first stage of thinking, and is conditioned by an intuitive trait of recognizing something as it fits some pre-existing pattern. Normally ‘thinking’ clutches to the old paradigm or some dogma, and as such the call of the new dawn falls on deaf ears or viewed with suspicion and fear

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12 PHILOSOPHIES AND CONCEPTS of unknown. That’s the reason of so much opposition to change. The natural phenomenon of human mind is to get conditioned easily, carry out certain tasks in specific ways, and be reluctant and rigid to accept changes—these characteristics promote status quo thinking. There are virtually no techniques or tools to facilitate paradigm shift, a fundamental shift in thinking or paradigm shift is often realized when pushed back to the wall or in a life-threatening crisis or when thrown into a newer role of responsibility or accountability. This simple reality is equally applicable for individuals as well as for organizations. The only known effective way is making conscious and flexible effort in updating thinking; a determined effort through constant self-education sharpens the quality of thinking enabling replacement of old perception which is often called paradigm shift. Such conscious determined effort to acquire positive thinking and cultivating different ways of seeing and doing are quite effective for paradigm updating. The second stage of thinking is about judgment, which analyses what we know and tells us how to act. However, clout of perception is, usually more than judgment. Several techniques and tools are available to aid judgment; interested readers may refer to various publications on judgmental tools.

Centering on Eternal Values and Principles Certain principles and values provide deep insight into the fundamentals of quality. Quality is a question of ethics, social or business. By centring on the correct principles, an organization can build a solid foundation for its own prosperity that will also benefit society, and as a result, the individuals within that organization will also build strong characters. Value-centric organizations withstand the test of time and escape the damaging scandals that can make the stock price of even a well-respected company take a nosedive. These values are very simple and include remembering societal obligations, caring for customers, respecting human dignity, unleashing the hidden talents in people, showing concern for environment and safety, being trustworthy to investors, showing constancy of purpose, etc. while principles include honesty of reporting, fair treatment of stakeholders and shouldering of corporate responsibility. However, many businessmen and professionals do not give much credence to the necessity of the principles and values because to them the end (profit!) is more important and not the means. Sadly in many cases a given management may talk about principles or values while hypocrisy takes its toll and the declared principles and values are finally trampled in practice.

Envisioning An organization should clearly envision its future since vision is the destination while missions and values act like the rudders that help sail in that direction. Envisioning complements our imagination and conscience. According to Stephen R. Covey, two unique human endowments that enable us to expand our proactive efforts are imagination and conscience. Imagination creates a goal to aim for, while conscience steers us on the right path to achieve it.

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Being Alive to the Management of Entropy Entropy has to be visualized as a natural phenomenon occurring in business and life. With the increased velocity of change, disorder and uncertainties will be more pronounced. The downtrodden can no longer be neglected, providing minimum standard of living to all will be major global issue. Demands for quality will reach unprecedented higher scales with no limits and cost-effectiveness will be under constant downward pressure. Product packages consisting of blurred products and services will be rejected with customers demanding a la carte product packages. Globalization and use of communication and information technology has caused the virtual death of distance, so customers all over the world will expect identical quality and almost instant service. The new market forces of changed value system of new generation and altering demands of senior citizens, with prolonged life cycle, will demand innovation and creativity. Speed, 24 × 7 integrated service, e-commerce, flexibility, convenience and pleasure in shopping, etc. are the new mantras Simultaneous pressures for corporate social responsibilities, green movements, ethical issues, new regulations of environment and health hazards, stringent corporate governance norms, etc. will add to the new dimensions of challenge. The developing countries will further face twin challenges of catching up with the developed countries and raising the standard of living of its large number of people living below poverty line, this obligation can no longer be capped. Management of entropy implies keeping pace with changing time. In fact it will involve tackling the multidimensional quality issues at various levels and on unstipulated fronts. This requires striving for higher levels of quality, which invariably implies radical changes in attitude, habit, behavioural, technical and management skills, relationship, social interactions and governance. The multiplicity of changes cannot be handled alone as they are too complicated and delicate for singular attention. Therefore the new strategy of quality and efficacy calls for of partnership with business stakeholders and involvement of employees through teamwork and empowerment.

Philosophical Indoctrination Philosophical indoctrination provides guidance in choosing the road map, and maintaining consistency and constancy of purpose. Quality requires delicate care and handling at every stage; embracing quality philosophy gives a man conviction to nurture and groom quality right from the embryo stage.

Discipline in All Walks of Life Indiscipline cannot beget ‘quality’ and is the antithesis of quality-consciousness. For instance garbage on the road, jumping the queue in service counters, violating traffic rules, not coming in time to the place of work, process indiscipline, spurious medicines, compromises on business ethics, extortion, noise pollution, promoting coaching class instead of teaching in class, manipulation of accounts, bribery, etc., are all manifestations of indiscipline in social, professional and public life. Quality

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14 PHILOSOPHIES AND CONCEPTS cannot be sustained or even germinated amidst such indiscipline. It is necessary to have at least some basic discipline to improve quality in all areas of public and business life including government and social services. Some aspects of discipline have to be self-imposed while others need to be enforced or monitored by the concerned authorities. One may have lofty visions, wonderful strategy, consensus through participation but shoddy and disorganized deployment and implementation can spoil the whole thing. Disciplined organizational governance is a necessary facet of managerial work-culture to establish credibility and win confidence and trust of the stakeholders.

Ongoing Education The famous exhortation of the Japanese quality guru Dr. Iishikawa, ‘Start with education and end with education’ sums up all about the need of on going education for quality. Education imbues moral and social values, and helps attain higher intellectual levels. Many of the quality characteristics are sensory but qualityconsciousness can be attained or enhanced through proper education. Education also teaches the basic disciplines of community and social living. Education and training can influence change of mind-set, and thus alter or modify attitudes and habits that promote quality. Most importantly the principal focus of education and training should be for character building, i.e. building quality of people. Unfortunately in most developing countries enough investment is not made on education. Some critics say that this policy is deliberate so that unscrupulous men can prolong their rule at the expense of the uneducated mass.

Proactive Work-culture A proactive work-culture can aptly be described through the famous saying of Einstein that only human task is to make ‘good easy and bad difficult.’ The underlying mission is the obligation to work towards the long-term well being of the organization and society at large. It requires compliance of few things-like doing right things, focus on process, following right work practices, no compromise with quality, elimination of waste, abhorrence of malpractices, service orientation, promoting healthy relationships at work place, maintaining discipline in community spheres, etc., etc. Other notable characteristics of proactive work-culture are the involvement of all through different types of teamwork, continuous improvement of quality, cooperation, and not deterred by hard work. Most importantly ‘Proactive work-culture ‘ implies ongoing monitoring, correcting and reorientation of work culture to the imperatives of changing times.

Nationalistic Fervour Nationalistic passion promotes quality; one takes pride in the quality of a country’s products, culture and heritage. The Japanese, Germans, Americans, now the Chinese all take pride in products, and achievements in product innovation,

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PERSPECTIVE OF TOTAL QUALITY 15 progress in technology and science, social development, achievements in Olympic games, etc. The French are proud of their Airbus industry, cheese and wine, the Italians are proud of their shoes, packaging machines, spaghetti, wine, etc. In India we still suffer from cynicism that has a negative effect on quality especially when people accept their shortcomings for granted. Businessmen and leaders may consider systematic promotion and exhortations of nationalistic feelings by institutionalizing recognition and wide acclamation of quality achievements in the country so that others are inspired.

Self-appraisal Self-appraisal is very important tool to recognize inhibiting factors in oneself and help take corrective actions to improve quality of self. A quality driven person consciously introspects his own drawbacks or shortcomings to realize insight and create an ability to demarcate between dogma and emerging reality. One of the main disease that affect so-called successful person is the egotism— an egocentric person fails to see the obvious because of induced arrogance he is unable to think rationally. A professional with ego disregards listening to the voice of customer and is oblivious to the pains and problems of the employees. Humility is the virtue of an enlightened person who accords due respect to human dignity. A true professional recognizes every body’s hidden talents including his own and this realization propels him to leverage his own talents for the good of the organization. A quality conscious man subordinates his interest to the interest of the organization. He sincerely believes that quality starts with self, and sees himself as a catalyst to spread the quality movement.

SOME COMMON DEFINITIONS OF QUALITY FROM THE INDUSTRY It is a challenge to define quality comprehensively, and there is little agreement on what constitutes quality. There is nothing called absolute quality; it is relative and subjective. It is a moving target. When it comes to delighting the customer, it is difficult to define the delight factor or put a shape to the expectations that may lie beyond what is on offer. How do we define the characteristics of passion and commitment to serve the customer, stakeholders, or the society at large? Quality is also in little intangible things like courtesy, keeping promises, meeting deadlines, cleanliness, responsiveness, the uniqueness and artistry of products and services delivered, etc. The concept of quality varies among different countries, regions, economies, ethnic groups, age groups, etc. and this compounds the problem of definition. For instance ripped, patched, embellished or distressed jeans may represent high fashion quality to the young, but would be regarded with horror as damaged goods by their elders. Even the published national and international quality standards for trade, industry, law and governance fail to define and cover all facets of quality. Philip B. Crosby, the noted quality consultant, feels quality should be expressed in specific criteria and in measurable terms devoid of any emotional vagueness so

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16 PHILOSOPHIES AND CONCEPTS that logical action can be taken to attain it. Crosby further states that quality must be defined as ‘conformance to requirements’, and should be measured in costs incurred. Requirements must be clearly stated so that there is no ambiguity, and continuous measurement should be taken to ascertain conformance to those requirements. Non-conformance of any sort should be regarded as absence of quality. J.M. Juran, a pioneer in quality expertise, defines quality as ‘fitness for usage’. According to him, the word ‘quality’ has multiple meanings of which two are critical. One is product performance, which results from product features that create satisfaction. The product performance should be at least equal if not superior to the quality of competing products. The other is freedom from deficiencies that cause product dissatisfaction and lead to complaints from consumers. Juran carefully points out that product satisfaction and product dissatisfaction are not exact opposites. According to Crosby, Juran’s definition of ‘fitness for usage’ may be useful for concept decisions and design considerations, but cannot be practically applied while buying and manufacturing. Juran on the other hand strongly feels that quality being a moving target, Crosby’s ‘conformance to requirements’ cannot meet the changing needs of the consumers in the long run; it can only temporarily meet certain quality standards and involves the danger of wastage as such standards cannot be universally applied. Definition of quality as per ISO 8402:1994 is: ‘Totality of characteristics of an entity that bears on its ability to satisfy the stated and implied needs.’ This was modified by ISO 9000:2000 as: ‘Degree to which a set of inherent characteristics fulfils requirements.’ The ISO 9000 standard clarifies that ‘fitness for usage’ or ‘conformance to requirements’ represents only certain facets of quality. A.V. Feigenbaum, former President, American Society for Quality Control, as well as author of the book Total Quality Control, has defined product quality as ‘The composite product characteristics of engineering and manufacture that determine the degree to which the product in use will meet the expectations of the customer.’ Though Feigenbaum’s definition refers to manufacturing, it could be easily interpreted for various service-oriented businesses. Feigenbaum is more direct when he states, ‘Quality is what the customer says it is.’ Masaki Imai, in his book Kaizen, defines quality as anything that can be improved, and emphatically points out that it will be improper to think in terms of ‘product quality’ only. The Kaizen philosophy stresses continuous improvement in all walks of life and by involving everyone. Imai elaborates on the quality of the three building blocks of business: hardware, software and manpower. However, he stresses that the quality of manpower must be of foremost concern. Tom Peters, in his book Thriving on Chaos, states that quality must always be defined as the response to customers’ perceptions of excellence. He also emphasizes the moral and aesthetic aspects of quality, which should be recognized as a virtue to be sought without any consideration for profit. Peters defines quality as the ‘manifestation of practical action that translates into the attitude and emotional commitment to excellence.’ Quality-consciousness must become a part of one’s nature, and the passion and precision in everything one does must come naturally. The sincerity and innovativeness in ensuring customer care and deliveries achieved beyond expectation enhance perceived quality.

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PERSPECTIVE OF TOTAL QUALITY 17 Ishikawa in his book What Is Total Quality Control? talks about a holistic, all pervasive approach towards quality that includes quality of work, quality of service, quality of information, quality of process, quality of division, quality of the skills of people including workers, managers and executives, quality of the system, quality of the company, quality of the objectives, etc. In such a desirable quality state there will be conformance to design parameters, savings in raw materials and energy, improvement in productivity, reduction of overall costs, and the cumulative effects of all these would make customers as well as stakeholders happy. The operational definition of quality, as per Deming, is the characteristic that brings in a predictable uniformity in the delivery of products and services by narrowing down the possible variations from intended or planned target. According to Deming’s philosophy quality is the pride of workmanship or the joy in work from the employee’s point of view. From the user’s point of view, quality is anything that enhances satisfaction. Based on this philosophy, the definition of quality on a bigger canvas can be stated as the totality of characteristics that meet societal obligation by maintaining the constancy and consistency of purpose and ensure an organization stays in business by providing products and services that care for customer satisfaction, induce pride in employees, create more jobs, enhance productivity and improve the standard of living. Dr Deming considers quality as an obligation and top management’s obligation in this regard is very crucial. Dr Ishikawa goes a step forward by saying, ‘quality’ will help world peace. Merely an operational definition of quality limits the perspective, which in turn may limit the efforts and zeal for higher realizations. To combine the definitions of quality given by ISO 8402:1994, Deming and Ishikawa, we may define quality as, the totality of characteristics (tangible and intangible) of an entity that enables meeting the stated and implied needs, responsibilities, obligations, or combination thereof for its customers, stakeholders and society at large, and in doing so, creating wealth for society, improving the environment and enhancing the quality of life. However there is no doubt that each organization needs to develop its own definition and understanding of quality with the perspective to create an understanding amongst its employees and partners in order to perform various activities as well as pursue policies and values that will enhance customer servicing and add transparency to corporate governance. This may require sub-definitions of quality within the defined overall quality perspective so that concerned persons, departments or associates clearly understand and perform their roles. Frontline manufacturing employees need to understand quality in terms of specifications while the senior managers need a much higher understanding of quality to plan for the total quality objectives of the company. This implies that total quality plays an important role in business and national affairs. In a larger perspective, total quality can be a critical instrument to induce a thought revolution among leaders and top management in order to correct the irrational behaviour of polity and business, the cumulative effect of which in turn will revitalize the economy, improve the political climate, eradicate poverty and illiteracy, and thus bring about a national resurrection.

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ECONOMIC COMPULSIONS TOWARDS QUALITY In a monopoly, businessmen can get away with the murder of quality. However, in the current competitive market, relative quality is the single most important factor affecting the prosperity of business units. The present market scenario is overwhelmed by a plethora of products, particularly consumer durables, and at the same time industry is dealing with rapid technological obsolescence, new innovations, dismantling of trade barriers and geographical boundaries, demand shock, global fluctuations in trade and markets, etc. The customer is no longer taken for granted, and with so much to choose from, customer preferences too have become unpredictable. Business strategies of the past, traditional quality management systems and cost-plus-pricing policies, have become redundant. Even worldrenowned companies are facing great competition in spite of their strong brand names and reputations for quality. In sectors like banking, hospitality, health, tourism, education services, etc., no other point of differentiation is proving to be more powerful than quality. In this scenario market leadership can only be established through the relative perceived quality of products and services. As a strategy to establish a distinctive edge in relative quality, ‘product and service blends’ are being offered increasingly. No matter how contradictory it may appear to be, such market competition actually gives a boost to quality. The market forces ultimately abandon those who ignore the market call and continue to compromise on quality. Quality affects a company in two principal ways: primarily, by the effect it has on costs, and secondly, the effect it has on the sales income. Quality at all stages of planning and input ensures drastic reductions in cost and provides improvement in the final output. Cost-effectiveness is an integral characteristic of total quality. The issue is not to improve a mediocre product but to make a near-perfect one at lower cost. The TQM philosophy has established that when quality goes up, costs come down. This explains the popularity of initiatives like six-sigma, balance scorecard and business process outsourcing. A company offering a quality product at a competitive selling price has the scope to increase its sales volume. Costeffectiveness and an enhanced market-share improve profitability. Clearly quality pays, notwithstanding the traditional idea that quality is costly. Quality cannot be achieved consistently by concentrating only on certain areas, as it is an outcome of the whole approach to quality, termed ‘total quality’. Total quality includes every tangible and intangible aspect of all things connected with a product or service, i.e. the totality of all inputs, resources, processes, and milieus and the efforts of all persons and entities involved. In this dynamic yet volatile business environment an organization cannot achieve and sustain excellence unless it adopts total quality as a strategy. The real economic benefit of total quality lies in the fact that an organization can earn its return on the capital employed, and thus develop the resilience to meet future challenges so that it can thrive and prosper, benefiting stakeholders and society at large. Hence, total quality is becoming an integral part of business economics.

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PERSPECTIVE OF TOTAL QUALITY 19 A good quality environment raises the morale of an employee, as there is no constraint on his producing quality output. Besides, the pride of doing a quality job gives him a feeling of fulfilment too. The employee also develops a sense of security for his own and the company’s future, as he knows that quality of output ensures that the company will remain in business. Involvement in quality programmes gives recognition and a feeling of self-actualization to the employee. A company must invest adequately in continuous improvement of operational and other business processes in order to achieve a higher quality of products and services relative to the market. Despite automation and extensive usage of machines, quality remains an outcome of human effort that can only be achieved through the involvement of people. Therefore organizations cannot shirk their responsibility to build the sense of quality-consciousness in people, since fit manpower is what gives them their strength to confront and overtake competitive threats. Investing in initiatives to create quality-conscious people holds out manifold returns over the long term. This process also contributes significantly to nation building. Professionals need to understand that the traditional management and planning systems institutionalise poor quality at planning stage itself by making provisions for lower yield, inevitable operational wastages, in process inventory losses, rectification and salvaging costs, extra burden of inspection, some percentage loss in equipment utilization, some drop in operating efficiency, etc. These built-in operational inefficiencies in planning are dangerous as these create hidden losses, which are never reported separately in the Profit and Loss accounts. Management consider these as cost of doing business. Studies reveal these hidden losses can be as high as 40 per cent or more of the sales cost. Despite such high hidden costs and shoddy quality, companies in the past have survived through their enjoying near monopoly. However, in the present scenario, producing quality goods at competitive prices is an imperative for survival in the market. Discarding the traditional planning systems, TQM focuses on the process to stop all forms of wastages and inefficiencies, and institutionalises continuous process improvement to ensure quality output at competitive cost as per changing market requirements. Cost reduction is a direct outcome of improved quality. Implementation of total quality requires a change in the mind-set and correction in the perspective of the implementers. Leaders in politics-governance or opposition, business, service, or other fields must understand the concept and expanse of total quality, and the ramifications of ignoring it. This profound knowledge also needs to be comprehended by planners, and bureaucrats. People in finance, who are often too preoccupied with short-term objectives or financial gains, also need to comprehend this concept. Quality has thus become an imperative for economic success, and without it all other measures of system- and nation-building will fail. National agendas based on principles of total quality will add to the nation’s prosperity, as only qualityconscious nations emerge as winners. The criticality of total quality including quality of people at the centre stage of business strategy and nation building is well established and efficient deployment of this strategy can create wealth for the society. It is also an established fact that the quality conscious nations are the winners.

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20 PHILOSOPHIES AND CONCEPTS Developing countries are still struggling to percolate the benefits of economic development and modern technology for poverty alleviation and raising the standard of living of the majority oppressed strata of their populations. Undoubtedly it is the failure of management. An integrated quality approach by politicians, bureaucrats, intelligentsia and businessmen through resource planning, mobilization and deployment can unleash a positive cycle of economic chain which will also put the economy on a better pedestal. Mankind has seen successful culmination of such experiment in post-war Japanese revival. Many call it a miracle but in essence it was a sincere concerted effort and dedicated deployment of the principles of total quality in the field of business economics.

OBSTACLES TO QUALITY Deficiency in adhering to the disciplines that lead to quality is a major setback, and unless tackled at an early stage, can turn into a serious disease obstructing all efforts to improve quality. Visionless and corrupt political systems are a bane to quality, and action taken to replace such governance in itself is an act of quality-consciousness. However, there are always many resistances to radical transformation. By nature or by nurture, some naturally care for quality while some are callous or indifferent to it; teamwork comes naturally to some whereas some just cannot work in teams. Laziness, negativism, emotionalism, fatalism, etc. are often congenital or social factors deterring quality. These attitudinal problems vary among different individuals and groups. If the negative paradigm of the governing class is very strong, correcting it requires bold and unique interventions by concerned groups and individuals at national and state levels designed to induce a paradigm-shift and establish quality-benchmarks for public, legislative and governing positions. Regressive characteristics need to be noticed and reoriented to induce qualityconsciousness and productivity. A. P. J. Abdul Kalam, the then Indian President, in his address on Republic Day in 2005, called upon the nation to launch a mission to remove all obstacles in five key areas, namely, agriculture and food processing, education and health care, information and communication technology, infrastructure development and selfreliance in critical technologies. His bid was to generate more employment and a better economy that will eventually improve the quality of life of people. Qualityconsciousness of people is essential for inducing quality in all areas of society and industry. In the context of an organization there are many external and internal constraints that impede quality. Some of the external factors are economic recession, inflation, government restrictions on imports, trade barriers, restrictions on technology, unfair trade practices, etc. An organization cannot have direct control over these factors, but besides that, there are many internal factors that may hinder quality. The very structure of organizational ownership sometimes constrains the growth of an organization. If the owners have a feudal mind-set, narrow outlook and lack of professionalism these become the obstacles to quality. In addition, whatever the

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PERSPECTIVE OF TOTAL QUALITY 21 structure of the company, hypocrisy and abuse of power in the top management, lax policies in eliminating defects that are allowed to move on to the next process or to reach the consumers, also harm quality. Such acts induce a work-culture of ‘chalega’ [as popularly known in Hindi language, meaning ‘Oh it will do, let it go’]. The employees develop a cynical attitude towards quality and the exhortations, ‘doing right the first time’ or the likes remain only paper slogans or remain hung on the wall covered with cobwebs. Therefore, top management’s commitment is not good enough to establish their credibility with its own employees, it is the visibility of management’s commitment that motivates employees to embrace the quality movement. Modern day business cannot ignore the trade unions or employee associations. Without active support of trade unions it is just not possible to reorient the workculture focused on quality. The days of bulldozing have gone; management, therefore, has to take initiative to build partnerships with the unions to promote quality and thus protect the interests of employees and stakeholders. Foundation of this relationship must be built on the principle of never to bargain with productivity or quality of products and services. There are many novel examples of managementunion co-partnering particularly with some firms in Japan and Brazil. Even when the management of ITC Ltd were employing various means to improve the quality and productivity of their Kolkata plant, success came through only with an active participation from the union, and ultimately the plant recorded the highest productivity amongst all the Indian plants of ITC. Despite such exemplary successes, it is a pity that many unions and management still react cynically to the prospect of such co-partnering and view these initiatives with suspicion. In order to protect the interests of employees, these trade unions need to embrace the totalquality approach and act as catalysts to augment quality-conscious work-culture, instead of becoming obstacles to quality themselves. Education in quality-consciousness for trade union leaders is essential—they ought to be convinced that the long-term interests of the employees lie in progressive improvements in quality. They should also learn that having a quality edge brings stability to a business, protects the employees and creates employment opportunities.

QUALITY DEPLOYMENT Quality is not a fixture or furniture that can be ordered, procured, and installed. Quality is a mission; it does not come by having a wish list. Quick fixes may work occasionally, but the effects are not long lasting. Quality is more about doing the right things than doing things right; most fail to recognize this subtle difference. It is the result of good intentions, sincere efforts, intelligent direction and skilful execution. Besides dedication and patience, quality also requires a flexible mind-set and approach. Success comes only when quality becomes a way of life or working. A concerted pursuit is needed, as quality is a journey and not an end by itself. Management constantly has to insist on quality and encourage employees to work

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22 PHILOSOPHIES AND CONCEPTS

Quest ← Q U → Urge Admire ← A L → List Inspire ← I T → Transparent Yield ← Y Figure 1.1: Traits Hidden in the Letters of Quality

on areas that need further improvement. Transparency in decision-making is another critical issue that enhances the credibility of management and the organization. The above-mentioned points are presented in Figure 1.1. Monitoring quality is certainly not a one-man job, but more often than not, it ends up becoming nobody’s job. The job of the quality control or inspection department is fault identification, data collection and analysis, not the production of quality—however, they check and report on quality levels and are to some extent responsible for them. In the final analysis, the success of quality deployment depends upon the synergy between the intentions of the management and the participation of all concerned. Each company has to devise its own deployment strategies based on its unique characteristics and milieu, but nevertheless incorporating the aforesaid fundamentals. Quality deployment at national level is a tricky task, it calls for sincere and voluntary involvement of all political parties, apex body of business associations can perhaps act as facilitator. Sincere effort of political leaders will have salutary effect on bureaucrats and other rungs of society. Despite reluctance, mute opposition, and sabotaging such efforts must continue, but the vexed question is who will take the lead? The corporate sector is better placed to approach the subject and organize meets to give political leaders initial exposure to the philosophies of transformation management, and if this first hurdle could be overcome then the subsequent steps can evolve out of consensus.

SUMMARIZING TOTAL QUALITY Total quality is not just a phenomenon; it is a holistic approach toward life. It is not a new discovery or revelation—it has been there since the evolution of mankind. Early man’s endeavour for quality has raised modern man’s standard of life. Quality is not an accident; it is the result of integrated efforts and is often dependent on many seemingly unconnected activities. Understanding and implementing quality also require shedding and ultimately banishing ego. The force of entropy continually disrupts and degrades quality. TQM or any other quality initiative primarily fails because it is very difficult to sustain quality once achieved. The co-existence of extreme levels of prosperity and poverty is definitely not a sign of quality-consciousness in a nation or an organization, nor is the high incidence

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PERSPECTIVE OF TOTAL QUALITY 23 of terror, crime, injustice and social disorders. If imbibed and practiced, the philosophy of true quality ought to eradicate poverty, raise the standard of living and bring about world peace—as prophesied by quality gurus like Deming, Ishikawa and others. Why then this state of affairs? Is it our narrow or limited understanding of quality, or is it something in human nature that wishes to abuse quality? Why do we see that not all ISO 9000 certified organizations record high growth or, even survive? Why do organization go under even after winning awards for Total Quality Management? The only plausible answer is that they initiate TQM as a fad to get some instant results or acquire an ISO 9001 certificate only as a business gimmick, without providing the substance and the real infrastructure that should back it up. It is sad but true that very few organizations intend to succeed by deploying quality. The great impressionist painter Monet once advised his disciples that to understand the real nature and worth of a painting one should not perceive the trees and houses as representative symbols, but concentrate instead on the dots or triangles or squares of colour. Even the quality of dots in a printout is what determines the final quality of a print. We must free and train our minds to visualize the larger picture of quality, which is the cumulative effect of small pictures. Such perseverance helps to recognize the real nature of the object. Seeing the smaller picture ‘q’ as well as the bigger picture ‘Q’ is necessary to construct a real quality culture. Quality is multi-disciplinary; it is the compact effect of small characteristics that make quality, and the cumulative quality of smaller elements decide the quality of the whole. In other words to realize the envisioned bigger picture, one must identify and concentrate on the small ‘q’s. This perspective of quality is more complete, more practical and is universally adaptable. Figure 1.2 is a graphic representation of the importance of small ‘q’s within the bigger ‘Q’.

Figure 1.2: Total Q is a Larger Picture Comprising all the Small Tangible and Intangible ‘q’s. The Finer and Sharper the Dots, the Clearer is the Final Picture.

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24 PHILOSOPHIES AND CONCEPTS In earlier times quality-consciousness was institutionalised through organized religion at the social level, while at the family level, moral quality was preached and monitored by elders. These old ways of institutional monitoring are on the wane in this modern era, while quality perceptions are undergoing radical paradigm shifts induced by market economy and globalization. This has not yet led to a global standardization as different countries and races still have different ideas of quality pertaining to moral, ethical and social issues. This is due to attitudinal differences in the perception and practice of quality. As discussed in this chapter, the progress of civilization is intimately linked with quality. With time many of the old perceptions and parameters of quality have changed, however, the core quality values remain universal. It is the capability and tenacity to perceive total quality and the quality of deployment that ultimately matters.

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2

CHAPTER

Synopsis of Philosophy, Concepts and Implementation Principles t is interesting to note that there is no original philosophical book or work having as such the title Total Quality Management. The business philosophy evolved out of combination of different quality management philosophies and approaches gave rise to the generic name of Total Quality Management, popularly known as TQM. Also, there are no books on Total Quality of Management (TQOM), which underscore the criticality of the role of leadership or top management in implementing TQM philosophy in governance or business management. Many books on TQM, Total Quality Control (TQC), company-wide quality control (CWQC) and change management written by various authors are available in the market today. However, Walter A. Shewhart, A. V. Feigenbaum, W. Edwards Deming, J. M. Juran, Philip B. Crosby, Kaoru Ishikawa, Tom Peters, Masaaki Imai, Genichi Taguchi, among others, are considered the pioneers of change/quality management philosophies, or total quality control. There are two distinct approaches—one that advocates philosophical indoctrination envisaging a bigger picture or role of quality in national resurrection, economic development, business management etc., while the other specifically proposes a new approach to total quality control or quality management in industries or service sectors. Dr Deming along with Tom Peters, Dr Ishikawa, Masaaki Imai, etc. have been the principal proponents of philosophical approach, which has got the generic name TQM. Many concepts and tools and techniques of total quality control prescribed by other eminent philosophers like Dr J. M. Juran, Philip B. Crosby, A. V. Feigenbaum, Dr Stewart, Dr Taguchi, etc. have become integral elements of TQM philosophy. As the focus of this book is on total quality of management based on the principles of TQM only the relevant management related philosophies and concepts of eminent philosophers have been discussed in this chapter, the concepts purely related to quality control, or quality management per se have been excluded for obvious reasons.

I

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26 PHILOSOPHIES AND CONCEPTS Study of different approaches of all total quality management (TQM) or total quality control (TQC) or company-wide quality control (CWQC) principles can help the professionals to acquire knowledge and appreciate the real worth and applicability in wider context or in their own unique situation. Unfortunate ground reality is that hardly the politicians, leaders, have any inclination or patience to study books on TQM philosophy. Almost it is same case with egocentric practicing professionals. However, some professionals genuinely do not get time to study the approach of all philosophers. To present an overall perspective on TQM, this chapter includes a brief comparison of different change and quality management philosophies and a synopsis of various quality improvement approaches.

THE CORE PHILOSOPHY Responsibility Towards the Nation and Society TQM, if properly understood and interpreted, is in essence the rediscovery of philosophy of human consciousness as per the scripture of the ancient Indian philosophy, Vedanta. At the centre of spiritualism is the adoration of Human dignity and welfare, dedicating all efforts towards ever improving quality of human life. This is, also, in nutshell the essence of TQM philosophy. One of the central tenets of TQM is that a country or an organization can come out of crisis, and even thrive on chaotic conditions around. (Titles of the books Out of the Crisis by Dr W. Edwards Deming, and Thriving on Chaos by Tom Peters aptly brings out this aspect.) The philosophy addresses the most traumatic issue of mankind to alleviate poverty and raise standard of living of the multitude living below poverty line. The statement of Deming ‘any country with enough people and with good management, making products suited to their talents and to the market, need not be poor’,1 lays emphasis on institutionalising good management and harnessing the ability to produce marketable products to keep the chain of economic activities moving. The challenge of national resurrection demands first and foremost dedication and constancy of purpose to plan and implement integrated short and longterm initiatives to produce competitive quality products and services to make the economy stronger and vibrant, create more employment opportunities, improve upon the ‘Human Development Index’, and ensure that benefits of liberalization through economic and technological development reaches the vast majority living below poverty line which in turn will enlarge the domestic market and economy. A company should continue to grow and prosper and become like a Banyan tree, creating multiple economic and social opportunities for many and thus perpetually serve the society and nation. It is obligatory for trade and industry to play its contributory role in nation building. TQM calls for the fulfilment of the needs of the organization and society in a mutually exclusive manner. A company that develops resilience to survive, compete, register steady growth, and prosper despite the vagaries of super dynamic

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SYNOPSIS OF PHILOSOPHY, CONCEPTS AND IMPLEMENTATION PRINCIPLES 27 changing environment, will be serving the nation in true sense as it generates wealth for the nation. According to Deming, the ‘performance of management should be measured by potential to stay in business, to protect investment, to ensure future dividends and jobs through improvement of product and service for the future, not by quarterly dividend.’2 A profitable company directly or indirectly contributes to government revenues by generating national wealth; it distributes part of its surplus to shareholders, enhances buoyancy of the share-market, as well as invests part of its surplus in meeting other corporate social responsibilities (CSR), and thereby invests in the growth of the nation. Society should be grateful to entrepreneurs and promoters for having floated companies, which add to national assets. Owners together with its employees are trustees of the companies that have been created for the society. The owners, promoters and professionals should manage their organization in a way that does justice to the expectations of society. Loss of market and resulting unemployment are not inevitable, they signify the greed of owners/management for short-term windfall profits, or reluctance to change the way of managing, and utter contempt towards the philosophy of corporate responsibility. Dr Deming had said, ‘Dumping employees on the heap of unemployed is not socially acceptable.’ A company has no reason at all for existence if it forgets the ideal of contributing to society and human life. In his book Entrepreneur and Gentleman, Akira Sueno, founder chairman of the Japanese company Showa Boeki, has stated, ‘it is true that profit considerations cannot be thrown out of the windows if an enterprise is to stay alive and grow, but truly, a company has no reason at all for existence if it forgets the ideal of contributing to society and human life.’3

The New Economic Age The accelerating complexities of the new economic age demand a new management philosophy. Recasting or revising old and out-of-date management trends will not suffice; a radically different philosophy is required to challenge and replace the old ways. Deming terms this ‘transformation’ while Peters calls it ‘revolution’. This whole approach is akin the transformation philosophy of the ancient Indian Vedic philosophical tenet that transformation sheds the old, and gets rejuvenated. Deming also says, ‘Transformation of style of management is not a job of reconstruction, nor is it revision. It requires a whole new structure, from the foundation upward.’4 Globalization, liberalization, outsourcing, and so on interconnectivity of global financial markets, etc. are no longer predictions but hard realities. Bouts of recession, inflation, and crisis of financial markets has become regular feature. No Country or Organization including large multinationals or conglomerates are insulated today from the ravages of economic cycles, they are no longer invincible. Moving quality benchmarks, innovative value addition and cost-effectiveness, enhanced responsiveness, flexibility, shorter order lead-time, continuous short cycles of product innovation and introduction, etc. are the new market forces. It is a

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28 PHILOSOPHIES AND CONCEPTS paradox that the ultimate cause of intense competition has often been competition itself; companies are competing for larger shares both in domestic and export markets through constant improvement and change which includes innovative financial packages. Understandably, traditional management practices can no longer tackle the complexities of this new economic age. Traditionalists dread this global liberalized economy, however, those seeking transformation are capitalizing on the opportunities being offered by this maelstrom of change. Top management must provide the vision and stimulus while the direction must be derived from TQM principles and concepts. The vagaries of this new economy can only be tackled by consistently delivering cost-effective yet high quality products and/or services in tune with market demand. Companies must keep their focus on long-term prosperity through short-term profits. The prudent strategy is to strike a fine balance between shortterm objectives and long-term prosperity without compromising on quality and competitiveness. The above principles can be extended to national planning and governance. The short-term focus on acquiring vote banks only creates a vicious circle of despair and compromises the future. Total quality must be the overriding strategy for national development too, as it is while charting a company’s survival or growth plan.

Quality: The Principal Strategy Progress of civilization continues to be the effect of the quest and endeavour for higher quality in all walks of life. Learning the theory and implementing the practice of total quality brings out the best in everyone. Progress is the effect of the quest to attain higher quality in all walks of life. Philip B. Crosby says, ‘Quality is the all-important catalyst that makes the difference between success and failure’.5 The word ‘quality’ does not refer only to the quality of products and services. Ishikawa says that the term ‘quality’ should manifest in every aspect from (a) the quality of service, information and processes, (b) the quality of the people involved, including workers, engineers, managers, executives in the company, and (c) above all, the quality of objectives. The TQM philosophy propagates this enlarged perspective, which should ideally include all facets of governance, management, business, community and personal conduct. Ishikawa firmly believes that this philosophy can bring about a ‘thought revolution’, correct all sorts of irrational behaviour within industry and society, and thereby ensure just allocation of resources, save energy, bring costs down, and increase productivity. The success of any organization or nation depends upon these key factors. In his book Thriving on Chaos, Tom Peters states that quality and flexibility will be the hallmarks of the successful economy. Quality has to be viewed in a bigger perspective and must become an integral part of an overall strategy to survive and be competitive. Juran sees the phenomenon of ‘life behind the quality dikes’ in first-world countries as a major effect of the pursuit of quality in those countries. Quality of life is dependent on the quality of goods and services available. Mere

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SYNOPSIS OF PHILOSOPHY, CONCEPTS AND IMPLEMENTATION PRINCIPLES 29 compliance with national or international standards is not enough to ensure this, because consumer requirements keep changing while these standards do not. Quality needs to be continuously reviewed to meet the requirements of consumers and society. By producing world-class products, the economy of a country will find a firm foundation and create more business and employment opportunities. Speaking about the wider ramification of TQM, Ishikawa states that if nations co-operate with each other in implementing TQM, the cumulative impact will radically improve the quality of life all over the world. The resultant prosperity will help eradicate poverty and illiteracy, and bring about peace. Conscious of their responsibilities towards environmental pollution and climate change, these nations will become more proactive in controlling factors causing environmental deterioration. As the challenge of raising the standard of living intensifies, the total quality of leadership and management becomes more and more important. Leaders and managers need to imbibe and practice the TQM philosophy so that quality becomes an innate feature of every process. Pointing out common bad practices and behaviours, Deming says, ‘Filth and vandalism raise the cost of living and, as any psychologist can aver, lead to slovenly work and to dissatisfaction with life and with the workplace.’6 Tolerance towards these common bad practices and behaviours has a deep impact on the culture and psyche, deterring progress. Besides adding to the cost or depreciating the standard of living, lapses in quality can also lead to catastrophes like the Chernobyl disaster or the Bhopal gas tragedy. They are tragic reminders of the fact that quality failures pose serious threats to society.

People Orientation through Training and Education Respecting humanity and treating people with due dignity must become management mottos. The commands and ‘standards’ of traditional management practices are dehumanising as they do not recognize the hidden abilities of workers and treat them as mere machines. Ishikawa warns against all such traditional systems based on ‘Taylorism’. People are by nature good but the systems traditional management is designed on the premise that people are basically dishonest and unreliable. Consistency and improvement of quality cannot be achieved under such obnoxious environment. For any economic miracle to happen the human factor must come to the fore. According to Imai, of the three building blocks of a business, viz., hardware, software, and human-ware, the human ware has to be squarely in place so that the full potential of the hardware and software of a business can be realized. Ishikawa says, ‘If people are treated like machines, work becomes uninteresting and unsatisfying…. Industry belongs to society. Its basic goal is to engage in management with people in the center.’7 It is now established that the companies able to harness the latent talent and energy of its people will ultimately have the competitive edge. The foremost concern has to be the quality of people and therefore the most critical task is ‘Making People’. The most pertinent issues of quality of leadership

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30 PHILOSOPHIES AND CONCEPTS and quality of people comes out of Deming’s statement, ‘Abundance of natural resources is not a requirement for prosperity. The wealth of a nation depends more on its people, management and government than on its natural resources.’8 The critical task of ‘Making People’ is quite a vexed problem as the equation brings out: Quality of Leadership/Management

Quality of People

However, the underlying theme of TQM is that leadership or management has to take initiative in ‘Making People’ including institutionalising education and training, team building, and other initiatives that would facilitate unleashing hidden talent. Making people means building quality into people so that they become responsible citizen discharging their responsibilities and obligation towards national building means. It means making people conscious and capable of continuing improvement in personal life, home life, social life and working life.

Education Human beings are bestowed with the innate talent which can be nurtured through education and training and unleashed through empowering environment. All philosophers, and particularly Dr Deming and Dr Ishikawa has given lot of stress on education and training. Competitiveness has to be primarily achieved through skill enhancement and innovativeness of its employees since in this liberalized economy all can have easy access the latest technology and machineries. ‘Start with Education, and End with Education’ this famous dictum of Dr Ishikawa has now become integral to TQM philosophy, and a key management strategy to make people. Education and training according to Tom Peters is an investment in human capital as one does in hard ware. He advises to spend time lavishly on recruiting, and train everyone lavishly. The thought processes of all employees must be changed to make them think, raise their intellectual level so that they can effectively participate and contribute towards the continuing improvement initiatives including innovation. In TQM philosophy stress is on both education and training whereas in conventional management practice ‘thinking’ by the employees is a ‘taboo’, the emphasize is only on the training element to make workers more adept in skills as required by their allotted jobs. The leaders and top management need to make conscious effort themselves to acquire ‘profound knowledge’, to understand things that are essential strong and right foundation for implementation of TQM principles. They must delve deeper into TQM philosophy to imbibe the holistic knowledge, and keep themselves abreast with changes around.

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SYNOPSIS OF PHILOSOPHY, CONCEPTS AND IMPLEMENTATION PRINCIPLES 31 Management must endeavour to transform the organization to a learning organization as ‘Knowledge is power’. Long-term commitment to new learning and new philosophy is required of any management that seeks transformation.

Responsibility Towards Employees For any management, the first concern is the happiness of people, including those employed by the company’s subcontractors and affiliated sales and service organizations. Reasonable emolument is of course a factor for happiness but pride of association, enjoyment in work and self-esteem weigh much more. It is an erroneous hypothesis that most quality or productivity problems are due to workers or employees. This wrong assumption, according to Crosby, is a costly blunder as it diverts management action to the wrong place. Studies reveal that 85 per cent or more of problems are caused by management decision or indecision, while only 15 per cent or so are due to employees. This revealing weakness should prompt a responsive management to be self-critical and review its management philosophy and processes.

Vision and Purpose Management of expectation is vital but the first step is to have a clearly articulated Vision statement. A nation or an organization ought to develop a shared ‘Vision’ that articulates the desired future state of the nation or organization and embodies the impassioned imaginations or dreams of its leadership. Vision helps all involved to see the big picture and is the first step on the continuum that leads to resurrection or prosperity. Absence of vision is akin to a rudderless ship losing its way on the high seas, or to a journey ending in the wilderness. The vision, a focused statement of a shared destination, provides macro-strategic direction and stimulates energy for the journey. Defining in unambiguous term the ‘Purpose’ of the organization in tandem with ‘Vision Statement’ is critical to induce a culture and value system that would create an enabling environment for the long-term enduring success of an organization. Dr Edward Deming has emphasized ‘constancy and consistency of purpose’ as a vital characteristic for transformation. Living through that shared vision and purpose minimizes the chance of wayward falling.

Customer Loyalty In the new economic age, expecting the ‘loyalty of customers’ is outrageous. On the contrary, it must dawn on management that companies must be loyal to their customers. A dynamic customer-oriented strategy is the only way to remain loyal to customers and meet their changing requirements. In a radical shift from traditional marketing, the new philosophy places ‘customers’ at the epicentre of all business activities. The ‘supply-chain’ is also included in the process loop, and ‘integrated total quality’ is the principal strategic tool to ensure consistent customer satisfaction.

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32 PHILOSOPHIES AND CONCEPTS Emphasis on customer orientation implies study and consideration of the opinions and requirements of consumers at the design, manufacturing and selling stages of the product and its associated services. A radical customer orientation strategy shuns the short-term profit mentality, as producing enduring customer satisfaction through continuous improvement has become the overriding factor for business success. Any sacrifice of quality or any direct or indirect indifference to customer satisfaction is bound to lead to disastrous business consequences. Tom Peters exhorts managers to treat customer as appreciating assets, and urges them to become obsessed with listening for and measuring customer satisfaction. In the case of national resurrection or development, the ‘people’ are to be at the epicentre of all change management initiatives.

Importance of Relative Quality “Relative quality” is a critical factor; changes in relative quality have a far more potent effect on market share than do changes in price. It is also a characteristic that gives competitive edge in international trade and business. In his book Thriving on Chaos Tom Peters remarked that high market share does indeed bring profit; however sustainable market share comes primarily through leadership in what researchers call relative perceived product or service quality— ’relative’ meaning vis-à-vis competitors, and ‘perceived’ meaning as seen through the customer’s eyes rather than the provider’s eyes. If a customer is given a choice between two equally priced products of differing quality, the customer will always choose the product with higher perceived quality. Likewise, if a customer is given a choice between two equal-quality products of differing price, the customer will always choose the lower priced product.

Management Responsibility Towards Quality Quality is made in the boardroom—it begins with the intent fixed by the management. It is the obligation of top management to ensure the translation of the intent into action. This obligation cannot be delegated: quality is everybody’s job. The paradox is that quality may become nobody’s job unless the search for quality is institutionalised and monitored through processes or systems. In the traditional management system the top management focuses on quantity and distinctly on sales volume, creating the notion impression that it is the responsibility of inspection or quality control department to take care of quality. Thus, despite the axiom Quality is everybody’s job, the quality becomes the baby of the inspection/quality department. In the new philosophy ‘Quality’ is and will remain the responsibility of the entire organization, with the top management discharging its pivotal role. Commitment and visibility of top management’s concern for quality is absolutely a ‘must’ for an ingrained quality culture. The role of the Inspection or Quality Control department is to provide support services like measurement, detection, data collection, data analysis and guidance for improvement.

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The Importance of Built-in Quality Quality must be built into each design and process. Juran states that managing for quality is best done by the sequential integrated processes of the Juran Trilogy, viz. quality planning, quality control, and quality improvement. This integrated and systematic approach is in sharp contrast to the fragmented and limited approaches of earlier days. Ishikawa attaches significant importance to quality assurance, which means to assure quality in a product so that a customer can buy it with confidence that he or she will be able to use it for a long time with confidence and satisfaction. This implies constant attention to consumer requirements, continuous redesigning based on consumer feedback, and constant revision of quality standards to ensure continuous improvement of quality. Adherence to this policy over time will build trust in a particular company, generate improved sales and profit figures, promote business growth and ensure satisfaction of all stakeholders.

The Role of Price ‘Price’ is an integral element in the broad perspective of ‘quality’. ‘Price’ has no meaning without a measure of the quality being purchased. The challenge is to deliver the promised quality within a competitive price. This importance of end-user satisfaction has to be borne in mind during the sequential integrated processes of quality planning, quality control, and quality improvement. Improvement in product quality must also be balanced against cost improvement. The underlying task is to maintain cost effectiveness in all market situations. From a broader perspective, cost-effectiveness is a critical factor in optimising the scarce resources of a nation. Generally cost control and quality control are two sides of the same coin—one can forget cost control if quality control is lax, and vice versa.

Loss Function The new powerful perspective of the ‘Loss Function’ conceptualises the loss to society due to deviation from the absolute target quality even though the achieved quality may be within specified limits. The loss function emphasizes that departures from the optimal point represent a loss to society, and the larger the departure from the best value, the larger is the loss to society. ‘Production of a product or service that no one wants is gross national wastage as scarce resources that have gone into designing and manufacturing that could have been better invested elsewhere,’9—are wise words of Genichi Taguchi who embraced Deming’s doctrines on quality and transformation. Taguchi asserts that instead of simply trying to stay within specification limits, one should determine where, within those specification limits, the best value lies, and then try to minimize the variability around that point. Unfortunately traditional management practices do not take into consideration the losses due to variation from the nominal value. Managers wake up only when the value of the specified characteristic goes beyond the specification limit and then there is a spurt in sorting, blending, rework, rectification, scrapping of product,

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34 PHILOSOPHIES AND CONCEPTS adjusting the process, etc. Professionals need to realize the fact that such sudden actions or firefighting greatly increase the cost of production. The paradox is that most managers consider these expenses a legitimate part of operation costs. Managers feel happy so long as the product characteristics are within the specification limits and they do not find compulsive reasons to run after continuous improvement. As long as conformance to specification is regarded as the main objective for any operation, it will be impossible to sustain any real process improvements.

Significance of Intangibles In this fiercely competitive world, intangibles play more important and decisive role than ever. Successful handling of intangibles yields positive tangible results. The intangible moral dimensions of TQM philosophy are the real drivers of transformation. Sharing, caring, concern, courtesy, flexibility, timeliness, commitment, etc are important intangibles that affect perception and performance. Worthy intangibles bring about attitudinal change, create trustworthiness, and provide the competitive edge. They need to be practiced as part of a proactive work culture that boosts the morale of the employees and makes them more humane, and service oriented. Intangibles cannot be measured by conventional methods, yet they directly impact quality, productivity, sales, profit and the overall image of the company. In his book Thriving on Chaos TOM Peters has advised to attend especially to the intangible attributes of the product or service. Most intangibles are connected with the sociological and cultural heritage of a society or nation. Virtuous intangible characteristics need to be actively cultivated to overcome the bad ones. Some nationalities have inherent virtuous intangible characteristics that are the envy of others. Tom Peters says, ‘To the Swiss, with their passion for grace and precision in everything from pocketknives to highway bridges, quality is second nature. Can we import not just Swiss products but the attitudes behind them?’10 Service, delivery and other intangible attributes are part of quality—quality as perceived and defined by the customer. In fact, Tom Peters has put it down in a simple formula, given below in Figure 2.1. CP =

D E

Customer perception (CP) equals delivery (D) divided by expectation (E). Maximizing CP is essential in the squishy, real world where perception of intangibles is everything. Figure 2.1: Equation for Customer Perception of Quality

Process Vedic philosophy exhorts, ‘Concentrate on karma, not on the end result.’ One of the principal elements of transformation is: ‘Focus on the Process, not on the end

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SYNOPSIS OF PHILOSOPHY, CONCEPTS AND IMPLEMENTATION PRINCIPLES 35 result.’ Deming says, ‘Focus on outcome is not an effective way to improve process or an activity.’11 Process-oriented thinking induces a proactive attitude and disciplined culture to follow and stabilize the process. If the process is followed and made stable, the result is bound to come as planned. There is scope for improvements and innovations in a stable process, and with each process improvement, the individual and the organization gain new insight and knowledge. There has to be deliberate concentration on improving the process and then building on it so that the end result also improves. This enables organization to attain and sustain competitive edge even in volatile business environment. Kaizen, the single most important concept in Japanese management, epitomizes process-oriented thinking. In his book Kaizen Masaaki Imai says, ‘Process-oriented thinking means that one should check with the result and not by the result.’12 Management’s supportive and stimulating role is necessary for people’s efforts to improve processes. However, management needs to develop process-oriented criteria (P Criteria) for evaluation and guidance. The ‘P criteria’ must have a longterm outlook. It is not enough to evaluate people simply in terms of the result of their performance. Instead, management should look at what steps have been followed and work at jointly establishing criteria for improvement. Unfortunately traditional management philosophy uses ‘Result-oriented criteria (R criteria)’ which stress short-term results while evaluating people’s performance, and this approach often does more harm than anticipated. A goal beyond the capability of a system will not be reached. Deming says, ‘If you have a stable system, then there is no point in setting a goal. You will get whatever the system will deliver.’13 Therefore, it is wrong to blame an individual for not achieving improvement since any substantial improvement must come from a change in system.

Variation Variation, a natural phenomenon, exists in every facet of manufacturing processes and all other types of work. Walter Shewhart established the fact that only variation control can make a process stable and bring in uniformity of output. Often professionals make a common mistake to try adjustments to obtain greater uniformity but this actually increases the problem of variation by making the process even more unstable. The causes of variations are unlimited. It is important to understand the nature and sources of variation to minimize it. Variation control at the source or upstream is a critical step for improvement. Improvements can be undertaken only if the process or system is stable, i.e. under statistical control.

Statistical Techniques The adage ‘Speak with data and Act (management) with data’ is aptly recognizes the importance of facts and data. Through proper utilization of facts and data, statistical methods can be developed for minimizing variation, making the process stable, and carrying out further improvements. Imai has said, ‘The skill with which a company collects and uses data can make a difference between success and

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36 PHILOSOPHIES AND CONCEPTS failure.’14 It is important to think in statistical terms, one has to be true to facts and faithful to data. Ascertaining the true facts is essential, as ignoring or misrepresenting them may lead to erroneous decisions or solutions. Facts are to be considered along with reliable data for statistical analysis but false or mistaken data as also the inability to obtain data are fraught with danger of misrepresentation or erroneous deduction. Deliberate manipulation of data is unethical and smack of narrow vested interest. Quality of products and work processes are never identical, there are variations and these variations show a statistical distribution. Information contained in variation can be statistically analysed to discover the special causes of variation so they can be removed and the variation can be controlled. The process or system can now be called stable. Now it can be decided whether the process or system should be left alone or further improvement is necessary. The mean value, standard deviations, etc., derived from the statistical distribution, are effective measures of variation. Tools like variable control charts, attribute control charts, and initiatives like Six Sigma, etc. are some of the statistical techniques focused on control and improvements. Data generated by properly implemented statistical techniques do not mislead, they give clues and guidance to anticipate, identify and correct non-conformity and reduce variability in the system thereby improving quality and achieving excellence. Combining statistical knowledge with initiatives for improvement is a sign of mature management. Ishikawa has said, ‘Improvement in the management’s attitudes is an important by-product of utilization of facts, data, and statistical methods.’15 Therefore statistical methods must become commonsense or common knowledge. Reluctance to learn about statistical methods on the grounds that they are too mathematical or difficult to comprehend is only the expression of a psychological block, as the fundamentals are actually quite simple. The generalists may focus only on basic learning, while operations managers can take advanced training in applications of the appropriate techniques. Top managers need to have fundamental knowledge to interpret the information or analysis and comprehend the recommendations for proper actions. To those antagonists who continue to say, ‘We rely on our experience,’ Deming has advised, ‘this answer is self-incriminating—a guarantee that your company will continue to have the same amount of trouble. There is a better way, now. Experience can be catalogued and put to use rationally only by application of statistical theory.’16

Suppliers The supplier’s processes are an extension of the company’s ‘process loop’. No quality let-up can be allowed on outsourced material if the company is to establish and maintain its competitive edge. Variances in quality of purchased goods cannot guarantee quality assurance of finished good and inevitably ends up in higher cost of production than envisaged. Lowest total cost is more important than lowest initial cost of material purchased. Companies should try to reorient their policy to aim ideally for one source of supply per item instead having multiple sources of supplies as followed in the

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SYNOPSIS OF PHILOSOPHY, CONCEPTS AND IMPLEMENTATION PRINCIPLES 37 traditional purchase policy. Buying from several sources invariably increases the variation, processing troubles, and the chances of affecting the performance of finished product. With just one or two suppliers the problems due to inherent variations can be contained and tackled and thus there will be stability in operations. The imperative is to develop mutually beneficial working partnerships with suppliers so as to ensure continuous improvement, cost-effectiveness, just in time delivery and almost zero inventory. Companies must dismantle the traditional practice of awarding business strictly on the basis of lowest tender, since in such cases compromises on quality are quite rampant. Persistence with the policy of working closely with suppliers is essential. In case of matured company-supplier relationship the responsibility for quality assurance or loss of production due to quality variance rests with the supplier. Further there can be joint effort to improve the quality, cost, and services, and the benefits of improvements or savings should be shared. Deming says, ‘the best solution to improvement of incoming materials is to make a partner of every vendor, and work together with him on a long-term relationship of loyalty and trust.’17 The government must give powers to its civil and military wings to give due weightage to quality instead of using the blanket criterion of lowest bid for awarding contracts. The main audit parameter ought to be transparency in the evaluation of quality and cost-effectiveness.

Problem-solving and Prevention Prevention rather than correction or fire fighting should be the new approach to problem solving, and for this a reorientation of mindset is essential. Problems if not prevented will come back with vengeance; just removing the symptoms is merely a temporary measure. The prevention route identifies and controls variation that facilitates elimination of root cause of the error or problem thus ensuring prevention of the problem from reappearing. Most problems, with the exception of unknown phenomena, are preventable. Processes, particularly upstream processes, must be controlled to obtain better effects. This approach anticipates problems and prevents them before they actually occur; Ishikawa has called it as ‘vanguard control’. In expanding the hypothesis of his ‘Second Absolute: The System of Quality Is Prevention’, Crosby states ‘The secret of prevention is to look at the process and identify opportunities for error. These can be controlled.’18 Therefore, in order for efforts to be focused and well coordinated, this new approach of problem solving needs to be standardized and incorporated so that it becomes part of the workculture.

Continuous Improvement According to ancient Indian Vedic philosophy matter reverts to its original form to recreate itself again and again. Creation is cyclical, not linear; everything is recycled by nature in a continuous process of rejuvenation. The Vedic philosophy emphasizes that rejuvenation is not a one-shot and one-time affair—it is a continuous process. The TQM philosophy has also adopted this routine cycle of creation. The cycle of improvement must not stop—it must be repeated again and again.

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38 PHILOSOPHIES AND CONCEPTS Quality has no limiting benchmarks, so similarly success or excellence has no ultimate benchmark or pinnacle, and search for new heights has to continue to avoid stagnation. TQM philosophy calls for commitment towards continuous improvement which is inextricably linked to maintaining and improving standards. J. M. Juan has also stressed the need for clear focus on continuous improvement as opposed to piecemeal projects. TQM requires constant monitoring and course correction. Walter A. Shewhart, who pioneered the use of statistical techniques in industry, also discovered the ‘continuous cycle of process improvement’ that consists of four basic stages: Plan, Do, Check, and Act. This continuous cycle, initially christened by Deming the Shewhart cycle was popularised by the Japanese as the Deming cycle and is also known as the PDCA cycle. The institutionalization of continuous improvement induces a competitive spirit among employees to provide everimproving services and products so that the organization becomes competitive, and this in turn helps the nation to also become competitive. In his book Kaizen, Imai says, ‘improvement brings many truly satisfying experiences in life: identifying problems, thinking and learning together, tackling and solving difficult tasks, and thus being elevated to new heights of achievement.’19

Innovation Small and steady improvements through institutionalised continuous improvement initiatives may steady the ship but are not sufficient to make it surge well ahead of the competition. Innovation provides breakthrough and leapfrog improvement that takes a company a few notches above the immediate competitors. Innovation does not happen daily, Masaaki Imai says, ‘innovation is like magma that appears in abrupt eruptions from time to time.’20 Innovation is technology and money-oriented and can only occur if there is a suitable environment, along with support and encouragement from management. Juran has recommended seven steps, viz. ‘breakthrough attitudes, identify a few vital projects, organize for breakthrough, conduct the analysis, and determine how to overcome resistance to change, institute change, and institute controls.’21 Therefore, innovation and continuous improvement are both needed to create, and hold onto, a dominant position in the growing global market.

Profit The dictum ‘quality first, not profit first’ is a radical departure from the traditional management philosophy where profit comes foremost. In the ‘quality first’ philosophy the stress is on competitiveness, long-term growth, enduring profit and prosperity. These are the fundamental requirements of building organizational resilience to combat the vagaries of a volatile market. A ‘Quality first’ strategy ensures customer satisfaction under all trying conditions. Contrary to the belief of traditionalists, higher quality leads to lower costs, and the consequent savings contribute handsomely to the bottom line. The strategy of continuous improvement of quality ensures higher market-share and enduring higher profits.

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SYNOPSIS OF PHILOSOPHY, CONCEPTS AND IMPLEMENTATION PRINCIPLES 39 The traditional management approach of focus on profit was perhaps tenable in the monopoly or virtual monopoly markets of the past, but the same strategy is suicidal under the present market scenario. Buckling under stock market pressures, the traditional management approach focuses on profits by cost cutting at the expense of quality and long-term competitiveness. The traditional management practice of setting objectives and targets by working backwards from desired profit is focused on volume, margin and short-term profits. If a company continues to pursue short-term profit as its goal, it will soon lose competitiveness and stability. Tinkering with financial figures and operational compromises may improve shortterm business profit but has disastrous impact on quality and the future health of the company. Short-term bullish euphoria in response to stock market pressures compromises the stability and long-term prosperity of the organization. Ishikawa has warned that short-term focus on quarterly results gives rise to falsehood, relying on false sales figures and false production figures. Deming has bluntly pointed out that ‘the timid and the fainthearted, and people who expect quick results, are doomed to disappointment.’ Dedicated and loyal customers generate real profits, much higher than could be had from casual or non-dedicated customers. Therefore the company needs to deploy a strategy to create a net of dedicated and loyal customers, and this can only be achieved by providing ever-improving services and products. Profit should not be the prime motive rather the strategy has to be oriented towards prosperity. The goal should be to ‘earn profit’ rather than ‘make profit.’ New age finance managers must stress and evaluate on investments in people development, market development and continuous improvement of quality, cost-effectiveness, productivity, and customer relationships. These investments will reflect in financial terms the efforts towards enduring profit and prosperity. A radical change of mindset is required for the financial people to embrace this aspect of TQM philosophy.

CLASSIFICATION OF CUSTOMERS The relative ‘vital few’ customers who impact processes and sales ought to receive special attention, while the rest, the ‘useful many’ can be given standardized attention. With multiple customers, it is useful to classify them in ways that enable the planners to allocate priorities and resources. Juran has recommended the use of Pareto principles to distinguish the ‘vital few’ and the ‘useful many’. Studies have confirmed that about 80 per cent of the total sales volume comes from about 20 per cent of the clients: these are the ‘vital few’, as shown by Figure 2.2.

The Concept of Internal Customers ‘The next process is your customer.’ Kaoru Ishikawa invented this phrase way back in the 1950s. The idea of the ‘internal customer’ ensures smooth communication at every interconnected processing stage. It breaks through the barriers of sectionalism and rivalry among departments/employees of any type of organization,

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40 PHILOSOPHIES AND CONCEPTS 100

Useful Many

Vital Few

Per cent 0 Customers

Sales

Figure 2.2: Vital Few and Useful Many: Based on Pareto Principles private or public. The satisfaction of internal customers is a key element to satisfying the actual users or beneficiaries of a product or service, while the dissatisfaction of internal customers is a source of higher cost, poor quality, and shoddy performance. The internal customer-supplier relationship extends to every process and person in the organization. The quality of any given information, data, physical components, commands, requests, and so on, impact the output of the next process or person using it as an input, which in turn affects the final output. The concept of satisfaction of internal customers throughout the process chain really awakens the individual and the organization to the wider perspective of ensuring inbuilt quality at all stages.

The Triple Role Concept Each person, each division or department carries out three quality-related roles: as a processor, a producer and a customer. This ‘triple role concept’ is another seminal concept for quality planning developed by Juran, and is applicable to any organization or entity. Through use of spreadsheets, the concept can be translated effectively into quality planning.

Measurement What cannot be measured cannot be improved. The concept of continuous improvement cannot be applied if critical elements, processes, products, services, and performance (pre- and post-improvement) cannot be measured. Both ‘P criteria’ and ‘R criteria’ are to be measured to monitor the efforts of improvement. Any non-conformance to the stated or unstated requirements is labelled unquality. Unless measured neither the present status nor the future goal could be known. Measurement parameters and methods are dependent on unique requirements of the process, part or product. Measurements at all stages of planning and execution will identify areas needing improvement or course correction. The industry and business that has learned to measure consumer satisfaction characteristics will emerge a winner. This is true even for government projects. Juran has recommended application of measurement in the ‘Juan Trilogy’ continuum. Figure 2.3 gives the synopsis of measurement required at all stages of planning and execution.

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SYNOPSIS OF PHILOSOPHY, CONCEPTS AND IMPLEMENTATION PRINCIPLES 41

APPLY

PRINCIPAL ACTIVITIES

INTERMEDIATE OUTPUTS

Establish quality goals MEASUREMENT THROUGHOUT

Identify customers Determine customers needs Develop product features

List of quality goals List of Customers List of customers needs Product Design Process Designs

Develop process features Develop process controls, Transfer to operations Process ready to produce Figure 2.3: A Typical Network of Measurements

Understanding Taguchi’s loss function gives a new dimension to measures of quality. Quality has a monetary value and can be measured by the deviation of an output characteristic from its target value. It can also be related to performance measures such as signal-to-noise ratio, which is used in the design phase. Such an understanding is necessary for management and technical people so that quality improvement will be taken up seriously.

The Cost of Quality Quality is measured by the cost of doing things wrong. Some call the measure ‘cost of quality’ (COQ), and some call it the ‘cost of poor quality’ (COPQ). Eminent quality theorists like Feigenbaum, Juran, Crosby and others have strongly recommended the use of the ‘cost of quality’ approach. The four components of the ‘cost of quality model’ are the costs associated with appraisal, prevention, internal failures, and external failures. Appraisal costs are the result of efforts to find errors, such as inspection, audit, etc. Prevention costs involve efforts to avoid errors, such as training, calibration of instruments, etc. The cost of a defect increases dramatically as it moves along the production line. Internal failures are errors discovered prior to shipment, leading to scrap and rework, etc. and external failures comprise errors discovered after shipment, including warranty and repair costs. Spending on prevention and appraisal should continue only until no longer justified by commensurate savings in

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42 PHILOSOPHIES AND CONCEPTS internal and external failures. Crosby asserts that quality is free, what costs money is the unquality of things, that is all the actions that involve not doing it right the first time. He says, ‘Every penny you don’t spend on doing things wrong, over, or instead, becomes half a penny right on the bottom line.’22

Teamwork There has to be perfect alignment between management’s commitment and employee’s involvement, and this is best achieved through institutionalising teamwork. Management of expectation is vital but involvement of all is crucial. Teamwork is essentially a group activity that promotes cooperation, mutual trust, learning, and self-confidence while putting brains together to achieve common goals and objectives. It involves people of all levels irrespective of hierarchy, destroys sectionalism, and improves cross-function management.

Change Change has to become a way of life; only certainty in this uncertain world is Change. Instead of being caught unaware of change, management must be proactive to Change. Resistance to change is quite natural and has to be tackled head on but with delicacy. One must consider the uniqueness and appeal of culture and tradition while designing initiatives for change. Making people change their behaviour requires doggedness and missionary zeal, but perseverance is worth it for the value of the overall impact. Every change inflicts some pain, but ingenious ways can be found to minimize this as much as possible. One cannot force change, no one can thrust ‘good’ on the unwilling. Philip B. Crosby says, ‘Basically, we are slow to change because we reject newness.’23 Some people are apprehensive of change per se, while some are negative about the possibility of change, some despise it, and some oppose it to protect their vested interests. Such leaders or people who shun change are to be bluntly told that ‘ Survival is not compulsory. You don’t have to do it.’

Obstacles It may be quite difficult to recognize the impediments that stand in the way of change as they hide under the garb of so-called successful management practices, and are bolstered by managers’ obstinate attitudes. Some of the deadliest diseases are manifestations of an ingrained culture. Many of the methods and norms followed by traditional management create obstacles to change. Some of these diseases can be cured, while others require eradication.

Scope and Macro-Strategy TQM can address the basic cause of trouble in society and organizations and offer guidance and solutions. Its philosophy and principles are equally applicable to

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SYNOPSIS OF PHILOSOPHY, CONCEPTS AND IMPLEMENTATION PRINCIPLES 43 the family and self for self-actualisation. The practice of ‘total quality’ lays the basis for a proactive humane culture. Total quality management (TQM) philosophy directs the principal strategies, but the total quality of management is the prime requisite for nation-building or national resurrection, revival of sick companies, and ensuring sustained growth and prosperity for an organization. Philosophical indoctrination with pragmatic implementation suited to the situation is a must. Dogmatism must be shunned; the hope of instant or quick results is a delusion. Disjointed efforts will have no impact.

PRINCIPLES FOR TRANSFORMATION AND QUALITY IMPROVEMENT PROGRAMMES Deming’s Fourteen Cardinal Principles for Transformation The fourteen cardinal points encapsulating Deming’s philosophy were first published in July 1981 in a Business Week article he wrote. Subsequent versions appeared in 1985, 1986 and 1990, indicating the evolution and elaboration that Deming felt was necessary to overcome certain misapprehensions and bring further clarity, though the essence remained the same. Interested readers may refer to Deming’s book Out of the Crisis or other books on his philosophy to get the verbatim text of the 14 points (all versions). The essence and analysis of each of 14 points is given in Table 2.1. Mulling over the points again and again will show the relevance of each point in the context of the current economic uncertainties.

Ishikawa’s Recommendations Synopsis of Kaoru Ishikawa’s philosophical premises is listed below: z

z z z

z z

z z

z z

Companies can become instruments for enhancing the quality of life for people, and in this way help bring about peace in the world, TQC is to be implemented company-wide, Respect for humanity is a management philosophy, QC begins with education and ends with education. Provide continuous education for everyone, from the President down to line workers, Promote quality first, not short-term profit first, Achieve consumer orientation, not producer orientation. Think from the standpoint of the other party, The next process is your customer: breakdown the barrier of sectionalism, Introduce full participatory management. TQC is the responsibility of all employees and all divisions. It is a group activity and cannot be done by individuals, Engage in teamwork and cross-function management, Quality must be built into each design and each process. It cannot be created through inspection.

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44 PHILOSOPHIES AND CONCEPTS Table 2.1: Deming's Fourteen Points POINT ONE Salient features z

z z

z

z

Analysis

Aim: To become competitive, stay in business, and provide jobs, Purpose: Improving product and services, Ensure constancy of purpose: Allocate resources for long-range needs rather than short-term profitability, Create and publish to all employees: A statement of aims and purposes, Management commitment: To be demonstrated constantly.

To stay in business and provide jobs through competitiveness is the principal focus. Involvement of people (employees), and visible commitment of management is necessary to ensure constancy and consistency of purpose. There should be consistency in deployment throughout the activities of the organization. Close monitoring and course corrections keep the plan on track.

POINT TWO z

z z

z

Management and employees should learn the new philosophy, Adopt the new philosophy for economic stability, Refuse to allow commonly accepted levels of delays, mistakes, defective materials and defective workmanship, Management must awaken to the challenge, learn their responsibilities, and take on leadership for change.

Techno-economic changes will continue to be rapid and unpredictable. It will require radical change in management psyche to shed all inhibitions regarding new learning. It will require the vision, passion, courage and commitment of leaders to deploy and implement the principles.

POINT THREE z

z

z

Cease dependence on mass inspection to achieve quality, Understand the real purpose of inspection: improvement of processes and reduction of cost, Ensure built-in quality in the first place both in manufacturing and purchasing functions through statistical techniques and evidence.

There must be a change in the mentality ingrained by traditional management practices. Inspection cannot induce quality characteristics. Sole dependence on inspection implies process incapability and planning for defects. The new philosophy recommends building quality in the first place by deploying statistical techniques for process and quality control.

POINT FOUR z

z z z

z

Discard the traditional practice of awarding business solely on the basis of price, Instead, minimize total cost, Reduce the number of suppliers for the same item, Eliminate those suppliers who do not qualify with statistical evidence of quality, Aim toward a single supplier for any one item, building a long-term relationship of loyalty and trust.

As switching overnight to this new policy may not be practicable, management should move towards gradually reducing the number of suppliers so as to control variation, improve quality and productivity, and reduce cost. This point stresses partnership with suppliers for mutual benefit through continuous improvement of quality, productivity, and competitiveness. It calls for institutionalising the use of statistical evidence for accepting supplied materials.

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SYNOPSIS OF PHILOSOPHY, CONCEPTS AND IMPLEMENTATION PRINCIPLES 45 Table 2.1: (Continued) POINT FIVE z

z

The quality of products and services must improve, while the cost must come down to meet a changing market, Improve constantly and forever the processes and systems of production and service to improve quality and productivity, and thus be able to decrease costs constantly.

Two important shifts have taken place. One is that the decrease of cost is a function of improvement of quality and productivity—all other measures are short-term and ineffective and have adverse impact. The other important point is that there is no end to improvement-it must go on forever.

POINT SIX z

Institutionalise training. It should cover all aspects including on-job training, and modern methods should be employed.

Training should not be considered a one-shot affair; it has to be ongoing to develop the skills and intellect of employees. If an employee gives poor or average performance even after statistical control is achieved, management should identify his deficiency and arrange remedial training or redeploys him. The training curriculum includes both hard and soft skills.

POINT SEVEN z

z

z

z

z

Leadership techniques of management need overhaul, The aim of leadership should be to help people to do a better job, Immediate action must be taken on reports of defects, maintenance requirements, poor tools, inadequate operating definitions, or other conditions detrimental to quality, Leadership among workers must be encouraged (see Point Twelve), Therefore, teach and institutionalise leadership.

Emphasis is accorded to leadership across the organization for continuous improvement and attaining the long-term objectives of the organization. This strategy calls for management to have a change of heart regarding involving people for organizational growth. Further, it calls for reorientation of the traditional role of a supervisor to the role of a leader who will help unleash the talents of people in solving problems and contributing to continuous improvement.

POINT EIGHT z

z

z z

Ensure that everyone may work effectively and more productively, Drive out fear throughout the organization by encouraging effective two-way communication, Create trust, Create a climate for innovation.

Review all procedures, systems and styles to create an environment where all have a feeling of belonging, have opportunity to participate freely in teamwork and contribute to continuous improvement. Communication and other tools are only enablers.

POINT NINE z

z

Optimise the efforts of all toward the aims of the company, Break down barriers between departments by encouraging teamwork.

The barriers between the departments/functions that get erected either by design or narrow professional ego must be broken through institutionalised teamwork across the organization. The vision and

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46 PHILOSOPHIES AND CONCEPTS Table 2.1: (Continued) z

z

Combine the efforts of people from different areas such as research, design, sales and production to foresee and solve problems of production or service, Solve problems through the efforts of teams, groups, and staff areas.

purpose of the organization needs to be disseminated and optimised through the focused efforts of the teams.

POINT TEN z

z

Eliminate the use of numerical goals, posters, and targets for the workforce asking for zero defects and new levels of productivity and the like unless management is able to provide appropriate methods, Stop promulgating exhortations and slogans for the workforce.

Slogans and exhortations make people weary and cynical. The employees judge the visible commitment of the management. Employees need to be taught the application of enablers and tools for problem-solving and continuous improvement. Motivated and empowered employees do not need exhortations or slogans.

POINT ELEVEN z

z z

z

z

Eliminate work standards that prescribe numerical quotas, Eliminate management by objectives, Instead learn and institute methods of studying the capabilities of processes and how to improve them. Use statistical methods for continuing improvement of quality and productivity, MBO or numerical goals should be replaced with leadership, Eliminate quotas on the factory floor. Substitute leadership.

This is one of the difficult points to comprehend as management and professionals are accustomed, since the days of Taylor, to working to numerical goals, which take precedence over long-term objectives. Leadership must see beyond the mundane responsibilities of manager-ship and stop short-term window-dressing of results. Leadership should not be limited by numerical goals or MBO and must study processes statistically to achieve real control.

POINT TWELVE z

z

Remove barriers that rob people in management and in engineering of their right to pride of workmanship or achievement. Management by objectives, management by numbers, the annual or merit rating system are all inimical to pride and self-esteem, The responsibility of supervisors must be changed from sheer numbers to quality.

A sense of pride and fulfilment can unleash the inherent talents of people. The appraisal systems now used are heavily tilted towards numbers. People are recognized and rewarded for short-term number crunching despite all exhortations to quality. All such systems stifle initiative and creativity and must be replaced with new ones that promote actualisation of one’s talent.

POINT THIRTEEN z

z

Encourage a vigorous programme of education and self-improvement for everyone, Introduce retraining to keep up with the changes in materials, methods, product design and machinery.

There must be all-round development (including selfdevelopment) of people through education. This keeps them updated in their relevant fields, harnesses their leadership qualities and instils confidence. Education is for all including management.

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SYNOPSIS OF PHILOSOPHY, CONCEPTS AND IMPLEMENTATION PRINCIPLES 47 Table 2.1: (Continued) POINT FOURTEEN z z

z

Take action to accomplish transformation, Clearly define top management’s permanent commitment to quality and productivity and its obligation to implement all of these principles, Put everybody in the company to work to accomplish the transformation. Transformation is everybody’s job.

Document the vision, mission, purpose of the organization, and all strategy and actions (including behaviour) must reflect top management’s visible commitment. All other employees should be actively involved in the transformation. According to Deming management of change in this volatile market can only be accomplished through transformation.

Ishikawa further makes the following recommendations for implementing the new policies on the ground: z

z z z

z z

z

z z z

z

Not only know the requirements of consumers but also determine what the consumers will buy, Define quality after knowing the cost, Anticipate potential defects and complaints and take pre-emptive action, Determine the assurance unit, measuring method, and the relative importance of quality characteristics so that there is no misinterpretation within the company or at the supplier or customer’s end, Use facts and data with statistical methods for process and quality control, Follow the PDCA Cycle: Plan, Do, Check and Act repeatedly till the improvement is realized. The PDCA cycle can challenge, revise, and replace the earlier standard set with new and better ones and this process is never-ending, Reduce the need for inspection and checking. An ideal state of quality control is where control no longer calls for checking, Prevent errors by removing the basic cause, not the symptoms, Institutionalise teamwork including quality circles, Carry out TQC audits, following some standard such as the Deming Prize audit or the President’s audit, Use the QC Story to persuade employees to undertake TQC activities. The QC Story is an effective tool for improving communication across all levels regarding the deployment of strategy and tools, the results achieved in quality, cost reduction, work simplification, maintenance, efficiency, the intangible benefits, measures to prevent backsliding, and finally insights and future directions.

Masaaki Imai and Kaizen Masaaki Imai’s view is very similar to Ishikawa’s. He clarifies that the term ‘quality control’ within ‘Total Quality Control’ should not be construed narrowly as product quality control. TQC has to be viewed in a larger perspective of improving managerial performance at every level. Imai in his book Kaizen has clarified that Kaizen is an ‘umbrella concept’ covering TQC and some other uniquely ‘Japanese’ philosophies and concepts which together give a practical recipe for small but

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48 PHILOSOPHIES AND CONCEPTS continuous improvements in all walks of life, be it professional life, home life, personal life, or social life. Kaizen in the workplace involves everyone: top management, middle management and frontline employees. Getting everyone committed to maintaining total quality is crucial for an organization’s survival. Quality requires painstaking attention and care to every detail in the workplace. Therefore the philosophy and practice of kaizen must spread to the grassroots level.

Tom Peter’s Management Principles for Quality Revolution Tom Peter’s five management principles are as follows: 1.

2.

3.

4.

5.

An obsession with responsiveness to customers. This includes listening to customers, showing responsiveness and flexibility, offering differentiated value-added products/services, and adding value across the board, Constant innovation in all areas of the firm. This requires more starts on new things, involvement of all functions and each person, fast-paced work and change, persistence and tolerance for failures, Partnership, or the wholesale participation and gain sharing with all people connected with the organization. This involves empowerment of people, flexibility and a high degree of involvement, minimal hierarchy, taking on highly trained and more freewheeling employees who will be adaptable and react fast to new realities. Awards based upon new performance parameters are a good idea, Leadership that loves change (instead of fighting it) and instils and shares an inspiring vision. This involves inducing people to love change, leading, guiding and controlling in situations of short production runs, higher quality, treating every customer as a ‘market segment’ under cost-control pressures, Control by means of a simple support system aimed at measuring the ‘right stuff’ for today’s environment. This requires a redefined process of measurement and control, systems to measure quality, flexibility and innovation, and sharing information. The systems must abet (instead of impeding) the revolutionary agenda. There has to be stress on total integrity.

Tom Peter’s Further Prescribes Twelve Steps to Quality Management Step 1: Management obsessed with quality Quality is on top of the agenda, and management does not knowingly ignore a tiny act of bad service or poor quality, demonstrating their emotional commitment to the plan. They persist with programmes despite setbacks, and this establishes the credibility of their moral leadership.

Step 2: There is a guiding system or ideology One needs to have both passion and system. Most quality programmes fail for lack of one or the other. A company should choose one of the ‘systems’ propagated by quality theorists and follow it rigorously.

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SYNOPSIS OF PHILOSOPHY, CONCEPTS AND IMPLEMENTATION PRINCIPLES 49

Step 3: Quality is measured If something cannot be measured, it cannot be improved. Start by measuring the ‘cost of poor quality’ precisely and in detail, covering critical functions such as rework, warranty costs, cost of repair or return of poor goods, and inspection costs. Measurement must begin at the outset and be visible: solutions can be found if data is recorded, displayed and analysed.

Step 4: Quality is rewarded Rewards based on quality are indicative of top management’s attitude and must be part of everyone’s performance evaluation. They could be designed as a part of an executive compensation plan.

Step 5: Everyone is trained in technologies for assessing quality Every person irrespective of hierarchical level (including the CEO) should be extensively trained. All course designs should include group problem solving, causeeffect analysis, rudimentary statistical process control, and interaction techniques.

Step 6: Teams involving multiple functions/systems are used Engage in multi-function problem solving and aim to make business systems that cross functional boundaries. Discourage functional fiefdoms and hoarding information. Shift managerial philosophy from adversarial to cooperative.

Step 7: Small is very beautiful There is no such thing as an insignificant improvement. Small quality improvements add up to significant contributions.

Step 8: There is constant stimulation The antidote to boredom is new goals, new themes, new rewards, new team champions, new team configurations, and new celebratory events. Change everything, except the structure of the basic system. No item in the improvement process is too small to use in generating and sustaining momentum.

Step 9: There is a parallel organizational structure for quality improvement Create parallel structures like Steering Committees, a Recognition Committee, a Zero-defect Day Celebration Committee, Quality Groups, Company-wide Quality Teams, etc. for quality improvement. Unexpected stars do get born in the process. However caution has to be exercised as such ‘parallel’ structures can deteriorate into a new, inertia-inducing layer of bureaucracy or a means of career advancement.

Step 10: Everyone plays! Suppliers especially, but distributors and customers too, must be a part of the organization’s quality process. Such partnership can lead to phenomenal improvements.

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50 PHILOSOPHIES AND CONCEPTS

Step 11: When quality goes up, costs go down As higher quality is built into a product, the cost of achieving quality does not increase, but rather decreases. Overall, perfecting quality saves money, while the cost of poor quality is quite huge. Cost-reduction campaigns don’t usually result in long-term lower costs or improved quality. Almost all quality improvement comes via simplification of design, manufacturing, layout, processes and procedures. Effective quality programs yield not only improved quality but lasting cost reductions as well.

Step 12: Quality improvement is a never-ending journey There is no such thing as a top quality product or service, as all quality is relative. To aim for less is to be less than serious: the goals must be bold. Tom Peters recommends a target of 90 per cent reduction in defects in three years, with a 25 per cent reduction in the first 12 to 18 months. Reduce the cost of poor quality as a percentage of sales; cut rework hours while sales are growing, etc.

Juran’s Recommendations Juran recommends a ten-point management process for quality improvement, as follows: a. Build awareness of the need and opportunity for improvement, b. Set goals for improvement, c. Organize to reach the goals: establish a quality council, identify problems, select projects, appoint teams, designate facilitators, d. Provide training, e. Carry out projects to solve problems, f. Report progress, g. Give recognition, h. Communicate results, i. Keep score, j. Maintain momentum by making annual improvement part of the regular systems and processes of the company. He further advised, ‘Make no small plans.’ Deployment of strategic quality management or company-wide quality management requires creating an action plan. Some basic and auxiliary means suggested by Juran are given in Table 2.2.

Crosby’s Fourteen-Step Quality Improvement Programme The fourteen-step quality improvement programme developed by Crosby is based on the ‘four absolutes of quality management’ and ‘four objectives of a quality programme’ that he formulated. The four absolutes are shown in Table 2.3. Crosby then outlines further steps to ensure that concern for quality becomes a part of daily life. These are his four objectives for a quality programme.

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SYNOPSIS OF PHILOSOPHY, CONCEPTS AND IMPLEMENTATION PRINCIPLES 51 Table 2.2: Juran’s Action Plan BASIC MEANS

ADDITIONAL SPECIFICS

Provide personal leadership, through membership on the Quality Council z Adopt the Big Q concept z Train managers and specialists, at all levels, in how to plan for quality z Include ‘quality’ as an integral part of the strategic business plan. Set ‘stretch goals’ as a means of revolutionizing the quality management through extra-ordinary means z Re-plan selected existing processes and products z Mandate participation in quality planning by those impacted z Mandate the use of structured quality planning to replace empiricism z

Set goals and identify the projects to be carried out z Select a team and organization z Provide training materials z Train facilitators/trainers z Train teams z Measure and report progress z Provide recognition z Revise the reward system z

Table 2.3: The Absolutes of Quality Management The First Absolute The Second Absolute The Third Absolute The Fourth Absolute 1. 2. 3. 4.

The definition of quality is conformance to requirements, not goodness. The system for causing quality is prevention, not appraisal. The standard must be zero defects, and not close to that. The measure of quality is the price of non-conformance, not indexes.

Establish a competent quality management programme in every operation, both manufacturing and service, Eliminate surprise non-conformance problems, Reduce the cost of quality, Set a world-class standard of quality that can be benchmarked.

Based on the four quality absolutes and four objectives for a quality programme, Crosby recommended a fourteen-step programme for quality improvement where the stress is on preventing defects. He says that it takes four or five years to get people to understand the need for, and learn to have confidence in, such an improvement programme. A brief explanation of his fourteen points is given below:

Step 1: Management commitment Commitment is the expression of dedication on the part of management first, and everyone else soon after. The top management provides clear direction and leadership, prepares a quality policy that embraces the absolutes of quality and explicitly spells out that meeting the requirements will be the yardstick of individual performance.

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Step 2: Quality improvement teams Teams representing every function are formed to ensure effectiveness of quality improvement throughout the organization. Teams draw up action plans including schedules with review mechanisms, assigning clear roles and responsibilities. Involvement of senior management leverages the expertise available within the organization.

Step 3: Quality measurement Areas are pinpointed for correction and improvement. Quality measurements for non-manufacturing functions are also established, if necessary.

Step 4: Cost of quality evaluation The cost of quality is used as a catalyst management tool to evaluate where correctives will be profitable for the company. It brings full awareness of what is happening on the quality front and fosters a new attitude at all levels of the company towards quality improvement.

Step 5: Quality awareness Share with all employees the findings of what non-quality is costing. Spread the word through media like house journals, films, posters, etc. This is one of the most important steps to involve people.

Step 6: Corrective action The habit of identifying problems and preventing defects takes root through daily, weekly and monthly supervision and task force meetings at different levels. People are enthused to resolve forever the problems identified through the previous steps.

Step 7: Establish an ad hoc committee for the zero defect programme The ‘zero defect’ commitment represents a major step forward that does not allow the initial improvements to flatten out and thus ensures the longevity of the quality management process. The concepts of ‘zero defects’ and ‘doing it right the first time’ are synonymous. Three or four members are selected to form the ad hoc committee to study and then spell out the details of the programme including all facets of communication and training.

Step 8: Supervisor training Set up a formal orientation programme for all levels of management and define the type of training that will be needed so that managers and supervisors are empowered to explain the process to their people and carry out their part of the quality improvement programme.

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SYNOPSIS OF PHILOSOPHY, CONCEPTS AND IMPLEMENTATION PRINCIPLES 53

Step 9: Zero defects day Using a little show business, fun and celebration has its own feel-good advantage. The day commemorates the revelation of ZD, an event that will let all employees realize through a personal experience, that they are embarking on change and a new way of corporate life. It is also the day when top management on a public platform reiterates its commitment to the zero-defect approach.

Step 10: Setting goals Turn pledges and commitments into action by encouraging individuals to establish and specify measurable improvement goals for themselves and their group in pursuit of the ultimate goal of zero defects. Discourage minor goals.

Step 11: Removing causes of error As opposed to a suggestion scheme, this step envisages giving the employees a method to recognize the problems that stand in the way of implementing the pledge to improve quality, and communicate their findings to the management so that steps can be taken to remove the causes.

Step 12: Recognition To appreciate those who participate and recognize their contribution publicly and loudly. All individuals now know that management seriously needs their help and sincerely appreciates it.

Step 13: Quality councils These bring together professional quality people and teams to determine the actions necessary to upgrade and improve the quality programmes. This helps planned communication, mutual learning, and improvement.

Step 14: Do it over again Repetition makes the programme perpetual; it gains speed, takes on many new tacks, develops new ways of doing things, and causes even more improvement. As quality improvement programmes get entrenched in the way of working, they become the culture of the company.

COMPARISON OF QUALITY PHILOSOPHIES It seems that there are two distinct lines. One line sees a bigger picture or role for quality theory beyond the quality of specific products and services and stresses the need for deep philosophical indoctrination of all concerned to make total quality management really effective. The other advocates a more ‘pragmatic’ method of boosting product and service quality through an integrated quality management

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54 PHILOSOPHIES AND CONCEPTS system involving all functions and employees, with the principal focus on customer satisfaction. Deming has been the principal proponent of the first line, and thinkers like Tom Peters, Kaoru Ishikawa, Masaaki Imai, and so on have also stated or implied that a philosophical foundation is a necessary step. Deming calls for a scale of adoption of the new philosophy that is quite radical; he stresses corporate social obligation and responsibility in ensuring that the company stays in business, creating employment opportunities and social wealth. Deming, Ishikawa, Peters, Imai and other theorists saw a bigger picture of quality being synonymous with the progress and levels of civilization. Deming categorically states that the successful deployment of the principles of the new philosophy should help humanity to live better. Ishikawa speaks of philosophical and pragmatic goals being complementary to each other and satisfies both the broader prospective and the operational perspective. He defines the basic goals of management. The first goal concerns people: management must ensure the happiness of people who are counted with the company, and the second goal concerns the consumers: they must feel satisfied and happy with the company’s products and services. The third goal concerns shareholders: the welfare of shareholders must also be taken into consideration. Lastly the company should not feel shy about making profit after meeting its aforesaid goals, as without profit the company cannot grow and meet its societal obligations. Ishikawa’s philosophy of total quality raises the question of ‘democratisation of capital’. Old style capitalism, where many owners directly run their companies, has the tendency of looking at short-term gains, often compromising quality and long-term interests. CEOs, under pressure to make short-term profits on every quarterly balance sheet from the owners or the stock exchange, are not equipped to deal with long-term problems. Democratisation of capital, as has happened in the Japanese economy, makes it possible for companies to adopt long-term perspectives, devoting attention to their responsibilities to society, employees and their families, consumers and to the nation in general. Liberalism and fair distribution of income contribute to economic development. This philosophy condemns the tendency of governments to control, as this leads to bureaucracy and nepotism, which are not conducive to ‘quality’. On a higher philosophical plane, Ishikawa foresees that proper deployment of the philosophy could help bring about peace in the world. According to Tom Peters, effective leadership at all levels is distinguished by the manner in which managers adhere to and implement the core philosophy and vision. Masaaki Imai puts forward the concept of kaizen, an integral part of TQM philosophy. Kaizen or continuous incremental improvement should be so deeply ingrained in the minds of both managers and employees that it becomes a natural route for ongoing improvement in whatever one does. Deming calls for transformation of management through adopting the new philosophy and making a longterm commitment to new learning. Ishikawa believes that this leads to a thought revolution in management. Tom Peters, like Deming, considers implementation of the total quality philosophy a means of managing change, which can be achieved only through revolution that challenges old ways and old traditions. Feigenbaum, Juran and Crosby look to a ‘systems approach’ integrating all functions to improve the quality of products and services, though all of them have

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SYNOPSIS OF PHILOSOPHY, CONCEPTS AND IMPLEMENTATION PRINCIPLES 55 Profitability = Saleability + Producibility + Productivity Total quality control contributes substantially to each element in the above formula. Figure 2.5: Equation representing Total Quality Control stressed an enlarged role for quality encompassing all levels of employees and all functions. According to Feigenbaum, quality control activity now can be extended to an entire business system of a company, and he has termed this approach Total Quality Control. TQM has now emerged as a systematic body of principle, practices and technologies. The relevance of Total Quality Control is applicable to management anywhere in the world. Feigenbaum refers to the axiom given in Figure 2.5.

Definition of Quality Deming stresses the bigger picture of quality and therefore his definition of quality covers a wider perspective. Juran and Crosby are more concerned with immediate business needs but there is variance in their definitions of quality. Crosby’s definition of ‘conformance to requirements’ implies meeting the customer’s stated requirements, arrived at by assessing customer needs, and then translated into specifications. Juran also gives top priority to customer needs, but does not totally rely on meeting the specifications. Instead he stresses ‘fitness for use’: meeting specifications or requirements will be of no consequence unless the product (or service) is fit for use. Feigenbaum states that the word ‘quality’ does not have the popular meaning of ‘best’ in any absolute sense, it means in the case of industry, ‘best for certain customer conditions’. He defines product quality as ‘the composite product characteristics of engineering and manufacture that determine the degree to which the product in use will meet the expectations of the customer.’24 According to Feigenbaum it is important to balance composite characteristics, which include cost, aesthetics and attractiveness, reliability, serviceability, maintainability, product obsolescence, etc. Ishikawa goes beyond the narrowly interpreted meaning of ‘quality’ to include categories such as quality of work, quality of service, quality of information, quality of process, quality of division, quality of system, quality of company, quality of objectives, quality of people including workers, engineers, managers and executives, and so on. Ishikawa further clarifies that one cannot define quality without considering price. Tom Peters advises that every firm must always define quality in terms of customer perceptions as customers have wide choices of competitive products and services. The fundamental reason we have specifications in the first place is that ‘specifications should define what it takes to satisfy the customer’. Imai states that quality is anything that can be improved. The quality of people is of foremost concern followed by the quality aspects of hardware and software. Deming considers the consumer the most important part of the production line, and therefore includes the consumer in his concept of extended process, along with joy and pride in workmanship. His definition of quality also deals with predictable uniformity of the products or services. This radical definition has led to development and use of various statistical techniques like Six Sigma and so on.

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56 PHILOSOPHIES AND CONCEPTS

Measurement of Quality All theorists stress the need for measuring quality though there is perceptible difference in their emphasis on elements to be monitored or measured. According to Deming, measurement must point the way to improvement and not just indicate how things have been going. Unfortunately most managers use ‘measures’ to carry out post-mortems on the state of affairs, and not as tools for improvement. Deming shows that ‘measurement’ by itself does not improve productivity; only an orderly study of outcomes and productivity with respect to goals can help management to take steps for improvement. Measurements should help create constancy of purpose towards improvement so as to enable the organization to become competitive. However, it is significant that Deming calls for a diminished role for mass inspection. He stresses the need for stable processes with control of variation as the principal means of measurement. Process capability study and subsequent improvement cannot be undertaken unless the system or process is stable. It is also important to ensure the precision and statistical control of instruments to avoid false signals or inaccurate readings. Masaaki Imai has shown that in the process-oriented approach one should check with the result, and not by the result. On the matter of measurement and evaluation of performance of individuals, the ideas of Deming are radically different from most other theorists. Deming vehemently opposed evaluation of performance of individuals as demeaning and demotivating; he considered the measurement of process efficiency as more relevant as ‘personnel’ efficiency is largely dependent on system/process efficacy. Masaaki Imai has also emphasized that instead of pulling up people for poor performance, one should look at ways to improve the process for better results. Tom Peters’s contention is to keep the measurement system simple and understandable by all and measure only those that are important to the business. He advocates dismantling the unnecessary complex systems particularly the distracting biases of traditional cost accounting. One should measure most of what is important to success today, maybe a manager should not track more than three to five variables that impact the basic success of the business. All theorists have stressed the need for measuring customer satisfaction, company’s responsiveness, employee involvement, employee satisfaction, number of improvements including innovation in a year, etc. All the quality philosophies have emphasized the need for reduction, elimination and ultimately prevention of defects, rework, scrap and wastage. All the experts have advocated the usefulness of having a system to determine and monitor ‘cost of quality’, though there are some fine variations in approach. Feigenbaum feels the cost of quality approach is one of the major elements of sound TQC as it is a measuring tool, process-quality analysis tool, programming tool and budgeting tool. Juran talked of the goal of reducing ‘cost of poor quality’ (COPQ), which according to him ‘consists of those costs which would disappear if our products and processes were perfect’, and stresses the need to include this goal in the business plan and to deploy it successfully to lower levels. He suggested tackling the chronically high cost of poor quality through planned breakthroughs using the quality improvement process. According to Crosby ‘quality is measured by the cost of quality, which is the expense of non-conformance: the cost of doing things

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SYNOPSIS OF PHILOSOPHY, CONCEPTS AND IMPLEMENTATION PRINCIPLES 57 wrong.’25 According to him the measurements of different categories of COQ should be displayed to indicate the current status and result of improvement efforts. Deming’s worry was costs of unquality that were not visible. According to him, ‘A company may appear to be doing well, on the basis of visible figures, yet going down the tube for failure of the management to take heed of figures unknown and unknowable.’26 According to Deming cost is composed of both visible and invisible figures. He also has also issued word of warning for those companies who manage through visible figure alone, ‘... he that would run his company on visible figures alone will in time have neither company nor figures.’27 The cost of dissatisfied customers or employees is never reported in the traditional accounting (visible) figures but these costs affect the cost of quality profoundly. Similarly the costs of poor maintenance, poor quality of tools, delays in servicing, poor employee moral, etc. are not computed and therefore remain invisible though they affect the cost of quality. This profound knowledge from Deming is worth exploring for properly determining the real cost of quality and taking appropriate actions. Deming also insists on the use of statistical techniques that will help in reducing the cost of quality through elimination of defects, and/or improving the process. Ishikawa has stressed that in competitive scenarios the company that has learned to measure true quality characteristics will emerge as a winner, while nothing can be accomplished if the method of measurement is vague. He further clarifies that where true quality characteristics are difficult to measure, one should try to determine the relative importance of quality characteristics. Genichi Taguchi’s philosophy is concerned about the loss to society due to poor quality, including losses due to failures in meeting the ideal target value during production, ideal life-cycle performance, and in containing harmful side effects. Taguchi’s concept of a more realistic Loss Function has changed the way of thinking in terms of the definition of quality; it leads unavoidably to a new definition of world-class quality ‘on target with minimum variance’. Minimum variance will require a process to be operated in such a way that it will display a reasonable degree of statistical control. The failure to operate a process on target with minimum variance will inevitably result in dramatic increases in the average loss per unit of production.

Management Commitment All the philosophers stress the need for top management’s commitment and support. But Deming has been more openly critical of the traditional hypocritical role of top management. According to him the management’s apathy towards ‘quality’ and lust for short-term results are responsible for the sickness of industries and unemployment, and nothing short of transformation of the style of management will be able to stop this rot. The performance of management should be measured not by quarterly dividends but by potential to stay in business, to protect investment, protect and create jobs and to ensure future dividends through improvement of products and services for the future. Other theorists have not viewed the top management’s role from such a wide perspective though Ishikawa, Imai and others have embraced Deming’s philosophy and made efforts to build upon it. Deming’s

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58 PHILOSOPHIES AND CONCEPTS concept of constancy and consistency of purpose has brought in radical thinking about top management’s role and responsibilities. All Deming’s 14 points call for undivided attention and action from top management, and the first and second points explicitly relate to their fundamental tasks. Crosby’s philosophy is dedicated to creating an enabling ‘quality culture’ which cannot come without management commitment as enunciated in step 1 of his fourteen-step improvement process. Juran’s quality trilogy calls for an integrated and unified management approach, and his concentration on a project approach to implementation implies management support at each stage. Imai stipulates that Kaizen is not possible without top management’s commitment. The first ‘pillar’ of Kaizen is management-oriented Kaizen concentrating on strategic and logistic issues. Top management’s effort and commitment keeps up the morale, maintains the momentum and does the necessary course correction for continued Kaizen efforts all through the organization. Tom Peters prescribes practicing visible pro-change management that is comfortable with risk-taking. He urges managers to be ever-present on the scene of change, imparting training, coaching, cajoling, and at the same time caring and comforting. Peters has listed ten steps for getting on with visible management. Feigenbaum has also stated that the basic responsibility for ‘quality’ rests in the hands of top management. The commitment and visibility of top management was an important criterion stipulated in Clause 1 of ISO 9000:1994.

Strategic Approach Deming, the leading proponent of the holistic approach, calls for transformation of the style of management, and has prescribed the 14-point strategy. No other philosopher has so categorically advocated adaptation of the new management philosophy as part of the strategic approach. Deming’s strategy calls for inclusion of customers, vendors, and delivery and distribution chain entities in the whole production/service system, otherwise mere talk of quality accomplishes little. Integral to his view of quality education for employees is the need for training in the rudiments of statistical techniques for improvement of quality. Management must install effective information systems, identify and root out diseases and obstacles and create a critical mass of people committed to change who will carry on the change-management initiatives at every level. According to Deming, the traditional exhortation to ‘do one’s best’ is fraught with adverse effects; rather a clearer operating principle would be to let people ‘know what to do’. Deming insists that managers must listen to employee’s suggestions and solicit their active participation in continual improvement and for this he calls for a clear-cut strategy embodying a ‘bottom-up approach’. Masaaki Imai in Kaizen talks of a similar strategic approach. The Kaizen concept must be constantly applied to the areas of labour management relations and improvements in communication. He elaborates that corporate strategy should not be monopolized by a handful of top management executives but has to be understood, interpreted and carried out by everyone in the organization. Better management through a people-oriented strategy will enable

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SYNOPSIS OF PHILOSOPHY, CONCEPTS AND IMPLEMENTATION PRINCIPLES 59 the organization to serve the market with competitive products and thus yield higher profit and growth. Ishikawa calls TQC a thought revolution in management. Like Deming, he also advises managers to concentrate on long-term results as two-thirds to four-fifths of mistakes are caused by management’s negligence or irresponsibility and therefore management’s education and total commitment to TQC are critical elements of corporate strategy. This is the meaning of his famous dictum ‘start with education and end with education’. Respecting human dignity is a critical element of the strategy outlined by Ishikawa. Like Deming, he stresses management by facts and application of statistical techniques for problem-solving and continuous improvement. He clarifies the strategy of TQC: striving to supply a product with the right quality, the right price, and in the right amount to generate adequate profit to sustain growth. Tom Peter’s strategic approach has a lot of similarity with Deming, Ishikawa and Imai. He calls his approach ‘revolution’, challenging the prevailing ways of managing or doing things. According to him, the process is about delivering world-class products and services with new, high and distinctive quality features. He is clear that ‘today’s and tomorrow’s winning hand is quality and flexibility’. He calls for development of a core quality philosophy, as well as living an enabling and empowering vision. Juran calls for ‘managing for quality through a trilogy of managerial processes’. His strategic approach is oriented towards a quality planning process linked with two other interrelated processes, quality control and quality improvement. All these three inter-related processes, trade name ‘Juran Trilogy’ form his basic approach. This operation-oriented total approach is quite practical to tackle the ground situation, but does not have philosophical implications. Crosby considers quality a practical programme and not a movement, and his approach are based on the successes he had during his ITT days. To him, quality is an all-important catalyst that makes the difference between success and failure. He feels that ‘quality management’ has now become too important to leave to chance. The first goal according to him is to create a corporate-wide concern for quality, and then embark on a deliberate strategy of establishing a cultural revolution though implementing his 14-point programme based on ‘quality improvement through defect prevention’. In his book Quality Is Free,28 Crosby recommends that the managers use the Quality Management Maturity Grid as a useful tool to take a snapshot of the current quality situation. Crosby’s approach is purely managerial and operational, devoid of any reference to societal and emotional quotients (SQ or EQ). Feigenbaum’s approach is also operational centring on creating an effective system that will integrate the effort of all groups in the organization for quality development, quality maintenance and quality improvement. The objective is to enable production and service at the most economical levels that will allow for full customer satisfaction.

Setting Goals Deming is vehemently opposed to the traditional way of setting numerical goals including management by objectives (MBO) as he firmly believes that such policies

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60 PHILOSOPHIES AND CONCEPTS are short-term and against the constancy and consistency of the declared purpose and vision. He believes setting short-term quantitative targets leads to compromises with quality and other undesirable practices. If the management sets numerical goals without showing concern for how they are to be achieved, i.e. the boss says, ‘I do not care how, but you have to achieve x maximum cost or y minimum productivity in this quarter or I cut your bonuses,’ people will fudge figures or cut corners to achieve the goal and protect their self-interest and position. Deming abhors such setting up of numerical goals and instead recommends implementation of the new philosophy, which will ensure achievement of realistic short-term results that are consistent with long-term objectives. Juran and Crosby, on the other hand, call for setting of short-term goals in keeping with their more conservative approach. Juran recommends an annual quality improvement programme where success against specified goals can be measured in a given year. This fits the framework of MBO. Crosby’s approach to short-term goals (see step 10 of his 14-step programme) involves employees setting goals for short periods of 30, 60 or 90 days under the guidance of their supervisors to serve short-term business objectives. But this route according to Deming is fraught with danger. Masaaki Imai gives the correct perspective on setting short-term goals in Kaizen philosophy: people should constantly seek self-improvement as well as improvement in all areas connected with business to achieve the long-term goals of Kaizen and TQC. According to Ishikawa, management at the operation level should determine goals consistent with company policy, which should be formulated keeping the overall picture in mind. Once a policy is determined, goals become self-evident but Ishikawa recommends three to five priority goals to avoid confusion and dilution of efforts by the employees. All long-term policy and shortterm goal statements must be consistent, and this is the fine difference from MBO, which focuses on short-term goals dictated by stock market pressures, and narrow business motives in isolation from the long-term. Tom Peters, agreeing with Deming’s strong views against performance appraisal systems, states that setting objectives as part of job descriptions intended to control people is downright dangerous. However, he also says that the process of developing objectives will work if it is truly ‘bottom-up’. His view of MBO is that it has been misused by bureaucratic culture, as its inventor, Peter Drucker, had intended ‘management by objectives’ as a tool for self-management, not the use found under the capital letters MBO used by other consultants. Juran says that establishing goals is necessary for laying out the quality planning roadmap. He classifies the goals in two broad categories: (a) strategic quality goals that are set at the highest level of the company and are part of its business plan, and (b) tactical goals that have an operational and narrow perspective and are established by the middle and lower levels of the company. Interested readers may refer to Chapter 2 on Establishing Quality Goals, of Juran’s book Quality by Design.29

Problem Solving Deming, Juran, Feigenbaum, Ishikawa, and Crosby all claim that management is responsible for 85 per cent or more of the problems that crop up in business or

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SYNOPSIS OF PHILOSOPHY, CONCEPTS AND IMPLEMENTATION PRINCIPLES 61 operations, however, the redeeming feature is that these problems are controllable. They all recommend finding the root causes and eliminating them through the use of statistical techniques but nobody has been more emphatic than Deming on this. Deming insists that without the use of statistical techniques it is just not possible to prevent defects, solve operational problems or pursue continuous improvement. He categorizes the causes of out of control defects as common and special causes. Tackling special causes first will help to bring the process under control. Deming, Ishikawa and Imai recommend use of the seven QC tools that can solve the majority of the problems. Juran has discussed the structure and principles of quality improvement but has not dealt much with problem-solving tools. In his 14-step programme, Crosby talks of ways to identify reasons that prevent meeting the zero defect goal (step 1), tackle problems through discussions (step 6), set up ad hoc committees to implement the zero defects programme (step 7), celebrate the zero defect philosophy through Zero Defect Day (step 9), and so on. But he does not deal with techniques and tools to identify and solve problems. In contrast, Deming, Ishikawa and Imai have not only talked of concepts and structures but they have dealt at length with the techniques and tools to identify and solve problems.

Continuous Process Improvement All theorists stress continuous process improvement and perhaps the methodology suggested by them all can be consolidated and leveraged for optimum results. Crosby’s continuing cycle of quality planning, control and improvement is akin to Juran’s Trilogy. Deming’s PDCA cycle is a vital concept and tool that promotes continuous improvement across all processes. Imai talks of the combination of small improvements (Kaizen) with innovation strategy. Peters calls for developing corporate capacity for innovation. Juran’s breakthrough sequence also shares the philosophy of continuous improvement. According to Imai improvement can be broken down between Kaizen and innovation. Kaizen signifies small improvements made in the status quo as a result of ongoing efforts. Innovation involves a drastic improvement in new technology and/or equipment. Maintenance and improvement have thus become inseparable. Deming’s emphasis on variation control is the essence of ongoing improvement. The recent spurt of Six Sigma activity is a substantiation of the great value of the concept of variation control. Deming stresses the need for getting the process under control before any attempt can be made at improvement. Likewise Juran calls for establishing process capability before going for improvement. Imai also explains that in kaizen philosophy the emphasis is on process orientation rather than result orientation.

Education and Training Ishikawa has brought out the importance of education and training beautifully with his dictum ‘start with education and end with education’. Deming considered education and training as a critical part of the strategy for business transformation. Out of his 14 cardinal points for organizational transformation two points, 6 and

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62 PHILOSOPHIES AND CONCEPTS 13 are exclusively devoted to various aspects of education and training. Deming, Ishikawa and others have gone a step further in insisting on the education of top management. Deming also stressed the need for retraining. Imai, Ishikawa and Deming all speak of enhancing the ‘quality of people’ through education and training. Crosby has also emphasized the criticality of training by including ‘training and quality culture’ in his 14-step strategy for quality improvement. According to Feigenbaum the basic management objective for quality education has to be the development of company personnel in all functions and at all levels in at least three key characteristics: attitude, knowledge, and those skills which contribute to production of company products at minimum cost consistent with full customer satisfaction.

Structure Deming’s approach to structure really aims at percolating philosophical indoctrination from top management to all levels and functions of the organization. Though he has not suggested any formal structure to initiate and drive transformation, Deming advocates a ‘team structure’ or ‘teamwork’ to involve people, reorient culture for transformation, and keep the momentum of continuous improvement going. He also suggests appointment of a proficient leader or a seasoned statistician reporting directly to the CEO with the responsibility of coordinating deployment of statistical techniques in critical areas and then extending it to all functions. Deming has not suggested creation of any other large staff category for initiation and control of organizational transformation. Juran, on the other hand, suggests formation of a ‘quality council’, steering arms and diagnostic arms for problem solving. The function of the steering arm is to establish the direction of the problem-solving effort, determine priorities and, organize resources. The diagnostic arm has the responsibility of analysing problems and tracking down the root causes. Juan’s approach is mainly operational and directed towards solving problems related to products and services. His suggestion of a project-by-project approach and following MBO has to be viewed in this context. In this Juan differs from Deming, Imai, Ishikawa or Peters who advocate a ‘total quality’ approach. Crosby’s approach is also operational and narrowly focused on making products and services to meet the requirements. He also suggests creation of a quality council, quality improvement team, an ad hoc committee for zero defects, audit teams, etc. He recommends bestowing plenty of importance and powers on Quality Managers and quality departments, but this approach has an inherent danger of promoting bureaucracy and allowing the philosophical tenets of traditional management to linger. Such ‘quality bureaucracies’ actuated by the whims of quality managers were quite common in the old style of management. Deming has not talked much about structural changes, but has concentrated on transforming thinking, adopting a new philosophy and doing things differently with a clear focus on objectives. He has given importance to involving people through team structures, and use of basic statistical techniques. He is against systems and structures that promote bureaucracy and fear, and instead suggests a

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SYNOPSIS OF PHILOSOPHY, CONCEPTS AND IMPLEMENTATION PRINCIPLES 63 simple structure of cross-functional teams. Imai also suggests cross-functional activities through teams as this extends TQC activities horizontally and breaks departmental barriers. TOM Peters like Deming is wary of bureaucracy. He says that structure kills and urges radical reduction in layers of management and ratio of non-supervisors to supervisors. He also suggests redeployment of excess support staff to line functions. People can be retrained and will contribute effectively if transferred to the line function rather than being shunted into non-productive staff jobs that promote sluggishness and inefficiency. Ishikawa’s suggestion of forming cross-functional committees selected from senior managers somehow smacks of hierarchical bias. It may be acceptable in Japanese culture but many may view it as being against the true spirit of TQM philosophy. Furthermore, his idea of setting up different project teams and a separate secretariat to give administrative support to the committee is likely to promote bureaucracy and perhaps encourage two parallel power centres within the organization.

Notes 1. W. Edwards Deming, Out of the Crisis (Madras: Productivity and Quality Publishing, 1992), p. 6. 2. Ibid, p. ix. 3. Akira Sueno, Entrepreneur and Gentleman, Tokyo: Charles E. Tuttle Company, 1981), p. 93. 4. W. Edwards Deming, Out of the Crisis, p. ix. 5. Philip B. Crosby, Quality Is Free (New York: Penguin Books, 1980), p. 6. 6. W. Edwards Deming, Out of the Crisis, p. 27. 7. Kaoru Ishikawa, What Is Quality Control? The Japanese Way (New Jersey: Prentice-Hall, 1985), pp. 25, 112. 8. W. Edwards Deming, Out of the Crisis, p. 6. 9. Gregory B. Hutchins, Introduction to Quality (Singapore: Maxwell Macmillan International Publishing Group, 1991), p. 252. 10. Tom Peters, Thriving on Chaos (New York: Alfred A. Knopf, 1988), p. 83. 11. W. Edwards Deming, Out of the Crisis, p. 76. 12. Masaaki Imai, Kaizen (Singapore: McGraw-Hill Inc., 1991), p. 46. 13. W. Edwards Deming, Out of the Crisis, p. 76. 14. Masaaki Imai, Kaizen, p. 48. 15. Kaoru Ishikawa, What Is Quality Control? The Japanese Way, p. 112. 16. W. Edwards Deming, Out of the Crisis, p. 404. 17. Ibid, p. 43. 18. Philip B. Crosby, Quality Without Tears (New York: Penguin Books, 1985), pp. 66–68. 19. Masaaki Imai, Kaizen, p. 41. 20. Ibid, p.25. 21. J. M. Juran, Managerial Breakthrough (NewYork: McGraw-Hill, 1964), pp. 15–17. 22. Philip B. Crosby, Quality Is Free, p. 2. 23. Ibid, p. 109. 24. A. V. Feigenbaum, Total Quality Control, Engineering and Management (New York: McGrawHill, 1961), p. 13. 25. Philip B. Crosby, Quality Is Free, p. 15. 26. W. Edwards Deming, Out of the Crisis, p. 124. 27. Ibid, p. 121. 28. Philip B. Crosby, Quality Is Free, pp. 21–34. 29. J. M. Juran, Juran on Quality by Design (NewYork: The Free Press, 1992), pp. 2–43.

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3

CHAPTER

Key Foundational Concepts PROFOUND KNOWLEDGE uperficiality of knowledge has been one of the principal reasons behind the of failure for most TQM initiatives as professionals often rush to introduce certain TQM tools and enablers without in-depth study and gaining insight into the TQM philosophy. Deming had emphasized that unless the management acquires profound knowledge total quality management will be elusive. Profound knowledge enlightens on the essence and true inference of a concept, it catches the vibe regarding the real purpose and objective. It facilitates to discern the true inner meanings, evaluate the qualitative advantage and understand the implicit behavioral changes. The profound knowledge is intense, heartfelt, radical and discerning. Some aspects of profound knowledge are given below:

S

Profound Knowledge Does Not Come With a Wish List To acquire profound knowledge one must banish egotism, acquire humility and be eager to learn life-long. Only depth and conviction can lead to profound knowledge. Conviction comes with learning and experience, while depth is gained by comprehending the underlying theme. There is a fine distinction between knowledge and learning that complement and supplement each other. Knowledge is the outcome of learning, while the application of the knowledge acquired follows a learning curve. In operational terms, learning is the sum total of the knowledge gained from education and training, alongside the experience gathered from practice and mistakes. Acquired profound knowledge has to be spread across the organization so that the organization is transformed to a learning organization. This is possible if the owner or top management is genuinely interested.

Profound Knowledge Is Knowledge Universal to All Businesses TQM principles are universally applicable since governance, public/private/ social organizations for profit or non-profit, and all business enterprises whether

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KEY FOUNDATIONAL CONCEPTS 65 in manufacturing or service, are subject to the same basic principles of management. Only the political leaders, businessmen, professionals and bureaucrats who are consciously or subconsciously suspicious of change or have fear of losing their position or prestige, insist that their field of activity or business is different and as such the profound knowledge about TQM or any sort of transformation philosophy is no good or applicable to them.

No Nation Need Be Poor Abundant natural resources are not a pre-requisite for prosperity. The wealth of a nation depends on the quality of its people, management, and government. Profound knowledge unveils the fact that a country like India should leverage the latent talent of its people. The challenge is to ensure total quality of management in governance and business so that self and sectarian interests are overpowered to create wealth. Thus, even the way we run our economy or institute social policy must be guided by this profound knowledge. Philosophical indoctrination and long-term commitment to new learning and new philosophy is essential for transformation. A foundation based on the principles and values serves as a motivational elixir for the arduous journey to national or organizational transformation. Experience alone, without theory, teaches nothing about management of change, be it about eradicating poverty, creating job opportunities, removing social ills or to improve quality and competitive position. Experience alone cannot guide what to do about transformation or how to go about it. Management of expectations is vital, and involvement of all is crucial. Ownership of vision and adherence to values are basic ingredients of success. Top management’s visible concern and commitment to vision, purpose, and values are the driving forces. The actual state of a nation or an organization mirrors the attitude, commitment and efficacy of its political leaders or top management. The leaders must establish constancy and consistency of purpose. While constancy defines what to do, consistency of purpose entails ‘doing one’s best’ to control the variation or dissipation of efforts around the set course. It ensures effective monitoring so that the focus is not lost while the company pursues a competitive edge in the marketplace creates jobs and meets its societal obligations. To ensure constancy and consistency, management must link their short-term actions and long-term strategic steps. Making changes in the system without the benefit of profound knowledge and proper guidance is mere tampering. Transparency cannot be installed by the dictates of corporate governance. It will come if the management religiously believes in total quality of management and deploys TQM philosophy in day-today management. Improvement of quality and productivity make significant contribution to material living of people and is a necessary step towards prosperity. Short-term dividends and paper profits do not improve the competitive position of a company nor do they create wealth for society. Innovation is the foundation of the future but it cannot be institutionalised unless the top management has declared unshakable commitment to the basics i.e. quality and productivity.

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66 PHILOSOPHIES AND CONCEPTS Acceptance of reality is a prerequisite for planning any management of change. Ironically, quite often some leaders, management, trade unions, or other concerned people refuse to see or accept reality. They need to be reminded of Deming’s comment on survival, ‘Charles Darwin’s law of survival of the fittest, and that the unfit do not survive, holds in free enterprise as well as in natural selection. It is a cruel law, unrelenting.’1 Realization of the inner sense of this famous law may help the paradigm shift of many die-hards. However, if they do not want to survive, then no body can help—it is their self-deceptive choice for virtual suicide. The company should be loyal to its customer and not the other way round. The company should always strive to meet the changing needs of the customer, who is the most important part of the business process and whose money pays for the company’s operation and profits. Political and labour leaders must realize that protection by tariffs and laws forcing people to ‘buy national’ only encourage incompetence and act against the real interests of labour. Mere talk about quality, or getting ISO 9000 certificate, or initiating some change management programmes accomplishes little. The critical issue is of proper deployment of TQM principles so as to ensure totality of characteristics of its human and other resources is in tune with the requirements of continuous improvement in all aspects of the company operations. Abandoning TQM, and then taking on Six-Sigma, Balanced Score Card, or any other fads or ‘in-thing of the day might give temporary success, but will ultimately lead to a vicious circle of failure and abandonment, sowing confusion among the rank and file. Compatibility is easily achieved if the new initiatives like Six-Sigma, Balance Score Card, etc., are introduced after the core principles of TQM have been solidly entrenched in the organizational culture. The statistical tools required for TQM are not all that difficult for management professionals to comprehend and use. Experts will help in implementing the techniques but management needs to make efforts to have an overview of the concepts of variation and variation control, and how the relevant statistical tools manage these. The job of management is inseparable from the welfare of the company. Performance of management should be measured not by quarterly dividends but by potential to stay in business, to protect investment, to ensure future dividends and to create of jobs through improvement of products and services for the future. People are valuable resources. There is a dichotomy between this principle, and the policy of dumping employees onto the heap of the unemployed whenever there is a hint of market recession, fierce competition, or some other adversity. How can a ‘valuable resource’ be dumped? There is growing resentment against such shortsighted policy; it is no longer socially acceptable to treat employees as commodities. The realization that every person has some inherent talent that can be harnessed for creativity is part of profound knowledge. The problem with most management is that they treat the dictum ‘power of people’ as a buzzword. One has really to believe and act without any inhibition to create a conducive environment and institutionalise systems that would help unleash and leverage the hidden talents of people for the good of the organization. Human resource development is not accomplished passively or by standard packages. It’s a process that involves

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KEY FOUNDATIONAL CONCEPTS 67 constant encouraging, sharing, confronting, re-evaluating, adjusting, and even totally changing the prevalent views and systems. All problems have solutions. Simple tools can solve 80–85 per cent of the problems managers face. It is a pity that most managers do not use simple problem solving tools and instead thrive on fire-fighting situations. Managers need to proactively develop a problem-solving aptitude and capability and institutionalise the use of these tools across the organization. Re-orientation of attitude and behaviour is possible through paradigm shift. QC is a thought revolution in management; therefore the thought process of all employees must be changed. Occasional reorientation or course-correction is necessary for the company to be in tune with changing times. To accomplish this, education must be repeated over and over again. Also self-evaluation and self-education by the top management personnel is crucial for direction and course-correction. Ishikawa minces no word when he says, ‘Top managers often have little or no understanding of total quality control…. Top managers are always interested in profit, sales, investment in plant and equipment, financial manipulations, and political dealings, but they exhibit very little interest in quality, which is at the core of everything.’2 The onus is on top management to give the lead in the TQM movement or business transformation, the seeds have to be sown with their becoming role models. To assume leadership role top management need to know the truth about their own quality or about TQM. Culture shapes as well as drives the behavioural pattern of an organization. The quality expert Philip B. Crosby has stated, ‘Changing culture is not a matter of teaching the employees a bunch of new techniques or replacing their behaviour patterns with new ones. . . The culture we have now was caused.’3 It is a matter of changing something that was caused, it can be accomplished by changing attitudes through imbibing and living the values to achieve organizational vision and mission. Real teamwork is reflected through the synergy achieved through the combined efforts of people, for which managerial support system is essential. It takes time and care to build a team, but insistence for results before the process is complete will only result in frustration and disillusionment. Knowledge is a scarce national resource. Deming has pointed out that apart from capital, materials, and men there is a fourth, vital element of wealth creation. Maturity and effective deployment of this fourth element called ‘knowledge resource’ will yield competitive advantage. Bringing Knowledge to bear quickly is critical, Tom Peters has put it nicely, ‘“Soft" dominates, “Hard” has been eclipsed.’4 In today’s competitive environment learning, information management, and knowledge management are the only routes to security. Unlike rare metals, which cannot be replaced, the supply of knowledge in any field can be increased by education. A company must, for its very existence, make use of the store of knowledge that exists within the company and learn how to make use of help from outside, and when it can be effective. Global organizations need to restructure, organization structure for global knowledge management entails bureaucracy-less configurations to leverage accumulated knowledge across the various divisions and locations of the organization. However, fear of knowledge

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68 PHILOSOPHIES AND CONCEPTS is pervasive amongst many senior professionals. Some top managers or professionals appear to have no motivation to learn. Some are too steeped in their ego, fear acknowledging their own ignorance and are unable to accept the added responsibility that the new knowledge necessitates. Continuous improvement is not an abstract concept. It is an essential business strategy to improve quality, productivity and reduce total cost so as to retain customers, expand customer base, and improve profitability. It challenges the historical acceptance of the view that meeting specifications was the best one could achieve in providing quality product or service. The new philosophy emphasizes that there is potential for improvement in each process step of products we create or services we deliver. Planning for continuous improvement is radically different from the traditional management way of linear planning which concentrates on one time-bound result. In continuous improvement, linear planning is replaced by a cyclic order planning (PDCA) cycle that spirals towards ever changing parameters of improvement at least till standardization has been accepted. The planning process includes steps for identifying and defining opportunities, deployment through identified methods or strategies, justifying or testing the hypothesis of deployment strategy, and taking corrective action or seizing further opportunities for improvement. ‘Partnership with supply and delivery chain entities’ is one of the key success recipes. But the principal company must really consider such entities as stakeholders, and honestly initiate joint actions or projects to protect the interest of customers and all other stakeholders. Information technology’s ability to influence every aspect of organization is clear. According to Tom Peters the best gross indicator of competitiveness may be simply the amount of resources committed to information infrastructure. One cannot shut out the parts of the world one does not like. They are real. Competitors in the field also want to win; they could also be in change management mode, improving processes, systems, products, and services. One needs to benchmark effective or successful systems, processes, or strategies to learn something valuable. However, bench marking does not imply blind copying. There is an economic loss for any deviation from a target, which is set at a value that will lead the customer to praise the product. A slight deviation from the target may lead to a small loss, but the loss gets larger as the deviations move further away from the target outcome. Irrespective of the fact that the deviations may be well within the specifications, there is loss. Any loss of material, energy, resources, etc., is a loss to society. Setting up an effective feedback system is of paramount importance in enhancing knowledge, and helps in decision-making for course corrections or further improvements. A feedback system creates databases that are the result of lessons learned. It highlights weaknesses and reinforces confidence in systems and procedures that have been effective. Lessons learned can play a big role in facing competition in the marketplace. J. M. Juran has placed a lot of importance on institutionalising the lessons learned, he pointed out that this analysis converts those scattered events into useful knowledge. For managers a major use of this knowledge is in decision-making.

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KEY FOUNDATIONAL CONCEPTS 69 Long-term stability, growth, and prosperity are dependent on goal orientation towards higher quality, cost-effectiveness and resultant higher productivity. Given the same capital, labour, and technology, one firm can produce better quality with higher and continually improving productivity than another, if it possesses profound knowledge. Unfortunately, in traditional management systems, task orientation towards achieving short-term financial targets takes up all available managerial effort and energy, while goal orientation towards higher quality, costeffectiveness and higher productivity takes a back seat. Manipulating the visible numbers or the economic variables does not lead to improvement, regardless of our ability to do so and regardless of the amount of money thrown into the effort. Deming has said many times, ‘He who runs his company on visible figures alone will soon have neither the company nor the visible figures to work with.’5 Profound knowledge helps to identify invisible figures and intangibles, and teaches us to balance between the visible and invisible figures to become competitive.

VARIATION Understanding variation is a part of profound knowledge. Professionals in any organization who are seriously contemplating improving their business ought to pay attention to understanding variation and the imperatives of variation control. Control and reduction of variation is one of the key elements of TQM implementation. The legendary statement of Dr Deming, ‘consistency and constancy of purpose’ implies variation control in all aspects of management to achieve the stated vision and mission. Failure of top management to study and understand ‘Variation’ is a serious hindrance to leverage the full potential of TQM. In the words of eminent statistician and consultant Lloyd S. Nelson, the central problem in management and in leadership is failure to understand the information in variation. Walter Shewhart, who worked during the 1920s with Bell Laboratories, developed insight into variation, its nature and ways to minimize it. Edwards Deming propagated the utility of this concept, and incorporated it into his treatment and application of statistical techniques for continuous improvement. He taught the concept of ‘variation’ to the Japanese who conscientiously concentrated on variation control through application of statistical techniques, which they also learnt from Deming. The roots of post-war Japanese rejuvenation are in the understanding and control of variation as well as other teachings of Deming, supplemented by Juran. Both Deming and Juran have explained the phenomenon of ‘variation’ through a simple demonstration. The experiment is quite simple and can be conducted easily with some modifications. A suitable bowl is selected to accommodate 1,000 round beads, 900 are white and 100 are red beads. Six people are randomly chosen to take part in the experiment. They are called in by turns and blindfolded. They are required to stir the mixture and draw 50 beads from the lot. After they have drawn the sample of 50 pieces and eyes are set open, they are asked to count and record the number of red beads. Each person has gone through the same series of

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70 PHILOSOPHIES AND CONCEPTS cycles of (1) taking out a random sample of 50 beads, (2) counting the red ones, (3) returning the sample to the bowl, and (4) mixing thoroughly. We will find that the number of red beads varies from sample to sample despite the fact that the process remains unchanged, that is, when any cycle begins, there are always the same contents in the bowl: 900 white and 100 red. The fact that stands out is that the performance varied in spite of constructing physical circumstances nearly equal for all the six people: the inference was that variation would be there even if the system or process were standardized. Variation is a naturally occurring phenomenon and not an exception. In fact it is a law of nature that no two natural items in any category are the same. No twins are exactly the same in all aspects nor will the behavioural pattern of an individual be identical on consecutive days. People’s thumb impressions are different and this natural variation phenomenon is used in security management, prevention and detection of fraud and crimes. One needs to comprehend that all processes exhibit variability irrespective of place of work or process employed. Whether large or small, variations exist in parts manufactured in all production processes whether they are hand lathes, blanking presses, annealing furnaces, chemical processes, CNC machines, etc. Similarly with the service sector there will be variations, however minute, in repetition of the same service. With small and minute variations, items may appear identical; but precision instruments will show differences. Simple examples are weight variation between standard packs available in supermarket shelves e.g. toothpaste tubes of the same brand, food materials in standard containers, weights of milk-pouches, standard packaging of biscuits, etc. Some variations may be quite large and easily noticeable, such as the height of human beings, while some variations may be so infinitesimal that only very high precision instruments can measure them—the master gauge block can measure variation guaranteed to precision of two-millionths of an inch. The natural phenomenon of variation has established the truism that no two pieces or objects are ever made exactly alike. Variability occurs in al most all aspects of manufacturing and service operations. However minute it may be the physical dimensions of a part or a product vary. The chemical composition of a product varies; the number of errors in a clerical process vary; the percentage of parts meeting specifications varies, the taste of a particular brand of sweetmeat varies, the behaviour of the front-desk supervisor varies, and so on. Similarly under the same working conditions the absenteeism or the labour turnover rates vary. Processes dependent on handwritten inputs invariably exhibit variation; as for example the post-offices offices try hard to grapple with the problem of errors in interest payment against monthly income scheme. Then there are variations in the data entry in the hand written accounts book of small provision or grocery shops. The number and type of errors vary from one person to other and the errors are not identical though they may be similar. Gracefully accepting the ‘truism’ of variation and understanding or studying the extent of variability will be a critical input to process design of ensuring correct documentation of insurance policies. Non-human processes also exhibit variability. Variations in processes are due to a combination of various factors like the equipment, materials, environment, and

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KEY FOUNDATIONAL CONCEPTS 71 operator. The variation due to equipment includes tool wear, machine vibration, work holding-device positioning, hydraulic and electrical fluctuations, etc. The sum of all these variations affects the capability or precision of the equipment beyond the original design. Even supposedly identical machines will have different capabilities. The extent of variability is a critical input to process design and a very important consideration when scheduling the manufacture of critical parts. The second source of variation is the material, which is someone else’s finished product. The logic of variation occurring in the finished product can be extended to raw material category. Variation in the quality characteristics (tensile strength, ductility, porosity, moisture content, etc.) and dimensional accuracy contribute to the overall variation in the final product. A third source of variation is the environment. Variations in environmental conditions like temperature, light, radiation particle size, pressure, and humidity, etc. affect the performance of equipments, and consequently contribute to variation in the finished product. To counteract the effect of such variations precision products are often manufactured in controlled environments. Experiments are being conducted in outer space to learn more about the effect of the environment on product variation. A fourth source is the operator. Even with more and more automation the effect of the human interface cannot be totally eliminated and therefore variation due to the operator cannot be totally discounted. This source of variation includes the operating method, the operator’s physical and emotional well being and level of skill, physical fitness, nagging health problems, emotional stability, etc. An operator’s lack of understanding of process, equipment and material variations due to lack of training compounds the problem of variability as the operator resorts to frequent machine adjustments since operator is unable to deal with the variations in process, equipment, and material. The secondary source of variation due to inspection cannot be overlooked. Variations are induced due to faulty inspection equipment (absence of calibration being the major culprit), incorrect application of the quality standard, or nonstandardization of human sensory ‘feel’, too much reliance on sensory feeling of inspectors (e.g. reliance on sensory feeling while checking with micrometer), etc can be the cause of the incorrect reporting. The increase of inspection points or frequency to counteract process variation may actually aggravate variation as operators develop a tendency to depend on inspectors. The traditional management approach assumes the inevitability of variations caused by such factors like tool wear, machine vibrations, loose bearings, faulty jigs and fixtures, poor raw materials, careless or untrained operators, and weather changes. Some deviations (variations) from the standard shape, thickness, colour, and size are taken for granted since they are accommodated in the permissible tolerance provided in the drawings or specifications. There are also variations due to operational decisions like procurement of material and parts from more than one source. Lot-to-lot variation from any one supplier gives enough operational headaches but the problem of variation is more acute in case of supplies from two or more sources. Even though two suppliers may send excellent materials, differences still exist causing unpredictable variation in

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72 PHILOSOPHIES AND CONCEPTS the process output. So the next process or the final output as the case may be, will have to deal with this induced variation. In traditional management system provision is made for some amount of waste due to various types of variation. Similarly variation in various financial parameters involving output, sales, gross margin, wastes, operating costs, etc., affect the projected profit.

Causes of Variation Causes of variation are in the system itself. Treatment of variation depends on the status of the system, i.e., whether the system is stable or unstable. Lowering the number of defects in a stable system can only be achieved by changing the system. To put it in layman’s language, a system is a series of interrelated activities and processes that have an outcome. A few examples of outcomes are on-time delivery rate, product characteristics, time to take a customer order, on-time examination results, service characteristics, gross national product (GNP), gross domestic product (GDP), the balance of trade (BOT) of the national economy, timely running of train services, or the profit of a company at the end of any period. The point to comprehend is that these outcomes are all variable because the systems that produce them exhibit variability. When management looks at information on output or performance, it is confronted with a range of numbers. How does one know whether or not the differences are due to chance? The usual assumption is that each is due to one specific cause, such as the effort or lack of effort of an individual. But as we saw, in a system like the bowl and beads, all the parameters were the same for everyone, yet it was clear that variations were due to chance, and this meant that the variations were caused by the system, not by the employees. Who is responsible for system design? Is it not the management? Why then blame the employees? Understanding the nature of variation is essential in deciding what, if anything, should be done to improve the outcome. All the causes of variation can be categorized into two basic types. The first type is the Common cause, also called constant or chance or random cause. System or common causes are essentially influences due to the way the system is designed, whenever the system is running these influences will commonly be present. Variation from constant causes implies the same causes from hour to hour, lot to lot, worker to worker. If common causes are present, then the variation in the products or services to the customer will be random, with a steady mean and range. Chance/common causes are a natural part of the system and usually cannot be detected or measured. If the customer—the person receiving that output—is not happy with the range in outcome, then the system might have to be redesigned. The second type is the Special or assignable cause. Assignable causes are not random; they can be detected, measured, controlled and eliminated. Special causes are brought about by special events, which are not built into the system, but are introduced by some occurrence outside the normal pattern or design of it. Due to their non-random nature, they cause occasional variations outside the normal range of the process or system. They need to be identified and solved to put the system in a stable statistical condition.

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KEY FOUNDATIONAL CONCEPTS 73 It is important to be able to distinguish between these two types of causes of variation critical to system efficacy. Common causes are a feature of system design, whereas special causes are created by individual things, people or events, which are extraneous to the system design. There could be errors of judgment leading to under- and over-reaction in attempting to control variation. Management may take actions assuming a special cause when none exists, the system might just be displaying its inherent natural random variation. It is often found that professionals, while grappling with the problem of the reliability of their product, tend to take action by making changes at every sign of departure from uniformity. Smart professionals ultimately realize their methods were folly; actually their actions only made things worse. This is quite a common phenomenon as the concerned professionals lack comprehension of variation and its causes. The riddle is answered by Shewhart’s hypothesis that professionals make two kinds of mistakes in their efforts to achieve uniformity and both mistakes are costly. The two kinds are: (1) attributing an outcome to a special cause of variation when it actually came from a common cause of variation, and (2) attributing an outcome to common causes of variation when actually it came from a special cause. Anyone may set for oneself a perfect record from this hour, henceforth, never to make ‘mistake 1’, it is quite simple: attribute any outcome to common causes. In doing this, though, one will maximize one’s loss from ‘mistake 2’. Likewise, anyone may set for oneself a perfect record of never making mistake 2 simply attributing any outcome to a special cause. But in doing this one will maximize one’s loss from mistake 1. It would good never to make mistake 1 and never to make mistake 2. Unfortunately this is impossible. Shewhart settled on a different aim: make mistake 1 now and then; make mistake 2 now and then, but regulate the frequencies of the two mistakes to achieve minimum economic loss from both. To this end, he gave to the world the control chart, with 3-sigma limits. This simple concept of control limits indicates process stability and helps management to take corrective action. All the data pertaining to the differences in measured quantity such as production output or the number of defects fall within three standard deviations (common measures of variation). Control limit functions similar to standard deviations can be applied to any situation and have proved to be very effective. When all the data fall within the control limits and there are no trends or cycles, we have achieved what is called statistical control or stability. All the variation is best explained by chance. When, however, some of the data fall outside the control limits, either above the upper limit or below the lower limit, then it is worth our while to hunt for the cause of that variation. Anything that causes a variable to fall outside the control limits is probably a special cause. Special causes can be found and often eliminated. The control charts do a marvellous job under a wealth of applications. Each special cause identified as a point goes outside the control limits, and taking appropriate action to remove the special cause(s) may bring the process under statistical control. One need not emphasize here the advantages of having a process in statistical control. Limits of variations as well as costs are predictable with a high degree of credence. The usual or rather the common tendency is over-adjustment

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74 PHILOSOPHIES AND CONCEPTS in case of mistake 1, and in case of mistake 2 never doing anything to try to find the special cause. Any adjustments of an existing system that is already in statistical control can upset it and lead to abnormal or volatile variations. Only purposeful redesign of the system can lessen variation and volatility. Deming concurred with the hypothesis, adopted and improved upon the statistical techniques discovered by his friend Shewhart and popularised the use of statistical control techniques for variation control. Over-adjustment, often called tampering, of a stable system inevitably makes things worse. There are three ways of acting on a stable system. One is a change in the system leading to improvement; the second is a change in the system making things worse, and the third is tampering which also makes things worse. Only one of the three, a change in the system leading to improvement, will make things better. Only management is in a position to make any of these changes, but making the changes in the system without the benefit of profound knowledge can result in tampering—worsening, even ruining, a system. One has to bear in mind, that when we say a system is stable that means there is variation. Some systems can have a lot of variation and some display little, but all systems, whether mechanical or human, vary. State of control of a system or process is achieved when the assignable causes have been eliminated from the process and only chance causes of variation are present to the extent that the points plotted on the control chart remain within the control limits. The process is in control i.e. stable and predictable over time, and the future variation will be the same unless there has been a change in the process due to an assignable cause. Small variations due to characteristics of 3 Ms, i.e. men, machines (equipment), and materials, are expected and considered to be part of the stable process. The point to be comprehended is that no higher degree of uniformity can be attained with an existing stable process. However, it need to be comprehended that greater uniformity can be attained only through a change in the basic process which implies change of system resulting from quality improvement ideas. For in-depth comprehension of the causes and impact of variation interested readers should study the work of Shewhart, Deming, and others. Understanding and applying statistical techniques is essential in detecting, measuring and controlling variation. The commonly used measurement methodology and units of variation are range, frequency distribution, standard deviation, etc. The unnatural, unstable nature of variation makes it impossible to predict future variation. The assignable causes, which induce variation over time, must be found out and corrected before a natural stable process can be restored. In-depth analysis of apparently stable process can indicate the looming danger of the process getting out-of-control, the occurrence of ‘unnatural runs’ or ‘patterns’ of variations though within the 3σ limits are glaring examples. The term ‘out of control’ is usually thought of as being undesirable; however there are some situations where this condition is desirable. Statistical books list such possibilities. It is possible to develop a unique checklist for each process using questions as a guide to find out reasons for the process being out of control. A simple example of a manufacturing process will illustrate the point:

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KEY FOUNDATIONAL CONCEPTS 75 a. b. c. d. e. f. g. h. i. j.

Are there differences in measurement accuracy of the instruments used? Are there differences in the methods used by different operators? Does the environment affect process? If so, what are the factors? Is the process affected by tool wear? Were any untrained workers involved in the process? Has there been any change in the source of the raw materials? Is the process affected by operator fatigue? Has there been any change in maintenance procedures? Is the equipment being adjusted too frequently? Did samples come from different shifts, operators, or machines?

A stable and consistent process displays controlled variation that is inherent in the process itself, therefore to reduce the variation the process needs to be changed. As seen earlier, tampering with the process will lead to ruinous results. On the other hand an inconsistent and unstable process displays uncontrolled variation that changes from time to time. This was not the intention of process design. There must be some assignable cause for excessive variations that must be identified and removed. There are instances when the assignable cause results in a beneficial change, and in such cases trying to make it part of the process results in improvement not originally envisaged. Both Shewhart and Deming have given several examples of how the removal of detrimental assignable causes (special causes) leads to substantial improvement in the behaviour of the process. The aim in production should be not just to get statistical control, but also to shrink variation. Costs go down as variation is reduced. It is not enough to meet specifications: moreover, there is no way to know that one will continue to meet specifications unless the process is in statistical control. Until special causes have been identified and eliminated, at least all that have appeared so far, one dare not predict what the next hour’s output will be: the process may be doing well in the morning hours, yet turn out items beyond the specifications in the afternoon. The traditional management control system is based on fire fighting on variances as reported through ‘daily or monthly output’ or variance reports of the ‘month’s actual against budget’. These reporting systems are based on output measures rather than process measures, and actually concentrate on single point figures that take no account of system variation. Thus one can hardly have evidence of control, judge early trends or monitor improvement. On the contrary, management monitoring through output measures of single point values leads to tampering with process and compromises, or manipulations for the immediate or short-term gains at the expense of medium/long-term objectives. No business can operate for long unless a certain amount of stability has been achieved. This is verified through bringing the processes under statistical control. But a system that is operating in the state of statistical control is not necessarily defect-free; there could be a certain percentage of defects in the system. Further improvement can be achieved if the whole system can be redesigned without fiddling with the existing individual causes of defects. Only the management can authorize the redesign of the system. Taguchi’s theory of the ‘loss function’ has added a new dimension to loss reduction through variation control. According to Taguchi, the loss can be lowered

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76 PHILOSOPHIES AND CONCEPTS by first reducing the variation, σ, and the adjusting the average to revised target. In Taguchi’s view, continuous quality improvement requires constant reduction of the variations approaching the target value. In traditional systems, quality is acceptable as long as a dimension is anywhere within a specification spread. Taguchi believes that the traditional system is faulty as it causes huge loss to society, and is the cause of inconsistent quality and poor performance. According to him attaining the target dimension is the ideal point for a process to attain consistency and the secret to quality control is the ability to hit the target consistently and to limit any variation about this target. Taguchi reinforces this by saying that any movement from the target results in deteriorating quality until a process outside the specification limit ends up producing products that are a loss to society. Taguchi recommends selective tightening and/or upgrading of statistical tolerances to eliminate excessive variation around the target and to use analysis of variation (ANOVA) to determine which factors contribute to the total variability and the loss function to obtain a trade-off between quality and cost. Readers need to comprehend the two distinct approaches to process improvement through variation control. One looks for ways to transform an inconsistent and unstable process to a consistent statistically stable process within the specification limit while the other seeks modify an existing well-defined and consistent process to reduce the variability around a target value in order to meet consistently the ever-increasing stringent expectation of the customer. It is a pity that despite exposure to modern management philosophies most managers still believe that the majority of problems and inefficiency are due to people in the system, and therefore give priority to controlling people instead of processes. They still do not understand the significance of variation and are ignorant of the random or special causes of variation. The hallmark of controlling people lies in policing to ensure that people work hard and produce at maximum stretch, exhorting them to compete for quantity at every turn, holding the employee accountable for quality, and installing merit-rating systems for reward and reprimand. This mindset is a stumbling block to acquiring real knowledge about variation and system, understanding that both variation and system design account for most of the organizational problems and that management is responsible for initiating variation control and system redesign if required. Exposure to variation control techniques will enable management to know whether or not the differences are due to chance or common causes or special causes, and will guide them on tools and techniques to stabilize the processes by removing special causes and redesigning the system to tighten the variation against the new target value. The profound knowledge will begin to dawn on management that the deficiencies in the performance of many employees are directly due to deficits in management practices, and seeking explanations from employees for all variances leads to much waste of time and effort in fruitless witch-hunts when the variances are to a large extent only system variations. Managers lacking comprehension about variation and variation control methodology typically over-react and resort to fire fighting, making the situation worse. A common fallacy is the supposition that it is possible to rate people by their performance; to put them in rank of expected performance for next year, based on

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KEY FOUNDATIONAL CONCEPTS 77 performance of the previous year. According to Deming, a fair measure of capability through conventional performance rating is impossible. The performance of anybody is the result of a combination of many forces of variation: the person himself, the people that he works with, the job itself, and many other factors. The variable factors are many, they include the material that he works on, his equipment, his customer, his management, his supervision, environmental conditions like noise, confusion, poor food in the company’s cafeteria, etc. That these forces produce unbelievably large differences between people comes out clearly from the numerous examples of performance that can be collected in any organization over a period of time. The unbelievable differences between people must be attributed to action of the system that they work in, not the people themselves. A man not promoted is unable to understand why his performance is lower than someone else’s. Deming proves with simple examples that appraisal rating of an employee is akin to a lottery. Incalculable damage is done, the appraise takes his rating seriously, he develops an inferiority complex, suffers from low morale because he does not know how to improve his performance; in fact unless he gets real help his performance can decline further. Management has to be able to distinguish which of the employees are really in need of special help and those who are above average. The former is a special case and can be addressed; the performance of latter category is due to inherent characteristics of the system that allows chance variation, trying to address it directly, without system change, will lead to tampering and only makes things worse. One has to have some better way of distinguishing one from the other, knowledge of variation and use of control limits are the best ways making the distinction between special cause and random cause. Once management determines who is in need of special help, they have an obligation and a responsibility to provide that help. They have an opportunity to help one employee improve his/her output, which in turn raises the output of the group and in the process, bolsters the morale of everyone in the company. Outstanding performance may be attributed only to someone whose performance, by appropriate calculations, falls beyond the limits of variation of the system, or that creates a pattern. Management need to study and replicate his method by modifying or changing the system so that majority of employees can perform at this new level. Apart from the points discussed above there are other critical factors that lead to variations in business outcome, they may include variation due to inputs, design, customer servicing, internal financial controls, etc. Despite automation, the impact of variation due to employees has not lessened. The advent of knowledge workers has really given a new dimension and challenge to direct the efforts to reduce the adverse impact of variation. In general the employee’s physical and emotional well being is also a contributory factor to variation. Overall milieu, specifically organizational and societal environment, also induces variations in attitude of people that affect performance. These explanations are not at all exhaustive. ‘Variations’ in supplies do create problems, and sometimes havoc. In terms of percentage the material cost due to outside supplies is more than 60 to 70 per cent

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78 PHILOSOPHIES AND CONCEPTS (in some unique cases the percentage is higher) of the total material cost. Yet the management takes little care about variation in the outside supplies, whether it is in quality, time delays, reworks, re-inspection, etc. Lot-to-lot variation from same source do cause headache but the problem is compounded further with the lack of control of ‘variations’ of supplies of the same material /component from more than one source; such supplies often create chaos during operations. The management policy of having more than one supplier is purportedly for ensuring regular supplies and competitive price. Management is happy to accept the materials as long as they are within the specification limit approved by the inspection/quality department as per the company’s sampling or acceptance criteria; it is important to note that management does not talk of limiting the variation around a target value. Acceptance of supplies, each having an absolute value within the specification, does cause problems in assembly and in performance. Management may be on a cost-cutting drive, and may have chosen the supplier on the basis of lowest price without much regard to quality. Knowledge of variation will help management to comprehend the necessity of variation control in purchased materials. They will be able to comprehend that variation control will not only ensure consistent and improved quality but also ultimately bring the cost down. It is ironic that management puts a lot of effort and sets up systems for in-house processes while they pay scant attention to the variations of outside supplies which account for more than 60–70 per cent of the total material requirement and more often than not have a direct bearing on the quality and cost of the final output. A high-level quality consultant is helpless to improve quality when managerial policy forces the purchasing department to buy supplies on the basis of lowest cost. The prudent policy is to have the company develop partnership with a supplier, sharing knowledge to improve the supplier’s production methods. Similarly, quality cannot be improved when design is poor because the designer has ignored ‘variations’ contained in consumer research reports or has neglected the variations encountered by the engineers or front line personnel who have to build the product or deliver the service as the case may be. Knowledge of variation gives good insight into how to continually improve products and services to keep customers satisfied. It also helps to sustain top-class service. Customer dissatisfaction with service is often attributed to the quality of the service rendered by the service staff, but service staffs are part of the system. Instead of pointing fingers at their staff in case of service complaints, prudent management equipped with the knowledge of variation will examine the system, take necessary corrective actions for variation or will change the system, if required.

Financial Control Well-established processes are used in establishing financial control systems that include evaluating actual financial performance by comparing with financial goals that have been set up, and taking action on the difference: the accountant’s ‘variance’. There are numerous sub-processes for financial control: cost control,

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KEY FOUNDATIONAL CONCEPTS 79 expense control, inventory control, and so on. But the paradox is that despite this elaborate system, managers really do not go to the root of policy variations that distort the organizational vision or mission. The management fails to comprehend the real meaning of Deming’s ‘consistency and constancy of purpose’. Deming is really warning management about the variations in management’s policy and raising doubt about real intentions. One of the greatest dangers in managing financial variations is through ‘rear-view mirror control’. When one looks in a rear view mirror one looks backwards instead of looking forward at the goal to adjust the steering. Short-term financial goals often become sacrosanct, and management resorts to all sorts of manipulations and compromises in operations, customer servicing, and financial areas. Such actions totally negate the essence of variation control, and in fact sacrifice one of the critical tenets of variation control in management of an organization, i.e., consistency and constancy of purpose. Such compromises and malpractices make the much talked about transparency in management or total quality of management merely eyewash. Management students and professionals should be aware of the negative impact of the misrepresentation, and wrong deployment of variation control principles. Finance managers, though experts in their own field of management accountancy do not attempt to study operational variations. Practically all our management systems are based on short-term finance-oriented figures such as profit, return on assets, ROI (return on investment), stock cover, etc., which are generally all retrospective figures that tell what has happened, rather than predict what will happen. Financial trends are normally reported on a period-by-period basis, with explanations being demanded for significant variances. Very few managers really understand variation and even if they have read about it in a textbook, many of them usually feel it does not apply to them. Not that most managers are unaware of the need for long-term goals but they are simply unable to circumvent the circumstantial pressure to manage by short-term objectives as their performance is evaluated through their ability to meet quarterly or annual targets. Even the national economic analysis is solely concerned with return on capital employed, levels of output, GDP growth, number of employed people, and so on. The economists at government and Reserve Bank levels are experts in their own field but even they tend to ignore the relevance of variation control. It is understandable, then, that in seeking improvement in the way the economy operates, those who have been guided strictly by economic theory would revert to adjusting or manipulating variables like the interest rates and exchange rates. They totally ignore the scope for improvement through improvements in system design and variation control in all facets of operation. The lesson is clear, sustained improvement does not come from manipulating the visible numbers and the economic variables. Variation always creates costs. Actions taken to deal with variation after the fact will inevitable increase the costs, while actions that reduce variation at the source will reduce subsequent costs while increasing product quality. The further upstream one works to reduce variation, the lower the costs of variation will be. Costs of failure are those costs associated with rectifying problems—instances of excessive variation—after they have occurred. They include the cost of rework,

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80 PHILOSOPHIES AND CONCEPTS product recall, cost of extra inventories, extra workspace for returns and defectives, and loss of customer goodwill or even permanent flight of the customer. There are daily variations, almost by the minute, in the stock/economic market, which are beyond the scope of this book. Fluctuations in the stock market or commodity market can be due to various pressures or market forces, which could be extraneous factors of an oscillating system, rather than random variation. But it would be naïve to expect that random variation may be also at work even if there is a strong cyclical element to the market. So a combination of both random and cyclical factors would be even more impossible to control by adjustment. Once in a while, one gets lucky, but most of the time attempts to adjust a system without perfect knowledge of the system would be tampering, making things worse. In real life, experts say, we never have perfect knowledge of the stock market system and its variation.

Relevance of Variation to Total Quality Management As stated earlier, as long as conformance to specifications is regarded as the main objective for any operation, it will be impossible to sustain any real process improvements. Management will continue to have a short-term bias and be oblivious of the long-term perspective. They will be extremely happy as long as the measurements or results are within the specification limits, and will not bother at all to reduce variation around the mid-point or to tighten the target point. Management who cannot shed this philosophy are bound to find itself trapped in the whirlpool of uncertain survival. Achieving ‘Zero defects’ is not good enough, and industry must do more than merely meet specifications. Management must learn to study processes, seek out the sources of variation and take steps to constantly improve products and services by reducing or eliminating variation. Statistical control is not the monster that many think it is, it is very user friendly in indicating variation, pinpointing its causes, measuring it, and helping to control it. So control charts should be used as a guide to pinpointing these sources. As the variation in the process in reduced, the parts will be more nearly alike, and the products will work better and services will be uniform and user friendly. It would be prudent management practice to reduce the variation of any quality characteristic (say thickness, or measure of performance) irrespective of whether the particular characteristic is in a state of control or not, and even when few or no defectives are being produced. Deming has further stressed on the important lesson about statistical control, ‘A process that is in statistical control, stable, furnishes a rational basis for prediction for the results of tomorrow’s run‘. The Japanese experience, with the subsequent experiences of GE, Motorola, and others, has proven the effectiveness of continual improvement of processes through variation control. If the Japanese manufacturers, Motorola, GE, and many others could improve their quality and increase their productivity by applying concepts propagated by Shewhart, Deming, and Juran, then there is no reason why others cannot do the same.

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UNDERSTANDING THE LOSS FUNCTION It is important to understand the loss function in the context of fulfilling responsibility towards society, a principal objective of total quality of management. The understanding of the loss function will help variation control in processes, products, and services, and also various statistical and other applications. In September 1960, Genichi Taguchi came out with a totally new approach in the loss function; the root of this approach is in Deming’s teachings. The concept gives a totally new dimension of treating variation and continuous improvement and has become an important model and tool for total quality of management. Taguchi totally rejected the so-called ‘goalpost’ philosophy of quality management. In the goalpost approach, one recognizes that the requirements have tolerances, any values lying within the allowed tolerance brand are acceptable, and any lying outside the allowed tolerance band is unacceptable. This has led to the concept of meeting specifications versus not meeting specifications. The phrase ‘good enough’ undoubtedly emerged from this type of thinking and concept. Since the industrial revolution, industries all over the world have managed according to this goalpost philosophy. Taguchi raised a fundamental question about the validity of ‘goal post’ approach. He asks about the difference between dimensions that lies just within the allowed tolerance band versus one that lies outside the allowed tolerance band. Taguchi maintains that the difference is insignificant, and from the customer’s point of view, the product that barely meets specification is as good (or bad) as the product that is barely out of specification. So long as the dimensions were within specifications, management never bothered to have strict vigilance, rather the process was left to its own as they assume that the process is ‘operating okay’. If one dimension deviated slightly from the specification limit, the operating process was declared to be ‘in trouble’ which was sudden and unexpected to the management who then ordered thorough investigation and resorted to witch-hunting. This is a peculiar phenomenon that is rampant in the traditional style of operating management: periods of neglect of the process broken by periods of intense scrutiny. During the periods of neglect any insights into the process are usually lost, process improvements are ignored, and the product quality begins to drift away from the target once again. Unfortunately, this is the characteristic of the specification approach and moreover, as the loss associated with the variation is perceived as zero, the management has no compulsion for continuous process improvement. This mindset stops management from perceiving or comprehending that it is variation control around the target value, and not adherence to specifications limits that will give the competitive edge and retain or expand customer base. Taguchi’s loss function overcomes the deficiencies discussed above. Taguchi asserts that instead of simply trying to stay within specification limits, one should determine where, within those specification limits, the best value lies, and then devote efforts to minimizing the variability around that point. The Taguchi loss function emphasizes that departures from the optimal point represent a loss to society, and the larger the departure from the best value, the larger the loss to society.

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82 PHILOSOPHIES AND CONCEPTS Societal losses include failure to meet customer requirements, failure to meet ideal performance and consequential warranty costs and loss of market share, and deterioration of health, safety, and other harmful side effects. Many practitioners have included the losses due to production, such as raw material, energy, and the labour consumed on unusable products or toxic by-products. Assuming the target is correct, losses of concern are those caused by a product’s critical performance characteristics deviating from the target. Product failure or non-acceptance of product induces loss of resources that have gone into designing and manufacturing a product. Product failure in the field resulting in a loss of life is a tragic loss to society. Likewise, the cost of environmental pollution falls into this category. The secret of achieving consistent quality is the ability to hit the target consistently and to limit any variation around the target. A classic case of the Japanese company Sony manufacturing TV sets in USA and Japan proves the importance of concentrating on ‘hitting the target’. Despite identical design and specifications, US customers preferred the colour density of Sony TV sets shipped from Japan over those produced by Sony USA. Investigation revealed that the frequency distributions of product quality were markedly different. Even though Sony Japan had 0.3 per cent outside the specifications, the distribution was normal and cantered on the target. The distribution of Sony USA was uniform between the specifications with no value outside specifications. It was clear that the customers perceived quality as meeting the target (Japan) rather than just meeting specifications (USA). Many companies, producing the same product from different locations, have had a similar experience. The form of the distribution of quality characteristics will influence customer satisfaction as well as the expected loss. Taguchi defined loss as being caused by functional variation of the product which he calls ‘noise’. He talks about three types of noise: (a) Outer noise, or variations in environmental conditions such as temperature, humidity, customer usage, etc. Some typical impacts of outer noise are: customers eat, drive, play or dress differently; different interpretation of policies and procedures within the same organization; people understanding TQM philosophy differently; more corrosion than planned in a greenbelt area; people quickly losing their tempers in highly humid conditions, etc., (b) Inner noise or deterioration of elements or materials. It is the variability due to deterioration within a piece or product. Simple examples: paint peels, joints get rusty, resistance of a resistor increases by 10 per cent in five years; plastic gets brittle with age; wear in a shaft with use; people getting tired; policies get outdated; etc., etc. and (c) Variation noise or piece-to-piece variability of products. Simple examples are: the pattern of cracks in a leather belt, scratches on a pair of eyeglasses, different weights of camshaft; students’ learning in classroom setting is different; travel expense reports are different, etc. Genichi Taguchi came out with a radically different approach that gives a new way of treating variation through a quadratic loss function with a product distribution. The Taguchi loss function speaks the language of things, which is engineering’s measure, and money, which is management’s measure. Although Taguchi has developed more than 68 loss functions, three of them cover practically all that may arise in practice. The three functions are (a) nominal is best, (b) smaller

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KEY FOUNDATIONAL CONCEPTS 83 is better, and (c) larger is better. Design engineers and managers responsible for initiating and driving continuous improvement should study Genichi Taguchi’s loss function.

‘PDCA’ CYCLE The PDCA cycle is a now universally acknowledged process that helps business decision-making, deployment of management strategies, and keeps alive the continuous improvement effort at all business stages or processes. It is a closed loop cycle that allows planned deployment of organizational vision, goals and strategies to meet the ever-changing needs of the customer. The flexibility of the cycle allows its use in any planning or implementation task. The PDCA cycle, in simple terms, channelizes the planning, implementing, monitoring, and improvement efforts in an organized, structured and coordinated way and also keeps the momentum of improvement going. Shewhart’s concept was a radical departure from the old way of industrial management that practiced product-out policy, took the customer for granted, and gave a clear message to customers that they could take it or leave it. In the traditional system, the customer’s preference or voice was totally ignored. Shewhart foresaw that the power of statistical techniques could be leveraged economically to find out customers new requirements or preferences, and link feedback to the process, piercing through all the structural barriers in between. Shewhart conceived that there ought to be institutionalised continuous improvement to meet the everchanging needs of the customer. This is the genesis of the PDCA cycle. The cycle containing the four steps should continue to rotate to ensure never-ending improvement in quality at lower cost. The first step of this new system considers various facets of the customer’s preferences or options like colour, shape, size, hardness, strength, finish and uniformity of materials. Since all the steps of the cycle can record the customer’s voice and take appropriate action, the continuous loop is designed to meet changing customer needs competitively. This concept of Shewhart’s is synonymous with Deming’s concept of the helix of continual improvement leading to the satisfaction of the consumer. The continuous cycle has several steps that incorporate the customer’s (both internal and external) requirements, plans and implements deployment strategy, studies the results of action, notes the lessons learned, applies course correction, and can predict the future state. The four-step cycle as conceived by Dr. Shewhart is a helpful procedure to follow for improvement of any stage. It also helps to find special causes of variation detected by statistical signals. The concept is based on scientific and statistical approaches that make it economically possible to collate reliable data. Edwards Deming during his first visit to Japan in the 1950s presented the relevance and utility of this four-step cycle in the seminar organized by JUSE (Union of Japanese Scientists and Engineers), and it is here that he formally named the cycle the Shewhart Cycle. Deming stressed the imperatives of regular

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84 PHILOSOPHIES AND CONCEPTS dialogue and interaction among design, production, sales, and market research, institutionalised on the concept of a rotating wheel (cycle) based on the original Shewhart cycle to ensure that the voice of the customer has been collected, studied and been given due weightage in various activities. The cycle works on the principle of quality-first perceptions and quality-first responsibility. The first rotation of the cycle is followed by another cycle that begins with modification or redesigning based on the experience or knowledge gained in the previous cycle. The use of the tool gives practical deployment of the concept of listening to customers’ voices and meeting their requirements through improved manufacturing practices and standards. Deming also advocated the adaptation of the Shewhart Cycle for improving processes and products. The cycle if institutionalised will help change the organizational culture and assure quality to consumers/customers. The concepts of Shewhart and Deming are synonymous; the superimposition of both the concepts brings out the full impact of the wheel. The Japanese were quick to comprehend the relevance and importance of the cycle and opted for its immediate use. They reverentially renamed the cycle the Deming Cycle. The application of the concept is not limited to activities related to recording the voice of the customer, but equally applicable to all phases of management. The four stages of the wheel can be utilized to correspond to planning, implementing, measurement and evaluation, and finally course-correction or standardization. They were quick to realize the immense scope of the cycle. Kaoru Ishikawa gave

`

_ `

_ `

`

_

_ Figure 3.1: PDCA Cycle another name to the Deming cycle, calling it the PDCA (Plan-Do-Check-Act) Cycle for quick understanding. Today, reference to the Deming Cycle automatically means reference to this PDCA Cycle, shown in Figure 3.1. The traditional management guru Frederick Taylor emphasized ‘control’ and described his ‘control’ in three words: Plan-Do-See. Whereas the Shewhart/ Deming/PDCA cycle is an improvement cycle with four stages: ‘Plan-Do-CheckAct’. The cycle has provision of checking and consequent standardization or course correction as the case may be, and most importantly the cycle continuously moves clockwise so that no step is overlooked or missed. Ishikawa, based on

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KEY FOUNDATIONAL CONCEPTS 85

A

1. Determine goals and targets. 2. Determine methods of reaching goal.

P

1 2

6 5

3. Engage in education and training. 4. Implement work.

3 C

4

D

5. Check the effects of implementation. 6. Take appropriate action.

Figure 3.2: The Six Categories of Action in the PDCA Cycle as Prescribed by Ishikawa

practical experience, modified the cycle by sub-dividing the ‘Plan’ and ‘Do’ steps into two categories each, which means that the cycle has six categories instead of four. The six steps are explained in Figure 3.2. Many organizations have developed variations of the PDCA Cycle and some have given it a unique name to highlight the uniqueness of their processes. One such variation of the PDCA Cycle is called PDSA Cycle. PDSA stands for Plan-DoStandardize-Act. However, some prefer to call the process of stabilization or maintenance as SDAC (Standardize-Do-Check-Act) cycle in order to differentiate the activity from the improvement stage. The process requires the same methodical approach of moving round the cycle steps till stabilization is achieved. Similarly when a new improvement has been incorporated, the improved process needs to be stabilized before any further improvement can be conceived. In order to distinguish this from the ‘mother PDCA Cycle’, some call the process of standardization of maintenance the SDCA Cycle. The relationship between the PDCA and SDCA cycle is inter-woven. At the beginning the process is standardized and brought statistically under control. Only then is the continuous improvement cycle started and once improvement is achieved the new process/procedure is again standardized and maintained and the cycle moves on. Even when the improvement cycle is temporarily switched off due to priority given to other projects, the SDCA cycle has to be kept on and monitored so that performance does not show a downward trend. Understanding of this standardization and maintenance cycle is absolutely necessary to comprehend the PDCA cycle as a whole, as many may not use a separate nomenclature for the SDCA Cycle. PDCA Cycle necessitates the use of various reports and problem-solving tools at different stages. Reports used particularly in the ‘Plan’ stage include market surveys, customer complaints, employee surveys, performance reports, reports on cost of quality, etc. Depending on the study, analysis, action or review required, the brainstorming tool; check sheets, various statistical control charts, process flow diagrams, the seven QC tools, etc., are used. The seven new tools are used by design personnel or by the senior management. Managerial skills in using Taguchi

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86 PHILOSOPHIES AND CONCEPTS Step

Focus

Some composite or key activities at various process stages

1. A

PLAN

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2. A

P

C

DO

3. A CHECK

P D

4. A

P

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(i) Identify opportunity, (ii) Analyse process/design, (iii) Operationally define the opportunity, (iv) Develop/ plan optimal solution, operationally define the theory, (v) Obtain data, (vi) Agree on tests, (vii) Agree on assessment/measurement, (viii) Provide education and training, (ix) etc. (i) Test it internally and/or on a small scale externally, (ii) Analyse data, (iii) Form tentative conclusions, (iv) Once the best solution is established, in the next cycle prepare implementation plan, (v) Obtain approval, and (vi) Implement process improvements as planned.

(i) Study the results, apply assessment criteria, (ii) Analyse trial data, (iii) Check effectiveness of trial and tentative conclusions including shortcomings or further improvement required, (iv) Analyse anything which effects future results.

(i) Redefine and predict the opportunity, (ii) Implement changes, (iii) Standardize to maintain the improvement, (iv) Educate and train people in the new/amended process, (v) Communicate the changes to all concerned, (vi) In case of unacceptable trial or implementation, repeat the cycle, (vii) Observe and note learning for future planning and guidance.

Figure 3.3: Table Showing a Few Activities for Steps of the PDCA Cycle

Quality Engineering, BPR or Creativity are also required in specific circumstances or challenges. For quick comprehension a composite table that lists a few of the key activities generally applicable to the PDCA cycle has been shown in Figure 3.3. The simple looking concept of the PDCA Cycle is in reality so versatile and powerful that its use is recommended for all the functions and facets of management and even wider domains such as governmental, and societal, institutions, professional fields, and in personal life. In problem solving the cycle must be used uninterruptedly till the root cause is eliminated. Top management will find the systematic use of this tool by policy implementation, reviews and decision extremely effective.

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KEY FOUNDATIONAL CONCEPTS 87 The PDCA cycle can be effectively used to implement the methodologies of planning suggested by different philosophers, viz. the Juran trilogy, or Crosby’s method of eliminating non-conformances. Even such diverse processes as drawing up a vision statement or deployment of strategic plans, education and training plans, improving processes at banks, improving hospital services, improving retail sales processes, etc., can benefit from the adaptation of the PDCA cycle. Professionals ought to realize that PDCA is an essential part of the ‘tool-kit’ required for the long and arduous journey for success.

BENCHMARKING Benchmarking is a tool that helps one to measure oneself against competitors or industry best practices. Benchmarking is neither a business philosophy nor a business strategy, as many tend to think. It is a concept that compares a product or service to competing products/services in order to assess its comparative strengths and weaknesses. Further, it is a legitimate tool to identify the ‘best practices’ for critical business processes with the objective of adopting and/or adapting them so as to support the value creation process to meet the ever-changing targets of competitiveness. It is a tool to propel and keep the momentum of ‘change’ turned towards continuous improvement, and not caught off-guard by the rapidly changing market and competitive forces. Benchmarking is applicable to virtually any business, production process, product or service, and increasingly used by many businesses/industries all over the world. Some of the advantages of benchmarking are: (a) Serves a useful purpose in stimulating breakthrough thinking (b) Offers the opportunity to achieve significant improvements based on adoption and adaptation (c) Help encourage creativity through exposure to alternative approaches and results (d) Encourages major improvements rather than only incremental refinements of existing approaches The importance of benchmarking can be gauged by the fact that the 1992 award criteria of Malcolm Baldrige National Quality Award of USA have included a stipulation that applicants need to benchmark external organizations.

Types of Benchmarking There are six major sources/types of benchmarking:

Internal Benchmarking The diverse internal functions or process of large organizations, national or multinational, having ‘divisional’ or ‘SBU’ structure offer immense opportunities to

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88 PHILOSOPHIES AND CONCEPTS study, experiment and learn. Internal benchmarking has many advantages in obtaining data that would help generate improvement ideas or identify common problems that could be probably selected for framework for external inquiries.

Competitive Benchmarking This establishes the strengths and weaknesses vis-à-vis direct competitors. As any organization’s survival depends on its performance relative to competition, opportunities for improvement vis-à-vis process and product performance need to be identified. The weaknesses that need to be tackled on a priority basis are identified and become part of the short-term intense focus. This will get the base line of competitiveness corrected.

Process or Generic Benchmarking The scope of this type of benchmarking covers the whole industry or business sector. Many functions or processes are common across business/industry boundaries, and many new ideas can be picked up. Since information collation and sharing is relatively easier, opportunities for improvement or innovative can be identified.

Best-in-Class Benchmarking This is the strategic decision to look for new innovative practices regardless of their source. Distribution, logistics, queuing, service calls, etc., are many examples of common problems/process that can really be benchmarked from an identified world class or best-in-class process with some organization or other. For benchmarking it is the processes, rather than the products, which are more important. Dieter Markworth of IBM explained that the search for ‘best of breed’ extends beyond IT organizations and into television manufacturers and service companies. He said that if a pizza company can get a hot pizza across town in thirty minutes, then why couldn’t one deliver cold maintenance parts in the same timeframe?

Customer-Driven Competitive Benchmarking This type of product benchmarking is driven by the inputs from the company’s customers (or potential customers). This is required and used when performing a QFD (Quality Functional Deployment). Customer competitive benchmarking is primarily accomplished through the use of customer surveys. The results of survey data are included in the QFD matrix. (A separate chapter on QFD is included in this book). This competitive assessment is vital for the company to improve its product design, manufacturing ability or improve product delivery and services.

Internal Product Benchmarking The engineering department or quality department usually does this. They compare or benchmark with competitive products. They might identify some features of a

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KEY FOUNDATIONAL CONCEPTS 89 competitive product that need to be adapted. Against the customer’s benchmarking, internal benchmarking offers a reality check for the company’s ‘think-tank’ and corrects the perspective for product development efforts.

Planning for Benchmarking Planning for benchmarking must be considered most professionally. It has to be used for the right reasons and be aligned with organizational strategy. Identification, information, collection and collation, information analysis and the assessment of deployment opportunities are the important features of the benchmarking. The internal team selected for the assignment should be properly exposed to ‘benchmarking’ by external consultants, or consulting houses dealing with the subject. Benchmarkers should develop an in-depth knowledge of their own processes and also the processes of the best-in-class organization that provides the benchmark. Another imperative is to develop mutually beneficial relationships with business partners both at the supply and the delivery end to generate the desired customer service levels as well as bottom-line contribution. The most critical requirement will be constant managerial support through global perspectives and resource allocation. Implantation of ideas may not be possible, but adaptation is feasible. As no single best practice exists for business processes, the management has to choose one that will serve their purpose/objective. A best practice has to be judiciously selected for its implementation flexibility as well as enhancing the capability to delight or keep the customers or enlarge the market share.

The Tools Used in Benchmarking The tools normally used in benchmarking are the normal problem solving/ improvement tools. Flow diagrams, Pareto diagrams, C and E diagrams, questionnaires, interview techniques, etc., are the common tools that aid understanding and implementation. Gnat charts and Project Evaluation Review Technique (PERT) are useful tools for project planning to a timetable. ‘Research’ is the most widely used technique to identify sources of information for benchmarking, best practices or selecting partners for benchmarking. The publicly available documents or information in trade journals, on the Internet and with trade associations are helpful. The QFD matrix is an effective tool for customer-driven competitive benchmarking. For companies developing products, internal competitive benchmarking can also be carried out with the help of the QFD matrix. In the case of customer-driven competitive benchmarking, one side of the assessment is labelled ‘good’, and the other side is labelled ‘bad’ with the different companies’ symbols positioned between these extremes. A set of symbols for each company is positioned along each of the WHAT rows signifying how well customers feel the product satisfies each of their needs. A customer-driven competitive assessment tells the management about the opportunities for improvement. Internal (engineering) benchmarking assessment is similarly carried out except that benchmarking results are plotted opposite the HOWs. Readers may note that

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90 PHILOSOPHIES AND CONCEPTS in a QFD exercise the HOWs represent how a company satisfies each of the WHATs, so it is appropriate that the internal benchmarking results be plotted against corresponding HOWs, while the customer benchmarking results are entered against corresponding WHATs. Other important tools are numbers and ratios and financial and performance information available in balance sheets or trade association libraries. Business contacts, consulting houses, consultants are also excellent sources of information. The purpose and utility of benchmarking should not be confused with initiatives for continuous improvement like Kaizen or breakthrough innovations. Benchmarking is not industrial espionage it is a legitimate process whose core objective is to identify the ‘best practice’ for the processes involving critical business success factors. Such identification will help to get information about the benchmarked processes and also to study the feasibility of suitable adaptation to improve the relevant processes or systems. This should help to raise constantly the performance levels to beat the bar set by the competitors at least to be in par. It is not copying, but keeping a tab on external environment and ensuring that one is not caught off guard by the progress achieved by the competition. It helps to identify and adapt what the best in class has achieved. Adaptation is not copying, nor can it be equated with industrial espionage. It is just an additional tool to the effort of continuous improvement. Managers must realize that stand-alone ‘benchmarking’ will not by itself deliver the desired results. It must form an integral part of the changemanagement initiatives and use the available TQM/problem-solving tools as appropriate. The process has to rigorously follow the PDCA cycle to counteract the ever-changing upward trends of competitive performance standards. Learning organizations weave benchmarking into the fabric of their planning process.

OBSTACLES AND DEADLY DISEASES Deployment of total quality management does not happen easily. Aberrations and distortions due to some deadly diseases and obstacles must be judiciously tackled. While obstacles may be overcome through tenacious follow-up, the cure and eradication of diseases require a complete shake up in the style of management. Disease in the case of organizations implies something seriously wrong with the organization and/or entrepreneurs’ or top managements’ outlook or thinking affecting the culture and behavioural pattern of the organization. According to Deming, cure and subsequent eradication of the deadly diseases will require total reconstruction of management. Obstacles make it difficult to make things happen and inflict as much damage as the deadly diseases.

Deadly Diseases Overviews of some of the deadly diseases (including some spelled out by Deming) are:

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Lack of constancy of purpose Lack of constancy of purpose has a disastrous effect on the future stability, growth and prosperity of the company. Management often lose focus on ‘purpose’ perhaps due to blurred objectives, or maybe for fear of hostile takeover or leveraged buy-out. Very often management hastily calls off the resource allocation towards continuous improvement of processes and products, forgetting that this is the only route to protect the investment as improved products and services only will retain customers, expand market, continue to create jobs, and meet societal obligations.

Emphasis on short-term profits Pursuing the quarterly dividend and short-term goals is both cause and consequence of a faltering economy. In a developing country like India, unscrupulous entrepreneurs have plundered the national wealth to create their personal empires. Deming has warned that paper entrepreneurial greed has a self-perpetuating quality that, if left unchecked, will drive the nation into further decline.

Evaluation of performance, merit rating, or annual review The idea is appealing but the effect is exactly opposite of what the concept promises. Everyone tries to move forward to serve his own narrow interest of career advancement often at the expense of the interest of the organization. Merit rating/ traditional appraisal systems do not recognize the efforts to improve the system but reward those who do well within the existing system, ironically increasing the variability of performance of people. People resort to numeric juggling with scant regard for quality, and this degeneration leads to a poor work ethic of manipulation and compromises. It stifles teamwork as group performance is subordinated to individual achievements.

Mobility or short tenure of top management Job-hopping, particularly by the top/senior management, is a serious disease and is more pronounced nowadays. Today professionals are more concerned about their own careers and try to make the most of the opportunities available. Companies need professionals who are not only committed to quality and productivity but also have roots in the company so that there is no uncertainty and bewilderment. Management has to have policies both cultural and financial that will emotionally bind the professionals within the company. Inculcating belongingness is a major problem with senior professionals who have now more allurements from the competitive market. Mobility annihilates the teamwork so vital for keeping the momentum of continuous improvement.

Management by visible figures alone No one doubts the importance of visible figures (counting the money), but one cannot sustain success, and ensure long-term health by monitoring visible figures

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92 PHILOSOPHIES AND CONCEPTS only and paying little or no consideration to activities that impact the health of the business. Management by figures focuses on profit that leads to manipulation and stifles continuous improvement. This is akin to driving by looking at the rear view mirror. Management does not care to find the figures for accrued losses due to annual performance rating system, demoralized employees, poor transport logistics, poor maintenance, dissatisfied customers, delay in services, poor relations with suppliers, reworks, etc. Such figures normally are not reported or even recorded. There are many such activities, practices or systems in an organization that may have significant positive or negative impact on profitability and the long-term health of the organization.

Treating people as expendable commodities Deming has mentioned this disease on several occasions and held management responsible for abrogating their responsibility of providing as well as creating jobs. Today unfortunately the hard reality is that the call for increased productivity carries with it a veiled threat of lay offs or retrenchment. Management due to shortsightedness is unable to see this phenomenon as a disease as they do not consider job-protection their responsibility and argue that the accompanying liberal compensation (in some cases sweetly termed the golden handshake) absolves them from any responsibility or moral obligation. Deming’s philosophy has been that the surplus employees are still valuable renewable resources; it is the responsibility of management to use these resources in other productive jobs or new projects. That’s the challenge a TQM company must take up.

The Kaikeyee Syndrome A common syndrome of family businesses can be termed the Kaikeyee Syndrome, where through machinations the son is given the full or majority control of the family business at the expense of cousins or other shareholders. In the great Hindu epic Ramayana, Queen Kaikeyee manipulated King Dasharath to banish Rama, his eldest son from his first queen, for 12 years so that Kaikeyee’s son Bharat could become king. Lust, greed, machinations, etc. are the greatest bane of second- or third-generation family businesses. Often this ultimately leads to sickness, stagnation or demise of the enterprise. Unfortunately in most countries, particularly in third world countries, the family businesses form the backbone of the economy including employment generation and social security.

Rampant corruption It does not require detailed elaboration or intellect to understand that corruption has a severe negative impact on quality and productivity. Corruption is like cancer, it is rampant in the underdeveloped and developing countries as per the study conducted by UNDP (United Nations Development Program) and Transparency International (TI). A visionless and corrupt political system is a bane to quality and action to replace such governance is in a broader sense an act of quality! Radical transformation is the only answer.

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Bureaucracy Bureaucracy induces delays in servicing operational requirements and decisionmaking, spoils organizational nimbleness and flexibility, adversely affects customer servicing, kills empowerment, and chokes creativity. Overall bureaucracy adversely affects productivity and business efficiency. The morale of the employees goes down.

Hypocrisy Employees know the sound bites of hypocrisy. The employees may not be vocal but in their minds they sneer at duplicity, management loses credibility and even genuine improvement initiatives are viewed sceptically.

Lack of common national agenda Lack of common national agenda creates no road map for development, stalls competitiveness. Misdirected efforts create vicious circle of haphazardness and vacillation induces corruption and inefficiency, etc. Further, lack of common national agenda means absence of vision and sense of purpose. Thus there can be no concerted effort towards improvement or creating national wealth. What is most damaging in absence of national agenda and resolve is the disastrous negative impact of corruption, inefficiency and despondency.

Ego Entrepreneurial or professional ego induces complacency and arrogance. The vision gets blurred, efforts for growth get dissipated, the need to enhance competitiveness is ignored, and the organization gets trapped in inertia. All these unobtrusively result in overall inefficiency including moribund quality, productivity and customer servicing. Some obstacles to quality and change management; could be due to adverse natural phenomena related to environment, natural resources, etc. Obstacles can come from socio-economic circumstances, political set-up, state of education, technological backwardness, etc. There are again obstacles due to attitudinal problems and some local or regional characteristics and traits that are not conducive to quality, productivity and customer care. The chronic nature of these deterrent factors can manifest over time as a serious disease that would distract as well as obstruct efforts towards improving quality levels. Cycles of recession, inflation and stagflation do affect the progression to higher levels of quality; relatively better cost-effective quality products and services will survive the vagaries of economic cyclic whims. Similarly trade restrictions bar the entry of quality products and throttle the quality perspective in the medium and long term. In the context of an organization there could be some external and internal obstacles, constraints or unique negative characteristics that impede ‘quality’. Enlightened and dynamic management are not daunted by these external obstacles, but take up the challenges and produce quality. Bold initiatives, exclusive training, handling, and constant prodding can convert unique negative characteristics

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94 PHILOSOPHIES AND CONCEPTS to a manageable position compatible with delivering quality outputs. However this requires lot of perseverance and patience.

A FEW OTHER FOUNDATIONAL CONCEPTS OF TQM Adoption of a philosophy provides intrinsic motivation, guidance, and a missionary zeal. One must be able to differentiate between a philosophy, concept, and methodology. Philosophy involves a set of principles and beliefs while a concept means a generalized notion and a methodology is set of orderly procedures for an activity. An organization without any philosophical motif is on a journey towards the wilderness, almost like a rudderless voyage. The true power of a radical philosophy cannot be captured or leveraged if only those points liked by management are adopted and those that clash with the old, conventional or traditional view are discarded or avoided. For a philosophy to take root, percolate and yield desired results, the owner or top man of the organization has to go beyond merely patronizing the philosophy; he must become a disciple of total quality. The vision emanating from a noble and exalted philosophical doctrine must be shared by all to induce ownership. A shared vision induces purpose and values, which give the organization conviction and character to face the hurdles and climb towards success. Vision must be followed up by appropriate action. ‘Mindset’ is a form of negative bias that is an impediment to quality and change management initiatives. The shifts in the real world have to be recognized and conscious effort is required to ensure that one is not saddled with the old paradigm. ‘Quality starts with self’, hence, conscious effort towards self-development is essential. One must comprehend the imperatives and change one’s own attitude and behaviour. Management of change implies total transformation. A company or organization that wants to transform has to change completely and revalidate its fundamental belief and practices. Provision for wastages and poor quality at the planning stage as practiced by traditional management is in reality institutionalising inefficiency, and perpetuating wasteful performance by giving allowance to chronic quality problems. Poor quality is not inevitable; unfortunately it is planned for short-term gains. Excellent quality does not mean great expense. Unlike the conventional thinking quality improvement and cost reductions are not contradictory or to be achieved at the expense of the other. The costs continue to accelerate if a defective reaches the customer. Apart from other costs, no one really knows the ramifications and cost of a disgruntled customer. Cost control or cost cutting are actions taken in desperation and cannot provide permanent solutions. Organizations have to work towards cost-effectiveness, which is a win-win situation for both the customer and supplier. Cost-effectiveness, like quality, is also a moving target; it is a great challenge that can only be met by proper deployment of TQM philosophies and ensuring total quality of management. Anybody who is impacted by the processes and products is a customer and may be internal or external to the organization. In order to bring in the personalized

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KEY FOUNDATIONAL CONCEPTS 95 factor of satisfying the customer it is necessary to institutionalise the concept of internal customer. The concept promotes the formal commitment never to send defective parts or incomplete services to those in the following process. Further the concept makes management realize that the needs of internal customers go beyond quality of work-in-progress, processes, products or services; it includes joy and pride in work, respect, self-esteem and other cultural values. Management by edict doesn’t work. The belief that the worker or employee is responsible for poor quality, low productivity and high costs is wrong as management is responsible for inputs, process and systems. Similarly, the knowledge and skills of individuals are the real source of improvement, and are more central to continual improvement than one time or even time-to-time investment in machinery or new technology. Just because balance sheets have no provision to measure the value of accumulated knowledge or the synergy of cooperative working does not mean that these have no value and can be ignored. Management by control introduces various insidious aspects like trampling the dignity of human beings, an environment of fear, manipulations to meet numerical goals regardless of consequences, killing self-motivation, innovative ideas and creative spirit, etc. Contrary to conventional thinking, exhortations, slogans, clichés, targets, etc., cannot yield higher output, or better quality, rather they often induce cynicism and loss of credibility for management. An organization or enterprise can sustain improvement if the individual within it really feels comfortable and works without any fear and inhibitions. Intrinsic motivation is the key to quality enhancement and business improvement; it is extremely difficult to revive intrinsic motivation if it is replaced wholly by extrinsic motivation. Extrinsic motivation should be judiciously used as a fine tuner only to supplement intrinsic motivation. The joy of work and the pride of workmanship experienced by employees in accomplishing quality is something that needs to be understood. And the inter relationship between quality, employee’s gratification and profit must be comprehended. There is never enough time, one never knows enough and skills can always be improved. Training improves the system; it lowers costs and improves revenues. Studies reveal that the organizations that emphasize training invariably seem to have better earnings than the firms that rely on cost control to such an extent that they practically get rid of all training programs. The cost of a defect increases dramatically as it moves along the production line. It is essential therefore to ensure quality in the upstream processes to contain cost as well as to achieve optimum quality. ‘What cannot be measured, cannot be improved’, is an important dictum of TQM. It is essential to measure final output and outcome (impact) as well as in-process inputs and outputs. This will facilitate course-correction. ‘Speak with data, and act with data’. The use of data helps to remove falsehood and a lot of subjectivity. Most important numbers and facts don’t even show up on traditional financial reports. The numbers of suggestions received and implemented, the number of innovations, the cost of defects that have reached customers, the number of customers that have deserted the company, reduction in bureaucracy, processes simplified, training imparted to top management, etc., are some of the important aspects which influence the competitiveness and enduring success of the company.

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96 PHILOSOPHIES AND CONCEPTS Management of expectation is vital, and involvement of all is crucial. Societies and companies that cooperate most effectively will find greatest improvements in quality, productivity, and wealth generation. Institutionalising teamwork, and cooperation and collaboration with trade unions and business partners are absolutely essential. The top management often does not know the true state of affairs, being far removed from the actual field of activities, and customers. Reports do not always represent a true picture, hidden or suppressed facts may have wide repercussions over time. To ensure reporting of true facts, the fear psychosis must be removed. Every individual plays a triple role of customer, processor and supplier. This holds true for each activity or process. Realization of this triple role concept helps to prepare for built-in quality.

Notes 1. W. Edwards Deming, Out of the Crisis (Madras: Productivity and Quality Publishing Private, 1992), p. 155. 2. Kaoru Ishikawa, What Is Total Quality Control? The Japanese Way (New Jersey: Prentice-Hall, 1985), pp. 122–23. 3. Philip B. Crosby, Quality Without Tears (New York: Penguin Books, 1985), pp. 98–99. 4. Tom Peters, Liberation Management (London: Pan Books Ltd, 1993), p. 382. 5. W. Edwards Deming, Out of the Crisis, p. 121.

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4

CHAPTER

Envisioning Transformation The elements of the first step towards envisioning transformation elaborated in Figure 4.1 seem deceptively too elementary and simple to conform; they, as a matter of fact, are the most difficult and complicated set of interrelated core principles to imbibe and practise. Hopefully, this chapter will bestow profound knowledge on to the readers that the roots of transformation are nourished by vision, purpose and mission and reinforced by values and apt culture. The elaborate treatment will also help the readers to understand the relevance of Vision and other elements to the total quality movement, and how to develop and deploy them effectively to become inherent part of the organizational culture.

z z z z z

Set your Sight-vision Clarify Purpose Fix your Mission Define your Values Lay the Foundation of a Distinctive Culture The first step is a resolve for the destination, Towards the land of dream and imagination, False start can easily mar the determination, And compromises will lead to hallucination. – Tapan K. Bose

Figure 4.1: The First Step

VISION Vision is the compelling image of a possible and desired future state of an entity or a nation that does not presently exist or perhaps never existed before. A vision

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98 PHILOSOPHIES AND CONCEPTS may appear to be a vague dream, but is in fact a clear indicative of a future state which the country or organization wants for itself. Vision talks of transforming the existing state into an ideal future state, achieved through action and continued effort in the days to follow. An organization, once formed, is not only a legal entity, but also an organic part of society, and therefore must live through the ages by serving society with its sustainable wealth-generating performance. The purpose of vision is to visualize this bigger picture and outline a compelling future to create the energy and momentum needed for the management of change and stimulate the drive against all odds such as allurement of short-term gains, newer technology, volatile market changes, a high expectation of returns by stakeholders, etc. Vision is a simple-to-understand, inspirational, focusing statement on shared ‘bigger picture’ of a mutual destination. It articulates the overarching goals of the organization or an individual that are realistic, credible, and attractive. It is a target that induces creative tension. Peter Senge of the Massachusetts Institute of Technology states, ‘Creative tension cannot be generated from current reality alone. Vision without an understanding of current reality will more likely foster cynicism than creativity. The principle of creative tension teaches that an accurate picture of current reality is just as important as a compelling picture of a desired state.’1 A vision statement visualizes lofty aspirations, sets the tone and gets the ball rolling towards the vision, though often the organization may not be able to accomplish that ideal in the near future. Even Martin Luther King, Jr. while articulating his famous speech ‘I have a dream’ knew well that it would take decades to eliminate racial discrimination totally from American society. However, he did set the ball rolling towards racial harmony. Today, Barack Obama is the President of the USA. Great vision statements are often futuristic. And there may also be ones that describe the desired state of a relatively near future; once the visualized state is reached, a new vision must emerge. For example, after becoming the most dominant computer software company of the world, Bill Gates, the CEO of Microsoft, envisioned to dominate the home communication and office equipment scene next. This just goes to show that TQM is a never-ending journey. People change more for emotional reasons than rational reasons. Vision provides that emotional stimulus along with a rational picture of the future desired state. This empowers people to assume the responsibility for changes in their own behaviour or reorientation. Willis Harman, former President of the Institute of Neotic Sciences, USA, reminds entrepreneurs and professionals that business is actually meant to provide nourishment and life to society. Unfortunately we often ignore this necessary socioeconomic reality. Vision statements contain this implicit inspiration. To quote Anthony Robbins, ‘A compelling future is not an accessory, but a necessity. It allows us not only to achieve, but to partake of the deep sense of joy, contribution, and growth that gives meaning to life itself.’2 The great Indian poet, philosopher and noble laureate, Rabindranath Tagore, has used the metaphor of a golden deer in his eponymous poem as a symbol of high ambition.3 A vision expands the thought process; it depicts the desired future state beyond the present. A flicker of vision releases, or rather unleashes, the

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ENVISIONING TRANSFORMATION 99 power of thinking and enables one to visualize the bigger picture, as well as stirs an emotional feeling within to try and strive towards the target, the golden deer as the metaphor used by Tagore. The vision induces a surge of internal energy— an energy that is proportional to the expansion of thought. Each small success increases the expanse of thinking further, thus increasing the supply of internal energy that drives towards the vision with dedication and missionary zeal. It is vital to comprehend this inspiration imparted by a vision. The credibility of leadership lies in living the shared vision and purpose. Envisioning is one of the basic traits of a leader/manager. An article in Fortune magazine said, ‘The new paragon of an executive is a person who can envision a future for his organization and then inspire his colleagues to join him to build that future.’ The visionary will envision a future, articulate it, and inspire people around to share the dream and surge ahead. Father Theodore Hesburgh built Notre Dame into a major American university during his thirty-five years’ tenure as the president. He infused a revitalized vision of Notre Dame into the students, alumni, faculty, and the general public. Talking about his role in transforming the university, he said, ‘the very essence of leadership is you have to have a vision. It’s got to be a vision you articulate clearly and forcefully on every occasion. You can’t blow an uncertain trumpet.’4 Father Hesburgh’s trumpet was never uncertain. Organizations imbibe the attitude that is generated by their thought leaders; it begins with conducting exercises to draw a vision statement or sessions explaining the relevance of the vision statement drawn earlier. People who understand the vision develop a sense of ownership towards it, which helps them see beyond the immediate task and understand how their efforts contribute to corporate objectives. This provides them with a compelling reason to change and generates some sort of creative tension within them—people love their work and are willing to walk an extra mile in an environment of creative tension to overcome the gap between the current status and the desired state depicted by the vision. Thus a shared vision becomes a rallying point to tackle change; each change triggers the need to create a new tomorrow, which is captured, articulated, documented and shared through the vision. Thus, a vision drives all actions for transformation, and acts as a reference point for course correction like a compass. Former Stanford professor Robert X. Cringely says, ‘Every high-tech company needs a technical visionary, someone who has a clear idea about the future and is willing to do whatever it takes to push the rest of operation in that direction.’5 The vision awakens the emotion and spirit within people who seek fulfilment of their cherished dream. The company changes with a change in the collective spirit; people now work with a new spirit to translate the shared vision into actions, offer new and improved cost-effective products to customers and remain ever alert to the market dynamics. Vision in action creates an environment in which people willingly participate and enjoy walking that extra mile to realize the super-ordinate goals that contribute to improving the quality of living. Thus, vision induces a paradigm shift in thinking and attitude—one discovers a new meaning to work, looks forward to an otherwise mundane Monday morning, and work is no longer drudgery. At his convocation address on 21 March 2002 at the Xavier Institute of Management, Bhubaneswar (XIMB), India, Narayan N. R. Murthy, chairman of Infosys Technologies Ltd,

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100 PHILOSOPHIES AND CONCEPTS exhorted the fresh management graduates, ‘Dare to dream and more importantly dare to see that dream through. The challenge we face is to build durable, worldclass organizations that are truly innovative. You are young, you can explore the unknown and you can take the risk.’6 Vision binds and empowers. It involves the employees in a common and seemingly difficult task. The spirit of the vision reflects in their work and their sense of responsibility, which with proper training and empowerment becomes a part of the work-culture. Tom Peters advocates the development of an inspiring vision that is clear and challenging, but leaves enough leeway for bold initiatives to address the ever-changing environment. To elaborate his point, Tom Peters gives the examples of Steve Jobs at Apple, Fred Smith, founder of Federal Express, and the Nordstrom family. Steve Jobs wanted to start a revolution in the way the average person processed information, Fred Smith had a vision of truly reliable mail service and the Nordstrom family wanted to create an experience within their stores and asked their employees, customers and suppliers to join them in the task. Effective visions are in tune with the emerging market and stand the test of time through flexible adaptation and execution. Tom Peters had talked of eight traits of effective vision statements, which have been elaborated in his book Thriving on Chaos. Aimless persons or organizations without vision ultimately lose their way; Studies reveal that most of the erstwhile successful companies in monopoly did not have a ‘live’ vision. Many entrepreneurs and managers who have been operating without a vision believe that since things have been happening without a formal vision, in future too things will get done without a vision. However, they fail to comprehend that the winning edge and efficacy can only be established through the involvement of people in the processes. When there is a strong purpose but no vision, regardless of how committed the people may be, tirelessly working to do something good or worthwhile, the passion is directionless. Only a vision based on an ideal can direct such passionate involvement and leverage the true potential of people to overcome challenges. Vision literally presents a broad picture of what the ideal state of the organization will be in future and what it will feel like to work there, if everyone’s efforts are successful. A dream may be based on fantasy; however, a vision is a realistic picture of what is possible. Vision inspires, rekindles the fire in the belly to do something worthwhile. When there is a genuine vision, people excel and learn, not because they are told to, but because they want to.

Purpose A company builds its image over time by living its ‘vision’ and with righteousness in its ‘purpose’. Defining the purpose unambiguously and maintaining its constancy and consistency is critical for strategic planning and deployment on which depends the enduring success of an organization. According to Akira Sueno, founder of the Japanese company Showa Boeki, neither is moneymaking the sum of life, nor profit-making the sole purpose of business. In his book Entrepreneur and Gentleman, Akira Sueno terms companies without clarity in the purpose of their activities as parasites because despite

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ENVISIONING TRANSFORMATION 101 making huge profits over a short span of time, they fail to exist for long. He says, ‘It is true that profit considerations cannot be thrown to the windows if an enterprise is to stay alive and grow, but truly, a company has no reason at all for existence if it forgets the ideal of contributing to society and human life.’7 If a company wants to implement TQM it has to align the purpose of its business with the philosophical dictum that calls for pursuing policies that will ensure the company stays in business forever, provides jobs and meets societal obligations. There has to be an unwavering commitment towards delighting the customers with cost-effective quality products and services. The purpose statement though overtly mentions the unique tactic of the organization, also includes the underlying intent succinctly and directly. In the case of nations, particularly third world countries, the basic purpose of all political or developmental activities should be to focus on long-term initiatives that would raise the standard of living measured by indexes of human development and ensure that none of its citizens remain poor. Thus, the purpose of the ‘purpose statement’ is to give insight into the service that touches the foundation wherefrom generates the social-cum-philosophical meaning of one’s work. This internalisation of the core purpose enables an employee to co-relate the company’s purpose with his personal values and self-actualisation criteria. The motivation from within provides him with the impetus and inspiration to deliver the core intent without a feeling of drudgery or inferiority complex. For example, a salesman at the counter of a provision shop will develop an outlook and positive attitude of delighting the customer every time he comes to buy, remembering his name as well as his weekly or monthly needs, while a bookseller will acquire extra knowledge to help his customers. Internalisation of a well perceived ‘purpose statement’ would induce a proactive attitude, a focused approach and a high level of commitment. Everyone alive ought to have some purpose or reason for living; otherwise one daily suffers the ill effects of drudgery. Relating one’s own purpose of living with the purpose of the organization is crucial to help employees identify themselves with the organization. Only then will the employees accept the premise outlined in the company’s purpose statement and be able to take decisions that are consistent with its vision and purpose. An office employee who felt bored while filling in heaps of forms daily would often make mistakes, be late and file them incorrectly. No amount of reprimand or pep talk could correct the situation. The new supervisor studied the situation and realized to his surprise that the poor employee was a decent fellow, who was neither aware of the importance of the documents, nor did he understand the purpose of his work. When the supervisor took the trouble of explaining all that to him, it gave him a new insight to his otherwise mundane work that changed his behavioural pattern and attitude and resulted in timely and error-free output. An old man in the scorching heat of a midsummer day was chiselling out stones, in spite of sweating profusely. When asked if it was a painful drudgery to earn a living in such inhuman conditions, the old man returned a philosophical smile and said that on the contrary he was lucky to have been given a part in this noble assignment of building a temple (cathedral). To him the ‘purpose’ was an exalted one and he felt gratified for the opportunity. As for himself, Akira Sueno says that

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102 PHILOSOPHIES AND CONCEPTS the last thing he wanted to be was one who had a negative effect on society. ‘Even if I lived out my life in complete obscurity, I at least wanted to have a reason for living, a purpose in my life.’ A noble purpose in life makes a self-esteemed man. It is the responsibility of the top management to articulate and document the ‘purpose’ and institutionalise it to ensure constancy. Only they can make policy, establish the set of core values, or set the long-term course for the corporation. But merely stating the purpose will not suffice, management need to publish the statement and disseminate it among all employees. Further, it is essential to ensure constancy of purpose, and the commitment to the intent of the ‘purpose statement’ has to be demonstrated constantly to establish management’s credibility. The criticality of the ‘purpose statement’ can be well comprehended from the fact that Deming has accorded ‘Purpose’ as the number one point in his famous 14 cardinal points for transformation. ‘Purpose’ is a statement of the ‘raison d’être’ of an organization; it outlines a noble means of rendering perpetual service to customers or society. Despite many allurements or hostile situations, management has to be vigilant to maintain ‘constancy of purpose’ in order to protect the future. Deviating from the stated purpose is a sign of fickleness or wickedness. Again, mere constancy of purpose will not give the desired results unless there is consistency in the efforts to bring deviations or variations back to the charted course.’ Deming has repeatedly stressed the crucial need for ‘constancy and consistency of purpose on the journey towards total quality management. As the organization starts believing its stated ‘purpose’, the behavioural pattern of the employees and the whole decision-making process starts aligning with it, and ultimately changes to support the cause. Purpose is the positive ‘adrenalin’ that boosts the quest for organizational vision, and the individual’s search for selfactualisation. Comprehending the inner meaning of ‘purpose’ gives one impetus and inspiration to work in good spirits. The old and rickety-looking labourer who knew that his work was very much part of building the cathedral needed no supervisor standing by his shoulder, rather he took extra care in shaping the stone. His personal raison d’être matched with the purpose of the work allotted to him, and the satisfaction and inner pleasure that he derived cannot be described in words. IBM is an example of a corporation, which through the decades has developed an internal ‘resilience’ not just to remain afloat. Even today the ‘Big Blue’ continues to find place on the top rungs of the Fortune list as one of the world’s largest and most successful companies. How? Tom Watson, its founder, clearly defined what the company stood for; what would be most important for all people to experience regardless of what products, services, or financial climates they would enter in the future. The direction and destiny of the company was thus set up. Purpose also brings people onto the same platform and induces a unifying effort to reach the envisaged destination. It is also a self-instituted measure by which the business is to be judged. Occasional review of the ‘purpose’ is necessary. Failure to clearly define the organization’s purpose, or defining it poorly, can result in loss of opportunities. Take the failure of once thriving railroad companies in the United States as a classic case study. These companies thought or defined their purpose as supplying to the train

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ENVISIONING TRANSFORMATION 103 transportation. Had they viewed their purpose as providing the most efficient and comfortable transportation, not necessarily on trains alone, they could have become dominant suppliers in other transport sectors as well, like the air-lines, thriving on opportunities, revenue expansion and consequent profits. Or take the classic example of Metal Box India Ltd, which was once the most regarded amongst all the blue chip companies of India. The company thrived on its monopoly in tin containers. Even with the advent of competitive and alternative packaging options, Metal Box, the largest packaging company of India in its time, instead of redefining its purpose to remain as number one packaging company in India by including alternative packaging options in its product offering. Instead they continued with just metal containers, which was fast loosing its market to the emerging alternative modes of packaging herein India and also elsewhere in the world. Further, Metal Box inexplicably diversified into non-synergistic businesses of manufacturing Bearings and Printing machines and failed due to absence of competency in these areas. The company soon went out of business and still remains closed despite change of hands. It is a classic case of a monopolistic company ignoring the changes in the market place did not bother to redefine its vision and purpose. No sooner than later the company lost its way and rest is history. Deming has warned against the obstacles that tend to trample the ‘purpose’ of an organization. The most dangerous ones are: lack of constancy of purpose, emphasis on short-term profits, hope for instant pudding, etc. Vision and Purpose statements, are not at cross-purposes, rather they are complimentary to each other. Vision describes the future exalted state, the embodiment of ultimate realization. While purpose clarifies the core essence, intrinsic goal and relevance of the current and planned business activities towards achieving the organizational vision. The combination of vision and purpose statements creates coherent framework within which lies the direction and stimulation and emotional bondage .The charged-up action lead to extraordinary contributions from a very large number of employees. A clear definition of Purpose of an organization enables the planners to develop enabling strategy; the various sub-units and departments know exactly what to focus on and prioritize. The employees are aware of the required skills and are conscious about the behaviour pattern. Purpose is the positive adrenalin that stimulates actualisation of organizational vision and purpose and is a key supporting element to an individual’s self-actualisation.

Mission A dream can turn into hallucination unless put through the process of visualization where one is able to foresee its realization as possibility within a time frame. Though difficult, it is not an impossible task. This foreseeing is then recorded in black-andwhite as a vision statement. In earlier days, the old woman in the moon was folklore. But John F. Kennedy dared to have a vision to put a man on the moon by the end of a decade as he could foresee the tremendous possibilities of the space technology. Edmund Hillary dreamt of scaling Mt Everest, the world’s highest altitude, and

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104 PHILOSOPHIES AND CONCEPTS within a time frame successfully ascended the very difficult terrain hitherto unconquered; that was his vision. To realize the vision, one needs to give a more concrete shape to one’s thinking. Though within the realms of man’s enterprising guts, a mountaineer has to decide his strategy of climbing the hitherto unconquered mountain top, identify transition camps and put the contingency plan in place before taking-off from the base camp. Each of these out-of-the-ordinary definitive tasks are the various ‘missions’ that are to be accomplished before one can attempt the final climb to the top. These missions are the integral plots of the road map necessary to start the journey for realisation of vision. Though generally ambitious, the mission statement breaks up the vision statement into concrete realistic tasks that requires focused implementation. Generally the macro-strategy or tasks, both tangible and intangible, are clearly delineated in the mission statement. There should be no ambiguity in the mission statement to avoid misunderstanding the basic tasks. The mission statement needs to be disseminated to all levels of management so that they can comprehend their roles and tasks and establish an operational link between the processes within and beyond their domain. It is essential for the mission statement to be simple and clear so that all employees, both blue and white collared, are able to visualize the interconnectivity between the characteristics of their own jobs and the vision and missions of the business. A well-articulated mission statement is the road map to reach the desired goal; it guides employees in how they should manage their activities. It also sets a level of expectation among customers as to what they should get from this organization. Apart from providing direction, the mission statement establishes measurementcriteria. It also acts as a compass for course correction. People are able to clearly relate to what they are supposed to do and how their individual work and team effort is linked with the overall scheme of journey towards the shared vision. Mission statements clarify the macro-strategies and policies with respect to the scope of product and services, key goals (to compete, grow and prosper), and the relationship with critical constituencies. A versatile mission statement also includes what the organization is about, what it intends to accomplish, whom it intends to serve, etc. To remove any misgivings, the statement should explicitly or implicitly clarify the limitations of the company, it what the organization is not, what the organization does not intend to do, and whom the organization does not intend to serve. Mission statements establish parameters, policies and limits and thus act as the reference point to all levels of employees, helping them align their efforts towards achieving the mission objectives related to their individual or group responsibilities. The mission statement, when published and disseminated to employees throughout the organization and widely communicated to the customers and public at large, commits an organization internally and externally to a specific purpose. The mission statement pumps up the adrenalin and induces missionary zeal to achieve the desired missions. Mission statement often supplants the vision, purpose and value statements. Some organizations only have a mission statement that spells out the company’s

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ENVISIONING TRANSFORMATION 105 vision, purpose and values; it depends on the uniqueness of the business, structure or tradition of the organization and has its own advantages and disadvantages. Small businesses may have one comprehensive mission statement, however, in case of medium or large entities the author is in favour of having distinctive statements for simplicity, comprehension, focus and effectiveness.

Values Values are the principles that an organization follows to live the purpose and vision; they are the means through which the missions are accomplished. Values are not ‘hard’; they are the innate intangible characteristics that influence behavioural patterns and moral standards of an entity. Normally, ‘value’ represents the goodness—something worthy and beneficial. The challenge, however, is to infuse these core values and beliefs within the day-to-day behaviour and transactions, which is essential to the TQM culture. Contrary to common belief a value is not abstract. Though intangible, it affects our nervous system, influences our thoughts or moulds our attitude and behavioural patterns. Values may be rational or emotional or both at the same time. Though they cannot be seen or measured, their effects are visible and mostly measurable. Some values are eternal and universal, and connected to long-term aspirations or end-states of existence. Some values are society-, country- or even time-specific. Younger generations have a different/newer set of values, which is usually termed as a ‘generation gap’. Organizational values if bunched together act as catalysts, which attempt to shape a dream or vision statement into a reality. Values are the foundational force that combines emotional commitment with behavioural traits conducive to TQM; without these two basics all other TQM efforts will be futile. An entity ought to have a sound set of values and beliefs upon which it frames all its policies and actions; adherence to these values and beliefs is a prime factor for success. The roots are nourished and nursed by values and culture. Deming once explained in his response to a magazine interviewer why the Japanese succeeded in applying his teachings while American managers did not. He said, ‘I think there is something fundamentally different (between Japanese and American business managers). The best description I can think of is that of people have roots and the roots are the company’.8 The principles of Taylor-ism are no longer tenable for 21st century management. The imperatives of ever-increasing complexities of business and management include new paradigms and radically different sets of values and behavioural traits than hitherto practiced since the days of Fredrick Taylor. It is worthwhile to note that the basic and most important of values and beliefs in the TQM reflect the age-old philosophies of mankind. On the foundation of this rediscovered set of eternal values and beliefs operates the initiation and sustenance of the TQM movement. However, individual entities would often require developing values specifically oriented to their unique sphere of activities. Some organizations religiously follow some daily rituals to facilitate internalisation of the organization’s vision, purpose and values. A visit to the any Vivekananda Ashram

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106 PHILOSOPHIES AND CONCEPTS (hermitage), an institution set up by Swami Vivekananda, the great Indian philosopher, will prove the point. They conduct an evening assembly accompanied by prayers and songs daily. This daily ritual symbolizes the process of internalisation of their unique philosophy, its values and beliefs thus creating a distinctive culture of the institution. Akira Sueno, founder of the Japanese company Showa Boeki, wrote a company song that became the daily morning ritual reminding the employees of the company vision, values and ethics. The time invested in such simple rituals has a deep impact on the employees and reminds them the lofty aims, purpose and values of the organization and binds them together to pursue a common aspiration. Some eternal values are: z z z z z z z z z z z z z

Respect humanity. Focus more on the process/work rather than on the result. Focus on quality, profit will follow. Recognize and respect inherent talents within people. Banish ego—be humble. Customer is supreme. Failures teach more than success. Harness the human touch in service. Do not point fingers/blame others. Do not repeat the same mistakes. Keep learning; there is no end to learning. Practice flexibility in approach. Others.

Some specific TQM values are: z z z z z z z z z z z z z z z z z z z

View work as a process. Focus on continuous improvement. Ensure quality of intangibles. Do not compromise with quality. Focus on variation control. Ensure quality in upstream processes. Strive towards preventing errors or defects. Speak with data and act with data. Ensure people’s involvement. Encourage team contribution more than individual brilliance. Respect commitments on ‘Time’. Consider ‘vendors’ and ‘dealers’ as partners. Banish the psychosis of fear from the organization. Practice empathy. Be a housekeeping fanatic Adhere to safety norms. Respect environmental standards. Comply with statutory requirements. Others.

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Beliefs Thomas Watson, Jr. in his book says that if you look at ‘any great organization— one that has lasted over the years—I think you will find that it owes its resiliency not to its form of organization and administrative skills, but to the power of what we call beliefs and the appeal these beliefs have for its people.’9 In this era of global and liberalized economy, factors like technology, finance, innovation, organizational structure, geographic location, etc., no longer provide the distinctive edge. Watson says, ‘All these things weigh heavily on success. But they are, I think, transcended by how strongly the people in the organization believe in its basic precepts and how faithfully they carry them out.’10 Often there is some rationale behind a particular value; this rationale is nothing but a belief. Beliefs are confidence-generating convictions which when practiced with true spirit becomes a value. Sometimes it is difficult to differentiate between values and beliefs. Some fundamental beliefs crucial for TQM are listed below: z z z

z z z

z z z z z z

There ought to be quality in whatever we do. Customer is central to whatever we do; customer is always right. We, too, are customers but at the same time we are all giving some service to others. Every human being has some inherent talent(s). None of us are absolutely independent; we are interdependent on others. Problems and errors are caused. and one that has been caused can be tackled and put right. There ought to be a solution to a problem. Progress is synonymous with continuous improvement. Open communication develops mutual trust. Walk the Talk. We are all trustees and must discharge our obligations to serve society. Let us be the ‘Best’ in whatever we do!

Beliefs must not be superficial; ingrained beliefs induce behaviours that are in consonance with the TQM requirements. However, that requires the top management’s visible commitment to values and beliefs and institutionalisation of enabling systems. A belief in being the best induces motivation of the highest degree and releases tremendous energy. Sometimes beliefs are clubbed together with values. Adherence to certain values automatically results in operating and behavioural discipline, which ensures consistency in efforts made towards institutionalising a TQM-compatible value system. It will require constant care and nurturing. Organizations without a value-system cannot be relied upon to sustain the quality of their products and services. Wrong means or compromises with values ultimately thwart the TQM movement. Compromises made with quality or values severely damage the credibility of management. The employee’s lose faith, and the low morale cause serious despondency across the organization. Thereafter, no amount of exhortations or posters/wallet-size laminated cards proclaiming values and beliefs can change the situation. Values cannot be merely proclaimed; they need to

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108 PHILOSOPHIES AND CONCEPTS be taken seriously and lived convincingly. Visible commitment of management towards the proclaimed policies and values is critical. Management should realize that shared values are sacrosanct to the employees and should not be trampled at will. It is better not to have any value statement rather having ones that people do not live up to in letter and spirit. It is important to state the true-shared values, instead of a set of ideals that looks good on paper. If left unguided, individuals may interpret the organizational value system as per their own thoughts. Though the style or whims of successive owners or CEOs leave an imprint on the value system and culture, absence of any guiding principle may lead to concocted values that ultimately gives birth to a hotchpotch culture. In their book In Search of Excellence, the authors Thomas J. Peters and Robert H. Waterman Jr have discussed basic beliefs overriding values at length. After the study and analysis undertaken by them on behalf of McKinsey, the authors stated, ‘Every excellent company we studied is clear on what it stands for, and takes the process of value shaping seriously. In fact, we wonder whether it is possible to be an excellent company without clarity on values and without having the right sorts of values’.11 Their study further revealed an ironic fact that the companies with the higher quantified financial targets had done less well financially than those with broader qualitative statements of corporate vision, purpose, and values.

Culture Knowingly or unknowingly, subtly or overtly, we frequently use the word ‘culture’ in our thought or speech. The culture factor is so over-bearing in all facets of life that we cannot ignore it, especially in our working life. A common example experienced by almost all of us illustrates the point: when one visits an office or household, the first thing one encounter is the culture—the first impression made by the family or the organization largely influence such encounters. Similarly, when we meet a person for the first time, consciously or sub consciously we put a cultural-tag on him or her. Every organization, every department, every family has a culture. Every formal/ informal work group or a new set up tends to develop a culture of their own; whenever someone says, ‘that’s the way we do things around here’, he or she is actually referring to the work-culture. Everyone has a culture; one can neither avoid it nor do away with it. It cannot be seen or touched, it can only be sensed. Unconsciously the culture becomes second nature, manifests itself in behaviour and performance outcome. So effects of the culture can be felt or seen and can even be measured. In an organization, culture is created by daily decisions and behavioural trends, it is the sum total of all the ways in which people respond and act in reality as opposed to what they are supposed to do as per the standard operating practice (SOP). The organizational culture is influenced by the prevailing organizational behaviour born out of past practices, behavioural norms and the kind of leadership. In corporate terms, culture is made up of actions, practices and systems that emanate from the basic tenets of the top management. The attitude of trade unions and quality of people also influence the work-culture to a large extent. Focusing on short-term profits or objectives breeds a manipulative culture where quality is a matter of chance, whereas in a positive environment top priority is accorded to

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ENVISIONING TRANSFORMATION 109 quality and customer needs. Indifference towards customer needs reflects a poor work-culture; a customer-proactive company will, on the contrary, encourage and empower efforts to improve customer servicing. Culture has the strongest bearing on the TQM movement; culture sets the tune. It requires a dedicated effort from the top management to transform the prevailing organizational culture to a new proactive culture where the intrinsic values of TQM could be practiced and get reflected in every system and action so that with time the reoriented TQM culture gets embedded. The CEO has to embrace the TQM values himself as his behaviour has a direct bearing on the organizational culture; his walking the talk reflects the visible commitment of top management towards TQM. The employees take their cue from top management or whoever is the immediate boss. Nurturing the right culture is critical to the success of TQM. The TQM culturesystem not only specifies ‘what is right’ but also empowers the employees to do the right things. Empowerment is an exponential of the right culture system. The Tylenol crises of 1982 and 1985 rocked Johnson and Johnson. However, the managers instead of panicking sought solutions in the company vision statement, in the relevant portion that states, ‘… we believe our first responsibility is to the doctors, nurses, and patients, to mothers and all others who use our products and services. We are responsible to the communities in which we live and work and to the world as well.’12 Based on this value and the authority conferred by this statement, managers ordered the recall of every package from every shelf in the world. Despite incurring a huge short-term financial loss, the managers were applauded not only for taking unique responsibility as envisaged in the vision statement but also for restoring the credibility of the company and winning the confidence of society at large. The culture was the saviour in this case. Culture is a living phenomenon—it never dies, though it can be changed or reoriented through disciplined behavioural and systematic changes. The traditional management culture of focusing on short-term objectives and fire fighting gets in the way of initiating the TQM culture. Therefore the first task is to tackle the existing culture. Unless enough precaution is taken, the prevailing culture may overwhelm and distort the TQM initiatives. Therefore steps must be undertaken to ensure that the TQM movement moves forward. Re-orientation of culture, particularly from negative to proactive culture, is an uphill task, there must be constant vigilance against pressures to reverse or negate the efforts of reorientation. Old habits die hard; they have the inclination to bounce back with slightest opportunity provided by slackness. In the old culture where people are more accustomed to ‘doing things right’ as directed, the attitude is crystal clear-’do not stick your neck out’. In such a scenario, even breaking one’s head nothing will happen with regard to reorienting to culture of ‘doing the right things’ unless the top management leads from the front and give unstinting support to the cause of TQM culture. It is ironic but true that top management has to re-establish their credibility among the employees as regards to their genuine resolve to institutionalise TQM culture since the patterns of their earlier behaviour and actions contradicted TQM principles. The attitude of the trade union too influences the culture, and therefore needs special attention. Often the trade unions and employees do not embrace this ‘thought revolution’, refuse

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110 PHILOSOPHIES AND CONCEPTS to change their old cultural stance despite all genuine efforts. It is worthwhile to note the views of Tom Peters- management guru and David T. Kearns-ex CEO of Xerox. Tom Peters says, ‘Today, loving change, tumult, even chaos is a prerequisite for survival, let alone success.’ On the remarkable turnaround of Xerox David T. Kearns says, ‘Our only hope for survival was to urgently commit ourselves to vastly improving the quality of our products and service….It meant changing the very culture of Xerox from the ground up.’13

LEARNING ORGANIZATION The business and economic environment of 21st century is becoming more and more complex by the day and nobody can foretell any easing up. With things of today becoming obsolete for tomorrow, the economy is being fuelled by the power of intellect rather than hard assets; knowledge is now the additional fourth element besides the three traditional factors of production—capital, labour, and technology. The advanced countries are already knowledge-driven societies, while the developing countries are still acquiring knowledge to catch up. Knowledge is the key to analyse and combat the negative effects as well as identify and take advantage of the opportunities being offered by the changing business scenario. Even the incremental changes in daily routines of business require knowledge and subsequent application of it. Achieving sustainable success depends on the organization’s information base, knowledge and skill. Capital, technology and labour are readily available, however, knowledge has to be acquired, grasped, imparted and nurtured. It is obvious that the foremost imperative is to acquire knowledge, in other words, the entity must become a ‘learning organization’. The relevance of ‘learning organization’ and ‘knowledge management’ can be well appreciated in the context of understanding the concept of ‘organizational actualisation’. The key to a better society and a better world lies within the framework of our organizational functioning because of the limitations of what individual can do. It is through rendering exceptional service to society the organizational actualisation is achieved, the enabling environment accelerates self-actualisation of the individuals working across the organization. V. S. Mahesh says, ‘corporate executives can help themselves, and others for whom they are responsible, grow up towards self-actualisation through their normal tasks .’14 The concept of a ‘learning organization’ is not abstract or vague though admittedly it is complex. A ‘learning organization’ would mean an organization that has successfully created an institutionalised atmosphere where knowledge is acquired freely and continuously; the acquired knowledge is disseminated across the organization and applied through deliberate policies to create value across diverse business processes and activities. These unique characteristics become an integral part of the organizational culture and facilitate intelligent risk-taking and creativity needed to meet the challenges of this new age Organizations are essentially organisms whose behavioural traits evolve with time and shape their distinct cultures. The primary objective of a learning organization

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ENVISIONING TRANSFORMATION 111 is to facilitate a cultural change towards continuous and radical improvements that keep abreast with market changes. Transformation in organizational terms is about making multiple discontinuous behavioural changes to the whole organism. Humility, respecting the dignity of each individual, service orientation (both internal and external), etc., is a few distinctive features of a learning organization. It induces a compatible environment for the professional development of each individual through affective, behavioural or cognitive learning methodologies; generally organizations require a combination of all these three types of learning. Designing a learning organization involves evaluation and consideration of aspects unique to the particular organization. They consist of factors like the existing organizational culture, strategic intent, budgetary support, methodology, environment, and various other issues. Training is the most basic form of learning and sharing knowledge that needs to be considered as an investment and budgetary allocation for that should not be curtailed even in times of recession. In fact, recession is the best time for learning and there should be no hitch to spare people from training or retraining. A learning organization is restless against status quo maintenance and always craves for improvement, be it small or radical. Learning implies guarding against obsolescence and egotism of ‘we are the best’. Learning is not only limited to acquiring and disseminating new knowledge and know-how but also creates a compatible environment for practical deployment of the philosophical and conceptual inputs to experience knowledge by taking intelligent risk, enhancing creativity traits to try innovative solutions or improvements. In a learning organization employees are challenged to improve the existing way of working, and innovate new ways of improving both internal and external service and productivity. Measures for these achievements denote the efficacy of learning. The learning program should be designed in tune with the bigger picture—the purpose of existence—by addressing, eliciting, and reaching a consensus on the vision, mission and values of the organization. Unfortunately managers/professionals often ignore or side step an important point: unlearning must precede learning. Exposing the employees to TQM behavioural traits and comparing them against the existing non-compatible behavioural traits will help the participants with unlearning. Chances are there that the people concerned will appreciate the need to discard the old habit and practices and embrace the new. Paradigm shift is indicative of successful unlearning. Management may appoint an experienced consultant or conduct in-house unlearning exercises by themselves; various unlearning packages are available in the market. The most important premise of a learning organization believes that everybody has some thinking power and hidden potential. It is, therefore, a critical objective to create a climate where people can reorient their thinking process, unleash their creative talents and restore confidence within themselves to change the organization for the better. A company must, for its very existence, make use of the store of knowledge that exists within the company, and learn how to make use of help from outside. A learning organization formalizes a collaborative culture by bringing together a critical mass of people; sharing and working together leverages the knowledge

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112 PHILOSOPHIES AND CONCEPTS available within the organization. Such information-sharing and cross-stimulation not only breeds new ideas but also, and most importantly, raises the knowledge and IQ level of employees with lesser experience. Bearing this principle in mind, a learning organization promotes ‘quality circles’ and ‘teams’ that work smarter to solve problems and improve things across the organization; the company as a whole works smarter. Every interaction, relationship and engagement gives an opportunity to learn and such opportunities need to be leveraged to gain knowledge. Managers need to give up psychological bars and have joint learning sessions with the employees and/or vendors. Given the proper encouragement and esteem, employees and vendors can freely share their experience and suggestions that could impart valuable lessons/learning. Several learning modules are available to boost the process of learning from each other. Few such learning modules are: combined group-learning, team learning, learning with clients, learning from delivery and supply chain associates, etc. These modules are very important in the context of TQM as they not only help in breaking the age-old inhibitions and promote mutual trust but also in taking up ‘learning projects’ focused towards solving problems, institutionalising continuous improvements and reorienting the work-culture. The opportunities of learning from competitors, adversaries, and outsiders are limitless. It requires an open mind, humbleness and conviction. Listening to consultants for new concepts, sharing experiences in professional meets, attending seminars, field and customer visits, etc., are a few more learning sources. Learning from apparently non-synergistic organizations or businesses is now an accepted concept. One can even gain valuable insight from different design of processes or different ways of conducting business activity. For example, an automobile spare parts dealer may gain valuable insight by studying the system of a whole-seller dealing in schoolbooks. Scope of such learning is enormous and the extent is limitless; this learning technique can be classified as ‘benchmarking’. Advancements in IT technology enhance search, acquisition and sharing/dissemination of knowledge. It can break the hierarchical levels, disseminate knowledge across the organization, and facilitate learning together. Knowledge of IT can be innovatively used to simplify processes, optimise costs, and hasten up decisionmaking. With an extended application of IT, knowledge can be utilized to establish working relationships with supply and delivery chain entities to offer cost-effective quality services to customers. Systematic wide dissemination of success stories from within the organization is another good source of learning, Also the experiences gathered from the exercises and audits in order to qualify/apply for coveted ‘quality awards’ are invaluable. Effective learning depends on the mindset and culture. The top management’s open-mindedness and proactive attitude towards self-development and increasing the knowledge base in the organization sets the tone of creating a learning organization. If the steps are not initiated to treat and integrate learning and knowledge management within the overall ambit of cultural transformation right at the beginning, the TQM culture will remain ineffective and incomplete.

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ENVIRONMENT Culture and environment have a great influence on human behaviour and organizational characteristics. The internal environment needs to be reoriented to take up the challenges of the changing external environment with rapid responses based on clear-cut imperatives. The internal environmental conditions must be conducive to human development. Proper environment enhances self-esteem and opens up the path to self-actualisation. In his book Thresholds of Motivation V. S. Mahesh says, ‘For the first time in the history of economic organizations, the unfolding of human nature to its full potential of perfection has become a critical, unavoidable factor for economic success. Adam Smith’s economic man has to be replaced by an achievable version of Abraham Maslow’s self-actualising man.’15 If the employees believe that the organization is genuinely concerned with the full development and realization of their potential, then their attitude towards the company, supervision and their job will significantly improve and get reflected in their behaviour. That is in the best interest of both the organization and the individuals concerned. Exuberance is characterized by the fact that people walk briskly and have radiant faces with positive vibes and the environment promotes collaborative working across the organization, and with business associates. In the excitement of trying things, management must guard against losing their way or interest by starting out in a disorderly/loose fashion. They should seriously monitor implementation and evaluation of a few basic behavioural TQM tools and enablers. Management should make a conscious effort to get rid of the ubiquitous yes-men syndrome, and discourage knowledge hoarding that leads to an undesirable condition where some people try to exploit on the indispensability. Knowledge hoarding and sycophancy are anathema to environment conducive to learning organization. An environment conducive to knowledge sharing and learning is essential for the blossoming of TQM culture. Housekeeping reflects the culture of the organization. Good housekeeping practices symbolize hygienic work environment, trusteeship and caring responsibility towards fixed and current assets including routine equipment maintenance, wastage, control of work-in-progress, and adherence to safety norms. It not only indicates the organizational attitude to quality in practice in its own backyard but also reflects the caring attitude of the employees for each other. Dirty and undisciplined work environment is a TQM deterrent. Management is advised to organize intensive education and training programs on housekeeping. Regular housekeeping audit against the principles of ‘5-S’ should form part of the work culture. Communication is inextricably linked with every step and phase of TQM implementation. TQM philosophy has brought with it radical changes in communication, both in terms of need and style against the traditional one-way ‘command mode’ of top down communication. TQM replaces the old divide in management between the ‘thinkers’ and the ‘doers’ with a radically new approach of participative management—the hallmark of a learning organization. Therefore, TQM needs a free flow of information and communication to leverage the potential of all employees as well as business associates. The communication style has to be open, transparent,

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114 PHILOSOPHIES AND CONCEPTS not stymied by hierarchical considerations. The efficacy of the communication loop, which includes feedback, is a major determinant of course-correction strategies. Apart from formal communication channels like departmental and team meetings, organizations need to encourage formal and informal network of conversation. In the past, companies frowned when people were talking amongst themselves, as the management thought that this was a breach of discipline—they were wasting working time, people are not supposed to think, they are to do things as directed. Things have changed today. The eminent professor H. Thomas Johnson states, ‘Humans are gregarious animals. Left to themselves, people naturally seek other people, to communicate and share ideas.’16 Creating a listening environment is a prerequisite to effective communication and learning. It is peculiar that in many organizations bosses initiate steps and design mechanisms or systems to listen to the customers but they themselves do not listen to their own immediate subordinates. Listening to employees will enlighten the management with valuable yet unknown facts and information offering opportunities to try new ways of doing things that would have otherwise eluded the management. It is necessary to examine the efficacy of the market-communication system, particularly with reference to changing customer needs. Communicating customer complaints, competitive data, market analysis, etc., to the frontline employees is a crucial step towards involving employees in the customer-orientation strategy of TQM. Some managers suffer the delusion that the TQM initiatives will automatically make the environment receptive and conducive to the basic values and practices required for imbibing and practicing the TQM philosophy. In the initial stages, the gap between the ‘desired state’ and the ‘ground realities’ of environment will be discomforting. Mistrust and cynicisms will snag the progressive movement. To overcome the contradictions and distractions, people need role models to emulate. Therefore, it is crucial that the managers consciously reorient their role from ‘managership’ to ‘leadership’ and discard their egocentrism. With the traditional fire fighting method of solving problems, the problem keeps reappearing and never gets solved permanently. Institutionalising the use of problemsolving tools as a means of continuous improvement is meaningless unless it is made into a mandatory part of organizational work-culture. Managerial support system (like training and recognition) and visible annoyance at fire fighting approach should create a proper environment where the task of problem solving will be approached in a professional way and that will pave the process of continuous improvement. In a TQM-compatible environment the lingua franca is ‘data’. Here data is used to compare notes, measure efficiency and analyse trends; the dictum is ‘speak with data, act with data and measure with data’. Removing misconceptions and the fear of data and statistical techniques should be among the top agendas of management action. Managers often do not understand the relevance of data management with respect to continuous improvement. Data display is the single most visible commitment from the management towards TQM movement. In a TQM-compatible environment, data management is one of the most versatile enablers reducing variation and cost, improving quality and maintaining the

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ENVISIONING TRANSFORMATION 115 momentum of continuous improvement. Use of data will eliminate the undesirable practice of taking decisions based on assumptions or gut feeling. A proactive organizational environment has a culture of tolerance towards failure. People do not attempt even small improvements if self-initiatives are frowned upon and there is lurking fear of reprimand in case of failures or unauthorized initiative. This undesirable yet common managerial rigidity and intolerance towards failure strikes the death knell on proactive thinking, suppresses inherent talents and kills self-initiative among people. Managers need to accept failures as a part of the learning process and that any stifling of the inherent talents within the people is against the interests of the organization. Soichiro Honda, founder, Honda Motors, said, ‘Many people dream of success. To me success can only be achieved through repeated failure and introspection. In fact, success represents the 1 percent of your work which results only from the 99 percent that is called failure.’17 Gordon Forward, President, Chaparral Steel, USA, says about creating an environment where mistakes are cherished, ‘You’ve got to have an atmosphere where people can make mistakes. If we are not making mistakes, we’re not going anywhere. The scientific method is designed for mistakes.’18 A learning organization considers ‘learning from failures’ an invaluable asset that increases organizational capacity for innovation and may lead to some dramatic improvements. Lessons learned from failures are to be properly analysed along with the concerned persons for education and such knowledge should be disseminated across the organization. The concerned persons are to be encouraged and supported to carry on with the unfinished work with renewed zeal, with a modified or a new approach. However, sloppiness or deliberate negligence should not be tolerated under any circumstances. ‘Fear’ has been identified as the most damaging factor that thwarts all attempts to institutionalise a TQM culture. At the initial stages of TQM, people hesitate to practice certain values and actions as they do not feel confident about the management’s real commitment and tend to play safe by somehow maintaining status quo. One of the tenets of TQM states that employees must be empowered to take initiatives to strengthen the movement, however, in reality empowerment becomes the first casualty in an atmosphere filled with mistrust and fear. Precisely for these reasons, the 8th point in Deming’s famous 14 cardinal points for transformation states, ‘Drive out fear, so that everyone may work effectively for the company.’19 TQM strives to create a fearless atmosphere that encourages free expression and seeing and judging things in new perspectives. In cases of omissions or errors nobody should be blamed, rather the process should be examined to find out the root cause behind the omissions or errors and eliminate it. The onus of creating such an environment is on the management. Hassles and bureaucracy are hurdles to flexibility, quick decisions, elimination of non-value adding activities and empowerment. They make the organization flat-footed, inefficient; customers feel unhappy and frustrated and the employees suffer from low morale. Steps have to be taken at the beginning to identify and remove these irritants. Tom Peters and Philip B. Crosby have been vociferous against bureaucracy and hassles. In his book Thriving On Chaos, Tom Peters says, ‘The campaigns against bureaucracy must become strategic priorities of the first order.’20

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116 PHILOSOPHIES AND CONCEPTS De-layering of the management structure and liberation from excessive procedures may lead to de-bureaucratisation. Fewer rules and eliminating humiliation should reduce hassles. In the words of Philip B. Crosby, ‘Hassle means different things to different people. But to me it is the unnecessary difficulties or harassment placed in the path of someone trying to do a reasonable thing.’21 According to reengineering guru Michael Hammer, bureaucracy and hassles are cancerous cultural aberrations that need major surgery. He suggests destruction and obliteration of bureaucracy and hassles. The environment has to be proper for recruiting and inducting new people. It is now established that the performance of any organization is impacted by the quality of its people that includes the quality of leadership. Enrichment of the human resource pool can be achieved by professional recruitment and an induction policy that matches the envisioned TQM culture. Ceremonies, traditions and other cultural expressions can help clarify and reinforce certain values and beliefs. It is essential to view which ceremonies/rituals is being followed in the organization and scraps those that are not in consonance with the current reality. A judicious selection of ‘eventful days’ will reinforce the proactive environment. Credibility must be protected and improved. Employees, who demonstrate an initiative to solve problems, appear resourceful for improvement and innovation, and who can step outside their routine responsibility to get things done, should be identified, developed and encouraged. The efficacy of recognition, reward, and annual appraisal systems must be evaluated. Edwards Deming had strong views about appraisal systems, point number 12 b of his famous 14 cardinal points for transformation virtually advocated scraping the annual appraisal system. The point explicitly states, ‘This means, inter alia, abolishment of the annual or merit rating and of management by objective.’22 Most companies may not have the courage to do so but they can definitely alter the focus of such appraisals. The management should publicly declare that the appraisal system will henceforth be heavily tilted towards adherence of organizational values, interest in learning, customer orientation efforts towards continuous and involvement in other TQM initiatives. Further, during the initial stage of constructing a TQM culture, management should ensure that the appraisal system is used as a tool for counselling and mentoring for employee development. Having established an atmosphere that will promote TQM, professionals should initiate concurrent systems that will encourage collaboration and knowledge sharing. The new environment should discourage knowledge hoarding and promote systems that reflect the idea that real power comes not from the knowledge kept, but from the knowledge shared. Therefore, it is vital to ensure that people who share knowledge are backed and rewarded. Plethora of new independent initiatives such as ISO 9000, ISO 14000, Quality Circles, Small group activities, Kaizen, 5-S, TPM, JIT, Six Sigma, safety programmes aligned with international safety awards, etc., along with independent TQM initiatives may create confusion and bewilderment amongst employees. Integrating the ongoing initiatives with the TQM continuum will be a challenge. Therefore, management has to extra careful to ensure that such initiatives do not run parallel with TQM programme or contradict TQM culture. It is important for management to innovatively integrate all such improvement initiatives under the umbrella of TQM so that there is no clash of priorities, and chance of

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ENVISIONING TRANSFORMATION 117 cultural aberrations. In tune with the TQM axiom that ‘that which cannot be measured cannot be improved’, organizations need to periodically measure the overall environmental factors as well as factors affecting customer satisfaction, market standing, people orientation, process orientation, variation control, continuous improvement, efficacy of supply chain management, etc. The fact that culture influences the quality of intangibles and that intangibles in turn impact the tangible results must dawn on the management so that they undertake actions to tone up the environment for inducing a TQM compatible culture. Resistance from constituencies such as trade unions, employees and middle management is nothing unnatural and management must find out ways and means to tackle this resistance. The real problem, however, is covert resistance from senior managers who sabotage the movement by not supporting the cause with due enthusiasm. Such resistance can be attributed to egotism, cynicism, superiority complex, fear of loss of power and status, etc., etc. Anjali Hazarika, Director, National Petroleum Management Programme, India, commented, ‘This is a stumbling block for many executives in the way of developing strategic view of the business by looking for ideas outside their specific field of specialization. The paradox here is such that developing a core competence could well lead to developing core rigidity over time.’23 Only training, persistence and initial small successes within the organization can win over such resistances. Also, right at the embryonic stage the executive management should organize intensive education and training for their senior managers; hard decisions must be taken against non-believers if all efforts of persuasion fail. Expenditure against TQM movement starts yielding tangible results only after a few years of sustained effort. Ensuring long-term health and consequent prosperity is one of the principal aims of TQM, and therefore, it should be treated as an investment instead of revenue expenditure. If the finance is the limiting factor, it is better to start modestly with the basics, creating and strengthening the building blocks, so that further initiatives can be added later on to take the movement to greater heights. Once the budget is settled and approved, the empowerment policy has to be clearly defined. There should not be any budget cut even during recession; it will rather be prudent to utilize the slag-time for education, training and upgrading the human resource capability, to meet the post-recession challenges. Accomplishing the transformation requires an environment attuned to practicing the TQM values and principles. Some executives suffer from the wrong notion that by mere official instructions, diktats or exhortations they will successfully create the necessary environment. The task of the top management and senior professionals is to create, nurture, and maintain an environment where the TQM philosophy can take deep roots and flourish. Further, management and trade unions need to collaborate for a homogenous team effort.

CONSTRUCTING A TOTAL QUALITY CULTURE The key managerial imperative in this competitive environment is constructing and shaping a culture that will measure up to the challenges of market vagaries,

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118 PHILOSOPHIES AND CONCEPTS

Constructing a TQM culture

CHOOSING Embracing the TQM philosophy z Developing a model z

EXPRESSING Statements of: z Purpose z Vision z Mission z Value

Shaping the TQM culture

SHAPING Cultural Aspects z Soft and Hard Initiatives z Professional Integrity z Perseverance

MEASUREMENT

z

Course-Correction Track Figure 4.2: The Continuum for Construction and Shaping of TQM Culture

take on the competition and ensure resiliency through a never-ending pursuit of excellence. It has to be a close-knit integrated effort—the continuum is represented in Figure 4.2. The construction and shaping of TQM culture is not a one-time affair, but a continuous process that focuses on two ends of the continuum, viz., the conceptual framework of highest level of abstraction and the actions at the most mundane level of detail. Short-circuiting any will not give the desired results. The first step of the continuum is the initiation to TQM; logically embracing the ‘core’ of the TQM philosophy is the pre-requisite. This would require a deep study of the philosophy and concepts pronounced by eminent management philosophers/ consultants on total quality control (TQC) or total quality management (TQM) or change management. Confirming to a philosophical approach would involve of lot of intellectual thinking, a conceptual framework that embraces the highest level of abstraction, emotional involvement and societal commitment. The next task is to choose or design a model for implementation. Designing a model aligned with the unique cultural factors, market forces and other ground realities is better than following the dictums of a particular guru. However, the profound knowledge gained from the study of different philosophical doctrine and concepts should help in designing the model with appropriate initiatives, methodologies and tools, in relevance with the unique circumstances of the organization. Seeking guidance from an experienced consultant will be a prudent move. The next in the continuum involves expressing and firming up the core tenets of the TQM model that the organization will follow. This step involves primary tasks to give concrete shape to vision, to elucidate and reconfirm the rationale

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ENVISIONING TRANSFORMATION 119 (purpose) behind the business/activity, to draw up the charter of macro-strategies (mission), and to agree to norms (value-system) of individual and organizational behavioural pattern. This step of firming up the strategic intention and defining the behavioural norms is an arduous exercise and a mission by itself. It calls for emotive involvement of people, and lots of brainstorming and planning sessions will be required to define a shared vision as well as the basic road map to live the vision. Further, all these need to be documented and communicated effectively. Cases involving construction of TQM culture can generally be divided into two broad categories, viz., one that involves reorienting the existing culture and the one dealing with start-up companies. Some organizations are lucky to get inspirational leaders, imposing men with exalted ideas have the magnetism to pull people and galvanize them around a common towering vision. These leaders, however, never ‘sell’ their vision, inspire others and these inspiring leaders do not require to formally ‘sell’ their vision, yet they do take steps to articulate, document and disseminate the vision, purpose, and mission statements. The innate capability of the leader to rally people around him makes the construction of TQM culture relatively simpler. However, all organizations are not lucky to get the likes of Bill Gates, J. R. D. Tata, Narayana Murthy, or Jack Welch. Incumbent leadership has to challenge the prevailing culture including ‘status-quo’ as well as the ‘incremental’ mentalities, to design a TQM model to surge forward in pursuit of excellence. Changing from task orientation to goal orientation requires a paradigm shift and a revolutionary change in culture. This is the principle behind the construction of TQM culture. And the starting point is the conceptual framework of the future end-state. Envisioning is a base-trait that a professional should cultivate and it is the starting point of constructing a TQM culture. The leader has to hone his capacity to define his dream, articulate the meaning of being in business, and influence people to strive for total quality of management. This ‘visioning’ should not be taken as a ‘fad’. Envisioning could be god-gifted to a very few only, the art needs to be cultivated by the professionals longing to succeed. Emotional commitment to canalise professional efforts for long-term heath is the basic trait required. The whole process is abstract; therefore it requires full stretching of intelligence quotient (IQ), emotional quotient (EQ) and social quotient (SQ). Rational thinking will clearly identify the common ground of congruence of professional and societal responsibility. The lessons of hindsight and the imperatives of worldview can help to plot a future scenario with respect to market, competition; technological changes, etc. i.e., the picture of the environment the organization is likely to face might emerge. Juxtaposing these with dream or mental imagery on the future will help the blurred outline to take the shape of a vision that is clearly focused to live up to the expectations of the stakeholders and simultaneously fulfil societal obligations. The ‘visioning’ takes into consideration the key capabilities required for future scope and development of products and services. The leader thus can envision the state of the organization he would like to see and a leader’s vision ought to have his distinctive mark. Vision and other organizational philosophies remain ineffective, if they are not shared. A vision is truly shared if it evolves out of a consultative

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120 PHILOSOPHIES AND CONCEPTS process and when one can relate the vision to his aspiration or dream. Thus shared vision becomes the rallying point where people are committed individually as well as to each other in pursuit of common aspirations. Involvement in vision exercises hones the conceptual capability of the employees, and that is good for TQM movement. The process of sharing the vision must start first at the top echelon. The leader (usually CEO) must have conviction and courage to share his draft or concept on vision with his immediate next-level colleagues. This involves both formal and informal exchanges. The formal exchange is best done at an off-site brainstorming session for three or four days to discuss and arrive at a consensus on the conceptual framework of vision and draft of the vision statement. Difference in opinion and dissention are two different things, divergence of opinion through formal sessions can be converted to convergence of thoughts but dissention at the top on the vision may lead to disastrous consequences. In an autocratic environment, vision loses its way. A plan of action is necessary to involve the employees because of the nature of this large constituency. Unions generally influence the employees more than the managers, and therefore wherever there are unions they need to be persuaded to be a part of the exercises to construct a TQM culture. Participation of unions in such exercises as well as in training and other interventions will gradually lead to their involvement. Understanding and active support of trade unions is necessary for reorientation of work-culture. This step though difficult and ticklish is not an impossible task. Vision can effectively put into action only if the employees have a sense of ownership, and that could only happen if their opinion has been sought before finalizing the vision statement. This is best achieved by conducting in-house ‘story-boarding’ type of brainstorming sessions of small batches (maximum 11/15 participants per batch) held across the organization. Since the sharing of vision is an important strategic issue, a lot of care and thought should go into selecting task force teams to conduct the sessions. The ideal set up for conducting the sessions would be to include senior executives in the task force teams having the background of the ‘visioning’ exercise conducted at the top/senior management level. The senior executives should be able to conduct the sessions in a manner that all suggestions of the employees after proper stratification and classification are in congruence with the essence of basic vision developed earlier. An abridged version that conveys the essence is then prepared unanimously. To bring in uniformity in conducting the sessions it is advisable that the task force team members are trained by an experienced consultant on the techniques of conducting storyboarding sessions. The next step is to present the evolved summarized versions of ‘vision statements’ to all levels of employees for coming to one abridged final version of company vision that is short enough to be remembered and yet conveys the sentiments expressed in all sessions. Choice of words is therefore very important, and the words should convey unambiguous meaning and understandable by all. In case of multi-lingual society, the vision statement should have multilingual authentic and understandable versions. Vision evolved by such extensive process of dialogue

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ENVISIONING TRANSFORMATION 121 will earn credibility. Though time—consuming, the process ensures convergence of individual dreams or expectations into one common bigger picture. The ‘purpose’ of the business is debated, finalized, and documented by the top management and approved by the board of directors. Quite often it is drawn up by the board or the entrepreneur and delegated to top management for implementation. However the ‘purpose’ of the business should be communicated and explained to the employees to enable them to relate their role and responsibilities. Instead of a separate session this could be better taken up in the beginning of the ‘visioning’ session since ‘purpose’ and ‘vision’ are closely related. ‘Values’ are the behavioural characteristics that will drive vision into action. Therefore it will be quite logical to take up the issue of ‘values’ at the end of the visioning session itself or at an extended session soon after. In this session the employees from the vision statement infer ‘values’. These agreed ‘values’ would have a higher chance of acceptance and success than those imposed by the top management. As the ‘mission statement’ entails macro-strategies on operational/business directions to accomplish the goals enunciated in purpose and vision statements, it is imperative that the top/senior executives be involved in drawing up the mission statement. An off-site meeting for the purpose will ensure undivided attention to this serious task. The meeting will give due consideration to the suggestions of the task-force teams that had sessions with departmental heads and union officials on the subject. This process ensures wide consultation on drawing up mission statement without diluting authority and importance. The expression part of the construction is formalized after the statements are documented, issued and communicated. The formal communication is done to the employees through their departments or work-supervisors. The formal communication also exhorts the employees about the need to align or re-orient their individual work and behaviours in order to march towards the shared vision. As a constant reminder to all, the vision and allied statements are framed and displayed in prominent places but it is critical that such ‘displays’ are properly maintained. The entrepreneur’s ‘start-up’ vision or the ‘shared vision’ of the management and employees may not be adequate to take on competitive forces or for long-term success. Therefore, vision may need to be revalidated, modified, or redrawn altogether as per the changing circumstances. In such case it will be prudent to follow the same procedure as outlined above. Cynics or diehard traditionalists raise eyebrows about the detailed visioning process outlined above and there are some who believe in top-down dictates as they feel that these ‘statements’ are management prerogatives. Such people need to be reminded that vision, mission, purpose, values, provide the inner urge, direction, character, unified effort, and adrenalin to tread the arduous journey to excellence. Involvement of people in these exercises is a professional effort to overcome resistance to change, and creating a critical mass so necessary for TQM initiation. Impatience leads to shortcuts or compromises that ultimately do not yield the desired results. Avoidance of a false start is absolutely necessary to instil a TQM culture.

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Notes 1. P. M. Senge, ‘The Leader’s New Work: Bulding Learning Organization’, Sloan Management Review, MIT, Fall 1990b, pp. 7–23. 2. Anthony Robbins, Awaken the Giant Within (New York: Simon & Schuster, 1992), p. 307. 3. Rabindranath Tagore, Song No. 184, Geetabitan (Kolkata: Vishwa Bharati, 1978), p. 343. 4. Father Theodore Hesburgh, Former President, Notre Dame University, quoted in TIME, May 1987. 5. Robert X. Cringely, Accidental Empires (New York: HarperBusiness, 1993), p. 188. 6. Narayan N. R. Murthy, quoted in The Economic Times, Kolkata, 21 March 2002. 7. Akira Sueno, Entrepreneur and Gentleman (Tokyo: Charles E. Tuttle Company Ltd, 1977), p. 93. 8. Interview quotation, ‘Dr. W. Edwards Deming—the Statistical Control of Quality’, published in the magazine Quality, February 1980; Marshall Sashkin and Kenneth J. Kiser, Total Quality Management (Maryland: Ducochon Press, 1992), p. 26. 9. Thomas Watson, Jr, A Business and Its Beliefs (New York: The McGraw-Hill, 1963), pp. 4–6. 10. Ibid., pp. 4–6. 11. Thomas J. Peters and Robert H. Waterman Jr, In Search of Excellence (New York: Harper & Row Publishers Inc, 1982), p. 280. 12. James A. Belasco, Teaching the Elephant to Dance (New York: Crown Publishers Inc., 1990), p. 202. 13. Tom Peters, Thriving on Chaos (New York: Alfred A. Knopf, 1988), p. 45. 14. David T. Kearns and David A. Nadler, Prophets in the Dark (New York: HarperBusiness, 1993), p. xvi. 15. V. S. Mahesh, Thresholds of Motivation (New Delhi: Tata McGraw-Hill, 1993), p. 73. 16. Ibid, p. 16. 17. H. Thomas Johansson, Relevance Regained (New York, The Free Press, 1992), p. 160. 18. Tom Peters, Thriving on Chaos (New York: Alfred A. Knopf, 1988), p. 259. 19. Ibid, p. 259. 20. W. Edwards Deming, Out of the Crisis (Madras: Productivity and Quality Publishing Private Limited, 1992), p. 23. 21. Tom Peters, Thriving on Chaos, p. 377. 22. Philip B. Crosby, Quality Without Tears (New York: Penguin Books, 1985), p. 34. 23. W. Edwards Deming, Out of the Crisis, p. 24.

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5

CHAPTER

Shaping TQM Culture INFORMATION MANAGEMENT nformation technology and businesses are becoming inextricably entwined, as today’s imperative is to enhance organizational response to match the everincreasing speed of business worldwide. The advanced information technology has made it possible to retrieve real-time information on ever-changing customer tastes and expectations enabling quicker response to the changes, almost as reflex. Today strategic deployment of the digital information technology is necessary to enhance the organizational capability to take timely managerial actions and remain ahead of the competition. With the knowledge base reinforced, organizations have the scope to improve their reflexes, speed and overall organizational resilience through continuous improvements and creativity. A well designed and effectively used information technology brings the key people onto the same wavelength as they are accurately kept informed with relevant real time data that enable them with business process insights and solve business problems in ways that could not be conceived earlier using conventional methods. Relevant data include elements such as market share, customer satisfaction, cost, revenue generation, competition, employee involvement, etc., which are basic to all businesses irrespective of nature and size. A prudent management will not only concentrate on a well-designed system but will also ensure proper infrastructure for effective deployment so that they can monitor and improve their processes. The linkage between the customer feedback mechanism and the supply/delivery chains/ processes also offer opportunities to improve customer servicing and attain distinctive competitive edge. The availability of on-line and often live information and data enables the work force to cut across departmental barriers, exchange ideas and collaborate to work smarter. When people work together—on-line, on new tasks or on innovative product/service ideas—the overall operational efficiency improves. The uniquely designed digital interface often provides alternative solutions that empower middle managers to take decisions and respond almost instantaneously to the business situations. This enhances the self-esteem and confidence of the middle managers as now they too, besides the senior executives, play an important role in keeping pace with the velocity of changes in business. In the traditional system, the middle

I

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124 PHILOSOPHIES AND CONCEPTS managers felt choked and frustrated about being kept from participating in the process of taking important business decisions. Information includes both tangible and intangible aspects; it also involves data collection and data analysis. The information loop includes both external and internal entities and factors entwined with the organization’s activities. Information concerning customer interface are of prime importance to any commercial organization. Delivery and supply chain information help to improve customer servicing. Organizations must keep themselves abreast with technological advances and be aware of their availability. Benchmarking the best practices is another area where information management plays an important role. Systems to measure and monitor cost of quality will necessitate an elaborate design of information management system. Even a simple knowledge management system will require a professional way to record numeric/non-numeric data, past and current performances, evaluation of traditions and practices, etc. Radical transformation of business/operational processes to keep pace with time is simply not possible without the use of information technology. Bill Gates, Chairman of Microsoft, has observed in his book Business at the Speed of Thought1 that though at heart most business problems are information problems, almost no one is using information well. Integrating information management into the TQM continuum will mean design and installation of hardware and software to ensure real-time information loop involving customers and various business processes. The management often miss this vital point. There is scramble today for installation of standard information management packages like ERP or SAP; no doubt they are really good planning and decision-making packages but the management must be clear about what they really want. Therefore, right at the beginning of TQM initiation, management should initiate a team to work with the consultants or suppliers who install the information management system to make it absolutely compatible with the TQM requirements. In case of existing information system, the team should evaluate its compatibility and take corrective actions. In his book, Bill Gates laments, ‘the gap between what companies are spending and what they’re getting stems from the combination of not understanding what is possible and not seeing the potential when you use technology to move the right information to everyone in the company.’2 Mobilizing the right information to everyone in the company is one of the critical factors for the success of TQM. Foresight and care at the initiation stage of TQM will make it easier to foster a credible and effective information management system compatible with the specific TQM requirements of the organization.

KNOWLEDGE MANAGEMENT In this competitive business environment, where the importance of human development is obvious, priority is to unleash and leverage the hidden talents and potential of people. This critical task can only be accomplished by imparting knowledge. Therefore, systematic knowledge capture and its management is a strategic business imperative.

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SHAPING TQM CULTURE 125 Knowledge management put in simple terms imply a structured approach towards initiation, coordination, integration and applications of various learning activities that systematically strengthens the knowledge base and enhances creative skills among individuals as well as the organization as a whole. Knowledge management in reality is as an investment in intellectual capital that will ultimately leverage the inherent talents amongst the organization’s work force and result in the best collective effort towards consolidating its business position and market standing. Properly managed intellectual capital enhances the organizational IQ and impacts the company valuation. Management and financial pundits of today predict that future market leaders will be those companies who manage their intellectual capital well. Intellectual capital is the intrinsic value of intellectual property and the knowledge base possessed by an organization. The idea of intellectual capital is no longer considered a mere theoretic management concept; its ascendancy is clearly borne out by the dominance of software and intangibles. In this new era, ‘soft’ plays a more dominating role than ‘hard’; in today’s dynamic market milieu, companies need a high corporate IQ to succeed. Corporate IQ is the measure of how easily and broadly, learning and information is shared within an organization and how well people within the organization build on each other’s ideas. Corporate IQ is enhanced through individual learning and the cross-fertilization of ideas form different people/sources. The admixture of all these characteristics is called ‘knowledge’, the all-important ingredient of ‘soft’ and the source of almost all-economic value addition. The CEO’s personal interest and professional role in raising the company’s corporate IQ is crucial in establishing an atmosphere that promotes knowledge sharing and collaboration through appropriate knowledge management policy, outfit or structure. Conscious and firm initiatives to create such an organizational learning atmosphere must be the first-step of TQM initiation. Positive values such as, banishing ego, respecting human dignity and inherent talents of individuals, yearning for learning, etc., have to be a part of the organization’s value-system. The top management should institute management support systems to promote and sustain well-coordinated machinery for management information system, learning and team-working. The CEO should ensure that the other top management team members really believe in knowledge sharing, and are willing to engage with employees in co-learning and knowledge management efforts. These leadership traits concerning the softer aspects of knowledge management are prerequisites for knowledge management; otherwise despite huge investment on infra-structural ‘hard’ facilities all efforts for successful knowledge management will fail. Existing cultural aberrations and wrong practices should be identified, and a massive drive should be undertaken to reorient the work-culture and practices at all levels to fit in with the behavioural traits of knowledge management. Organizations need to initiate campaigns, design systems and procedures that encourage knowledge dissemination and sharing to avoid knowledge hoarding. It is a pity that some organizations without having the profound knowledge about knowledge management have resorted to re-designating the General

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126 PHILOSOPHIES AND CONCEPTS Manager-Human Resource Management as General Manager-Knowledge Resource Management similar to earlier trend of re-designating GM-Personnel as GM - Human Resource Management without affecting or even understanding the new role orientation, sadly it was akin to putting old wine in a new bottle. Such false steps send out wrong signals throughout the organization; professionals should not treat knowledge management as a management fad or a modern fancy. Top management must therefore understand the cultural, operational and structural requirements of knowledge management before initiating any organizational/ structural changes. The responsibility of knowledge-management function better is integrated with the responsibilities of leading and coordinating TQM movement. At the onset it is necessary to prioritise areas and activities to lay the foundation on which further blocks could be built. The fundamental action plan is to design a user-friendly digital information management system; use of simple problemsolving tools and teamwork will leverage the existing but dormant knowledge within the organization. Knowledge management will ensure that the information/ learning from market, process(es), in-house success-stories, competition benchmarks, technological developments, etc., are appropriately interpreted, selected or discarded so as to integrate with the operational/business goals and that all ambiguities are dealt with. Acquisitions are a powerful growth strategy practiced by many organizations. The challenge is to integrate the knowledge of the acquired company with that of the parent or vice versa; the key is to create a culture of trust so that knowledge can be exchanged without any inhibitions. An organization’s recruitment policy and strategy needs to be reviewed from time to time to ensure the infusion of new/contemporary knowledge. Similarly organization’s human resource development policies should be consistent with the broad framework of knowledge management. This includes deployment of resources, transfers, promotions and reward and recognition systems. The fruits of knowledge management can be classified as intellectual property. The World Trade Organization (WTO) has also underscored the importance of intellectual property and has framed a set of rules called the Intellectual Property Rights (IPR). Organizations, particularly in the emerging economies, have to have strategies and set ups to deal with IPR, trademark and brand-equity management. They need policies and administrative control against knowledge leakage as well as knowledge protection against attrition.

PROACTIVE ROLE OF TRADE-UNIONS A plan of action is necessary to involve trade unions and deal with such large constituencies of members. Trade unions generally influence the employees more than company managers; therefore, these unions need to be persuaded to be a part of the exercises to construct a TQM culture. Trade Unions are a reality today; one cannot ignore their existence. An enlightened management will strive to get the trade unions as partners in the progress, and the unions on their part have to play

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SHAPING TQM CULTURE 127 a more a proactive role than they have played so far. The age-old mistrust between management and union can only be reconciled through such partnerships. The onus is on top management to take initiatives to help the trade unions change their outlook with regard to their new role. They need to be convinced that unless the new challenges to protect the long-term interest of the organization are faced together by the union members and the company management, the whirlpool of change will leave nobody unscathed. Trade unions cannot remain oblivious to their responsibilities towards tackling the change. The survival and growth of all organizations now hinge on enduring competitiveness. Employee cost being a major competitive factor, the employee strength will be under constant pressure for optimisation. Business process outsourcing (BPO) has become a norm while more and more areas are being outsourced beyond national barriers. At macro-level both the management and union have to team up to draw strategy and missions, and at micro-level employees, irrespective of hierarchy and functions. After all the survival and growth of an organization is an essential common interest. The trade union movement has played a historical role in the exploitative past, however, now it has to reorient itself from being a management adversary to partnering the mutual interest of survival against the onslaught of market changes. In the 21st century dynamic market scenario neither the trade union can afford to oppose market-induced changes nor can the management enter into an unholy truce with or compromise the trade union as they have done in the past monopoly. Today’s situation calls for a radical role shift in case of both trade union and management. Trade union has to play a proactive role while the management has to shed its feudal attitude and induce policies that will foster cooperation and partnership from the trade union. The dramatic success of Ricardo Semler of Semco, a Brazilian company, can be attributed to one single factor—his ability to get the union and the employees to rally behind his dream and concepts. The union and employees understood the real essence of empowerment, got themselves involved and took decisions that focused on the long-term health and prosperity of the organization. Readers are advised to read the book Maverick written by Semeler.3 Trade union movement cannot remain unaffected from the winds of change blowing across the world. The real role of trade union/employee is not to oppose management initiatives but to develop a partnership with the management, share the vision and construct a culture conducive to realize the shared vision. Management too must shed their ego and inhibitions, and leverage this partnership, instead of looking upon this task as disdainful or suffering from ingrained skepticisms such as ‘union leaders can’t be changed’, etc. It is the moral obligation of the trade-union leader(s) to channelize the efforts towards a suitable knot between the interests of the employees and the long-term enduring prosperity of the organization. Trade union leaders too should shed their ego, utilize their social and political power for a noble cause and must agree to take train themselves in change-management and TQM principles. Management should financially support appropriate learning programs for the union leaders.

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128 PHILOSOPHIES AND CONCEPTS Off-site combined training-cum-seminar on management of change for both topmanagement and union leaders is an effective strategy; co-learning helps break barriers. Management ought to have patience as building bridge with trade unions means overcoming the age-old antagonistic outlook and mental block prevailing on either sides. The political, emotional, and cultural aspects are critical, and therefore, need to be sensitively tackled. Fostering co-operative role with trade unions should form the integral part of corporate strategy; faithful adherence to this strategy would ultimately culminate in partnership with the trade union.

ADDITIONAL POINTS ON SHAPING THE CULTURE Expressing or constructing the TQM culture, though an arduous process is a onetime exercise. However, ‘shaping’ the culture is an on-going process; the TQM culture cannot be ordered nor can it be installed like a software program. Defining, sharing and articulating the vision, mission and values does not mean that the organization has successfully embraced the TQM culture; it has to live the values and mission to accomplish the purpose and vision. Employees in general tend to doubt the real intentions of the top management. Hence, the top management’s commitment and its visibility are critical in shaping the culture; management must lead the initiatives. Reorienting an existing culture is a demanding task—ingrained perceptions and traits over the time create a unique organizational ‘gene’ that has lingering effect. Negative perceptions and wrong easily overpower good characteristics and bad practices become part of the company culture. Such ingrained cultures even sway new employees disable novel ideas at the inception itself and continue unless something drastic is done to change the culture. The first real obstacle in shaping the culture is the over-bearing cultural distortion. Hence establishing the credibility of vision related exercises are crucial. But this is not good enough … in fact the hard work begins only after vision and other statements are adopted and published. Right at the beginning management should declare their resolve to institutionalise the adopted TQM philosophies, and to scrap the existing policies and systems that are not compatible with TQM. Adherence to the letter and spirit of this declared policy is crucial in shaping the culture. Compromises, short cuts, and inconsistent management behaviour dissuades the promotion of TQM culture are indicative of management hypocrisy. For example, manipulative actions to obtain ISO 9000 certificate cause tremendous damage to the management’s credibility; all future attempts or exhortations about TQM culture is thereafter viewed by employees with utter disdain. Many managers do not practice the seven QC tools (known to solve 80–85 per cent of the problems) as they think that it is below their professional dignity to use such simple tools that are also being used by frontline employees or workers engaged in quality circles. Such lackadaisical and hypocritical attitudes are not conducive to the TQM culture. Top management has to ensure that all the top and senior members of the management embrace the philosophy and consciously reorient their attitude and

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SHAPING TQM CULTURE 129 behaviour to TQM requirements. Leaving the use of policies and programs to the whims of managers will prove to be dangerous, as double standards in use of policies and programs threat to spoil all the groundwork invested in shaping the TQM culture. Managers must learn to do things differently, their actions should reflect the vision and, most importantly, they have to set personal examples to have an impact on the ingrained culture. Courage to do right things sets the tone; an enlivened environment helps nurture TQM values that ultimately demolish the bad cultural traits accumulated in the past. People change more for emotional reasons than for rational reasons. Every person longs for an emotional vibe to belong to an organization that enables them to experience positive, meaningful, and personally important feelings, even if the organizations cannot always provide everything they envisaged. A successful professional or leader brings the emotional vibration of the work force to a common platform of shared vision and inspires them to surge ahead towards accomplishing the set missions. While designing such interventions the leaders, however, need to be extra cautious not to trample on any cultural sensitivity. The dangerous trap of insensitive cultural transplantation must be avoided; the prudent step is to design company specific TQM culture, integrating the best from the past. However, with due respect to the old culture and tradition, it has to be emphatically impressed on all concerned that the bad and incompatible (with TQM) behaviour and practices needs to be banished forever. Involvement and empowerment are two vital elements that shape the organizational culture. Empowerment is not sharing of power but it is sharing of obligation and responsibility in ensuring total quality in every process and transaction. Empowerment is progressive, it is not passing the buck but rather the anti-dote for indecision and retrogressive steps. However, in the transition period people are afraid to take initiatives or decisions on their own. So, leaders need to intervene and provide with the impetus by constantly and persistently demonstrating the empowerment contained in the organizational statements of intent and resolve viz., vision, mission, purpose and values. Shaping the culture can be considered complete only if people fearlessly deploy such empowerment for the interest of the organization. Managers must understand that the TQM philosophy calls for involvement, and one cannot exclude trade unions from the scope of involvement; though difficult, at times frustrating and backbreaking task, one cannot escape undertaking this vital initiative. Managerial ego must not be allowed to get in the way of such an important strategic step. Having unshackled themselves from such ego-traps, the top management executives of the Japanese automaker, Mazda, visited the Solidarity-House, the headquarters of the UAW (International Union of the United Automobile, Aerospace and Agricultural Implementation Workers of America) to start the dialogue of cooperation with the auto-union for their new plant near Detroit. After protracted negotiations an understanding was reached. This is an example of how leaders take bold steps, and do things differently to accomplish their mission. Readers may refer the book Working for the Japanese-Inside Mazda’s American Auto Plant by Joseph Fucini and Suzy Fucini4 to learn more about this exemplary work culture.

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130 PHILOSOPHIES AND CONCEPTS Shaping a culture on the TQM philosophy is to a great extent dependent on middle-management—people in this level wield tremendous influence as they are located right at the confluence of ‘top-down’ and bottom-up’ positions. These often ignored or taken for granted employees can be the catalysts to or may wreck havoc on the TQM initiatives. This sandwiched lot often finds themselves undecided in dubious situations such as choosing between quick-fixes vs. permanent solutions, short-term objectives vs. long-term goals, task orientation vs. goal orientation, loyalty to immediate superior vs. loyalty to company vision, etc. And this group, that normally does not express their opinions openly, tend to play safe because they feel that they are in the receiving end in either case. Their uncertain steps may undo all the initial good work. On the other extreme, an empowered middle management can fix all the cultural aberrations and effectively lead the employees towards the new culture. W. Edwards Deming in his plan of action has recommended, ‘Management in authority will explain by seminars and other means to a critical mass of people in the company why change is necessary, and that the change will involve everybody. This whole movement may be instituted and carried out by middle management, speaking with one voice.’5 Attention to details is necessary in the implementation stage of any initiative or project. Comprehension of TQM philosophy requires organization-specific planning, which involves training, workshops, educational visits, and various other initiatives. Implementation of TQM culture implies impregnating values through myriads of daily activities or events like helping to interpret and understand how quality of each activity is related to the realization of the shared dream, guiding on-spot corrections of the aberrations and keeping the enthusiasm level high. Middle management by virtue of being on-spot and used to eyeing the details are in an advantageous position, and if properly trained and charged can facilitate in implanting this new culture at the grass-root level and implement ideas in detail. For shaping the culture, a blue print of initial sowing activities has to be drafted. Many organizations chalk out implementation-plans to initiate the use of TQM enablers, however, the majority does not prepare a blue-print for tackling the ‘soft’ issues like reorienting the attitudes and behaviour, imbibing the values, unambiguous interpretation of vision, mission and purpose, etc., which in reality nurture the TQM culture. These fundamental ‘soft’ issues encompass every major business activity or operation, from people to systems, and pose a great challenge for the top management; establishment of credence on this score is crucial to success. Sometimes culture needs a shock therapy to change—it has to discard some of the old or prevailing values before injecting in new ones. Such changes cause pain, yet management must demonstrate their courage and resolve to go through the pain. They must overcome the problems of cynicism, hesitation and frustration. Using and demonstrating commitment towards vision really counts during the embryonic stage. Shaping a culture congruous to TQM philosophy is not easy. Exhortations, training courses, campaigns, etc., on their own do not shape the TQM culture. Imbibing a TQM culture calls for consistency of behaviour in actual practice over long periods of time. Top management should initiate systems that would encourage

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SHAPING TQM CULTURE 131 professionals to undertake self-development and leadership courses as well as redesign reward and appraisal systems to make them compatible with the new philosophy. Institutionalisation of the PDCA cycle for management monitoring and corrective action will drive the culture from the top. Further, top management needs to be extra careful not to get swayed by the natural phenomenon of resistances, failures, frustration, strife, etc.; such phenomenon should not dampen the enthusiasm. Allurements of short-term objectives, or ‘will do it right next time’ attitude, or cost-pressures are bound to be there; one has to be resolute to counteract such distractions. Consistency and persistence in pursuing the fundamentals are vital for shaping the TQM culture.

Notes 1. 2. 3. 4.

Bill Gates, Business at the Speed of Thought (London: Penguin Books, 1999), p. xiv. Ibid, p. xv. Ricardo Semler, Maverick (London: Arrow Books, 1994), pp. 58–180. Joseph Fucini and Suzy Fucini, Working for the Japanese—Inside Mazda’s American Auto Plant (New York: The Free Press, 1992), pp. 1–229. 5. W. Edwards Deming, Out of the Crisis (Madras: Productivity and Quality Publishing Pvt. Ltd, 1992), pp. 86–87.

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II

P A R T

Macro Strategy For the Implementation of TQM

Part II deals with macro-strategies that should help the professionals to draw unique road map suited for their organization. This part elaborates on the four macro-strategic orientations the organization should adopt to get the philosophy entrenched in the organizational culture. The strategic missions to achieve these ‘orientations’ have been elaborated. It deals at length about the dos and don’ts particularly as regards to harnessing the power of people. It also gives overview of most recent initiatives like JIT, TPM, BPR, Six Sigma, etc. Organizations should chose or design their road map according to their unique operational & business requirements and environment they work. Proper implementation should well equip the organization to deal with the vagaries of changing business scenario including increasing competitiveness.

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6

CHAPTER

Market Orientation THE KINGPIN: CUSTOMER any organizations still practice the traditional ‘Product-out’ profit-oriented strategy, which is self-defeating in the present competitive market. The profound knowledge from TQM philosophy clearly points out that profit is the outcome of efficacy of the customer-satisfaction process as a whole. Mechanical approach towards ‘customer satisfaction’ as a routine chore cannot yield sustainable results. It is critical to understand the difference between customer focus and customer orientation. Customer orientation is the all-pervasive culture across the organization to serve the customer, whereas the customer focus is generally a stand alone the policy or means to somehow satisfy the customer. Compromises, omissions and let downs are quite common in the customer focus policy. The right approach is to institutionalize a customer-oriented strategy, which accords customer the status of Kingpin in the integrated organizational planning and processes. The concept has been depicted in Fig. 6.1, the concurrent task of continuous improvement of quality and customer satisfaction embraces every activity in design/redesign, supplies, production, process control, cost control, delivery, service, market research, etc. Way back in August 1950, Dr. Deming at a conference in Mount Hakone Japan exhorted the Top Management to include the ‘consumer’ as the most important part of the production system. Monitoring customer feedback is an essential element that helps understand the changing needs of the customer as well as dynamic and altering market forces. Any feedback indicating customer dissatisfaction, unstated or new requirements of customers whether tangible or intangible, must be reviewed & acted upon promptly at all integrated interfaces. Many organizations or professionals even today talk of ‘customer loyalty’, an expectation that smack of obsolete thinking. It is too much to ask for loyalty from customers who today, thanks to the Internet and other technological innovations, have multiple alternative choices of products and services. Now the real issue is whether the company is loyal to its customers or not. In order to be loyal to its customers the company must display its perpetual concern towards them, and make continuous effort to take care of all their changing needs and aspirations. This is what customer orientation is all about!

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MARKET ORIENTATION 137

IMPACT OF MARKET FORCES ON THE CUSTOMER Market forces discard any organization that sticks to traditional outlook and practices and disregards customer psychology and requirements. One cannot overlook the impact that advancements in information technology, the Internet and other innovations have had on the market forces. In fact, they harness the power and scope to gather newer information on what is impacting the market. Globalisation and economic compulsions have forced the underdeveloped as well as the developing countries to liberalize their economies. Even developed countries cannot stop outsourcing nor can they unilaterally impose trade protection due to the conditions that have been laid down to promote international trade. Gone are the days when product quality itself was enough to satisfy customers; today they look for unique value-enhancing services as well. It is difficult to market a stand-alone product—a plethora of competitive service packages has to be offered alongside. Customers are being pampered with distinctive and innovative services. Let us look at a very common current example. Car manufacturers no longer sell just cars. They now offer a complete package of purchasing or leasing personal transport vehicles that includes services like financing at competitive interest rates, car insurance along with life insurance cover against accident, 24 hour on-road emergency/breakdown service, up to three years of free maintenance, an extended warranty period, a substitute car while the car owned is in servicing, customized seats, personal choice of color, etc. In other words, the facility of virtually ordering a personalized car a la carte. This transformation in the marketing and sales strategy reflects a radical shift in customer preferences and psychology. More and more companies are accepting the reality that competitive edge and long-term profitability depend on the attendant distinctive services offered to customers. The service sector too is reorienting their services as products and offering comprehensive packages. This is the order of the day. Innovations in information technology and communication have killed distance. One is well informed about the market and lifestyle in other parts of the globe. This has made the customers more aware of their choices and rights. Convergence of tastes has become a major market force; the customers in developing countries are aware and eager to reap the benefits of newer technology and services. Advancement and impact of information and communication technologies have induced another vital imperative, which is knowledge management. The customers are no longer easily swayed by the company’s tall promises. Equipped with adequate means to crosscheck, they are more knowledgeable now and expect nothing less than excellence. To cater to this knowledgeable market, organizations must invest in knowledge management to promote innovativeness within their culture. Innovation does not occur by chance or luck. Regular innovation helps anticipate customer expectations and deal with competitive pressures. Innovations also help influence the customer’s opinion. An example—Hindustan Lever (now Unilever) continuously upgrade their products, be it soap, bathing gel, shampoo or facial cream; they have even recently introduced cosmetics for men to create a niche market for themselves.

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138 MACRO STRATEGY Service industries such as banking, tourism, hospitality and even healthcare have started taking care of the ‘intangibles’ which have become determinant forces in today’s market. Demands for courteous, affable employees showing concern, care and promptness, a pleasing environment, clean rest rooms, etc., are no longer considered customers’ whims. Customers do not want stock-outs, shortage of small denomination coins at cash counters, or mistakes in bills or invoices; these apparently small and unimportant aberrations can cheese off customers and affect the reputation and credibility of the company. In this competitive era often the winning streak is provided by the ‘intangibles’, which get converted into tangibles i.e. sales and profit. Thanks to these competitive compulsions, a whole new realm of services hitherto unheard of have spurred the growth of diverse types of business like data/information processing, leasing, business process outsourcing, innovative healthcare, new sectors in the hospitality industry like adventure tourism, eco-tourism and health tourism, and a host of unusual or specialty support services. This new service economy has become a critical determinant of customer retention and calls for designing and developing the process-orientation of the work-force towards service and newer management skills like institutionalising feedback and taking prompt and positive action on it. ‘Saving of Time’ has become one of the major market-forces and marketing USP. The customer’s desire to get things done instantly has resulted in the development of many products, for example fast food and convenience food. Besides connectivity with the customer and market, connectivity within parts of the organization across geographical and political boundaries, and with supply and delivery chains are also becoming business imperatives needed to serve the customer more effectively. Shopping, banking, ticketing, etc. over the internet has already become popular, even governments are offering many public services via the internet such as filing taxes, checking electoral rolls and other services. Traditional retail marketing has also been modified into a convenience-cum-leisure experience through various alluring retail chains and glamorous malls. The niche lifestyle segment cannot be ignored either, as it is a significant marketforce that caters to the self-esteem and psychological needs of the emerging urban upper-middle class in developing countries. They are looking for contemporary fashion, brand-image, exclusivity and a lineage with high social status. Organizations catering to these segments often outsource to get customized quality product/ services at optimal prices. The race to get noticed or certified as ‘green-conscious’, against child labour, concerned about wildlife preservation and cruelty to animals, etc., reflects a new trend in market pressure; with passage of time the influence of such social and humanitarian forces is anticipated to get only stronger. Lastly, the ‘awakened customer’ is emerging as the most powerful market force; customers can no longer be bulldozed. The companies have to fine-tune their marketing paradigms to the desires and aspirations of the awakened customer. The marketplace silent revolution of transforming all organizations into service organizations will have a positive impact on society at large.

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MARKET ORIENTATION 139 The concept of truly serving the awakened customer is an important criterion for total quality of management; it is also valid for social & political leadership.

IDENTIFYING CUSTOMERS AND CUSTOMER GROUPS Though very survival of the business is at the pleasure of customers, in most organizations the task of identifying customers is not taken seriously. Most consider ‘customers’ as per the traditional way of thinking i.e. those who directly transacts the deal of buying the goods or services. This narrow view excludes many others who are directly or indirectly impacted by these product and services, or influence the buying and consumption of these products and services; in reality these groups are constituent of the principal customer group and should be accorded the same attention and importance as the ultimate consumers. Since product/ service failures are quite often dependent on the attitude and positive involvement of the impacted principal customer group, marketing division/department should ideally take up the responsibility of identifying the constituent members of this principal customer group. For convenience of focussed survey or study, the principal customers may be divided into two broad categories: ‘direct customers’ and ‘auxiliary customers’. The ultimate consumers, buyers, and decision makers can be clubbed together under ‘direct customers’, while the ‘auxiliary customers’ may include secondary consumers, opinion leaders, regulators and other indirect customers who influence the consumption of or the decision to buy any given product or service. It is important to classify the principal group of customers and ascertain the ‘value’ that would enable to retain the different class of customers. Therefore management must accord strategic importance to this task, which should not be done half-heartedly.

Direct customers The task of identifying direct customers appear to be deceptively simple, there are different categories of direct customers. The concept of ‘user-chain’ better is used with ingenuity to classify the ‘direct customers’. This can be illustrated by a simple example of a typical large Indian family having household helps. The home maker deciding what groceries, vegetables, and fish/meat to buy is a decision maker, the individual who buys the listed items from the market is a buyer to the seller/s, the persons involved in sorting & storing, grinding cooking ingredients, chopping & cutting the vegetables, and cooking are all end-users, and finally the persons who eat the meal are consumers. So this ‘user-chain’ has got multiple direct customers consisting of decision makers, direct customer, end-users, and consumers. Consumers who consume or use the products or services may get their products or services themselves or through someone else. Similarly, the person who buys may not always be the end-consumer but this category of customer normally gets preference from sellers or service providers as the money transaction takes place through them.

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140 MACRO STRATEGY Then there are one-time customers and some companies even designate or classify institutional buyers, or buyers with big purchasing budgets, as ‘clients’. A powerful category within ‘direct customer’ is the decision maker who determines or prescribes the buying decision of the actual buyer or consumer, he/she sometimes dictates. Award of high-value contracts or capital goods buying is not left to the purchase department; the actual decision maker could be the CEO or some top management personnel or committee of senior management. The other kinds of decision makers include physicians, parents, travel agents, engineering/ project consultants, coaches, etc. who decide or influence the choice(s). They are extremely important direct customers to cultivate because their decisions are normally carried out. It is well known that house lady is normally the decision maker in the purchase of household goods and provisions. It is prudent strategy to accord importance to all categories within direct customer group. Even one time buyers be accorded due importance as one satisfied customer can give more business through annual maintenance contract, additional or replacement purchase and most importantly bring in more customers through positive referrals by word-of-mouth. Value or worth of a single customer should not be discounted as they can create more business.

Auxiliary Customers Auxiliary Customers, another major category of principal customers, could be individuals or entities. A satisfied auxiliary customer not only supports the direct customer’s decision to buy, but also promotes the products and services whenever the opportunity arises. Some organizations unfortunately ignore this category of customers because of their ignorance or arrogance, and there are some who because of shortsightedness think that this fine classification it is not worth because of cost involvement. Some categories of auxiliary customers are discussed below.

Secondary users The secondary customers are second, third, or subsequent users of product. They come very close to direct users in the sense that they are also impacted by the product or service characteristic, they are either disappointed or are satisfied. It sometimes becomes difficult to identify secondary users as it is often mixed up with direct end-users. One can illustrate the importance of secondary user through simple yet familiar examples. If one reads an old magazine in the reception room of a dentist, he is a secondary consumer (reader) as he has not bought the magazine, nor in the first place it was bought for his reading. After all the primary customers [end-users] had read the magazine, it was kept in the reception area for the patients and their accompanying escort/s. They are the secondary users who contribute to the growth of readership figures. A person buys a car; he and his family members who drive or use the car are primary customers while the car chauffeur they employ is the secondary user of the car. The opinion of the chauffeurs is also important for the brand image of the car model. Similarly, the second-hand buyer

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MARKET ORIENTATION 141 is a secondary customer so far as a car company is concerned. A secondary customer can also influence another secondary customer, like a car chauffeur can influence a second-hand car buyer. Similarly, in the industrial front there are secondary manufacturers who use the waste generated by a principal manufacturer as input material—coal-ash, a waste of the coalmine, is used to make bricks. Similarly, there are numerous cases where the product or services are utilized other than the intended usage. Such secondary consumers also influence the market. The reputation of many products is enhanced by word-of-mouth appreciation by secondary users, and on the other extreme, the sour relationship with secondary users can put the business in jeopardy. As they do wield considerable influence, secondary users should be considered like end users and identified explicitly.

Opinion leaders Opinion leaders have an incredible influence over prospective customers. These are customers who do not buy the product, are not decision-makers, nor the end or even secondary users. Yet their opinions have an impact on mass consumer behaviour. They may be the critics and reviewers on television, radio, magazines, etc., the consumer forum, or consultants or individuals with a lot of credibility. In almost every business, there is the presence of such opinion leaders—internal or external or both—who have a good following. They must be identified, as their input can help improve the product or service and gain customers. The economic power of these opinion leaders as individuals may be negligible, however, their opinions can sway the decision of the direct customers.

Regulators or regulating bodies Almost all countries have some government departments and legal-constituted bodies to frame ground rules not only to protect the consumer’s interest, and fair play in trade and business but also for regulating steps against health and environmental hazards. Then there are regulatory bodies against monopolistic and unfair trade practices. The organizations that manipulate such regulations for shortterm gains ultimately loose their credibility and face serious crisis of survival. A prudent company will consider it essential to identify all such regulating bodies, consider them on par as their principal customers and culture harmonious relationship. They will interact with the concerned bodies to keep themselves abreast with the regulatory requirements and initiate steps for compliance before introducing the product/services into the market or venturing into new markets and or expanding the existing one. A TQM company shall respect the rules and regulations of the society and follow ethical and lawful strategy.

Internal customers The ultimate satisfaction of the customers is dependent on the totality of efforts of the persons involved in the chain of interlinked processes for creating the product/ service. Person/s at each processing stage must do right things that would cumulatively lead to satisfaction of ultimate customer. This implies that the persons

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142 MACRO STRATEGY involved in each processing stages will need to be individually satisfied with the required inputs and services from the upstream process so that the next person who receives the output is totally satisfied as if he is a customer. Treating such internal processors as internal customers is a concept first mooted by Dr J.M. Juran. The concept brings in an attitudinal change of identifying and serving the internal customers to ensure satisfaction of the principal customers. To deploy the concept it is necessary to institutionalize a system of identifying all internal customers without any bias and irrespective of levels or hierarchy. Sometimes some internal customers are not so obvious, they come to light perhaps after some emergency situations. Some apply interview approach, some leave it to planners to specify, but perhaps the best approach is by the combination of process flow chart, tree diagram (extending customer–supplier relationship to every person in the organization) and individual interviews across the concerned process chain.

Indirect customers Business partners—the supply, delivery, and service chains in particular—play a very crucial role in the task of satisfying the ultimate consumer. Satisfaction depends on the quality of input materials provided by the entities of the supply chain as well as the delivery and services provided by the outlets. The principal customers mostly deal directly with the delivery/service chain entities and not with the main service provider. As such they form opinion about the principal supplier company based on their experience of interactions with these delivery/ service chain entities. Market forces of global economy are compelling companies to outsource not only product but also processes so as to ensure supply of quality products and distinctive services at competitive prices. It requires a paradigm reorientation of traditional managerial psychology to treat such entities not only as business partners but also serve them as indirect customers. The requirements of indirect customers are to be taken seriously and met promptly as would be the case with internal customers. For their own self-interest companies need to serve and support their delivery and service chain entities so that the requirements of principal customers are satisfactorily met.

The Public/Society The public at large may not be direct client who buys the product or services but definitely is a customer as the society is impacted by the company’s product or services depending on the type of product or services. The concerns could be of safety, effluent treatment, waste disposal, moral issues, monopolistic practices, transgressing human dignity, and many more. Satisfaction of public at large has become an important issue, the organizations need to identify the ‘customer group’, and work with them for satisfying the concerns of the public or society at large. The organizations need to identify such ‘customer groups’, and work with them for satisfying the concerns of the public or society at large.

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MARKET ORIENTATION 143

Summary Delivering products and/or services to consumers and maintaining the overall quality of transactions, is not an isolated activity between the company owner and the end-user. It involves on one hand the decision-makers, end-users and direct customers, and on the other hand, a host of other activities such as procurement, processing, inspecting, transporting, stocking, delivery, billing, training, servicing, etc. Ensuring quality at all these series of transaction steps can only assure ultimate desired quality to the actual user and implies satisfaction of the concerned individuals of the larger impacted group. The companies need to effectively identify all categories of external customers and internal customers, and for this purpose they may need to design special structure and/or use different methodologies and tools for identifying different categories of internal customers. The tools may include matrix designed to record the survey data on internal customers; may use Pareto diagram to identify vital few in each category, or use flow charts or TRIPOL diagram, etc. Intensive training and communication is recommended before such programs are implemented. These exercises must be repeated within a few years to update the list of customers and must become a part of the structured approach towards customer orientation. It is very important to do the task seriously as it is time-consuming and requires a lot of involvement.

DETERMINING CUSTOMER NEEDS The significance of the three important marketing idioms or dictums must be comprehended and viewed in proper perspective of determining the complete need of the customer in the first place: (a) customer does not give many chances (b) the goods come back, but not the customers and (c) a dissatisfied customer does not complain, he just switches. Market research reports show that on the average a happy customer tells eight people about the product, but the dissatisfied customer vents his horrendous experience to more than twenty people. The future loss of business from a dissatisfied customer can have cascading negative impact including bad reputation, loss of market share, and ultimate demise of the organization. The activity of finding the real needs of the customer has to accorded top priority, unfortunately many managements take it up in a ritualistic fashion without making serious effort to have a dent into the ‘customers territory’. Success in finding out the real needs of the customer is tantamount to striking gold. Maintaining an enduring relationship with the customers is dependent on the ability to update and meet the changing requirements of the customer and deliver products/services accordingly. Satisfaction of the implied needs is also a factor. It is important to find out and study the ‘unintended use’ of the products & services as some such uses can offer commercial opportunities. However, those unintended use that are health or safety hazards must be monitored with war footing to prevent such misuse of planned usages. Through study of implicit needs arising out of technological changes and innovations or statutory requirements against health

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144 MACRO STRATEGY and safety hazards, environment control, etc., should be duly considered. Similarly the need for intangibles cannot be overlooked as it has become an important consideration, particularly pronounced are the various types of needs at the customer–supplier interfaces in travel bookings and services, hospitality and service sectors, organized retail marketing outlets, health centres, fast-food counters, etc.; even the telephone number of the service center and concerned service personnel is a need. Speed and promptness of service have also become important customer needs; the glaring example is popularity of ‘fast food’ chains that meet the needs of almost instantaneous supply of tasty foods. Therefore while identifying customer needs special emphasis has to given on delivery schedule, frequency of service, response time, etc. Similarly innovative warranties and guarantees have become important needs of the customer. Lastly, in order to restore restore customers’ faith or confidence the imperative is to find out factors related to product dissatisfaction so that they can be addressed expeditiously for damage control; such study is helpful for anticipating factors that may cause dissatisfaction and taking pre-emptive actions. The various points or concerns regarding the identification of customer needs are well summarized in the Kano model, developed by the Japanese engineer and consultant Noria Kai Kano. It clearly brings out the following points: (a) There is no upper limit for customer expectations, and there is no cut-off point where it is no longer worthwhile to expend effort for further improvement, as the customer will never say enough is enough. (b) The basic performance related requirements are generally and explicitly documented. Even if these basic requirements are met successfully, the customers do not give any credit: they are taken for granted as the minimum benchmark of doing business. But any shortcoming or defect in them, however small it may be, causes dissatisfaction in customers such that some even desert the brand forever. (c) The implied requirements are not clearly spelled out by the customer; they are treated as a standard or accepted norm. Examples are issues related to environment, safety, courtesy, promptness, quality of service, even apparently mundane characteristics like behaviour towards customers, quality of carry bags, quality of food, running hot water in a hotel room, etc. Customers rarely specifically mention the standard of such requirements but these implied needs, if not properly met, can cause intense customer dissatisfaction. (d) Ironically the expectations of the customer are fuelled by the company promotion campaigns promising the unexpected beyond the customer’s original specifications. Such unexpected gains beyond specification may delight the customer to begin with, but if the customer starts expecting this ‘special treatment’ as a routine it becomes an implied need and any subsequent withdrawal of the ‘special treatment’ will cause major customer dissatisfaction thereafter. (e) Similarly, the innovative features of the product or service excite the customers, they love it, and over time such features or improvements become part and parcel of the ‘expectation list’.

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MARKET ORIENTATION 145 (f) Competition induces a race amongst companies to satisfy customers beyond the stated and implied requirements. (g) Customer expectations are not static; dynamic competitive ‘packages’ are preferred (h) Though the basic need may remain stable for long time, however, one cannot blame the customers if their expectations or priorities change thanks to competitive allurements, technological advances, modern trends, cost-effectiveness, and other factors. (i) Thus, companies need to vigilant to continuously track true customer needs against factors of customer satisfaction or dissatisfaction and this task cannot be left as routine rituals which are completed somehow.

Classification of Customer Needs Classifying customer needs will help not only with the product/service design, but also in drawing up marketing strategy, positioning, pricing policy, in-process control and the employee training schedule. There are various ways to classify customer needs, but each organization should develop their own procedure to match their specifics. Classification based on the hypothesis of eminent experts like Dr J. M. Juran and Philip Kotler is a useful guidance. They mention five types of needs viz. stated needs, real needs, perceived needs, cultural needs, and unintended usages (secret needs-according to Kotler). Philip Kotler points out that understanding customer needs and wants is not always simple. Some customers cannot articulate their needs, while some are not fully conscious of them. He differentiates between responsive marketing, anticipative marketing and creative marketing. Table 6.1 explains the concept.

Stated needs These are the needs that are stated by the concerned persons in their own language, it could be vegetables, grocery, car, computer, stationery items, or food items, etc. These needs are also expressed with the specifications of the product/service, e.g. purchasing a particular material for industry, office, or any other material that cannot be procured without mentioning the specification.

Real needs Identification of real need helps to better serve the purpose for which a product or service is being bought. The real need behind buying a particular food product Table 6.1: Types of Marketing Sl. No.

Type

Purpose

1. 2. 3.

Responsive Anticipative Creative

Finds a stated need and fills it. Looks ahead at needs the customer may have in the near future. Discovers and produces new products to which customer responds.

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146 MACRO STRATEGY may be the nourishment value, or the pleasant taste, or a diet to reduce cholesterol. Comfortable transportation may mean comfort on the rural roads to a city slicker, while it may mean fat person sitting comfortably in the economy seat of an international airliner. A retreat may refer to the green and clean air of the backwaters or a quiet valley away from the bustle of city life. Thus, understanding the real need is very important to properly design and position the product.

Perceived needs These are things to which the customer has got accustomed through regular usage or habit. Among some examples are preferring a brand of toothpaste for its flavour, preferring a brand of shoes, or buying daily necessities from a fixed shop. These perceived needs or preferences could be due to habit, brand-image, and prevalent trend or due to certain biases, however, such perceived needs cannot be ignored as customers buy products and even choose outlets that meet their perceived needs. Any difference in perception between suppliers and customers could mean trouble, whereas identification of such differences could present great opportunities for expanding the product-range, product positioning or market penetration. Customers are often willing to pay more to satisfy their perceived needs.

Cultural need This is a sensitive need that has assumed high importance in this era of globalisation and outsourcing. Certain input materials, processes or behaviours may impinge on the cultural values or systems of a market or a society. For example the use of particular lard or meat in processes or finished food products hurt the sentiments of Hindu/Muslim society. Similarly Indian exporters have to take care of the sentiments of the European market by avoiding the use of child labour or animal furs. Gastronomic needs vary according to regional habits or culture—which is why the taste of Chinese food has distinct regional biases. Products that do not meet the cultural norms and values of a region often encounter passive or open resistance. The prudent market strategy is to study cultural issues before entering an alien or overseas market, and modify or redesign the product or process design, as is necessary, with acceptable input materials and processes.

Unintended usages There are innumerable instances of actual product use is extended beyond the ‘use’ specified by the company. Some of the innovatively extended or different ‘uses’ may offer opportunities to stay entrenched in the market while some ‘misuse’ can badly affect the image of the company jeopardizing its market presence. Many mothers conveniently use the well printed tin containers of chocolates or sweetmeats to pack snacks or lunches for their children or husbands. The beautiful glass-jars of jam or jelly when empty are used for keeping cooking ingredients. The list is endless. Some secondary uses like bricks manufactured out of coal-ash are industrially, socially and economically useful. On the other hand there are many misuses, simple examples being the misuse of plastic bottles or bags. Unintended

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MARKET ORIENTATION 147 uses could have many reasons—some genuine reasons of ignorance, a few innovative adaptation for convenience or even some malicious intentions. Companies need to trace and study such unintended uses, take effective steps to leverage the opportunities offered by unintended adaptations and urgent steps to stop minuses that they may jeopardize their market and reputation.

Techniques to Determine Customer Needs Some just use judgemental technique based on past data, experience and intuition to determine customer needs. The ideal method would be to use combination of judgemental and analytical tools to align holistically the two conceptual frameworks viz. customer satisfaction model and classification of customers needs with facts and data gathered specially for the purpose and then come up with a plausible list of consumer needs. One of the best methodologies is to take a process approach and follow it religiously with PDCA cycle as expectations of customers are ever changing. Based Juran’s process approach, the recommended methodology to determine customer needs is outlined in Figure 6.2. The process approach encompasses activities like identifying customers, finding out the real purpose or utility of the intended product or services, customer expectations, levels of satisfaction, etc. that involve a whole gamut of things to win and retain the customer. Amidst dynamic changes in the scenario, the needs must be updated regularly; the interval or frequency obviously depends on the type of the product, the nature of technological changes and other market forces. “Needs” can be broadly divided into two categories: ‘deliverables’ and ‘interaction experience’, the essential features of these two categories are:

INPUT List of Customers X

Determining Customer Needs

P

D

A

C

X

PROCESS

X

OUTPUT List of Customer Needs Figure 6.2: Input-Output Diagram to Determine Customer Needs

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148 MACRO STRATEGY a) Deliverables—the attributes that are promised to customers. b) Interaction experience—company behaviours and style that impact customers. This categorization helps identify improvement opportunities and thus focus on the totality of customer needs. Common tangibles and intangibles like reliability, instant delivery, reasonable price, aesthetic qualities, serviceability, responsiveness, accessibility, courtesy, empathy, convenience, etc., now are almost like standardized specifications. Therefore, companies should develop their own framework to capture and understand the unique features and characteristics that would influence enhancing the ‘value perception’ of their customers so as to design, produce and offer better products & services than the immediate competitor. There are companies who are too complacent to adopt this proactive mode and prefer waiting for customer complaints to pour in first, or their competitors to take the lead. A TQM company will, instead, conduct internal and external surveys, regularly undertake market visits and keep in touch with customers/users to closely monitor key events that may influence customer behaviour, and take appropriate actions. Kotler’s views are akin to the customer orientation of TQM philosophy; he advocates a totally integrated marketing approach to focus on determining customer needs for the target market. Customers are not always fully aware of their ‘total package’ of needs; they often impulsively state their requirements partly based on some given outline of specifications; there are many unspoken desires or requirements which the customer is unable to specify or quantify A framework called ‘Voice of the Customer’ (VoC) is often used to listen and comprehend the real needs and desires of the customer as it is not enough to have an idea or even a detailed list of customer requirements. Listening to the VoC implies converting customer requirements into product/ service features by analysing the requirements and priorities, establishing process capacity and measurement/performance standards of customer satisfaction vis-àvis the identified requirements, and finally delivering the product/service with the new features. Some of the methodologies for collecting data and information on customer needs, some of these are given below: (a) Market surveys: feel the pulse of the market, details competitive scenario, feedback of customers/consumers’ reaction, and provide general trends. (b) The customer research: provides micro-information on changing habits, changing preferences on tangible and intangible needs, and also provides valuable information on future needs/trends. (c) Information through front line employees: often gives right lead to customer dissatisfaction, changing needs, and news on competitive products/services. (d) Communication with customer through various communication channels like direct mails, interviews with question, advertisement, media etc: customer satisfaction, dissatisfaction, and changing needs & trends. (e) Information through distribution, wholesale, or retail chains: provide valuable data on customer satisfaction, dissatisfaction, changing needs & trends, and information on competitive products/services.

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MARKET ORIENTATION 149 Care should be taken to ensure that no customer need is overlooked amongst the large volume of data collected for planning. Therefore organizations need to institutionalize some of these methods to suit their unique conditions. Here various approaches to organizing such a large mass of information are available, such as graphs, pyramid of needs, tree diagrams, spreadsheets, QFD and so on. Spreadsheets are handy tools that ensure that all customer needs gets properly incorporated into the design, planning and decision-making processes. Spreadsheets also prove effective in determining the needs of internal customers. Quality function development (QFD) and tree diagrams are commonly used tools used to balance the tradeoffs and relationships between multiple requirements. This balancing proves particularly helpful in designing products and services. Professionals interested in technical details of these tools may refer to books on quality management, TQM or good reference books on the particular subject.

Translating Customer Needs Proficiency in translation of customers need is a critical step for the success of the ‘customer orientation’ strategy. Accurate translation of tangible and intangible requirements whether stated or unstated by the customer is necessary to process, measures and deliver what the customer had desired. The challenges of designers and process planners are more complex as often the inputs received from customers about the new product/services or desired innovations are abstract and sketchy and the design has to be cost-effective. The needs of customer are usually stated or recorded in customer’s own language. It is necessary to translate the customer ‘input’’ (needs) into an operational definition so that it is understood universally within the organization including the internal suppliers/customers throughout the processing stages till the final delivery to the customer. However, the harsh operational reality is that the planner may not always find it feasible or feel it necessary to consult all internal customers. Another common but peculiar problem across the organization is about ensuring uniform interpretation/translation with regard to some ‘managerial products’ like policies, objectives, plans, organization structure, orders/ commands, advice, reviews, incentives, audits, relationship building, management-union agreement, etc. Interpretation and response to the action to be taken is critical to the intended achievement or success. Therefore, management has to tackle these practical problems objectively to ensure that the key internal customers are consulted and that there is no distortion due to translation. Vague terminology leads to multiple interpretations, which in turn leads to operational confusions. Multiple dialects unique to different functions within the same organization, or between businesses, also create problems in communication. Such issues are usually tackled through compiling a glossary, giving samples, translation through in-house or external agencies, standardized measurements, etc. Standardized operational definitions should take care of translation problems. Whatever the measures, chances of misrepresentation or miscommunication must be narrowed down to the minimum. The glossary is usually a published form of agreement on the precise meanings or definitions of key terms. The narratives,

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150 MACRO STRATEGY particularly for technical or special jobs, are supplemented by sketches, photographs, videotapes, etc. to facilitate better communication. Depending on the complexity and size of projects, multi-departmental teams are formed to assemble and analyse the inputs to come to a full agreement regarding the translation. Written or verbal expressions often fail to convey the true sense behind the listed customer requirements. That is why samples often substitute or supplement the written specification. The concept of samples is not limited to physical goods but is also used extensively by service-oriented organizations to train their employees— by exemplifying good service through intangibles like appropriate mannerisms, courtesy, concern, housekeeping, etc. Samples appeal better to the human senses and help establish near perfect communication, something not possible with mere written specification. Samples such as textile swatches, colour cards for interior decorative paints, etc. are especially very useful and effective when dealing with product details that just cannot be explained in writing. Standardization is a permanent feature of technological society, without standardization there will be chaos and catastrophe. Standardization, particularly where international or national standards are available, often solves or to great extent eases out the problems associated with translation of customers’ needs. Standardization covers vocabulary, products, processes measurement, etc. ISO 9000 Standards for quality management vocabulary has helped organizations in uniform understanding of quality management terms. Standardized nomenclature and short designations of words, phrases, code numbers, acronyms, and so forth make the communication easier with internal customers as well as with supply and deliver chain entities. Many external customers particularly industrial/business customers adopt the nomenclature used by principals and as such mitigate the problem of translation due multiple dialects. Service organizations like Airlines, Hospitals, Insurance, Hospitality, Internet connection providers, mobile telephone, etc. use their industry-specific nomenclature that are commonly understood by its customers. Standardization thus, not only benefits the organization and its employees but also it is mutually beneficial to customers and suppliers. Unstated needs such as timely delivery, safety issues and cost-effectiveness need to be translated into operational terms. The most effective solution is to establish units of measurement after the customers’ needs have been appropriately translated and then clearly specifying the ‘means’ to verify or establish such measurements. The ‘means’ could be instruments or sensors that may include human sensors wherever essential. A unit of measure is commonly understood or standardized method or unit that evaluates the amount or extent of some quality features present in numbers. Such quality features encompass a wide spectrum viz. technological, managerial, operational, quality, and so on. The units of measure therefore should be appropriate to each type of quality need. The advantages of units of measure using sensors or establishing other means of measurement are many viz., broadly applicable, easily understandable to all concerned, less chance of misinterpretation, and provides an agreed basis for decision-making. Translation of customer needs should not belittle the bigger picture of meeting societal obligations, and satisfying the needs of stakeholders through features of

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MARKET ORIENTATION 151 continuity (as opposed to quick obsolescence), enhanced positive contribution to the bottom line, reduction in the ‘lead time’ of new product development, etc. Apart from optimizing the costs for the company, designers should ensure the customers get value for their money. The product has to be truly cost-effective, that is, both the customer and supplier are in a win-win situation; the supplier gains a market foothold and decent profit, while the customer has value for money. According to Dr Juran, ‘the national economy would benefit enormously if the ‘life-cycle cost’ concept were made effective. Under the concept product design is aimed at minimizing the ‘cost of ownership’, which is the sum of purchase price plus the subsequent costs of operation and maintenance.’ Among other common tools, spreadsheets are widely used in translating customer needs. The product features and their relationship with customer needs are entered into the spreadsheet, and the relationships thus identified help the planners decide on the features/provisions required to meet needs. This works for both new and existing designs. The translated operational definitions are entered in the spreadsheet in appropriate columns. The spreadsheet compresses a large volume of valuable information into a small space making it useful for design and process planning. Besides spreadsheets, statistical tools like the seven QC tools, QFD, QPD, Design of Experiments (DoE), Taguchi’s loss function, Taguchi’s robust design, Taguchi’s DoE, seven new QC tools, etc. can be used to translate customer needs.

SERVICE Under burgeoning competitive pressure businesses are vying to get the attention of customers with all sorts of service-packages, Adding value to the overall offer with innovative and distinctive services is a business imperative; service is no longer an optional item that is to be implemented at the sole discretion of the manufacturer or seller. The distributions of the chief quality-characteristics of materials, finished product and service become so narrow that technical specifications are lost beyond the horizon. According to Dr Deming product put on the market must do more than attract customers and sales; it must stand up in services. Companies cannot today win or retain customers merely with ‘physical product’ or ‘pure service’—the key to competitive success lie in the quality of the ‘composite’ offering of value added services. The service differentiators could be ease of financing and ordering, prompt delivery and installation, low maintenance cost, extended warranty, real customer care through training, maintenance, & repair of products bought, and building long-term relationship through support of product upgrading, etc. The ground reality is fierce competitions have led to a situation where the customers are really being pampered, and the appetite for more & varied service is on the increase. Over the time some service features hitherto clubbed as ‘implied’ needs have become real needs. The customer’s reaction to what he calls good service or poor service is usually immediate whereas reaction to quality of manufactured product may be belated. A production worker may not know immediately the customer

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152 MACRO STRATEGY reaction to the well-done job by him but in contrast a person in service sector can sooner immediately gauge if the customer is satisfied. Perception about quality of service is entirely dependent on the outcome of encounter the customer has with the company including its product, service, and people. Their encounters are both tangible and intangibles. While many of the tangible services like resolving some performance specific complaints, delivery speed of service, accuracy, product training, extending credit etc. and be measured or improved but customer will hardly give another chance if he or she is totally cut off with the unacceptable quality of intangibles like concern, courtesy, behavior, promptness, environment, billing delays, and others. Unfortunately in many service organizations employees treat their assignment merely as a job, they are not aware that they have a product and that product is service, and the good service make happy customers who keep the company in business and provide jobs. ‘Service’ in its own worth and right has become a full-fledged business, it has become so organized and big that it is now acknowledged as service industry or service sector. In developed countries it is the service industry that dominates the economy, improvements in the standard of living are highly dependent on the productivity in the service sector. Service companies are dealing with non-physical products like banking instruments, insurance, credit cards, software, hospital, travel, hospitality, hair-cutting, event management, marriage bureaus, and ever increasing list of such dedicated services. Nowadays these service-products have become a necessity of modern life style. Readers may note such ‘service-products’ also have ‘service support’ of various types and customers do have ‘service experience’ of both tangible and intangibles. Tangibles like time, duration, and promptness could be measured, the intangibles like courtesy, behaviours, environment, and concern care, etc. is ‘perceptions’ based on customer–supplier interface or experience encountered during ‘moments-of-truth’. It is important that the ‘product’ servicing in the service sector also requires service support system, as it is required in the convectional industrial sector. One thing that haunts professionals today is that there is hardly any differentiation between products and services in competitive offerings. One single core principle stands out—it is the experiences in encounters that define the quality of service. All other features/and characteristics remaining more or less same, it is the company’s ability to create a lasting positive perception in the mind of the customer by serving their intangible needs during transactions will ultimately help them win the market. Sustaining high level of quality in meeting the intangible needs reflect the service orientation of a company. While the strategic initiatives and systems tackle the ‘hard’ issues of customer satisfaction, it is the service orientation that manages the ‘softer’ aspects of service such as care, empathy, concern and comfort for the customer. The conceptual framework of Deming’s three aspects of quality in service is shown in Figure 6.3. The characteristics appearing at the top vertex or the left or right hand corners of the triangle by themselves cannot yield successful customer orientation. Cumulative cultural efficacy comprising concern and care, distinctive features of service and the quality of interaction with the customer ultimately decides the

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MARKET ORIENTATION 153 Concern and Care

Distinctive Features

Quality of Interaction with Customer

Figure 6.3: The Three Facets of Service Orientation market winner. Technology, systems and other product-service packaging initiatives are necessary; but all such initiatives go in vain if the cultural aspects towards customer orientation are neglected. The cultural aspects in fact require much more effort, time and patience; and cannot gain a competitive edge unless they reflect the ingrained culture of customer-orientation. Constant pampering by the competing companies, the expectations of the customers have skyrocketed, they now expect more—from cost effective price, financing at low interest…to hassle free up-keep, or extended warranty… and so forth. Under such competitive pressures of high expectations and price sensitivity, the alternative is not only to design and deliver cost-effective innovative products but also render distinctive service through support and value-added services creating a differentiated delivery image. To be competitive the companies have to develop policies and systems to design and deliver such service packages at cost-effective price and at the same time ensuring healthy bottom line. The winning formula ‘turn intangibles into tangibles’ though sounds simple, is a tough ask, especially when there are outsourced delivery and service entities to be factored in. The service package has to be backed up by the ten elementary determinates of field service quality viz. reliability, assurance, responsiveness, timeliness, appropriate environment, transparent and timely communication, tidy presentation, empathy, hassle-free procedures and pleasing and honest human encounters. Customer expectation is formed through word of mouth, advertisement or experience, and customer satisfaction is dependent on the comparison of perceived service with expected service. The company can lose the market if the customers do not consistently experience satisfying and pleasant encounters with it. Many customers form their opinion about the product or the service solely by their contacts with only person in the company that they have interacted—the front line contact men of the company. Therefore the ‘People role in Service’ should not be belittled. Ability to interact with customers pleasantly should be an important selection criterion for hiring and management should ensure proper training of employees for interacting with customers. Apart from technical and commercial training, the critical focus should be on the ‘soft behavioral’ aspects. Courtesy, smile, concern, empathy, tidiness are all people-concerned intangibles and are abstract. Smile cannot be measured, it could be ‘mechanical’ or could be really from the

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154 MACRO STRATEGY core of the heart, but the undisputed point is that ‘SMILE’ is necessary. Therefore education and training is necessary to imbibe and practice such intangibles, the training has to be repeated quite often as old habits die-hard. It is up to the management to help employees to understand that service is one of the most critical commercial activities. Enlightened management empowers service employees even to make financial commitments to resolve customer grievances or redress complaints on the spot, as the company will make the expenditure back from consequent higher revenues and greater profits. Healthy relationship between management and employees will mean healthy customer relations. Hostile or indifferent employees do a lot of irreparable damage to customer relationships. Management should endeavour to develop a culture that would constantly remind the employees that it is the customers that keep a company in business. The organization’s performance review system should be heavily tilted towards feedback from the customer and the field, and particular gravity should be given to cases and levels of customer disappointment and dissatisfaction. Periodic surveys of the company’s public image done through an external agency are a good measure to judge the quality of ‘people-interfaces’ with customers. It is up to the management to help employees to understand that they responsible for one of the most business activity ‘service’. Enlightened management empowers the service employees even to make financial commitments to resolve customer grievance or complaint on spot—the company ultimately achieves higher revenues and greater profits from ever increasing number of satisfied customers. Further, the enlightened management also maintains healthy proactive relationship with its employees since employee relations affect customer relations. Hostile employees or indifferent employees do lot of irreparable damage to the standard of service and customer relationship. Further, management should ensure that internal-customer concept is institutionalized and that the customer interfaces are friendly and devoid of hassles and bureaucracy. The organization’s performance review system should be heavily tilted towards feedback from the customer and the field, and particular gravity should be given to cases and levels of customer disappointment and dissatisfaction. Periodic surveys of the company’s public image done through an external agency are a good measure to judge the quality of ‘people-interfaces’ with customers. While designing the service support program, companies must take into account customer needs with respect to reliability, acceptable failure frequency, downtime, bearable costs of maintenance and repair, degree of service dependence, preferred visiting hours, etc. The company must define carefully both the tangible and intangible requirements of their service support system and include other attributes depending on the unique needs of the business. Global companies should take care to provide local service support; otherwise even reputed international brands might be disadvantaged in capturing the local market. Companies should harness the power of technology and innovation to provide customers with smart and efficient service. This will however entail training the service employees in the use of new technologies.

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MARKET ORIENTATION 155 Surveys on ‘service’ reveal a peculiar aspect of ‘quality service’. That is, customers whose complaints are promptly attended and resolved satisfactorily are often touched emotionally by the gesture and become more company-loyal than customers who had no complaints to start with. Satisfied customers do not get the chance to experience this culture of customer-care from the company. This does not mean that the company should create dissatisfied customers, but that it should deal well with the few it has. Studies reveal that prompt resolution of major customer complaints ensure that 50–52 per cent of customers stick to the company. With minor complaints, prompt and efficient service prompts a percentage of customer retention as high as 95 per cent. Hence, the most important factor is the customers’ perception of service quality. It is the cumulative effect of all encounters right from say the advertisement to receiving and using the product/service and post-sale experiences with support services till the life cycle of that product/service ends. Therefore service satisfaction is the result of dynamic encounters, rather than static or one-time encounters. The customers knowingly or subconsciously evaluate these tangible and intangible aspects of all the key elements. It is the effect of ‘totality’ that generates trustworthiness and retains the customer. A poor product/service cannot be replaced by a good relationship, but a shoddy relationship can mar the prospects of an excellent product. The fundamental lessons are: z z z

z z

z

z z z z

Be tuned to market changes. Listen to the changing voice of customers. Be loyal to customers. Service the customers genuinely—protecting the customer’s interest should be the interest of each employee. Customers bring business. Establish service as an integral part of the overall company strategy. Involve people. Train them to imbibe the concept of customer-orientation and value of service. Encourage creativity and innovation to create cost-effective distinctive service. Improve the ‘processes’ of service; control variation. Turn intangible to tangibles. Set standards and measure performance. Follow the PDCA cycle to design, implement, monitor and improve services.

CUSTOMER RELATIONSHIP MANAGEMENT Since plethora of multiple choices these days have made the customers choosy, some sort of bond with or sentiment about a brand/product helps a buying decision. All things remaining equal, the psychology of bonding, sentiment or attachment decides the preference. Management of this characteristic by winning the preference of the customer is the manifestation of company’s success in nurturing good relationships with the customers. Winning the customer is the initial step, but retaining the customer for long is not easy. As per TQM philosophy customers are part of the extended business process, and profit has to be earned out of sustained respect and attachment of the customer. This is the genesis of Customer Relationship Management

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156 MACRO STRATEGY (CRM). High-pitch marketing advertisements professing concern and care for the customers may not necessarily reflect the ‘real-life’ customer orientation culture of the company. Mere talk about CRM accomplishes little, the relationship has to overcome the acid tests of every interaction/interface (however mundane it may be) the customer has with the supplier. Studies reveal that depending on the categories of industry/business, a 5 to 6 per cent reduction in ‘customer losing rate’ can unbelievably increase profits by 25 per cent to 85 per cent. Acquiring new customers can cost four to five times more than the costs involved in satisfying and retaining existing customers; and it costs as high as sixteen times as much to get the new customer’s satisfaction to a level that will generate the same profitability as the lost customer. Converting a first-time customer to a dedicated one requires institutionalised as well as informal interventions that involve technical and system inputs and a lot of emotional transactions. Satisfaction (‘feel-good’ factor) is a positive feeling, which is caused by something extra beyond just having products/services as specified or ordered. This extra bit could be anything that generates a positive perception. Satisfaction is therefore a function of perceived performance and expectation. Perception can be influenced to a great extent by effective relationships. Satisfaction or delight results when the performance exceeds the expectations; this feeling creates an emotional bond with the particular product. Once this happens, the customer does not recall the product with a rational preference but with a fondness towards the ‘brand’. The underlying point is that a customer decision to stick with the company or not, is the sum of many small encounters. If the customer feels or get the impression that he is no longer ‘valued’, he might take an impulsive decision to exit. Many companies, unfortunately, ignore the fact that customer retention is more important than customer attraction. Customer psychology points out that a satisfied customer may switch because he feels that he does not ‘owe’ anything to the company and he won’t lose by the change, and might even gain. But on the other hand a repeat customer has a positive feeling about the products and services and induces his friends and acquaintances to buy them. This positive psychology of feeling connected needs to be tapped. One of the surest ways to accurately judge the customer’s changing perceptions is through institutionalised (not casual) close contact with the customer. This institutionalised contact or relationship can help companies respond effectively to changing customer needs and track customer value expectations and satisfaction over time.

Objective of Relationships Philip B. Crosby reminds us that ‘success comes from customers, not evaluators’. He emphasizes that such relationship should improve continually as relationships determine success; the relationship is the means through which the bond with customers can be cemented. The customer and supplier have to have a relationship based on mutual need but the onus is on the supplier company to establish quality relationships with all the stakeholders including customers, employees, supply-

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MARKET ORIENTATION 157 chain entities, distributors, retailers, agencies etc and ensure that this relationship blossoms. When either party is in trouble or going through changes, the other party appreciates the situation and takes care to help. The effort to build long-term profitable customer relationship is called ‘relation marketing’, which is entirely different from traditional marketing that focuses only on transactions that address immediate or short-term needs. The relationship matures through initial and then continuous multifaceted partnering requiring optimisation of each one’s resources and expertise. In his book Marketing Management, Philip Kotler says, ‘Relationship marketing has the aim of building long-term mutually satisfying relations with key parties—customers, suppliers distribution in order to earn and retain their long-term preference and business.’ According to Kotler, ‘the ultimate outcome of relationship marketing is the building of a unique company asset called marketing network.’1

Imperatives An astounding proliferation of products and value-added services demand a stronger bias towards customer relationship management. Keeping touch with evolving social changes and personal needs and taste has become one of the greatest challenges. In the current market scenario, seeking to establish brand allegiance is becoming increasingly sophisticated and often frustrating. The imperative is to show company’s loyalty to the customer by being alert to his the changing needs and addressing these needs promptly. This is done through institutionalised customer relationship and the normal expectation is that the customer also exhibits his gratification by sticking with the company. Relationship marketing involves close physical, and emotional contact and effective communication with the customer. Because old and dedicated customers account for a substantial amount of a company’s profit, it is important that enduring relationships should be maintained with this category of customers. Despite many allurements, present customers should be induced to stay with the company and not to drift away to the competitor. In the case of a large customer base, the prudent policy would be to work closer with the few large customers who contribute the bulk of the sales volumes. It is best to apply Pareto principles to identify the vital few customers. Applying the same logic the principal supplier has to establish healthy relationships with its sub-suppliers, as the current trend is to procure anything between 50 and 70 per cent or more components (including sub-assembly) from sub-suppliers. Similarly, global companies work with suppliers who can deliver and service products/services to many locations. This requires development of relationships (trust being one of the key elements) through working closely with the company’s team.

Strategy A few practical strategic steps for sustaining customer relationship are listed below:

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158 MACRO STRATEGY z

z z

z

z

z

Instead of making a profit on each transaction/sale, the strategy is to earn profit by managing ‘customer life time value’—a phrase coined by Philip Kotler. Customized services build strong customer dependence and bondage. Earning confidence and trust of the customer by quality supplies of large variety of products and service required by the customer. Train and encourage employees to act and behave as required by the market. Apart from customer-focused approach towards the individual process, the employees are encouraged to meet or interact with customer. Such of interaction will give them lead to effective customer relationship. Companies need to explore to provide such opportunities. Communication and developing partnership are two important aspects of relationship building. Close working relationship with vendors is very critical, but peculiarly many management often neglects this area. The practice of this principle is unfortunately limited to few-generally companies buying sub-assemblies (e.g. in automobile industry sub-assembles like steering gear boxes, engines etc. are procured, etc.) will call such parties as vendors or ancillaries but will be hesitant to accord them the status and right of a partner. Outsourcing only as a measure of cost-containment & continuous improvement in performance parameters will yield desired results only if the concerned entities work in real partnership.

The principal supplier, more particularly in industry sector, should realize that it should have high-class customer-supplier relationship not only with its vendors (sub-suppliers) but also with the entities in its distribution chain. As Dr Deming has pointed out that the principal supplier is not only buying various inputs or delivering product/services to its ultimate customers but really buying engineering, quality, system supports and capability and means to customer servicing. Unless these transaction-interfaces perform exceedingly well, it will be almost impossible to satisfy consistently the ultimate customers. The companies who have taken strategic decision to build & nurture partnership-relationship with such entities have been able to develop a superior value-delivery network, and are able to create a win-win situation for all. Today companies have at their disposal very many options of the advance IT, communication technology & service specialized entities (e.g. on-line computer linkage, telemarketing, call-centers, etc.) to make customer interaction with the company seamless and responsive. z

z

Increasing personal and social bonds with initial few customers is a good relationship strategy. According to Philip Kotler, the thoughtful companies turn their customer into clients. Customers are nameless, whereas clients are specific individuals who are the decision makers. Clients need to be served by professional assigned specifically to serve the particular account. Lastly and most importantly the centerpiece of CRM is to install an effective feedback mechanism and act appropriately with speed. The PDCA cycle should be used effectively and the C (check) and A (act) parts of the cycle is the main essence/objective of the feedback mechanism.

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MARKET ORIENTATION 159 Few other check/action points are important: z

z z z z

z

There should be credibility, transparency and social value attacked to promotional campaigns, sponsorship or other innovative programs designed to maintain enduring relationship with customers. Regular customer-satisfaction survey should be an integral part of strategy. Keep a tab on competitive offering. Keep abreast with technological improvements and breakthroughs. Put the most resources into building relationship with its most profitable customers. Regularly benchmark changing habits, satisfaction level, preferences, and other key factors of customer’s delight.

Many approaches, techniques, software tools are available to implement CRM, but ritualistic deployment of CRM mechanics will only give fringe and sporadic benefits. The most critical pre-requisite is to imbibe the customer focus philosophy, and to institutionalize the customer oriented work culture across the organization. The marketing and sales people must come out of their traditional thinking of treating the marketing and sales as a functional responsibility, they should rather think themselves as customer-satisfiers and routinely interact with all internal process and functions as to up-hold customer’s interest.

Methodology Sales teams and marketing representatives should be trained for more personal interaction with customers, spending extra time to develop relationships that will benefit both buyer and seller. Some ‘measure’ or evaluation should be developed and put in place to monitor the efficacy of relationship management. ‘Listening’ to the market place must be institutionalised through proper planning of questionnaires and training, and communicated through feedback mechanisms to the key functions responsible for preventive, corrective, and continuous improvement. Focusing on the ‘intangibles’, body language or tone, and the speed and flexibility denoting concern should be the hallmarks of a company’s strategy for customer relationships. The people who interact with customers must be trained on these aspects, particularly those interacting with customers either directly or indirectly via the telephone/mail must be trained on using voice tone that would convey the message “I Care” and concern for speedy action. One should not confuse customer relationship management with relationship marketing. Customer relationship management is a holistic approach of initiating and nurturing relationships with customers, while relationship marketing is only an effective marketing strategy towards that end. CRM is equally important in transactional marketing (or transaction-oriented marketing). Organizations should design their own checklists, feedback forms and methods to identify and evaluate the key elements of customer relationships.

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160 MACRO STRATEGY

Structure Companies need radical structural change to become customer-driven and not merely customer-focused. All policies are to be dictated by ever-changing customer needs and preferences. Marketing gurus have suggested several structures but few companies have had the courage to fully redesign themselves in spirit and in practice, for many still find it odd to empower frontline employees to take operating/financial decisions that would instantly address the grievances of the customers. An organizational structure that would support customer orientation should make possible the following critical aspects: z z z z

z z z z z z z

Measuring the pulse of the marketplace. Keeping tabs on the changing needs of customer. Determining the quality and service level that would delight the customers. Hassle-free system and methodology to record customer difficulties/complaints/other needs. Responding promptly to queries/complaints. Establishing and monitoring relationships with customers. Driving partnership with supply and delivery chain entities. Institutionalising problem solving. Nurturing creativity and innovation. Setting up a feedback mechanism. Taking prompt action on feedback.

CONCLUSION The customer relationship management (CRM) is a series of interwoven organized systems with holistic approach to get to know the customer intimately so that their needs could be identified and serviced in such a manner that a feeling of bondage and permanence about relationship with the customer is achieved. It addresses the needs & interest of target markets and helps the company to deliver satisfactions more effectually and efficiently then competitors with the aim of keeping customer-desertion at the minimum. Seen on a bigger canvas success in CRM helps the company to fulfill in a systematic manner its obligation towards customer and the society at large.

Note 1. Philip Kotler, Marketing Management (New Jersey, USA: Prentice Hall International, Inc, 2000), p. 13.

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7

CHAPTER

Process Orientation THE CONCEPTS BEHIND PROCESS ORIENTATION QM is not merely a philosophy but a process that requires delicate handling and perpetual attention. The Vedic verse (Indian philosophy) ‘focus on Karma (work) and not on results’ signifies that ‘means’ (process) is more important than result and is synonymous with the cardinal tenets of TQM philosophy—quality first, not profit first and if the process is alright, optimum results and profits are bound to follow. In the traditional form of management the focus is always on the results. Management hardly pays attention to the ‘means’, that is, the way the job is done, so long as the result is achieved. This result-oriented approach invariably results in process variations, wastages, and compromises with quality, poor customer focus, and neglect towards measures to achieve long-term goals. On the other hand the TOM process orientation approach focuses on the ‘Process’ with meticulous adherence to processing norms, and then continuously endeavouring to improve the process to ensure long-term prosperity of the organization. It’s not merely a system change but really a philosophical reorientation of thinking, attitude, way of working and accepting the onus of continuous improvement. The Japanese were lucky to learn about process management directly from Dr Deming in 1950s, and this learning was supplmented by further insight in the process planning and control taught by Dr J. M. Juran during his visit in 1954. The Japanese heeded to the advice of Dr Deming and Dr Juran, and it was the process orientation that helped transformation of the Japanese industry and had played in key role in Japanese renaissance. This example of Japan is given here deliberately to impress upon the readers about the tremendous impact process orientation can have on any nation, community, industry or organization. Such long-term outlook usually requires attitudinal and behavioral change. Modern process control applies statistical quality control (SQC) that was first conceived in the 1930s by W. A. Shewhart of Bell Laboratories, USA, and was later popularized through the use of control charts by W. E. Deming during the 1950s. Deming and Juran played a key role in the Japanese renaissance.

T

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Definition of ‘Process’ In a very simplistic way, one can say that ‘whatever we do is a process’. The creation of every product or service happens through various steps, systems or activities which together constitute a ‘process’; quality, cost, delivery schedule, customer satisfaction and organizational profit are all dependent on the efficacy of this process. Putting it in simple management language, a process is the blending and/or transformation of inputs such as materials, equipment, people, etc. into desired outcomes. Some of these inputs help in the transformation, while some get transformed themselves. The processes are the means that enable a system of production to produce the product or service features required to meet the customer needs. Competitive pressures drive these processes to produce the features that will delight and help retain the customer. Deming introduced a holistic view of overall business process where customers and supply and delivery chain entities are all integral parts of the process; customer satisfaction depends on the efficacy of all the interlinked processes. Ishikawa points out that an ‘effect’ or ‘quality characteristic’ is the culmination or result of several cause factors. These cause factors collectively is called ‘process’. Ishikawa emphatically states that ‘process’ does not refer merely to the manufacturing processes, but also work relating to design, purchasing, sales, personnel, and administration. He adds that even politics, government, and education are processes. From this, readers can visualize how the quality of these ‘processes’ determine a nation’s quality of life. This definition of process is extendable to service sectors e.g. hotels, departmental stores, banks, construction, industries, the health sector, etc. In short, all activities related to business which may include physical facilities or human component, can be categorized as ‘process’—-all these processes together justify the unique requirement of the particular business/ organization. Dr J. M. Juran’s definition of process is also quite straight forward and simple. The basic generic definition given by Dr Juran is that a process is a ‘systematic series of actions directed to the achievement of goal.’ The generic definition covers a wide spectrum of ‘processes’ in vogue in business and organizations. They include: (a) The overall process of managing business that generally are the responsibilities of board, entrepreneur or the CEO. (b) Functional processes like finance, HRD, customer service, information management, etc. They are generally supportive processes, or support functions. (c) Multifunctional processes like booking customer orders, billing, appraisal systems, surveys, interviews, etc. (d) Operational processes like identifying customer needs, developing product design, process planning, developing process features, establishing process control, recruitment etc. (e) Then there is process related to HRD, supplier selection, distribution management, servicing, etc.

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PROCESS ORIENTATION 163 (f) In short, all activities related to business; it may include physical facilities or human component, can all be categorized as ‘process’—all these processes together justify the unique requirement of the particular business/organization. According to Juran, the ‘process’ should meet the following criteria: (a) Should be goal oriented—their goal should be established: standards if available should be specified. (b) Systematic—interconnected, interdependent activities denote coherent concepts and follow a designated sequencing. (c) Capable—process should be able to meet the goals under operating condition. (d) Legitimate—the process has been standardized and authorized by the empowered persons. According to Philip B. Crosby, another noted American Quality philosopher, ‘each company is a process from one end to other. All work is a process. Everything is linked together in a series circuit. Whenever anything goes wrong in any area, the shock waves are felt throughout the organization.’ Process includes activities to achieve objectives or organization goals and encompass non-manufacturing as well as manufacturing activities, and do involve human resources as well as physical facilities like materials, equipments, environment, and people. Some processes are people dominant where the people contribute most on the variability of the outcomes. Further, one processing system’s input might come from one or several processing systems’ outcomes. These outcomes might be invoices, design change, trained employees, finished subassemblies, or any number of other possibilities. Process output includes both tangibles and intangibles. It covers lot of territories like product/service quality, cost, delivery time, time frequencies of service, schedule, productivity employee morale, competitiveness, customer satisfaction, etc. The customer does not have to be a person. It could be the next machine, it could be another institution receiving a report, it could be the environment receiving effluent or it could take to the form of any of other resources or entity. The foregoing discussions have also implicitly brought out the fact that four groups of people are engaged/involved in any process: 1.

2. 3. 4.

Customers: The persons or the people of an organization entity for whom the product or service is being produced. They will either use or consume the output directly or take it as input into their work process. Such persons of the same organization who take it as their process input are called internal customers. Work Group: The person or the people who work in the process for value addition or service support and transform the input to output. Supplier: The people (or person) who provide input to the work process. The people in the work-process(es) can be classified as customers of the suppliers. Owner: The person responsible or accountable for the operation of the process and for its improvement.

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Explaining Process Orientation Dr. Deming was the first person who during conference of Japanese top management in August 1950 displayed a flow chart that considered the customer as an integral part of the whole production system. He explained that all activities in a system that transforms the inputs into outputs were ultimately meant to satisfy the customers, and therefore urged the management to concentrate to ensure that these activities are performed as per the planned sequences and norm instead of focusing on end result. This in a broad perspective is process orientation. Process orientation is a strategy to deploy TQM philosophy, which clearly stipulates that ‘results or effects’ are consequences of cumulative quality of means or work processes employed. This hypothesis is akin to the Indian Vedic axiom ‘Fruits are the result of work processes.’ The present state of ‘affairs’ or ‘effects’ is the cumulative result of ‘causes’ or ‘process’. Therefore improving the current state of affairs implies change or improvement of the processes that have caused the present ‘effect’. This is also the approach of Dr Kaoru Ishikawa, the eminent Japanese philosopher who is candid that the processes are collection of cause factors that must be controlled & improved to obtain better products and effects; problems must be anticipated and prevented before they actually cause the damage. Process orientation helps to establish two important aspects of TQM, the first point being that people know what to do i.e. establishing the constancy of purpose and the second point being that it helps to maintain the consistency of purpose as by controlling the range or dispersion the efforts are not dispersed. All actions or outcomes are considered to be directly or indirectly related to customer satisfaction and for meeting the changing needs of customers continuous efforts are made to improve the way employees do their jobs. Process-oriented management is also people-oriented that encourages active participation of employees to cultivate a productive work culture and mindset to serve the customer. The Japanese concept of kaizen is also based on process-oriented thinking.

Relationship between Business Processes and Quality Process-oriented approach is really a vanguard control that focuses on the objectives and predetermined performance goal instead of traditional rear guard control where people engage their energies for damage control after the poor performance is detected. The ‘rear guard control’ way of dealing with problem is basically fire fighting where instead of finding the root cause of the problem, the attempt is to somehow hide the problem or manipulate the process to show rectification or correction. Such compromises and short cuts giving rise to many ill effects. Processoriented approach ensures total quality in all business processes so as to satisfy always the customers and all other stakeholders. Since all business processes impact customer satisfaction, customer retention, and market expansion, one cannot delink the effect of even a small quality factor from the input or output of any business process. Today the list of quality deliverables is not limited to product or after sales service quality, rather it is an ever increasing list of expectations that include packaging, timely delivery, cost-effectiveness, technical & service support, easy

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PROCESS ORIENTATION 165 financial sales packages and dealings in all exchanges with the company. For example, the quality of interaction of the sales person at the counter can make or mar the sales transaction. It is quality all through and this cannot be achieved unless there is process-oriented approach.

Few Critical Elements to Institutionalize Process Orientation Few critical aspects that need to be addressed in order to institutionalize Process Orientation.

Ensure involvement of people People ‘input’ and people ‘contribution’ are critical parts of process orientation. If ‘people’ themselves are not customer oriented as well as process oriented, then there cannot be any process orientation. There ought to be policies, systems and structures that would recognize the role of employees, enhance their talent, and ensure their voluntary involvement.

Concentrate squarely on process: do not blame ‘people’ Traditional management practice calls for making people accountable for results. The award and reprimand systems are principally designed to assess ‘people’ contribution or effort in success or failure to attain the results. But according to TQM philosophy the people are only the ‘medium’ or ‘interfaces, failure to attain desired result is mainly due to ‘process’ failure or lacunae. Blaming people instead of rectifying the root cause or irrationality in the process behaviour will not yield lasting solutions. Award systems based on ‘end results’ breed compromises—people take to dubious means and often hide problems to project an immediate but superfluous success. Such compromises are like a cancer that surface only when it is too late. Concentrating on process makes things transparent. It may slow down a bit in the beginning but ultimately a reliable process would give consistently good results.

Quality first, not profit This age-old dictum of ‘quality first, not profit’ is unfortunately often forgotten due to lust of short-term gains. Management should never lose focus on the fundamentals that customer satisfaction is the objective, profit is the result and process is the means through which the objectives are met. Management focus on profit at the expense of process orientation will have disastrous impact on the quality.

Abhor short-term gains, embrace long-term profitability Zero in on short-term gains will invariably lead to compromises on “means” which will have adverse impact upon the long-term profitability and prospertity. All ancient philosophies of the world has talked about adopting the right ‘means’,

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166 MACRO STRATEGY the Vedic philosophy (Indian philosophy) is quite candid in preaching that ‘means’ is much more important than results. In TQM process-orientation is a ‘means’ through which the long-term prosperity of the organization is ensured.

The next process is customer The phrase ‘the next process is your customer’ was invented by Ishikawa to emphasize that the user at the end of each processing stage should be considered an internal customer. Quality assurance in the finished product is ultimately dependent on the satisfaction of all the internal customers. The obligation of treating the next process as a customer offers a challenge to employees never to send defective parts/items to those downstream in the processes. Unfortunately, for most of the organization the adage ‘the next process is your customer’ is mere jargon. Therefore, the implementation of the concept of internal customer must have management backing so that process-orientation becomes part of ingrained TQM culture.

Control upstream processes Quite often, the root cause of problem lies somewhere in the upstream processes. Generally the yield or productivity losses or seeds of poor quality are sown at the initial processing stages. The rot starts from there. Therefore, control of upstream processes is a fundamental requirement of process orientation. In order to achieve the agreed target the traditional management approach is lopsided concentration of managerial time and effort towards the finishing operations or stages. Top management pays scant attention to the quality assurance of input materials and has hardly any time to review the productivity or quality control/quality assurance issues at initial processing stages.

Team up with business partners Materials and most of the components, and services are supplied by the supply or delivery chain entities. Such entities should be accorded the status of business partners since in reality business processes are being procured from them. Teaming up will facilitate improvement of relevant processes, both at principals’ end and supply or delivery chain entities’ end, which have critical bearing on products, services, cost-effectiveness, and competitiveness. Supply chain can be considered as part of the upstream process, while in relative term, the delivery chain is part of downstream process.

Institutionalize variation control In process orientation, the variations need to be understood and controlled; the processes have to be brought to a state of statistical control before any improvement can be undertaken. Management should institute proper statistical techniques to control variation. After initial process control has been achieved, companies should initiate continuous process improvement (CPI) and breakthrough improvement to

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PROCESS ORIENTATION 167 outguess customers as well as keep ahead of competitors. However, management should beware of the tendency to ‘over control’ at every process step. Over control not only causes cost ramifications, but also has many negative aspects.

Ascertain ‘process capability’ Most ‘performance gaps’ are created by this initial mistake of setting of goals without considering process capability, hitting the planned goal consistently is dependent on good luck. Not only the inherent deficiencies in process capability won’t yield desired results, it will stand in the way of those results or goals that require higher levels of process capability. Unfortunately this simple truth is often neglected. Ideally, either goal should be set based on current process capabilities or processes need to be designed or redesigned to achieve consistently the planned goals. Also without knowing the process capability it is difficult to finding the root cause of a problem associated with process. The quantification of process capability serves several important objectives. It helps meet process parameters of tolerance, judge the merits of alternative processes, and communicate process needs to the input providers or suppliers. Studies on process capability should be used in process design or redesign. Process planners and designers also need to provide measurement and adjustment capability.

Prevent and not merely detect defects Detection of defects as practised in the traditional management system cannot ensure quality nor make the product competitive. Even the use of sophisticated technology cannot guarantee that defective products will not sneak into the market. The strategy of preventing defects at source is the only solution.

Identify and remove non-value-adding process steps or processes Many process steps do not add value or become superfluous over the years. In traditional management practice no one bothers about reducing non-value-adding processes, rather the tendency has been to increase bureaucratic steps of so-called ‘control’. These non-value-adding steps or processes need to be identified and eliminated.

Encourage breakthrough improvements Breakthrough improvements, even once in a while, give competitive advantages. Processes may have to be redesigned in case of breakthrough innovations or technological changes.

Ensure dynamic continuous process improvement Each process step to create new products and services has room for improvement. Expensive technology is not in itself the answer to quality and productivity deficiencies. Through continuous process improvement (CPI), it is possible to reduce

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168 MACRO STRATEGY the variability of products and services, thus obtaining higher quality at the lowest cost. Elimination of process waste and re-work and reduction of wastage in manpower, machine-time, waiting times, and improvement on material yields are physical manifestations of CPI. An effective CPI creates additional capacity through release of machine-hours and man-hours; most importantly CPI makes people happy since they are able to utilize their inherent talent to ensure better competitive position for the company.

Cost-effectiveness One cannot be competitive if one manages the processes only on gut feeling or experiences. There are many invisible figures that affect the process but are generally ignored by the professionals. Dr. Deming has stressed that to remain competitive one must balance the visible and invisible figures. Deming has said, ‘He who runs his company on visible figures alone will in time have neither company nor the visible figures.‘ An effective process orientation will pay due attention to invisible figures and hidden losses; it will turn these into opportunities for positive contribution. Such droplets of savings from invisible figures can ultimately make a substantial contribution to the bottom line.

Process Changes have to be Authorised by Top Management Eighty-five per cent of the problems in industry, including process-related problems, relate to management domain. Therefore process changes have to be approved by person/s authorized by top management. Dr Ishikawa, like Dr Deming and other eminent philosophers, has stressed that quality must be built into each process, and such process-oriented approach would no longer rely exclusively on the existing inspection and QC division to ensure quality assurance. In other words, all functions departments and employees from top to bottom levels will discharge their QC obligations. The sub-contractors, dealers and distributors will also discharge their quality obligations through standardized process(es) that would be subjected to continuous improvement.

Synopsis of the Approaches Advocated by Eminent Theorists Eminent philosophers including Ishikawa and Deming have stressed that quality must be built into each process so that there is no need to rely exclusively on the existing inspection and QC division for quality assurance. Similarly all functional and operrating departments including employees from top to bottom levels will discharge their QC obligations as would sub-contractors, dealers and distributors. Based on the cardinal 14 points, synopsis of Deming’s recommendation on process orientation is highlighted in Table 7.1. Ishikawa recommends the use of the PDCA cycle for all phases of process orientation, and has emphasized that too much fixity in standards and methods is contradictory to the principles of continuous improvement. If the standards and

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PROCESS ORIENTATION 169 Table 7.1: The Highlights of Deming’s Recommendation Philosophical and conceptual

„ Be bold in adopting new philosophies of transformation. „ Ensure long-range needs are met. „ Focus on competitiveness. „ Design process for built-in quality. „ Improve constantly and forever the system of production and service to improve quality. „ Ensure consistency and constancy of purpose. „ Demonstrate management's commitment towards published aim and purpose constantly.

Operational

„ Clarify operating definitions. „ Refuse to accept commonly accepted levels of delays, mistakes, defective materials

and defective workmanship. „ Take immediate action on reports of defects, maintenance requirements, poor tools, etc. „ Incorporate statistical evidence of built-in quality in manufacturing and purchasing

functions. „ Use statistical methods for continuing improvement of quality and productivity. „ End the practice of awarding business on the basis of price tag alone. „ Reduce the number of suppliers by eliminating those that do not qualify with statis-

tical evidence of quality. „ Replace supervision with leadership. „ Create a climate for innovation, break down barriers between departments. „ Institutionalize teamwork including cross functional teams. „ Improve communication and create trust. „ Use modern methods of training.

Learn

„ Learn the capabilities of the process and how to improve them. „ Learn and institute methods for improvement.

regulations (including the newly established) are not revised in six months, it indicates that no one is seriously using them. Revision of standards after regular process analysis means advancement of technology and knowledge accumulation within the industry. Good control means that the methods and standards are reviewed constantly to reflect changing needs, thus taking into account the voice of the customer. Good process orientation ensures that this principle is also true for internal customers. Ishikawa has emphasized the use of statistical techniques but has cautioned against manipulation of data, the reliability of the data collected must be ensured. J. M. Juran has pointed out that in the traditional management system failure rates are largely determined during planning stage itself, the management and planners take the easy way by providing for ‘unavoidable’ wastage, rework delays, downtimes, excess consumption of materials and utilities, absenteeism, etc. Monopolistic or non-competitive sellers’ markets allowed such leeway but one cannot have such luxuries in this competitive world. Some managers even today justify such planning as inevitable and part of contingency planning , and some who do realize the negative impact of such in-built process follies do not know how to tackle and get rid of the system practised over the years.

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170 MACRO STRATEGY Juran has further pointed out that instead of leveraging the advantage of the IT revolution, many companies have blindly converted their existing manual systems directly into ‘ERP’ or ‘SAP’ systems. Management who lament on with inadequate returns on the incurred huge expense incurred for the package often blame the technology or the implementing agency but do not realise their own fundamental fault of not having reengineered their existing processes. The manual mess became an automated mess. Technology per se’ won’t give the edge, it is the process upgradation with technology that matters. The Juran Trilogy, formulated by Dr Juran, stresses upon the inter-relationship among the three managerial processes: planning, control and improvement. Process planning focuses on meeting customer-oriented goals, process control is directed at eliminating the root causes of chronic problems, and process improvement is aimed towards reduction in variation and continuous improvement. The Juran Trilogy is applicable to numerous business processes including internal ones like recruitment, sales forecasting, producing invoices, making management information reports and production review reports, customer servicing, supplier evaluation, etc. Philip B. Crosby’s approach is quite simple and straight forward—he asserts that the ‘four absolutes’ of quality management come together as the four basic concepts of the quality improvement process. The synopsis of his recommendation against each of his ‘absolutes’ are given in Table 7.2. Crosby lays a lot of stress on planning, as, ‘good things only happen when planned, bad things happen on their own’. According to him each and every activity or task must be listed and assigned some sort of action time. However, Crosby, like Juran and others, is critical of the traditional management practice of planning for reworks, defects, poor yield, etc. According to him, prevention is something that can be implemented if one understands the process, and then looks at the Table 7.2: Synopsis of Crosby’s Approach on Process Orientation Synopsis of Crosby’s recommendation on action points against each of the four ‘absolutes’ Sl.No Absolutes Synopsis of Action Points „ In order to satisfy the needs of the customer, process output must 1 The definition of quality is conform to the requirements of the customer. conformance „ The company must keep track of changing requirements. to requirements „ The best brains and most useful knowledge should be invested in establishing the requirements in the first place. 2 The system of „ One of the key principles of process management is ‘prevention’ quality is of defects. prevention „ Prevention ensures consistent delivery of quality output. 3 The performance „ Variation control as near to the absolute requirement is the measure of standard is zero process efficacy and the objective of quality improvement. defects 4 The measurement „ The objective and efficacy of process-management is to enhance of quality is the customer satisfaction and reduce losses to society. price of non„ Contribution to the bottom-line will be automatic. conformance

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PROCESS ORIENTATION 171 process to identify opportunities for error. He warns of the pitfalls of compromise to meet short-term results. If management themselves encourage procedural ‘band-aids’ then the employees lose confidence in management and as well in the processes. Further, the success of the quality improvement process does not depend on any ‘evangelical’ powers possessed by quality experts. It depends on education and implementation in a serious and methodical way. A process should be capable of delivering consistently the output goals under operating conditions. A process developed for ‘laboratory conditions’ may not necessarily be effective under operating conditions which are never ideal. Operation conditions are composed of variances on environment, materials, machines, infrastructural facilities, human attributes, etc., and such the imperative is to plan a process having process capability to tackle those known variables of operating conditions. Variability affects all processes (including human and non-human), it is universal—in manufacturing processes the variables could be temperature, speed, feed, acidity, hardness etc. and in sales process the variables could be price, delivery, creditors, ambience, location, etc. The extent of variability is a critical input to process planning and the onus of finding up the operating conditions is on the shoulders of planners who have to plan a process that would have the process capability to tackle those known variables of operating conditions. Feigenbaum, Crosby, Juran, and others have stressed that to gauge the efficacy of process improvement initiatives it is essential to institutionalize measurement of cost of quality. Deming and Taguchi have gone a step deeper, they have suggested efficacy of process quality improvement measured through reduction of loss to society.

ISO 9000 and Process Orientation The International Organization for Standardization in its quality management systems (ISO 9000:2000, ISO 9001:2000, ISO 9004:2000), has identified ‘process approach’ as one among its eight quality management principles. It states that a desired result is achieved more efficiently when related resources and activities are managed as processes. ISO 9001:2000 and ISO 9004:2000 standards mention (clause 0.2) that ‘an advantage of the process approach is ongoing control that it provides over the linkage between the individual process within the system of processes, as well as over their combination and interaction’. Clauses 4 to 8 of ISO 9001:2000 are really process linkages meant to ensure ‘process efficacy’ to satisfy and retain customers. Process orientation, as it emerges from the ISO 9000 family of standards, can be summarized as follows: z

z z

z z

Defining, designing and deploying processes that lead to improved organizational performance. Acquiring and using process data and information on a continuing basis. Ensuring systematic working and respecting documentation without creating bureaucracy. Nurturing a culture of continual improvement. Measuring and evaluating process improvement.

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172 MACRO STRATEGY Readers may refer to clause 5.1.2. of ISO 9004:2000, which gives a comprehensive list of issues to be considered. Here management has been advised to consider identifying process owners, and giving them full responsibility and authority. This advice implies that organizational authority is really decentralized at each process level. The process owners are empowered to cut departmental/functional barriers to achieve process objectives and ensure that the needs and expectations of interested parties are met. It is unfortunate that most of the ISO 9000 QMScertified organizations do not take this recommendation seriously. Institutionalizing the concept of ‘process owner’ would have given the management some scope to redesign the organizational ‘box structure’ and make operational decision-making decentralised. The offshoots of bureaucracy and power-centres in reality hamper teamwork and CPI. With more and more stress on ‘outsourcing’, the concept of ‘process owners’ become more useful and effective. The process owner would be responsible from the beginning of the process through all process improvements till the end point, which could be at the customer’s premises.

Some Elementary Cultural Aspects of Process Orientation Process orientation also means constant measurement/evaluation of all facets of productivity, i.e., quantity, quality, cost, schedule, delivery and morale of the people. It will be worthwhile for the readers to go through some of the cultural aspects or disciplines of process orientation. They look simple, but are hard to imbibe and practice: (a) Don’t lose your temper when your subordinates make mistakes. Rather create an encouraging environment where subordinates feel free to report and discuss their mistakes. By getting angry, you make truth disappear as subordinates try to save their skins by providing you with false data and reports. The customer and ultimately the company suffers. (b) Involve all concerned in discussing the problem to prevent its recurrence. (c) Check the effect after an action. It is equally important to recheck the effect to see if preventive action has been successful. (d) Try to reach the source of problems. Even if you think you have taken the right action, you may still be mistaken. (e) Checks must be carried out both for a short-range effect and for a long-range result. (f) ‘Process control’ means stability, progress and advancement but not maintenance of status quo. (g) The excuse, ‘I don’t know’ is an indication of lack of control of one’s thoughts and actions. If control is properly carried out, ‘I don’t know’ will disappear. (h) With proper process control, the role and importance of inspection becomes insignificant. (i) Remove the basic cause, not the symptoms. (j) A temporary measure will not stop recurrence. It is true that a mistake can be fixed for the time being, but that is not a cure.

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PROCESS ORIENTATION 173 PROSPER

GROW

COMPETE

SURVIVE Figure 7.1: Steps to Prosperity (k) People who are satisfied with patchwork are the people who do not want to be bothered with the more cumbersome task of finding the true cause factors. (l) Create a climate that does not breed factors of hindrance such as despair, jealousy, envy, sectionalism and ignorance about other divisions or other industries, etc.

CONTINUOUS PROCESS IMPROVEMENT (CPI) The objective of continuous process improvement (CPI) is to ensure continuous improvement not only in all business processes but also in parameters that propel growth. In this era of uncertainty, no organization or individual can take things for granted. For a company to blossom or prosper, it has to cross three vital phases depicted in Figure 7.1. Organizations have to remain alert for all the three phases—survival, competition, and growth—preceding the next stage, prosperity. There is no respite from the ordeal of unpredictability and rapid changes. The purpose of deploying this element of TQM philosophy is to circumvent the vagaries of a changing market and ascend the ‘change-ladder’ to prosperity. This protects jobs, generates further employment opportunities, and creates further wealth for society. To sustain this state of prosperity all the business and operating processes should be constantly updated and improved to meet competitive as well as environmental challenges. This is the logic behind calling this ‘continuous process improvement’ (CPI). In today’s uncertain climate, ‘status-quo’ management is a sign of stagnation that will ultimately lead to decay and demise. There have been some controversies regarding the CPI approach. Some, particularly those leaning towards the Japanese way of management, favor Kaizen strategy, i.e. maintaining and improving the working standard through small, gradual improvements. That is the overall improvement, over a long time, is built up on small step

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174 MACRO STRATEGY improvements done ceaselessly. Other theorists who vouch for Western management prefer a philosophy of dramatic improvement through innovation. The real proponents of TQM are of the strong opinion that it is a waste of time to debate over the issue of Kaizen versus innovation; the only way to deal with the challenges of the new millennium is to utilize in tandem both the approaches i.e., Kaizen and innovation are to be considered as twin components of improvement. However, the interface between innovation and Kaizen should be understood. Innovation efforts make an immediate impact on the performance level and as such it is prudent to concentrate on breakthrough innovations by leveraging new technology in areas of strategic importance like R&D, operations, marketing, etc. sustenance. However as per the natural phenomenon the improved performance level achieved by innovation is destined to deteriorate unless it is propped up, and Kaizen does this maintenance. The Kaizen not only steadies the gains of innovation but also make constant efforts to upgrade the innovated standards and the improvement is an ongoing effort having cumulative effects over a long time. Innovations or breakthrough improvements are one-shot deals or at best intermittent gains, and therefore to sustain the gain and improve upon it must be propped up by Kaizen efforts. The standard operating practice (SOP) in the workplace has to be subjected to constant scrutiny for improvement. But before such improvements are implemented, it is absolutely essential to ensure that the existing SOP is being followed rigidly as the running standard. Professionals should further note that CPI has to be carried out on the principles of the PDCA cycle. The PDCA cycle can be applied to almost all functions and concerns or wide variety of subjects like mission, objectives, project work, training, marketing, service, problem solving, relationship improvement, housekeeping, etc. The cycle must be rolled over a steep gradient, i.e., stretch targets to be aimed. The concept of application of PDCA Cycle to continuous improvement, step improvements plus breakthrough is graphically depicted in Table 7.3 and Figure 7.2. Parkinson’s law states that an organization, once it has built its edifice, begins its decline. Even maintaining the status quo will require a propping-up effort, which is nothing but a struggle for continuous improvement against deteriorating condition. Not only operating processes but management and business processes at higher and staff level functions are also prone to inevitable decay over the time which unless tackled can have serious ramifications. Enlightened management is aware of such pitfall and takes conscious decision to institutionalize PDCA Cycle led continuous improvement at all levels to ensure growth dynamism in the organization. Table 7.3: The Plan, Do, Check, and Act Cycle Activities Plan Do Check Act

Set objectives, mission; decide means to achieve objective; develop plans Execute plans Check plan vs. actual quality of implementation; check planned vs. actual result Repeat the cycle if the results are disappointing. If okay, then standardize the cycle and move on to the next project.

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PROCESS ORIENTATION 175

Figure 7.2: Application of the PDCA Cycle in Continuous Improvement

Institutionalization of continuous improvement is not an easy matter. Derailments are quite common under pressures for quick results for which managers opt for fire-fighting mode. However, managers have to overcome such short-sightedness and guide people towards continuous improvement, as that is what will ultimately bring business stability and sizeable returns.

Cultural Requirement to Institutionalise CPI The cultural issues involved to institutionalize CPI require a change in working habits, and constant support from top and senior management. Top management should recognize that they are the principal catalysts for CPI. Some of their working habits including focus on short-term results and attitudes influenced by positional ego are the worst obstructions in the way of institutionalizing continuous improvement. Their involvement and the visibility of their commitment will trigger a chain reaction to impact employees positively. Managers need to reorient their leadership roles, show how to do the right things—motivate people and put in all the systems necessary to keep the initiative going, namely: 1. 2. 3. 4. 5.

Process simplification Identification, and elimination of random or special causes of process variation Striving to achieve variation control of the key process parameters Cost-effectiveness Optimizing various time elements of a process. For example the setting time, changeover time, tool change time, cycle time, lead time, etc.

Institutionalization of a continuous improvement culture is equally dependent on certain ‘soft’ processes like (a) service processes dealing with people, (b) processes of education and training, (c) information processes that use paper or computers, and (d) management processes to share information, get things done,

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176 MACRO STRATEGY and lead people effectively. Institutionalizing the use of simple problem-solving tools is another critical requirement. Though the usefulness of these tools (particularly the seven QC tools) is universally recognized, it is unfortunate that most senior professionals hardly use them on a regular basis, perhaps due to their positional ego. If the managers themselves use the seven QC tools and insist on their use, they will be utilized profitably by the whole organization. Design managers, specialist professionals and other senior managers can also appropriately use other tools like the new seven management tools, DoE, Taguchi methods, QFD, QPD, etc. If so, they will find the task of continuous improvement quite interesting and attainable.

Features of CPI Continuous improvement can be categorized broadly into three types: (a) Continuous small or incremental improvements—this is popularly known as kaizen, as named by the Japanese. (b) Breakthrough improvements by adopting new technology or other innovations, generally capital- and time-intensive. They may involve radical process changes, even discarding of the old process. However, once the new breakthrough process is stabilized it requires continuous improvement; otherwise, it will follow the natural law of gradual deterioration. (c) A combination of (1) and (2). This is perhaps the most judicious approach because it guards against complacency and keeps up with changing technology.

Measures of Continuous Improvement All processes have to have an output—tangible or intangible, and certain common measures through which productivity and improvement can be tracked, reviewed and benchmarked. One of the acid tests to gauge, whether the organization is progressing or not, is the objective assessment of people’s feeling of ownership. If the employees are gaining more ownership in running the business, and are able to really leverage improvement for prosperity of the organization, one can say without hesitation that the organization has a climate for improvement. The gap between management and employees gets narrower. Professionals should recognize that one important factor in sustaining the improvement mode is to ensure continuous improvement in relationships with employees. Process performance is generally measured by process productivity; this formula, though very simple, represents the rational basis for continuous improvement. Output Output Value Created = or Input Minimum Input+Work Value Invested Quality, Cost, Delivery, Safety, Morale = Productivity of QCDSM = Man+Machine+Material+Method+Measuurement

Productivity =

Figure 7.3: Measuring Performance by Productivity

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PROCESS ORIENTATION 177 Managers must realize that even 99 per cent effectiveness is unsatisfactory as that 1 per cent of unsatisfactory products or services will still be reaching the customer. To ensure competitiveness there has to be continuous improvement in the interfaces of 5M’s—man, machine, material, method, measurement—so as to eliminate waste, control cost, reduce cycle and setting times, induce a conducive environment to produce high quality products in right quantity and on schedule. This calls for the application of the PDCA cycle in all the 5 ‘Ms’ process interfaces. When the assignable causes have been eliminated from the process to the extent that the plotted points on the control chart remain within the control limits, the process is in a state of control. No higher degree of uniformity can be attained with the existing process. However, greater uniformity can be attained through a change in the basic process. When a process is in control, only chance causes of variation are important. One should realize that when we are talking about process improvement, we are not limiting ourselves to improvement of quality, reducing cost or increasing productivity. We are also talking in terms of reduction of: z z z z z z z z z z

Inventory (finished goods) Inventory (work-in-progress) Throughput time Cycle time Setting time Raw material consumption Consumption of ancillary material Electricity/water/air requirements Cost of Tooling Downtime

We are also talking in terms of reducing processing steps. Process simplification and also process combination can also contribute to overall improvement. Reduction of direct labor and supervision could be an additional gain but cannot be the principal focus of process improvement. Improvement of productivity will optimize the use of manpower. Automation unless deployed properly is not necessarily improvement. Automation of old ineffective processes will automate the inefficiency in the system, and is more damaging.

TOTAL PRODUCTIVE MAINTENANCE (TPM) Manufacturing managers are under tremendous stress to keep delivery commitments in spite of machine breakdown hours. Several breakdowns at the same time or lingering breakdowns put pressure on maintenance people who are unable to simultaneously attend to all the breakdowns. It is very common to find operating managers or supervisors having heated arguments with their maintenance counterparts about delays; often notes are exchanged between the concerned officials with copies being forwarded to the respective higher ups. This strenuous relation

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178 MACRO STRATEGY and infighting and firefighting are quite common in traditional management. Often, a large percentage of machinery under breakdown cannot be attended on time because of non-availability of crew who may be busy attending some other equipment. Paradoxically, the people who run the machine and whose earnings/ incentives are linked with machine utilization and performance, pointlessly wait for maintenance crews to show up and attend the machine. The structural design of the organization prevents the machine operators from trying to fix breakdown problems, thus the traditional management system willy-nilly builds up barriers between maintenance and production personnel. Due to rigid functional responsibility or job description the operating people do not attend even the minor equipment problems, and they wait for the maintenance crew. In this traditional management system of specialization and centralization of machine/equipment maintenance function has a baneful effect on equipment productivity; the men who run or use the machine day in and day out are kept out of picture even in case of routine and elementary maintenance. The system makes operating people callous and indifferent to elementary parameters of maintenance, viz. the importance of daily lubrication, cleaning of machines and their areas, visual checking of certain parts, etc. They often wait for maintenance or dedicated crew to do such jobs. Strict adherence to schedule and doing preventive maintenance properly does not guarantee reduction of frequency of breakdowns, though it definitely leads to some improvement over the prevailing state of affairs. Efficacy of preventive maintenance is affected primarily by two reasons: (1) manpower resources are rarely geared up to cover running and preventive maintenance adequately. The ‘employee cut-back’ of every cost-reduction program makes this worse. (2) Nonrelease of the machines by the production department in order to meet volume demands. This vicious circle is paradoxically generated by frequent machine breakdowns. Further, it is not financially feasible to have on the rolls as many maintenance specialists as types, variations, and number of machines and equipment in a plant. Even when a progressive management decides to strengthen its skill base for running and preventive maintenance, it can never really match peak load requirements. Thus, a certain amount of mismatch in promptly attending breakdowns is inherent in maintenance system. Many of the ‘special causes’ of quality or operational troubles are related to malfunctioning of equipment. Process reliability, quality and productivity are all dependent to a large extent on equipment productivity. This is true even with automatic machines. Therefore the issue of equipment productivity should receive management’s due attention. Equipment productivity is the net of multiplication result of equipment utilization and machine running efficiency measured against the design parameters [Equipment productivity = machine utilization × machine efficiency]. One can therefore say that equipment performance is also a key contributory factor to customer satisfaction. Sadly, management often ignores this simple and obvious fact. Like any other system, maintenance management also needs continuous improvement. It is therefore necessary to extend the scope of total quality management to

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PROCESS ORIENTATION 179 maintenance also. To indicate the similarity of approach, such maintenance management is called total productive maintenance (TPM). Within the holistic approach to overall maintenance management, TPM is directed towards maximizing equipment effectiveness through the life cycle of the equipment. This would call for total monitoring, control, and improvement of several facets that include: (a) machine downtime (b) maintenance cost (c) preventive maintenance (d) machine rebuilding (e) machine parts inventory (f) labor loss due to downtime (g) information support systems, (h) simplification of system and procedures etc. TPM gives importance to the fact that machine/equipment performance is not dependent only on the design of the machine but also on its interface with (a) the maintenance planning and system and (b) the skill, interest and commitment of the employees connected with running the machine. Basic implementation strategies of TQM are applied to get TPM going. Masaaki Imai in his book Kaizen, says, ‘Total productive maintenance (TPM) aims at maximizing equipment effectiveness throughout the entire life of the equipment. TPM involves everyone in all departments and at all levels; it motivates people for plant maintenance through smallgroup and voluntary activities, and involves such basic elements as developing a maintenance system, education in basic housekeeping, problem-solving skills, and activities to achieve zero breakdowns.’

Concepts and Strategy Based on the philosophy of TQM, the conceptual backdrop to TPM can easily be developed. Few concepts are listed below: (a) Operators have more emotional attachment to their machines than the maintenance/repair specialist or departmental supervisor or manager. The operators normally have a subtle feeling of ‘ownership’ of the equipment, and this feeling, if exploited/utilized positively, can aid in better upkeep of the equipment. (b) Even an illiterate operator knows more about the machine troubles and chronic problems than the maintenance crew. (c) In this competitive as well as high-cost economy, better equipment utilization has become just as important as manpower and system improvements. (d) Inherent talent and problem-solving ability of the employees can be utilized to solve the nagging maintenance problems and improve equipment productivity. (e) If the routine and elementary maintenance can be handled by the operators themselves, then not only will equipment downtime reduce, but also specialist or maintenance staff will have more time to solve non-routine chronic problems or concentrate on improvements in productivity. (f) Close and emotional care of equipment by operators reduces equipment downtime. Housekeeping also improves beyond usual conditions. (g) People normally like to have broader responsibilities that ensure involvement and enhance their self-esteem and pride. As such, properly handled, they would gladly do routine preventive and running maintenance jobs.

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180 MACRO STRATEGY (h) Given proper training, encouragement and scope, the machinist would do a better job of routine and preventive maintenance, as has always been the case in small factories where the operators themselves take the responsibility of machine maintenance. (i) There is inherent draw back on depending on few specialists or highly skilled mechanics for all maintenance jobs—in between themselves they are expected to attend and repair all the machines/equipments available in the plant Thus those highly skilled mechanics never become as intimately familiar with the machines as the small factory’s machinist who normally attends to the running maintenance of the machine he operates. (j) It has been found that small group activities at the work place or workstation really focus on continuous improvement. The same logic extended to maintenance can produce consistent improvement in equipment performance and maintenance practices. There would be considerable improvement in reducing down time attributable to malfunctioning of machines and repair. (k) If the routine and simple running maintenance is done by the machine crew themselves, then that will help reduction in frequency of breakdowns and overall downtime facilitating release of machines to PM against planned schedule and also allowing maintenance crew to do a better job on preventive maintenance due to less running pressure. This step along with prudent policy for procurement and stocking of spare parts should help to develop a core preventive maintenance strategy. (l) Specific strategy for machine re-building. It is generally observed that the machines that have a history of frequent breakdowns are most unreliable in producing parts within the tolerance limits. In such cases, the solution lies in identifying the special causes and solving them permanently. Either the root cause can be permanently cured through problem solving or the equipment needs complete overhauling. Rebuilding machines not only reduces downtime but also ensures consistent quality of the items produced. Expenses on wellplanned machine rebuilding program can reduce. The situation often becomes so bad that the total cumulative loss becomes much higher than one-time well-planned machine rebuilding. Apart from complete rebuilding of the equipment, often replacing the bad parts is a prudent strategy. (m) Developing counter-measures against losses due to downtime, reduced speed, poor quality due to equipment, and so on. These countermeasures can by easily developed according to the nature of business or industry. (n) Decentralization of selected maintenance functions will help to improve maintenance services, and overall efficacy of the whole maintenance system. (o) To develop and install Fast maintenance features reduce downtime. These may include Fast detachment or attachment of accessories, easy removal of machine covers, quick replacement of OEM components like motors, gearboxes, special attachments, etc. (p) Principles of the PDCA cycle need to be applied in planning, implementation, and training.

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PROCESS ORIENTATION 181 (q) Standardize the spare parts stocking and procurement policies for optimum benefit. (r) It may help to acquire a single source of supply for spare parts to reduce variation in quality, consequent variation in performance, time consumed in repair or replacement, procedural paraphernalia and so on.

Practical Approach to Initiate TPM Implementation It is only through the principle of voluntarism that operators can be motivated to look after the routine maintenance of their own machine/equipment. It will be the responsibility of management to convince trade unions of the benefit and criticality of TPM. TPM is never focused on reducing jobs; it aims to bring competitive stability to the organization. It is up to management to drive this message home and seek the union’s cooperation. Trade unions normally will not oppose the job enrichment of the operators and the maintenance crew once they are convinced that TPM will bring greater productivity and help stabilize the organization. In an existing organization, a new initiative for TPM cannot succeed without the union’s cooperation and support. New organizations should introduce TPM work culture from the beginning. Planning should also involve training and role changes for machine crew, maintenance crew and staff. The new role of the maintenance crew and specialist technicians would be to attend non-routine maintenance, specialized jobs or important projects for the equipment. They would also be required to train machine operators in basic maintenance skills. Self-machine cleaning, daily lubrication, visual checking of certain parts must become a part of work culture, and should be included in job description to avoid any future dispute. These good operating practices unfortunately get neglected or overlooked unless they become a part of work culture. Formal training sessions in housekeeping and machine upkeep need to be conducted, both in general and catering to specifics. The operators and maintenance crew should receive appropriate training in the seven QC tools, relevant simple statistical tools and analysis, team working, and CPI. A system of monitoring and reviewing would keep a watch on effective uptime, equipment performance, cost of maintenance, response time, machine operators’ direct involvement, improvement projects undertaken and completed by maintenance crew, cost of machine repairs and inventory holding, etc. It is essential to have management support system (that includes recognition & rewards) to encourage creativity and innovation in the TPM area.

Conclusion A well-managed total productive maintenance system will increase the machinery available for production, optimize the life of spare parts, and even generate some extra capacity. Teamwork between production and maintenance departments will improve morale and working environment. Better maintenance procedures will remove hassles, reduce response time, optimize paperwork, and help in containing overall maintenance cost.

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182 MACRO STRATEGY Smooth flow of production, reduction in the overall cost of maintenance which includes cost reduction in spare part inventory build up, are the visible gain of effective TPM. Unique TPM program is greatly influenced not only by inherent design characteristics, planning, systems, and execution of the concepts of total productive maintenance, but also on the interest and commitment of top management, support of trade unions, and attitude of the employees who run and maintain the equipment. Successful implementation of TPM is a great leap forward towards successful deployment of TQM philosophy.

KAIZEN Kaizen has become one of the most important word and tool in the modern management lexicon because of its underpinning critical role in the deployment of TQM philosophy and resurrection of sick industries. ‘Kaizen’ simply means improvement; it builds on small and continuing improvements. Once a new technology or innovation has been introduced, efforts must be made to first standardize it and then improve upon it further, be it on quality, cost reduction, yield improvement, etc. After bringing the process under statistical control, continuous effort is on to improve it further by process simplification, process reengineering or combination of small or breakthrough improvement, and to continue the effort after the improvement has been standardized and stabilized. Kaizen is not merely a tool or enabler but a movement that ushers the organization into a process-oriented way of thinking, which is diametrically opposite to the traditional management practice of concentrating only on results. Kaizen gives more emphasis to the means than the results, as that lays the foundation for achieving long-term goals. Process-oriented thinking reinforced with Kaizen strategy improves overall organizational competitiveness in the long term. Besides small continuous improvement, Kaizen specifically concentrates on certain aspects which otherwise are taken for granted: (a) (b) (c) (d) (e) (f) (g) (h) (i)

Improving layout, Better housekeeping, Reducing cycle time/standard time, Reducing unnecessary human motions, Reducing ‘setting’ time, Reducing ‘change-over’ time, Ensuring ease or comfort of working, Reducing waiting time, Reducing response time.

Kaizen, though originally an important element of traditional Japanese style of management, has become an integral part of the TQM movement. Kaizen recognizes that while problems do exist, there are always opportunities for improvement, and there is no end to improvement; it requires a positive attitude and concentrated

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PROCESS ORIENTATION 183 efforts to turn problems into opportunities. Kaizen effort is a combination of both process- and people-orientation. This requires not only a paradigm shift in thinking but reorientation of work culture, commitment, dedication and patience. Kaizen, like TQM, induces behavioral change involving missionary goals, sharing, caring, and commitment. It is important to comprehend that kaizen is not a tool but an ‘Umbrella’ concept that engulfs all aspects of our life whether working, social, home, and personal and all these aspects of life deserve constant care and effort for improvement. Kaizen contributes to self-development in confidence and enhancing self-esteem. It induces a culture of free flow and sharing of information, adaptability, and belief in human talents. Kaizen has to be the way of life. Deployment of Kaizen concept is not capital intensive but requires dedication to commitment of top management and other levels of hierarchy. Management has to adopt the ‘people orientation’ strategy so that the principle of focusing on ‘P’ (Process) criteria is institutionalized. The key is to facilitate building quality into people so that people naturally become quality and Kaizen conscious. In Kaizen philosophy, there is no place for finger pointing, rather people are encouraged and helped to improve the process so as to ensure consistency in the delivery of desired end result. Through effective communication and information flow the Kaizen strategies and responsibilities are made crystal-clear to everyone in organization so that they can be practiced at grass-root levels. Participation in Quality circles, 5-S, TPM, suggestion schemes, safety drives, or any other small group activities facilitate involvement and cooperation. Inducing a corporate Kaizen culture is dependent both on topdown and bottom-up commitment and efforts, for this active support from trade unions is critical. Kaizen should be applied in the field of industrial relations to improve relations with its employees, and avoid or reduce confrontation with trade unions—the acid test of success is turning confrontations to cooperation. Another vital step is the concentrated effort on on-going education and training that would facilitate behavioral and culture change, and enhance problem-solving skills conducive to Kaizen. Dimensions of managerial responsibility in Kaizen must be understood. One dimension of the job responsibility is to ensure maintenance and administration of established system or standard to monitor the desired result (performance), and on the other part, the manager has to make conscious effort to improve the process further so that a new standard is achieved. Quite often, quality, cost and scheduling (quantity and delivery) are matters of cross-functional management, and as well as that of a specific work area or center. Therefore, Kaizen activities must span across both cross-functional management and line-organization so that the operational and functional capabilities are enhanced and opportunities of improvement are seized. Kaizen efforts can have several distinct orientations: management-oriented Kaizen, group oriented Kaizen, and individual oriented Kaizen. These orientations will help concentration on important strategic, logistic, and operational concerns; however water-jacketed approach is not suggested as opportunities are everywhere. Kaizen activities are all guided by the PDCA cycle, which fosters a process-oriented way of thinking. Through use of various statistical, problem-solving and managerial

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184 MACRO STRATEGY tools along with people-orientation, the Kaizen philosophy takes root, and over time becomes so ingrained in organizational culture that employees do not realize that they are thinking in a Kaizen way; continuous improvement becomes a natural part of working culture. Statistical and systematic approaches to problem solving help in the maturity of Kaizen. All the efforts of management and employees towards Kaizen must ultimately lead to customer satisfaction. In Kaizen customer satisfaction in achieved through improvements in quality, cost, and scheduling (right quantity and right delivery). The relative priority among these measures are decided by the management by setting goals depending on the actual study of customer preference or behavior, it is the customer who actually sets the standards. The improvement of Q, C and S is also related to maintaining the quality of upstream processes. Since the bulk of the materials and parts are outsourced, it is very essential that Kaizen should be extended to improving supplier relations and supplier operations. This is an important area of management-oriented Kaizen. The scope of Kaizen in improving supplier relationships include better/optimum inventory levels, reducing order cycle time, improving quality of parts, reducing cost, and staggered precision delivery as per JIT norms. Only when the supplier’s quality need not be checked, can one say that the Kaizen relationship with the supplier has matured. Kaizen efforts can be extended by joint project or task force teams working on issues like new product development, resource-saving, energy-saving, paperless working, etc. Unlike traditional management, focusing on short-term profits and sacrificing or compromising on some quality features or cultural issues, a Kaizen-oriented company pays a lot of attention to improving the culture continuously, however subtle or latent the efforts appear to be. If the management through Kaizen at various levels can maintain the momentum of improvement, the company will become more productive, more competitive and cost effective, and will earn higher profits in the long run. Kaizen efforts will lead to lower break-even points, making the company more profitable. Measures to improve organizational culture may sometimes hurt short-term goals but in the long term it will help to create a more resilient and competitive organization.

JUST-IN TIME Definition Jeffery K. Liker in his book The Toyota Way describes JIT in a simple way: “JIT is a set of principles tools, and techniques that allows a company to produce and deliver products in small quantities, with short lead times, to meet specific customer needs. Simply put, JIT delivers the right items at the right time in the right amounts.” Properly deployed JIT becomes so powerful that even it allows a company to be responsive to the customer needs even on of the day-to-day shifts in demand.

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Conceptual Framework The seeds of JIT were implanted in Ishikawa’s famous inspirational phrase ‘The next process is the customer’. The concept shows that the next process i.e. customer should get quality products (zero defects) in just quantity, and in the right time. He just picks up the part and concentrates on his work, he need not worry about the parts he has received from previous process(es) or directly from the outside supplier. This realization in turn leads to awakening in all downstream process(es) that no defective material should be supplied to the next process and that keeping the time sequence and schedule is sacrosanct. In other words, there should be no inconvenience or disruption in the rhythm of production at the next process stage. This was later institutionalized as the Kamban system and the Justin-Time concept. The concept of ‘Just-in-Time’ looks very simple and straightforward. It means that the exact number of right quality units are brought to each successive stage of production at an appropriate time so that there is no waste and no built-up of in-process inventory. Paradoxically, conventional management thinks differently; it plans for adequate inventory so that supply-line to customer is not disrupted. The planning therefore justifies the need to have buffer in process stocks and safety stock at delivery points. Traditional management is aware of the cost of carrying the inventory, and in order to optimize the inventory carrying cost it follows the Economic Ordering Quantity (EOQ) methodology of inventory management, which provides sufficient buffer inventory to meet customer demands. Today’s business imperatives of better quality and cost effectiveness are negated by some glaring shortcomings of the traditional business practice of building high inventories. (a) Inventories hide problems. The nonconforming or defective products find their way to inventories. One only needs to have a tour of a conventional factory to discover that a good number of inventories piled up in stores and in process are either obsolete or rejected. And the stocks are generally hypothecated to banks against working capital limits! (b) Availability of work-in-progress inventories as well as policy of stocking/ manufacturing for inventory creates various operational inefficiencies such as sub-optimizations of equipment maintenance, setting time, and material usage, unbalanced machine scheduling and loading, inadequate time given for process control etc. (c) Reserve quantities to make up for changes in customer demand or make up for quality rejects or other hold ups actually add cost that the customer really coughs ups. And yet the quality cannot be assured! (d) There is no pressure really to improve quality or productivity till the reserve quantities are available. Professionals are under the spell of self-deception that some rework/scrap is inevitable. (e) The idea that reduction of setting time could be an opportunity for improvement never crosses their minds so long as inventory coverage is available. As a matter of fact in the traditional management system, to apportion the cost of

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186 MACRO STRATEGY setting time a long run is usually planned. This supposedly economic batch quantity invariably ignores the inherent inefficiency due to long setting time. (f) The inventory cover hides the need to improve supplier’s delivery time or hasten up the internal processing time. The premise that delivery times cannot be reduced is used as justification for inventory build up. The ‘Just-in-Time’ concept is a total reversal of the traditional thinking on building inventories. It implies a significant decline in inventory levels, the ideal being zero. This means that the exact number of required units is supplied to each successive process stage at the appropriate time so that the right quantity having the right quality is delivered to the customer at the right time; the guiding rule is not to have goods shipped too early or too late. But implementation of this ‘Justin-Time’ concept calls for elimination of all forms of ‘waste’ so that there is no holdup or shortage in the production flow. Taiichi Ohno, who was the first person to implement Kamban and JIT, classified waste into seven categories. These are listed in Table 7.4: Table 7.4: Seven Categories of Waste in the Production Process Sl. No

Cause of Waste

a. b.

Overproduction Waiting time at the machine

c.

Transportation of units

d.

Processing

e.

Inventory

Possible ways of eliminating the waste Reduce set up time, produce just quantity, and synchronize timing. Synchronizing, and balancing workflow and workload. z Flexibility of men and equipment. z No equipment downtime, which implies effective maintenance. z No hold-up for tools and other supplies. z Constantly improve process flow by BPR or other means so that processing steps are reduced or combined avoiding unnecessary transportation of parts/units. z Look for reorientation of layouts and in-process locations to make transport and handling shorter or unnecessary. z Rationalize unavoidable transportation and material handling for smooth production flow so as to avoid queuing up or inventory building up at the processing stages. z Eliminate rework/scrap. z Bring process under statistical control; find out and eliminate root causes of the ‘special causes’ of variation. z The process output must satisfy the next process customer. Stop processing if quality is not okay but never allow bad output to sneak into the next process stage. z Also think in terms of BPR—whether the process itself was necessary, or whether it could have been combined with previous or subsequent processes. Do not waste time and energy on unnecessary processing steps. z Eliminate the activity of inventory taking. z Reduction of setup times and lead times will improve the workflow, which will automatically reduce the inventory pile up at process stages. z z

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PROCESS ORIENTATION 187 Enhance work-skills. Skill in optimizing demand forecast so that unnecessary inventory build up could be avoided. z Motions and procedures that continue over the years without major modification do create lot of waste in terms of unnecessary motions and high cycle time. Such motions need to be identified and then rationalized to improve the processing cycle time. z Before mechanization or automation, a full BPR exercise should be undertaken otherwise there is a danger of automating the waste. z Defect prevention should be the strategy. z Bring processes under statistical control and ensure process capability. z Employ continuous process improvement strategies so that no defective ‘output’ is produced. If quality products are consistently fed to the next process, there is no question of hold up due to poor quality. z z

f.

Motion

g.

Defective units

In order to compete with American giants Ford, GM and have a foot-hold in US market Toyota adopted a dual strategy of manufacturing small numbers of many different models of cars out of the same assembly lines, and elimination of all forms of waste so that Toyota can become competitive and efficient in meeting customer demand. This was opposed to the conventional practice of large economical batch quantity of one particular vehicle and having large waste. Ohno strongly felt that over-production was really the central evil that generated waste, and so he introduced a production system that had two main structural innovations: (1) the JIT concept and (2) Jidohka (autonomation). Toyota’s production system was geared to maintain an even flow of production for different units throughout the year so that there was no abnormal peak load at any given time. This is in contrast with the conventional practice (or malpractice?) of having peak load at the month-ends. The Toyota production system is designed to ensure that the exact number of parts and components are procured or manufactured and forwarded to the final assembly line so that the final output of cars is not stopped or hampered. The JIT inventory management philosophy is centered on the concept of providing materials only when needed at each workstation, and ensuring that the final processing stage for output is never starving for want of requisite components and parts. To achieve these objectives without creating in-process inventories really meant a reversal of normal thinking and working practice. As per traditional ways of working (even now followed in most organizations) units are moved or transported to the next processing stage as soon as they are proclaimed ready. However, to introduce the philosophy of JIT, Ohno reversed the process—instead of units moving automatically to the next stage, each stage requiring material for processing had to go back to the proceeding stage to ask for a pickup, the exact number of units needed thus ensuring no material wastage and build up of inventory queuing up at that particular stage. To institutionalize the concept, Ohno deployed the ageold Japanese communication tool ‘Kamban’ for use in the JIT production and

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188 MACRO STRATEGY inventory control system. A Kamban meaning signboard or label is attached to each bin or box or parts to go to the next process signifying delivery of given quantity. When the parts are used up, the Kamban that is returned to the preceding process serves two purposes—one, a record of work done and secondly as an order for new or fresh supply of parts. The unique feature of the system is that Kamban controls the inflow of parts and components and as there is no queuing the processing time is minimized. In the Toyota plant it was thus possible to have an engine delivered to the plant in the morning being mounted in a finished car that rolled out from the assembly line by evening. There was no inventory buildup for engines. To support the JIT concept, Ohno changed the basic structural feature of Toyota’s production system. He introduced Jidohka meaning autonomation (not to be confused with automation) meaning that in case of a problem the machines would stop automatically, thus ensuring that no defective part is passed on to the next process. The machine designs were modified to incorporate the Jidokha structure. The system ensured that the machine would restart only after the root cause of the problem was identified and eliminated; firefighting would not do. Jidokha also enabled one worker to take charge of several machines at a time, as he did not have to be present at one machine to check and sort out the conforming and nonconforming parts. Thus the productivity of an individual worker also increased very significantly. As against over production in automation, the Jidokha system not only controls the inventory but its auto-stop devices ensure that malfunctioning of the equipment does not produce defective parts as the equipment stops if any problem in detected. The beauty of the system is that it forces line management to produce quality, as every time an inferior quality part is produced and forwarded, the line will be stopped. This will immediately put everybody concerned on alert to find the cause of the trouble and solve the problem so that it never recurs. Therefore, the JIT system along with Jidokha ensures (a) quality is maintained at the highest level at all production/processing stages including that of suppliers and sub-suppliers (b) shortened lead time (c) almost zero inventory or base minimum inventory numbers at a given time (d) reduced time spent on non-process work (e) better balance between different processes (f) problem identification and (g) prevention of problems. In the JIT system, the spaces for in-process stock are specifically allotted; the trolleys or carts carrying in-process stock must stay within the designated space. If there is no space for another cart, the production of the preceding process stops till the clearance is obtained through space availability at the next stage. The successful implementation of JIT has also led to improvement and optimization of layouts, refined capacity planning, empowerment for line-stops, and reorientation of planning and system philosophies. To put it in right perspective, JIT does not call for small volumes or restrict the batch size. It only calls for a production planning discipline that matches scheduling with the actual or confirmed demand. The word ‘discipline’ is very important. JIT discourages the normal tendency to overproduce to facilitate sales later on. If the demand grows, volumerelated economics can easily be planned within the JIT setting. Economics of scale

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PROCESS ORIENTATION 189 can also be obtained by having different product variations at the final assembly/ processing stages, like in a car plant (employing JIT) each car coming out from the assembly line is different from its predecessor, the variation could be in color, trimmings, accessories, etc. Apart from the concept of Kamban and Jidohka, successful implementation of JIT will require the following: (a) Commitment, involvement and enthusiasm of people. The concept of internal customer or quality at source cannot be implemented unless there is commitment and enthusiasm from people who will make it work. (b) Effective supplier relationships. (c) Appropriate training for shop floor/first line employees in using the statistical tools to control the process. (d) TPM or at least good preventive maintenance. (e) Substantial reduction of set-up time. In JIT manufacturing ‘just adequate’ production runs with great flexibility is totally dependent on the ability to operate with small set-up times. The set-up time taken by traditional manufacturing system is not at all suitable for JIT system. By eliminating external factors of downtime that contribute towards set-up delays and by standardization of setting accessories it is possible to drastically reduce setting time. Some auxiliary capital investments in dedicated tooling, and automatic accessories of positioning, height adjustments, clamping, fine-tuning, adjustments, etc. help further in reducing the setting time. Most successful JIT operatives have been able to reduce setup times from hours to seconds in some critical areas. Money tied up in inventories is a financial threat to the health of the company. But reduction of inventory through implementation of JIT will require continuous effort to unearth inefficiencies as well as problems, which have to be solved permanently with reduction of waste, better quality, reduction of setting times, and real improvement of productivity. Minimizing inventory levels exposes the numerous hidden problems and thus enables one to tackle the problems one by one. JIT philosophy is thus firmly rooted in TQM philosophy, which emphasizes that highest level of productivity is possible only through best quality of the output. Some proponents of JIT call JIT a unique intervention that can succeed as a standalone initiative. But the author would strongly advise against any such notion— JIT is part of the continuous improvement effort of TQM. The impetus to introduce JIT in industries was provided by the artificial ‘oil-crisis’ of the 1970s, thrust upon the world by the oil-producing nations. While the Americans took the legislative and political route to procure as well as consume fuel, the Japanese took a minimalist approach to reduce their dependence on imported petroleum. One of the routes the Japanese took was to reduce their workin-process inventories. They realized that the work-in-process inventories also consume ‘oil’. The best way is to reduce the in-process inventory and yet optimize production. The Japanese, thus, concluded that they had to have a manufacturing system that would produce little or no scrap and could optimize productivity

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190 MACRO STRATEGY with little inventory. Fortunately the Japanese had the experience of the Toyota plant to learn from. Japanese success with JIT inspired many industries all over the world to emulate the JIT initiatives.

OVERVIEW OF TAGUCHI METHODS TO QUALITY IMPROVEMENTS Genichi Taguchi, a Japanese quality consultant and mechanical engineer, brought in a fresh approach to the challenges of continual improvement. The TQM requirement of a never-ending cycle of improvement is well supported by Taguchi’s Quality Engineering and statistically designed experiments. The concepts of robustness, and parameter design and the Taguchi methods of experimental design are applicable both for variable and attribute data. Readers may revisit the chapters dealing with variation, Taguchi philosophy, and loss function for better understanding of their relevance to continual improvement. Genichi Taguchi’s loss function combines cost, target, and variation in one matrix; the specifications are of secondary importance only. As per Taguchi principles Quality is measured by the deviation of a characteristic from its target value and such deviations cause loss to society. Taguchi questions the logic of traditional management in accepting outputs falling within the specification limits, and thus shutting off the opportunities for improvement. The concept of robustness means that the noise factors are taken into account to ensure that the system functions correctly. Noise factors are uncontrollable variables that can cause significant imperfections in the process or the product, the quality characteristic deviate from the target value. Noise can come from internal or external sources. Internal sources of noise are a result of settings of the product and process parameters. Examples include manufacturing variation and product deterioration over time due to wear and tear. Manufacturing imperfections occur because of the inevitable uncertainties in a manufacturing process. They create product-to-product noise, or variability. External sources of noise are those variables that are external to the product and that affect its performance. Examples include changes in environmental conditions such as humidity, temperature, dust and variability in operators who make the product. The following points will help understanding of noise: z

z

z

z

Neither at the design stage nor at performance evaluation stage, all sources of noise can be accounted for because of the lack of knowledge concerning the various factors that affect the product’s performance. Physical restrictions limit the number of experiments to be performed and the number of factors for analysis; this on turn limits the choice of the number of factors to control. Noise factors that impact the product’s performance are to be judiciously selected. It is to be noted that in the parameter design phase, only those sources of noise that are included in the study are termed noise factors. Three sources of noise variation are environmental variables, product deteriorations and manufacturing variables.

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PROCESS ORIENTATION 191 z

z

z z

Counter measures against all three sources of variation can be taken at the product design stage to build quality into the product and processing phase. Counter measures against environmental and product deterioration variables have to be taken in the design stage itself. This is what Taguchi calls ‘off-line’ quality control. In the process design and manufacturing stage only counter measures against manufacturing variations can be implemented through methods of statistical process control.

Robustness and Robust Design Since total elimination of noise factors neither practical (because it is very costly) nor feasible rather often impossible, the Taguchi methods seek to minimize the effects of noise. These methods try to determine the optimum level of the important controllable factors based on the concept robustness aims that noise factors are taken into account to ensure that system functions correctly. In general, it is much easier to adjust the mean value of a performance characteristic to its target value than to reduce the performance variability. Through utilization of non-linear effects of product and process parameters, the variability of output is reduced thereby dampening the impact of the sources of variation. This is key to achieving robust design. It can also be related to performance measures such as the signalto-noise rates, which is used in the parameter design phase. Concentrating on product and process designs that are robust, that is less sensitive to uncontrollable factors such as temperature, humidity, and manufacturing variations; the Taguchi concept attempts to reduce the impact of noise rather than eliminate it. By dampening the impact of the noise factors and selecting the controllable factor levels which force the desirable quality characteristics to stay close to target values, a robust design of the product, and thereby process, is achieved. The objective is to create a product/process design that is insensitive to all possible combinations of the uncontrollable noise factors and is at the same time effective and cost-efficient as a result of setting the key controllable factors at certain levels.

The Signal-to-Noise Ratio (S/N) Another significant part of Taguchi’s approach is the Signal-to-Noise ratio, developed as a proactive equivalent to the reactive loss function. To measure the effectiveness of a design there should be some measure that can evaluate the influence of the design parameters on the output quality characteristics. Both desirable and undesirable aspects of performance are part of any performance output; therefore any acceptable performance criteria should incorporate both the aspects of performance output for evaluation, correction or improvement Taguchi has combined these two aspects into one metric, known as signal-to-noise ratio. When this performance measure is maximized, the expected loss will be minimized. The desirable element of a characteristic generally hover close to a specified target value, the average value of this desirable characteristic is denoted as ‘signal’. The

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192 MACRO STRATEGY undesirable elements of a characteristic termed as ‘noise’also a measure of the variability of the output characteristics. Since it is almost impossible to eliminate ‘noise’, the effort is directed towards making its effect as small or insignificant as possible. There are many different S/N ratios; Taguchi has proposed more than 60 signal-to-noise ratios for use in particular/specific applications, and their corresponding equations for the S/N ratio can be found in Tables included in good statistical books. The three basic and popular S/N ratios are (1) Normal-the-best, (2) Smaller-the-better, and (3) Larger-the-better. Measure of S/N units are decibels (dB) which are tenths of a Bel, commonly used in electrical engineering. The S-N ratio is the essential tool for parameter design and is also very good for performance evaluation. Taguchi advocates maximizing these ratios in experimental analysis, as a means of minimizing variability. In order to apply the formula well, one must first gather reliable engineering and statistical knowledge of the product and the process and use this data to derive the ratio. If variability is minimized, the design is robust, and this is one of the major goals of Taguchi’s quality engineering. Since the signal-to-noise measure proposed by Taguchi is proportional to the square of the ratio of the mean standard deviation, it is desirable to maximize this ratio. The S-N ratio helps to reduce variation, bring the average on target, and compare the new design with the old one. Pre-calculated tables (given in statistical books ) showing S-N ratio in decibels (dB), the range and the per cent change help the designers to evaluate which design is better and how much.

Summary In system design, the capacity constraints with respect to the new design are identified, and the process operational sequences are drawn up and analyzed. The tooling requirements and measuring equipment are identified. The formulae for the loss function can be utilized to find out the manufacturing (working) tolerance of a parameter. Taguchi recognized a need for an experimental approach that would extract the most meaningful information from a minimum of tests. He specified experiments that can be conducted physically or as computer simulations to find optimum solutions. Computer simulation is more cost-effective, but one must first establish mathematical models that realistically describe the relationships between the parameters and the output characteristic. Tolerance design is the process of determining the statistical tolerance around the target, it involves the setting of tolerances, that is, a range of admissible values, around the nominal settings of the control parameters identified in the parameter design phase. Tolerances that are too rigid or tight will increase manufacturing costs, and tolerances that are too wide will increase performance variation, which in turn will increase the customer’s loss. In this delicate task, analysis of variance (ANOVA) is a useful tool to determine which factors contribute to the total variability and the loss function to obtain a trade-off between quality and cost.

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BUSINESS PROCESS RE-ENGINEERING (BPR) The concept of ‘Re-engineering’ is implicit in TQM philosophy and a critical element to sustain the principle of continuous improvement. Viewed from the right perspective, BPR helps an organization to maintain its process orientation through combined effects of breakthroughs and continuous incremental improvements. Through breakthrough process improvements a company can catch up with the pace of ‘market changes’ and ensure a competitive presence. However, the so-called ‘superior stance’ or stand-alone approach of some proponents of BPR has been proved wrong; to access the inherent strength of BPR it must be deployed as part of total quality management.

Definition of BPR Michael Hammer and James Champy, the two pre-eminent American management gurus and consultants of the 1990s, were the leading exponents of business reengineering. In their book ‘Re engineering the Corporation’ Hammer and Champy say that business re-engineering means ‘putting aside much of the received wisdom of two hundred years of industrial management. It means forgetting how work was done in the age of mass markets and deciding how it can best be done now.’ In another definition they explain the role of BPR more clearly: ‘Re-engineering is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed.’

BPR Questions the Relevance of Traditional Business Processes Re-engineering questions the efficacy of the traditional established business processes that are rooted in the philosophy of Adam Smith, described in the Wealth of Nations (published in 1776). Henry Ford applied Adam Smith’s principle of the division of labor to mass production, and Alfred Solan applied the principle to management and organizational structures. Ford made the jobs of industrial workers much simpler by dividing the desired output into smaller repeatable tasks, but the process of achieving the desired final output became more complex as it entailed coordination and combination of results of all smaller tasks. Solan, applying again the principle of Adam Smith, divided the responsibilities of specialists and corporate executives. The specialists will bother about engineering or manufacturing while which should b corporate executives should look after the ‘numbers’ and ‘financials’ related to sales, market share, inventory holding, profit/ loss, etc. This practice, followed more or less over the last two centuries has institutionalized a work culture having division of professional labor in parallel with the division of manual labor. The sales & profit orientation of the top management impelled controls to achieve somehow the planned results. This result oriented work culture did not bother even manipulation of processes.

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194 MACRO STRATEGY Studies reveal some startling facts—many management systems/procedures or many tasks that employees perform have nothing to do at all with meeting customer needs, and senior managers are often unable to justify the reasons for the existence of some of these processes. Many tasks are done to satisfy internal organizational demands or to maintain traditions that have no relevance today. Many non-manufacturing processes have long trail passing through different departments with hierarchy of controls. These cumbersome and non-focused business processes often become the breeding ground of troubles and irritants. Not surprisingly, mistakes and inefficiencies become a regular affair. The principles on which such processes were originally designed are no longer valid since the market conditions and customer psychology of earlier era is no longer valid. In today’s market, customers can no longer be forced to pay for inherent process inefficiencies.

Synopsis of Principles of BPR BPR raise the fundamental questions: ‘why do we do what we do at all? Is it adding value to the customer or is it at all necessary for customer satisfaction?’ In order to sharpen their competitive capabilities, organizations should, therefore, take initiatives to identify and eliminate systems and processes that in part or as a whole do not add value. This implies that the professionals and subsequently the employees working in the organizations must unlearn many of the principles and techniques they were hitherto following. This radical approach makes BPR different from normal process improvement approaches. The task-oriented job approach must give way to work organized around processes so that the focus is not only on value addition but also on keeping the overheads down.

Michael Hammer and James Champy Lay Stress on the Four Keywords Fundamental In BPR the fundamental questions like ‘why do we do what we do?’Or ‘why do we do it the way we do?’ unearth the tacit rules and assumptions that somebody had set some time back. In today’s competitive environment such assumptions may be obsolete, erroneous, costly, non-value adding, or inappropriate to the real business objective. Re-engineering therefore begins with no assumptions and no givens, rather it determines what a company must do to become competitive, then how to do it. It ignores ‘what is’ and concentrates on ‘what should be’.

Radical Radical means getting to the root of things and not making superficial changes or fiddling with what is already in place. It is throwing away the old disregarding all existing structures and procedures and coming out with completely new ways of accomplishing work. Hammer and Champy say that re-engineering is about business reinvention—not business improvements, business enhancement, or business modification.

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Dramatic Re-engineering is about achieving a quantum leap in performance as against marginal or incremental improvements. Marginal improvements require some modest alterations or fine-tuning whereas dramatic improvements demand courage to discard the old and take up something totally new.

Processes The business managers and professionals have to come out of their traditional result- and task-oriented thinking and learn to consciously focus on Process to ensure that value is being added to the output for customer satisfaction. The delivery of the order of goods/services to the customer’s hands is the only value that the process creates and this process output that really matters to the ultimate success of the business. The rest are all superfluous steps that need to be identified and eliminated or replaced with something new that adds value. . The hallmark of a truly successful company is its willingness to abandon what has long been successful and embrace the new to achieve still higher levels of performance. They undertake re-engineering when they are in peak condition. Re-engineering also helps companies in deep trouble to turn around, provided management can muster the courage to do it. Progressive management looks at re-engineering even if their companies are not yet in trouble, to insure against the vagaries of market dynamics.

Characteristics of Typical Re-engineered Processes Striking similarities among the various re-engineered processes transcend industry/business type and even the identity of the particular process. Much of what holds true for a re-engineered electric-motor manufacturing unit is also true for an insurance company or a retail outlet. Processes must be kept simple while the individual might require multi-skills or might have to bear several job responsibilities. Process simplicity has tremendous bearing on competitive characteristics.

Several jobs are combined into one This is a total reversal of the division of labour principle introduced by Adam Smith. In a re-engineered process, the earlier distinct jobs/tasks are integrated and compressed into one to ensure single-point responsibility. For technical reasons it is not always possible to compress the jobs into one integrated job; however the entire process might have several integrated sub-processes. There could be a single process owner with the responsibility for the sub-processes resting on members of the process team. While the coordination between team members may still create some confusion, delays, and errors, they are insignificant compared to problems caused by non-integrated jobs, interdepartmental hassles and lack of crossfunctional coordination. Because of improved controls, integrated processes can reduce process checks and administrative overheads. Monitoring the performance of small numbers of people is much easier; process evaluation becomes more focused.

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Workers make decisions Re-engineering not only compresses processes horizontally but vertically as well, eliminating or at least reducing to on great extent the need for hierarchical controls or approvals. Decision-making becomes part of work; no leeway is given to pass the buck to higher ups. The people assigned to the job have to perform all such tasks and take decisions making redundant the traditional system of monitoring and checking by the line inspectors, supervisors, or by the auditors or accountants. Compressing the work vertically as well as horizontally has manifold benefits like fewer delays, low overhead costs, better response to customers, and greater empowerment to the front-level employees. This also helps to dismantle the traditional form of hierarchical management structure to a lean and flat management structure.

The steps in the process are performed in a natural order The traditional method of linearity of process sequence delays the completion unnecessarily. It also virtually blocks the possibility of interaction and discussion amongst process planners and designers during processing stage to reduce rework or to improve the design, method, measurement, cycle time, etc. Re-engineering follows the natural precedence in the work, the sequencing is designed in terms of what needs to follow what. The sequencing need not follow a linear pattern; many jobs can be done simultaneously without affecting other jobs. Thus ‘delinearizing’ helps processes speed up through overlap of certain jobs in time and also due to consistent quality output because of less rework and scrap. This further helps in reducing lead times, improving customer service and decreasing the chance of obsolescence of product or service.

Processes have multiple versions The traditional standardized processes designed for were mass production and mass market will not be able to effectively meet the demands of today’s diverse and changing market. Re-engineered new processes will have the capability of multiple ‘paths’ or ‘versions’ to cater cost effectively to the requirements of different markets. Hammer and Champy suggest that the first step is ‘the triage step’, where the designers identify which version will work best in a given situation. They refer to the example of IMB credit which developed three versions of the credit approval process—the first one was straight forward, entirely done by computer, the second for medium difficulty situations handled by the ‘deal structure’, and the last one for difficult cases where the ‘deal structurer’ takes help from specialist advisers. Traditional generic processes are usually very complex as they incorporate elaborate and special procedures to handle a wide range of exceptions and situations. A multi-version process, by contrast, is relatively simple and straight forward because each version needs to handle only the situation for which it is appropriate. Special cases and exceptions are taken care of in the multi-version design stage itself.

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Work is performed where it makes the most sense In a traditional organization, an accounts department has to order its stationery items and pencils through the ‘purchase’ department who are supposed to be specialists in purchasing. This kind of practice is expensive and time-consuming, since it involves different departments and so-called specialist functions plus the overhead associated with paper work, formalities, and to-and-fro dealing. Reengineering tries to simplify the process by getting the work done where it makes the most logical sense. The help of ‘specialists’ can always be sought if needed. It may make more sense for the shop floor or field people to buy small-value items directly, within sanctioned cost limits. This approach of re-engineering to get ‘work performed where it makes the most sense’ opens up new opportunities, and scope for innovative process design. Such shifting of work across organizational boundaries improves overall performance. Much of the work done earlier, be it documentation or inspection, becomes redundant. The current trend towards business process outsourcing uses this logic.

Checks and controls are reduced Checks and controls are mostly non-value-adding work and they are moreover not foolproof in stopping process abuses. Numerous instances can be cited where it takes more time and effort to complete the formalities and checking than to do the actual purchasing, and worse still is the fact that often the cost of checking exceeds the cost of the goods being purchased. And mind you, these ‘extra’ costs are loaded onto the final selling price i.e., the customer pays for the organizational folly of process checks and controls. Re-engineering strives to minimize such process checks and controls, substituting aggregate or deferred controls. The risk of possible increases in abuse is amply compensated by lower costs and elimination of hassles and encumbrances associated with the controls. Furthermore, it must be remembered that even in the old process there was absolutely no surety that the process was immune to abuse.

Reconciliation is minimized Reconciliation is not only a non-value-adding activity but it also mars the relationship with business partners. Reconciliation jobs like inventory management, accounts receivable, accounts payable, etc. are not only tedious but increase overhead and have a negative influence on organizational efficiency. Errors and need for reconciliation are enormously reduced if the work and responsibility of a particular activity is bestowed on one source only i.e. either on the organization or its business partner. Single ownership rather than dual ownership not only improves business relationship but also increases process efficacy through minimized reconciliation. This point is important: traditional business processes have too many reconciliation points that not only create mistrust but add cost and bring down the overall business efficiency. This point is to be remembered while designing business partnerships with suppliers and delivery chain partners.

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Hybrid centralized/decentralized operations are prevalent A unique feature of the re-engineered process is the ability to simultaneously leverage the advantages of centralization and decentralization in the same process. Proper deployment of information technology enables companies to operate as though their individual departments/units were fully autonomous, while the organization still enjoys benefits as well as economies of scale or centralization. The process hardware and software are so oriented and designed that employees are encouraged to practice empowerment without flouting or abusing the company’s overall policy directions and operating norms. The use of information technology helps to re-engineer the processes so as to eliminate bureaucratic machinery and hassles. The employees are empowered to take decisions though they are guided by centralized policies like selling prices, delivery schedules and other conditions.

Work units change from functional departments to process teams Through teamwork, individual efforts are clubbed together to perform an entire process bringing in synergy and eliminating the incongruent goals. The traditional management practice of dividing a ‘work’ into tiny pieces to be carried out by different people was really a fractionation of a whole process. This fractionation promotes incongruent goals among the different people involved. One executive might only care about inventory management, while the other may be bothered only to meet the delivery time without caring about quality. Instead, the people and goals are clubbed together to perform the entire process in synergy.

Jobs change from one-off to multi-dimensional work Process team members now have different kinds of job; instead of the individualistic approach they now share responsibility with their team members for the whole process. Individual team members are encouraged to develop a broad picture and acquire multi-skills. People spend more time doing real work rather than doing may unproductive works like checking, reconciling and tracking. Re-engineering thus eliminates not just the waste but non-value-adding work as well. As work becomes more multi-dimensional, it also becomes more interesting and substantive leading to personal development and growth opportunities for the employee.

People’s roles change from being controlled to empowered A re-engineered process cannot be deployed without management agreeing to empower the process workers. Re-engineering and its consequent empowerment require and promote people-development initiatives as well as set new guidelines for subsequent recruitments. Process team workers are required to think, interact, use judgment, and make decisions. Since re-engineering gives a team the responsibility of completing an entire process, it is logical that management must also give the team members the authority to make the decisions needed to get the job done.

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Job preparation changes from training to education The emphasis shifts from training to education. While training increases skills and competence to undertake the ‘how’ of a job, education imparts the means to understand ‘Why’ and increases the workers’ insight and analytical power. Companies also have to change their recruitment polity to hire educated people and also take initiatives to institutionalize continuing education so that there is no dearth of knowledge and skill.

Focus of measurement and compensation shifts to entire performance In a re-engineered process, employees are normally paid on the basis of the value they create i.e., the process performance. A complete TV has a value to the company, not the soldered joints of the cord. Re-engineered process looks for that which has intrinsic value, which can be measured.

Organizational structures change from hierarchical to flat Re-engineering really breaks down the company hierarchy as teams with adequate autonomy and empowerment perform work. Requirements of supervision are minimal, as teams are required to analyze and take decisions as per situation. Hierarchical clashes are almost absent as team members enjoy equal status. Work is organized around processes and it is the teams that perform them. Communication and control are vested in the people performing the process. Therefore the need for managerial as well as functional support is greatly reduced and thus the organizational structure gets flattened. After re-engineering the issue of structure and control recedes into the background. In the flatter organization the senior executives come closer to the people performing the real value-adding work; they also become closer to the customer. Executives shed the traditional role of controller; instead, they influence and reinforce employees’ values and beliefs by their words and their deeds. In short, re-engineering practically changes everything about the company because all the aspects of jobs, margin, performance criteria, management and values undergo a radical change.

Role of information technology in effective BPR Sadly many entrepreneurs and managers make the mistake of considering IT as a magic wand that will automatically ensure process re-engineering. But they are soon frustrated, as the mere introduction of computers or other information technologies does not produce process re-engineering if the same old processes are being repackaged. A company that equates technology with automation cannot re-engineer. Many companies introduce ERP/SAP and other management packages without re-engineering the processes involved—they soon get frustrated with limited improvement or no improvement at all. Computerization or automation of ineffective processes does not make the processes efficient. Instead the ‘inefficiencies’ get more deeply rooted and institutionalized. The real utility of information

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200 MACRO STRATEGY technology is not in applications that make old processes work better, but in enabling organizations to create new ways of working. Information technology can provide, generate and collate real time data, can help analyze the data/information for real-time decision-making. Not only hastening up the process(es), information technology helps the organization in quality decision making. A good re-engineered process leverages information technology to attain radical improvement. Employee empowerment can be really effective if backed up by efficient real time information system. The scope of using IT in reengineering exercises is unlimited—its depth and breadth cover all aspects and processes that a business encounters. Innovative re-engineered applications leveraging the power of IT can provide distinctive competitive advantages over the nearest business rival.

A Few Wrong Notions about BPR BPR is not aimed at automating things one is doing at present, nor is it about doing things faster or doing what is being done now at a lower cost. Re-engineering is not fixing a problem or making a patchwork. Many professionals think reengineering is a tool for getting rid of personnel, but it is not! It is not the same as reorganizing, delayering or flattening an organization, though it is quite possible that re-engineering may result in flatter and more responsive organizations. It is no wonder then that this wrong perception on the part of some managers has given an ‘initiative non grate’ stamp to BPR—the unions look upon the imitative with doubt and fear. The opposition to BPR from trade union leaders is the result of wrong application and in some cases the malicious intention of the management.

Leveraging BPR for TQM Process re-engineering is not a straightforward matter of just following some set rules; nor do all the re-engineered processes look alike or have all the characteristics discussed above. Creating a new design requires insight, creativity and judgment. Viewed from a right perspective, BPR is an essential program that helps an organization to maintain its process orientation through breakthrough process improvements so that the company keeps pace with market changes. Readers need to see that continuous process improvement is ensured through the combined effects of breakthrough improvements, and continuous incremental improvement. The breakthrough improvements after implementation need to be supported or propped up by continuous incremental improvements to counteract the natural ‘sagging’ effect.

SUPPLY CHAIN MANAGEMENT Selecting suppliers, and the developing and maintaining quality working relationship with them have become today an important strategic issue for business

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PROCESS ORIENTATION 201 success. In the ever-changing scenario of market competitiveness, the companies are resorting to all sorts of outsourcing; what the customers are getting today is a bundle of value additions done by various supplier organizations under the aegis of the seller organization. As a result, there are numerous suppliers or several chains of suppliers to an organization; the expenses on materials & services procured from outside sources could be as high as 90 per cent or more of sales revenue. Even in traditional management practices the cost of input materials, depending on the nature of business, was as high as 50 to 70 per cent or more of sales revenue.

Paradigm Shift: Organizing Inputs for Quality Traditionally dealings with suppliers have been purely transactional, and generally adversarial. Most of the time the suppliers, barring the odd ones having leveraging power, were treated with contempt. Even today many organizations still have the same attitude. However, in general there is a paradigm shift in the attitudes of prudent businessmen or organizations who have either opted for TQM/change management or have resorted to outsourcing—they now realize that healthy relationship with suppliers is now a business imperative to ensure consistent supply of products and services to its customers. The role of suppliers and the logic to develop quality-working relationship with the suppliers have to be viewed from all together different perspective: z

z

z

z

z

z

A company may not have the financial, infrastructural, or technical ability to produce competitively all the parts or services that is required for the contemporary end product/service offering to its customers. In today’s competitive market it is, therefore, prudent to ‘outsource’ for efficiency, quality and cost effectiveness. The quality of final products or services is largely dependent on the quality of input supplies. Input supplies are either transformed or go through valueadded steps to become integral parts of the final output. The logical deduction from this hypothesis is that the ‘up-stream’ processes at the suppliers’ premises must have built-in quality assurance. Instituting a hundred per cent inspection regime of incoming materials is costly, often impracticable and shows a lack of faith in the quality assurance of the supplier’s processes. Rejection, scrap and rework after inspection of the suppliers’ materials is at best only a temporary measure. This action by itself is neither corrective or preventive actions carried out on the suppliers’ processes, nor do they assure the quality of the final product. One cannot inspect quality into a product. Rework raises costs but unfortunately traditional management has accepted ‘rework’ as part of doing business. The customer bears this cost, and the manufacturer’s acceptance of the burden sets the suppliers free from the obligation of correcting their processes. To put it in more concise words, one is really buying a supplier’s ‘process’ as the material supplied is the output of the outsourced or brought-out process.

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202 MACRO STRATEGY A logical deduction from this is that the ‘up-stream’ processes at the suppliers’ premises are important contributory factors to the quality of input supplies. z

z

z

z

z

Adherence to specifications does not guarantee the desired performance as every process has inherent variation. Supplies from different suppliers compound the problems as cumulative variations will encounter processing difficulties and adversely impact the quality even though the supplies may be within specification limits. Suppliers must have knowledge and insight into the processes of the company to whom they are providing input. This will induce them to improve their process and the output, which is being supplied to the principal. The policy of hiring the lowest bidder or hammering down the price of brought-out items/services, with no regard to quality and service, brings in unscrupulous vendors and induces a repugnant culture of nepotism, corruption, and apathy towards built-in quality. The suppliers who care quality quietly leave the field. No supplier, in actual practice, would be serious about satisfying the ultimate customer of his principal unless principal unless as a matter of policy has been seriously involved in the process of customer satisfaction. That’s why Deming’s extended process includes the input suppliers. A supplier would invest in process control and continuous process improvement only if he is assured of long-time business involvement.

The above points clearly brings out that in order to combat competitive challenges today, the buying policy and relationship with suppliers must undergo a radical change. There is an absolute necessity of developing a close working relationship or partnership with the suppliers.

Sourcing Policy To make a new beginning with supply chain management, the start has to be with the radical change in sourcing policy, which reflects management’s philosophy and business strategy. The twin procurement policies that are still prevalent with most of the organizations are (1) arm-twisting the suppliers to reduce price, generally through competitive bidding. Lowering the procurement cost is the objective given to buyers, and (2) to have several sources of supplies for any regularly required item, apparently to insure against disruption of supplies. A supplier, who agrees under duress to supply at low cost, will try to maintain his margin at the expense of quality; he knows how to camouflage poor quality from being detected by the inspectors. As per TQM philosophy the traditional purchase focus on lowest initial cost of purchased material must be reoriented to lowest total cost. Management must acquire profound knowledge in purchasing. They must endeavor to develop working relationship with one source per item to ensure consistency of quality in

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PROCESS ORIENTATION 203 supplies, and limiting the problem of variation in further processing stages. Apart from the benefits of quality supplies, and operational advantages, the single source of supply makes is cost effective and best for economy—it will bring down the total cost, even the inventory carrying cost, accounting & related administrative paper work will be less. To quote Deming once again, ‘The price tag is still easy to read, but an understanding of quality requires education’ [AC10].

INNOVATION Innovation vs Invention Generally the word ‘innovation’ gets mixed up with the word ‘invention’, most people consider ‘innovation’ and ‘invention’ to be the same thing. But it is not so. The word ‘invention’ typically signifies something original, a discovery of scientific theory, technical apparatus or instrument, or method, etc. Invention is original thought that outlines the theory or hypothesis behind a particular phenomenon or possibility. It is also making, creating, designing or producing something new for the first time, something that did not exist before. Some companies, particularly in the field of medicines, computers, electronics, etc. who carry out focused R-and-D, have been successful in inventing technologies or products. Innovation deals with exploitation of new concepts, theories, or inventions in commercial or social use, and deals with radical changes in ways of doing things. It involves not just new methods and devices, but also new customs and ideas. The term ‘innovation’ is not restricted to technological or scientific matters as most people think. Very few people talk of quality circles, the PDCA cycle, problemsolving tools, statistical techniques, etc. as innovation, but they are—they have made a radical impact in management and other fields. The competitive world today requires more social and organizational innovations. Radical ideas for reorganization, harnessing human talent, raising quality levels, cutting costs, budgeting and finance, improving communication and relationships, assembling products, or providing services that could ensure a distinctive service edge are also innovations. Innovation can also depend on finding not new but better work methods, products, services, and processes that would be able to establish a competitive edge. It creates and introduces original solutions for new or already identified needs.

Innovation as Business Imperative In this dynamic as well as volatile economic environment one must, indeed, innovate to remain afloat and be competitive. Apart from these known factors, one need to have a broader perspective to understand ‘innovation’ as a business imperative: z

Rules of governance with respect to business, industry and economy are fast changing.

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204 MACRO STRATEGY z

z z

z

z

z

z

z

z

Globalization, deregulation, reduction or elimination of subsidy, removal of traffic barriers, etc. are now too common phenomenon. Some countries or companies benefiting, and for some these are setbacks and stiff challenges. New technology and business practices are reducing and shifting employment. To feed a ‘new population’, which based on projected world population growth of 1.8 per cent is currently estimated as large as world’s entire population in 1940; China and India are two nations who face the greatest challenge on the score. India’s population now at 100 crores will soon surpass the population of China who has been able to contain its population due to implementation of regimented birth control rules. Meeting additional demands for food, raw materials, and products with land resources becoming scarce and complicated. Meeting the stringent norms of waste disposal, use of fertilizer and biocides, environmental regulation, and increasing pressure of ‘green’ activists. Meeting unprecedented increase in energy requirements, containing the price of oil, saving energy and developing new sources of energy will be big challenges. Genuinely improving the living and purchasing standards of people in developing countries standard and simultaneously creating infrastructure for education, health, and creating job opportunities. Also meeting the growing expectation of further higher standard of living in the developed countries is also a factor. The growing dichotomy between the two extreme situations is a challenge that requires new innovative treatment. The challenge of creating more jobs particularly in developing countries against the trend of manpower rationalization due to pressures of cost effectiveness and competitiveness. Responding the ever-increasing demands of society and stakeholders.

Superimposition of all these factors over the business dynamics is not a figment of imagination but hard realities. Such colossal and scaled up challenges cannot be met purely by technology and capital mobilization, it will require innovative approach and solutions. Governance and management has to undergo radical transformation to meet not only the challenges that have already appeared on the horizon but also those to come. Like small improvements or Kaizen, innovation has to be an integral part of TQM so that new situations can be met head-on. For developing countries, leap-frogging through innovation is essential to reduce the technological, economical and living standard gaps with developed countries. Innovation has to be an essential ingredient in the overall strategy to satisfy today’s imperative of rapid economic growth and social development. The standard of living and quality of life can be enhanced only through creating new ways of handling the challenges, better use of scarce resources, and meeting social obligations. Therefore innovation must become an important element of the TQM deployment strategy so that focus is not lost on organizational transformation and self-renewal of leadership and management.

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Characteristics and Approach of Innovation Innovation is a great-leap approach characterized by technological breakthroughs, use of latest management tools, market penetration strategies, and new production techniques or adoption of new theories or inventions. Its impact is dramatic, and could also be abrupt and volatile. Imai describes the progress achieved through innovation as staircase progression; the pace is of big steps. Innovation often scraps the old and builds a new; sometimes it rebuilds an old edifice. Normally innovation calls for large investments, particularly in case of technological innovation or commercialization of a new invention. Innovation also aims for short and/or quick returns on investments. Innovation depends by and large on the creativity of a few individuals or the expertise of functional specialists. In many organizations, the R-and-D department spearheads innovation. Innovation is generally technology- and system-oriented, and the information flow is generally restricted. One should comprehend that the standards or effects achieved through innovation are always under threat of competitive forces and bound to decline because of the natural law. To maintain even the same level of standard achieved through innovation, continuous propping up through improvement is necessary. Twin strategy of Kaizen and breakthrough improvements through innovation efforts is required to surge ahead of the competitors. This calls for strategic investment in R&D and other efforts of innovation. TQM advocates proper coordination between innovation and continuous improvement efforts, and this intermeshing of efforts will create synergy for enduring competitiveness and profitability.

MEASUREMENT ‘What cannot be measured, cannot be improved’ is an important dictum of TQM. The concept of continuous improvement and several other concepts of total quality management cannot be applied if critical elements, processes, and performance cannot be measured. Clarifying and identifying the parameters to be measured and then defining the measures and collecting data will facilitate systematic implementation of continuous improvement initiatives for all processes, products, and services; comparison of the pre and post deployment data help course-correction. The measurement aspect of TQM asks the question: where are we, and where are we going? Generally the expectations are in excess of the minimum standards specified, and therefore it is important to know how to measure customer expectation or what kind of scrap and rework is being generated? But more complex is to evaluate the quality or overall performance of the company, whether it is improving or getting worse, acceptable or unacceptable? As Dr Deming has pointed out that one of the deadly disease that plague top hierarchy is ‘management by use of visible figures, with little or no consideration of figures that are unknown or unknowable’. In traditional management practice close monitoring is done on the visible figures that are generally the measures of short-term financial figures or goals. The TQM approach is to identify, measure, and focus on the ‘unknown

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206 MACRO STRATEGY or unknowable’, the often neglected or hidden elements and characteristics that have long-term repercussions on the destiny of the organization. In traditional quality management practice, inspectors are deployed to detect defects and rework groups are engaged to rectify process defectives. It is interesting to note that the total costs against these two activities are neither reported in productivity reports nor in the pages of statement of accounts; they are all hidden burdens. Professionals accustomed to this traditional detection-oriented concept do not even ponder and question this way of working, and as such do not bother to keep a measure of detection-oriented activities. Casually they would guesstimate the cost of rework and poor quality to about 4 to 5 per cent of gross sales, while studies reveal that it could be as staggering as 30 to 50 per cent of gross sales. Should we not measure this wastage and turn it into a profit opportunity? The higher precision in information needed in modern business is best attained when the information can be ‘said or put in numbers.’ For this we need a system of measurement consisting of a unit of measure, and a sensor. A unit of measure is a defined amount of some quality or feature, which facilitates evaluation of that feature in numbers. When measuring abstractions such as ‘well being’, innovative measures are agreed on to establish units of measure. Counting the violation of abstractions or lack of abstract quality, etc. is one way. For example number of accidents (which is lack of safety) is an effective measure for safety, which is an abstract. In case of courtesy, beauty and similar intangibles, unit of measure can be ‘instances of lack of’ such abstract qualities, the instances can be counted. According to J. M. Juran, in such cases one can go a step further by measuring through an index i.e. a ratio of the number of such instances of ‘lack of’, to the opportunity for such instances, e.g. road accidents per million man-hours of driving. Another way commonly used is to break the abstractions up into identifiable realities. A familiar example is the abstraction ‘quality appearance’ of a hotel room. One can make the job relatively simple by breaking it into identifiable specific features that collectively constitute the ‘quality appearance’ like the state of the carpet, lavatory, linen, curtains, flower vase, ashtray, writing stationery, etc. The input and output of all processes are measurable characteristics and there cannot be any excuse of not measuring them. It is important that measurements of important elements should be made to ensure process stability. Unless it is measured, the real state of affairs cannot be judged, and any talk of improvement becomes redundant. Measuring the non-conformances, defectives, wastages, etc., and simultaneously taking action on the elements causing the non-conformances can most efficiently improve process deliverables or output including quality and value. For most product and service deficiencies the unit of measure is expressed by a simple generic formula that provides a fair basis for judgment: Quality =

Frequency of deficiencies Opportunity for deficienciies

A wide spectrum of units of measure is in use to measure broad range of quality and performance characteristics concerning technological aspects, product

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PROCESS ORIENTATION 207 performance, errors and failures, functional or departmental performance, top management reviews, senior manager performance evaluation, etc. A wide spectrum of units of measure is in use to measure a broad range of quality and performance characteristics concerning technological aspects, product performance, errors and failures, functional or departmental performance, top management reviews, senior manager performance evaluation, etc. Generally the measures at the lower levels are more or less standard or common, and are in place at most organizations, whereas a lot of innovative measures are required for the kind of measurement necessary at the top and senior levels to ensure consistency and constancy of TQM deployment, and the measures obviously have to be unique to each organization’s need. A quality measurement system should include summaries of (a) non-conformance quantities and costs, (b) scrap, rework, and repairs, (c) supplier performance, (d) product reliability, and (e) cost of quality. Pareto charts are extensively used to show quality measurement results, though graphs, trend charts, pie charts, bar charts, and other statistical tools are also widely used. However these messages or data will go to waste if no corrective and preventive actions are taken. Productivity and quality control are only measures, they are not reality, and they serve as a way of checking results. Productivity is only a description of the current state of affairs and the past effort of people. Quality control is also a post-mortem measure of reality. Efforts will be needed to improve productivity and quality, and the only way is to stabilize and/or improve the process. Measurement is a yardstick of whether the goal has been achieved or not, and a guide for further efforts towards improvement. The collections of customer satisfaction data measures the extent to which customers perceive their needs are met. There is no place of hunches or opinions in TQM, rather objective and checkable data provided by measurement is used for realistic assessment of performance under various headings and initiating steps for further improvement. The selection of objective ‘measures’ to evaluate the unique characteristics of widely varying processes is a huge challenge. This selection is straightforward in manufacturing areas where (a) customers generally constitute a coherent group having similar expectations, (b) generally customers are isolated from production, (c) the outputs are tangible, and (d) the operations are repetitive. Tangible outputs facilitate direct physical measurement; customer requirements can be determined objectively and translated into definitive engineering specifications. The deployment of principles pf continuous improvement, and selection of ‘measures’, however, encounters hurdles in non-manufacturing areas where (a) customers may not have identical or similar expectations, (b) they are generally involved in the delivery of services, (c) outputs and value added are generally intangibles, and (d) quite a large number of processes are not repetitive in the true sense, or are infrequently repeated, and the outputs can also be unique every time. Establishing measurable objectives for professional, administrative, hospitality,

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208 MACRO STRATEGY Table 7.5 Three Measurement SL No. Levels Scope 1

Process

Activities, variables, and operations of the work processes

2

Output

Specific features, values, characteristics, attributes, etc.

3

Outcome

Ultimate impact of the process

Four Types of Measures

Parameters

Remarks

Measures at process level include supplier’s input of products and services, and parameters that directly control the integration of people, materials, methods, machines and the environment within the work process. Output measures can be examined by two sides i.e. as desired by the customer representing the voice of customer and the other side represents the output characteristics actually delivered by the process representing the capability of the process Dependent on what customer does with the product or service. Outcome measures are difficult to define and analyze because they are confounded by customer's work process.

Predict the Performance characteristics parameters of outputs before they are delivered to customers.

Measures at output level reveal what is delivered to customers.

Requirements Capability

Impact can only Customer be determined Satisfaction after the product had been delivered or service provided.

and similar services is challenging, as it is difficult to identify or capture a complete set of customer expectations. How can the behavior of customers involved in service transactions be predicted? How should we measure and analyze administrative processes that are repeated cyclically such as quarterly, half yearly or annually? In service and non-manufacturing areas, such issues really throw up challenges to identify and define ‘measures’. To overcome the difficulty of measuring diverse business characteristics, the measurements are taken at three levels: process, output, and outcome, the details are summarized in Table 7.5. Capturing the full set of performance measures is not practical always due to the factors beyond the objective and tangible outputs involving intangibles, subjective characteristics, and other unique outputs .The measures developed and designed at the process, output, and outcome levels mitigate the task to a great extent. The concept of upstream process and internal customer is used at every work-process model. Four types of measures viz., performance parameters,

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PROCESS ORIENTATION 209 requirements, capability, customer satisfaction are used in three distinct levels within the process improvement model. These measures are not limited to one dimension of measuring customer satisfaction and the resultant outcome, rather measurement in additional three more dimensions involving stakeholders satisfaction is also important in TQM, more explicitly they are financial return for share holders, job satisfaction for employees, and social impact on the community. It is essential to measure final as well as in-process outputs of products and services, technological as well as human elements or factors responsible for the outputs or deliverables, as it is necessary to measure all related tangible and intangible aspects. To ensure perfect understanding, and communication between service provider and receiver care should be taken to make certain that measures of product and service evaluation used by user or receiver are identical with that used by providers or suppliers. Other than universally used measures, the other measures agreed between the concerned parties should be understandable, conducive to uniform interpretation, economic to apply, and compatible to existing systems and sensors of the involved parties. Since quality has become a top priority strategic consideration, ‘quality reviews’ by the top management, indicates their commitment and seriousness in establishing the efficacy of total quality management initiatives. Performance review of major business processes, and factors that lead to customer satisfaction must be measured and corrective and course-correction actions thereof should be institutionalized. The evaluation in terms of unit of measures is done by sensor. A sensor is a specialized detecting device, method or technological instrument or human being designed or trained, and deployed to recognize the presence and intensity of certain phenomena and to convert that sensed knowledge into ‘information, which can carry out the evaluation, and state the findings in numbers, in terms of unit of measure’. Common examples of human sensors are patrol inspectors, watchmen on the beat, field auditors, food tasters, etc. The precision and accuracy of sensors is important. The precision of a sensor is the measure of ability of the sensor to reproduce its results on repeat test. The accuracy of a sensor is the degree to which the sensor tells the truth. In case of human sensors care should be taken against bias. Sensors are used at all levels of the company—at managerial levels as well as technological levels. Because of the importance of sensors, the ISO 9001 standard has been given lot of stress to institutionalize the periodical checking and calibration of measuring instruments. Absence of meaningful goals and measures can lead to vicious circles of wandering in unnecessary activities and wrong directions. The two-part measurement framework is quite effective; the first part uses three distinct levels of measures viz. (a) guiding operations within the process, (b) assessing the delivery or output, (c) quantifying the outcomes or impact, while the second part of the frame work measures the satisfaction against perspectives of four basic stake holders namely customers, shareholders, employees, and the community at large.

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OVERVIEW OF THE BASICS OF STATISTICAL TECHNIQUES USED AS TQM TOOLS This section gives just a glimpse of the basics of statistical techniques to help readers to appreciate the relevance and indispensability of certain techniques that act as TQM enablers. Serious readers interested in the theory may kindly consult reference books on statistics or those TQM books which have elaborately dealt with statistical tools & techniques used in TQM. TQM without statistical techniques is unthinkable; implementation of total quality management principles is just not possible without deploying any of the statistical techniques or tools. Leaders, businessmen, and professionals, irrespective of their specialization, need to have an overview and appreciation of statistical techniques as used in business and governance, just as in this modern world they cannot ignore information technology. Unfortunately most businessmen and professionals have an unfounded fear that statistics is too difficult and complicated to understand. Thanks to advancements in software packages, complicated calculations and graphics can be done on computers and this development has really made statistics user-friendly to non-statisticians. Leaders or professionals can now easily understand, interpret, and initiate actions based on the statistical data though they might require the help and guidance of a professional statistician in certain cases. Life is a pattern and its every activity follows a rhythm. The heartbeats follow a particular rhythm; if the rhythm of the heart beat shows some irregularity or abnormality the doctor says that we have a problem! The pump supplies the blood to the heart, if the rhythm is distorted or erratic, the doctor or God intervenes. A workaholic professional wonders about the worried (rather panicky) expression of his wife when he returns home early at 4 PM instead of usual 8.30 PM to 9 PM., it is the broken rhythm of the routine that triggers the warning bell in the mind of wife. The point is that all our activities of life, whether it concerns our body, mind, profession or family life follow a certain pattern or rhythm. Whether one is suffering from typhoid or not, is diagnosed by the doctor by studying the temperature chart of the patient. We may not actively notice, but the milkman comes more or less in same time, so does the newspaper vendor when delivering newspaper early morning at certain time. All our daily activities or chores follow a particular pattern or rhythm. Any major variation from this routine or rhythm causes some concern. The ‘spikes’ in our routine (normal) trends or rhythms are indicative of aberrations in the system. These aberrations need to be corrected, otherwise one day the system could be out of tune. Regularity of these spikes is indicative an underlying pattern and suggest its treatment, but if the occurrences are sporadic or random, interpretation and correction may be totally different. When the doctors say that cholesterol level is high, he is referring to an indicative range or limit; similarly range or limit is also a usual thing in our profession or daily home/social life. If someone behaves irrationally beyond the accepted norm, we admonish him by saying that he has crossed the limit. The foregoing simple examples from daily life is referred to explain that all activities whether in profession, or daily life develop a rhythm

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PROCESS ORIENTATION 211 or pattern, and that there could be aberrations of this routine, some could be chronic or some could be sporadic. Similarly measurements or norms do have ranges or limits. Variation from this normal or acceptable ranges or limits is cause of concern or warning. By study of these variations one can do educated guess of predictability and probability. Systematic mathematical study of the characteristics of trends, patterns, limits, range, variation, predictability, etc. are done through mathematical subject called statistics. Therefore through statistics, one can study the business or social activities for trends, problem identification, etc. and use this powerful tool for solutions and continuous development and stay focused. A ‘modern world’ without statistics is unthinkable. The census is a good example of the usefulness of statistical planning and application in modern governance. The conducting of exit polls during elections is another statistical application; similarly agricultural or industrial production forecasts or demand forecasts of corporate houses are all the results of application of statistical techniques. The urban planning, be it of road or other infrastructure are based on some form or other statistical tools or techniques. The provisions shop of a new locality is stocked based on some assumption of figures or trends or expectations, it might be the output of a scientific statistical program, or could be a mere statistical assumption by the shop owner. We may not always realize but statistics in some form or measure is linked with our business and daily life. Statistics helps us: z z

To focus on the object, collect, measure and collate data. To analyze trends, pinpoint problems, and identify opportunities for improvement. In getting feed back by plotting and measuring the trends, and helping us to take remedial and improvement action.

Thanks to the seminal work of Shewhart, Deming, Taguchi, and other pioneers of statistical theory and application, it is possible to measure and control variation to ensure continuous improvement. Costs go down as variation is reduced, better quality ensures customer satisfaction, improves competitiveness, and higher profitability. Understanding the standardized definitions used in statistics is a prerequisite for the study and application of statistics and statistical techniques. A few important definitions are given below but for in-depth study the students should refer to some good books on statistics.

Population A collection of group of items/products that may be finite or infinite. It could be a group of products, observations, individuals, measurements or, a shipment or, a lot. It may be real or even hypothetical. However, common feature is that all the items must possesses a certain characteristic of interest.

Sample It is a subset of population. It is a small representative groupsubset of products or items selected from the population. A representative sample has the same quality

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212 MACRO STRATEGY characteristics as that of the parent body, i.e. the population. It is not feasible, most of the times, to obtain data in every element of the population; large volume of data collected from population is generally impracticable so samples are taken from it.

Parameters Measures that describe the characteristics of a population.

Values and Groups In statistics the practice is to call values as observation or elements, and the group is called a data set.

Raw data This is raw, unorganized statistical data, meaningless numbers obtained through customer surveys, process inspections or tests, product quality characteristics, counting defective products, measuring response times for delivering services, and in numerous other ways. Raw data hardly gives information that can be used to make decisions and must be organized into meaningful formats to be interpreted and used. However, there has to be planning and care to ensure that the right data is collected properly as processing flawed data will generate flawed output.

Useful data Those that can be used to identify and eliminate the immediate symptoms and root cause of a process or product defect or machine or system failure.

Variables Characteristics those are measurable on a numerical scale. A ruler or a micrometer or a thermometer reads numerical values.

Attributes Characteristics that can be classified as either conforming or nonconforming to a stipulated standard or specification. The measuring instruments only classify the results as good/bad, or acceptable/unacceptable. Attribute data are countable but do not provide measurement details that would help process improvement. They summarize the results of a process or operation and indicate the area where something is amiss.

Process capability Ability of a process to consistently meet specifications. Process capability studies are part of the operational requirements of TQM.

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PROCESS ORIENTATION 213

Array An array arranges numbers in ascending or descending order.

The frequency of distribution Arranges data into grouping that show the number of observations in different categories.

Central tendency It is the characteristic that locates the middle of a distribution. Figure 7.3 graphically explains the concept. The curves A, B, C are showing central tendency characteristic. Though different symmetrical curves A and B have same central tendency, the symmetrical curves B and C have different central tendencies.

Mean It is one of the most common measures of central tendency. A mean is the arithmetic average of a set of values or data set calculated by adding all values in a group and dividing by their number. The equations of population and sample means are based on the same concept except that different notations denote them as shown in Table 7.6.

Weighted mean It is another measure of central tendency. It is similar to the mean concept, except that the mathematical calculation weighs the importance of each value in relation to the whole data set.

Median Another measure of central tendency, it is the value representing the center of an array of numbers.

Mode It is the value that appears most often in a set of numbers.

Figure 7.3

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214 MACRO STRATEGY Table 7.6: Notation and Formulae for Statistical Mean Type of mean

Notation

Population mean

μ

Sample mean

X

Formula =

∑X N

=

∑x n

Explanation N=number of elements in population n = number of elements in sample x= observation Σ = summation Note: students may please refer to books on statistics to know other forms of measuring the central tendency, such as weighted mean, median, or mode. Same as above.

Figure 7.4: Spread

Dispersion or spread This is the characteristic that locates the middle of a distribution. Dispersion or spread is an important aid to understanding processes and their output. Figure 7.4 gives a graphical presentation.

Range It is the difference between the highest and lowest values in a data set.

Assignable cause The factors causing variation that can be identified and eliminated.

Chance cause/Random cause/Common cause Variation caused by random factors, which cannot be detected or identified.

Variance This is another measure of dispersion. It measures the variation (deviation or distance) from the mean of all values in a data set.

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Population variance This considers all observations in the population, and is the average absolute deviation calculated from the population data. Summing up the squared distances between each mean and each observation and then dividing by the number of elements in the population measure it. Instead of calculating the absolute value of each deviation, each number is squared to ensure the value is positive.

Sample variance This considers only the observations in the sample.

Measure of central tendency The tendency of measured or observed data to cluster around a central value.

Standard deviation Standard deviation measures the deviation or distance from the mean and is derived from variance. Standard deviation can be computed both for sample or population and are the square root of the respective variances i.e. sample variance and population variance respectively. Sample standard deviation = s =

∑(X − X)2 n −1

Sample standard deviation = σ = =

∑(X − μ)2 , N

σ is greek letter sigma.

Normal Distribution The tendency of a large number of cases of observed data of whatever kind to be distributed in a bell shape or curve, which is also known as a Gaussian curve.

Bimodal distribution It is a curve with two modes, having two distinct humps like a camel’s back, indicating two groupings of data.

Skewed left distribution A distribution skewed left has most of its measured points on the right side of distribution and fewer on the left, suggesting that more data points are in the higher ranges of the X axis.

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216 MACRO STRATEGY

Skewed right distribution A distribution skewed right has most of its measured points on the left side of distribution and fewer on the right, suggesting that more data points are in the lower range of the X axis.

Random distribution A random distribution has no recognizable pattern and does not reveal much information.

Statistics The resulting numbers from the computation of ‘mean’ and ‘standard deviation’ from sample data is called ‘statistics’, in other words it is a measure that describes the characteristics of a sample. Statistics is the science that deals with collection, collation, classification, and analysis of data or information contained in ‘sample’ and is used to make inferences about population parameters that are unknown. Statistics can be subdivided into three broad categories (see Table 7.6). Of the three types of statistics, ‘descriptive statistics’ is the study of organizing, summarizing, and displaying data, ‘statistical inference’ derives information of a population based on the characteristics of a sample, and ‘probability’ is reaching conclusions about a sample by studying the population.

RELEVANCE OF DATA AND DATA COLLECTION In TQM philosophy, generating accurate data and using it for continual improvement is sacrosanct. It is a pity that dishonest managers manipulate data to serve their Table 7.6: Statistics used in TQM THREE AREAS OF STATISTICS NORMALLY USED IN TQM Descriptive Statistics Inductive Statistics Describes the characteristics Draws conclusions on the of a product or process population based on information based on data collected available about a sample about it. Organizing, presenting The sample has to be and displaying data in representative of the population meaningful patterns for study through: Marketing uses statistical z Arrays inference to find the right z Frequency distributions, sample size to conduct z Frequency Polygons market surveys on a new z Pareto diagrams product. z C-E diagrams, etc.

Probability Study of a sample based on knowledge of the population (the reverse of statistical inference) Make statements about the likelihood of a sample having certain features based on information about the population.

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PROCESS ORIENTATION 217 vested interests. Data management is the primary element for correct deployment of statistical techniques, and ensuring transparent data collection is an important characteristic of TQM. Data is the primary element on which statistics and statistical techniques are built, and hence top management’s active interest and superintendence is required to ensure that there is no laxity or manipulation in data management. Data generated by properly implemented statistical techniques give clues and guidance to anticipate and correct non-conformity and reduce variability in the system. Data is used in all areas of statistics viz. descriptive, inductive and probability. Data is also the basis on which corrective and preventive actions are taken and reviewed, using measurement and benchmarking. Process control, variation control, Six Sigma initiatives and even Balanced Scorecards are based on data analysis, and the success or failure of such initiatives are also indicated by data. Customer satisfaction or delight is indicated by data. Data is fundamental to the TQM axiom that states that which cannot be measured, cannot be improved. Appropriateness and accuracy of raw data is crucial as data are processed through statistical steps until useful information is generated. Unfortunately there is a lot of indiscipline in data planning, collection and analysis. TQM philosophy says, ‘Speak with data and act on data’. Data reflect the real state of affairs, give warning through trends, and throw up opportunities for improvement. Whatever is done or not done needs to be captured in time and analysed for continuous improvement. Accomplishment is only authenticated by data. Top management has to lay a lot of stress on the need for honest and efficient data management and a work culture where data is not something alien or fearsome but a valuable input for decision-making and improvement. Top management should take extra care to train and motivate people in data collection and relevant statistical techniques. Management should also institutionalise systems and procedures to ensure calibration, training and checking of measuring instruments and sensors to avoid faulty data.

Frequency Distribution The frequency distribution graph is a fundamental tool that gives a representative picture of the nature and extent of total variation and studies the variation after improvements. The ‘central limit theorem’ discovered by Walter A. Shewhart, the statistician and quality philosopher of the 1920s, establishes that if measurements from a process or machine are graphed, they often form a bell-shaped frequency distribution, which has been likened to a London bobby’s hat. This distribution curve is also called normal or Gaussian distribution. If a distribution of measurements is graphed from a chance (constant cause) system, it does not matter whether the shape of the distribution of individual values (population) is triangular or trapezoidal, the averages of different sized samples will have a similar central tendency and will be distributed in a bell-shape. This bell-shaped distribution occurs frequently in business and nature. A normal curve has three important characteristics.

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218 MACRO STRATEGY It is shaped like a bell symmetrical about the mean, and the median, mean, and mode are same. Various extraneous reasons can distort the normal distributions to such shapes as bimodal, skewed left, skewed right, and random. The Bell curve shows how to use the mean as a measure of central location and dispersion. Data have a tendency to cluster around a central value and variance around that value is known as dispersion. The data of the curve can be analysed graphically and mathematically. Much of the variation in nature and in industry follows the frequency distribution of normal curve. The theory implies that any process can be monitored and controlled over a period of time by sampling from a population of data and calculating the mean; the sample mean will be close to the population mean. A chance or constant-cause system means that there are no abnormal factors causing measurements to vary. The frequency distribution according to A. V. Feigenbaum is a tabulation, or tally, of the number of times a given quality-characteristic occurs within the sample being checked. The tabulation may be plotted with the frequency of occurrence on the vertical axis and the relevant characteristic (like inches, volts, magnetic strength, pounds, hardness, etc.) plotted on the horizontal scale. The approximate central value, the spread of the value and the relation of the values to the tolerance can be deduced from the frequency distribution tally curve. The information also evaluates the tendency of the variation and compares the process upper and lower limit with the specified lower and upper limit. Frequency distribution gives a graphic or pictorial view and thus a better understanding of the process conditions than raw data of ‘Yes/No’ or ‘Passed/Rejected’. Figure 7.5 shows this in a simple way. A histogram is a simple bar graph using class interval and width. Though sufficient for many quality control problems, it does not provide with much analysis. There are two principal analytical methods of describing a collection of data:

Figure 7.5: Frequency Distribution of Rejects in a Process

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PROCESS ORIENTATION 219 measures of central tendency and measures of dispersion. Three common measures of central tendency are mean, median, and mode. These help to describe the center of a set of observations or measurements. Average is used (a) when the distribution is symmetrical or not appreciably skewed to the right or left; (b) when additional statistics, such as measures of dispersion, control charts, and so on, are to be computed based on the average; and (c) when a stable value is needed for inductive statistics. A control chart based on the median is user-friendly and excellent for monitoring quality. The mode is used when a quick and approximate measure of central tendency is desired. The mode of a histogram is easily seen since the tallest column represents it. It describes the most typical value of a distribution, such as the most common age of a particular group. The frequency distribution makes important contributions to statistical inferences and process control. It reinforces the principle that some amount of variation must always be expected among manufactured parts or repetitive services and establishes an important approach to the study and control of the variation. It helps to answer the vexed question whether the variation in a process will allow parts or services to be produced or delivered within specification limits. It is to be noted here that a ‘sample’ frequency distribution is represented by a histogram, whereas a population frequency distribution is represented by a smooth curve. The more data points there are the more a histogram will resemble a curve. The primary objective in selecting a sample is to learn something about the population that will aid in making some decision. The sample selected must tend to resemble or represent the population. How successfully the sample represents the population is a function of the size of the sample, chance, the sampling method, and whether or not the conditions change. Figure 7.6 gives a comparison of sample and population.

SAMPLE Statistic

POPULATION μ – mean

X – average s – sample standard deviation Note: ‘average’ changes to ‘mean’ when used for population

σ –-standard deviation

Figure 7.6: Histogram versus Curve

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220 MACRO STRATEGY Another important feature of the frequency distribution is the shape of the curve. It indicates the central tendency of measurements, the spread of data, and the number of measurements within specification limits. If the specification limits (upper and lower) are added to the graph, interesting deductions about the process capability or data spread come out. Skewness or distortion is often the result of the operation of some strong factor or factors that may be difficult to identity. It could be of tool chatter or some irrational behavior. However, there has to have some reasons for the distortion and they need to be corrected. The fundamental contribution of frequency distribution towards process control and improvement is summarized in Table 7.7. Table 7.7: The Uses of Frequency Distribution The fundamental contribution of the frequency distribution Reinforces the principles 1 (a) All processes have some inherent variations and some amount of variation must always be expected among manufactured parts or service rendered. (b) The general nature of variation is such that the distribution will take a graphic shape. (c) A methodology can be established to study and control the variation. 2

3

Addresses the basic steps of any operation or business (d) Taking observations/readings. (e) Analyzing the observations/readings. (f) Determining ,by analyzing the process capability, if the observations represent ideal, economical, or competitive operating conditions. (g) Taking corrective actions where necessary. The predictive value of the frequency distribution (h) To predict the characteristics of an entire lot of completed units from the characteristics of a frequency-distribution sample drawn from that lot. (i) To predict the characteristics to be expected in the future on a process or product design from the characteristics of a frequency distribution sample drawn from the process or units of that product design.

Some of the scope and usefulness of frequency distribution is in evaluating new design, controlling incoming material, controlling and comparing products and processes, measuring dimensional and service characteristics, evaluating performance of tooling and various TQM initiatives, and assessing accuracy of fit between parts. Some of the basic tools of descriptive statistics are so simple and effective that the Japanese (after exposure to the ideas of Deming, Juran and Ishikawa) have institutionalized them as the Seven QC Tools and since then they are universally used by managers, engineers, QC circles, teams and other small groups for identifying and solving problems. These seven QC tools (Check-sheets, Graphs, Scatter diagram, Histograms, Control charts, Pareto diagrams, and Cause-andeffect diagrams) have been dealt with separately in Part III of this book.

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PROCESS ORIENTATION 221

MEASURES OF VARIATION The measures of variation describe how data are spread out or scattered on each side of the central value. Variation and dispersion are similar terms describing the spread of data. Measures of dispersion and measures of central tendency are both needed to describe a collection of data. Three common measures of variation are range, variance, and standard deviation. Range is a simple indicator of dispersion, easy to use and understand and therefore user friendly. It is used in one of the principal control charts used in quality control. The primary advantage of range is in providing knowledge of the total spread of the data, especially when the quantity of data is too small or too scattered to justify the calculation of a more precise measure of dispersion. But it has a serious drawback. As the number of observations increases, the accuracy of the range decreases. Because it becomes easier for extremely high or low readings to occur, consideration of only two numbers can be biased by the outlying values and does not consider the impact of all numbers in the data set, or does not take into account how the values are clustered. It is suggested that the use of range be limited to a maximum of ten observations. Standard deviation is used when a more precise and reliable measure is desired as it is a much more effective reflection of all observations or readings in a series, and any sporadic spike will have little impact on it. It is a numerical value in the units of observed values that measures the spreading tendency of the data. The ‘standard deviation’ is represented by the lowercase Greek letter σ (sigma). While each quality feature has its own unit of measure, standard deviation is a universal unit of measure for variability—a measuring unit that expresses the extent to which any frequency distribution is bunched or dispersed and can be used with samples of almost any number of readings. The smaller the value of the standard deviation, the better the quality, because the distribution is more closely compacted around the central value. On the contrary, a large standard deviation indicates that the observations are much more scattered. Standard deviation is difficult to compute without a calculator. Software programs are available, and there are even published statistical tables of standard deviations. The important characteristics of standard deviation (sigma) are: 68.27 per cent (round off to 68.3 per cent) of all observations lie between ( X ± 1 σ), 95.46 per cent (round off to 95.5 per cent) of all observations lie between ( X ± 2 σ), and 99.73 per cent (round off to 99.7 per cent) of all observations lie between ( X ± 3 σ), this is illustrated in Figure 7.7. Professionals and students are well advised to understand the relationship between the standard deviation and the normal curve. Variance is another measure of dispersion. It measures the variation from the mean of all values in a data set. Variance is the average of the squared distance between the mean and each observed item in a population. The purpose of squaring each number is to make each number positive. Apart from histograms several other statistical tools like run charts, control charts, x and R chart, etc. are effectively used in identifying, controlling, and reducing variation. Obviously choice of tools will depend on the unique requirements of a particular situation.

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222 MACRO STRATEGY

Figure 7.7

One of the relatively easy statistical tools is the control chart or some modification of it. Run chart is a simple visual tool to see if the quality characteristics are within control limits shows clearly trends and unusual movements in the process over time. The control chart has been used in industry for many years. Walter A. Shewhart, of the Bell Telephone Laboratories, U.S.A. has been one of the pioneers who advocated use of control charts. Only the understanding of a few fundamentals like central limit theorem is required for practical application of this tool. The control chart method of analysis and presentation of data is commonly used to assess if observed variations in quality are greater than the result of chance. It shows whether or not the process is in a stable state by adding statistically determined control limits to the run chart. The control chart captures unusual or abnormal variation that falls outside the control limit. Apart from the control limits, the specification limits are often interpolated to the run chart, to assist in judging the significance of the variation in the specified acceptance criteria for quality of the product. Control charts are commonly used for variables such as dimension of a part attributes such as the fraction of defective parts, time wastages, etc. and to find the number of defects per unit. A. V. Feigenbaum has brought out the uniqueness of control chart in his definition ‘A chronological (hour-by-hour, day-by-day) graphical comparison of actual product quality characteristics with limits reflecting the ability to produce as shown by past experience on the product characteristics.’ This comparison is usually made by selecting and measuring samples rather than by examining each piece produced. The control-chart method is a device of carrying out, on a factual basis, the shop-man’s separation of variation into ‘usual’ and ‘unusual’ components. It compares actual production variation of manufactured parts with control limits that have been set up for those parts. This helps either to justify that the design limits are satisfactory, or may be new limits should be set up. Figure 7.8 gives a typical example.

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PROCESS ORIENTATION 223

Figure 7.8

Figure 7.9

When a process yields samples whose characteristic remain consistently within control limits, it is a controlled process. The control chart indicates whether a process is ‘in control’ or ‘out of control’. A typical control chart is in its simplistic form is shown in Figure 7.9. The vertical axis plots the value of the quality characteristic, while the horizontal axis represents the samples and subgroups in order of time. It gives the opportunity to evaluate the ‘usual’ and ‘unusual’ variation, and whether the variation

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224 MACRO STRATEGY represented by control limits needs to be reduced. Bringing greater uniformity in variation, and also narrowing the control limits to beat competitive pressure is the route the six-sigma initiative takes. While the details for computing the control limits for these two charts differ, the basic approach is the same. It is based on the laws of probability that were discussed while discussing frequency distribution. The basic qualities that need to be addressed by any management after planning or theoretical exercises are: ‘Is the process capable?’ and ‘Is the process in control?’ The best way to get an answer to these questions is through real-time information about a process. The charts are ‘live’ in that they display ‘real-time’ process information as they are based on plotted data as parts are being produced. It gives an opportunity to adjust the process as changes appear, and thus stop producing defective parts. Mere posting of the results/observation, will not by itself improve the operation.

TYPES OF CONTROL CHARTS Some uses of the control chart are: (a) to predict rejects before defective parts are produced, (b) to judge job performance, (c) to establish tolerances, (d) to forecast costs (e) to guide management in corrective actions, and so on. Variable charts are of two kinds, x charts and R charts. The x chart measures the average, or mean, of samples of measured parts. The R chart measures the range, or dispersion of the data in the samples of measured parts. The x and R

Figure 7.10: Control charts

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PROCESS ORIENTATION 225 charts are the most effective graphic method used in SPC. The basic concept is to draw conclusions and take steps to control and improve through monitoring changes in central tendency and dispersion (variation) of a set of sampled product quality measurements. The convention is to have x graph above R graphs on the same sheet of paper, the composite is called x and R charts. x and R charts can be used to monitor and control machines and processes. They graphically display a relationship between measured data and specifications and furnish proof to customers that the process can give output conforming to specifications. By obtaining control charts for the specific quality characteristics, inspection of incoming material can be eliminated. They are thus a visual aid for continuous process improvement over time. Process capability is assessed through studying whether the specification limits can be attained by a process, or equipment. Capability is represented by C p and C pk. If the capability index C p = 1, this signifies that the width of specification spread is equal to the stabilized process spread. C pk is another index of capability, which measures the spread, and the centering of the distribution spread of points. A process in control has natural variation and plotted points are random. Natural variation is caused by chance factors. A process out of control has unnatural variation, which can be recognized and eliminated. Unnatural variation is caused by assignable factors. Capable processes can be improved through management action. When a process is capable, assignable causes have been eliminated. Only management can improve a process through changing procedures, purchasing a new machine, or authorizing additional training of personnel. Probability statements deal with the likelihood of an event occurring. This is the theoretical basis for sampling, and as such essential to the study of quality. In probability the analyst has information about the population and develops probability statements about the sample pulled from the population. The Venn diagram is a pictorial method for illustrating probabilities. Good reference books on statistics will give details on types of probability and distribution.

How to Know if the Process is in Control? One can only say that a process is under control if it is under statistical control. A process in statistical control has all its points inside the control limits, and there is no unnatural variation inside or outside the control charts. However, if there is non-random patterns, or points falling outside the control limits, the process is not under control. The cause of variation has to be identified, and eliminated before the process can be brought back to a state of control.

Is the Process Capable? There is a lot of difference between the actual process under control and the process capability. x and R charts help to show this. Two situations arise:

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226 MACRO STRATEGY z

z

A process in control should have all its control limits well inside specification limits. The implication of a process producing defective parts despite being in control is that the process is not capable and the situation is unacceptable. The situation can be tackled by several options such as investigating the possibility of relaxing the specifications, redesigning the product, changing the process, or perhaps buying new equipment.

Process capability study/analysis will help managers to arrive at strategies to prevent defects and meet customer specifications consistently. To recapitulate, evaluation of process capability must meet two primary conditions, firstly by bringing the process under statistical control through identifying, monitoring and elimination of assignable causes. Secondly, by comparing the process spread with the specification spread, and then ascertaining that specification can be achieved and met consistently, it shows that the process is capable.

Control Chart for Attributes Statistical process control (SPC) will remain incomplete unless control charts for attributes are also introduced. Every type of business has both types of data: variables and attributes. Attribute control charts are used to monitor defective products as well as number of defects, and have manifold utility in statistical process control. They are simple, handy and user-friendly tools that can be used for many purposes. They provide visual summarized information that immediately registers in the mind, a helpful timesaving tool for management. They help statistically establish the baseline of quality, i.e. the average quality level for the process. Future improvements can be compared with the baseline. Attribute charts summarize the output of a product in terms of acceptable/not acceptable, go/no go, and conforming/non-conforming. Careful planning is essential in using attribute charts, involving steps like (a) defining the purpose of the chart, (b) defining the process, (c) identifying management and operational requirements, and (d) minimizing variation. Attribute charts also have upper and lower limits that represent plus and minus 3σ respectively. The purpose of attribute charts is to warn of aberrations in the process. Four different types of charts are generally used, as given in Table 7.8. In attribute charts, out-of-control points and non-random patterns are two general ‘out-of-control’ situations. If points go above the upper control limit, an Table 7.8: Types of Attribute Chart Type

Purpose

‘p’ chart ‘np’ chart ‘c’ chart ‘u’ chart

For fraction defective of total products. For number of defective products. For number of defects. Number of defects per product/unit.

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PROCESS ORIENTATION 227 assignable factor is causing the deviation. If points go below the lower control limit, there is a faulty measurement or an improvement in the process. Further, non-random patterns exist if seven points in a row are above or below the process average, or if seven points in a row are continuously rising or falling.

SPC Planning Management cannot just order that control charts henceforth be used; it requires definite planning, training and commitment. SPC planning should not be misused as quick fixes for solving problems or improving quality. The following steps are important:

Management commitment Commitment is different from support. Managers have to educate themselves about the basic principles of statistical techniques, include them in operational strategy for continuous improvement, and make them part of management review meetings. Management has to support implementation by providing budgetary allocation for training, consultancy, and other operational requirements. SPC will not work if top management treats it as a ‘fad’ or ‘in-thing’ or has no conviction of its utility. The attitude of employees towards SPC will follow the management’s visible interest and commitment.

Get support from trade unions Unions should not see SPC as a threat; they should be educated to understand that SPC is a tool for continuous improvement and raising competitiveness level, which is really in the interest of employees.

Define product or service system A clear-cut understanding and definition of the process in terms of all ‘W’s is a must for planning the SPC.

Identify specifications and standards Any vagueness will make the initiative ineffective.

Identify product characteristics It is obvious that of the various characteristics, the critical ones must be identified.

Identify the cause of variation Before production, efforts should be made to make the overall product/process systems capable of producing to specifications, so that locations causing variation could be easily identified.

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Define measurement system This includes identifying appropriate units of measurement, acquiring proper testing and measuring instruments, training and instructing personnel.

Focus on continuous improvement Do not be satisfied with keeping the variation within the specified control limits. Instead pursue progressively narrower process limits over time to ensure a competitive edge.

Conclusion Application of SPC is not limited to process control or process capability studies but is found in many other widely used critical applications. They include acceptancesampling plans of variables and attributes, reliability and life testing; many design applications, applications in all service sectors, and also in administrative and financial areas. Efficiency can be improved in sectors like banking, education, food industry, government departments, healthcare services, hotels, hospitality services, insurance, public utilities, HRD, airlines, computer software, retail outlets: the list is endless. The scope is really unlimited; it only requires commitment and innovativeness to tap the potential of SPC especially in service or service related activities. The above text gives only a glimpse of the significance and relevance of the statistical techniques that underlie online statistical quality control methods. Genichi Taguchi has introduced offline quality control methods in design. Professionals entrusted with the introduction of SQC techniques or Six Sigma in their organizations should do in-depth study of quality statistics (includes frequency distribution theory, graphs, measures of central tendency, measures of dispersion, normal distribution, etc.), SPC planning, the theory and application of variable and attribute control charts, practical probability, inspection and sampling, reliability, auditing, applications in the service sector, computer software usage, Taguchi methods, etc. Fortunately good reference books are available. It is recommended that at least in the initial stages, the organizations take the services of qualified statisticians experienced in a similar industry or business.

OVERVIEW OF THE PRINCIPLES OF SIX SIGMA The Six Sigma initiative, originally invented by Motorola, has institutionalized the systematic and judicious deployment of statistical techniques to control and reduce variation in ‘the sigma way’. It follows the basic philosophy and principles of TQM including customer orientation, process orientation and people orientation, and helps sustain competitiveness through controlling variation, and tightening or revising target values. The structured methodology of Six Sigma concentrates on prevention of waste and defects through continuous improvement and thus helps companies to offer better, faster and less expensive products and services

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PROCESS ORIENTATION 229 than the competition. The new knowledge gained from the repeated, disciplined application of the master strategy encourages out-of-box thinking thus improving profit margins. To survive the manifold pressures of the fiercely competitive market scenario organizations have to develop manufacturing and supply flexibility to produce high-quality products cost effectively with much shorter delivery time, and for that the cycle and throughput times have to be slashed. Despite lower resources the organizations have to reduce the cost and development time of new products or services. To establish and sustain market reputation for reliability and dependability the companies, apart from ensuring quality of their products/services, have to find ways and means to ensure constancy in the intangibles. Also, the societal obligations as well as the ever-stringent environmental and corporate governance norms and laws have to be met. All these mean that the organizations will have to institute means to achieve the goal of near perfection. The Six Sigma initiative is aimed at achieving the operational goal of near perfection, it institutionalizes use of statistical tools to achieve better, faster, and reliable and less expensive products and services than the competition. The Six Sigma deployment would entail a few strategic business approaches: z z z z z

Measurement of how well business processes meet their goals. Deploy strategies and tools to make needed improvements. Reducing the cycle times. Attack the cost of poor quality (COPQ). Reorient the work culture that would focus on "out-of-box thinking" and strive for achieving stretch goals through judicious admixture of continuous improvement and break through improvements. Institutionalise behavioural and specialized training for the implementation of TQM principles and SixSigma initiative.

Basic training on Six Sigma and statistical tools is given to all, and specialized training on the use of advanced statistical tools and methodology is given to carefully selected personnel. Projects are selected based on key business issues, and as they are completed new ones are taken up. Increased profit margins due to successful implementation of Six Sigma projects reflect the impressive return on investment for the Six Sigma training. The unprecedented knowledge gain from the initiative enriches the organization’s intellectual capital. Six Sigma breaks the barriers between ‘business’ and ‘service’ as its applicability is diverse. The ‘benefit-list’ is almost limitless. Some of the benefits are listed below: z z z z z

Reduction of product development time Productivity improvement Growth of market-share Cost reduction Cycle time reduction

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Defect reduction Establishment of brand image And many more.

Like many other US and European firms in the 1980s, Motorola’s future was in jeopardy from the competitive onslaught of Japanese products of superior quality, low cost, fast delivery and unique service features. In 1987, Motorola institutionalized ‘Six Sigma’ as a new initiative that not only led to a remarkable turnaround but also transformed Motorola into one of the most admired and vibrant companies of the world. The decade between 1987 and 1997 show remarkable achievements: a five-fold growth in sales, cumulative savings of 14 billion dollars, 20 per cent per year increase in profits and stock price gains compounded to a annual rate of 21.3 per cent. All this was possible because of the full management support and backing by the Chairman and Chief Executive Officer, Bob Galvin, of the Six Sigma initiative first conceived by Bill Smith, a senior engineer and scientist in Motorola’s communicators business. The resilience and power of Six Sigma was tested again during setbacks and new challenges faced by Motorola particularly in the cellular and satellite telephone business in late 1999 to early 2000. The company continues to stand behind the commitment and the mandate of Six Sigma; as a matter of fact the Motorola University is entrusted to spread the Six Sigma concept, tools and work culture throughout all the branches and locations of the company in the world. The underlying concepts of Six Sigma are derived from the Deming philosophy, and Taguchi Loss Function where Taguchi points out that any deviation from the absolute value of the specification is a loss to society. Six Sigma is based on a logical extension of the principles of statistical application invented by Stewart and propagated by Deming. Very often professionals are satisfied if the average figures look all right, for example average cost, average cycle time, average yield, average margin, average delivery time etc. Management however, does not realize that this measure of average is in reality hiding many inefficiencies and inherent problems. Averages are not the real measure of business and processes; they disguise variations, which are the real measures of performance evaluation. Variation is the cause of inefficiency and loss while variation control, a principal objective of Six Sigma, offers opportunities to improve competitiveness and profitability. Let us say the target time of delivery at a fast food counter is 6 minutes from the point of acceptance of the order. Management is pleased with the study report that says average delivery time is 4.2 minutes, and the management rewards the manager and his team for their excellent effort. Later on, after receiving several complaints, management is surprised to know that there were instances of long waits for the food ordered. The average had hidden the fact that 15 per cent of orders were delivered late i.e. beyond the stipulated time of 6 minutes. It was discovered that with the existing process the average delivery time would have to be reduced to 2 minutes to get all the orders delivered within the promised 6 minutes from the time the order is accepted. This was prohibitively expensive. But by studying the process variation and taking steps to control it, management could

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PROCESS ORIENTATION 231 achieve an average delivery time of 5 minutes with no late complaints. This was a Six Sigma performance. Many professionals and businessmen feel comfortable with 94 per cent, 95 per cent or 99 per cent of quality-level performance, some are even satisfied with say a 78-80 per cent quality level or index. They think that achieving a quality level near 100 per cent is not possible, or is too expensive. Six Sigma breaks this dogma. Even a level of quality or goodness of 99 per cent will have inconsistencies such as: z z z z z z

20,000 lost articles of mail per hour. Unsafe drinking water almost 5 minutes per day. 5000 incorrect surgical operations per week. 2 short or long landings at most major airports each day. 200,000 wrong drug prescriptions each year. No electricity for almost 7 hours per month.

The above statistics will leave the management to ponder if even 99 per cent quality level is good enough to remain competitive. Six Sigma calls for a perfection level of 99.9997 per cent. For comprehension let us review the performance of 99 per cent quality versus a Six Sigma quality level (see Table 7.9). The difference is pretty startling: Table 7.9: Performance Levels Item

With 99 per cent

With Six Sigma

For every 300,000 letters delivered Out of every 500,000 computer restarts For every week of TV broadcasting (per channel)

3,000 missed deliveries.

1 missed delivery.

4,100 crashes.

2 Crashes.

1.68 hours of dead air.

1.8 seconds of dead air.

Due to traditional management thinking or ego (quite a common phenomenon) managers believe they understand all about performance level, though they may be blind to variation and the factors that give rise to it. It is very important for managers to analyze the differences between Six Sigma and traditional performance levels. And variation is one of the key points that the managers should try to delve into more seriously. Irrespective of the type of business, manufacturing or service sector, the inputs are converted to outputs (performance) through process/es; see Figure 7.11. The process flow is simple enough but the paradoxical fact is that most companies and managers have a hazy and incomplete understanding of the relationship of X and Y in the context of their business. Performances are dependent on the ‘X’s i.e. the performance of upstream business processes. Comprehension of the simple fact (known to almost everybody) that Y is a function of X or Y = f (X) is crucial to steer the business in the right direction. Y = f (X) that indicates the changes or variables

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Figure 7.11

in the inputs and processes of the system will decide the performance levels or variables at the end i.e. the ‘Y’s. The management should draw up strategies to determine the factors critical to quality in inputs and processes and to figure out which of the variables or ‘X’s have the most influence on the results or ‘Y’s. The changes in the overall performance results (the ‘Y’s including the external factors) need to be monitored to adjust the business processes (including inputs). Professionals should realize that ‘Y’s could mean strategic goals, customer retention, customer satisfaction, profits, product reliability, overall business efficiency, etc. Management must understand the variation in the performance output levels i.e. ‘Y’s depend on many X’s, some more influential than others. Apart from the process variables, ‘X’s can also mean critical actions planned to achieve strategic goals, key parameters for meeting customer requirements, staffing, cycle time, inputs, technological efficacy, etc. Inconsistency or wobbling of business processes has a negative impact on the results. Process variation must be controlled or eliminated through improvements or re-design. Through these strategies variation is controlled or narrowed till the business performance objectives are met. That is precisely what Six Sigma does. In Figure 7.12, Stage I shows an existing process condition where a good percentage of output is rejected as it is beyond the specification limit. Stage II improvements control the variation in such a manner that all the portions of bell curve are brought within the specification limit—the result is that due to process

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PROCESS ORIENTATION 233

Figure 7.12

improvement all the ‘units’ are acceptable as they are within customer requirement specifications. Stage III depicts a state where either the customer has tightened the specification or the company itself has tightened the specification to improve the products or services. The variation is designed/controlled in such a manner that the deviations/variations are well within the new specification limits. In both the cases of reducing variation the six standard deviations for the average are well within the specified limits. Any business that can reduce its variation to that degree gains a huge edge in efficiency and competitiveness. And this significantly contributes to bottom-line gains. To repeat, Six Sigma performance works by reducing and controlling the standard deviation of a process or narrowing the range of variation so as to fit all the output within the tighter (revised) customer specifications. Readers must at this point appreciate that Six Sigma measures/initiatives have to be dynamic to meet new challenges or tighter customer requirements. The measurement of ‘goodness’ called sigma level or sigma quality level is equated with parts-per-million (ppm) defect rate/opportunity rate. The two important features of this statistical measurement system are (a) that it accounts for typical (operational) shifts and drifts of the mean in practice; an adjustment is made to accommodate a variation (shift) of 1.5σ to the mean value, and (b) the percentage unit improvement in parts per million (ppm) defect rate does not equate to the same percentage improvement in the sigma quality level.

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234 MACRO STRATEGY Table 7.10 Distribution with ± 1.5 σ shift

Normal Distribution Per cent

Defective ppm

68.27 95.45 99.73 99.9937 99.999943 99.9999998

317300 45500 2700 63 0.57 0.002

Specification Limit ±1σ ±2σ ±3σ ±4σ ±5σ ±6σ

Per cent 30.27 69.13 93.32 99.3790 99.9767 99.99660

Defective ppm 697700 308700 66810 6210 233 3.4

Figure 7.13: The Basic Six Sigma Measurement

The consideration, calculation and experiments are too elaborate and complicated and as such they are not included in this chapter, interested readers may refer to a good book on statistics. To understand the implication of 1.5σ shift, Table 7.10 will be revealing. Table 7.10 sigifies that in order to become a world class company, the management has to raise its quality level to six sigma level which means limiting the defect opportunities to 3.4 ppm. The defect rate (ppm) can also be related to sigma quality levels as shown in Figure 7.13, which represents the daunting task a company will face from its present quality level. For example to bring down the

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PROCESS ORIENTATION 235 defect rate from 6210 ppm to 230 ppm means a process improvement of 30 times and to again reduce defect rate to six level from 5, i.e. from 233 ppm to 3.4 ppm will mean a further 70 times improvement. To realize a Six Sigma level of quality the process capability index values for Cp and Cpk of 2.0 and 1.5 respectively will have to be achieved [Any good book on statistical techniques will give the details]. This is really a mind boggling and daunting task! Merely beginning the Six Sigma initiative does not achieve that level of quality—it requires commitment and tenacity of deploying each principle and following all steps of Six Sigma As measurement forms an integral part of Six Sigma, an overview of defectrelated elementary measurements of Six Sigma will help readers to understand Six Sigma from the perspective of "defect" elimination. Defect-related measures, called in short ‘defect measures’, evaluate the overall effectiveness of a process. The measures are quite simple; an elementary knowledge of mathematics is enough to understand them.

Unit A final product or service being delivered to the customer, or an item is being processed. It could be a car, a refrigerator, a housing loan, a bank statement, a hotel stay, a mobile phone, etc.

Defect A failure to meet a customer requirement or performance standard. It could be an error in bank statement, delayed delivery of a courier mail, a misplaced document, noisy compressor, short length of a pair of trousers, an out-of-round shaft, etc.

Defective Any unit that contains a defect. Example: A room air conditioner with any defect is, technically is just as “defective” as an air conditioner with 7/8 defects.

Defect opportunity Since most products or services have multiple customer requirements/specifications, there can be several chances or opportunities to have a defect. The number of defect opportunities on a Diesel generator for example, might be over 50, the number of defect opportunities in a passenger car could be well over 100 or a fast food chain may have defect opportunities of more than 100 depending on the menu list.

Proportion defective Refers to the fraction or percentage of item samples that had one or more defects.

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236 MACRO STRATEGY Table 7.11: Three Measures with Simple Calculations

Title of the Measure and Formula 1

Proportion Defective Number of Defectives = Number of Units

2

Final Yield (i.e. percentage of ‘good’) = 1 − Proportion defective

3

Defects per unit or ' DPU ' Number of Defects = Number of Units

THREE MEASURES applied to examples above Calculation for Service Examples a) 56 defectives 300 = 0.186 i.e. 18.6 % defective b) 76 defectives 180 = 0.422 i.e.42.2 % defective

Calculation for Manufacturing Examples c) 87 defectives 650 = 0.133 i.e. 13.3 % defective c) 89 defectives 1200 = 0.074 i.e. 7.4% defective

a) 1 − 0.186 = 0.814 i.e. 81.4 % yield

c) 1 - 0.133 = 0.867 i.e. yield 86.7 %

b) 1 − 0.422 = 0.578 i.e. 57.8 % yield

d) 1 − 0.074 = 0.926 i.e. yield 92.6 %

a) 86 defectives 300 = 0.286 i.e. 28.6 % DPU b) 215 defectives 180 = 1.19 i.e. 119 % DPU

c) 102 defectives 650 = 0.156 i.e. 15.6 % DPU d) 243 defectives 1200 = 0.202 i.e. 20.2 % DPU

Final yield It tells what fraction of the total units produced and/or delivered was defect-free. One of the essential things in ‘defect based management’ is to make sure that data on performance against customer requirements is available. Data on ‘delivery cost’ will not serve the purpose if the customer requirement is ‘delivery-on-time’. Often managers really do not know how well or poorly the process is performing, and how defects are getting ingrained into work culture. This information/ knowledge is gained through three measures explained in Table 7.11. Let us take a set of four examples to elucidate this.

Service examples 56 of 300 billing of a mobile service operator contain defects and total number of defects is 86. 76 of 180 legal documents for registering house property contain defects. Total number of defects is 215.

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PROCESS ORIENTATION 237

Manufacturing examples Eighty-seven of 650 sub-assemblies of industrial machinery contain defects; and the number of defects is 102.89 of 1200 extruded aluminum channels contain defects; number of defects is 243. It is important to assess the existing sigma levels of performance before firming up strategies to get to Six Sigma level. This requires measures that will equate performance across different, varied, and complex processes. The two measures are ‘opportunities for defect’ and ‘defects per million opportunities’. Any product or service will have opportunities for defects. Management assesses the measure ‘Opportunities for defect’ realistically and consistently for their process or product relating to manufacturing or service sectors. Defects per million opportunities simply indicate how many errors would show up if an activity were to be repeated a million times. Determining opportunities for defects is a tricky matter as there could be many opportunities for defects in any manufacturing or service product or process; there could be technical shortcomings, aesthetic blemishes, and other facets related to commercial, transportation, packaging, order finalization, tax levies, etc. Listing all such possibilities or opportunities for every odd rare defect will be a wearisome and unwieldy exercise that may not give a true picture. The best practical approach is to limit the search to standard problem areas, clubbing similar defects as one category, selecting those, which are important from the customer’s perspective, following existing benchmarks, unique to the business, and finally ensuring a consistent policy, which can be changed only if there is any justifiable cause. Here is how this looks when applied to our four examples (see Table 7.12). These simple measures calculated as per simple formulas, give us knowledge clue about the real efficiency and standing with respect to sigma levels of quality unfortunately many companies do not know their standing with respect to sigma level quality. Very interesting inferences can be drawn from the examples discussed above. The legal documents have a low sigma score whereas service sector pertaining Tabel 7.12: Calculating Opportunities for Defects Measure

Service Examples

Manufacturing Examples

1

Opportunities for defect

c) 65 defects/sub-assembly d) 4 defect opportunities/channel

2

Defects per million opportunity (DPMO) = DPO × 106

3

Sigma (By consulting table against particular DPMO)

a) 6 defect opportunities/bill b) 8 defect opportunities per legal document. a) DPM0 = 0.047 × 106 = 47 000 b) DPM0 = 0.149 × 106 = 14 9000 a) 47,000 = 3.2 sigma b) 149,000 = 2.4 sigma

c) DPM0 = 0.0024 × 106 = 2400 d) DPM0 = 0.051 × 106 = 51000 c) 2400 ≈ 3.5 sigma d) 51000 ≈ 3.1 sigma

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238 MACRO STRATEGY Tabel 7.13 YIELD (%)

DPMO

SIGMA Level

6.68 15.87 30.85 50 59.87 64.565 69.15 84.13 89.44 91.545 93.32 95.99 97.73 98.78 99.12 99.38 99.7 99.87 99.94 99.96 99.977 99.987 99.992 99.997 99.99767 99.99833 99.999 99.99966

933200 841300 691500 500000 401300 354350 308500 158700 105600 84550 66800 40100 22700 12200 8800 6200 3000 1300 600 400 230 130 80 30 23.35 16.7 10.05 3.4

0 0.5 1 1.5 1.75 1.875 2 2.5 2.75 2.875 3 3.25 3.5 3.75 3 4 4.25 4.5 4.75 4.875 5 5.25 5.375 5.5 5.625 5.75 5.875 6

to billing, manufacturing of industrial machinery and aluminium extrusion are no better, they are hovering around 3 Sigma. They are below even an average company. Excerpts from a Sigma conversion table are given in Table 7.13; interested readers may consult a good book on statistics for full table. The basic Six Sigma deployment model, called DMAIC (pronounced ‘dehMAY-ihk’) is based on the principles of the four-step Deming cycle (PDCA). DMAIC follows a 5-step cycle, and is applicable to both the efforts of process improvement and process design/re-design. As shown in Figure 7.14 DMAIC is a five-phase improvement cycle, the phases are: Define (includes design and deploy), Measure, Analyze, Improve and Control. The implementation of Six Sigma is quite an elaborate process (as opposed to a quick-fix solution) and it uses an array of tools and methodologies ranging from simple problem solving category to complicated statistical analysis and application. Middle level managers and other relevant employees are trained on basics of statistical techniques and variation control, QFD, PDCA cycle,

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T

T

PROCESS ORIENTATION 239

A

P

C

D

Improve I C Control

Define D Measure M

T

T

A Analyse T

T

DMAIC Figure 7.14 Teamwork, etc. At the operating level the Six Sigma projects are carried out by the concerned employees or teams by using simple problem-solving tools, seven QC tools, simple trend and other process control charts, etc., which does not require strong mathematical skills. However for the realization of the full benefit, the Six Sigma initiation is best undertaken after the organization has successfully embraced the basic tenets of TQM philosophy and culture. This chapter is not intended to cover extensively all the phases of Six Sigma implementation strategy; detailed information and guidelines can be obtained from the various books on statistical techniques or Six Sigma implementation. The implementation of Six Sigma requires a dedicated structure of professionals specially trained in statistics, process improvement and product improvement methodologies. These Six Sigma experts are designated as sponsor/champion, Master Black-belt, Black belt, Green belt, Team leader, etc. Books on Six Sigma will guide readers through the Six Sigma course curriculum for various levels of employees, and particularly the specialized ‘corps’ for Six Sigma. The "Master Black belt’ label, drawn from martial arts, is indicative of fine honed skill and discipline that has achieved breakthroughs in improvement projects yielding significant ‘monetary’ gains. Companies design their Six Sigma implementation structure based on their unique culture and needs, but these are generally adaptations of the structure developed by Motorola in the early 1990s. Figure 7.15 gives a typical implementation structure. Six Sigma can be deployed innovatively in governance or any manufacturing or service sector of business. It can tackle both the tangibles and intangibles and is equally applicable to staff and line functions. The only thing management

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240 MACRO STRATEGY

LEADERSHIP COUNCIL

Provides with overall and strategic direction

T

Sponsor/Champion Guides and oversee the project Master Black Belt Advises & supports Project/Team leader

T

Team/Project Leader Coaches & supports Project/Team leader

Black Belt

Figure 7.15 should take care of is whether the core philosophies and basic approach of TQM have been successfully embedded in the organization before juggling with Six Sigma. The key orientations involving the customer, process and people are prerequisites for a successful Six Sigma initiative. The intellectual capital formed out of unprecedented knowledge gained through properly deployed Six Sigma initiatives helps in business consolidation and expansion contributing handsomely to the bottom line results. However one should be extra careful to ensure that the results are not fabricated and savings turn out to be phantoms. There have been cases of results being fabricated because managers’ bonuses are tied to Six Sigma savings.

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PROCESS ORIENTATION 241 Professionals who do not really understand the core principles of TQM will invariably fail to appreciate that Six Sigma is a logical extension of statistical applications enabling continuous improvement for achieving and maintaining competitiveness. Professionals must understand that achieving the desired results of TQM or even stand-alone initiatives of Six Sigma necessitate proper deployment of the principles, the shortcuts or zest for quick or instant results lead to failures, frustration, and disillusionment.

References 1. J. M. Juran, Juran on Quality by Design (New York: The Free Press, 1992), p. 219. 2. Philip B. Crosby, Let’s Talk Quality (New York: A Plume Books, 1990), p. 72. 3. Kaoru Ishikawa, What Is Total Quality Control? The Japanese Way (New Jersey: Prentice-Hall, 1985), p. 104. 4. W. Edwards Deming, Out of the Crisis (Madras: Productivity & Quality Publishing Pvt. Ltd, 1992), p. 121. 5. Masaaki Imai, Kaizen—The Key To Japan's Competitive Success (Singapore: McGraw-Hill, 1991), p. xxv. 6. Jeffrey K. Liker, The Toyota Way (New Delhi: Tata McGraw-Hill, 2005), p. 23. 7. Kaoru Ishikawa, What Is Total Quality Control? The Japanese Way, p. 104. 8. Michael Hammer and James Champy, Reengineering the Corporation (New York: Harper Business, 1993), pp. 2, 32. 9. W. Edwards Deming, Out of the Crisis, p. 33. 10. A. V. Feigenbaum, Total Quality Control (New York: McGraw-Hill, 1961), p. 40.

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8

CHAPTER

People Orientation CONCEPTUAL BACKDROP ompetitive and unpredictable market forces have brought about a major change of strategic emphasis. Now orientation towards people has become the focal point of attention and holds the key to market dominance. People’s role in business has undergone a radical change. From bring treated as a ‘commodity’ for so long, ‘people’ are now treated as the most valuable asset. Management everywhere is being urged to take steps to unleash the inherent potential of their employees, which has become a critical factor in ensuring an organization’s existence and success. But it is not easy to graduate to the radical concept of ‘people orientation’ from the entrenched mindset of treating people as a commodity. This ‘archaic mentality’ (so called by Ricardo Semler in his book Maverick)1 of traditional management is influenced by the ideas of Adam Smith and Frederick Taylor that suggest that employees cannot think, that their performances will be sloppy unless supervised, and that they cannot be trusted. In traditional management, this mindset has led to the splitting of jobs into small parts so that employees have no scope to think. ‘People orientation’ in TQM philosophy has a deeper meaning than what the normal dictionary meaning of the word ‘orientation’ suggests. The concept of ‘people’ in TQM includes customers, employees, suppliers, partners in the delivery chain, and all other stakeholders. Since customer-orientation and partnership with supply and delivery chain constituencies have been dealt with previously, this section will focus on employees, and the word ‘people’ in this section will mean employees unless mentioned otherwise. If one analyses the essence of TQM philosophy, it is basically meant for and directed by the people. Since the philosophy commands consistency of purpose to protect the long-term interests of the people by keeping the organization alive, creating jobs, and enhancing the quality of life, one can say that the philosophy is ‘for the people’. Improvements have to be made by developing the potential of the people. Therefore, the implementation part of the philosophy can be said to be ‘by the people’. Professionals need to comprehend these two broader aspects of

C

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PEOPLE ORIENTATION 243 people orientation. Management and professionals must consciously discard the old theory (Smith’s thesis and Taylor’s prescription) that human beings are selfseeking and greedy, and that the expression of their individual skills and abilities wastes time and money and destabilizes the culture of a company. Numerous examples around us indicate that it is extremely difficult for managers to switch over from this mentality; nevertheless, it is imperative that they do so. Through the deployment of TQM ‘people orientation’ strategies, organizations have to take care to make work interesting. They must create environments that give employees freedom and space to innovate. This will help them to acquire intrinsic motivation, self-development, and mastery in their fields. In peopleoriented strategies, a worker’s self-worth as a human being is respected, inherent talent is recognized, and the opportunity is provided to help him achieve his full potential. From the psychological point of view, people-oriented strategies and policies support people’s instinctive need for self-actualization. For the individual, the path towards self-actualization runs initially through the satisfaction of a hierarchical order of physical and mental needs, and finally through intense activity in one’s own chosen area of endeavour. Thus, the true potential of a human being is harnessed towards the progress and prosperity of the organization and society at large. People’s active interest, talent and involvement are required for effective process orientation and customs orientation. This is the conceptual background of the ‘people orientation’ strategy. People-orientation strategies, in their truest sense, do not rely on gimmickry. As we shall see later in the chapter, it has been proved that extrinsic motivations yield limited, short-lived results and the quality of the output is inferior to that produced by intrinsically motivated people. An effective people-oriented strategy achieves ‘oneness’ between the organizational vision and personal aspiration; people identify their aspirations, goals, etc., with the organizational vision, mission, purpose and values. The vision, purpose, and values are stimuli, which when properly disseminated among people, can form the basis of intrinsic motivation. Individually the employees seek self-actualization, while together, they achieve the company goals. One of the pre-requisites to institutionalizing a ‘people orientation’ strategy is the unequivocal commitment of the top management, and for this, the first step is to free them from traditional management principles. They must stop believing that management is the art of implementing the executive’s ideas among the employees, that only the managers can think, and that the rest of the employees are only there to execute. Respecting human dignity will be one of the key elements of the people-orientation protocol. Management must start believing that every individual has latent talent, and that only the collective intellect of all the employees can stand up to the forces of competition. Konosuke Matsushita, the founder of Matsushita Electric Industries (now Panasonic), stated, ‘For us, management is the entire workforce’s intellectual commitment to the service of the company without self-imposed functional or class barriers.2 The essence of a people-orientation strategy is to leverage the hidden talent of people for the benefit of the organization as well as the stakeholders. ‘Peopleorientation’ policies induce a radical role change among employees, from merely

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244 MACRO STRATEGY being cogs in the machine to partners in progress. Human capital has acquired new status as the most critical asset; if properly nurtured it has unlimited value, since intellectual capital yields exponential growth. Konosuke Matsushita was very clear about developing and involving his people. He was visibly upset when an employee in response to his query, ‘What does Matsushita Electric make?’ replied, ‘We make TVs, radios and vacuum cleaners.’ ‘No, no, no!’ Matsushita protested. ‘We make people! We make people first before making products. Matsushita Electric is the place to make people. Our company should be known as such.’ Even if the idea is understood, deployment is not easy. An organization needs to find out effective ways to nurture, harness, and ultimately tie together people’s creative resources. Matshushita introduced the idea of ‘glass wall management;’ the glass wall symbolizes open communication throughout the company. He believed that if relevant information could be shared with everybody, all the people in the organization could participate in managing the company collectively. Matsushita ensured that key management information was shared. Process sheets and representative customer returns were displayed at appropriate places for all to see. All good or bad news was widely disseminated. Market information and news of progress were shared, so that everybody understood the situation. The idea sounds simple but organizations need to find ways as well as have the resolve to introduce such people-oriented systems. Matsushita was of the view that it is important for everyone to try and accomplish something with conviction, and to develop a positive viewpoint towards the organization’s progress. A people-orientation strategy should not only be focused towards nurturing and leveraging people’s potential but should also ensure that talent is not wasted— the worst kind of waste. The onus is on top management to make a conscious effort to provide opportunities for others to utilize their talents—these could range from problem-solving skills to creativity or other improvement-generating skills or traits. The ideal outcome of a good people-oriented policy is to have each individual contributing to the whole, and yet each individual motivated towards self-development. People-oriented policies and systems should be reflected in all areas of productivity viz., quality, cost, delivery commitment, safety, and morale of the people. The number of suggestions generated and implemented, the number of successful improvement projects, the number of breakthroughs, etc. represent the total creativity of the organization. And the management and people should maintain the momentum by coaching, guiding and sharing ideas. Superficiality in people-oriented strategies will give superficial results which in turn may provide the excuse to return to the clutches of the ineffectual traditional management style. Placing too much importance on rewards, internal competition, or too much stress on breakthrough improvements, technology and mechanization (automation) are the major reasons for failure. To institutionalize empowerment, the top-down policy hitherto followed must be abandoned in favour of participative management. Several companies have survived the onslaught of changing environments, including Matshushita, Toyota, IBM, GE, Xerox, Motorola, Honda, Tata Steel (India), Sundaram Claytor (India), Toshiba, ITC (India) and several others.

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PEOPLE ORIENTATION 245 Ricardo Semler of SEMCO, Brazil, created waves with his people-oriented strategies, which were responsible for the unprecedented success of SEMCO. Deming’s approach to the ‘people-aspect’ of management is holistic. This is clearly manifested in his 14 cardinal points for organizational transformation. When he spoke of consistency and constancy of purpose, (point no. 1 of the 14 points), the welfare of people was his underlying theme. He had more faith in people’s abilities than in the availability of natural resources; as reflected in his statement, ‘abundance of natural resources is not a requirement for prosperity. The wealth of a nation depends on its people, management, and government, more than its natural resources.’ This is an inspiring hypothesis, and the greatest problem that most nations face is the lack of good management and good governance. The principles of total quality management support a work culture that is people-oriented and aim at the involvement and development of people on the way to inducing a total transformation. This focus on people-orientation is capable of having a catalytic influence on all other institutions and sectors of society, since it can be deployed in virtually all types of entities and in any country. Deming forcefully made the point that transformation can only be accomplished by man, and not by hardware—be it new machinery, gadgets, automation, or computers. The onus to instigate this awakening and its follow-up lies with the management who have to consider themselves as part of the ‘people’ in the organization; they must demonstrate an unflinching commitment to quality and productivity, and keep their focus people-centric. Every other responsibility can perhaps be delegated, but not this one. Merely promising or extending support will not do; the management needs to initiate transformation and re-examine all policies and systems so as to be efficient in their people-orientation manoeuvres. Companies have to regard their employees as their most critical assets and provide them with good orientation and training. Employees need to be involved in all aspects of operation including design, planning, goal-setting, monitoring of performance, etc. Work practices need to be recast so that they become less restrictive, but make employees responsible and more productive. The management has to understand the problems of its people and not avoid or manipulate their way out of them, as was the practice with traditional management systems. Some of the major obstacles in the way of high quality operations management are the in-built cultural and system barriers against the realization of the pride of workmanship. Deming also cautioned against losses due to incompetent leadership caused by an overriding focus on short-term results. Symptoms such as absenteeism, opposition to the mobility of the workforce, increase in the number of accidents, poor housekeeping, excess inventory, etc. are due to poor leadership. Leadership is also a people-development issue. Apart from the inherent human characteristics of intellectual prowess and manual dexterity, Deming asks to leverage co-operative ability. Structured co-operative working should be one of the important aspects of a people-orientation strategy. Effective people-orientation policies must replace the systems designed for extrinsic motivation. In Deming’s view, internal motivation is really the unseen engine of improvement. Similarly Kaoru Ishikawa and Masaaki Imai have also

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246 MACRO STRATEGY emphasized the need to focus on processes instead of blaming people. The Kaizen concept accords utmost priority to people’s efforts to play a positive role to improve processes, and calls upon management to play a supportive and stimulating role. People-orientation calls for a long-term outlook, as such policies are directed towards people development, and often require behavioural changes. Kaizen ensures that people-orientation systems not only support and encourage focus on process criteria but at the same time give due recognition to results. Kaoru Ishikawa’s view on management is very forthright. Unlike many theorists who proclaim that customer satisfaction should be the first priority of any company, Ishikawa stresses that the first concern for a company should be the happiness of the people who are connected to it. The company does not deserve to exist if it cannot make its people feel happy. Apart from ensuring that the employees have adequate income, their humanity must be respected, and they must be given the opportunity to enjoy their work and lead a happy life. Ishikawa was very specific in stating that by employees he meant all the employees of subcontractors and sales and service organizations as well. The consumers came next. He has similar views with Deming in that he believes that companies exist in a society for the purpose of satisfying the people in that society. This is the reason for their existence and should be their primary goal. TQM is management based on respect for humanity, and discipline that combines knowledge with action, it also destroys sectionalism and combines the efforts of all employees to establish a co-operative system. TQM ensures the nurturing of human resources and employee happiness, and provides cheerful workplaces in addition to passing the torch to the next generation. All the TQM quality gurus and theorists have stressed ‘people-orientation’ in various forms, manners, and ways of presentation. The Japanese, including Ishikawa, hinted that the success of ‘people-orientation’ policies depends largely on society’s proactive culture. The author tends to agree with that, and since the basic and eternal nature of the human being is same irrespective of geographical location or state of economic development, it is possible to mould or change human behaviour with the help of the idealistic characteristics of a true people-orientation philosophy. It requires a change of mindset, the shedding of feudal values and the decentralization of authority and decision-making power. This is, however, not so easy in practice and may take several generations. People-orientation implies a management philosophy where ‘people’ are at the centre of management activities. The idea is to create an organization or workplace where humanity is respected. Management based on humanity is a system of management that lets the unlimited potential of human beings blossom. It is a management system in which all employees participate, feel comfortable, have no fear and are proud and happy with the company. Success of people orientation policy in an Indian company is a good case reference. Infosys, the famous Indian IT company is today a multi-billion dollar IT power house has reached dizzying heights because it puts emphasis on human capital and growth opportunities for employees. It is a live example of what a radical people-orientation policy can do! Infosys is an example of how a bunch of young

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PEOPLE ORIENTATION 247 people, from unheralded backgrounds and without money, going on to make millions of dollars through sheer commitment and hard work. Today, it’s an inspirational brand for millions of young entrepreneurs and employees; glaring example being that Infosys recently got a million applications for 10,000 posts. What Infosys did was change conventional wisdom on many things; one, the notion that it is the wisdom of top few brings business success; two, the notion that without money, you can’t be an entrepreneur; three, the notion that you can’t do business without bending the rules. Infosys chief Nandan Nilakani, says, “We went on to turn another notion on its head: that a company is all about its employers, not employees. From day one, we had a huge focus on people and growth opportunities. I think it’s the whole work culture, the milieu, and the intangible stuff. It’s all about people. And that’s why they want to be part of this dream.”3 Addressing a select media briefing at Mumbai on the main growth driver, Unilever’s CEO Paul Polman said, “In the long term, it will be our people and values that will make the difference to the lives of consumers.”4

LEVERAGING PEOPLE POTENTIAL The concept of leveraging people potential emanates from the following core principles of total quality management: (a) Success in this volatile and highly competitive business environment is largely dependent on the organization’s ability to tap its people potential The major underemployed assets—the education, experience, and creativity of the employees must be fully exploited to sustain success. (b) Competitive advantage is spearheaded and provided by people through continuous improvement of quality, cost-effectiveness, distinctive service, flexibility, and constant innovation. (c) Every person has latent talent, and this hidden potential can be nurtured, activated and livened up through appropriate education, training, and deployment opportunities. The nature of this impact depends to a large degree on the intended use of the major underemployed assets—the education, experience, and creativity of the employees. People need to be appropriately involved in business decisions. (d) A truly involved team of people can contribute beyond normal expectations— there are virtually no upper limits on the contribution from a well-trained and motivated employee. Therefore, involvement of people ought to be one of the critical business strategies. (e) The efforts of all employees must be combined for synergy. Effective integration can be done through teamwork and cross-function management. Such integration helps to build an organization-wide perspective that strengthens the entire organization as opposed to the traditional mind-set of protecting and promoting sectional (divisional) or functional interests only.

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248 MACRO STRATEGY (f) Respect for humanity is an essential element of the TQM philosophy, and therefore it is of utmost importance to create a workplace and environment where humanity is respected. Respect gives dignity; respect and dignity induce ownership. Human dignity is some sort of sacramental element that energizes the breeding and blossoming of human potential. (g) The primary concern of an organization is the happiness of its stakeholders— if they are unhappy the organization does not deserve to exist. They should have the feeling of being important members of the extended organization. Apart from supply and delivery chain entities and their employees, the other stakeholders include shareholders and families of the employees. (h) Management must take steps at the beginning of the TQM initiation process to remove obstacles that prevent employees from taking pride in their work. Management must understand that pride is a precious thing to an employee. Management’s reluctance or failure to take these initial steps will results in low participation and low contributions from first level employees. It will be no exaggeration to say that survival, winning, and prosperity thus depends totally on people. Comprehending the principles is the first step towards leveraging people potential. The next is to create the right foundation for launching initiatives and programs, and design dedicated systems, activities and review mechanisms. Appropriate investment of resources will not occur unless the top management has fully comprehended the theory. Just trying to copy what someone else has done, or introducing a seasonal ‘fad’ may generate some temporary fringe benefits, but will end in frustration. Deming’s 14 cardinal points on transformation are based on the core principles that nurture, develop and unleash human potential and are radically different from traditional management practices. Nine out of Deming’s fourteen cardinal points on organizational transformation relate directly to people orientation. Some systems of traditional management, however, are being unknowingly implemented even today. Companies and HRD professionals use them without realizing their negative and demoralizing effects on human potential. Take the example of performance reviews through annual appraisals, management by numbers or management by objectives, etc. that are still prevalent in most industries or organizations; some have even adopted 360 degree appraisals which have become annual rituals. Management does not really care to evaluate the cost of managerial time wasted nor do they review the real contribution to improvement and innovation resulting from such exercises. It requires a lot of courage to break away from many such practices—that’s the real predicament that most professionals have to face. Most theorists like Crosby, Juran, Peters, Ishikawa, Imai, and several others agree with Deming that the key elements of people orientation are education and training, leadership, driving out fear, elimination of bureaucracy, teamwork, breaking down barriers, etc. However, on issues such as annual appraisals, zero-defect drives, numerical quotas, or management by objectives, etc. Deming’s view is radically different from most others. It is interesting to note that Japanese theorists tend to

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PEOPLE ORIENTATION 249 side with Deming perhaps because his points are compatible with Japanese culture. Interestingly Deming’s idealistic approach is analogous to the ideal human behaviour and development prescribed in the Vedic scriptures. It is a great misfortune the application of these Vedic guidelines got stymied due to historical and social factors, and the knowledge remained locked away from general access. In spite of the progress made in human resource development in recent years, there exists a dichotomy between the core TQM philosophies and actual ground realities. The loss of jobs due to implementation of voluntary separation schemes, downsizing etc. runs counter to the TQM philosophy that advocates creation of jobs. Such incongruity leads many to infer that unleashing the ingenuity and potential of people is a suicidal step; many unions and employees propagate that it is against people’s interest, and therefore they oppose initiatives that would lead to process improvements. On the other hand, managers who show ingenuity and courage in taking ‘hard’ decisions on downsizing and show short-term results become the darlings of the stock exchanges and investment communities. Persistence with such schemes will yield to conflict and failure of such magnitude that the movement for total quality management may entirely be wiped out. Instead of taking the easy route of asking people to leave, a management that believes in TQM will find out investment opportunities where the excess human resources can be redeployed. Professionals must consciously strive to develop a holistic perspective that would direct human talent and potential to newly designed systems that would ensure that everybody has a bread-earning capability and an opportunity to live decently. This is what Deming stressed as being management’s sacred responsibility. Conceptual frameworks can induce genuine faith and enthusiasm but they will not yield any positive results unless the concepts find expression in action. Knowledge of theory without implementation is of no use. It is unfortunate that ‘people-orientation’ policies and systems are often hijacked by so-called ‘latest’ HRD theories, often nothing but new packages of the traditional ‘people control’ systems. Readers are therefore advised to study with care Deming’s 14 cardinal points, and the people-orientation principles of Ishikawa, Imai, etc. Juran’s treatment of people-orientation is basically drawn from practical experience gathered from historical studies. Some findings are listed below: (a) Every organization is also a human society that has a distinct cultural pattern resulting from the beliefs, habits, practices and so on that it develops to deal with perceived issues or problems. (b) Within a large entity, there are multiple sub-societies due to the existence of various functions, hierarchy levels, professional disciplines, locations, and so on. These sub-societies could differ in their perceptions and cultural patterns. (c) Each constituency of an organization exhibits a varying degree of cultural resistance to threats to its values. Many, particularly the old guard, tend to resist change management. (d) Participation in quality planning helps to overcome the cultural resistance of different hierarchical or professional groups. The spirit of teamwork is bolstered.

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250 MACRO STRATEGY (e) Application of the concept of internal customers ensures involvement and commitment. Determining the varied needs of the internal customer will require a resistive approach to the cultural needs of the various groups. Juran suggests the use of employee surveys to overcome biases. (f) A process for employee selection, training and motivation to improve quality must be included in the system. (g) Employees must get instant feedback so they are able to associate their actions with the results and can be trained in self-control. (h) Employees must have precise knowledge of quality goals and systems of measurement to assess actual performance, so that they may take the right action in case of non-conformances. (i) Management must train & encourage decision making by the employees, as the extent of delegation is dependent on the extent of employees’ preparedness for the state of self-control. To enable employees to contribute, top management should ensure that employees could communicate their views and ideas to their bosses. The bosses in turn must provide the workers with timely and objective feedback on their performances without ascribing any blame. The emphasis should be on ascertaining causes. Readers are well advised to study the rules of the road by Juran.5 These rules include (a) providing participation, (b) no surprises, (c) providing enough time, (d) starting small and keeping it fluid, (e) creating a favourable social climate, (f) weaving changes into an existing, acceptable part of the cultural pattern, (g) responding positively, (h) working with the recognized leadership of the culture, (i) treating people with dignity, and (j) keeping it constructive. To motivate employees, quality-oriented rewards should be woven into the overall reward system. This requires new ‘metrics’ for evaluating performances. It is necessary to impart and extend training throughout the organization if amateurs are to be transformed to professionals. In addition, Tom Peters advocates the following points:6 z

z

z

z

One must involve all personnel at all levels in all functions in virtually everything. One must genuinely believe the axiom that there are no limits to an average person’s ability to contribute provided he is well trained, supported and encouraged. People must become the primary source of value addition and not one of the ‘factors of production,’ meant to be optimised or minimized or, when needed, eliminated.7 Real people orientation means that with simplifications, combinations or improvements in processes, the human resources released can be utilized elsewhere through retraining, redeployment, etc.

Unless there is some sort of guarantee of continuous employment (subject to acceptable performance), contribution to continuous improvement may fizzle out. Only such a guarantee induces employees to give up restrictive practices, generate

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PEOPLE ORIENTATION 251 ideas for lower cost and time saving, and be flexible towards performing tasks, when required, outside the normal job definitions. Peters has suggested several ways to tackle this paradox, such as careful hiring, retraining and redeployment, attractive voluntary retirement, work sharing, shorter weeks, etc. He also advocates the use of self-managing teams, supporting committed champions and encouragement even in times of failure. Management should institute efficient support systems like listening, drafting compatible recruitment policies, training and retraining, incentive and reward systems, celebration and recognition, and employment guarantee. Management must also do away with systems that inhibit employee involvement such as bureaucratic rules and humiliating conditions, and they must redefine supervisory roles and hierarchical structures. Crosby laments that organizations are not truly people-oriented. Management spends a lot of time reviewing financial and operational figures; they dwell on processes, projects, facilities, and money but hardly discuss ‘people’ except in some individual cases. Crosby exhorts the senior executives and supervisors say to themselves, ‘I am in the people business.’ Crosby comes down heavily on demotivating factors like hassle—according to Crosby, a ‘hassle-free’ environment offers pleasant working relationships, smooth systems, and makes for happy employees; it creates an environment for maximum profit and growth potential. However, Crosby’s approach toward employee involvement is not that radical; he is not very enthusiastic about quality circles, the Japanese concept that promotes voluntarism, self-development and involvement. The post-war Japanese success story is predominantly due to the success of the Japanese philosophical and practical approach towards people-orientation and process orientation, a combined adaptation of Deming’s philosophy and teachings of age-old Japanese philosophies. The single most important concept in Japanese management is that of ‘Kaizen’, which implies an ongoing improvement of everything that involves everyone. And ‘everyone’ means top management, managers, middle management, employees and workers. The readers will note that one of the principal planks of group involvement of front-line employees is through 5-S, TPM, quality circles or similar small group activities. ‘Quality circles’ are also a desirable and effective way of leveraging people potential; people voluntarily solve problems or improve the working process at their respective sections or departments. Suggestion schemes are one of the effective ways of involving people individually; management must implement well-designed plans to ensure that the scheme is effective. Middle management and all other level of employees should also take part in suggestion schemes. Top, senior, and middle level personnel’s involvement is generally secured through cross-functional management, task force teams or project teams. Cross-functional management relates to efficient coordination and effective deployment and implementation of strategies and policies throughout the organization as well as realizing the cross-functional goals of improvement. In TQM, the routine job of managers is broadly classified into two areas: (1) ‘maintenance-managing’ of the success in various performance parameters and profits that has already been achieved, and (2) ‘spearheading continuous improvement’ for improving processes and systems.

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252 MACRO STRATEGY Leveraging people potential is not merely a philosophical or theoretical buzzword, it has been proven by the Japanese resurrection after the end of the Second World War. The Japanese have been able to leverage their people’s potential to engineer their country’s economic renaissance, and improving the quality of life of their people.

ENABLING AND ENHANCING SELF-ESTEEM Research has conclusively proved that customers’ delight with products and services is linked to how sincerely the employees identity themselves with the organization. Involved, satisfied and empowered employees anticipate and exceed customer expectations. The output of people’s activities is qualitatively very high if they are driven by intrinsic motivation (as classified by psychologists), induced by interest, enjoyment, satisfaction, and the challenge of the endeavour itself. In his classic 1943 work Theory of Human Motivation, Abraham Maslow put forward the concept of a hierarchy of needs.8 According to Maslow, after one’s basic needs—physiological needs, need for safety and belonging—are reasonably met, the need for self-esteem crops up. The Indian philosopher Rajasekhara (c. 880–920) in his work Kavyamimamsa had classified recognition (respect) from others, as one of man’s distinct needs. Then there is higher need for self-esteem which lead up to the ultimate need of self-actualization. In other words, man is born with an instinctive need to strive towards self-actualization, the path to which initially runs through the satisfaction of a series of hierarchical needs. The humans look to go beyond the satisfaction of their physiological needs and crave for the satisfaction of their psychological needs, which induce the intrinsic motivation to excel (see Figure 8.1). The Greek philosopher Aristotle had said that it is as natural for a human being to achieve his full potential as it is for an acorn to grow into a mighty oak tree. He also mentioned that the most essential prerequisite to realizing human potential is a ‘conducive’ environment—just as an acorn requires the right physical conditions like soil, heat and moisture for its growth. Many top management who still practice feudal and traditional ways of management, treat employees, both within the management and general category, as commodity—expendable as per the whims of the top management, and this perverted culture has negative repercussions on the psychological frame of all categories of employees affecting their sense of belonging, involvement, and performance. Pride is an important source of selfesteem. In the words of Dr Deming, it is important to ‘Remove barriers that rob the hourly worker of his right to pride of workmanship. Regrettably, many top managers do not realize that poor performance can easily be induced by management systems and procedures such as defective upstream processes, too much dependence on inspections, focus on short-term goals and compromises on quality despite there being written quality policies. All these act as barriers to pride and self-esteem. If an employee is patted on the back for quantitative results instead of quality (as is quite often the case), the system really tramples his sense of self-esteem.

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PEOPLE ORIENTATION 253

es rov Imp rts) o f f (E nce rma e r fo P f o lity Qua

O N E S

SELF-ACTUALIZATION

O W N D O M A I N

KK

Higher Needs I N T R I N S I C M O T I V A T I O N

SELF-ESTEEM

O T H E R S

RECOGNITION BY OTHERS PRESTIGE BELONGINGNESS

Basic Hierarchical Needs

D O M A I N

LOVE SAFETY PHYSIOLOGICAL EXTRINSIC MOTIVATION

Figure 8.1: The Mechanism of Intrinsic Motivation The management cadre, when confronted with declining market shares, increasing costs, falling profits and declining quarterly dividends, spend long hours worrying about cost cutting, neglecting the problems of people and processes. In these times of crisis, suggestions are rarely sought from employees, rather the various initiatives designed to involve employee like quality teams, suggestion schemes, training programs, etc. are suspended giving the impression that they were only used as smoke screens. The employees get disillusioned, frustrated and hurt. It is essential to understand the inner meaning and relevance of the two facets of ‘people orientation”—a key strategic thrust for deployment of TQM philosophy. See fig. 8.2. Unfortunately management often fails to comprehend the ramifications of neglecting human psychology and hierarchical needs. Most traditional management practices, despite their pro-people packaging, try to control people instead of giving them space to pursue self-actualisation. The effect of these practices on a human being has been portrayed with tragic irony in the Charlie Chaplin movie Modern Times. The system may have worked efficiently in the days of monopoly

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254 MACRO STRATEGY

Respect Human Dignity

Enhance Self-esteem of Individuals

Figure 8.2

or limited competition. It may still work in some existing closed economies or protected sectors, but not in a liberalized and competitive economy. Companies today have to find ways to constantly deliver better products and services at cheaper costs and faster. They need to rely on in-house improvements and innovations. Knowledge, skill and the involvement of people are the real and enduring sources of improvement. A company can become invincible through nurturing, enhancing and tapping the knowledge bank of its people. Companies like Microsoft have grown from strength to strength because they have not only depended on the knowledge base of their founder entrepreneurs but also built on their initial knowledge capital. For the sake of better comprehension, some key points on the critical area of self-esteem in the deployment of ‘people orientation’ policies are listed below. These points include the philosophical essence, business imperatives, hindrances, etc. which form the backdrop to the aspect of self-esteem in peopleorientation policies: z

z

z

z

z

The basic human needs are organized into a hierarchy of relative predispositions. When one physiological need is satisfied, the next level crops up. When all basic physiological needs are satisfied, higher needs such as the need for recognition and self-esteem emerge and dominate the organism. There is a distinct co-relation between one’s state of mind and quality of one’s output at his task or endeavour. Psychologists refer to motivation propelled by interest, enjoyment, social obligation, and satisfaction, challenge of the endeavour itself, the feeling of fulfilment, etc. as ‘intrinsic motivation’. It is far more powerful than extrinsic motivation actuated by punishment or reward. The older system of management based on the theories of Frederick Taylor favours extrinsic motivation over intrinsic. As a result, the majority of managers and entrepreneurs still follow traditional HRD/HRM practices for ‘people management’, albeit in newly packaged forms. The pseudo-intellectual egoist mind and the feudal psyches of the top management and entrepreneurs cannot differentiate between ‘people control’ and ‘people orientation’.

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PEOPLE ORIENTATION 255 z

z

z

z

z

z

Being treated like a commodity is demeaning. This includes control through measuring ‘performance’. A controlled human being will, like a robot, do what he is told to do. His vision will be blindfolded; there will be no innovation in his actions, and his talent will lie dormant, without a cause to channel it towards. A person with low self-esteem, despite being given freedom and authority, cannot contribute effectively to decision-making, problem-solving or continuous improvement. Self-esteem, at a higher level in the hierarchical needs, is a state where one seeks to master one’s chosen vocation, task or field of endeavour. This is purely a function of one’s own effort, concentration, dedication or focus, is under the sphere of one’s own control. Unless ‘respect for human dignity’ is institutionalised, employees will not be able to express their talents. Only a person who has reached a state of high esteem can effectively pursue the path of self-realization, the ultimate goal and need of an enlightened human being. If denied the opportunity to deploy their understanding people lose the habit of venturing to try new things, lose their confidence and self-esteem and become like robots programmed to carry out a few simple routines. Researches have conclusively proved that customers form their opinion about quality (of a product or service) based on their interaction with front line employees: thus, the more empowered employees are in an organization, greater are the chances that the customers’ assessment of the quality of services will be positive.

Whenever organizations have taken the initiative to make-work interesting, giving freedom and space for employees to utilize their talents, solutions have been found for chronic operating problems, and many innovative suggestions have been generated for process improvements. Many Japanese, American, European, Korean, and Indian companies have benefited from such initiatives. Unfortunately, very few companies have institutionalized such initiatives. Most have succumbed to short-term business pressures and have continued operating with the mindset of traditionalists. Man has an in-born need to move towards self-actualization, and he thrusts himself instinctively in that direction. According V. S. Mahesh, the eminent consultant on human resource management, human being is aware that ‘ his natural direction for growth is towards self-esteem and self-actualisation needs, rather than towards gratification of “desires” at the lower needs levels’ . Only after the satisfaction of his hierarchical physiological needs does the route to self-actualization open through intense activity in his chosen area of endeavour. After attaining selfesteem, man moves towards meeting his ultimate need, that of self-actualization. To achieve a quality of output that can be described as profound, one has to rely on the intrinsic motivation of a human being to reach out towards ‘self-esteem’ and ‘self-actualization’. Managers (including owners and entrepreneurs) generally

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256 MACRO STRATEGY look down upon or underestimate the capability of the rest of humanity. This has a devastating effect on organizational and individual performance. They must shed their arrogant and cynical view of the rest of humanity, which often only rests on their achievements within their limited sphere. When the lower needs of human beings are not adequately satisfied, the higher needs do not appear. Psychologists have proved through experiments that the introduction of extrinsic motivation results in the reduction, or even disappearance, of any intrinsic motivation that might previously have been present. It is a crime to suppress the natural positive instincts of human beings. Students and professionals will do well to remember that many conventional HRD systems do just that— throttle intrinsic motivation.

EDUCATION AND TRAINING Ishikawa advised TQM professionals to ‘start with education, and end with education’. Of the 14 cardinal points in Deming’s prescription for organizational transformation, two points are devoted exclusively to education and training. Two kinds of education are necessary for TQM: educating the bosses to let go of their traditional mindset, and educating the workers to have faith in their ability to innovate and improve. Today, many professionals are theoretically aware of ‘people potential’, but in practice are unable to break bad habits derived from traditional management techniques. Education and training can help to achieve this arduous task. Management must not treat education and training as expenditure that can be cut when business cycles are down, but as investments to protect the interests of the organization against all odds. In order to implement people orientation policies, the top management must make a conscious effort to learn about human psychology and behaviour, develop empathy towards fellow employees, and no matter what the provocation always respect human dignity. They need to become what they want others to be, and for this they need to consciously partake in selfdevelopment initiatives. Readers will note that the words ‘education’ and ‘training’ have been used together. This signifies that the two are complementary to each other; education is incomplete unless the knowledge is tested in practice; similarly, training without any theoretical backup or hypothesis is too mechanical to enthuse or yield optimum results. Experiential learning through on-job training gives insight, while education keeps the mind fresh and young and facilitates paradigm shifts: education and training, when combined, help to give what Deming calls profound knowledge. Profound knowledge is gained through insights that delve deep into the knowledge bank. Deming says that what an organization needs is a not just good person; it needs people that improve with education. The objective has to be to make ‘quality people’; it is the contribution of the people that give an organization a distinctive competitive edge and the foundation for a secure future. Training teaches new and more rational behaviour. Lastly, good education and training break the shackles of the traditional management system. Employees are now expected to think, participate in problem solving and contribute towards the realization of a company’s vision.

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PEOPLE ORIENTATION 257 It is worth mentioning that the education of the entrepreneurs & top management was one of the starting points of the Japanese industrial and economic renaissance, designing & organizing education programs for them was one of the key strategies that the Japanese had adopted. Planning for education and training can broadly be categorized into two distinctive management interventions—first, foundational training for management, employees, and new employees, and the second intervention is continuous education (including self-education), and improvement for all. The education and training curriculum for employees who are not part of the management should include knowledge- and skills-based training to help them better implement the hard and soft aspects of total quality in all stages of their working life. Success at working life is bound to have a positive impact on their personal and social lives. The curriculum and intensity of education for employees need to be planned according to the general education level of the country or state. Quality education or change management education for employees becomes difficult unless the general level of education is reasonably high. Similarly, many attributes of the service industry such as customer care, cleanliness, punctuality, promptness, etc. are dependent on general outlook. Unfortunately, third world and developing countries encounter significant problems on these counts. Therefore in these societies more intense and basic courses have to be designed to lay the foundation for employees to receive lessons on total quality and change management. Basic courses on hygiene, civics, time-discipline and attitudinal orientation need to be included. In his book Quality is Free, Crosby raises a very insightful and pertinent point that people sometimes tend to retard their own intellectual growth by stopping learning and relying more on the clichés and comforts of old practices and habits.9 Some of these people, nevertheless, work very hard, and climb up the organizational ladder—they are ambitious but peculiarly close-minded and do not participate in learning at all. They run the risk of becoming too egocentric. Education and training for such senior managers has to be cleverly designed. The courses must be camouflaged, apparently oriented towards customers, products, services, information technology, or outsourcing, but in reality, aimed directly at the individuals involved. Crosby also recommends that education courses for all levels include orientation towards concepts and procedures, direct-skill improvement, and a continuous low-key but concentrated educational effort towards the creation of quality people through positive motivation. Tom Peters, in his book Thriving on Chaos, urges us to allocate training budgets before capital budgets. While it is true that it requires a lot of managerial courage and foresight to give education and training such importance and priority over other corporate agendas, Peters argues that apart from expending generous money and time, care should be taken to ensure on-the-job training, regular re-training, and that all employees must be covered for everyone has potential and needs to be involved. He also emphasizes that training must cover areas such as the organization’s vision, values, strategic thrusts, and be operation-driven. It is unfortunate that a majority of organizations have treated education and training’ as an HRD initiative only, instead of treating it as a corporate strategy.

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258 MACRO STRATEGY New HRD managers come in and experiment with the course coverage, expanse and content resulting in a discontinuous and diluted effort. The employees wonder whether the training efforts are directed towards them, or if it is only their workculture that needs orientation; or if there is some sort of class barrier behind the training. In order to dismantle such perceptions, the company should hold training sessions for combined groups of senior managers, middle management, and other employees so that everybody understands and genuinely shares in the vision, values, purpose, mission, strategies and goals of the organization. Certain recommended courses for combined groups are very effective in facilitating the deployment of change-management initiatives, and in overcoming resistance to change. Joint training of top/senior management and trade-union officials will break traditional barriers and develop mutual understanding and trust. These sessions are very effective in engineering paradigm shifts and eliciting co-operation. Some of these courses like team-building, continuous process improvement, reorientation of work culture, customer focus, housekeeping, etc., are very basic but raise issues pertaining to the unique experience and situation of the trainees and their work environment. While the nature, style, and curriculum of basic school and university education may be universal, the adult education courses for working life should address the psychological, cultural, and social factors of a particular region, province, or country. No matter how good the American, British and Japanese methods may be, they cannot just be imported or transplanted—countries/companies have to create their own curriculum and method. Education (including on-job training) cannot be conducted in a social and cultural vacuum—it needs to be developed within the framework of different societies and cultures. Unfortunately, many companies do not realize this—they mechanically run their ‘standardized’ programmes throughout different regions and countries. If courses are designed to tackle cultural aberrations that affect work-culture or quality, there is no reason why nations/companies cannot succeed in reorienting their work culture. In developing countries that still lag behind in basic school level education, the challenge for industries and businesses is much more difficult. Ishikawa stated in many seminars/conferences that Japanese industries have succeeded because they have invested time and money effectively and enthusiastically in QC education for all employees, including top managers and assembly line workers. Juran, like Deming, has identified this education as one of the vital factors behind the Japanese revival. Juran also pointed out that it took ten years for the education to show results. These comments are all related to experiences in Japan or the West where well-organised primary education is provided to all, which makes the task of educating employees much easier than in the developing and third world countries that are still struggling to raise literacy levels. Here, the time required for company education to take root may be much more than ten years. Top management ought to have patience, but this is where they often vacillate. Because of this inherent problem, companies/organizations should try to recruit educated employees. However, since even educated employees cannot be totally insulated from tribalism,

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PEOPLE ORIENTATION 259 superstition, folk prejudices and other negative cultural aspects, companies have to design courses and initiatives to counter them. Based on Juran’s exhaustive treatment on training,10 some useful guidelines are given below: z z z z

z

z

z

z

The basic purpose of the training should be to secure a change in behaviour. Senior managers should be the first to take new training. They should also participate to train the subordinate levels. The training plan should mandate the application of new knowledge and skills to jobs There should be proper balance between tools and methodology. For example there should be appropriate emphasis on the tools of statistics as well as on the managerial tools. The planning of the training should not be left solely to tool-oriented specialists; the line managers should also participate. A broad-based task force is recommended. Training curricula should include the list of courses and indicate clearly the courses for each category of personnel. The trainer’s expertise in respective subject matter and teaching skills should be clearly specified.

Unfortunately many companies or HRD managers concentrate more on technology, skills and other initiatives with tangible benefits. Ignoring the intangibles or the softer aspects is quite common. Management, perhaps through their own training on change management, must develop a conviction that the more educated their employees are, the more the company and all employees will benefit. Appropriate education and training for each level need to be developed through the PDCA cycle (discussed in a separate chapter). In order to ensure a permanent positive impact, it is often necessary to have continuous repetition of certain courses particularly for behaviour and technologies that require changes of mindset and habit. This helps to contain and then eliminate bad characteristics and strengthen the foundation for total quality management. It is obvious that there cannot be a standardized curriculum for all, though the general principles might be the same. Each organization has to develop its own curriculum and strategy. Ishikawa strongly recommends national programmes for promoting quality by industry associations. Ishikawa, further, points out that forming an overview of the general business principles is only a small portion of the required total education— his estimate is that formal education is less than one-third of the total education spectrum. The remaining two-thirds come from experiential learning and continuous educational inputs. The core objective of quality circles is to promote the practice of group-study, and help employees acquire enough knowledge to avoid making recurrent mistakes—it is not to improve working conditions or productivity per se as is commonly perceived. Such combined learning will stimulate thinking and when implemented in the workplace will automatically reduce scrap, improve quality, simplify procedures, etc. and thus affect an automatic increase in productivity. Ishikawa’s theory is based on the ‘each one teach one’ principle; in other

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260 MACRO STRATEGY words, employees should be encouraged to learn from each other through combined training, organized quality circles and participation in task force teams or cross-functional teams. Learning from each other not only enriches one’s knowledge, it increases the appetite for knowledge and practical learning and at the same time induces ‘humility’ at the expense of egotism. It is the responsibility of the facilitators, team leaders, and departmental bosses to teach team members or subordinates through actual work and delegation. Selection of trainers is crucial, but quite often, the top management neglects this vital step or leaves it to the HRD or training department. No policy guideline is issued. Quite often ‘cost’ comes in the way of selecting good trainers, while at the other extreme, top and senior management clamour to hear international speakers for a few hours and end up paying exorbitant fees. Training for top and senior management has to be seriously developed and organized. Senior consultants with knowledge of change management philosophies and experience of having occupied top management positions, would be ideal to design and deliver education and training to top management. Contractual long-term association with such educators will be beneficial to the organization. Suitable internal trainers from among the senior/middle managers can be developed so that the education and training of middle management and employees can be conducted through a judicious mix of outside and in-house trainers. There should be a system for the selection and appraisal of external and internal trainers, and the internal candidates must be trained specially for their new roles, preferably under the supervision of the external consultant. A systematic link between the education and the training— the theoretical exposition and its actual implementation—is critical for success. The teacher or trainer in statistical techniques should have a Master’s degree in statistics as well as adequate practical knowledge of industry and business. He should also have the right attitude to work with and learn from the change management consultant or educator of the organization, and the aptitude to develop statistical controls and techniques suitable to the client’s processes. Top management and HRD chiefs should ensure that the policy of selection of external and internal trainers is not transgressed. Quite often companies offer the job of trainer to friends and ex-colleagues. This dilutes and vitiates the whole training effort. Further it is necessary to ensure that trainers are also made accountable along with departmental heads to ensure that the transfer of training on the actual job is followed through. The readers are advised to refer to some good books on training to get an overview of the traits and skills of a good trainer, coach and counsellor, as well as course designs, training methodology, games, evaluation, etc. Managers normally keep a distance from their subordinates and are psychologically prone to an erroneous superiority complex. They are liable to derive pleasure in the mistakes of their subordinates and are often unwilling to teach them better. However, a leader knows that teaching the subordinate will give the latter access to knowledge and experience, which in turn will help him delegate authority. The tragic managerial flaw is that despite knowing the importance of education and training, the management only organizes ‘training’ when it comes to teaching tangible new skills that they believe will make their operations efficient and

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PEOPLE ORIENTATION 261 profitable. To them, the concept of education in the intangible skills to enable employees to unleash their potential is an abstraction unworthy of trial. But education really fine-tunes and capitalizes on the inherent good nature of man. Unfortunately in many organizations there is still hesitancy to consider expenditure on Education and Training as an investment, rather they consider such expenditure as a part of revenue expense that is curtailed or stopped depending on business conditions. Deming, Ishikawa, and other eminent experts have urged the management to invest in Education & Training as to secure the future of the organization. According to Ishikawa the returns could be as high as 100 to 1000 times the original investment from many different quarters, many of which would not have been conceived earlier. In a state of chaos, it is impossible for any individual in the organization to fully develop his potential capacity for quality, productivity, timeliness, service delivery, cost-effectiveness, etc. The state of chaos is characterized by poor supervision, bad management, and no statistical control. If work has not reached a state of statistical control, further training must be given. Groups where people are performing out of sync must be identified for remedial action. When performances are placed under statistical control, it is possible to identify defects or instances of unacceptable performance with their causes from the control chart. There will be cases where someone’s performance is out of sync with the group owing to the individual’s excellence, as confirmed by the control chart. Such individuals might have found a better, or more effective way of getting the job done, which could be institutionalized as an innovation and taught to other people in the company, thereby improving the overall performance. Deming advocates the use of statistical techniques to ascertain the training needs of employees as well as to evaluate performances after training. No one should be blamed for performances over which they have no control. Deming warns that the violation of this principle will lead to frustration with the job and consequently poor output and low productivity. The objective has to be clear: everybody must be given an opportunity to do a better job and derive a sense of job satisfaction. An individual should be trained intensively till his performance reaches statistical control as shown by the control chart, after which training can drop to maintenance levels. In order to not have a situation wherein the state of statistical control is lost due to carelessness or some unforeseen reason, it is advisable to have occasional retraining programmes. However, an individual whose work is in a state of statistical control but whose performance is unsatisfactory presents a real problem. Rather than to waste effort and resources retraining him on the same job, it may be more economical and will enhance his loyalty and confidence to retrain him for a new job more suited to his skills. The author knows of a multinational firm (where the author was involved as a consultant) in Kolkata where the union leaders were successfully convinced of the need to change in order to protect the interests of their employees. As a result, these converted union leaders became staunch supporters of training and TQM initiatives. The interest was so overwhelming that the Union Secretary would jointly inaugurate the many training seminars, and certain key seminars on team building, quality

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262 MACRO STRATEGY improvement, and productivity improvement were held in the union conference room. The unprecedented changes and improvements in this particular firm were due the exposure of union officials to TQM philosophy and this, in turn, helped develop an understanding of the management’s motivations for institutionalising several TQM initiatives for the common good of their employees.

HOUSE-KEEPING AND 5-’S’ The state of housekeeping reflects the ‘inner-quality’ of an individual or organization, the ‘inner-quality’ is an innate as well as ingrained characteristic that appreciates quality, seeks quality, and always strives for quality. The characteristic displayed at the place of work is bound to affect the final outcome in the form of the quality of the product or service. Shabby work places, oily floors and disarranged materials do not speak of discipline that can consistently produce quality and yield productivity. Unhygienic employee kitchens, foul toilets, cobwebs on the walls, peeling plaster or paint, littered floors, etc. represent an uncaring work culture. Cleanliness and orderliness on the other hand represents a culture of care, discipline, and commitment, which are behavioural characteristics essential to ensure total quality. To be a fanatic for quality, one has also to be a fanatic for housekeeping. It is a proven point that good housekeeping is one of the highest priority areas for reducing waste, avoiding mistakes, containing downtime, ensuring quality, and thus increasing productivity and profitability. People taking care and pride in their work areas will also take pride in their work. Disorderly and haphazard piles of materials and stocks, inability to identify the right materials at the time of need, mix-up of good and bad materials, stocking of unnecessary things, clumsy workplace design, walking aisles obstructed with material or equipment, trolleys, etc. are common maladies of the workplace. The contention that the trash on the shop floor or poor hygiene in the canteen is a symptom of the workers’ irresponsibility is nothing but management’s traditional class prejudice. Management often forgets that it is their basic responsibility to provide a congenial productive working environment; management has to have a basic outlook, policy, and operational concern for housekeeping and needs to involve employees in the self-management of individual/group workplaces. This self-management of one’s work place is the elementary step for empowerment. Through housekeeping the not discipline of the mind achieved, eye for quality is sharpened and employees get the opportunity to use their creativity, however insignificant it may appear to others. A pleasant and orderly workplace not only gives an impetus to work productively but also enhances confidence and self esteem. The trait of caring for others through quality, productivity and service gets ingrained. Professionals must not overlook or underestimate the significance of poor housekeeping; a disorganized workplace implies lack of attention to the most basic point of business i.e. a disciplined approach to achieve objectives. It also

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PEOPLE ORIENTATION 263 indicates management’s apathy towards quality or customer care, and that the employees are least bothered about quality, productivity or well being of the organization. Disregarding the importance of housekeeping induces a culture of carelessness and callousness, no wonder that the more difficult and complex tasks of TQM implementation then get derailed. Housekeeping calls for methodically organized and disciplined working. There are several approaches, but involvement of the employees is the most desirable and beneficial strategy. It does not end with arranging for cleaning by other departments or an agency; it is not about the clean floors only, but it involves a whole system of supervision and vigilance. While the management plans and provides infrastructure support and layout of the space, the responsibility for the cleanliness and orderliness of the workplace is bestowed on the employees. In some modern management situations, the employees are involved or given the responsibility of planning the infrastructure and/or designing the layout including the interior decorations. One such oft-repeated example is the authority given to employees at SEMCO, the Brazilian company. The employees were empowered to plan and design their own interiors. It worked wonders in ensuring belonging, self-esteem, and overall efficacy. What was achieved at SEMCO was perhaps due to the mature understanding between the management and employees. It does not require ingenuity to start a similar effort on a smaller scale in any organization; that is, start with attention towards housekeeping, and involve employees in that effort. It will immediately improve the work environment and overall climate, which will have a positive impact on productivity. To manage this, the Japanese 5-S system is the most popular system. It is a very methodical and effective system, easy to comprehend, establish and maintain. The name ‘5-S’ is derived from the initials of the five Japanese words—Seri, Seiton, Seiso, Seiketsu, and Shitsuke—representing the five distinct elements or traits of the system. These are to be interpreted as per the unique features of the work environment and requirement, and all steps are to be followed and practiced concurrently.

Seri—(Straighten up) It is about keeping only the necessary thing in the right number. It is generally seen that out of ignorance, negligence, carelessness, or habit unnecessary things get accumulated over time creating a chaotic disorder and economic waste. This can happen with (a) work-in-progress, (b) unnecessary tools (c) unused machinery (d) defective products (e) finished products and (f) others. One needs to regularly straighten up things by differentiating between the necessary and the unnecessary—the unnecessary items after proper identification need to be discarded. One can use the principle of differentiation between needs and wants, the relative usage frequency or obsolescence factor.

Seiton (Put things in order) It is frustrating to waste time and energy in searching the required materials. One experiences this scenario at home too.

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264 MACRO STRATEGY Things must be in order so that they are easily located and ready for use when needed. Orderliness ensures timely availability or retrievable as and when needed. This will save time, increase efficiency, and avoid wastage. Similarly, one must be able to put things back (away) easily and quickly in the designated place.

Seiso (Clean up) Apart from having a congenial environment, often it is an operational requirement to keep the workplace neat and clean. The dirt has to be meticulously cleaned from places normally unseen or inaccessible. Apart from being a part of routine in some jobs, regular cleaning up has to be practiced so that it becomes part of the habit.

Seiketsu (Personal Cleanliness) Unless a person is habituated to personal cleanliness and good hygiene, he cannot consistently, on his own, maintain good housekeeping and follow the disciplines meticulously. Personal cleanliness indicates a frame of mind that adores quality. It generates energy and interest in work, and the habit of cleanliness gets transferred to one’s job. One who is personally clean will not generally tolerate an unclean and messy workplace. Personal cleanliness also helps to rid one’s mind of negative thoughts and lets one remain proactive and cheerful.

Shitsuke (Discipline) It is of prime importance to follow the office disciplines as well as the working discipline. The cleaning procedures and practices as per standard operating practice (SOP), the ISO 9000 work procedures, and the prescribed safety procedures must be followed. Quality cannot be achieved without practicing discipline. Discipline is the result of a process or procedure being followed repetitively without any unauthorized deviation. Such discipline helps to form a correct habit. Self and operating discipline will ensure a good housekeeping but will reduce chances of variation as well as deliberate compromises. Discipline is the result of a process or procedure being followed repetitively without any unauthorized deviation. Such discipline helps to form a habit of correctness and reduces variation and compromise. The cleaning procedures and practices as per standard operating practice (SOP), the ISO 9000 work procedures, and the prescribed safety procedures must be followed. People need to be often reminded that Quality cannot be achieved without practicing discipline.

Conclusion It is unfortunate that quite a large number of management professionals do not take housekeeping seriously or consider it a critical element in the success of TQM or even productivity. The state of housekeeping should be audited—the frequency will depend on the complexity. Generally important elements should be audited

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PEOPLE ORIENTATION 265 and assessed using demerit points; the lower the cumulative demerit points the better is the state of housekeeping. Essentially, there ought to be a paradigm shift in management’s emphasis on housekeeping so that 5-’S becomes a habit, and housekeeping an important part of work culture. Practice of 5-S will help to develop the basic human trait of neatness, and involve people in the quality movement.

LEADERSHIP Many books have been written on leadership, and many more will be written. From the life histories of many emperors, kings, religious leaders, change-makers and political heavyweights, one can collate a list of leadership qualities. This chapter, however, will have a relatively narrow focus in that we shall be examining the basic qualities of leadership that are essential for the successful implementation of total quality management. Discarding the traditional hunger for short-term results, professionals need to embrace ‘people orientation and process orientation’ to achieve the long-term objectives of stability, prosperity and meeting societal obligations. This change is essentially from ‘manager-ship’ to ‘leadership’. To the traditional managers, people are just cog in the wheel but on the contrary a leader considers people as the most critical factor for success, and people orientation is a key strategy for success. Leaders sincerely believe in people, respect human dignity, and provide opportunities to unleash their latent abilities. They help people to do a better job with less effort by improving systems and removing causes of failure and frustration. Leaders instil confidence in people to realize their full potential, enhance self-esteem, and take pride in their roles as employees. They purposefully take steps to proliferate leadership traits throughout the organization so that the immense potential of people can be tapped for achieving and sustaining excellence. In his book Out of Crisis, Deming points out that transformation can only be accomplished by man, not by hardware.11 Unfortunately many managers still do not comprehend this vital role of people, to them the phrase ‘people are resources’ is merely an exhortation that is meant to be used in speeches for public consumption only. Such management has no qualms about getting rid of people when profit falls and the chips are down. Downsizing or offering Voluntary Separation Schemes (VRS) is quite common nowadays even in TQM or ISO 9001 certified companies. Market downturn is not the only situation that prompts downsizing or VRS; the irony is that process improvements often generate ‘surplus employees’ who are put on the chopping block at the earliest opportunity. This is an antithesis to the basic TQM dictum of protecting jobs and creating more job opportunities. There is no guarantee that downsizing will ensure survival or long-term growth of the company; however it is sure that employee co-operation and involvement will only be superficial, and the management’s credibility will take a beating. Real leadership will consider the surplus manpower as available resource and will find out innovative ways to productively utilize these released resources, not only to protect jobs but also that is the leadership challenge of this millennium, it is not

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266 MACRO STRATEGY about protect jobs but creating new employment opportunities. According to Dr Deming a true leader has unshakable commitment to the future, and this faith encourages remarkable innovations. A leader gives up the policing job practiced by managers; he rather works with the employees, and learns in the bargain. Instead of being a judge, a leader will be a colleague, a counsellor and a coach. Leaders have the conviction and courage to tackle the biases and obstacles to the implementation of total quality. They take steps to train and educate people and ensure the involvement of people in problem solving and continuous improvement. Middle management should embrace leadership roles by learning the work they are to oversee, exercising their empowerment to improve operating conditions and systems, and informing upper management of things that need correction and improvement. Top management (leadership) should act on the problems or corrections proposed by the front line leaders. Some managers or consultants offer simple solutions, ‘getting back to the basics’ as they call it, to tackle the challenges of the new economic age. But the enormity of the challenges of this new and unpredictable economic age cannot be tackled by simplistic pronouncements; it will require new approaches, new choices, and new skills. Leaders will embark upon these new territories, as they are concerned with long-term things while the traditional managers will prefer to stick to status quo and traditional ways of management. But the leader has foresight to see the danger of status-quo management—he foresees the downhill journey of the organization. Tom Peters in his book Thriving on Chaos has dealt at length with the new view of leadership—readers will do well to read Section V, chapters L-1 to L-10. Peters emphasizes leadership at all levels of management. In his words, the chief job of a leader, at any level, is to oversee the dismantling of dysfunctional old truths and to prepare people and organizations to deal with change, to make sure that everyone loves and develops affection for change. His prescriptions include acceptance of challenges, developing vision, empowering people, practicing visible management, pursuing ‘horizontal’ management by dismantling bureaucracy, and evaluating people on the basis of the ‘change’ implemented or initiated by the individual. The prescriptions have been explained in detail in his book. A genuine leader will be a torch bearer of the TQM movement, he will lead all the way, and even mould his own life on the principles of TQM philosophy.

THE DEADLY VENOM OF FEAR One of the key imperative of People Orientation is to leverage human potential and one of the essential step for voluntary that is to create an environment that will support human development and encourage involvement of employees in TQM initiatives. This cannot be achieved through fear, authoritarian diktats, or coaxing; psychologists say that security needs are some of the basic needs of human beings.

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PEOPLE ORIENTATION 267 Deming has said that no person can perform at his best unless he feels secure. He goes on to dissect the meaning of secure, a Latin word. Se means ‘without’, and the meaning of cure is fear or care. Secure therefore means without fear, not being afraid to ask questions, express opinions or give suggestions. All forms of fear adversely affect performance and are the cause of other ill effects that include all forms of manipulation. The fear psychosis does not grip only middle or entry level employees; the top and senior management also suffer from it. There is the fear of the owners or board members’ expectations regarding the meeting of short-term targets such as quarterly financial results, sales budgets, or cost-cutting targets. Further, there is fear of being passed over for promotion, superseded or finding oneself on the wrong side of the boss. Another disguised form of fear is the widespread resistance to knowledge. New knowledge might disclose individual failings or bring out the shortcomings in the management strategy and style hitherto followed. Advances that have been achieved through new knowledge can trample on the various vested interests or power enjoyed by managers till then. Some senior managers even wonder whether it is possible at their age to learn something new, some are apprehensive whether they have to give up some of the privileges or powers they have enjoyed so far. They are given to expressing reservations about the cost involved in the acquisition and deployment of new knowledge and whether it is worth the expense, since, according to them, it can never be recovered. Fear of losing pride, power or privileges in the wake of new knowledge is camouflaged in many ways that are not conducive to organizational health or growth. Managers who realize these facts will see that fear cause loss to the organization and the individual. Fear undermines human dignity, suppresses human talent, induces adversarial relationships, encourages sycophancy, breeds manipulation, promotes indecision, delays action, and so on. Avoidance, indecision or postponement could be a camouflaged form of fear. Fears of losing a job, the company being taken over, not meeting targets, annual merit appraisals, pointing out a mistake, admitting a mistake, being late to office, being superseded, etc. are quite common and were a part of traditional management. Class distinction and strict enforcement of hierarchical order in an organization induces fear, manipulation, and sycophancy. People on any job or assignment must have the freedom to inquire what they are supposed to do or what is the purpose of the job; they should not be afraid to ask questions or offer suggestions for the simplification and improvement of the process or system. Fear, moreover, is not limited to one particular section or level; in fact, it spreads throughout the organization. All these are reflected in different versions of Deming’s point number eight of the 14 cardinal points of organizational transformation. For the benefit of the readers, the different versions of the said point have been reproduced below: • • •

Encourage effective two-way communication and other means to drive out fear throughout the organization and help people work more productively. (1985) Drive Out Fear, so that everyone may work effectively for the company. (1986) Drive out Fear. Create Trust. Create a climate for innovation. (1990)

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268 MACRO STRATEGY Of the 14 cardinal points recommended by Dr Deming, nine points in addition to point number eight contain references to eliminating fear. Thus ‘driving out fear’ has to be one of the central strategies of a top management that desires to deploy TQM. The old thinking that some fear is necessary to keep everybody on their toes used to work to some extent in feudal societies and monopolistic market regimes. Today, instead of instilling fear, a progressive management will react to the uncertainties of the market situation by, first, considering them as challenges, and second, by rallying its people to meet the challenges by improving quality and productivity through innovation and teamwork. Managers often confuse discipline or pressure with fear. Discipline emanating out of responsibility has a lot of potential: it builds the character of an individual and strengthens the cultural foundation of the company. On the other hand, discipline enforced through fear is just superficial compliance, and is shrugged off at the first opportunity. Pressure to meet market challenges can lead to innovative thought and action; but fear may lead to dogged and ultimately counter-productive adherence to the status quo. Tom Peters has rightly pointed out that in a fearful organization, information hoarding, rather than information sharing, is a rather common occurrence. Delayed action, indecision, bureaucracy, etc. are similarly all manifestations of fear. Fear robs the organization of flexibility, speed, creative ability and teamwork. Another form of surreptitious fear can be observed in certain organizations’ responses to the explicit and implicit threats issued by their trade unions. In countries or organizations where trade unions are powerful, fear of the trade union could have a devastating effect on the well being of employees, as well as on the destiny of the organization. Here threats may be open, physical and crude, terrorizing employees into falling in line with the diktats of the union. The clout of trade unions is often so strong that the smallest management initiatives with respect to workloads, work standards, transfers, promotions, and general improvement have to be discussed and agreed on with the trade union. It is unfortunate that in such organizations, employees are subjected to a parallel and covert administration by the trade unions that issue edicts on matters that are supposed to be administered by the management. In these cases, suppressed fear robs employees of their cheerfulness, pride, and fulfilment. Despite having job security, employees are not happy. Trade unions have a positive role to play in ensuring that the management meets its societal obligations while preserving the stability and solvency of the company. Trade unions must realize that this societal obligation can be met if the organization is able to maintain consistency in its agreed purpose. Trade unions are partners in this forward march—they cannot shirk their responsibilities. They must be careful not to kill the goose that lays the golden eggs. They have a much larger constituency to serve than the immediate union members, for the long term interests of the working class can only be protected through overall improvement in the economy. However, it is ironic that entrenched union leaders usually feel threatened if employees start actively to participate in suggestion schemes, teamwork, innovative exercises, multi-tasking, etc. The unions fear that their popularity, importance and ‘hold’ on the employees will be reduced. This leads unions to believe that lingering discontent and unhappiness will help them to retain their

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PEOPLE ORIENTATION 269 position as the saviour and champion of the workers, and their only mouthpiece through which to talk to management. The unions also need, like the management themselves, exposure and training to make way for a paradigm shift. The new paradigm calls for the unions to enter into a partnership with management to ensure that the threshold limits of hierarchical needs are kept at the optimum level. Rather than set a maximum on productivity, they should set a minimum on compensation, and make sure management sticks to it. This will free the employees from their fear psychosis and allow them to contribute freely to the organization, and thus protect and create jobs in the future. Ricardo Semler of Semler and Co, Brazil, understood this delicate point—he followed a policy that promoted and encouraged union participation in all spheres of running the organization, including strategic decisions. The result was that the right decisions were taken without any fear or rancour; the union even had the conviction and courage to take the unpleasant decision of downsizing the labour force.12 It is the responsibility of HRD managers to give the unions the required exposure and training, and persuade them to take on a new role as partners in shaping the future of the organization.

MANAGEMENT BY OBJECTIVES (MBO) Peter Drucker, in his book The Practice of Management, broached the concept of management by objectives.13 What he advocated was non-bureaucratic self-management, but over the years some over-enthusiastic professionals have hijacked his concept and packaged it in three capital letters—MBO—to be used as a performance-driver whereby an individual’s performance is assessed against the agreed objective or contract with the boss. MBO became a sort of ‘twin’ version of the performance appraisal system, and thus quite a craze with top managements across the world. Tom Peters in his book Thriving on Chaos, section S2, says ‘MBO is one more great idea that has been neutered by bureaucrats in nine out of ten applications.’ According to him, MBO is a superb tool provided the objectives are (a) kept simple, (b) focused on what is important, (c) genuine bottom-up initiatives, and (d) a ‘living’ contract, not a ‘form’-driven exercise.14 Tom Peters further makes the point that the MBO should be used as a tool to generate momentum and commitment to succeed in the competitive world. To create a highly charged environment he suggests the setting of challenging but achievable targets. Many people confuse Juran’s quality improvement through goal setting with Management by Objectives. Juran’s Trilogy is part of his integrated approach towards TQM or CWQM (Company with Quality Management), while MBO is a tool specifically deployed to control or appraise the performance of individual managers against agreed targets. Management by objectives is normally focused on short-term numerical operational or functional goals. Juran suggests revising the merit rating system to accept new quarterly goals or more long-term goals.

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270 MACRO STRATEGY Out of the 14 quality improvement steps prescribed by Philip B. Crosby, step number ten talks of goal setting, but Crosby makes it clear that the goals should be specific and measurable. He suggests that each supervision team should request the employees working under them to set team goals that they would strive to achieve within 30, 60 or 90 days. The purpose is to turn pledges and commitments into action by encouraging individuals to set improvement goals for themselves as well as for their groups. In this way employees would be able to turn their ZD (zero defects) pledge into concrete action plans. Deming was vehemently opposed to MBO including all goal-setting initiatives, as he believed that they would impede continuous process improvement, which is the only route to attaining TQM objectives. In MBO practice, arbitrary numerical goals are generally set at the expense of long-term objectives and often serve the narrow self-interest of managers and short-term stakeholders. The bottom-up philosophy of allowing the employee to set a realistic self-actuated goal is not followed. On the face of it, the philosophy behind MBO appears to be logical. Normally, people do require some sorts of prodding to stretch themselves to reach higher objectives. Generally managers work backwards from the overall company goals, and set ‘stretch targets’ to make sure that their divisional or department goals for the financial year are met or exceeded. The employees have to fall in line with this so-called perspective of their supercharged manager. This induces, yet again, the phenomenon of ‘fear’. Management by objectives and inter-related systems like the evaluation of work standards, performance appraisals, etc. have the underlying premise that most employees, whether in operations or in management, basically do not want to work. The only way to straighten them up is to hold them all accountable for on-job behaviour as well as for the results expected of them. The whole supposition is a backward step based on Taylorism. Management tries to control the behaviour of employees by subversively using MBO, performance appraisal systems, etc. as weapons. In fact it is usually found that MBO promotes a win-lose conflict built into the system. The boss becomes the most important customer; satisfaction of the boss becomes the prime concern of the employees. This reduces initiative, risktaking, and entrepreneurial spirit, as MBO turns out to be an attribute-type system where either one meets the objective or not. Fear of failure and consequences are subtle but very real. Punishments for failure include withholding raises, blocking career growth, reassignment and even job loss. If the employee manages to bulldoze the boss into setting mediocre objectives then a false sense of complacency set in. People learn to survive in the system—they resort to all sorts of manipulations of the input and output processes to achieve the ‘agreed’ results, while they knowingly or unknowingly ignore the implications. In the long run, the manager himself or his successor may have to suffer because of this shortsighted action. Practical cases bear this out. A good number of professional managers go for profits at all costs and eliminate or reduce critical activities related to maintenance, staff training, research, product support or a myriad other investments related to future improvement or stability. This dangerous trend is often camouflaged by the apparent or superficial benefits of MBO. The cascading

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PEOPLE ORIENTATION 271 effects of manipulation to achieve numerical targets not only result in waste, loss of employee morale, etc. but also lead to loss of management’s credibility. MBO ignores tomorrow; it acts only for today, and will never allow total quality to manifest itself in the long run. When charged, managers often proffer the excuse that long-term achievement is hard to measure and harder to reward, whereas everyone can see and appreciate a numerical target. In future, if and when management is serious about process and people orientation or TQM implementation, the employees will look down upon such initiatives as just another passing fad. Hence, a manager addicted to MBO cannot take on the mantle of leadership to implement TQM. There is a great fallacy in the popular idea that everybody’s best efforts, regardless of direction, add up and improve an organization’s performance. But without an overall plan, many of these efforts end up working at cross-purposes. The fundamental flaw in the MBO concept is the assumption that a company’s good performance is dependent on the effort of individuals trying their best in their respective pockets or compartments. In other words, for the company to perform well, compartmentalized areas where people work in isolation must perform well. Initiatives uninformed by long-term objectives tend to set up conflicts within an organization; the goals of one department or unit may work against the goals of another. MBO overlooks the concept of extended and inter-related processes—it ignores the fact that every person and every facet of a organization is affected by and related to other areas in ways that we cannot always see or measure and in some cases can’t even imagine. Virtually no one’s results are independent in a company. Therefore, integrated effort is required for continuous improvement. MBO overlooks the constraints of systems; it believes all problems will be solved if everyone contributes a little more. It does not ask the question, a little more what? The proponents of MBO forget that problems are due less to employees in the system than to the system itself and its outdated and incorrect ideas. Employees’ contributions are limited by the optimum capability of the system; improvement really comes from improving the system and its processes. The numerical goals of MBO tend to destroy the stability of a statistically controlled processes. Often the MBO goal pertaining to the ‘process variable’ is beyond the capability of the existing system. Desperate employees end up disturbing or destroying the system for the goal, and are then rewarded for this, resulting in a proliferation of compromises, misreporting, sharp practice and lying. This does not produce a real sense of accomplishment from it, but rather a smugness that flows down the management levels to the employees. The effects of this, when finally discovered, may be too costly or difficult to mend.

Quota or Work Standards Management by work standards is a manifestation of Taylorism in industry or business. It is a cancer-like disease that slowly kills the competitive productivity of a plant or organization. It is now used as a bargaining tool by trade unions, but it is a self-inflicted malaise that hampers the long-term interest of the organization and its employees.

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272 MACRO STRATEGY In traditional management influenced by Taylorism, the work standard is an important tool to assess and fix plant capacity, production targets per employee, and costing. The industrial engineer computes what an average employee should produce or give in eight hours, broken down to so much per hour. A strong union challenges the figure, negotiates and drives it down. Trade unions use the work standard as an arm-twisting tool during disputes with the management by slowing down work, turning in only a wage-earning production as opposed to the mutually agreed target settled in earlier negotiations. This idea of the work standard or ‘quota’ negates the very idea of continuous improvement, and kills the idea of people’s initiative or talent to improve productivity. Work standards are clearly a barrier to implementing process orientation. A similar informal quota system is also in vogue in government and many large private organizations. It is largely responsible for the long queues in government offices and consequent inefficiency and poor service. When asked for the delay, the staff coarsely retorts, ‘That’s all I’m paid for’, they regard their salary as a recompense for a fixed amount of unilaterally defined daily work. This is a malady of the quota system. In the normal course, management also uses the ‘work standard’ as an input to have some sort of basic figure to aid them in cost projection. Unfortunately, the work standard or quota system does not have any built-in provision to improve processes or productivity, and so the projections remain virtually unaltered year by year. Management gets stuck with the original figure till the trade union or staff association agree to renegotiate it. However, even in a system that is tied down by work standards, there could be employees who view the waste and inefficiency with a sense of guilt, and want to improve processes or exceed the low numerical quota. But other employees or the union pounce on such people and force them to stay within the bounds of the ill-advised united stand. It hurts the self-esteem of sensible and conscientious employees to watch the wastage perpetrated by most work-standard-based work environments, but they are forced to stay within the capacity of the least able worker, as overproduction will not raise their salaries or their reputation. Although work standards may have an initial advantage in terms of achieving a predetermined level of output, this system leads to stagnation and tends to throttle any improvements that are mooted. Once the benchmarked norm is achieved, managers make no further effort to exceed the norm by improving the processes, although they do often realize the waste of opportunity and the under utilization of their investment that is occurring. Work standards that are determined by industrial engineering methodology or politically motivated union negotiations do not give correct planning figures—real achievable figures can only be obtained through the study of the process. Quotas set through management by numbers or management by objective lead to rampant malpractice across the organization. Management may be aware of this but takes little corrective action since the managers themselves are often implicated in the problems. Booking the production of the first ten days of April against the production of the preceding month to fulfil the quota of the year ended

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PEOPLE ORIENTATION 273 31 March is not ethical; it is a malpractice, irrespective of all rationale that may be used to justify the act. The phenomenon of sales people forcing dealers to manipulate sales to meet the monthly or yearly target and then quietly dropping the figures after a few months on some plea or other is quite common. Late receivables and consequent credit problems are mostly due to push sales to fulfil the sales quota. Unauthorized discounts offered to coax dealers to take delivery to meet the target are also a problem. The quality of training programs suffers if the principal focus is to complete the numerical quota of training. The more unrealistic the quota, the greater is the damage done to the system. Work standards also create a lot of ambiguity in understanding job responsibility— whether the job is to ensure meeting the customer’s needs or just meeting the quota is a question with no answer. This is a pertinent issue particularly in the service industry. If an employee is evaluated purely on attending say ten calls an hour (i.e. each call is to last approximately six minutes), the employee may politely hang up on a caller who has taken more than 6 minutes. The caller might not even have been able to express all of his/her problems, but for the employee the time was fixed, and it had lapsed. Such ridiculous things do happen in a work standard based environment.

RECOGNITION AND REWARD Some system of recognition, reward, and reprimand is followed in almost every organization, either codified in writing or agreed on informally by the members. In general, ‘recognition’ is symbolic recompense in terms of esteem, reputation, goodwill or admiration, while ‘reward’ is usually material, such as a cash prize, profit-sharing bonus, or stock options. The best systems combine the two in different ratios, such that a prize will contain both a symbolic reward in terms of reputation enhancement, as well as a cash bonus or other desirable material thing. Philip B. Crosby has pointed out that certain fundamental facets of character like integrity and compassion are vital for any business to succeed. He calls it system integrity and has developed a concept to explain it. The ‘integrity system table’, as Crosby calls it, is supported by four pillars, (i) management participation and attitude (ii) professional quality management (iii) original programmes, and (iv) recognition. All these need to be constructed to complement each other. Crosby points out that if properly designed, recognition programmes can become the shining star of the entire integrity system. According to Crosby, the methodology of the contest for, and measurement of, success is key elements of any recognition programme with relevance to the improvement of business. Crosby warns that it is wise not to attach relative value to employees’ contribution to the identification of problems, since awards or recognition are properly only for solving them. Conducting a ‘function’ or event to give away recognition awards is equally important. It lends credence and importance to the programme, and for a majority of the recipients the occasion may be the biggest moment of their lives. Along with the public recognition of

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274 MACRO STRATEGY exceptional performers, such functions must visibly project the management’s commitment and dramatize their praise. The award or recognition could be quarterly, bi-monthly or annual depending on the culture and requirements of the particular organization. Quite often a formal system of evaluating ‘recognizable’ performances is set up. Sometimes it is best to pick someone based on peer recommendation. Peer recommendations consider all aspects including intangible improvements, which may not normally get noticed. Tom Peters recommends for increased rewards based upon new performance parameters that have relevance to changing customer needs and constant innovation. His prescription is to listen, celebrate, and recognize. ‘Listening’ is recognizing that employees have talent to contribute. To make the act of listening a powerful medium for involving people, it will be necessary to have structured and unstructured forums for listening. The environment should be free of fear or apprehension, and the level of formality appropriate to the occasion. In some company cultures, informal breakfasts and dinners can also be arranged—the modalities can be worked out by different organizations as per their tradition, culture, or budget. Such listening programs enhance the self-esteem of individual employees. To ‘celebrate’ is to publicly recognise the achievement, to whatever degree, ranging from ‘thank you’ notes to glittering public functions. Tom Peters cities examples of how saying ‘well done’ or publicly acknowledging the good work of an employee can create trust and involvement. Informal recognition involves informal or semi-spontaneous celebratory events: special meals or treats, like a cake for the team to share, thank you notes, symbolic gifts like T-shirts, hats, fancy key rings, paperweights and desk ornaments, badges, belt buckles, tie-pins, even chocolate. The stimulus for such rewards could be unsolicited help on a difficult assignment, sticking out one’s neck to help, going out of one’s way, etc. By contrast, the reason for grand-scale recognition should be truly exceptional performances such as winning an internal competition on customer servicing, having no quality complaints, breaking productivity barriers, achieving zero defects, etc. The exact achievement, of course, will depend on the nature of the business. Some other suggestions made by Peters are (a) make formal appraisal of a small part of the overall organization, (b) seek out and celebrate the innovators, and (c) give recognition for jobs that illustrate imaginative responses in the face of difficulty. The last point shows how recognition can be inspiring also to those who don’t win the competition, since it gives an example of behaviour the management regards as praiseworthy. Care should be taken to reward small innovations as well as large ones, and if it was a team effort, to be sure to reward the whole team and not just the charismatic leader. Juran also spoke about giving recognition, but unlike Peters or Crosby he has not made it a key concept for quality management. According to him recognition consists mostly of ‘ceremonial’ actions undertaken to acknowledge meritorious performances publicly. Deming’s view on the subject of recognition and reward is radically different from the views of most practicing professionals and theorists. According to him recognition and reward systems are basically built-in controls for management-byobjectives or management-by-numbers. He sees rewards as given generally for

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PEOPLE ORIENTATION 275 achieving a particular pre-set goal that gives immediate short-term gains. The preponderance of short-term ‘bubble effect’ over the less dramatic long-term activities blurs the focus on the long-term goals of the organization. Further, the employees are set up in an internal competitive situation as opposed to the cooperative way of working required for continuous process improvements. The ‘recognition and reward’ system thus inherits all the ills of the merit rating system or the controlling type of management—it increases variability, encourages manipulations, promotes individualism, and in reality, works against the long-term interests of the organization. One of the greatest flaws of the ‘recognition and rewards system’ is the randomness of the system; the sporadic awards and recognition reflect the efforts and achievements for short-term goals. In this system there is no well-defined continuing link with long-term improvement efforts. The award winner takes away the prize but the basic problem remains and reappears. Except for the long service award instituted by some companies, one can hardly cite an example of a sustained reward or recognition system. Also one must realize that in the true sense recognition means ‘recognition by others’ i.e.—one has to achieve the objectives or standards set by others and is at the mercy or whims of others to get recognition or reward. This is contrary to the principles of continuous and unlimited improvement carried in the TQM philosophy. Deming thus brings out the pitfalls and detrimental effects of the traditional management’s ways of organizing awards and recognition systems. The traditional management axiom that ‘people need to be controlled by rewarding or punishing them for their performance’ is not compatible with TQM core values. Nevertheless, it is possible to use recognition, rewards, and celebrations with care to turn them into avenues to sustain TQM values, the following design aspects may be considered: z

z

z

z

z

The focus will be on the means and not on the ends. Enough care to be taken to ensure that rewards, recognition, and celebrations do not contradict TQM values or different elements of the TQM philosophy. Rewards/recognition should operate at the organizational level, at the group/ team level, and at the individual level. Organizational level rewards could be sharing the profit resulting from a firm’s good performance over a period and this could be clubbed with the yearly salaries or wages of rewarded employees irrespective of their level in the hierarchy. Reward and profit-sharing plans focused on group/team efforts encourage setting and achieving common goals, giving importance to co-operative working, and producing synergistic effort. Such systems ensure the development of the group and insulate it against subjectivity, politicking, or malpractices. Motorola follows this system. Individualism cannot be avoided altogether. Entrepreneurship, creativity, problem-solving skills, and other innovative talents of individuals make breakthrough improvements possible; it will be foolhardy not to encourage them. The only difference from the traditional management reward system will be in choosing the parameters for recognition and reward so that individuals

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276 MACRO STRATEGY are encouraged to help with effective process improvements, product/service design, solving problems, etc. That is, the suggestions or contributions that lead to major sustainable process or system improvements should be the ones worthy of recognition. In a system following the TQM philosophy, group effort is recognized or rewarded for the end result in performance, while the individual is given due credit for his process improvement suggestions or for excelling in new skills. A multi-level reward system should be carefully designed so that there are checks and balances. These include sharing between organization level, team level and individual level, and keeping the balance between symbolic and material rewards. Planning of the symbolic and material awards is limited only by the planner’s ingenuity and creativity. Some rewards are tied up with career planning. In the American manufacturing plant of Honda, each accomplishment, whether a team-based improvement activity or an individual suggestion on productivity or safety is awarded points. The points get accumulated throughout the associate’s career (as a Honda employee is called). The highest award, the Honda Award, is a Honda Accord car and a special vacation for two people anywhere in the world.15 There are again organizations that employ the ‘gain sharing concept’ for achievements that lead to substantial financial savings or gains. A common definition of gain sharing is ‘sharing with employees some of the gains accrued through their cost reduction efforts’. The reduction may have been achieved by increasing efficiency, reducing waste, or process improvements. The amount of sharing is decided on the basis of a pre-determined and agreed formula. Celebrations of success not only help to build self-confidence in the winners, they also provide stimuli to others. They also include celebrating certain days or events such as ‘Quality Day’ or ‘Safety Day’ that symbolize the core principles of the TQM movement. Such celebrations could be linked to any other important event or day that is universally, nationally, or regionally important.

SUGGESTION SCHEMES A well-administered suggestion scheme is an effective tool for employee involvement; it ensures that employees have kept their thinking caps on, their interests alive, and thereby enhanced their self-esteem. Though suggestion schemes are a part of traditional HRD practices, in most organizations, unfortunately, these schemes are not administered, the designated places for keeping suggestion boxes wear a desolate look and the boxes themselves look unkempt and battered. It is interesting to know that the suggestion scheme was also brought to Japan in the post-war era by TWI (Training within Industry), USA, and the US Air Force. The Japanese adopted the system as an integral part of individual-oriented Kaizen and strove to make it dynamic. While the traditional system of suggestion schemes stressed economic benefits, the Japanese style stressed positive employee participation and its resultant benefits. The Japanese were very serious about these

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PEOPLE ORIENTATION 277 schemes. The top management religiously reviewed the number of suggestions received, the number that were actually tried out; and the resultant benefits. They took steps to institutionalise appropriate suggestions. Though people have thinking power and do have an opinion or suggestions on things they use, work on, or come across, they tend to keep such suggestions to themselves due to various reasons. Nevertheless, even employees who are generally shy can be encouraged to participate in suggestion schemes. Getting productive or creative ideas from employees is not so much a matter of having creative employees but more about getting every employee involved in the process. It is the responsibility of management to create a supportive environment where ideas are welcome and can be submitted without fear of ridicule. Furthermore, the employee must be assured that the suggestions will be taken serious and evaluated properly. Top management’s genuine interest is a necessity for a suggestion scheme to be successful and sustainable. Otherwise, even a well-designed suggestion scheme will die out soon, leaving an undercurrent of cynicism and weakened credibility. According to Kenjiro Yamada, the managing director of the Japan Human Relations Association, the suggestion system should go through three stages: First Stage: In the beginning, management should make every effort to help employees participate in the scheme—it does not matter if the suggestions are simple or crude. The only criterion is that the suggestions should be relevant to the betterment of the employees’ work and workplace. This will help the employees to take a fresh or critical look at the way they are performing their jobs. Second Stage: Management should provide employee education so that the employees are better equipped to analyse their environment, diagnose the problems and provide better suggestions. At this stage better suggestions can be rewarded. Third Stage: By now employees are not only educated but also are really interested in their own development and the continuous improvement of the workplace. The best suggestions will now produce serious economic benefits. It takes anything between five to ten years before the suggestion scheme really takes deep root, and starts yielding consistent results. Unfortunately most managements want quick results—they even skip stages one or two, or both and move straight to the third, falling prey to the impatience to have quick results; but the results naturally disappoint. Frustration quickly sets in, and the scheme becomes defunct. This leads to further loss of management’s credibility and sincerity of purpose in the eyes of the employees, while the management responds disdainfully ‘oh we tried that but it didn’t work’ if anyone brings up the subject of suggestion schemes again. The Japan Human Relations Association has proposed an order of priority for the main issues to be considered in a suggestion scheme: (a) (b) (c) (d)

Improvement in one’s own work Savings in energy, material, and other resources Improvements in the working environment Improvements in machines and processes

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278 MACRO STRATEGY (e) (f) (g) (h) (i) (j)

Improvement in jigs and tools Improvements in office work Improvements in product quality Ideas for new products Customer services and customer relations Others

Criteria for inclusion should consider whether the suggestion would result in (a) making the jobs easier (b) removing drudgery form the job (c) removing nuisance from the job (d) making the job safer (e) making the job more productive (f) improving the quality of the output, and (e) saving time and cost. It is essential to clarify, right before launching a suggestion scheme, not only the scope but also the issues that are debarred from the purview of the scheme. A list of items that are debarred should be included in the text of the scheme to avoid future disputes. This would include issues dealt with only through union-management collective bargaining, grievances directed to management, subjects or issues that have already been accepted for consideration or have been settled or implemented, consideration of well known hypotheses, facts and practices, etc. Interpersonal conflicts will also not be considered in suggestion schemes. In some companies like Aisin-Warner-Japan, the suggestion scheme is extended to include employee’s families to encourage family members to suggest ways to reduce absenteeism or improve the quality of home life. However, the author feels that such extension should be undertaken only after the system has stabilized and matured, otherwise the focus will blur. Apart from awareness and promotional efforts, management should make it a part of a supervisor’s job to encourage employees to participate in the suggestion schemes. Management should realize that the interest and commitment of the ‘first line supervisor’ is necessary, and that the system cannot work effectively unless the supervisor motivates the people who work under him. One must make the philosophy of suggestion schemes clear—it is a movement by the employees and for the employees, and they must be alert to new opportunities for exercising this spirit of self-development. Eligibility for participation has to be made absolutely clear—generally, senior management are not allowed to participate in suggestion schemes. The documentation format or ‘form’ of a given suggestion scheme should be simple and easy to fill up but must ask for adequate information to precisely document the salient features of a suggestion, but should on no account smack of bureaucracy. The following example is given to illustrate the points that may be included in a form design: • • •

The status or problem before and after the suggestion is carried out, with sketches if applicable The method or process to be followed Goal to be achieved (tick)

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PEOPLE ORIENTATION 279 † Reduce man-hours, † Improve performance † Improve office work † Safety † Save cycle time

† Save materials, † Lengthen life † Improve environment † Easy maintenance † Save setting time † Others

† Improve quality † Improve productivity † Better hygiene † Cost-effectiveness † Save tool change time

The management would then record the following: • • •

Appraisal giving grades on creativity, originality, adaptability, simplicity, indirect effect, economic effect, etc. Result of appraisal: adopted/considered/kept in abeyance/rejected (give reasons in case of rejection) Recommendation for reward (tick one of a list)

A cross-functional high-powered team should finalize the criteria, the design of the form, and the administrative procedure of the scheme. It is prudent to spend managerial time to develop a system that will give results. While designing the administrative part, care should be taken to see that when an employee’s suggestion cannot be implemented, clear reasons must be communicated promptly. There should be a time frame fixed for the formal acknowledgment of the receipt of a suggestion and for communicating its acceptance, rejection or abeyance. Suggestions may go through primary and secondary reviews before adoption or rejection depending on the complexity of implementation or impact. Front line supervisors could handle the primary review whereas the second level review should involve people like departmental or functional managers. Measurement of the total number of suggestions and suggestions per worker not only evaluates the participation level but also indicates the efficacy and dynamism of the system. A dynamic suggestion scheme indicates that involvement in continuous improvement has become an embedded culture. In 1985, the Japanese company Matsushita received 6 million suggestions; Hitachi had 4.6 million suggestions. The most suggestions made by one Japanese employee in 1985 were 16,821. The phenomenal number indicates not only interest and involvement but also the individual skills of the employees of these plants and the enhancements such employees are capable of making. The Japanese firm Canon issued interesting guidelines to managers and supervisors which could be good reference points for professionals and students. The main elements of these guidelines were: • • • •

Always show a positive response to suggestions for improvement Help employees to fill up the suggestion form Make efforts to identify and correct even the slightest inconvenience for employees Display individual achievement charts—encourage competition

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280 MACRO STRATEGY • •

Help implementation as soon as a suggestion has been cleared Explain to them the calculation of evaluation and try to organize distribution of awards before payday.

EXHORTATIONS It is not uncommon to find hung all over the plant nice posters, slogans and exhortations urging the employees to work for better customer satisfaction, higher quality, improved productivity, less accidents, better housekeeping, and similar issues. There are some quality consultants who recommend the use of these posters to raise the morale of the people. But how much really do slogans, exhortations, targets, etc., improve productivity? Deming’s view is that not only are these slogans a waste of the company’s money, they cause damage to individual self-esteem as well as induce cynicism about the management’s approach towards improvement. The slogans ‘Climb the steps of success’ or ‘Safety is your responsibility’ may sound nice, but in reality has anybody explained to the employees how to discharge their responsibilities towards safety or indeed how to succeed? How is it that posters with the slogan ‘safety first’ are hung over a circular staircase with no railings? ‘Doing it right first time’ is of course a TQM philosophy but unless the employees are given education to comprehend the perspective and management takes necessary actions to enable the employees to achieve result at first attempt itself, the ‘axiom’ will have the same cynical effect as other exhortations. Certainly motivation and personal awareness are important, but they are no substitute for process or system capability. The responsibility for ensuring correct resource inputs is squarely on the management. How can workers ensure safety if the management has not provided the railings to the circular staircase? Or, how can one produce ‘right’ at the first attempt itself if the input material is defective, or the machine is not in good order or the measuring instrument is not calibrated? Quality is made in the boardroom—this is a hard fact that unfortunately the top management often forgets. A worker can produce lower quality but cannot deliver better quality than the process capability allows. When the slogans on the posters implore employees to give high output numbers beyond the system’s capability, the effect in reality is to demean the employees. Management is often ignorant or negligent of the adverse impact of the seemingly harmless and supposedly motivational act on the general employees. One must understand that the pictures, slogans and exhortations depicted in the posters are directed towards the wrong people. It is not at all true that production workers or front-line employees could, by putting their best effort and labour into the job, achieve constantly zero defects, improve quality, increase productivity, reduce cost, and all else that is desirable. The charts and poster do not take account of the fact that most variations and trouble emanate from the system. Time and again it has been proved that almost 85 per cent of defects, mistakes, high costs, delays, etc. come from deficiencies in process or system which are ‘management-controllable’ items. It will be naïve to assume that the employees are not aware of this:

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PEOPLE ORIENTATION 281 hence, they resent the posters, assuming that they are being made scapegoats and that management does not really care about their sentiments and pride of workmanship. Such campaigns ultimately ends up as a hoax inducing cynicism amongst the employees about management’s real commitment to improvement. This is not at all an insignificant matter to be ignored. In his point number 10 of the 14 cardinal points, Deming has given due importance to this aspect and has urged eliminatation of exhortations. The 1986 version of point 10 clearly says to eliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity. The only posters that are worthwhile are those that give practical guidance on initiatives that are already under way, for example posters that tell workers the right way to fill in a suggestion form, run a quality circle, etc. Posters that explain to everyone on the job what management is doing to ensure better incoming materials, better maintenance, new product development, new distinctive service to customers, better training, efficient information systems, etc., not only create interest amongst employees but establish management credibility.

PERFORMANCE APPRAISAL SYSTEM OR ANNUAL MERIT RATING SYSTEM The Performance Appraisal System is still a very popular management or HRM practice, as a matter of fact it is being constantly improved and upgraded like the 360-degree appraisal system. Most companies, including many government and quasi-government organizations, have adopted the latest performance appraisal system as part of their so-called effort towards human resource development. This so-called revolutionary idea of subordinate appraising the boss has captured the imagination of many HRD and management professionals and they have introduced the system with much fanfare. Most management got so carried away with novelty of the idea of subordinate apprising the boss that they could not comprehend the hollowness of the concept in realising some genuine improvement in human resource development. The hallucinatory effects do not allow management to see the demoralized faces of the majority of the employees. Ultimately it is old wine packaged beautifully in a new bottle. Many consultants and professionals have realized this but have not had the courage to challenge this popular system. Deming is one of the few management philosopher & consultant who vociferously opposed the institutionalisation of any sort of performance appraisal system, which he describes as nothing but management by fear. According to him ‘it leaves people bitter, crushed, bruised, battered, desolate, despondent, dejected, feeling inferior, some even depressed, unfit for work for weeks after receipt of rating, unable to comprehend why they are inferior. It is unfair, as it ascribes to the people in a group differences that may be caused totally by the system that they work in.’16

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282 MACRO STRATEGY The purported objective of performance approval system is to enhance the merit of the people but in reality the system focuses on assessing people by the end product or the result of the stream. It is not a tool to help people or people development. Normally the traditional performance appraisal system focuses on numerical goals that are to be achieved by the employee but it does not recognize the problems faced by the employee, his ingenuity to keep the wheels moving, or his efforts to improve the system. It is the compliance with agreed numerical target is all that matters, such compliance is easy to compute, record and review. If one delves into the practical working of the traditional performance appraisal system setting aside the dogma of so-called logic and superficial benefits, the following ‘truths’ come out: z

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It is against the TQM philosophy of according high priority to human dignity It is a demeaning system of ranking people, treating the people like high yielding, average yielding or low yielding type of commodity. One has no right to appraise a person and then categorize him in a pigeonholing or binning system of outstanding, excellent, average, satisfactory, etc. This is what a Japanese philosopher has said; the ancient Indian philosophy has also scripted that it is a wrong and objectionable practice to judge a person. Whatever refinement one tries to bring, in the ultimate analysis it is subjectivity that prevails, it boils down to the naked truth ‘at the pleasure of the boss’. As the boss is the employee’s most important customer, the employee accepts the target he sets. One cannot develop competitive edge if the system fosters mediocrity. The boss often does not know or care that the short-term objectives set by him invariably fosters mediocrity. Since the employee has not got the guts to oppose his superior, he accepts the target set by his boss and then manipulates the system to get to the agreed objective. Individual performance appraisal system thus destroys teamwork. An employee won’t hesitate to ditch the colleague to get to his target. Learning teamwork won’t get him high evaluation mark for his career advancement. It induces apprehension and fear, subordinate will not dare to point out the deficiencies of his boss. Even on reassurance though, he will use jugglery of words to sidetrack the main point. Thus the performance appraisal system does not achieve its goal of motivating people to strive for excellence. Instead everyone takes steps that will promote their own growth even at the cost of the long-term interests of the organization. Merit rating rewards people that do well in the system—it does not reward efforts to improve the system. It rewards playing safe and stifles teamwork, as people soon understand that co-operating with others may jeopardize their career prospects. If one does it right the first time, he is invisible. He is not rewarded, as he did his job as was expected of him.

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PEOPLE ORIENTATION 283 z

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But if one mess it up, and correct it later, he becomes a hero. People see that he has solved a critical problem, and he is rewarded. Management does not appraise that it was he who caused it first. Performance appraisal or merit rating focuses on performance at the end of the stream. The importance of upstream and mid-stream processes is lost.

As Deming points out, any attempt to reward people working in processes that are not under statistical control will lead to erroneous conclusions. The rationality or otherwise of the process is the real factor in performance here. A worker who performs brilliantly in a process under statistical control may well fail miserably when transferred to a division where the processes are not in control. Applying the law of variation to a statistically controlled process (following the normal curve) will lead us to the simple understanding that in any group of ten people, one will be in the top 10 percent and one will be in the bottom 10 percent. Similarly, except in extreme situations about half of the people’s performance will be above average and about half will be below average and there is nothing anyone can do about it. But when performance appraisal is applied to this situation, people are valued or denigrated depending on where they fall in the distribution. Some are rated below average, some near the average, and some above average, and management ‘rewards’ or ‘reprimands’ people within a logical performance pattern. But if people try to emulate those ranked above them without improving the system they will only throw the system out of statistical control. This is a case of ‘over control’. As a result of the well-intended effort to improve individual as well as process performance, a state of increased variability is induced. With half of the people trying to change to become above average, the variability of outcomes can rise to twice what it would have been if they had just continued with the status quo. The managers wonder why this is happening despite their introducing the latest performance appraisal system. With the 360 degree appraisal system, employees are often afraid to give their assessment freely as they are not confident that things will be confidential—historical evidence does not lend credence to the promise of confidentiality. Managers often manipulate the system by use of subjectivity and ensuring getting good rating for them. Funnily the human resource department often insists on review of the ‘rating’ of the compiled evaluation as the quota of ‘ higher rating has exceeded. This is the way even the new 360° appraisal package also misused, and many cases top management is also not aware of such manipulations. The primary objective of any performance appraisal system should be to help people overcome their weaknesses and develop their skills, not to rank people in order of their actual performance. This ranking has an undercurrent of finger pointing as it willy-nilly categorizes good people and bad people. This runs against the tenets of TQM philosophy. The annual performance review is really an extension of the age-old theory of carrot and stick. The challenge of replacing the deeply entrenched traditional appraisal system is enormous. It requires unflinching faith in the TQM philosophy and perseverance with the new approach. A new system requires several innovations. Firstly,

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284 MACRO STRATEGY to avoid the stigma associated with the old method, the new one should not be called a performance appraisal system. Instead it can be labelled ‘an employee self-development project’ or similar phrase. The design of the system must concentrate on fact finding, not on faultfinding. Next, the appraisers must be retrained. Instead of being a judge, the appraiser will be a counsellor. At the same time, statistical process control techniques must be installed. To help future action it is important to keep a note of special causes that could not be eliminated. Variation is to be accepted as a natural part of a stable process. Only people who get worse within a statistically controlled process should be offered special help. Deming sees a seven-year run of persistent deterioration as a case to worry about. People who consistently improve on the good side of the system over consecutive periods, and who contribute to the system and not just at their work, deserve special recognition. Also there are many examples of individual employees who may not work well in ‘teams’ but who perform as individuals exceedingly well or make tremendous contribution through creative solutions. Such people should be given space, recognized and honoured by the company. The distinction between good and outstanding performances should be made on the basis of unquestionable demonstration of improvement over several years, Deming says seven or more years. Monetary rewards are to be given judiciously; otherwise they may lead into a greed-trap. Formal interview sessions with employees may be held at least once a year, for at least three to four hours, to elicit their problems, ideas and aspirations. The appraiser must move away from the controlling people to helping people to achieve self-development. Employee-oriented individual meetings must not all be planned for the year-end as a routine ritual where duly filled up forms has to be sent to the human resource department. Passing a judgment on employee performance and traits or branding the employee good, average or bad as a result of the meeting is obnoxious. Instead it is important to explore the possibility of his specific contribution to the long-term goals of the company. This new approach will necessitate continuous effort in counselling, coaching, and open and honest communication between the employee and his superiors. Annual ‘raise’ in salaries or wages are best linked to seniority and bonuses should be left to the concerned group or team to decide. Performance against short-term objectives should be treated as a necessary operational chore to provide support to long-term objectives. The number of new products off the drawing board, or the number of training classes held, does not reflect real performance. So long Purchase Department is evaluated on the lowest cost of procurement, the bigger picture of quality and cost-effectiveness will be lost on them—purchase people will have least interest in quality or ultimate cost-effectiveness as their career progression is being evaluated on different units of measure. They won’t put their head on chopping block for some theory which management is not going to use in performance evaluation. Though Tom Peter agrees with Deming’s contention that performance appraisal is a major problem of traditional management, he falls short of suggesting its abandonment, but endorses its use to enhance quality, encourage innovation and

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PEOPLE ORIENTATION 285 destroy functional barriers. He suggests that (a) appraisal must be constant, not focused mainly on the annual or semi-annual event. The employee should get feedback throughout the year and be aware of the evaluation, (b) enough planning and time should be given for the appraisal which includes evaluation and feedback, (c) there should be minimum overlap or bunching of meetings, (d) common appraisal criteria to ensure equity and fairness of the system, (e) a small number of performance categories, and no forced rankings, (f) simple procedures and forms, (g) straightforward goals, (h) public pay decisions to avoid speculation or rumour, and (i) appraisal should be only a small part of overall recognition. According to Philip. B. Crosby the performance appraisal system lands up in merit comparisons rather than the intended aim of personal development. An interesting point Crosby makes is that people should be dealt with so that their self-esteem is not hurt yet they come to recognize their limitations and initiate self-development for improvement. The superior has to sit with the person drawing him in non-threateningly to discuss the trend of his drooping performance over the time and compare with his increase contrariness over time. This approach requires a lot of patience. If done in camera, this method does not humiliate a person but enlightens him on his shortcomings. He normally takes it positively and tries to improve by restraining the contrariness. Nevertheless, according to Crosby performance reviews probably do more to make employees antagonistic to their company than any other single item.

BUREAUCRACY AND HASSLES The common belief that bureaucracy exists only in government or quasi-government organizations is not true—bureaucracy is significantly present in private sector organizations. Despite being aware of the business imperatives of quick responses, flexibility, and empowerment to meet competitive challenges, many organizations continue to preserve bureaucratic rules and procedures. These characteristics are anathema to change management. Tom Peters has rightly recommended that campaigns against bureaucracy should be given strategic priority. Basically bureaucratic systems originate from the inherent ‘mistrust of people’ by the entrepreneur or top management, and overtime bureaucracy turns out as being directed against decentralization of decision-making power. Later on it becomes very difficult to lessen it or weed it out. Paradoxically bureaucracy thrives most in the highest echelon of an organization—managers enjoy the power that floats in the corridors of managerial block!. The excessive rules, regulations, and paper work exude managerial importance, ‘perks’ of all sorts boost management ego. Managers fail to appreciate that bureaucratic procedures isolates them from the ‘people’ including customers, and that bureaucracy is simply demeaning to employees, it is antitheses to the basic TQM dictum and obligation of respecting human dignity. The total quality management philosophy calls for trusting and involving people in the affairs of the organization whereas traditional management believes in

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286 MACRO STRATEGY controlling people and have basic distrust of people. To the top management bureaucracy perhaps acts like fail-safe mechanisms. Rules and lengthy procedures slow down the action, postpone decision-making, defend turf and assign blame. It is a pity that all professionals and most employees know that speed is essential in today’s competitive world to survive; yet the managers cannot get rid of the medieval sluggish way of working. Readers are advised to read Maverick by Ricardo Semler about his company Semco. Chapter 12 of the book deals with ‘The Trouble With Rules’ and are quite relevant. There was too much policy at Semco, and not enough thought, judgment and common sense. The bosses’ confused authority with authoritarianism, they did not trust their subordinates. Educated in traditional management, managers valued structure and supervision, and were accustomed to symbols of power, such as parking spaces near the door and embossed business cards, etc. Rules works fine for an army or prison, but not for a business that wants people to think, innovate, and act as human beings. A company makes, sells, bills and, God willing collects, but still at Semco like other companies following traditional management wasted valuable management time and resources to find out if the taxi ride being claimed by a manager was for business, or if another manager could have stayed in a hotel with three rather than four stars. There are instances galore of how often even the top management behaves ridiculously to protect the rulebook. During a quarterly review meeting the HRD chief had during his 45-minute presentation elaborated on how senior managers were misusing the company’s travel rules; he gave one example of a senior manager getting five shirts dry-cleaned in the hotel laundry for a three-day stay. The meeting spent more than an hour debating whether dry-cleaning five shirts in three days was a breach of travel rules and an act of dishonesty. The managing director felt that this apparently insignificant matter should be taken up seriously as managerial indiscipline could affect the overall discipline required to achieve budgeted performance. He set up a three-man committee to spell out the allowable laundry bills for different levels of managers during official tours. All this took so much time that one of the important items that day, to ‘win back market share by upgrading a particular product’ was postponed to the next quarterly meeting. At Semco, Ricardo Semler has the conviction and courage to dismantle the old traditional management practice to administer by the rulebook, he abandoned the very concept of ‘administrating’ through traditional organization discipline, policy manual, structure and supervision. He advocated a radical policy that was to let the companies be ruled by wisdom that varies from factory to factory and worker to worker. Rules and regulations divert attention from the company’s business objectives. Senior managers get busy infighting for their territorial rights or admonishing their employees (subjects!). Rules often become more important than objectives and divert attention to extraneous matters. They deter initiative and innovation, promote the status quo and discourage change. They flourish because of hierarchical organizational culture; they breed in the corridors of power. Therefore merely putting the rulebook or policy manual into the shredder will not eliminate

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PEOPLE ORIENTATION 287 rules and regulation. Uprooting bureaucracy is possible only in a flat organization structure that has embraced TQM principles and revamped its work culture. Professionals should be aware of another demeaning and irritating factor: hassles. Hassles and bureaucracy is not strictly the same thing though some hassles are caused directly by bureaucracy. Customers often get ‘hassled’ when they seek some remedy through after-sales service from an organization. They are obliged to fill in numerous forms, move from desk to desk, comply with many formalities and still have to wait indefinitely for a solution. Customers in such cases lose patience and swear to switch over to another company at the earliest opportunity. Crosby in his book Quality without Tears has dealt extensively with the ill-effects of hassles, which he says are those ‘normal’ operating practices and dealings which turn people off—the insensitive, thoughtless, irritating, unconcerned and harassing aspects of interaction. He makes the following points: z

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A ‘hassle’ company is one in which management and employees are not on the same side. A hassle-free company is one in which all employees are together and there are no sides. ‘Hassle’ means that the people inside the company spend more time working on each other than they do making something happen. Actions that hassle employees and create a negative atmosphere are usually not big items. It is possible to tell within fifteen minutes or so, which kind of company you are visiting. ‘Hassle-free’ firms offer pleasant working relationships, a smooth system, and happy employees. Customers can identify this type of company and have confidence in it. The irony of the hassle company is that it isn’t something created on purpose or though malicious intent. It just seems to happen through bad culture and habits, and thus it can be avoided. Avoidance is primarily a matter of attitude and communication. In a hassle-free company the employees have confidence that management respects them and needs their output, and that they will not be victimized for trifling actions. Hassle means different things to different people. But generally speaking it is the unnecessary difficulties or harassment placed in the path of someone trying to do a reasonable thing.

Many simple, routine, and innocuous requests like submitting and getting approval of travel expenses, taking money advances against next month’s wage or salary, leave sanction, replacement of customer returns, etc. get embroiled in ‘hassles’. Employees feel irritated, humiliated, and are put off with the whole system. The person-in-power makes fuss about settlement of laundry bills, long-distance telephone calls to family while on tour, receipts for taxi bills, parking coupons, and may such items. These frivolous checks and harassment cause immense damage to employee morale. In many companies the procedures for simple items like approval of travel requests or the settlement of expense accounts is so cumbersome

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288 MACRO STRATEGY (involving several up and down trips of forms between bosses of different levels), that it leaves the employee embittered and frustrated, and he promises to himself, no more travel for customer contact or other official duties. There are many such ‘hassles’ in getting an improvement initiative or suggestion even heard, not to speak of sanctioned and at the end of the experience the employee mutters an injunction to himself not to make any suggestions in future. ‘Hassles’ should therefore be tackled on priority. Professional should make a list of routine items or processes that create hassle, and try to eliminate them. One can use some sort of hassle-index as suggested by Crosby. The degree of hassle can be ruled in a rating scale of 0–10, 0 being minimum hassle and 10 denoting the maximum. The worst company will have a high score, approaching the number of items in the list multiplied by 10, while zero is the ideal case. Effort should be made to have the hassle index level as minimum as possible; it is not realistic to aim for zero. If hassles faced by internal customers are bad, hassles to which external customers are subjected are poison. A dissatisfied and fuming customer can cause immense damage to reputation and market share. A visitor to the plant could be a future customer, stakeholder, or a public who can do damage to the company’s reputation through word of mouth, and thus a responsive organization will take seriously even a single instance of a visitor not being treated properly. Tom Peters has made 45 prescriptions for radical reform, of which three i.e. P8, P-10 and L-8 deal with structure and bureaucracy. In P-8 titled ‘Simplify/ Reduce Structure’, Peters forcefully makes the point that excessive organizational structure slows down responsiveness to changed business requirements and circumstances. Structural weaknesses are not able to cope with the new business conditions, and in spite of opposition and hurdles, management must de-layer and reorganize the original structure. Tom Peters suggested three layers as an ideal structure; complex organizations such as multi-division firms can have a five-layer limit. He recommends more development of people in the field so than they can handle business issues on site. Currently the disempowerment of line personnel stimulates the better ones to fight their way up the corporate hierarchy though chance and manoeuvring. Peters suggests a radically increased ratio of non-supervisors to supervisors—a ‘wide span of control’ at the front-line level. In P-10, Tom Peters prescribes ‘Eliminate Bureaucratic Rules and Humiliating Conditions’. Bureaucratic procedures nullify the purpose and effect of training, team building, reduced structures, and re-defined roles of middle managers. Fewer rules mean lesser fuss, and more emphasis on the completion of the job in hand. It will liberate people, managers and non-managers alike, to perform to their potential; they won’t be wasting their energy in pursuit of compliance to rules. But debureaucratisation by itself won’t be enough to liberate people. There are many procedures that humiliate ordinary employees, reminding them that they are inferior and so should use separate toilets, canteens, or parking places. The situation is more pronounced in developing and third world countries. Managers do not go through security checks nor punch attendance cards, but workers do. What do such procedures convey? How can you humiliate and demean someone and then expect him or her to care about product quality and constant improvement? If the

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PEOPLE ORIENTATION 289 workplace looks shabby, if the toilets are foul with graffiti on the walls, how can you dare preach about commitment, participation, quality, and service? ‘De-humiliate’ implies eliminating such policies and practices. Mostly these are small items—not very complicated or expensive to dismantle. The task is not difficult at all provided the daunting task of changing attitude of senior-managers is attempted and achieved fully. Open-mindedness, flexibility, and a little sacrifice are required from top management but what they will get or achieve in return will be invaluable. Tom Peters also advocates managerial concern for housekeeping; he implores management professionals to become housekeeping fanatics. In L-8, Peters asks managers to pursue horizontal management by ‘bashing’ bureaucracy. To achieve this he recommends that managers vigorously and gleefully, with all hands participating, take the lead in destroying the trappings of bureaucracy. They should also manage the organization ‘horizontally’ that is, insist that ‘vertical’ obfuscating be replaced with proactive (no checking ‘up’), ‘horizontal’, front-line co-operation in pursuit of fast action. To institutionalize the above Peters has modified the PDCA cycle to create a Test-Try-Modify-Test and Act Cycle which means to become, according to Peters, ‘an avowed and public hater of bureaucracy, and to ceaselessly pursue more spontaneous communication among functions at the front line.’17 Tom Peters’ recommendations include making bureaucracy-demolition fun, so that people come forward with concrete suggestions, and having some sort of recognition or award for noteworthy demolition acts. One can get rid of file cabinets and memo writing, unnecessary copies be dispensed with. The ‘horizontal style’ of management will over time improves relationships, customer contacts, and cross-functional cooperation. The functional barriers to quality, service and productivity must be broken—vertical management and vertical ‘check up’ must be replaced by horizontal co-operation and teamwork.

RE-ORIENTATION FOR TOP MANAGEMENT’S POLICY AND STRATEGY Industrialists, entrepreneurs, top and senior managers, political and social leaders, are very important people as their philosophies and actions impact the lives of many people and overall quality of life. A greedy entrepreneur or a selfish and careerist professional focusing on short-term profit can ruin the industry or business. A power-hungry money-laundering politician exploits the misery and poverty of people. He is deluding them when he talks of vision, mission, purpose, and values. Paradigm shift and transformation of people who wield positional power is necessary. Almost all modern change management and quality gurus have stated that the long-term stability and growth of an organization and the welfare of its people are dependent on the top management’s unfettered dedication and commitment to total quality. The intent for total quality whether it is for the present or future has to be decided by the top management.

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290 MACRO STRATEGY Studies have revealed that top management is responsible for 85 per cent of the organizational inefficiencies and operational problems as the top management itself draws most of the business policies, system design and operating strategies. Unfortunately because of positional (hierarchical) power, ingrained ego, and superficial knowledge, most senior managers blame ‘people’ or environment factors for difficulties, problems and failures. Inept politicians also blame environment, the opposition and other extraneous factors for lack of progress or not fulfilling promises. Such people are oblivious of their own role and responsibilities. Entrepreneurial ingenuity and risk taking is no doubt a critical input, it is laudable but one must realize that the fruition i.e. subsequent growth, stability, and prosperity is dependent other employees as well on the total quality of management which includes the ability to involve other employees as well. Top management has to take steps to ensure perpetual existence of the organization, provide jobs, ensure satisfaction (as well as delight) of the customers and stakeholders, and fulfil obligations and responsibilities towards the society. This would result in a principle-based culture. Unless this ‘thought revolution’ takes place at the highest level comprising owners, boards of directors and top management, total quality of management will remain elusive. Top management must realize that TQM or that matter TQOM can not be ordered to be implemented; the philosophy has be embraced by the owners/top management who have to lead and oversee the deployment of new philosophy. Despite innumerable publications, seminars conferences and success stories, it is most unfortunates that this simple fact has not sunk into the mind of most industrialists, entrepreneurs, or practicing professionals. Even Juran has lamented that even managers involved in technological, financial service, human relations and certain other staff functions are reluctant to accept the new way of professional behaviour. Many people at the top feel at home with the traditional hierarchical way of management that focuses on shot-term quick results, treats ‘people’ as just a cog in the wheel, and considers the axiom ‘responsibility towards society’ as mere ornamental camouflage for public consumption. Being in top management or mere postgraduate educational backgrounds do not change the ingrained bias, it requires profound knowledge and transformation to see the bigger Q, i.e understanding the relevance of total quality of management. This involves embracing the new philosophy of management, changing the ownership role to trusteeship and the top management’s role from manager-ship to leadership. The enlightened top management need to draw specific philosophical charter suited to the unique need of the organization, consciously reorient their role, and guide the organization through transformation process. Top management must comprehend the profound knowledge that the latest technology or massive expansion or solving recurring problems will not halt the decline of industry; similarly the wholesale teaching of statistical techniques is not the real answer it is only transformation of the style of management can halt and reverse the decline and then take the organization on upswing path. Loss of market share is due to management’s failure to plan for the future and foresee problems or issues concerning product obsolescence, bad service reputation, rising manufacturing/service cost and low employee morale. The waste of manpower and other

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PEOPLE ORIENTATION 291 resources is due to management’s lack of foresight, planning, control, and timely corrective action. This requires transformation of the style of management followed so long. Unfortunately the central problem in management and leadership is failure to understand the nature of variation. Top management should make special efforts to understand variation which is a natural law—all aspects of management including planning, procurement, manufacturing, research, sales, personnel, accounting, law, decision-making, etc. are impacted by the law of variation. All human beings are affected by it. All levels of management must therefore better understand the meaning of variation and know its causes viz. special causes and common causes (random causes) will help management to control it. Controlling and improving on variation has to be the major strategic focus of the top management. It is also necessary to have knowledge of operational definitions, and how the failure to understand operational definitions brings loss and demoralization. It is the responsibility of top management to ensure the definitions are standardized and disseminated amongst the employers and business associates throughout the organization. Top management must realise that Quality is made at the boardroom, and hence they have to take step to ensure that ‘Quality’ is central to all management processes. The ‘intent’ of quality fixed by top management impacts all other operating processes and the inner message of management’s intent reaches out to all employees without any ambiguity. However, mere fixation of ‘intent’ of quality is not good enough. The ‘intent’ has to be backed up by top management’s declared as well as visibly unshakable commitment towards quality and productivity. It must pass through tests against business odds and the lure of short-term gains, ensuring that the policy is truly institutionalised. Thus credibility is established and employees will no longer be cynical and sceptical about management’s real intention. Sporadic improvement will not do. The obligation to constantly improve designs of products and services should never cease. Similarly there should be no let up in strengthening the partnership with supply and delivery chain entities. Top management has to take bold steps to come gradually to single source of supply for each input material, outsourced part, or outsourced process. Top management’s commitment towards team building and innovation reaffirms management’s faith in future, and it creates an envioronment that helps employees participate in management of change without any qualm. Team building, other small group activities, and innovation not only consolidates current business position but lays the foundation of future. One of the most critical tasks of the top management will be to take personal interest to ‘make quality people’. They must remove impediments and barriers that cause hindrance to people development and tap their latent talent for the benefit of the organization and society at large. Top management must take active interest to monitor the progress on initiatives introduced for continuous improvement and set up effective feed back mechanism for course correction. Just delegating this responsibility is not good enough. Another imperative of the transformation

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292 MACRO STRATEGY of style of management is to take proactive stance to transform managementunion relationships and improve relations with government, which are amongst the critical requirements for transformation. Top management, shedding their ego and inhibitions, must get them educated on the basic principles & application of statistical techniques. They must come consciously come out of ‘control mode’ through the rational financial indexes and ratios, and concentrate on the hitherto “unknown and unknowable” identification and actions on which will improve the operations and save considerable amount of money. Another important strategic transformation task for the top management is has to set policies and create environment for learning organization. Management must make use of the store of knowledge, apparent or hidden, that exists within the company, and ensure enhancement of knowledge through education and outside knowledge sources. It should take special care to see that knowledge is not wasted, as wastage of knowledge is deplorable or suicidal in this modern knowledge era. Without a cultural revolution in management, the TQM and other initiatives will not produce the desired effects; the fringe benefits are only a short-term hallucination of great achievement. Often, pride or ego stands in the way of requiring new knowledge. Top management has to come out of the traditional practice of making provision in the planning stage for yield losses, reworks, scraps, some inevitable drop in equipment utilisation, inevitable work-in progress, some market returns etc. That is to say that in the new way of working management must not plan for inbuilt inefficiency. Management should endeavour to optimise through put time, work with almost zero process and finished goods inventory which inevitably will increase productivity and reduce cost. Buffer inventory as is maintained in traditional management hides as well as breeds’ inefficiency. In the new role management should be brave enough to scrap work standards that promote quota system, and scrap the punitive style of management under the garb of performance appraisal system. Management has to find innovative alternative to severance package while downsizing. Deming had emphatically stated that it is no longer socially acceptable to dump employees onto the heap Deming had emphatically stated that it is no longer socially acceptable to dump employees onto the heap of unemployed. This is really a challenging task. Deming has said that ‘The basic cause of sickness in American industry and resulting unemployment is failure of top management to manage. He who sells not can buy not.’18 This statement is applicable universally—these seem to be very hash words but they are straightforward words pinpointing the reality. Top management should realize, as Deming has stated, that loss of market and resulting unemployment are not foreordained, they are the result of management callousness, inefficiency, selfishness, and lack of foresight. Top management need to reorient their thinking. An enlightened top management will foresee the need to change, and will not wait till the business is on the brink of disaster or rattled by fierce competitive pressure. The principal responsibility of

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PEOPLE ORIENTATION 293 the top management or leader will be to oversee the dismantling of dysfunctional old truths and to prepare people and organizations to deal with the management of change. Deming’s 14 cardinal points form an excellent base for macro strategy and policy. They can be supplemented and enriched by Tom Peters’ approach on people empowerment, leadership, customer responsiveness, etc. In order to comprehend continuous improvement, innovation, teamwork, etc. top management must read the works of Imai, Ishikawa, Crosby, Tom Peters and others. Management must learn and practice statistical techniques and problem-solving tools. They must use the PDCA cycle in their strategy formulation, decision-making, and management reviews. They also have to practice people orientation, process orientation, teamwork and leadership. Total quality has first to be instituted in all the upper echelons of an entity as employees always try emulating their example. For this the senior managers first have to reorient and transform themselves. Primary requirement, however, is the shedding of ego. The noted management educator V. S. Mahesh has stated, ‘No organization can hope to reach and sustain quality for any length of time where the organizational vision is tarnished by the personal, egocentric needs of CEOs.’19

Notes 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19.

Ricardo Semler, Maverick (London: Arrow Books Limited, 1994), p. 274. Kiyoshi Suzaki, The New Shop Floor Management (New York: Free Press, 1993), p. 4. Sunday Times of India, Kolkata, 18 April 2004. Times Business, Times of India, Kolkata, 30 March 2010. J. M. Juran, Juran on Quality by Design (New York: The Free Press, 1992), pp. 433–34. Tom Peters, Thriving on Chaos (New York: Alfred A. Knopf, Inc, 1987), pp. 282–83. Ibid., p. 282. Abraham Maslow, ‘Theory of Human Motivation’, Psychology Review, Vol. 50, Washington, 1943, pp. 370–96. Philip B. Crosby, Quality Is Free (New York: Mentor, 1980), p. 68. J. M. Juran, Juran on Quality by Design (New York: The Free Press, 1992), pp. 438–61. W. Edwards Deming, Out of the Crisis, p. 18. Ricardo Semler, Maverick (London: Arrow Books Limited, 1993), pp. 72–228. Peter F. Drucker, The Practice of Management (New York: HarperCollins, 1953). Tom Peters, Thriving on Chaos (New York: Alfred A. Knopf, Inc, 1987), p. 500. Kiyoshi Suzaki, The New Shop Floor Management (New York: Free Press, 1993), p. 220. W. Edwards Deming, Out of the Crisis, p. 102. Tom Peters, Thriving on Chaos, p. 458. W. Edwards Deming, Out of the Crisis, p. ix. V. S. Mahesh, Thresholds of Motivation (New Delhi: Tata McGraw-Hill, 1993), p. 267.

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9

CHAPTER

Prosperity Orientation QUALITY ECONOMICS: A PARADIGM SHIFT f all the factors and elements essential to achieve and sustain prosperity, the most critical is the total quality of management that includes quality of people and quality of products and services. The economics of quality has to be such that even after meeting its responsibility to its stakeholders, the organization is able to discharge its obligation to society. Obligations to society include providing competitive quality products/service in a cost-effective manner. Many confuse cost control with cost effectiveness; cost effectiveness is totally different than cost control. The cost-effectiveness implies win-win situation for both tube customer and service provider, it is a cost point at which both the customer and supplier/service provider are satisfied. The customer finds the cost affordable and gets value for the money spent while at the same time the supplier or service provider earns reasonable profit. There are several first-time experiences that give a fair idea about the state of quality and economy of a country or state. Experiences at the airport that include time taken to bring the aircraft to a complete halt, the disembarkation process, promptness of luggage arrival, courtesy and promptness of immigration and custom officials, the condition of the toilets, their cleanliness and plumbing, the availability and condition of the trolleys, the road condition on the way downtown. One gets an impression of the general quality of people, governance, and the health of economy in general, and therefore expects a certain quality of products and services. Total quality plays an important part in shaping the economy of the country; it is a critical element in building a nation. W. Edwards Deming is credited with pioneering the break in traditional management thinking that quality costs more. He established that cost actually decreases with an increased level of quality, thus setting in motion a chain reaction leading to higher productivity. All these help to retain existing customers and capture new markets thus increasing market share. This enables the company to grow and prosper, contribute to society in creating more jobs, and meet other societal obligations. Many professionals still go by the myth that there is a trade-off between quality improvement and cost optimization, one being improved at the expense of

O

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PROSPERITY ORIENTATION 295 the other. But this is not so. Comprehension of quality economics will remove this erroneous assumption and show that both quality and cost can be constantly improved. The principal reason for loss of sales is fierce competition in quality offerings, which include product quality, price, service, and a host of allied offerings to attract and retain customers. Tariff and other barriers are fast disappearing. Management has to understand the economics of quality while devising policies and strategies to counter the threat of competition. One of the hard realities of the competitive market is that even the so-called loyal customer is looking around for a supplier at lower prices and better quality. For a company therefore, quality and competitive selling price are market imperatives while at the same time, the company needs profit. Financial professionals need to comprehend that higher quality may lead to increased profit but the reverse is not true, i.e. increasing the profit margin will not automatically lead to higher quality; rather it may prove detrimental to the financial health of the company. Management and financial people find many ways of increasing profit, But the most damaging way is to lower the standard of quality. Attempts to raise profitability by tinkering with financial numbers will not improve quality, and if quality is sacrificed by making compromises in inputs or processes, the plan will backfire. The simple economics of quality is to enhance capability to produce & supply quality products or services at cost-effective price that would satisfy and retain the customer. Customers notice the ultimate quality and their continued satisfaction is what ultimately impacts the bottom line. These fundamentals were taught to the Japanese by Deming in the 1950s—the subsequent Japanese industrial and economic renaissance is a well-known success story. The Japanese top management comprehended the economics of quality and successfully implemented the teachings of Deming. A common malady in stating the ‘net current assets’ of many companies is that defectives have been put alongside the company’s inventory thus distorting the scenario. A defective product has as much capital, raw material, and labor put into it as the acceptable product. Even when defectives are later reworked, costs are actually being loaded due to additional labor content and raw and other material costs. Often additional costs are incurred to procure specialized equipment for further processing, measuring equipments for inspection and additional storage. And at the end, one is not sure if even after extensive reworking whether the reworked component or product will be as good as the original tested and passed product. The costs continue to accelerate if a defective reaches the customer. No one knows the exact cost of a disgruntled former customer, but we know it is quite high. A market research done by Ford, USA showed that a happy customer tells on average eight people the good news about the product, but a dissatisfied customer tells on average more than twenty people of the ordeal with the product. Finance professionals should be able to understand the ramifications. The cost of a defect increases dramatically as it moves along the production line and is at its greatest if it gets out to the customer; normally all the costs are immeasurable. To contain defects and costs it is prudent to spend money and

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296 MACRO STRATEGY energy on variation control. The closer a part is to the ideal, the better it is, and the less it costs to handle. Another important lesson from Deming’s teaching is that there is no ceiling to improvement in quality; by constantly improving the process and the product, the company serves the customers better and at the same time reduces costs. It thus earns a market reputation, builds up brand equity. Customers line up and wait for such a company’s products. The prevalent attitude of just knowing and sticking to the minimum quality level necessary to satisfy the customer is a recipe for losing market share to competitors. Continuous efforts lead to small improvements, and they add up. A one or two percent improvement in quality or productivity in any given year does not sound like much, but if it is repeated every year, it may lead to dominance in an industry. No one can predict in advance the effects of continual improvement. A company may appear to be doing well, on the basis of visible figures, yet going down the tube because of management’s failure to heed figures unknown and unknowable. Some of these include (a) time lost on the factory floor from attempts to use materials not suited to the job (b) poor maintenance (c) rework (d) poor leadership (e) cheap tools (f) failure to act on customer complaints (g) inept design of product, and (h) failure to improve processes, and so on. J. M. Juran recommends that reducing cost while improving quality is what everyone must do in this new economic age. The products of an industrial society have the potential to lengthen the human life span; relieve people of drudgery; provide opportunities for educational, cultural, and entertainment activities and so forth. However, the continuity of those benefits depends absolutely on the continuing and proper performance of those products, that is, on their quality. In a sense, people in industrialized societies live behind protective quality dikes without which we will have failures of all sorts: power shortages, interruptions in communication and transportation, inoperative appliances, etc. Yet we have numerous breaks in those dikes. Mostly they are small breaks such as failure of household appliances. Each is disruptive and annoying and requires time and money to mend. However, some of those breaks have been terrifying: birth defects caused by the drug thalidomide; the Three Mile Island nuclear reactor blast; the deadly gas cloud at Bhopal; the breakup of the space shuttle Challenger; the Chernobyl nuclear reactor blast. A principal finding has been that in the traditional method of quality planning provisions were made for some inbuilt quality deficiencies that were considered to be inevitable and a small price of doing business. Some losses in yield, some process wastages, absenteeism of employees, downtime for various reasons work-inprogress were considered inevitable—provisions were generally made based on historical data. One cannot afford this luxury in this competitive era. Unfortunately, due to the traditional mindset, management is generally happy if budgeted yield and machine utilization are achieved. But consider the impact on productivity gain and additional contribution to bottom line if through quality initiatives there are increases in yield over historical achievement of say 90 per cent to 98 per cent, or machine utilization from 80 per cent to 95 per cent. It is a simple but practical

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PROSPERITY ORIENTATION 297 example that there are enough opportunities for improvement and positive impact to overall business if management understands the impact of economics of quality. There are many such hidden opportunities in almost all organizations. Initiatives like SPC, Six-Sigma, JIT, TPM, etc. if implemented seriously will facilitate identifying opportunities for improvement, and attain the goal of optimizing quality and costs. Management should be careful that these initiatives do not end up as ‘fads’. The costs of poor quality, including customer complaints, product liability lawsuits, redoing defective work, products scrapped, and so on are cumulatively huge. In most companies they run at about 20 to 40 per cent of sales. In other words, about 20 to 40 per cent of the companies’ efforts are spent in redoing things that went wrong because of poor quality. It is only when traditional management sees and appreciates this figure that they are converted to quality philosophy. Traditional management also overlooks excessive costs due to chronic quality-related wastes. Generally about a third or more of what we do consists of redoing work previously ‘done’. This redoing consists of correcting errors, rewriting documents, scrapping or reprocessing factory goods, responding to customer complaints, and so on. Traditionally, such deficiencies were part of the planning process. Numerous specific quality crisis and problems have been traced to the way in which quality was planned in the first place. There is no implication that the planners were incompetent, malicious, or otherwise deficient. On the contrary, the planners have generally been quite experienced and dedicated even as they faced multiple obstacles: unrealistic schedules, tight budgets, and inadequate databases. However, the bad quality nevertheless was planned that way. Moreover, so long as the conditions of the past remain in effect, they will continue to plan it that way. Good quality planning demands a thorough look at the costs of poor quality. These costs, especially chronic waste, are always among the major opportunities for quality improvement and cost reduction. Any productivity evaluation must be based on quality units produced and not on the total number produced. One of the critical elements in a total quality management program is the identification, analysis, and control of quality costs for the business. Poor quality adds to the other costs in maintenance, production, design, inspection, sales and other activities. Quality costs cross department lines by involving all activities of the organization—marketing, purchasing, design, manufacturing, and service, to name a few. Indecision and delay in decision-making are also poor quality, and add to the cost in relevant areas. There is a need therefore to identify, measure, analyze and control such costs for optimizing quality economics. A reduction in quality costs in these areas leads to better quality, increased customer satisfaction and increased profit. In evaluating competitive bids, great stress is laid on the purchase price. However, little stress is placed on the added costs due to poor quality of the products purchased. Compromises in input material may meet some short-term interest but are risky for quality economics. Despite the teachings of Deming, very few companies have shown the courage to depend on one supplier and develop longtime relationships. Instead, the traditional system of having more than one supplier continues, the same old logic of having a safety cushion with more than one suppler

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298 MACRO STRATEGY or the so-called audit requirement is used. In many cases, the vested interest of a few is keeping the old practice in place. In-depth studies will reveal that instead of achieving economies in purchasing and optimizing quality, the policy of having several vendors breeds serious problems in operational areas like productivity, quality, inventory, administrative paperwork, customer servicing, cost control, etc. Though not always apparent, quality economics takes a serious beating. In a supply chain where each member has a quality management system having statistical quality control in practice, there is no need for any inspection at the receiving section of the principal. Not only is the cost of the inspection, rework and recall eliminated, but also the cycle time of the whole supply chain is reduced by the eliminated inspection delays. According to Deming, cost is composed of both visible and invisible figures. Traditional financial reporting is based on visible figures that are precisely reported. But the moot point is: do these visible figures represent the actual state of affairs? Do the piled-up inventory figures report how much of the inventory is of bad quality? Even though all the columns and rows add up exactly, how did a figure get on the sheet? Whose cost estimate is being used? Are all the facts known? For that matter, what is the fact that the visible figure wants to convey? It, like history, is what somebody else wants to let management know. Deming out of his wide experience states that if there is fear in the organization, the chance of knowing what is really behind a figure is very slim. Obviously, there is a lot of uncertainty in invisible figures. How will companies track the cost of a dissatisfied customer or what contribution can a satisfied employee make? Are the costs of repairs or salvaging being reported in the normal financial reports to the management? Generally the planned yield or planned machine utilization are much less than optimum value—they are not reported, they remain invisible camouflaged under the planned budget and nobody bothers so long as the visible figures are within the budget. The subtlest form of carryover of costly wastes has been to include them in budgets that hide the wastes. One of the perpetual measures of the impact of quality economics is the evaluation of growth in the market share and good operational review system to look at the costs of poor quality. These costs, especially the chronic wastes, are always among the major opportunities for quality improvement and cost reduction. Therefore, the essential element in a total quality control program is the identification, analysis, and control of quality costs for the business. A. V. Feigenbaum was one of the pioneers who advocated the computation of costs of quality for technical and managerial decisions. In those days of traditional management, quality was viewed as the responsibility of the Manager Quality Control and his men. The twin quality challenges that competitive conditions present to the business managers is (1) better quality of products, services and practices, and at the same time, (2) substantial reductions in the overall costs of quality. Through implementation of TQM, these challenges are effectively met; the defects and deficiencies are identified and corrected to put the process under statistical control, setting in motion continuous improvement to narrow down the variation to a level such that the product or service is equal or better than the competition. Management at its

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PROSPERITY ORIENTATION 299 own peril defers the initial investment and recurring expenses on this program of continuous improvement. Total quality control has a positive impact or the overall quality cost results particularly in the two major segments of operating quality costs: failure and appraisal costs. This is achieved by means of much smaller increases in the third and smallest segment of cost, which is known as prevention cost. Through preventive quality engineering and employee training, defects are not allowed to occur in the first place. The traditional inspection-type quality control functions something like this: the more defects produced, the higher the failure costs, the response to higher failure costs is more inspection which leads to higher appraisal cost. Tighter inspection does not really have much effect in eliminating defects. However vigilant the inspection procedure may be, some defective products do sneak out to the customers, the complaints thus pile up. Appraisal costs thus stay up as long as failure costs remain high. Left alone in this mode, the failure and appraisal cost go higher still without any sign of real improvement and consistency in satisfying the customers or containing the operating quality costs. The whole cycle was clearly inefficient and unprofitable, but business survived because of near monopolistic situations or having competitors of the same flock. According to Feigenbaum, ‘the total quality-control approach is to turn this cost cycle downward by establishing the right amount of prevention, supporting the right, though modest, amount of quality control engineering and quality information equipment engineering. This mainly means an increased expenditure for prevention to bring about reduced failure costs and reduced appraisal costs, with the balance of qualitycost dollars going to profit.’1 It is necessary to measure the efficacy of efforts in reducing cost while improving quality. Installing a system that will record and study the cost of quality (or rather un-quality) indicates whether corrective actions and quality improvement efforts are really resulting in savings for the company. Precise definitions should be laid down to identify the categories that make up quality costs. But beefing up the existing financial system to measure the costs of controlling quality and the costs of failing to control it is not the way to achieve it. Unfortunately, the traditional financial reporting system and practice is one of the bigger inhibiting factors in optimizing the economics of quality. In traditional management these costs get clubbed with overall operating costs, no separate analysis is done. One of the reasons was that quality was never treated as a strategic issue; it was more or less a technical or inspection-oriented issue. The inefficiencies and wastage costs got camouflaged under traditional financial heads in the routine statements; the concept of ‘cost of poor quality’ was nonexistent. According to Juran, cost of quality was never considered as management function and as such was never used as a management tool; it was merely considered to be a technical one used as a measure of inspecting defects on the manufacturing line. It is needless to stress that the continuance of any business is not only dependent on the satisfaction of its customers but also on its ability to make a profit. The company has to have enough leeway to fix its selling price to retain and expand its market share, as selling price is a function of the competition and customer demands. The company has to keep its manufacturing costs down so that it can

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300 MACRO STRATEGY have flexibility to fix its selling price. A part of these manufacturing costs will be the cost of poor quality, which is ultimately paid by the customers. The logical imperative for prudent economics of quality is that cost of poor quality should be measured. When top managers actually see the figures for this cost, they appreciate the potential for a profit increase and it becomes easier to obtain their support. The total cost of quality may be divided into subcategories of prevention, appraisal, internal failure, and external failure. One of the difficulties faced in this setting is the determination of the cost of non-quality, such as customer non-satisfaction. Notice that it is difficult to come up with monetary values for such concerns as customer dissatisfaction—which is one of Deming’s concerns in deriving a monetary value for the total cost of quality. Crosby believes that quality is free; it is un-quality that costs. Greater thoroughness in case of structured planning increases the costs in the early phases, but there is dramatic reduction of costs in later progressive phases because of fewer crises to be resolved. In case of unstructured planning though initial costs may be less but the costs increase exponentially later on because of unforeseen problems, firefighting, etc. As a thumb rule in the companies where quality improvement initiatives have not matured, the losses due to unreported poor quality could vary between 20 and 40 per cent of sales. In other words, about 20 to 40 per cent of the companies’ efforts are spent in redoing things that went wrong because of poor quality. The ultimate aim is prosperity so that the company can develop resilience to weather rough times and ensure continuous fulfilment of its responsibilities to the shareholders, and its obligation towards society.

Profit and its Place in TQM Most businessmen and executives think that they are in business primarily to make money. Yet again there are some professionals who are shy of talking about profit; and there are many who have developed a concocted view that the philosophy of serving the customer with excellent competitive products or services and simultaneously creating employment and wealth for the society as the primary motive of business is nice to sermonize about but impractical to implement. Many political, social leaders, and even some so-called intellectual leaders take a public posture depicting profit as an act to be despised. This stance may temporarily earn them some applause and popularity but in the long run they are doing a great disservice to society in germinating and spreading a wrong notion about business and entrepreneurship. Further, the lack of transparency in corporate governance, and the greed of some fly-by-night operators have made the general public cynical about ‘profit’. Such distorted views about profit create doubts in the minds of professional managers. The philosophy and practice of total quality of management treats profit in the right perspective—it is not at all apologetic about profit, it shows the right way to make more profit so that a company can contribute to the well-being of society. It is the sacred responsibility of any company engaged in economic activity to continuously work to eliminate wastage in any form, ensuring satisfaction of the customers

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PROSPERITY ORIENTATION 301 and stakeholders, meeting societal obligation, and reinvesting the surplus for further generation of wealth. This is the real purpose of profit; it is a noble purpose. This section elaborates the TQM viewpoint on profit and briefly discusses how to realize the goals.

‘Profit’ as Conceptualized in TQM or TQOM Profit is not a dirty word. As a matter of fact profit is like breathing, no business organization can survive in the long run without profit. Profit represents the health of the organization and is necessary to generate money to invest in new technology, modernization of equipment and facilities, or developing new products and/or services to meet the needs of the customer. Without profit there will be no growth, nor can the company retain good people, serve the customers and stakeholders, and fulfill its obligations towards society. Profit is a means through which the reserves are built, company net worth is enhanced, new opportunities are exploited and the future of the company is secured. Businessmen, entrepreneurs, and professional managers must also realize that just profit is not greed, earning profit is their obligation and responsibility so that the company thrives, and satisfies and serves people in that society. One can also believe, as the legendary Japanese entrepreneur Matshushita did, that management or the owner is amply rewarded by society in recognition of services rendered. It is the fly-by-night operators who are despised. If a company follows the principle of ‘quality first’, profit is bound to come, rather profit will increase in the long run and the company will be on the right track for prosperity. Eminent theorists like Deming, Ishikawa, Imai, Crosby and others have implored management to follow this route. This is synonymous to what the Bhagavad-Gita, the great Indian scripture, prescribed, ‘Focus on work, results will follow.’ Focus on work means continuously work towards process improvement, product and service development, elimination of waste in any form, ensuring satisfaction of the customers and stakeholders, meeting societal obligations, and then reinvesting the surplus for further generation of wealth. Profit is thus the outcome of operational efficiencies and efforts at continual improvement. It is the sacred obligation of any company engaged in economic activity to ensure that capital is put to good use, and ensure that returns are adequate to ensure that company exists and thrives so that it can create jobs, and serve people in that society. This has to be underlying purpose of any business; one of the principal tenets of TQM is that there has to be consistency and constancy of purpose. One should not forget that there are innumerable examples of companies that stressed a ‘profit first policy’ reaping profits in the initial years but losing out ultimately in the competitive race. Such examples are irrespective of ownership pattern or size and can be found in almost all countries. One must remember a losing company is a burden to society. TQM philosophy clearly advocates abhorrence of such companies. On treatment of ‘profit’, there are few other conceptual differences between TQM and the traditional management system. Traditional management considers profit as a goal and takes measures to achieve that goal. In TQM, profit is not a

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302 MACRO STRATEGY process, activity, or an end product by itself; rather ‘profit’ is considered a ‘result’. Philosophically it is rather the fruit or reward: right profit is the result of right actions. Profit can be optimized and sustained through right actions. At a macro level, profit is the result of customer backing, which can only be earned through all-pervasive quality products and services. Quality is the only route that has permanent effect on profitability and prosperity. The product and service quality is the net cumulative effect of operational, functional, infrastructural, and human qualities. An organization should focus on the expanded vision of quality that includes the tangibles as well as the intangibles of both the small ‘q’, and big ‘Q’. Striving towards excellence in quality will raise the level of profit. The Japanese followed this credo, taught to them by Deming, Juran, and their own Ishikawa. The fact is that the value customers place on quality does not need any fresh conceptual support; we are all surrounded by almost daily evidence that customers are evaluating value-addition features in all kinds of competitive products and services. A recent analysis by the American Strategic Planning Institute [SPI] using their Profit Impact of Market Strategy [PIMS] database reiterates that market share is the primary begetter of profits. Sustainable market share come from the customers’ relative perception of the quality of product or service offered. The PIMS researchers have found that relative quality is the most important single factor affecting a business unit’s long-term performance. The term relative is a used vis-à-vis competitor. The company that develops dedicated customers has much higher earnings than the company that just pushes the product out the door. Delighted and dedicated customers, not just satisfied customers, generate real profits. Satisfied customers may try a new product from a competitor or switch to an existing product if the price is right, but loyal customers brag about the goods or services they are receiving. They buy the company’s new products with little sales effort, and often convince a friend to buy them. Market studies from reputed firms reveal that profit from sales to a dedicated customer is six to eight times the profit from other customers. Professionals need to appreciate and comprehend this point; often companies, distributors and retailers tend to neglect their old/existing customers taking their loyalty for granted. Increased number of delighted and dedicated customers will in turn result in higher market share, higher margins, higher profits, higher share prices and a secure future.

Profit as Driven by Traditional Financial Management System In the traditional accounting system, profit is available surplus derived from the simple mathematical approach of netting all expenses against the revenue. Therefore in traditional management the focus is towards revenue generation and control of expenses, the principal driver being the profit urge or goal. Managers give in to stock market pressures for high quarterly and short-term results and thus conveniently forget their responsibility towards all stakeholders to ensure reasonable long-term returns and protect and grow the investment for future security. In spite of widespread dissemination of TQM and other modern management philosophies, paradoxically the recognition and reward system of professional

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PROSPERITY ORIENTATION 303 managers is still based on short-term objectives, and the carrot of upward mobility lures managers to focus on short-term results and profit. This is the reality in most companies. Short-term profit is all that matters and the forecast is arrived at by simple arithmetic projection picking some percentage; say 10 to 15 per cent, higher than previous year. A glaring example is the system followed and glorified by exchairman Harold Geneen of ITT. He took the projected profit as the end point and then worked backwards to fix parameters to arrive at the planned profit. The most appropriate analogy is that of trying to drive a car by looking in the rearview mirror. In the ‘profit first’ policy the budgeted profit becomes the focus of all activities; management does not care how one achieves it. Achievement of the budgeted figures is sacrosanct; the means is not so important: it goes in the background. This diktat creates excessive pressure and induces ‘fear’ in executives; their professional career or reputation is on the anvil. The consequential focus on short-term goals and projected profits leads to all sorts of manipulation. This is why during the financial year-end, sales people force dealers or whole sellers to book more sales to fill the quota irrespective of whether there is market requirement or not, and then in the following months the accounts department are busy reconciling credit notes against goods returned. Or the production department is busy fulfilling year-end quotas overlooking quality standards. Even many enlightened managers confuse ‘doing right things’ with ‘doing things right’. A wrong thing, done rightly will only result in intended wrong result, it won’t give quality result. Managers easily identify short cuts or compromises required to get short-term results, and they do those things right to earn short-term profits. These actions entail postponing or pruning investments, cutting down development expenses, postponing training, manipulating output, etc. The narrow emphasis on short-term profit defeats constancy of purpose in charting a path to improvement of competitive position to keep the company alive and to provide jobs for employees, and amounts to abandoning or compromising long-term objectives at the risk of jeopardizing the future growth and prosperity of the organization. Traditional Profit and Loss Accounting Statements and other systems are basically designed for management to ensure that short-term projections are met; finance managers feel the long term is too vague and distant to be presented in Pand-L statements or balance sheet. The visible numbers of the statements highlight the difference between revenues and expenses that affect immediate profit and this is what matters to management. The consequential firefighting to fiddle with the difference between revenue and expenses to ensure profit leads to all sorts of manipulation, compromises or abuse on operational, marketing, sales, service and other fronts. The results might meet management short-term objectives but the long-term effect will be disastrous. It is a pity that most management fails to realize that focusing on profit will not lead the company to growth and that the short-term profits are no index of ability or a reliable indicator of the company’s competitiveness, real profitability or the performance of management. Postponing and eliminating certain activities or cost, manipulating numbers, and accounting jugglery, may generate ‘profit’, but such actions are sure to backfire someday, and this can hurt the company. Deming

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304 MACRO STRATEGY had said that anybody could pay dividends by deferring maintenance, cutting out research, or acquiring another company. Dividends and paper profits, the yardsticks by which managers of money and heads of companies are judged, make no contribution to material living for people anywhere, nor do they improve the competitive position of a company or of a nation’s industry. Pushing out more with only superficial concern for quality is a sure step to going out of business. In some cases the demise is painfully slow and in others the business falls apart like a house of cards. It is a pity that even after so much effort at spreading TQM knowledge, and introduction of ISO 9000 QMS and relevant certification, managers have never comprehended fully the direct relationship between quality and sales, quality and productivity, quality and profit, quality and competitive position. Their apathy leads one to believe that they are not bothered about customer satisfaction as they discount its impact on profit. They give importance to the purely financial approach that a sale is just a sale, just a number that matters. They assume that they have fulfilled their responsibility towards quality by asking operational management to somehow get relevant ISO 9000 certification, treating the certificate as a commodity. This is the unpalatable reality with a large number of management, sadly more so in developing countries.

Deployment of TQM Philosophy for Enduring Profit What can managers do to ensure that TQM leads them to profit? Here are some guidelines to help attain that goal.

Arrive at the right strategy Profit is not the result of some hazy ‘best efforts’. Surely manipulation of operations or performance, or fudging the figures is not best efforts! Stopping process improvement initiatives, training programs do not reflect sound judgments—it is a panic reaction somehow meeting the profit quota. The management should give up using traditional financial reporting statements as control mechanism, rather they need to redesign and redefine the use of financial reports as guide and tool to propel employee development and involvement for continuous improvement of all facets of operation and embrace and institutionalize the idea that ‘quality equals profit’. To ensure a quality edge in the market place, an organization has to ensure total quality in every facet of its operation including interfaces with customers. Institutionalizing a policy of ‘quality first’ as part of the company’s work culture should be accorded top priority. In today’s competitive world, the only thing an enterprise can offer customers is quality. And quality to customers includes performance, quality assurance, timely delivery, distinctive service, quality of interactions, flexibility, etc. Real focus on total quality entwines all processes together with one objective: delighting the customers. The bounty that will follow in due course will be plenty and the company will be able to meet all its obligations. It will also develop the resilience that will see it live and prosper through many decades. The credo of

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PROSPERITY ORIENTATION 305 excellent companies is that they should become the world’s most efficient provider of whatever product and service they offer. Once they become the world leader, profits follow and grow to be sustainable. Robert Galvin, Chairman of Motorola, relegated financial discussions to the last item from its traditional place at number one on the agenda of review meetings, while quality was accorded the first place on the agenda. How many companies would dare to make such a shift of emphasis?

Let not a single old customer desert the company Management must keep customers really delighted so they stay with the company. Managers have to make special efforts to ensure that old customers remain dedicated or loyal (as some marketers call it). If that happens, then profit is bound to come and that will be a well-deserved fruit of concerted honest effort. Prudent management should realize that declaring profit year after year, without real investment and real effort to win customer loyalty is in reality bleeding the company to death.

Adopt the strategy of process orientation Do the right things to get processes under statistical control. Institute continuous improvement through kaizen, innovation and breakthroughs for process simplification, cost effectiveness, elimination of rework, defects and wastages. Readers may refer to the chapter on process orientation.

Redesign the financial measurement system The management should redesign and redefine financial reports or statements to propel continuous improvement projects for all facets of business operation including people development and involvement. They should scrap the procedure of working backwards from budgeted profit. The efficacy of the operations needs to be checked with the financial results and not by the financial results, as recommended by Masaaki Imai. Checking by the result generates fear and has a risk of managers resorting to manipulation or firefighting to get the desired result, thus throwing the process into disarray. Whereas checking with the result leads to finding and establishing criteria for permanent solutions and improved performance by involving people in continuous improvement. Such positive steps will lead to quality assurance, customer satisfaction, and expansion of the customer base: all this will result in higher profit. Financial statements need to be recast to aid managers to identify areas of concern as well as measure the efficacy of initiatives undertaken. Deming had often stated that managing processes, not results, means you reward people for effort [as long as they follow the process], not just for results. Getting results ever closer to a desired mean requires group effort to improve the process, not forcing individuals to excel as is implicit in traditional systems. Pand-L statements and balance sheets can be redesigned to highlight the opportunity areas for improvement, investment or people development. This single step of

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306 MACRO STRATEGY redesigning financial tools will energize organizational focus towards continuous small and radical improvements that ultimately bear fruit.

Tap optimum operational efficiency Oddly enough management is often unaware of the optimum efficiency inherent in a system; too large inbuilt safety margins kept by traditional management, have brought down the threshold limit of operating efficiency. Eighty per cent machine/ equipment utilization (barring continuous running processes) is considered to be good by most traditional managers, who would be elated with 90 per cent machine/ equipment efficiency. But the real performance is the outcome of the actual interface between the utilization and equipment efficiency, i.e. Real performance = 80 (machine utilization) × 90 (machine efficiency) = 72 per cent only against the theoretical optimum of 100 per cent (100 per cent × 100 per cent). The performance reports evaluate performance by measuring separately the utilization and efficiency of the system. Contentment with the result is illusory as the real performance is overlooked. Twenty eight per cent (100–72) has gone down the drain or in other words is an opportunity lost; the managers are not bothered so long as the budgeted output target and financial projections have been met. Why open the Pandora’s box?

Promote the concept of ‘partnership in profit’ One must bear in mind the important principle of TQOM that customer satisfaction and financial results are largely dependent on the efficacy of partnership with both supply and delivery chain entities. The new working should foster incredibly improved relationships where ‘partnership in profit’ has to be truly practiced. The fruits of improvement are generally passed on to customers, and fruits of increased sales and market share are shared between the partners leading to partnership in profit and mutual trust. The revised financial statements or reporting systems should include data pertaining to the efficacy of supply and delivery chain partnerships, they need to be evaluated very professionally.

Unravel data considered so far unknown or unknowable Eminent management and quality theorists have pointed out that all the costs of ‘quality’ and ‘unquality’ are not investigated, what is reported is only the tip in the iceberg. The extent of unreported or hidden loss, as estimated by various studies, could be anything 23 per cent to 35 per cent of sales depending on the efficacy of processes of the individual companies. Saving on such losses could contribute substantially to the bottom line. Prudent companies will take steps to systematically unearth such hidden losses and inefficiencies, and take remedial steps in order of priority. One universal system to unearth hidden cost is calculating cost of quality (some call it cost of poor quality); this has been dealt with in a separate chapter of this book.

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Eliminate non-value adding activities Many companies like Motorola and GE initiated process improvements by gathering information on non-value activity, improvement initiatives, and activity drivers. GE finance people probably invented the expression ‘you can only manage activities, not costs’. Over the years organizations have inherited several non-value adding activities that are being carried out as traditions with nobody able to justify them or having a clear idea as to why they are being carried out. Survival today depends on value-addition whereas activities that do not add value bring down the organization through operational inefficiency, cost burdens and a culture of inertia. They erode profitability.

Emphasize ‘cost-effectiveness’ rather than cost-cutting The traditional P-and-L account is often utilized to initiate frenzied cost cutting or cost-control exercises to achieve short-term objectives of booking profit. Most of the time cost cutting is arbitrary and involves downsizing. Often, cost control initiatives eliminate or defer investments or expenses related to long-term objectives. This in management jargon is called ‘hard decisions’. To the proponents of this hard-drive theory the logic is simple: survive today to protect the future. They are too anxious to cover their past mistakes and therefore refuse to explore other opportunities; they won’t take lessons from numerous examples of the ultimate futility of such cost-control exercises. Instead, a company believing in total quality should utilize the P-and-L account to promote the concept of ‘cost-effectiveness’. Not only is customer satisfaction important and crucial, the satisfaction and interest of employees and stakeholders are also vital. Cost-effectiveness is a point at which the satisfaction parameters of all concerned are met. Like quality, costeffectiveness is also a moving point, but with one rider: while with time quality requirements move upward, the cost-effectiveness point invariably moves down. Today’s real challenge for businessmen and managers lies in gearing up business processes and systems to meet both these moving targets and yet improve profitability.

Variation control Another important aspect management often fails to comprehend is the loss due to variation. Deming pointed out that managers should acquire this profound knowledge. Variation control through application of statistical techniques including Six Sigma not only ensures excellence in quality, operational efficiencies and customer servicing but also contributes handsomely to the bottom line. Readers are requested to refer to the chapters on variation and statistical techniques for detailed treatment on this very important aspect. Variation control through Six Sigma has become an important initiative to become or remain competitive.

Saving on the ‘time-elements’ of various activities Eliminating waste of time in various activities and interfaces not only improves efficiency but directly or indirectly contributes to profits. Delivery time, setting

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308 MACRO STRATEGY time, changeover time, response time, debt collection time, etc., impact operational efficiency, customer relationships and the bottom line. Completion time affects the profitability of all turnkey projects. The success stories of the Japanese in saving setting or changeover time have inspired others to concentrate on optimizing time-elements. The concept of Just-in-Time must be ingrained in the minds of all levels of employees; its relevance is not limited to inventory management. ‘Time’ is a critical element in the new sunrise business opportunities like BPO or call centers. The relevance of the axiom ‘time is money’ has unfortunately not sunk in with many managers and employees.

Optimize inventory management Paradoxically many finance managers do not insist on optimizing inventory. They, like operational managers, selfishly wish for high inventory. Operating managers prefer high inventory as an insurance against supply bottlenecks and sales managers want inventory for smooth servicing of their customers, finance managers want high inventory to leverage against bank financing or raising the credit limit. Management must make conscious efforts for paradigm shift. Working with just enough inventories will not only reduce wastage and increase efficiency but the substantial reduction of interest burden and write-offs of dead or slow moving stock will contribute handsomely to profits. It will release blocked-up finance for better utilization.

Improve and optimize material yields Traditional planning systems inherited from near monopoly market regimes have inbuilt inefficiencies in the guise of factors of safety. In those times, these assumptions made managers’ lives easy as there was hardly any competitive pressure. Today’s environment is different, such old assumptions must be discarded and improvement of material yields must become a priority. This will boost profits.

Ensure people’s involvement It is high time managers realize that profitability is largely dependent on people’s active interest and involvement. The chapter on people orientation deals with this subject. While short-term results dictated by the stock market cannot be totally neglected, prudent management will have designed a suitable intermeshing strategy between short-term and long-term goals. Short-term goals should lead towards long-term objectives. Whatever the strategy is developed to achieve both shortterm and long-term goals, the focus on continuous improvement on all aspects of total quality cannot be ignored since quality is the most critical ingredient for business success, and it can only be ignored at the peril of business failure. Businessmen, entrepreneurs and professional managers, irrespective of type and size of business they are engaged in, need to value and comprehend the dictum, ‘quality equals profit.’

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PROSPERITY ORIENTATION 309 A norm for an excellent operating standard is that which with cost-effective yet competitive quality products and services, continues to delight existing customers and attract new ones. This is the vision that drives excellent companies, not the profit motive. There is no remote-control manipulation to achieve profit targets at the expense of the company’s commitment to its vision. Managers of excellent companies view profit as a consequential reward for fulfilling its unwavering commitment to customers, not for blindly succumbing to the mathematical ratios and relationships highlighted by the P-and-L account and balance sheet. Using accounting variables to control people’s work is counterproductive. Essentially business will have to be managed by developing and leveraging people’s intelligence and emotional involvements. Companies that continue to control their people and processes with accounting information will not survive in the global economy. The business of management has to be about people and not finance—financial tools will have to be redesigned to aid people’s efforts. Deming’s philosophy calls for organizations to produce product and services that help people live better. Providing such goods and services is the raison d’etre of an organization. By providing ever-improving services and products, an organization develops loyal customers. In Deming’s philosophy, loyal customers—not just satisfied customers, generate real profits. Satisfied customers may try a new product from a competitor or switch to an existing product if the price is right. But loyal customers brag about the goods or services they are receiving. They buy the companies’ new products with little sales effort, and often convince a friend to buy them. Profit from sale to a loyal customer is six to eight times the profit from other customers. It is a well known fact among those who have studied consumer buying that profits from loyal customers are not only of better quality but many times higher than from the average customer.

Driving by the Rear-View Mirror From a Deming perspective most managers’ view of profit is backward. Managing by profit figures alone is like trying to drive a car by looking in the rearview mirror instead of the entire road ahead. To Deming, a company that is continually improving the quality of its goods or services improves its productivity and attracts loyal customers. Loyal customers are, in turn, the engine producing increased market share, higher profit margins, higher share prices, a secure and satisfied workforce, and more jobs. Too many managers, concerned with keeping the share price up, increase profit margins by cutting costs and cutting quality. The inevitable results are loss of customer confidence and decreased market share and profitability. Large amounts must then be spent trying to regain or increase sales. This, of course, results in decreased profitability. In the Deming view, increasing the quality of goods and services leads to higher productivity and profitability. The converse, however, of artificially increasing profits, does not lead to better quality or productivity. Instead, it leads to the decline of the company. If such a company is competing with a Deming-style company, the decline can be quite dramatic.

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Some Elementary Logic To see what’s wrong, let’s recall some basic logic. A statement such as ‘If A happens, B will follow’ may be true. But in converse, ‘If B happens, A will follow,’ is not necessarily true. In other words, increasing quality will lead to increasing productivity and increasing profit, but increasing profit will not necessarily lead to increasing quality. Attempts to improve profit by working on the numbers backfire. If quality suffers as a result, profitability soon suffers as well. Now any accountant can tell you that if costs decrease, profits increase. So substituting cheaper, but inferior, parts into RCA televisions would naturally mean higher margins on each set and higher profits for the company, right? Wrong! A funny thing happened. Many more televisions failed during the warranty period. These had to be replaced. Between the paperwork and personnel costs, taking back faulty sets is surprisingly expensive, perhaps 25 per cent or more of the cost of manufacturing the set. The most important numbers don’t even show up in the financial reports. Where are quality and innovation? What’s the cost of having a defect reach the customer? How many sales are lost as a result of poor quality? How many potential customers wouldn’t buy your product regardless of price? What was the cost to the US of the Challenger disaster, where poor quality led to the deaths of several astronauts and perhaps cost the United States its leadership in space?

COST OF QUALITY/COST OF POOR QUALITY Realization that ‘quality’ is the critical requirement for business success has made the measurement of the cost of attaining quality a critical imperative for managers. The measurement of quality in monetary units (Rs, $, £, etc.) helps to arouse the interest of management, provide a base to evaluate the efficacy of quality initiatives and to get management’s active support to install and continue systems to monitor quality costs and to explore opportunities for improvement and cost saving. A. V. Feigenbaum has aptly identified quality costs as one of the ‘soft spots’ where operating costs and losses can be decreased to improve profits. Deming has talked of the importance of ‘invisible figures’, which are unearthed by measurement of quality costs and have more profound impact on the bottom line than the visible figures reported by traditional accounting practice. Quality costs measured in money are well by understood by all concerned, particularly by those in lower echelons, than the quality indexes usually used in management reporting. Thus, implementation of TQM requires institutionalization of a system that would record, communicate and evaluate costs associated with quality, and particularly measure the impact of deficiencies so that corrective action can be taken. There is some confusion about the definition of cost of quality and the analysis of the cost summaries. Consultants or organizations have variously called such efforts Cost of Quality, Quality Costs, Cost of Poor Quality (COPQ), Price of NonConformance (PONC) and Price of Conformance (POC). It is very important for any management to clarify within the organization the nomenclature and scope of the initiative/system that will track costs associated with quality. The total cost

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PROSPERITY ORIENTATION 311 associated with quality can be broadly divided into two categories. One: Investments to build quality into products that will sell in the market. This includes the cost of design that takes into consideration Taguchi’s loss function and robust design, design of experiments, etc., for ‘in-built’ quality, further specific investments on processes, facilities, manpower, measuring instruments, etc., to attain the target quality that will sell. Two: the cost of poor quality due to deficiencies including occasional and chronic wastes, sporadic firefighting, correcting mistakes or policing them. According to Feigenbaum ‘Quality costs (inspection, testing, laboratory checks, scrap, rework, customer complaints, and similar expenses) have crept up to become multimillion-dollar items. For many businesses they are comparable in degree with total direct labor dollars, with distribution dollars, or with purchased material dollars.’2 In traditional financial reporting most of the costs falling under category two i.e. costs of poor quality are not reported or highlighted separately, instead, such costs gets absorbed or hidden within the overall cost of operations. These costs are huge, though not known with precision, as the accounting systems of most companies do not provide full coverage partly due to ignorance, and partly because they have been passing such hidden costs comfortably to the customers. Certain quality expenses listed under category one above such as designs of experiments are generally not recurring. Over time such expenses take the form of ‘investment’, are easily identifiable and can be accounted for by the traditional accounting system. It is to be noted that certain expenses like money spent on ‘prevention’ can fall in either category. According to Philip B. Crosby, quality is divided into two areas viz. the price of non-conformance (PONC) and the price of conformance (POC). Prices of nonconformance are all the expenses involved in doing things wrong. This includes costs of correcting the product or service as it goes along, of doing work over, and of paying warranty and other nonconformance claims. When you add all these together it is an enormous amount of money, representing 20 per cent or more of sales in manufacturing companies and 35 per cent of operating costs in service companies. The price of conformance is what it is necessary to spend to make things come out right. This includes most professional quality functions, all prevention efforts, and quality education. It also covers such areas as procedural or product qualification. It usually represents about 3 to 4 per cent of sales in a wellrun company. The price of nonconformance can be used: (a) as a whole to track whether the company is improving, or (b) as a basis for finding out where the most lucrative opportunities for corrective action reside

Units of Measure of Product Deficiencies For most products this is expressed by a simple generic formula: Quality =

Frequency of deficiencies Opportunity for deficiencies

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312 MACRO STRATEGY The numerator (frequency of deficiencies) takes such forms as number of defects, number of errors, hours of rework, cost of poor quality in monetary units, and number of field failures. The denominator (opportunity for deficiencies) takes such forms as number of units produced, total hours worked, value of sales in monetary units, number of units in service, etc. The resulting units of measure take such form as per cent defective, per cent errors, per cent rework, cost of poor quality per monetary unit of sales, and rate of field failures to units in service. Some companies use COPQ in order to observe trends and some compare performance of multiple organization units. Uniform interpretation and understanding across units of the organization necessitates creation of a unit of measure, in this case some sort of index or ratio. There have been many nominations for structuring the ratio. In all cases the numerator is the same: the dollars of COPQ. The denominator proposed include operating hours, dollars of sales, dollars of operating labor, dollars of standard operating cost, dollars of processing cost, units of product produced, etc. Because of the number and variety of product features, there is no known convenient and generic formula to serve as the source of many units of measure. In actual practice, each product feature requires its own unique unit of measure. A good starting point is to ask the customers what their units of measure for evaluating product quality are. If the supplier’s units of measure are different than those of the customer, this really sets the stage for customer dissatisfaction.

Categories of Quality-Related Costs Many consultants and national and international standards including British Standard 6143—’Guide to the Determination and Use of Quality-Related Costs’, American Society for Quality Control (1971) and ISO 9000 recommend the model of evaluating quality costs using categories of costs viz. prevention, appraisal, failure—both external and internal. Appraisal costs include the costs associated with measuring, evaluating, or auditing products, components, or purchased materials to determine their degree of conformance to the specified standards. Such costs include dealing with the inspection and test of incoming materials as well as product inspection and test at various phases of manufacturing and at final acceptance. Other costs in this category include the cost of calibrating and maintaining the measuring instruments and equipment and the cost of materials and products consumed in a destructive test or devalued by reliability tests. The costs of prevention are those extra costs invested in the design of the product or service and the processes for its delivery that aim to stop failures in the first place. Costs of failure are those costs associated with rectifying problems after they have occurred. They include cost of rework, product recall, loss of customer goodwill, loss of the customer altogether, and the loss of potential customers that were turned off by the recommendations of the people with whom they network. Traditional quality control activities that perform the policing role of inspecting quality are also part of the cost of failure. These costs together generally account for a significant part of the product or service delivery cost. Since many surveys have shown that the cost of poor quality is anything between 20 per cent and 35

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PROSPERITY ORIENTATION 313 per cent of sales and the average profit made by a company is between 4 per cent and 10 per cent, therefore any saving is well worthwhile. Amongst companies who measure these costs for the first time, surveys have shown that a typical distribution is: Failure (Internal and External) 65 per cent of the total Appraisal 30 per cent of the total Prevention 5 per cent of the total

Quality Cost Measurement Bases Quality costs by themselves present insufficient information for analysis, therefore, in order to run an effective system to monitor costs associated with quality, a judicious selection of measurement bases is required that will relate quality costs to some aspect of the business that is sensitive to change. The measurement bases must suit to the diversified or unique needs of each business or operation. The actual magnitude of monetary value in currency units (Rs, $, £, etc.) of quality costs is important to management not only for its immediate impact but also as it provides input to the calculation of such overall indices as return on investment. The total cost in rupees or dollars or pounds sterling may not give the true picture as the number of units produced may change which in turn would change the direct costs of labor and materials. Some of the commonly used measurement bases are discussed below:

Labor base index Quality cost per hour of direct labor is a common index. Direct labor information is readily available, because it is used for other indexes. Sometimes direct labor currency units (rupees, dollars, etc.) are used rather than direct labor hours. This technique of Rupees (dollars) being divided by Rupees (dollars) eliminates the inflation factor. Automation affects the base over an extended period of time; therefore, the value of a labor base is limited to comparisons within a short time span.

Production Quality costs per currency unit of production cost is another common index. Production cost is the sum total of direct labor, direct material, and overhead costs. Material price fluctuations or automation do not affect the index significantly. Purchasing cost, marketing cost, or design cost might be appropriate in some situations as a substitute for production cost.

Cost base index This index is based on calculating the quality costs per currency unit of manufacturing cost, and the relevant information is easily available from accounting

Sales base index Quality cost per dollar of net sales is the most common type of index and preferred by top management. This information is a valuable tool for higher management

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314 MACRO STRATEGY decision-making on long-term and strategic aspects. This index is generally not suitable for short-term analysis because of seasonal variations and the common phenomenon of sales lagging behind production rate. It is also affected by changes in selling price and shifts in available markets.

Unit base index This index calculates the quality cost per unit of production. If the output of different production lines is similar, then this index is valid; as for example quality cost per number of boxes, kilograms of aluminum, or meters of clothe. However, where product lines are dissimilar i.e. a company produces a variety of products, the comparisons are difficult to make. The product lines would have to be weighted, and a standardized product measure would need to be computed. For ongoing applications, various ratios can be used depending on management emphasis on areas that are undergoing quality improvement. Typical ratios that are used are: z z z

Operations failure cost as a per cent of production cost Purchasing quality cost as a per cent of materials cost Design quality cost as a per cent of design cost

For all of the above indexes there are disadvantages too; a change in the denominator will cause the value of the index to change, even if the quality costs do not change. If the cost of direct labor decreases, which could happen as a result of productivity improvement, the labor base index could increase. This increase should be interpreted cautiously since it could be misinterpreted as an increase in quality costs. Since there is no perfect ratio, more than one ratio is recommended, as theoretically there is no limit to the number of ratios that can be used. However, it has been practically found that use of any three indexes (selected on the basis of experience) is good enough to give a fair presentation of the comparative trends in quality costs. There is a few other quality cost categories. A. V. Feigenbaum suggests that though operating quality costs are important from the standpoint of financial control as well as market penetration, some other categories of quality costs such as ‘indirect quality cost’ and ‘equipment quality costs’ should not be ignored. Indirect quality costs hidden in other business costs are unfortunately ignored by management. Equipment quality costs normally get clubbed with capital investment. Quite often equipment is specifically obtained to measure certain product quality features for purposes of acceptance and control. When properly identified, amortized, and consolidated with operating quality costs, a more complete and realistic basis for measuring the effectiveness of the total quality control program is provided by equipment quality costs. Several other indices based on the uniqueness of a business or operation can be used as decision-making tools. For example, performance indices covering productivity, effectiveness, and timeliness of action for each major job of total quality control can be developed. Evaluation through indices is one of the major keys to identifying areas for continuous improvement. To determine realistic quality cost

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PROSPERITY ORIENTATION 315 estimates, well defined accounting procedures should be set up to collect and collate both direct and indirect costs; it must be comprehended that indirect costs are as important as such direct costs as raw material and labor. Quality cost data may cross the departmental barriers. Special forms need to be designed to report quality and figures. Quality cost data may be collected for each product line or project to meet the needs of different functions and levels of management, at each of which the needs are somewhat different. Top management may prefer a summary of the total quality costs, broken down into each of the four quality cost categories of prevention, appraisal, internal failure, and external failure categories for each division or level. On the other hand, line management or supervisors may want a summary of the direct costs, which include labor and material costs, as they relate to their area. The measurement of actual quality costs is essentially an accounting function. However, the development of the collection system requires the close interaction of the quality and accounting departments. The system should be designed appropriately by modifying the organization’s existing system that does record many ‘visible’ cost data. Some existing sources for reporting quality costs are time sheets, schedules, minutes of meetings, expense reports, credit and debit memos, and so forth. Be aware that not all accounting data are accurate. Some quality cost data cross the departmental lines, and these are the most difficult to collect. Special forms may be required to report some quality costs involving cross-functional territories or accountability. For example, scrap and rework costs may require analysis by quality control personnel to determine the cause and the departments responsible. Philip B. Crosby in his book Quality Without Tears says that collecting the cost of quality is not a difficult task, but it very rarely gets done in a company. The reasons are that those charged with collecting try to identify each last penny, and they want to show it in some non-critical way. As a result some companies have been working on gathering their cost of quality for years. In some cases, estimates are used to allocate the proportion of an activity that must be charged to a particular element. For example, when the marketing department engages in research, it is necessary for the departmental supervisor to estimate the proportion of the activity that pertains to customer quality needs and should be charged as a quality cost. Work-sampling techniques can be a valuable tool for assisting the supervisor in making the estimate. This view is similar to that of Juran who says that in absence of complete figures it is feasible through estimates to bring the goal of reducing the costs due to poor quality into the strategic business plan and to deploy it successfully to lower levels. Juran says that methods available for quantifying the effect of quality on costs involve evaluation of (a) various categories of costs of attaining quality as well as (b) categories of costs of poor quality. The evaluation may be done through enlarging the accounting system (a lengthy time-consuming process) or alternatively by estimates. Measuring the effect of quality on sales income has very little in common with measuring the effect of quality on costs. The factors that effect sales income cannot be determined with precision but methods are available to establish useful relationships. Collecting and reporting quality costs is often a tricky job. There may be confusions over allocation of a particular cost data to the cost codes, and quite often a

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316 MACRO STRATEGY lot of time and energy is spent on collecting data on insignificant costs like taking a reprint after correcting a spelling mistake in a soft copy or a secretary retyping a letter. The key point is that the cost of all significant activities or major elements must be captured even if the costs are only estimates. More and more organizations nowadays are making it mandatory to have supplier’s quality certification, the cost of such certification will be booked under preventive cost whereas the cost of receiving inspection would be booked under appraisal cost. A team meeting might have been called for problem solving on a failure; the total cost of such meeting has to be booked under failure cost, but the cost of solution is booked under prevention cost. Cost of verification to find out if the implemented solution is working or not, is booked under appraisal cost. Similarly the cost of telephones on 800 numbers would be prorated between the cost of doing business and customer complaints. Each cost element is to be described as well as how the data will be collected or estimated. Also, the methods for treating fringe benefits, overheads and other accounting adjustments are to be determined. Thus, it is necessary to give adequate exposure to TQM to senior accounting professionals, particularly on the relevance and impact of including cost of quality in the financial reporting system. Quality costs should be collected by product line, projects, departments, operators, nonconformity classification, and work centers. In all organizations there are some existing sources of data on quality costs, some of these are the time-sheets, schedules, minutes of meetings, expense reports, credit and debit memos, and so forth. According to Deming, about 85 per cent of quality problems cross departmental and functional area lines. Because these problems are usually more costly and difficult to solve, a more elaborate and structured project team is established. Members of the team would most likely be personnel from operations, quality, design, marketing, purchasing, and any other areas.

Program Implementation Introduction and sustenance of a cost of quality program entails long implementation time and extensive expenses. Small organizations with limited resources should choose one simple metric like operational scrap or easily identifiable and measurable external failures that will provide very conservative numbers. Larger organizations can afford to install an extensive system of review and analysis of the cost data, which will usually indicate that the costs are quite large. The program will have a greater chance of success if a single product line or department is used on a trial basis, and then extended to the entire operation.

Quality Improvement Through Strategy of Installing ‘Cost of Quality’ Program Research and practical experience have established that each failure has a root cause, causes are preventable, and prevention is cheaper. This is the basic concept that drives the initiation of a ‘cost of quality’ program. The program helps to identify the areas or problems that need to be tackled on priority. Based on this concept the following strategies are deployed:

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Contain failure costs The initial projects are mostly directed toward reducing failure costs. Generally the external failures are frequently targeted first for improvement because they can give the greatest return on the effort—increased customer satisfaction and reduced operating costs. It is well established that failures detected at the beginning of operations are less costly than failures detected at the end of operations or by the customer.

Focus towards ‘prevention’ Eliminate root causes and introduce systems or activities for prevention. Often prevention is better achieved by concentrating on purchasing, design or marketing. Care must be exercised to ensure that the root cause has been identified and eliminated, and preventive action has been taken.

Ensure reduction of appraisal costs wherever feasible With the reduction of failure costs there is a fair chance of reducing appraisal activities. This can have a significant impact on total costs. One must ensure that appraisal is not being used as a substitute for prevention. Pertinent questions must be asked about existing appraisal systems, such as: (a) is 100 per cent inspection necessary, (b) are more efficient inspection methods not available? (c) Can inspection activities be automated or can inspection stations be combined, relocated, or eliminated? (d) Is there any scope for introducing SPC? (e) Can data be more efficiently collected, reported and analyzed? (f) Is there is scope for computerization? (f) Why can’t the operating personnel be made responsible for self-inspection? One needs to ensure that the appraisal system is installed to ensure ‘assurance’ of product or service at sequential stages from design to delivery including assurance of conformity throughout the promised life cycle of the product. Though the frequency and spacing of the appraisals (evaluations) are based on cost-benefit analysis, some appraisal cost will always exist, as it may not be possible to achieve perfect control.

Continuously redirect prevention to gain further quality improvement Like Deming Cycle or PDCA Cycle this should continuously rotate to find new opportunities and optimization of costs related to quality. A reporting system should be developed incorporating monetary value to increase the efficacy of the system.

Importance of ‘Prevention’ in Quality Costs Finance professionals should appreciate and comprehend that rather than solve problems that are costing money; it would be much better if problems could be prevented even if this initially appears to be costing more. Some examples of effective formal techniques whose expenses can be clubbed as ‘prevention costs’ are:

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318 MACRO STRATEGY z

z

z

z z z

Running a comprehensive new product verification program before releasing for production. Running design review programs of new or changed designs with involvement of appropriate functional areas at the beginning of the design process Having an elaborate ‘supplier selection’ system that gives more weight to quality rather than price, Reliability testing to prevent high field-failure costs. Thorough education and on-job training of employees. Deployment of initiatives like quality function to ensure that the ‘voice of the customer,’ is incorporated in design, production and delivery.

With initial improvement in productivity, it is possible to see an increase in the costs of prevention and appraisal. As adequate control procedures are installed, they contribute to prevention and appraisal costs. Furthermore, process improvement procedures may also cause an increase in costs in these two categories. These costs are labeled the costs of conformance to quality requirements. The decrease of costs in these two categories in the long run offsets the short-term increase. The total cost of quality thus decreases. Moreover, as less scrap and rework is produced, more time becomes available for productive output. This causes an increase in the profitability of the company. As external failures are reduced, more satisfied customers are encountered.

Analysis of Quality Costs Of the various techniques available for analysis of quality costs, two are most common: trend analysis, and Pareto analysis. The objective of these techniques is to determine opportunities for quality improvement. Trend analysis involves studying company trends for a specified period, and it could be used also for comparing with historical trends. Trend analysis can be accomplished by cost category, by subcategory, by product, by measurement base, by different divisional plants, by department, by work center, and by combination there of, and can be used imaginatively. Trend analysis is an effective tool, provided it is recognized that some period-to-period fluctuations are chance variations. These variations are similar to those that occur on control charts. The important factor to observe is the trend. It is also important to note that there may be a time lag between the occurrence of a cost and the actual reporting of that cost.

Pareto Analysis Operator, can draw Pareto diagrams for quality costs by machine, by department, by product line, by nonconformity, by category, by element, and so forth. Similarly the Pareto diagram can also identify the departments, area, or processes that need immediate attention. Thus the vital few are identified and strategy can be worked out to tackle them. To ensure that ‘cost of quality’ becomes an effective management tool within a company, it is necessary to design systems to identify all the activities and operations

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PROSPERITY ORIENTATION 319 directly or indirectly contributing to ‘quality’. Cost information must be sought from various activities that take place outside the particular production department. Cost information pertaining to quality can be obtained after due analysis even from routine reports and records like payroll (including overtime expenses), traveling expenses including travel-related claims, operational expense reports, scrap reports (including the added value, which must always be considered), rework reports, design reviews, inspection and test reports, inventory reports including evaluation of age-wise quality, material review activity records, service reports, warranty cost information, etc. Savings contribute directly to profitability and this perpetual contribution to the bottom line is the best argument in favor of initiating an effective ‘cost of quality’ system. It is prudent that the initial program be introduced in a small but potential area rather than in the whole plant, as it is easier to get success established in a small area that will give the necessary exposure, experience and above all, confidence to progressively extend the initiative and ultimately cover the whole organization. The imperatives of a competitive environment force most companies to work to the right-hand side of the economic balance point to meet their customers’ needs and the more reliable the product has to be the higher the necessity quality level. This is reflected in very high prevention and appraisal costs to reduce the occurrence of failures. Companies in business involving a high degree of safety such as space program and undersea industries are typical of those thus forced into working well to the right hand side of the curve. For any product there is a point where quality level is adequate to meet the customers’ needs and at this point total costs have to be optimized. The total quality costs in companies who operate a quality system to improve the management of their operation, rather than to meet market pressures, will generally decrease as they become more committed to their quality system and it, in its turn, matures. This reduction is achieved by a redistribution of the costs in the different categories. Initially external failure costs will drop because failures will be detected in-house and the customer will no longer be used as the inspector. This causes internal failure costs to rise and then fall because appraisal and testing increases to prevent them.

Applications of Quality Costs ‘Cost of quality’ is a major tool that kindles top management’s interest in and commitment to continuous improvement. The term ‘cost of quality’ is something of a misnomer. It arises because of the gross apathy that prevents a product being made right first time, which is the primary aim of any operation wedded to TQM philosophy. Successful deployment of TQM philosophy calls for the institutionalization of a system to monitor ‘cost of quality’ for the whole organization. All concerned must accept this system, based on reliable facts and stable in measuring true quality costs throughout the organization. The Finance Department has to play a major role to ensure that this initiative becomes part of financial reporting and is leveraged for business success. The traditional practice of leaving the entire

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320 MACRO STRATEGY matter to a Quality Control Department is against the principles of TQM. Though the Quality Control Department is largely responsible for recording and monitoring ‘cost of quality’, it is important that the Accounts Department should undertake the design of parameters of ‘cost of quality’ as they are responsible for the measurement of all other costs and, therefore, have the means to measure quality costs. They are also likely to have greater credibility with the top management in this respect and their findings will, therefore, be more readily accepted. Moreover, since the quality department is largely responsible for helping to reduce quality costs, it is wrong, in principle, for them to report their own success or failure without an independent check. Generally the costs associated with scrap materials and parts, defective parts, reworking, replacement and failure will be more readily accounted for than those associated with the less definable areas of prevention and appraisal costs, abortive effort, detection of nonconformity, service failures and customer satisfaction, but attempts should be made to quantify all costs. The experience of many companies is that there are shocks in store when the program first starts. These must be accepted and used as spurs to improvement.

Notes 1. A. V. Feigenbaum, Total Quality Control (New York: McGraw-Hill, 1961), pp. 86–87. 2. Ibid, p. 15.

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10

CHAPTER

Basic Decision-making and Problem-solving Tools BRAINSTORMING rainstorming is a simple yet powerful judgmental tool/technique used in team or group working to analyse problems, offer solutions and facilitate decisionmaking. It is often used as supplementary or supporting tool to other problemsolving techniques. Brainstorming taps the inherent thinking power and intellect of each individual involved in the process. Use of the right methodology helps to define and focus on the problem (or topic of the discussion), induces a suitable enviornment that stimulates the collective thought processes of the team members in finding the right solution to pressing issues. In the process of brainstorming, inputs are sought in a cyclic order till all the participants exhaust their ideas and suggestions. The ideas and suggestions are first noted, then classified under various focus-points appropriate to the topic being discussed. Case-studies show that brainstorming sessions are more effective in producing these focus-points than an individual can do otherwise. A group consisting of a minimum of 7 to 8 persons to a maximum of 11 to 12 persons has proven to be most effective. Through consensus (voting in extreme cases), the discussed focus-points are prioritized and specific tasks are allotted among the members which are to be followed up in the next meeting. These characteristics distinguish brainstorming sessions from other types of meetings. It is the responsibility of the team leader to ensure a structured approach and provide an environment that encourages participation through free contribution of ideas on the subject, without any acrimony or dilution of purpose. Everybody must get an opportunity to speak his or her mind without the fear of being ridiculed. irrespective of hierarchy, function or responsibility. The cardinal principle of brainstorming is that there is no such thing as a stupid idea. Therefore, undue criticism of any idea should not be entertained. All inputs must be valued and recorded without exception; however, it is important to encourage the quality of ideas more than quantity. All kinds of ‘why’ questions should be reserved for analysis at a later stage.

B

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324 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS Brainstorming sessions are an effective way to break the barriers of hierarchy and counter the inhibitions that keep valuable opinions from surfacing. Members hit off useful ideas from their colleagues as well as feel the impetus to contribute fresh perspectives or innovative suggestions. The recognition received for positive contribution promotes a sense of worthiness that improves the work environment. Besides enhancing self-esteem, such brainstorming sessions also develop a synergy within the team, bridge gaps in interpersonal relationships and promote teamwork in ways that cannot be achieved otherwise.

STORYBOARDING Storyboarding, a variant of the brainstorming technique, follows all the basic rules that guide a brainstorming session. In this process the topic and objectives are predetermined; the ideas or suggestions generated with respect to the topic and objective are displayed randomly on a board without any bias or rejection. Thereafter, these ideas are categorized as per logical groupings, ideas having the same meaning are clubbed together. Subsequently, the grouped ideas are re-arranged creatively under appropriate headings and sub-headings. The engrossing process generates multiple options that the participants can weigh before arriving at a consensus decision. The main requirements are a set of large self-adhesive cards (e.g. Post Itnotepads) or plates of assorted sizes, coloured marker pens and a large size board or wall. Alternately non-adhesive plates/cards, a large size corkboard or similar type of board, and pins, which can fix the plates/cards on to the board, can be used. Coloured cards and plates are used by some to distinguish between the headings & sub-headings or to denote different categories of task. Portable and collapsible boards can be used if the venue of the meeting is not permanent. Besides the team leader or facilitator who conducts the session, there should be two ‘writers’, and one ‘pinner’. Two writers are preferred to ensure that all ideas get recorded onto the cards/plates legibly in short but precise terms as soon as they are thrown up so that there is no unnecessary delay to disrupt the trains of thought of the participants. Similar to brainstorming session, a storyboarding group requires a minimum of 7 to 8 and should not exceed 11 or 12. This technique is quite flexible and can be modified to suit any situation, no matter how unique it is. This is applicable to any size or type of organization or business. Figures 10.1, 10.2, and 10.3 illustrate the principal sequences of the storyboarding technique. Once all the ideas are up on the wall or board, they are prioritised for action— the top three or four ideas are enough to initiate the process. Some consider short listing to be synonymous with sorting the headers. This, however, depends on the uniqueness of the situation or the problem. At the end of the third stage, it is necessary to brainstorm to prioritize the tasks listed for the initial action taking—to start top three or four tasks should be good enough. It is preferable to reach a consensus decision instead of voting. Depending

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Figure 10.1: Stage 1: ‘Ideas’ generated are posted random

Figure 10.2: Stage 2: Grouping

on the uniqueness of the issue or problem, some times Headers or Sub-headers are short-listed for initial action. When linked with other problem-solving tools, storyboarding is a very effective and powerful technique. This technique, apart from being used in problem solving exercises, is very effective in drawing up vision, mission, value or policy statements, marketing and business strategies, etc. where involvement of key people is essential. It can also be innovatively used for conflict resolution. It is said that Michelangelo was the first to use the process in the Sistine Chapel. Late Walt Disney is said to have used the process successfully to put the words and music together for his famous cartoons.1

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Figure 10.3: Stage 3: Overall action plan

THE POWER OF THE QUESTION ‘WHY?’ No tool is as efficient in discerning issues down to their roots as the simple, innocuous question ‘why’. The trick is not to be satisfied with first response, no matter how correct it may appear to be—without repeating the question several times one cannot delve further. Experience shows that the question should be asked at least five times. It may be necessary to reframe the question to avoid reaching a dead end early on. However, effectively framing the question even five times can be tricky. One must keep in mind that the job is to get down to the next level and keep on till one gets to the root. When there is no room left for further questioning, one can assume that the root of the matter has been reached. Thereafter, depending on the situation, can then take corrective, preventive, or improvement actions. Figure 10.4 illustrates the point.

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Figure 10.4: Dig through the crust of the answers till the root is reached Repeatedly asking ‘why’ leads to the root cause. The simple example below will illustrate the point: (a) Question: Why so often the production line is stopping? Answer: Because the machine no. 3 is stopping frequently. (b) Question: Why is machine no. 3 stopping so frequently? Answer: Due to frequent tool replacements. (c) Question: Why does the tool need to be changed so frequently? Answer: The circular form tool is developing crack and then getting chipped off. (d) Question: Why does it get chipped so often? Answer: The Heat Treatment is not done properly. (e) Question: Why is the Heat Treatment not done properly? Answer: The heating cannot be properly controlled.

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328 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS (f) Question: Why can’t the ‘Heating’ be properly controlled? Answer: The temperature controller of the furnace is out of order. (g) Question: Why was the Pyrometer not used then? Answer: Because that is also out of order. This is a typical case where the question ‘why’ was needed to be raised more than five times in the process of reaching down to the root cause, i.e., both the furnace temperature and the pyrometer (a hand-held device used to measure furnace temperature) were out of order. With the root cause identified, the management can take appropriate action. Further probing may reveal some more problems like the maintenance department overlooked the preventive maintenance schedule, the concerned supervisor forgot to place the order in time for the spare of the pyrometer, or there was some problem at suppliers end. Professionals looking for an instantaneous solution often shrug off the prospect of using this simple yet effective method and dub it as too elementary. However, case studies show that the systematic use of this elementary tool has led to important clues in solving difficult problems.

5W AND 2H ‘5W 2H’ tool is a checklist that utilizes questioning power of the 5’W’s in combination with two elementary H’s viz. how and how much to solve problems. 5W’s refer to what, why, whose, when and who. This tool brings clarity to thought, unearths hidden problems, and brings forth opportunities for improvement. It is also useful for training of , understanding process, and finding missing information. It is a helpful tool in identifying superfluous work and thereby undertaking process simplification or re-engineering to achieve better results. Table 10.1 highlights the focus and the typical questions against each of the elements of this 5W 2H tool. Owing to the workload and the pressure of meeting targets, managers tend to overlook chronic wastage in certain areas or, failing to see any scope for improvement, they consider these losses inevitable. Use of 5W2H in conjunction with 3MU check-list, a tool used in the Japanese Kaizen activity, help to initiate actions that lead to significant improvements. The 3-MU checklist concerns itself about Muda (Japanese word for waste), Muri (Japanese word for strain), and Mura (Japanese word for discrepancy) in the areas of (a) manpower, (b) technique, (c) method, (d) time, (e) facilities, (f) jigs and tools, (g) materials, (h) production volume, (i) inventory, (j) place and (k) way of thinking. In The Kaizen philosophy stresses on carrying out the improvements however insignificant it may appear, and the simple yet effective 3-MU checklist helps to identify such improvement opportunities, chalk out action, and carrying out the improvements however insignificant it may appear to be. Quite often these 3-MU’s are not so obvious, which is why they often get ignored. Probing these 3-MU areas with 5W2H tool make the combination very effective to generate ideas for improvement. Appropriate questions and

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BASIC DECISION-MAKING AND PROBLEM-SOLVING TOOLS 329 Table 10.1: The Elements of the 5W 2H Tool Query

Focus

Typical questions

What

Object

z

Why

Purpose

Where

Location

When

Timing/ Sequence

Who

Person

What to do? z What is being done? z What should be done? z What else can be done? z What else should be done? z Why do it? z Why did he/she do it? z Why do it there? z Why do it that way? z Why do it at all? Note that here the ‘why’ is not used to find the root cause of a problem, but for re-engineering, developing an action plan or just identifying a problem. Where to do it? z Where is it being done? z Where should it be done? z Where else can to be done? z Where else should it be done?

z

z z z z

How

Method

How Much

Cost/ Measure

When to do it? z When should it be done? z When else can it be done? When else should it be done? Who does the task? z Who is doing it at present? z Who should be doing it? Who else can do it? z Who else should do it?

z How to do it? z How should it be done? z Is there any other way to do it? z Is this the best way? z Can this method be used in other areas? z z

How much is it? z How much is it costing? z How much should it cost? How much can we save?

answers help clarify things, remove ambiguities, pinpoint responsibilities and plan actions. The resultant improvements as well as the simplification and reengineering help achieve better results.

OTHER CHECKLISTS Besides the 5W and 2H tool and the 3-MU checklist, there are a few other checklists that can be effective. The ‘5M’ checklist is the composite of the 5 basic inputs and values, namely, manpower, machines, materials, methods, and measurements, which go into creating products and services of all sorts. The terminology used for each of these ‘M’s varies depending on the unique process or business; for example ‘measurement’ will be termed ‘test’ in a medical diagnostic centre or hospital. This commonsense tool, if used judiciously, can be very effective in solving problems, improving productivity, enhancing profits, etc. as can be seen in the following formulae: Productivity =

Output Output = All Inputs Just Inputs as required + Waste

Performance with respect to Value Created Quality, Cost, Delivery, Safetyy, Morale Productivity = = Value Invested Man + Machine + Material + Method + Measurement

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330 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS The output or performance needs to be judged from the totality of perception and experience of customer/consumer with respect to quality, cost, delivery and safety. On the other hand, employee safety and morale is also necessary for consistently better quality, reduced costs, timely delivery, a better level of service, etc. The root cause of most production- and process-related problems lies somewhere within the sphere of these 5 M’s. Through data collection or brainstorming, it can be assessed how and how much each of these ‘M’s contributes to the problems faced or solution sought. The next step is analysing the maximum value contributing M using techniques like the Ishikawa Diagram or Structural Tree analysis. Identification of deficiencies will trigger corrective, preventive, and improvement actions. When conventional ideas fail to deliver, the ‘5 M’ checklist can help gain further insights. There are some variants to 5W2H check list, some use a 5M1E checklist, the ‘E’ being the environment. In the case of environment, the checklist investigates possibilities related to improving lighting, air, temperature, humidity, noise, dust, gas, bad odour or other environmental factors that may impact work-conditions, productivity or customer satisfaction. The checklist may also cover safety aspects that include things like safety training, safety procedures, equipment safety, and safety status. Some only use ‘4M’ checklist focusing on men, machine, material and method. Again, some prefer using ‘6 M’s’ or ‘7 M’s’, the additional ‘M’ being the ‘milieu’ at the work place, and ‘money’ in cases where it is a big contributing factor. These checklists can be augmented with other elements depending on the unique process characteristics. When preparing a checklist, one should be careful that the questionnaire must not be too long or theoretical. The bottom line here is that they must help solve problems or identify improvement opportunities. The checklist given in Table 10.2 is only for guidance; professionals should design their own checklist or questionnaire based on the uniqueness of their process. ‘Information’ has become an essential element in ensuring business efficacy. Depending on the criticality the abbreviation ‘I’ representing management information can added to the checklists 5M 1E, 6MIE, etc. The new checklists with management information can be christened as 5M1E plus I or 6MIE plus I. The design of the checklist on management information will depend on the unique characteristics of the business or organization. The checklist on management information given in Table 10.3 is for guidance only. Quite often the hidden or un-delectable impact of silly acts of omission or neglect creates havoc in ultimate quality or overall efficacy of the business. The tendency of most professionals is to look for big problems overlooking the elementary slip-ups or problems at the grass root. They prefer using sophisticated tools to identify and solve the problems of quality, productivity, etc. However many of these are problems that can be identified and/or solved by the simple and elementary tools as discussed above.

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BASIC DECISION-MAKING AND PROBLEM-SOLVING TOOLS 331 Table 10.2: Table for 5 MIE Check List: 5 M 1E (The male gender has been used for the sake of convenience) Serial No 1

2

3

Category of M. Men (Operator or Employee)

Machine (Any equipment)

Material

Brief synopsis of what to check. Is his education adequate to handle the job? Does he require further training and education? z Can he communicate well? z Is he responsible and conscious to avoid problem? z How is his morale? z Is he healthy and wiling to improve further? z How well can he handle internal and external customers? z Will cross-functional or multi-skills training improve his performance and efficiency? and so forth. z z

Is the machine capable enough? Is the machine reliable? z How costly is its maintenance? z Can the machine be modified or upgraded? z Can it run at designed parameters of speed, depth of cut, feed, etc.? and so forth. z z

Is the quality of incoming material consistently good? Is the supply regular? z Can we improve the yield by reducing waste? z Is the handling proper? z Is the inventory level adequate? z Do the suppliers have QMS inbuilt in their system? z Do the suppliers provide statistical proof of quality control and assurance? z What is the extent of rework needed? and so forth. z z

4

Method

Is the method standardized and part of SOP or QMS? Are the safety measures adequate? z Are ‘re-checks’ and ‘re-works’ chronic problems? z Are the process variations within the specified limits? z Can we simplify, combine or eliminate some of the process steps? z Can the set-up time be reduced? and so forth. z z

5

Measurement

Are the instruments/sensors duly calibrated? Is the procedure for calibration still in use? z Does a computer back up system exist for the measurements? z Do the inspectors play a major role? z Do the operators or employees practice self-checking? z Are the employees empowered to initiate corrective action? z Are there visual aids for measurements? Are they updated? Does it lead to immediate corrective/preventive actions? z Is the information on measurement readily retraceable? And so forth. z z

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332 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS 6 1E (Environment)

What is the condition of the working environment? Is it clean enough, well lit, is the noise level acceptable, etc.? z Is any safety standard followed? z How is morale? Do the employees take pride in their jobs? Are they empowered enough? z

Table 10.3: Checklist for Management Information The Suggested Checklist for Management Information Are we clear on what information we need to have and disseminate at which levels? Are we clear on what information we need to gather, or need to collate? z Can we improve the existing communication or dissemination system? z Do we make best use of our Management Information System (MIS)? z Can we improve visual aids? z Can we eliminate unnecessary reports? z Can we reduce the distribution member of reports? z Can we improve our information and data gathering system? z Can we stop generating unnecessary reports? z Are there many regular meetings and are they effective? z Have we streamlined our processes before adopting modern information systems like SAP, ERP, etc.? z How to ensure that the customer feedback reports are not cooked up? z Is there any formal forum where the CEO can exchange information and views with the general employees? z Can we identify information-hoarding or bottlenecks? z Can we speed up information processing? z Can we effectively collect and disseminate the relevant data and information on benchmarking? z z

A COMBINATION TOOL FOR PROBLEM SELECTION Problem selection is a critical step in problem-solving exercises. The task becomes more challenging when adequate or reliable data are not available. In such cases, a judgemental tool that combines Relationship Matrix and Nine Blocks grid, is found to very effective (see Table 10.4). Most problems encountered in business and operations directly affect the outcomes of management measures viz. quality, production (quantity), cost, safety measures, delivery (schedule), and morale. In TQM parlance these measures are known as QPCSDM in the abbreviated form. Though such relationship cannot be ‘quantified’ in absence of data, the impact however can easily be classified as strong, medium, or weak; see relationship matrix chart given in Table 10.4, makes it possible to record the impact of problems and finally segregate the problems that have a strong impact on QPCSDM. The next step is to short-list the problems with relatively strong impact and then both the perceived impact of solving and ease of implementation are noted.

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BASIC DECISION-MAKING AND PROBLEM-SOLVING TOOLS 333 Table 10.4: The Relationship Matrix Chart RELATIONSHIP

Quality

Production

Cost

Safety

Delivery

Morale

€ Strong | Medium U Weak (Q) (P) (C) (S) (D) (M) PROBLEM AREAS I Wastages 1. 2. 3 II Stoppages /Delays 1. 2 3 III Human Relations 1. 2. 3. IV Input Material 1. 2. 3. 4 V Others 1. 2. 3. 4 Note: Problem areas and number of problems shown here are arbitrary. In actual practice the problem areas have to be business specific, and the actual number of problems are to be recorded.

Figure 10.5: Shortlisting the problems

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Impact of Implementation N.B. In the absence of data, make a judgment and put the problems in appropriate boxes. Problems those will fall in H-H should get the priority and be a starting point. If there is no consensus in the team meeting, then multi-voting could be resorted to.

Figure 10.6: The Nine Block Grid

The impact may be classified as high (H), medium (M) or low (L). These are noted systematically in a form similar to the one shown in Figure 10.6. These findings are then superimposed on the Nine Blocks grid, shown in Figure 10.6, to prioritize the problems and chalk out which need to be attended first. Both these tools, the relationship matrix chart and the nine block grid, use Brainstorming technique frequently. The Pareto diagram cannot be used in the absence of data. And when there is no time for data collection the Nine Block grid comes in handy as an optimal problem-solving or decision-making tool. The relationship matrix chart and the nine-block grid draw heavily from the experience of people and thus require involvement of the concerned people through brainstorming sessions. As such this combination tool is effective only in ‘Team Working’ situations.

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STRUCTURE TREE Structure tree is an effective judgmental tool that link cause and effect analyses of the elements of 5M in a systematic way to find out the root cause(s). In the absence of actual data, or where one cannot afford to wait for installation of a data collecting and analysing system, the Structure Tree tool helps guesstimate the numerical value against the elements of 5-Ms that are causing problems. Based on these guesstimates, systematic analysis is carried out to find the root causes. The guesstimates are based on experience and consensus arrived in a team-meeting, and systematic analysis is carried out to find the root causes. Figure 10.7 portrays the Structure Tree, the five roots, represented by 5M’s, are connected by a straight line that links to the problem(or effect or solution) which has been clearly defined earlier in the team meeting. In Figure 10.7, the problem statement is linked to the five (5Ms) categories of roots, which are the five principal contributory elements of a process. However, in cases where ‘5Ms’ are not applicable or require further extension, the causes can be categorized as Cause A, Cause B, Cause C, etc. as shown by the dotted line. The team needs to brainstorm to establish the percentage contribution of each category to the total problem; the total contribution from all categories put together must add up to a hundred percent. In the subsequent steps, the analysis is taken several notches deeper to pinpoint the root cause(s). The team meeting for this purpose follows the usual rules and utilizes the techniques of brainstorming, storyboarding, the power of ‘why, etc. to construct the ‘Structure Tree’. The analysis starts by defining the problem in simple and specific terms, preferably by incorporating

Figure 10.7: The Structure Tree. Note: The contributory factors for B.C, D are not shown. There could be many factors for each of the ‘M’s or causes.

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Figure 10.8: The Structure Tree Analysis

quantifiable facts and avoiding ambiguity and judgmental bias. Ill-defined problems misdirect the problem-solving effort, and one may end up treating the symptoms instead of the disease. The example given in Figure 10.8, clearly states ‘increase the productivity by 20 per cent’, instead of vaguely stating something like ‘do your best to improve productivity’. Often there are confusing signals from the problem statement itself. In such cases, it is best to rewrite the problem statement or the desired effect to reorient the focus. In stage I, a numerical percentage is set for each of the ‘M’s (or other causes, in case ‘Ms’ are not used) according to their potential of having contributed to the problem., In other words sum total of all contributory value percentage of all M’s must add up to a hundred percent. In the next stage, the element with the highest percentage is taken up for analysis and split further into cause categories. According to the contribution to the problem a percentage is allotted to each cause category but care has to be taken that the sum total tallies with the percentage contribution of the element being analysed as identified in the earlier stage. Next stage is to continue analysis with the element that has the highest percentage value; the process continues till the root cause is identified. In Figure 10.8, it is quite obvious that the causes under Machine’ category with the highest contribution to the problem at 75 per cent, need to be probed at deeper levels. The task is to allot percentages to all causes that contribute to this 75 per cent and identify the highest contributing value to this 75 per cent, and probe further. The next stage of analysis shows that ‘Tool down time’ is 50 per cent, the

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BASIC DECISION-MAKING AND PROBLEM-SOLVING TOOLS 337 highest contributing factor to ‘M’ which had the highest 50 contributing value of 75 per cent identified in the preceding stage of analysis. With the root cause still eluding us, ‘Tool-Down Time’ is subjected to further in-depth analysis in the third stage, which identifies breakage due to poor ‘Tool Hardness’ as the root cause hindering productivity. Therefore, this must be treated as a priority and both corrective and preventive actions must be taken to improve tool hardness. Further analysis using the questions related to ‘why’ questions may identify the factors causing the ‘Tool hardness’ problem. The identified problems could be selection of tool material, furnace overheating, loading problems, problem with temperature recorder, annealing process or untrained operators. These need to be probed and necessary corrective and preventive actions are to be taken to solve the problems concerning Tool Hardness which is the root cause of productivity being down by 20 per cent. Generating as many ideas as possible as well as thinking beyond typical horizons will bring success to the whole process. Patience is necessary to get to the root-cause; jumping to conclusions or ‘band-aid’ solutions will defeat the purpose. In case of a stalemate, it is necessary to re-evaluate the assigned percentages and start the process all over again. In case of utter confusion, it may be necessary to re-examine and correct the problem definition. The structure tree is quite similar in its approach to the Ishikawa diagram, though typically the Ishikawa diagram does not record percent probability of causes to arrive at the root cause. It may help to generate a better visual impact if Structure Tree is used in conjunction with Pareto diagram and Ishikawa diagram but the choice, however, purely depends on the preference of the ‘Team’ or the team leader.

PROCESS FLOW DIAGRAM (PFD) Process flowchart or process flow diagram (PFD) is a schematic diagram that sequentially depicts all the processes within the company. It aids the professionals to walk through the processes (process mapping) and discover the compromises made against the planned sequences, redundant steps taken, problem-prone areas and opportunities for improvement. This, if used as a tool, will help keep the focus on the process. To draw the flowchart, one needs to use activity-denoting symbols that are understood by all concerned. The symbols shown in Figure 10.9 are universally used. Flowcharts begin with a start (beginning of a process) and then all the activities or steps of the process are graphically depicted using the appropriate symbols, taking care that no activity is missed. The process chart can be made at two levels macro or micro depending upon the requirement. A realistically mapped process chart shows improvement opportunities. Figure 10.10 will give a fair idea of how to draw a PFD. A PFD shows how an apparently insignificant step might have a lot of bearing on the final output, and hence should not be left out. While there is room for ambiguity

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338 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS

‘



The rectangle represents an activity – a brief description of the activity is written within the rectangle. The diamond denotes decision making points – a choice between yes or no, right or wrong, acceptable or unacceptable or such points where the process can branch out into two or more paths depending on the questions or issues involved. Rectangles with rounded corners represent the beginning or end of a process, according to the designated flow of activity written within the symbol; i.e., start/begin or stop/end. This trapeze represents documentation or documents pertaining to the process are required. These arrows symbolize the flow paths. These paths connect the various process elements like activities, decisions, measurements, etc. The arrowheads indicate the direction of flow.

Figure 10.9: Universal Flowchart Symbols

in organization charts, there is hardly scope for misinterpreting a realistically drawn PFD with standardized symbols. It is up to the professionals to keep the tool alive and dynamic and tap the immense potential of the tool for initiating further improvements. Flowcharts also open up opportunities to probe the causes of delay, transformation bottlenecks, bureaucracy, duplicate work, unnecessary process steps, inventory build-ups, etc. Figure 10.11 shows the symbols that are used for such cases: Companies can also develop their own symbols to denote their unique operations and processes. Often coloured adhesive cards are used to denote or study a particular element of study e.g. identifying areas of delays at a glance. Process mapping helps to visualize the key processes in the organization. According to Michael Hammer and James Champy, who first proposed the concept of BPR (Business Process Reengineering), process mapping is as important as an organization chart. The flow chart displays a clear picture of the main processes, identifies key external & internal customers and facilitates focusing on principal strategy and output goals of each process. Process owners nominated by management can take up improvement projects. Though not complicated, it is better to give the responsibility of drawing a flowchart to a team constituted of experienced professionals to ensure that all steps of the key processes are mapped. The steps outlined in Figure 10.12 may be used as thumb-rules. A carefully drawn PFD removes blind spots or wrong notions and helps a holistic view of the actual state of affairs, prevents finger pointing and helps to study the inter-relationships within the entire process steps. It identifies non-value adding unnecessary activities and helps think through a complex process in simplified manner. Thus it aids or rather simplifies problem-solving or process reengineering initiatives like planned action to reduce delays, bureaucracy, process cycle

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BASIC DECISION-MAKING AND PROBLEM-SOLVING TOOLS 339

Order booked by Sales Represntative

START

Send it to sales Head Quarter

Enter Order Register

Send back if not ok Check Specifications, Pricing, Conditions

Okay Prepare Order Document

Send to Production Planning Prepare Order Acknowledgement

Okay

Send it To Sales

If, No Check

Copies to Finance, Purchase, Production, etc

Okay Send it to Customer END

Figure 10.10: Process Flow Diagram (PFD) or Flowchart

Check Schedule, Capability etc

Not Okay

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340 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS

‘Operations’ or a ‘Connector’ indicating continuation of the flow chart

Delay

Transportation

Stock Room or Storage

Define Process Boundary To remove ambiguity

T

Define the Process

T

Start

T

Figure 10.11: Few Other Flowchart Symbols

Finalize the symbol standards, and specials, if any.

Walk Through Process

Check for missing steps No

T

Yes, missing steps

T

T

T

Develop Flow Diagram through Brainstorming or Storyboarding

Record missing steps amend the diagram. T

T

Talk to Process! Interview internal customers and suppliers T

Yes T

Check for missing Steps/elements

Record missing Steps/ elements T

No

T

Finalize the diagram for further analysis, action, etc.

Figure 10.12: How to Map a Flowchart time and work-in-process (WIP) inventory through process simplification, and improvement. The true potential of PFD can be utilized if senior managers regularly use them to discuss issues and review improvement opportunities.

Note 1. George D. Robson, Continuous Process Improvement (New York: The Free Press) p. 31.

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11

CHAPTER

Seven QC Tools CHECK SHEET heck Sheet is a simple yet effective primary tool for systematic data collection; accurate data is necessary for judgmental or analytical interpretation during problem solving exercises or designing improvement initiatives. The raw data is subsequently arranged in logical way to allow rational interpretation and management action. Since raw data are inputs to statistical processes, enough care should be taken to ensure the logging of accurate data by keeping a close watch on factors like the accuracy of measuring or sensing instruments, methods employed, ensuring that data skill of the people engaged to collect data, etc. As the check sheet is required for the first stage of data collection, it should be so designed as to meet the requirements of diverse situations, depending on the needs of the investigators or problem-solving teams. Often it is necessary to use tally sheet knowledge of which is can be easily acquired from any elementary book on statistics.

C

HISTOGRAM Histogram presents data either accumulated or collected in a graphic format that allows conclusions to be easily drawn about process conditions like dispersion, central tendency, and helps evaluation of data distribution. The sequential steps for constructing a histogram are quite simple: (a) raw data is arranged into arrays, (b) then data is grouped into classes, (c) class intervals are determined, (d) a tally chart is constructed, and (e) finally the frequency distribution chart is constructed. One can also construct Frequency polygon, which is another common type of frequency distribution bar charts. Histogram shows the relationship between class boundaries and frequency. The vertical axis represents the number of observations i.e. frequency in each class; it can also represent cumulative frequency or relative frequency in case the intention is to draw cumulative frequency histogram or relative frequency histogram. The horizontal axis represents the class boundary. If, in the same graph, the midpoints of the class intervals of all the bars are connected, then it becomes

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342 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS a frequency polygon. The frequency polygon too, like histogram, shows frequency distribution data; and it has the distinct advantage in case the number of classes and observations are more since the generated curve is smooth which makes interpretations much easier. Those interested in detail construction of different types of frequency diagrams may refer any elementary book on statistics. The shape of a histogram tells us a lot about the characteristics of the process viz. central tendency, dispersion, skewness, and of course the symmetry or lack of symmetry of the data. Central tendency locates the middle of a distribution—it is also called the ‘measure of location’. It is interesting to note that similar symmetrical distribution need not have same central tendency, rather there could be different central tendencies. Dispersion or variation is the characteristic that indicates the amount of spread in the data. Skewness is the characteristic that shows the amount of distortion in an otherwise symmetrical frequency distribution. How far the data is skewed to the right or left represents the skewness. However, the symmetrical distribution is the ideal, i.e. where the data is equally distributed on either side of the centre. These simple graphical presentations give ample scope for further analysis, adjustment, control, and improvement.

Utility and Benefits of Using a Histogram z

z

z

z

z

z z

Graphic presentation in the form of a histogram communicates information more easily than numerical analysis. Voluminous unorganised data can be arranged into some meaningful order for further study of its characteristics and impact on the process. Visual presentation helps decision-making by providing sufficient clues causing problems with process or quality. Helps determine the process capability, compare the specifications, and indicate the spread of the population as well as show up discrepancies in the data. Gives warning in case the process goes out of control so that corrective actions can be initiated. It indicates as to where clustering of observations has taken place. Gives an overview of the variation in a data set.

Precautions z z

z

Ensure that histograms are not manipulated to show different interpretations. Too many or two few bars can be misleading. Optimum use of bars depends on the experience gained over the years. A histogram must be used over long runs or long time. To properly understand a process, histograms, alongside other control charts, must be prepared and studied over an extended period of time.

Histogram is thus a useful tool that not only enables visual judgement present if some observations are out of tune from others but provide definite information regarding the uniformity of a process. Furthermore, apart from the study of the

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SEVEN QC TOOLS 343 behaviour of the characteristics, it is easy to determine the conformance of a process with respect to designed specification limits. It is a flexible universal tool that can be used in operations, administration, service, and practically in any field.

PARETO DIAGRAM A Pareto diagram or analysis is not merely a problem-solving tool; rather, it is a tool that allows us to analyse a situation, prioritise action, and monitor the results after improvements or changes. It is a simple and cost-effective technique to find out what to tackle first by identifying where the severest problems lie, or what action will yield optimum results with least effort. The core of the Pareto principle is that the ‘vital few’ among the problems hold the key, while the ‘trivial many’ only dissipate resources, focus and energy. The Pareto principle is based on the 80/20 rule, which emphasizes that 80 per cent of the problems stem from 20 per cent of the causes. Logical application of this judgmental technique helps to identify and prioritise those important issues or problems which, when solved, will automatically lead to substantial cost-effective improvements. Important issues may include those pertaining to financial impact or the relative number of occurrences. J. M. Juran discovered this famous ‘vital few and trivial many’ principle which is analogous to an observation by Vilfredo Pareto, the noted nineteenth century Italian economist, that 80 per cent of the wealth of a country is concentrated in the hands of 20 per cent rich representing the phenomenon or principle of unequal distribution of wealth. However, Pareto never extended this observation to other areas nor did he attempt to universalise this phenomenon. Recognizing the value and relevance of Pareto’s discovery, Juran was the first to introduce this principle to the field of quality management. He magnanimously christened this universal principle the ‘Pareto principle’ instead of ‘Juran principle’. Since then the Pareto principle has been one of the most important tools in problem solving or decisionmaking, applicable to any field of work. It can be also innovatively applied in walk of life including home front or self-development. The few examples about the successful application principle of Pareto principle given below are only illustrative— the list is endless: z

z

z

The onerous task of competitive analysis is tackled by concentrating on key product features or key competitors, or on both. In case of value-analysis or cost-value combinations, the application of the Pareto principle brings out the combinations that collectively account for the bulk of the value or costs, as the case may be. Identifying and controlling these vital few factors will either add value or reduce cost. Human resource managers or planners find the Pareto principle useful in containing and reducing human error. Though human beings are by nature errorprone, their performances vary due to factors like skill-level, deliberate violation, lack of training, motivational problems, poor working environments,

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z

z

z z

z

z

z

poor communication, incomplete instructions, etc. By analysing the collected data the vital few causes can be identified and tackled through corrective steps. Overall human error is bound to reduce if the application is right. Pareto principle in conjunction with Brainstorming session can identify the vital few processes from the numerous steps depicted in flow diagram and then optimise the process steps through re-engineering. Finding out the vital few internal as well as external customers. It is also valid in finding out the ‘useful many’ customers. Analysing the impact of non-conformities on quality, cost, schedule, etc. Useful for senior managers: in time management and disposing of pending jobs. In the design of experiments, the selection of experiments to prioritise is done within the confines of engineering and cost constraints by concentrating on the ‘vital few’ rather than the ‘trivial many’. Process control parameters are monitored and improved by selecting activities using Pareto diagrams. In Hospital and Healthcare services, quality improvement usually starts after identifying the most critical or vital areas.

Technique of using Pareto Analysis in combination with Cause-and-Effect (C-E) diagram is very effective in solving problems. The most significant problem identified in the first Pareto chart becomes the effect in the C-E diagram. The causes identified in the C-E diagram are subsequently prioritised in another Pareto chart. This process is carried on until the vital few problems have been identified and eliminated. Thus, a Pareto diagram is an indispensable tool for problem analysis and continuous improvement activities. The general principles of construction for a Pareto chart are not much different from a histogram. Any textbook on quality management, quality circles, or descriptive statistics should contain the simple steps to constructing a Pareto chart. Leaders and top management professionals should have no qualms about practicing this powerful yet simple tool.

CAUSE-AND-EFFECT DIAGRAM (ISHIKAWA/FISHBONE DIAGRAM) Cause-and-Effect (C-E) diagram utilizes judgmental techniques to identify and evaluate the cause factors for any effect or output that have already happened or it may have been otherwise planned. This effect or output could be a problem, a task or a result, having either or both of tangible and intangible characteristics. According to Dr Kaoru Ishikawa, who invented the C-E diagram, a ‘process’ that is a collection of cause factors must be controlled to obtain better products and effects. In other words the desired goal or characteristic is the effect of the interaction among or the impact of various cause factors, and therefore process standardization through control of cause factors can lead to a planned ‘effect’. Juran, in his QC Handbook (1962), had honoured Ishikawa by naming the ‘cause-andeffect diagram’ after him; today it is popularly known as the Ishikawa Diagram.

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SEVEN QC TOOLS 345 This tool is used as both ‘vanguard’ and ‘rear-guard’ control. The term ‘vanguard’ control refers to anticipating problems and preventing them before they actually occur. ‘Rear-guard’ control implies taking action after the occurrence. The versatility and simplicity of the Ishikawa diagram makes the technique applicable across diverse behavioural and operational fields, and not just in manufacturing; it encompasses all processes relating to design, purchasing, sales, service, personnel, accounting, software, information technology, administration, etc. Ishikawa further elaborates that since politics, government and education are all processes whose characteristics are dependent on causes, controlling of these causes through C-E diagrams will benefit the output or effect of all these processes as well. The tool is particularly useful in a non-numerical situation, where a problem or issue cannot be analysed by collecting and studying numerical data to start with. The diagram is also called by the nickname Fishbone Diagram, owing to its characteristic shape resembling to that of fish bones. Figure 11.1 shows the principles behind the C-E diagram that probes the interrelationship between causes and sub-causes and effects or outputs. The ‘effect’ or the ‘problem’ is written on the extreme right-hand-side of the diagram, which symbolises the spearhead of the base (reference) line of the diagram. The major categories that could impact the effect or problem are listed on either side of the base line and are connected to the base line through a slanted or vertical line. The causes and sub causes, and maybe other significant micro causes of each category are shown according to their interrelationship.

Material

Measurement

Machine

X

X

X X

X

X

X

X

X

X

X

Effect X X

X

X X

X X

X

Men

X

X

Method

Cause Factors

PROCESS

Figure 11.1: Conceptual Framework of Cause and Effect Diagram

Characteristics

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346 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS The number of cause factors cannot be predicted; it could be infinite. Through brainstorming session where the question ‘why’ can be appropriately repeated, one can go on identifying many causes or sub-cause factors to reach the root, such factors could easily be ten, twenty or thirty or more. Since it will be a daunting task to control this innumerable number of identified cause factors, it is logical to use the Pareto principle to identify the vital few and put actions on hold for the trivial many. If used with innovation and imagination, the Fishbone diagram in tandem with Pareto diagram can list out the cause factors, establish their interrelationships and prioritise the action points. Once the vital problems have been identified one can collect data for statistical interpolation and then find appropriate technology or systems for preventive control. Thus, cost reduction, improvements in quality, and radical improvement in productivity. This, in the final analysis, is the principle objective of using the C-E diagram. Quality analysis and process analysis can also be done by using C E diagram and statistical methods, it identifies the substitute quality characteristics, and helps to evaluate factors that establish their relationships with the true quality characteristics. The process analysis attempts to identify the cause factors that hinder attaining the planned or desired effect of the process. Once the relationship between the identified cause factors and the effects such as quality, cost, productivity, etc. is established, it should be then possible to take preventive and improvement measures. Quality and process analysis fully utilize the immense potential of statistical methods to improve process capability in terms of increasing quality level, improved service level, reducing cost, higher productivity, enhanced reliability, etc. The construction of CE diagram involves the following principal steps: (a) identify effect, (b) identify and note the major categories or elements, (c) brainstorm the causes and sub-causes under each category and note them appropriately, and (d) analyse the diagram. Since a diagram drawn on a whiteboard cannot be preserved, the C-E diagram generated during the brainstorming session should be drawn on a flip chart, overhead transparency sheet or a graph paper for future reference.

CONTROL CHARTS A control chart is a graphic display of measurements for product or process characteristics that evaluates the performance of the system in real time as well as over a period of time. Control charts are basic yet important tools of statistical process control and are not too difficult to construct—the process involves plotting a few elementary statistical data on a graph for interpretation and action. The purpose and utility of control charts are briefly summarized as follows:

Means of On-line Process Control The sample statistics based on the data values collected from the process are plotted on a chart with control parameters. The chart indicates whether the process is

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SEVEN QC TOOLS 347 in control or has drifted out of control depending on whether the control parameters or limits have been calculated from live data or from previous data when the process was already in control state.

Tool for Management Control, and Setting Realistic Goals Management can take appropriate remedial actions and set realistic targets based on the comparison of the actual trend with the desired standard. Control charts give ‘live’ signals whenever the process tends to go out of control, whereupon alert and empowered employees can take timely action.

An Important Tool that Aids Management to Institutionalise Continuous Process Improvement When the process is in statistical control, the control chart information can be used to estimate useful process parameters like the process mean, standard deviation, and the proportion of non-conformity items or fallouts. These parameters help to calculate the process capability, i.e. the ability of the process to produce output or give results within designed or desirable specifications. Conclusions from such studies have great influence of critical management key-decisions out-sourcing, capital expenditure, selection and control of vendors, etc. It also helps management to initiate and direct continuous process improvement to reduce variability. The control limit within the control chart implies that any process can be monitored and controlled. Readers should note that control limit and specification limit are different concepts; control limits are calculated from the statistics of measured samples while specification limits represent theoretical limits designed by the engineers or planners. The calculations of control limits are quite simple, interested readers may refer to any book on statistical techniques. Points in the control chart are plotted against the running or accumulated data or from statistics calculated out of the data. A process can be in or out of control depending on the nature of variation as indicated by the plotted points. The control charts are used to plot both variable charts and attribute charts. The – variable control chart is also called X (x bar) or R (range) chart. The steps for constructing the variable and attribute charts are similar, and they include selecting data, calculating the process average, calculating the trial process limits, constructing the trial chart, analysis and then taking the appropriate action, and maintaining the chart thereafter. Table 11.1 lists basic significance and purpose of some common types of control charts/graphs for easy comprehension, while Table 11.2 that lists the four types of attribute chart most commonly used. To sum up, control charts have three basic purposes: (1) One can describe and understand a process or activity online, i.e. know the real-time state of a process. (2) Gives immediate signal or warning when the data deviates from the normal distribution, i.e. the bell shaped curve. This helps to identify, understand and

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348 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS Table 11.1: Basic Types of Control Charts and Graphs Type/ No. Characteristics What it does 1

Frequency distribution graph

Provides useful information and insight about process performance or quality.

2

Bell curve

3

Normal distribution curve Control chart

Shows how to use the ‘mean’ as a measure of central location and dispersion. Online process control by means of control charts. Monitors the activity of an ongoing process. Documents the average location and dispersion of the measured data.

4

5

6

Control chart when process is under statistical control – X and R charts

What it specifically indicates/measures The central tendency of measurements, the spread of data, and identifies and records the measurements both within and outside the control limits or specification limits as the case may be. The percentage of population that falls outside specified limits. Can be analysed graphically and mathematically. Appropriate sample statistics such as sample mean, sample range, sample standard deviation, etc. can be calculated from data collected. Indicates when to leave a process alone, or when to take corrective action. Estimates process capability. It also indicates the type of remedial action and possible means of improvement. Help in determining realistic product specification. z Calculates or estimates parameters like process mean, process standard deviation, and the proportion of non-conforming items. z Calculates the ‘process capability.’

Enables to maintain the process under statistical control through ‘live’ information and ‘dynamic’ control. Monitoring changes in central With the help of these two graphs not only it is tendency and dispersion possible to track and control the process or (variation) of quality machines but also they provide valuable measurements in a set of information on manufacturability, operator – sampled product. The X chart efficiency, information to customers, and graphs the mean values of provide a visual means and guidance to initiate sample of measurements over continuing process improvement over time. time, while the R chart graphs the variation of the measurements in each sample over time.

correct the causes of abnormal variation, and tightening up the distribution becomes a plausible option to make output even less variable. (3) It provides information to initiate changes to improve work processes so that higher levels of productivity or quality can be achieved. It is important that senior managers take a personal interest in enlarging the scope of usage and maintenance of control charts. One must guard against the tapering off of interest. Apart from being kept in a noticeable place where all concerned can see it, it should be kept active and dynamic by recording the relevant

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SEVEN QC TOOLS 349 Table 11.2: Four Types of Attribute Charts Sl. no Type of chart

What it measures

Characteristics

1

p

Fraction defective products

2

‘np’

Number of defective products

3

‘c’

4

‘u’

Number of defects in a single product Number of defects per product

The ‘fraction defective’ is the decimal equivalent of the fraction of products that are defective in a lot. It is based on binomial distribution. Example: If 10 out of 100 products are defective, the fraction defective is 0.10. A point above or below the control limits indicates process instability that warrants immediate investigation, there must be some assignable cause. The np chart displays the actual number of non-conforming items instead of the fraction defective. It is similar to p chart. It is a preferred chart if the size of the subgroup sample is constant throughout the chart. Graphs the number of defects in a product or errors in a form. It requires a constant sample size. The average rate of defects over the whole product run. It is similar to the 'c' chart, except that the number of defects is expressed on per unit basis.

changes and incorporation of characteristics that are of current importance. Use of control charts should be part of work-culture by making the charts integral to the review process at the operational level. It may not be out of place to mention that use of control charts is necessary to introduce six sigma initiative.

GRAPHS One of the most popular ways of depicting the real-time milieu of a process or operation is through elementary graphs. The types of graphs employed are dependent on the desired shape as well as the purpose of analysis. The most commonly used graphs are ‘Line’ graphs, ‘Bar’ graphs, and ‘Run’ charts. Line graphs depict variations over a period of time—they also depict the output or other characteristics of a live operation that runs routinely over a period of time. Bar graphs are useful in comparing ‘values’ which are plotted in the form of parallel bars. Run chart is a graph that provides an insight into the trends and operating conditions of the process. It visually depicts data to observe, monitor and analyse whether or not the long-range average is changing. Without a runchart, other data analysis tools such as the average, sample standard deviation, and histogram may lead to erroneous conclusions. The run chart plots the process, product, or quality characteristics as a function of time or sequence. The chart usually plots ‘live’ data point-by-point in the order in which it is obtained, and thus

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350 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS provides a ‘live’ overview of the general trend and degree of variability present in the process. Despite the limitation of conclusively summarizing any information or inference, the ‘Run’ chart provides useful information, which is practically a first step in data analysis. Two other useful methods of graphic representation are the ‘Pie’ charts and ‘Radar’ charts. Pie chart shows the percent slices or shares of a master data, principal output, or a main characteristic whose 100 per cent is represented by the entire circle. The sliced portions of the pie chart clearly show the relative share of each subcategory, arranged from the largest to the lowest share. Pie charts are generally very useful for presenting financial and market reports as well as for many specialised studies. A radar chart is a graph that assesses the relative strength and weakness of activities, functions, or characteristics measured against the planned or ideal parameters. Normally, the key parameters are selected, then the performances are measured on the ‘Likert’ scale and the average of surveys or measurements are taken. The data are plotted in descending order, i.e. the flow is from the outside towards the centre of the circle (highest to the lowest value on the scale). The points joined together present a picture that can be compared with the radar or wheel and depicts the current situation or ground realities. This helps to assess strengths and weaknesses, and the major action points become clear for the management to take appropriate actions.

SCATTER DIAGRAM In a scatter diagram the relationship between two variables is depicted. During process analysis it is often found that knowing the relationship between two variables or between a controllable variable and a desired quality or output characteristic is important. The scatter diagram depicts the influence that one variable has on the other, and it is used to test for possible cause-and-effect relationships. The scatter diagram does not prove that one variable causes the other, however, it does establish whether any relationship exists and the strength of that relationship. The knowledge of this relationship helps the analyst to set the controllable variable to achieve the desired level of output characteristics. Quite often when two variables are related, the scatter diagram graphically depicts what happens to one variable when the other changes. The two variables must, however, relate to the same event. The plotting of bivariate data is the simplest form of a scatter diagram. Like a graph, the diagram has two axes, the horizontal axis X representing the value of one variable, and the vertical axis Y representing the measurement of the second. The plotted points form a clustered pattern that resembles more or less to a straight line. The more that the cluster appears to resemble a straight line, the stronger is the relationship between the variables. The direction and ‘tightness’ of the cluster is an indication of the strength of the relationship between the variables. The straight-line pattern implies that every time one variable changes the

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SEVEN QC TOOLS 351 Table 11.3 Cutting speed and Tool life Training and Errors Overtime and Modification errors Temperature and Skin dryness

Breakdowns and Age of equipment Training and Performance Human height and weight

Speed and Gas mileage Production spread and Numbers of defective parts Accidents and vehicle age.

Blood cholesterol and Heart attack rates

Time management and Pending jobs

other will change by the same increment. The versatility of the scatter diagram makes the scope for application almost limitless; the possible uses cannot all be listed. The few indicative examples in Table 11.3 show how innovatively scatter diagrams can be used to relate pairs of variables. The scatter diagram graphically displays the effect of relationship between a certain variable on an output characteristic and this knowledge helps to decide on the setting of the controllable variable so as to achieve the desired level for the output characteristics. The tool is not at all complicated, and does not require any statistical and mathematical formulae. Even a front-line employee will not be scared to use it as they would be able to solve problems and take pride in his or her involvement and contribution. Elaborate treatment on the principles and construction steps of the seven QC Tools can be found in any good book on quality circles, quality management, or descriptive statistics. Those entrusted with team building & organizing Quality Circles or implementing SPC or Six Sigma must study the detail principles of Seven QC Tools along with construction details of allied diagram, graphs and charts. In case of implementing Six Sigma going through a professional training is mandatory.

References 1. Kaoru Ishikawa, What Is Total Quality Control? The Japanese Way (New Jersey: Prentice-Hall, 1985), p. 63. 2. Ibid, p. 64.

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Management Tools and Techniques THE NEW SEVEN MANAGEMENT TOOLS n 1972, the Japanese Union of Socialists and Engineers (JUSE) constituted a committee to develop new QC tools to tackle the 15 to 20 per cent of business management problems that could not be solved using the simple problem solving tools and the Seven QC tools (discussed in Chapter 11). This committee realized that in this new era the management needed to expand their focus beyond the traditional approaches towards product & production and all other aspects of the business—from management planning to decision-making. The committee felt the need to develop tools that will nurture encourage better lateral thinking, creativity, and collaborative functional effort to meet the challenges of this new era. The following are the seven new tools that the JUSE committee recommended and released in 1977:

I

z z z z z z z

Affinity Diagram Relations Diagram Tree Diagram Matrix Diagram Matrix Data Analysis Process Decision Program Chart (PDPC) Arrow Diagram

Over the years this new set of tools recommended by the JUSE committee has acquired several names like ‘New Seven QC Tools’, ‘Seven New Tools’, ‘The Seven New Management and Planning Tools (7 MP Tools in short), etc. These tools perform three basic functions: they help to (a) collate and organize diverse forms of data, and clarify complex functional or departmental relationships; (b) arrive at proper solutions to problems and define steps to achieve business goals concerning quality and productivity and (c) in planning and monitoring implementation. These managerial tools are able to collect qualitative information,

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MANAGEMENT TOOLS AND TECHNIQUES 353 promote better lateral thinking, and facilitate planning future directions by critical analysis of current trends. A brief synopsis of each of these tools is given below:

Purpose Methodology

Use

Purpose

Methodology

Use

1. Affinity Diagram To convert vague and unstructured concepts into specific information through precise language, diagrams and hierarchical structures. Organizes diverse type of data or information and categorizes them into clusters based on their natures and hierarchical relationships. Using brainstorming or storyboarding techniques, the Team or Task force meetings generate ideas which after due consideration of affinity and relative importance are orderly arranged hierarchical yet logical structure. Producing breakthrough solutions in confusing situations where only sketchy verbal explanations or large number of ideas have been generated. A very important use is understanding the ‘voiceof-the customer’ i.e. understanding and processing the customer’s expectations about products and services. 2. Relations Diagram To identify, understand, and classify the numerous cause and effect relationships among the factors in a complex problem so that the key drivers and outcomes are identified and used to solve problems. The cause-and-effect relationships of all factors are graphically represented using the traditional Seven QC tools like the C-E diagram, brainstorming, etc. The linkages amongst related items are depicted—often used in tandem with Affinity diagram; the tool takes the central idea, issue or problem and maps out logical or sequential links between the ‘Driver’ and the ‘Outcome’. The delineation of observed patterns help to pick up not only the central idea but also generating a lot of ideas. To analyse a problem or situation where complex cause and effect relationships exist. Also useful where sequencing of actions is important, or there is doubt that a problem is the manifestation of a symptom of some deeper causes.

3. Tree Diagram (also called the hierarchy/systematic diagram) Finding the most appropriate means or methods to achieve a goal by breaking up the main subject into elements and studying the interrelationships between the goal and measures. Methodology Uses the general principles of Fault tree analysis. In order to select an Objective’ or ‘End result’ to be attained or avoided the team conducts brainstorming sessions are on team mission statement, affinity diagram, relation diagram, etc. The objective or the end Purpose

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354 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS

Use

Purpose

Methodology

Use

Purpose Methodology

Use

Purpose

result is selected by conducting. The general principles of fault tree analysis are also used. In the next step the objective is broken down into increasing levels of potential contributors and sub-contributors that could lead to achieve the objective. To understand the relationships between the contributing elements by appropriately breaking down the problem or the solution. 4. Matrix Diagram To establish the relationships which exist among the elements and their characteristics, functions, tasks, responsibilities, etc. The direction and strength of influence can also be shown. A generalized matrix format featuring horizontal rows, vertical columns are used. The data whether objective or subjective are entered in the intersection of two rows with symbols that may or may not have numerical values. Quality planning spreadsheets, QFD, QPD, etc. are typical examples where symbols are extensively used. There are five standard formats of the matrix diagram: L-shaped (with 2 variables), T-shaped (with 3 variables), Y-shaped (with 3 variables), C-shaped (with 3 variables), and X-shaped (with 4 variables). The L-shaped format is the most commonly used format. It clarifies the relationship between two different elements. A common use is to substitute quality requirements into engineering characteristics and then subsequently into production requirements. 5. Matrix Data-Analysis Diagram To aid decision-making by prioritising the issues, tasks, characteristics, etc. To help easy understanding of the true strength of relationships between variables, ‘data’ is arranged in large ‘array’ of numbers to facilitate numerical and graphical analysis. It is the only method among the New Seven Tools that gives numerical results. The method of prioritisation is accomplished through prioritisation matrices, which depend heavily on both the qualitative and quantitative aspects of human instinct, and has logical consistency of the judgements. The prioritisation matrices are based on analytical hierarchy process developed on three principles, viz. constructing hierarchies, establishing priorities, and logical consistency. Easy access to the customer’s mindset through the process of prioritisation. 6. Process Decision Program Chart (PDPC) To foresee all events, surprises, contingencies or developments that may occur during implementation of the plan, and prepare countermeasures.

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MANAGEMENT TOOLS AND TECHNIQUES 355 Methodology

Use

A conventional flow diagram is modified to include unpredictable outcomes and anticipate failures. Each sequence of activities or factors is thoroughly examined for possible upsets with a query ‘What could go wrong’? Counter-measures for each contingency are prepared and evaluated through brainstorming sessions and noted in cloud like boxes superimposed on the chart. Alternatives selected or rejected are marked’ O or X’ respectively on the diagram. (i) In case of a new or unique task. (ii) Where consequences of error or failure are too serious to ignore. (iii) Where the impact of an undesired outcome must be prevented or minimized at any cost.

7. Arrow Diagram (Also known as activity network diagram, precedence network diagram, activity on node (AON), etc.) Purpose

Methodology

Use

To identify the steps necessary for implementation of a plan, spotting bottlenecks, determining critical tasks, drawing up a realistic time-table, clarifying the roles of team members and pre-planning corrective actions. A network diagram of planning activities is developed that underscores the relationships among the elements of the plan as well as identifies the milestones for implementation. This diagram combines popular project and planning tools such as the Gnatt, CPM and PERT charts. Most useful for planning out complex set of activities including scheduling of implementation plan having critical end target completion time. It is suitable for cases where subtasks are relatively familiar or even in complex cases where several simultaneous implementations that needs to be coordinated together.

Apart from being used individually these tools are normally used with each other for complex management and planning processes. Individually or as a complete system the tools have been proved useful in common applications like product quality improvement, cost reduction, new product development, policy deployment etc. The compact diagrammatic picture, Figure 12.1 elucidates the complex relationships that facilitate understanding in terms of complete systems or solutions: The New Seven QC tools are not at all complex as commonly believed by many senior managers. Statistical techniques are used only in case of matrix data analysis. They can be used singly and in appropriate combinations and applied creatively in management planning process as also in cross-functional processes. The combination of old 7 QC tools and New 7 QC tools contribute immensely toward achieving the basic business objectives despite the ever-growing complexities and problems of 21st century business scenario. Therefore, the top and senior management should not shy away from learning and practicing the New Seven QC tools

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T

T

356 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS

Affinity diagram

Relations diagram

T

Tree diagram T T

Matrix data-analysis diagram

T

PDPC

Matrix Diagram

T

Arrow diagram

Figure 12.1: System Flow Diagram

so that a powerful process of decision-making and problem solving is installed and institutionalized. The impact, however, will depend on the quality and seriousness of intent of applying these tools.

DESIGN OF EXPERIMENTS (DOE) The product design or even a process design to meet the demands of 21st century customers and consumers have become quite challenging; there are too many factors, complex variables, unpredictable environments, etc. involved in the process. Mere dependence on ‘on-line’ improvements in the operational or service stages is not good enough; competitive quality needs to be designed. Concepts like ‘offline quality improvement’ and ‘quality improvements at the design stage’ can no longer be neglected. The challenging issue is of design optimisation at initial stage itself, and if this is not tackled then the problems of variability in product or process parameters may induce detrimental effect on the process and product performance. Design of experiments (DOE) helps to tackle this complex problem by optimising at initial design stage itself the design criteria (settings or values) and the process parameters for testing at the prototype stage. DOE has become an important management tool that helps organizations achieve world-class levels of quality and productivity. Fortunately, the two new families of tools viz. Design of Experiments, and Analysis of Variance, developed during the later half of the twentieth century, are able to solve the problems of optimizing the process and product parameters. Design of Experiments helps to analyze and establish relationships between the numerous variables of the complex process and the characteristics of the process output(s) or final product. Apart from facilitating optimization of the product and process design this is an essential input to the concerned employees who have ultimately to deal with the variables and keep the process under statistical control.

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MANAGEMENT TOOLS AND TECHNIQUES 357 These tools provide the equations and algorithms needed to organize the variables into solvable form and fortunately the availability of the relevant computer software packages make the computations of the complex-formula easy and userfriendly. The Design of Experiments gives better results than the ad hoc and heuristic approaches. Through experimentation, changes are intentionally introduced in the process or system in order to observe their effect on the performance characteristics or response of the system or process. Designers and planners can thus come up with robust design and appropriate process that would achieve the desired product characteristics and target values to ensure consistent supply of product or services that would satisfy and delight the customers. Many people think that statistical process control (SPC) and DOE are synonymous, but they are not. SPC is an on-line tool that provides real-time downstream information from the state of the process itself facilitating process improvements, unlike DOE, where structural changes are done in advance through offline experiments to extract information needed for product and process improvement. Hence, DOE should precede SPC unless the customer directs otherwise. The ideal sequence in which these tools should be used is given in Figure 12.2:

Identified Customers’ Need

Quality Function Deployment (QFD) Identifying key characteristics and critical target values

Design of Experiments (DOE) Improve design and process so as to desensitize to variation

Statistical Process Control (SPC) Stabilize, improve and hold gains

Feed back (Knowledge) Translation

Feed back (Knowledge)

Figure 12.2: The Sequence in which QFD, DOE and SPC should Operate

In his book Total Quality Control, A. V. Feigenbaum defines DOE as, ‘The approach towards the use of significance tests in experimentation whereby statistics are brought in at the start of the experiment and where randomisation and/or deliberate variation is brought into use in the experimental framework is usually termed as design of experiments.’ The synopsis of the basic characteristics, primary goals and ultimate objectives of DOE are tabulated in Table 12.1 for easy comprehension. DOE incorporates three basic principals: replication, randomisation, and blocking. Table 12.2 shows a brief overview of the common terminologies used in DOE. General readers as well as professionals will benefit from knowing the meanings of Hypothesis Testing, Tests of Significance, Analysis of Variance and certain other concepts and techniques that are used or referred to while conducting the experiments. Table 12.3 contains a brief synopsis, however, practicing professionals entrusted with DOE need to acquire relevant in-depth knowledge by referring to good statistical books. The design of the experiments is one of the most powerful techniques for improving quality and increasing productivity. It can be effectively used in

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358 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS Table 12.1: The Characteristics, Primary Goals and Ultimate Objectives of DOE Design of Experiments (DOE) Primary Goals

Characteristics z

Randomisation is not disturbed.

Recognize that all inputs into product and process are inherently variable. z Product and process need to be systematically examined. z Flexibility to make desired changes in the input variables of a process to observe the output response. A set of variables is systematically manipulated, effect of these manipulations is determined, conclusion is made and results are implemented. z

Pinpointing the variable(s) and to study their magnitude that influences the response. z Determining the levels of these variables. z

Ascertaining how to manipulate these variables to control the response. z The final performance of the product or service is to be made insensitive to likely variability of inputs and environmental factors over the life span of the product. z

Ultimate Objectives Design built-in-quality into the identified product or service. z To facilitate statistical process control (SPC) by controlling the variables and eliminating troubles. z To improve an existing product or develop a new product. z

z

To yield better results both in reliability and economy.

Table 12.2: Common Terminologies used in DOE Sl. No.

Terminology

Explanation

1

Factor

2

Level

3

Treatment Condition Replicate

A variable that is changed and the results observed. Example: time, temperature, operator, speed, cutting tool, selected vendor, type of decor in a restaurant, amount of additive, etc., The factors may be quantitative or qualitative (discrete). A value that is assigned to change the factor. Example: Two levels for the factor ‘time’ could be −2 hour and 4 hour or two levels for the factor temperature could be 30ºC or 44ºC. The set of conditions comprising the factors and their levels in an experiment.

4 5 6

The repeat of a treatment condition. It requires a change in the set-up. Replication helps estimate the experimental error, the variations in the experimental units under identically controlled conditions Repetition Multiple results obtained by repeating the treatment condition in a changed set-up. Randomisation Treatment conditions are not manipulated; they are run in a chance order to prevent any build up in the results. Randomisation means that the treatments should be assigned to the experimental units in such a way that each unit stands an equal chance of being assigned to any treatment. The process helps in eliminating bias and ensures that no particular treatment gets favoured and also averages out the effect of uncontrolled factors.

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MANAGEMENT TOOLS AND TECHNIQUES 359 7 8

Orthogonal Array Interaction

9

Blocking

10

Experimental Error

A simplified method of arranging the treatment conditions to balance the design, and the factors can be analysed singly or in combination. Two or more factors that, together, produce a result different than their separate effects. Blocking or local control involves arranging similar experimental units into groups or blocks. Variability of the response function within a block can then be attributed to differences in treatments as because the impact of other extraneous variables has been minimized. Treatments are assigned at random to the units within each block. Variability between the blocks is eliminated from the experimental error, which leads to an increase in the precision of the experiment. Experimental error is the variation in experimental units that have been exposed to the same treatment. The variability is due to uncontrollable or noise factors. It is a basis for determining whether differences in the statistics found from the observations are significant. It serves as a benchmark for determining what factors or interactions are significant in influencing the response variable.

Table 12.3: A List of Experimental Design Techniques Sl. No Experiment 1

2

3

4

5

Hypothesis testing

Explanation

A statistical decision-making process in which inferences are made about the population from a sample. Primarily hypothesis testing is concerned only with whether or not two samples from identical population differ—that is whether or not their respective ‘Mean’s differ? Analysis of An analytical technique that helps understand if the differences in the average Variance performance are due to randomness alone or if there are specific causes. This is (ANOVA) done by mathematically comparing the differences between considered groups. The methodology considers the spread of the data as well as the average of each group. The degree of variation from preceding data is checked as well to see whether they are similar or significantly different. Average While conducting agricultural experiments to improve the average crop yield, Sir yield Ronald A. Fischer, a British statistician in 1930's, developed technique call average yield. This technique became the framework for all modern variance analysis. Details of the technique can be found in any standard book on statistics. ‘F’ distribution This framework of distribution was originally developed by Fischer, and later slightly modified by an American statistician named G. W. Snedeca, who named it ‘F’ distribution in honour of Fischer. It is concerned with the ratio of two estimates of variance in random samples from normal distributions. If both samples are drawn from normal distributions with the same variance, then the ratio of the two estimates follows the ‘F’ distribution. The ‘f’ ratio, as it is called, is used as a basis of comparison to determine whether the difference between the groups being analysed is due to randomness or due to special causes. The table for critical values of ‘F’ distribution normally can be found in any standard book on statistics. Tests of A dilemma frequently faced in actual operation is to decide between the good Significance and bad quality levels, as the difference appears to be insignificant. The problem is that the slight difference is masked by random variations in small samples. The Tests of Significance inform or signify whether the quality of a lot of material,

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360 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS or the output related to a given product or a batch of parts received from vendors differ significantly from a standard value or the quality of same type of product or parts from a second or more sources. Two most used ‘Tests of Significance’ are the ‘t’ test and ‘F’ test which reduce greatly the chance of coming to incorrect conclusions. The tests collectively (a) may detect differences in percents defective, averages, spreads, and other measures (b) determine which of a number of factors affect the quality of a process. These tests signify whether the quality of a particular lot, or the output of a given type, or a batch of parts received from vendor's deviates significantly from standard quality. Two most commonly used significance tests are the t-test and the F-test. These tests collectively help (a) detect differences in percentages, averages, spreads and other measures, (b) determine which factors are affecting the quality of the process, and (c) reduce the chances of arriving at incorrect conclusions; specially, in cases where the difference between good and bad quality levels is so slight that it gets masked by random variations in small samples.

non-manufacturing areas also and almost in all functions. The design of the experiments depends upon the problem, and unique factors such as type of industry/ business, and the degree of mechanization. It requires resources in the form of money, people, equipment, materials, time and unstinting support from the management.

QUALITY POLICY DEPLOYMENT (QPD) Instances are not uncommon where management do not seriously attempt to deploy company’s vision or policy statements; to some management it is a riddle as how to effectively do it. A goal that is not backed up by specific action & measures is likely to remain as a slogan. ‘ Quality Policy Deployment’ could be an effective tool to address this issue. The underlying principle of this tool is that the top management defines the goals or objectives emanating from the company vision and policy statements to reach the desired ‘End” state, and decides on the strategic ‘Measures’ which are the ‘means’ to achieve the objectives. It is the responsibility of the top management to disseminate in a structured manner the integral ‘ends’ and ‘means’ of the vision and policy statements so that all concerned are clear about their respective obligations and tasks. The structured methodology involves re-stating or rephrasing ‘goals’ or ‘ends’ at successive management and operation levels along with action-oriented goals set at precise quantitative values; for example figures for sales, profit, market share, etc. The ‘measures’ of the highest level becomes the ‘end’ or ‘objective’ of the next level, and this principle is successively carried on till the lowest level i.e. the ‘measures’ adopted by top management to achieve company goals are suitably deployed across the organization. The objective is to

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MANAGEMENT TOOLS AND TECHNIQUES 361 let all the divisions, departments and employees know in precise words the goals to be achieved and measures to follow and to achieve their goals, which are in sync with the overall company goals. In short, the principle involves breaking down at successive levels the abstract vision and policy statements to concrete and specific action oriented quantitative goals after taking due consideration of the imperatives of changing business environment, and review of past performances. Figure 12.3 outlines the principles and structured methodology of QPD in a simple way:

Top Management

Corporate Goals and Plans Policy (END)

Business

Measures

(Means)

‘How Much’s

‘What’s

Senior Management Division Goals and Plans Policy (END)

Corporate

Measures

(Means)

‘How Much’s

‘What’

Middle Management

Division Goals

Departmental Goals and Plans

Policy (END)

Measures

(Means)

‘What’s

‘How Much’s

Departmental ‘What’s

Individual Goals and Plans

‘How Much’s

(a)

Figure 12.3: Policy Deployment System

Operating Level

Policy (END)

(b)

Measures

(Means)

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362 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS As we can see in Figure 12.3, in the first step of QPD, the top management draws up strategy (means) in sync with company objective or policy. In the subsequent steps, this strategy becomes the objective (end) for the next organizational level, and the tactic developed at this level becomes the objective for the next level. This continues down to the lowest operational level. The objectives in QPD are shown as the ‘what’—what is to be achieved, while the strategies to achieve the ‘what’ are referred to as the ‘how’s and ‘how much’s. All the three are integrated; the ‘what’ is the source which flows down to the ‘how’s and ‘how much’s. These objectives do not get pushed down arbitrarily or by command but are rather established at all subsequent levels by what is called the ‘catch ball’ model—informal negotiations between two organizational levels to ensure that the focus and momentum of progress are maintained. The process is then cascaded down to the next level and continues till the last level is covered. Through such negotiations all parties contribute to the set organizational objectives, the goals are better understood and a genuine commitment to achieve these goals is generated. The two ways exchange definitely encourages ownership and ‘win-win’ negotiation. The dynamism of QPD is able to involve and link people and functions and provide the mechanism to maintain momentum of the processes to ensure long-term prosperity of the organization as envisioned in vision and other policy statements. There is equal stress on the objectives (means) and the strategies (ends); this is the fundamental difference from MBO. Another key principle of Policy Deployment is analogous to the dictum of ancient Indian Vedic Philosophy that ‘means’ is more important than ends. The policy is only an end, which calls for specific means to realize it. Compromises with ‘means’ will derail the long-term objectives though some may be happy with achieving short-term targets. Here lies the subtle difference between quality policy deployment (QPD) and management by objectives (MBO). MBO ties down the employees to an agreed target; though theoretically it is an agreed target the wish of the boss prevails. The management, more concerned with achieving targets, does not bother about the means, so the employees, under pressure of performance, resort to compromises to achieve the set target without bothering about the long-term implications. MBO has scant concern to Vision and policy statements; to put in management language MBO is more focused on ‘R’ (Results) Criteria than ‘P’ (Process) Criteria. The concept and working methods of policy deployment appears to be very simple, but in reality putting it into practice and sustaining it is quite tricky. Though the concepts are clear, no two organizations can implement it in the same way. This is not a quick fix; management has to have patience to continue with it as the results may take several years to show up. It may take five to ten years, depending on the size and complexities, before the policy deployment can be considered fully implemented and an integral part of the work culture. Unwavering commitment and patience of top management is crucial for the ultimate success of QPD initiative.

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MANAGEMENT TOOLS AND TECHNIQUES 363

QUALITY FUNCTIONAL DEPLOYMENT (QFD) QFD is a management-planning tool that translates customer requirements into appropriate company requirements. The tool systematically unscrambles and understands the voice of the customers (VoC). The information is then disseminated across the organization in an integrated way to ensure built-in quality at each interdependent stages for product or service development and delivery cycle— the development stages include marketing, design, procurement, processing, service, etc. Understanding VoC implies ascertaining the ‘un-stated’ requirements such as those not stated explicitly, or taken as granted or not identified at the specification stage. The QFD tool resolves the apparent contradictions between the requirements expressed by the customer and the tool also endeavours to find out the factors that would delight the customers. The tool utilizes the expertise and experience of relevant people involved in the process of designing, procuring raw materials, producing, distributing and servicing the product. Even relevant people from the supplier organizations are consulted. These steps ensure that that there is no perceptible ‘gap’ in understanding the customer needs across the organization. Dr Mizuno, professor emeritus of the Tokyo Institute of Technology, developed the concept of Quality Function Deployment in the late 1960s. Over the years QFD has evolved into a flexible tool to factor the needs of all stakeholders into the design process. Figure 12.4 outlines the QFD principle. QFD primarily utilizes a set of planning matrices in the different phases of the product development cycle to ensure translation of customers’ need and expectation into the actual deed of delighting the customer. Besides the concerned people within the company, people from supply and delivery chain entities are consulted for their valuable inputs. Figures 12.5 and 12.6 outline the basic principles and steps applied at each stage of QFD right up to final delivery. It is important to get the design right in the first place since about eighty per cent of the cost of a manufactured product is determined by the design. The other twenty per cent is affected by post design changes and measures for process optimisation. No figures are available for services; however, a similar ratio can be applied. Specific Requirement Deployment

Customer

through

Direction and actions in terms of Engineering Characteristics Expectation

Implied Expectations

Figure 12.4: Quality Functional Deployment (QFD) Tool

Common language

Product Planning Product Development Procurement Process Planning Production planning Production Delivery Service

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364 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS

Phase I: Product planning, starting with the voice of the customer

Phase II: Product development

Phase III: Process planning

Phase IV: Product planning, prototype and product launch

Figure 12.5: An Outline of the Basic Stages of Quality Functional Deployment (QFD)

Design Requirements

S

S

Part Characteristic

Manufacturing Requirements Part Characteristics

S

S

S S

Design Requirements

Delivery Requirements

S

Manufacturing Requirements

S S

S

S

Customer Requirements

Figure 12.6: The steps involved in Quality Functional Deployment (QFD)

QFD utilises a specialized adaptation of a generic spreadsheet, which is often referred to as the ‘house of quality’. The house of quality spreadsheet factors in additional information, including competitive technical data, customer servicing data, and so on. The objective of QFD is to translate customer expectations into requirements, and then into directions in terms of operational characteristics for concerned departments. Conflicting characteristics or requirements are identified early on and resolved before production. Once understood, the matrices are not as complex as they appear to be, they actually simplify the presentation and analysis

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MANAGEMENT TOOLS AND TECHNIQUES 365

Correlation Legends

W

(Put appropriately in the relevant columns)

E L E M E N T 1

HOW

Requirement 1 Requirement 2 Requirement 3 Requirement 4 Requirement 5 Requirement 6 ETC

W

WHAT

E L E M E N T 2

E L E M E N T 3

{



E L E M E N T 5

E L E M E N T 4

E L E M E N T 6

 Strong positive + Positive E T C

# Strong negative Ù Negative Relationship Legends (Put approximately in the relevant columns). A few examples have been shown as illustration

S



only S

 S

 Strong Relationship  Moderate Relationship

{ W

Put in quantifiable terms

How much

Figure 12.7: QFD Matrix

of large amounts of information. Though Figure 12.6 outlines the basic stages of construction for the QFD matrix, professionals entrusted with the task of institutionalising QFD need to study the construction of various QFD matrixes. Appointing a TQM consultant is a good idea. Like in quality policy deployment, the ‘HOW’s (strategies) at each phase in the QFD matrix become the ‘WHAT’s (objectives) of the next. The matrix identifies the ‘how’s that are to be accomplished or achieved to realize a particular ‘what’ and defines the relationships between all the ‘What’s and ‘How’s. In cases where a ‘HOW’ is seen to influence the realization of more than one ‘What’, it is crucial to check if they are in conflict with each other. In case of a conflict it is necessary to arrive at acceptable trade-off without hampering customer’s interest. Figure 12.7 shows a QFD matrix. New products developed using QFD are more likely to meet the requirements and expectations of the target market. QFD reduces product development time by a third or even half compared to traditional design approaches. An organizational responsiveness to the needs and expectations of the customers is institutionalised at all levels. Interdisciplinary integration helps eliminate surprises when a product moves from design and development to production, and then from production to customer via sales. QFD emphasizes the importance of customer requirements in relation to the design characteristics, instead of relying on intuition or judgment as in traditional management. The efficacy of QFD is measured on the basis of the number of design and engineering changes, time to market,

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366 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS costs, and quality. QFD is now used by many industries like aerospace, defence and service industries. For a company embracing the TQM philosophy, QFD is one of the standard practices that need to be pursued religiously.

TAGUCHI’S DESIGN OF EXPERIMENTS The focal point of Taguchi’s ‘off-line’ design of experiments is the use of the principles of Taguchi’s loss function which enables designing built-in quality most economically at the design stage itself with minimum test of specimens and experiments unlike the usual design of experiments needing large scale experiments with hundreds of test specimens. Apart from ensuring in-built quality product and reducing product development time and costs, the Taguchi method improves manufacturability and reduces product lifetime costs. The strategy of the Taguchi design of experiments is to initiate the ‘quality engineering’ efforts right at the design stage, and then direct the integrated improvement efforts downwards across the value chain up to delivery to the customer. Taguchi’s design of experiments is based on his philosophy of Loss Function, which emphasizes that deviation from the target value of quality causes a loss to society. A brief synopsis on the distinctive considerations is given below: z z

z

z

z

z

z

Quality is measured by the deviation of a characteristic from its target value. Uncontrollable factors, known as noise, cause such deviation. Since the elimination of noise factors like temperature, humidity, etc is unpractical and often impossible, the Taguchi methods seek to minimize the effects of noise. Manufacturing variability cannot be totally eliminated. Also incoming components and new material exhibit variation. Only at the production design stage are counter measures possible against all the sources of variation. Determination of the optimum level of the important controllable factors is based on the concept of robustness. The objective of robustness is to create a product/process design that is insensitive to all possible combinations of the uncontrollable noise factors. The design should be effective and cost efficient as a result of setting the key controllable factors at certain levels. By dampening the impact of the noise factors and by selecting the controllable factor levels, which force the desirable quality characteristics to stay close to target values, a robust design of the product as well as the process is achieved.

There is lack of complete understanding concerning the various factors that affect the product’s performance, all sources of noise cannot be identified nor the impact accounted for neither at the design stage nor at performance evaluation stage. However, Figure 12.8 gives a schematic presentation of identified ‘uncontrollable noise factors’ which is major consideration in Taguchi design of experiments.

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MANAGEMENT TOOLS AND TECHNIQUES 367

Uncontrollable Noise factors X

X

Due to

External

Internal Due to

Settings of the product X

X

X

X

Process parameters Manufacturing variations or imperfections (due to inevitable uncertainties) Product deterioration overtime due to wear and tear

Environmental Changes ‹

Humidity

‹

Temperature

‹

Dust

‹

Pollution

‹

etc.

X

X

X

Human Nature Variability ? In operators who make or service the products or ? In employees who are in service industry

Other uncontrollable elements

Figure 12.8

As the elimination of noise factors is impractical and often impossible, the only way out is to try methods to minimize the effects of noise. Experiments are designed to create a product/process design that is insensitive to all possible combinations of the uncontrollable noise factors and is at the same time efficient and cost-effective as a result of setting the key controllable factors at certain levels. By dampening the impact of noise factor and by selecting the controllable factor levels, which force the desirable quality characteristics to stay close to target values and achieve a robust design of the product and process which is the corner stone of Taguchi Design of Experiments. Figure 12.9 outlines the principles of noise control. Based on the above principles and considerations Taguchi developed a three stage design operation viz. system design, parameter design, and tolerance design. Generally in traditional approach the design parameter is ignored, rather more than 60 per cent of their design activity is spent on system design creating multitude of designs. Unfortunately these designs do not test the sensitivity of the desired output to the input factors and as such are unable to produce a cost-effective design. The anomaly is corrected in Taguchi’s approach by according parameter design the top most importance. The tolerance design determines the nominal values and tolerances for relevant parameters in the product and the process. Figure 12.10 compares the traditional approach with that of Taguchi Design of Experiments. A significant impact of Taguchi’s DoE is the use of S-N ratio as an essential parameter design tool. These ratios need to be maximized during the experimental analysis to minimize variability and bring the average back on track. It helps

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368 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS

Noise Control

Objective

Factors that create product-toproduct variability or noise Elimination of all noise factors neither practical nor feasible

minimize effect of noise optimum level of the critical controllable factors that will make the design insensitive to all possible combinations of noise factors

Product Design Stage

Process Design Stage

Environmental Variables Product Deterioration factors Elements of manufacturing variations

Manufacturing Stage

Statistical Process Control (SPC)

Off Line Quality Control Method (Taguchi Design of Experiments)

On-Iine Quality Control Method

Figure 12.9: Outline of the Principles of Noise Control

SYSTEM DESIGN S

Spend over 60 per cent effort

I Stage

System Design

II Stage

Parameter Design

III Stage

Tolerance Design

S

Robust design stages as per Tagucho’s concept Traditional Approach

Figure 12.10: A Comparison between the Traditional System Design and Taguchi’s DoE

to compare the new design with old ones to evaluate which design is better and how much. To ensure a simplified method of putting together an experiment Taguchi’s design of experiments use Orthogonal Arrays (OA) that is simply a matrix for analysis of variance that determines which factors are significant. Taguchi has

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MANAGEMENT TOOLS AND TECHNIQUES 369 made the process of selecting the appropriate OA easy by developing families of OA, which can be found in any Taguchi reference manual. The concept helps in selecting combinations of the various factor at which experiments are conducted to determine the output characteristic (responses) and thereby calculate the performance statistics. Taguchi also developed linear graphs associated with the orthogonal arrays. Such graphs show the assignment of factors to the columns of the orthogonal array, help in their design, use, and provide some guidance to performing experiments in a cost-effective manner. They aid in the consideration of interactions between factors, and help calculation of the main effect of a factor. Another feature of linear graphs is their applicability to the construction of hybrid orthogonal arrays. Taguchi method of design of experiments can also be applied to attribute data despite the disadvantage of not being able to provide a quantitative measure of the degree of variation of the response attribute from the target value. In case of attributes, often the information regarding two observations cannot be differentiated and in such cases one has to rely on the subjective judgment of the experimenter to categorize the responses. The summary statistics from the accumulation analysis of observed attribute outcomes help to select the optimal level of the parameters. Interested readers and professionals entrusted with conducting the experiment should study the reference books for proper guidance. Taguchi experiment calls for meticulous process planning involving seven steps, which is similar to the principles of PDCA cycle. The process steps include selecting factors and their interactions, developing an appropriate experimental design, analysing results using the ANOVA technique, and finally conducting a confirmation experiment. Figure 12.11 gives a graphical outline of the seven-step process: Commonly used ‘change one variable at a time’ approach of traditional empirical studies is not only time consuming but also a very costly affair. On the other hand Taguchi design of experiments can be conducted most economically in much lesser time, the experiments not only generate invaluable useful information but

SELECT

1

Factors and interactions

5

CONDUCT Tests

2

SELECT Factor levels

6

3

Suitable orthogonal array

7

ANALYSE Results

ASSIGN

SELECT 4

Factors and interactions to columns

CONDUCT Confirmation experiment

Figure 12.11: Schematic Diagram for the Taguchi Design of Experiments Process

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370 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS also has unlimited potential for innovative application in various technical, commercial, and other fields of manufacturing, service, and other business sectors. The following few examples of varied applications may help convey its expanse: z

z z z

z

z

Investigating the effects of new drugs in medical research, particularly in areas considered so long as incurable diseases. Assessing the impact of loans in commercial banks. Assessing the impact of subscription on total sale of a magazine, Optimisation of rapid transit urban transportation services through rationalization, Optimising the efficiency of a courier service company so as to ensure timely delivery with almost zero-defect. Etc, etc.

Taguchi’s concepts of loss function, noise control, signal-to-nose ratio (S-N ratio), robust design, analysis of variance (ANOVA), orthogonal arrays, etc., should be studied in depth by the personnel involved in design and development of product and processes. Professional training is recommended for those entrusted with designing & conducting experiments.

HOSHIN PLANNING The Hoshin Kanri is an old Japanese concept that integrates both the ‘breakthroughs’ and the ‘small/step improvements’ for continuous improvement efforts. The near equivalent translation of the word ‘Hoshin Kanri’ is ‘methodology for strategic direction setting’. The process, also known as Hoshin Planning, not only defines the ‘End’ by identifying improvement targets but also specifies the ‘Means’ to achieve them. The Quality Policy Deployment (QPD) discussed earlier in this chapter grew out of Hoshin Kanri. Hoshin Kanri is very much a practical concept that combines both the longterm and short-term objectives in finalising the strategy and targets for continuous improvement. At level one the stress is on ‘breakthroughs’ as per the strategic initiatives that focus on the bigger picture. Concurrently at level two the emphasis is on ‘Kaizen’ i.e. small improvements and achieving short-term objectives through efficient daily management controls. The strategic initiatives that are identified through discussions across and down the organizational levels are sometimes called ‘Hoshins’. Aligning and cocoordinating the business system for implementation of the identified strategic initiatives is termed as breakthroughs. Hoshin planning stipulates that a maximum of three to five major strategic initiatives should be implemented at a time and that all levels of management down to the lowest should spend maximum time on these strategic breakthroughs. One of the important features of Hoshin planning is to clearly understand and document the goals and plans at each level of the organization, and each of these

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MANAGEMENT TOOLS AND TECHNIQUES 371

HOWs Corporate Goals and Plans S S

Business Improvement Needs

HOWs S

WHATs

Division Goals and Plans S

HOWs

S

Corporate Goals and Plans

S

Department Goals and Plans

WHATs

S S

HOWs S

Division Goals and Plans

Individual Goals and Plans

WHATs Department Goals and Plans

WHATs

Figure 12.12: Principles Applied in Hoshin Planning goals and plans emanate from the corporate goals and plans. The process starts out with defining the ‘WHATs’ (ends) and then identifying the ‘HOWs’ (means) needed to satisfy these ‘WHATs’. The ‘HOWs’ of the first level then becomes the ‘WHATs’ of the next level down, and so on till the mission is achieved. The Hoshin Kanri process also provides the means to achieve these goals. Figure 12.12 explains the concept in a simple way. Hoshin Kanri process management ensures institutionalizing a coherent system of implementing the core objectives involving senior management to middle management and then to the implementation teams. Every level develops through ‘involved discussions’ its own policy, means and deployment matrix with major milestones. The methodologies of monitoring, control and review are pre-established by using a useful tool called ‘Target-means’ relationship matrix chart. The ‘involved discussions’ in this process uses ‘catch-ball/call’ technique, which ensures alignment and consistency among all participating levels or functions.

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372 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS Table 12.4: The Four Stages of Organizational Learning Stage No.

Description of stage

Explanation of activities

1 2

Management by facts Self diagnosis

3

Alignment of targets and means

4 (Final Stage)

Maturity

Basic quality tools are used to improve the processes. Managers diagnose their individual and organizational limitations and take appropriate action. Managers learn to align and interlink their priorities to set goals and decide on means and work together to achieve the goals. Usually one-year plan is preferred. In order to make the planning process effective, the planning horizon can be extended to three to five years. Backed by top management and followed meticulously the entire organization gets fully involved, and maturity stage is reached.

The structured focus on implementing the core objectives leads the whole organization to having a coherent system of continuous improvement. The PDCA cycle is used at every stage to take corrective actions. Institutionalisation of the highly structured and formal Hoshin Planning process is quite complex. The maturity of Hoshin Planning evolves through four stages of organizational learning, as outlined in Table 12.4. Hoshin Planning can be introduced only if there is agreement amongst the executives and managers. A team of senior managers needs to be thoroughly trained to lead the implementation, as well as train and guide other managers and executives through the implementation process. Whether the organizations should use QPD, QFD, Hoshin Planning or some combinations depend upon the unique situation, requirements and preferences.

Reference 1. A. V. Feigenbaum, Total Quality Control (New York: McGraw-Hill, 1961), p. 392.

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13

CHAPTER

Strategic Enablers ISO 9000/9001 STANDARDS btaining an ISO 9001 certificate has almost become a necessary business imperative today. The intended purpose of the ISO 9000 family of standards is to provide an effective quality management system that will induce a cultural base to launch TQM. The certification against ISO 9001:2000 is only a third party audit assurance that the company’s quality management system is geared for continuous improvement to satisfy the changing needs of the customer. The mandatory requirement of the European Union for the relevant ISO 9000 certificate for any imports in the EU countries and its cascading effect on other countries has unfortunately made the award of certification a commercial activity. It is hard fact that most businessmen or top management viewed ISO 9001 certification as a ‘necessary business evil’ and as such their only interest was to obtain the certificate by going through certain rigmarole or rituals, imbibing the philosophy or following the principles were their least concern. The obvious had to happen—the multitude problems including that of quality & service have devalued the credibility of ISO 9001 certificate and public at large have developed a cynical attitude towards ISO 9001 certification process. Unfortunately many even say that they ‘can’t trust an ISO 9001 certificate, it can be bought’, etc. The sorry state of affairs is the result of the ‘cavalier manner’ by which some businessmen, top management or so-called quality experts have gone about to acquire the ISO 9001 certificate. The synopsis of the process of designing a quality management system and obtaining the ISO 9001:2000 certificate is schematically presented in the diagram in Figure 13.1—only the relevant standards of the ISO 9000 family are shown and the utility of each standard is shown in the respective boxes. The requirements specified in ISO 9001:2000 are generic and applicable to all organizations regardless of type, size and product. However certain requirements may be excluded in particular situations as outlined in clause 1.2 of the ISO 9001:2000 standard. Table 13.1 lists the eight integrated quality management principles on which the stipulations of ISO 9000:2000 standard are based, these are also mentioned in clause 0.2 of ISO 9000:2000 and clause no 4.3 of ISO 9004: 2000. The ISO 9001:2000 has five major requirement clauses, clause 4 to 8, which covers all the macro-elements of the ‘The Eight Integrated Management Principles’

O

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ISO 9000:2000 Fundamentals of quality management systems and specifies the terminology for the QMS

T

Normative References (mentioned in the standard)

T

ISO 9004: 2000 Guidance for Installing the QMS Various other guidelines and technical reports of ISO 9000 family of Standards.as relevant or appropriate

Specifies ‘requirement’for quality management systems for use where an organization's capability, to provide products that meet customer and applicable regulatory requirements, needs to be demonstrated T

Award of ISO 9001:2000 certificate The coveted certificate is awarded based on the assessment of the certification body about the capability of the organization to satisfy customers now and in the future.

T

T

ISO 9001:2000 QMS

ISO 19011 Guidance: Managing and conducting environmental and quality audits.

Figure 13.1: Inter-linkage of Key Standards of the ISO 9000:2000 Family to Design the QMS and to Obtain the ISO 9001:2000 Certificate

and each clause has sub-clauses which deals with respective micro-elements. The five major clauses are: Clause 4: Quality Management System , Clause 5: Management Responsibility , Clause 6: Resource Management , Clause 7: Product Realization and Clause 8: Measurement, Analysis and Improvement. It is mandatory to demonstrate the capability of the organization to meet customer and regulatory requirements to the certification authority. The proper deployment and implementation, however, require certain key steps to be taken as prescribed in Clause 3.3 of ISO 9000:2000; these are presented in simple form in Table 13.2 for easy understanding. The mandatory Clause 5 of ISO 9001:2000 explicitly emphasize the importance of the role of top management, management gurus are also unanimous about the vital role of top management in setting the tone of quality movement and laying the foundation of a quality work-culture. It is no exaggeration to state that irrespective of having been awarded the ISO 9001 certificate, the level of efficacy of quality management system is directly proportional to the top management’s real concern and interest for quality Apathy or lip service have disastrous effect on quality movement and do cast aspersions on management’s intention and credibility.

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STRATEGIC ENABLER 375 Table 13.1: Eight Management Principles Contained in ISO 9000: 2000 Standard The Eight Integrated Management Principles Sl.No The Principle Synopsis of the principle 1 2

3 4

5 6 7 8

Customer focus

Organizations should understand their customers' current and future needs, meet them and strive to exceed them. Leadership Leaders establish unity of purpose, and direction, Internal environment of the organization is dependent on the leaders and they must create an environment in which people can become fully involved in achieving the organization's objectives. Involvement People are the assets of an organization and only through their full of people involvement their abilities can be leveraged for maximum benefit of the organization. Process When the resources and activities are managed as a process, desired approach results can be achieved more efficiently. The systematic identification and management of the processes employed within an organization and particularly the interactions between such processes are referred as process approach. A process approach is necessary to design, develop and implement the QMS. System approach There are interrelated processes to achieve a given objective. Identifying, to management understanding and managing these interrelated processes increase the overall effectiveness and efficiency of the organization. Continual Continual improvement should be a permanent objective of the improvement organization. Factual approach Logical or intuitive analysis of data and information adds to effective to decision decision-making. making Mutually beneficial The ability of the organization and its suppliers to create value is supplier enhanced leveraging mutually beneficial relationships. relationships

Documentation is a fundamental requirement for ISO 9001 QMS, mandatory for certification audit. It ensures operational discipline, internal communication and training, and evaluation of the effectiveness of the QMS. The certification body before starting the audit first checks the documentation to evaluate whether prima-facie the QMS developed by the organization meets the various requirements of ISO 9001:2000 standard. Therefore documentation has to be taken seriously. Interested readers may study the relevant standards of ISO 9000 family; the published standards are available from ISO headquarters or national standardisation bodies. ISO 9001:2000 standard clearly specifies the mandatory requirements. However, the following steps are recommended by the author for effective implementation so as to leverage the real benefit of ISO 9000 QMS viz. the cultural re-orientation, a necessary change to offer cost-effective & competitive products or services consistently to customers:

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376 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS Table 13.2: Action Points Prescribed by Clause 3.3 of ISO 9000:2000 Steps with respect to: Customer Focus (a) Determining the need and expectations of the customer Steps with respect to: Quality Policy and Quality Objectives (b) Establishing the quality policy and quality objectives of the organization (c) Determining the processes and responsibilities necessary to attain the quality objectives (d) Establishing measures for the effectiveness of each process towards attaining the quality objectives (e) Establishing measures for the effectiveness of each process towards attaining the quality objectives (f) Applying the measures to determine the current effectiveness of each process Steps with Respect to: Non-conformities (g) Determining means of preventing nonconformities and eliminating their causes (h) Looking for opportunities to improve the effectiveness and efficiency of processes Steps with Respect to: Improvements (i) Determining and prioritizing those improvements which can provide optimum results (j) Planning the strategies, processes and resources to deliver the identified improvements (k) Implementing the plan (l) Monitoring the effects of the improvements (m) Assessing the results against the expected outcomes (n) Reviewing the improvement activities to determine appropriate follow-up actions

a.

Recognize quality management as one of the principal business strategies and act accordingly. b. Obtaining the certificate should not be the primary goal rather it should be considered as automatic by-product of an effective QMS. Therefore efforts should be concentrated on designing, implementing and sustaining a live and effective QMS. c. Visible commitment of the top management is an important element to install an effective QMS. Apart from undergoing training on top management’s role and overview of the stipulations in the clause and sub-clauses, the management should be vigilant to see that no compromises are made on the stated and implied requirements of the QMS. d. Involve employees in drafting company quality policy & goals, and subsequent departmental quality objectives. e. Appointment of management representative is mandatory as stipulated in ISO 9001: 2000. Management seriousness is judged by the selection of the management representative. Appointment of a redundant or weak person for the job conveys wrong signals. f. Management or professionals should be wary of the trap of saying of some socalled experts that ‘you document whatever you are doing, follow that and demonstrate that to the auditors, you will be awarded with the certificate’. It is a fallacy that one can get the coveted certificate even by documenting the wrong way of doing things and meticulously following this documented procedure. Hence, before the ‘documentation’ it will be prudent to check the correctness of existing processing steps and incorporate changes to correct any

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STRATEGIC ENABLER 377 aberration with respect to documentation procedure or stipulated requirements of ISO 9001. Subsequent improvements will be a part of continuous improvement, as stipulated in clause 8.5.1. g. Institute training. Apart from giving exposure to the relevant ISO 9000 standards, lot of stress has to be given to the following: Behavioural training—the people ‘characteristics’ needed to be directed or changed towards ‘quality orientation’. z Training on documentation z Training on simple problem solving tools including the seven QC tools z Training on relevant statistical techniques z Training to selected people on internal audits z Training on quality circles and team working. z

h. Do not compromise with corrective and preventive actions; do not get lured to the common trend of compromises on some plea or other or under pressures of short-term objectives or gains. i. Focus on the continuous process improvement. j. Take ‘management reviews’ seriously. Hold it regularly and monitor the course —correction actions. Many companies do not conduct regular management reviews as stipulated in ISO 9001:2000 standard, and some even ‘cook up’ the minutes of management review just before surveillance audit. Such actions send wrong signals throughout the organization, where any talk of quality improvement is viewed with cynicism and credibility of management is lost forever. k. Institute self-assessment as also top management audit. Both these steps should help to keep the ISO 9001 implementation on the right track. l. Involvement of all is vital for success of the QMS, therefore encourage teamworking—it can be quality circles, task force teams, cross-functional teams or other type of team structures. m. Bring dedicated small suppliers in the fold of quality movement. n. Proliferations of stand alone change management initiatives will end up in creating vicious circles. Effective implementation strategy for ISO 14000 standard, will be to integrate the provisions of ISO 9001 and ISO 14001 and the same logic holds true for other TQM initiatives as and when introduced. It is better not to introduce other TQM programs till the ISO 9000 QMS stabilizes. The prudent strategy will be to build up a strong ISO 9000 platform on which the TQM movement can take off. As the trade unions now recognize and accept the need of ISO 9001 certification as a pre-requisite to do business, management should in all earnestness grab the opportunity provided on a ‘platter’ to involve the workforce and trade unions to re-orient the work-culture for better quality, productivity and continuous improvement. A true proponent of TQM will ensure right deployment of the ISO 9000 QMS principles and compliance to the requirements for the ISO 9001 for certification and leverage the gain to consolidate TQM movement.

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378 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS

ISO 14000 Environment protection and management is global concern now. It is no longer a mere ethical and social issue, the global warming and carbon emission has become a major political and business concern. Self-reviews or self-audits by a company cannot assure future performance to meet all environmental issues & requirements that also include legal and policy obligations. The complex environmental requirements include legal and policy obligations. Environment protection and management are becoming an important aspect of today’s ethical, social and business outlook. Self-reviews or self-audits are not sufficient to meet all environmental requirements and the associated legal and policy obligations. However, this problem can be overcome by installing and administering environmental management systems as per ISO 14000 family of standards developed by the International Organization for Standardization (acronym known as ISO). Successful demonstration of compliance to the requirements of ISO 14001:1996 standard leads to the award of ISO 14001 certificate. The award of the certificate signifies an assurance to the interested parties that an appropriate environmental management system is in place. Installing an EMS complying to the requirements an ISO 14001:1996 standard and obtaining the necessary certification—is fast becoming an obligatory standard for all organizations. ISO 14001:1996 prescribes a set of ten management action points for institutionalising an effective EMS (environment management system). It is interesting to note that the mandatory action points for the management has been indicated by various ‘verbs’ used in the text of the standard. Table 13.3 gives an overview of the action points: Table 13.3: Ten Management Action Points Prescribed for ISO 14000 EMS Sl.No

Mandate for management as prescribed in the standard

1

Recognize

2 3

Establish and Maintain Determine

4

Ensure

5

Promote

6 7 8

Establish Provide Evaluate

9

Establish

10

Encourage

Synopsis of management action points Environmental management is one of the key priorities of any organization. Communication with internal and external interested parties. Legislative requirements and environmental aspects associated with the organization's activities, products and services. Everyone in the organization to commit environmental protection and clearly assign responsibilities and accountability. Encourage environmental planning throughout the life cycle of product and the process. A management discipline for achieving targeted performances. Right resources and sufficient training to achieve targets. Performance against environmental policies, objectives, and targets. Make improvements whenever possible. Process to review, monitor and audit environmental management system to identify opportunities of improving performance. Vendors to also establish environmental management systems.

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STRATEGIC ENABLER 379 ISO 14004:1996 provides the guidelines for an effective EMS, and the ten action points that have been referred here form the core of the guidelines. The EMS has to incorporate the mandatory requirements of ISO 14001:1996 Organizations adhering to these requirements may follow ‘self-declaration’ route as well but organizations opting for certification must. Demonstrate conformance to the mandatory requirements of ISO 14001:1996 to the auditors appointed by the certification Clause 4 of ISO 14001:1996 states mandatory the requirements of the EMS. They are: (a) General requirements; (b) Environment policy; (c) Planning; (d) Implementation and Operation; (e) Checking and Corrective action; and (f) Management Review.

Clause 4.1: General Requirements Management has to define, document and communicate the environmental policy that it would adopt and implement. The policy must be appropriate to contain the impacts on environment due to various activities of the organization. There has to be commitments to continual improvement, prevention of pollution, abide by the relevant regulations and legislation. The defined environmental policy should not only provide a framework for setting the environmental objectives but also be able to review the targets.

Clause 4.2: Environmental Policy An environmental policy statement expresses a commitment to the implementation and maintenance of an organization's environmental management system and the improvement of its overall environmental performance. It should also emphasize the need to prevent pollution and to comply with all relevant legal and other requirements.

Clause 4.3: Planning Planning includes establishment and maintenance of procedures and documents with respect to: (a) environmental aspects, (b) local and other requirements, (c) objectives and targets, and (d) environmental management program(s).

Clause 4.4: Implementation and Operation This clause for implementation and operation has several specific requirements as mentioned in the seven sub-clauses which are listed below: 1. 2. 3. 4. 5. 6. 7.

Structure and responsibility. Training, awareness and competence. Communication. EMS documentation. Document control. Operational control. Emergency preparedness and response.

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Clause 4.5: Checking and Corrective Action Checking and corrective action specifies the requirements with respect to (a) Monitoring and measurement (b) Corrective and preventive action against nonconformance and (c) Records (d) Environmental management system audit.

Clause 4.6: Management Review Management review fixes up the periodicity of efficacy review by the top management. The review process must ensure collection of necessary information & data to conduct the evaluation. The review must address issues like (a) is there any need for change in policy, objectives, and other elements of the EMS? (b) Audit results, (c) response to changing circumstances, (d) commitment to continuous improvement, (e) overall adequacy and effectiveness, (f) the action necessary for course correction. For system design and understanding audit requirements for the EMS reference to the following standards may be necessary: 1) ISO 14OO4: 1996, Environmental management systems—General guidelines on principles, systems and supporting techniques. 2) ISO 14OO1: 1996, Environmental management systems—Specifications with guidance for use. 3) ISO 14O10: 1996, Guidelines for environmental auditing—General principles. 4) ISO 14O11: 1996, Guidelines for environmental auditing—Audit procedures—Auditing of environmental management systems. 5) ISO 14O11: 1996, Guidelines for environmental auditing—Qualification criteria for environmental auditors. The ISO 14001:1996 standard clearly states that it shares common management system principles with ISO 9000 QMS. Only there are certain procedural obligations for respective certification or registration. It is therefore a prudent policy to innovatively integrate the quality, environmental, and other management systems so as to avoid confusion, duplication, paper overload, bureaucracy, etc. Besides the crucial commitment from the top management, the involvement of all levels and functions is necessary for implementation and sustenance of the EMS.

STRIVE FOR WINNING AWARDS Deming Prize The Deming Prize is regarded as one of the most coveted business awards, not only in Japan but throughout the world. It was instituted in December 1950 by the Japanese Union of Scientists and Engineers (JUSE), to commemorate W. Edwards Deming’s contribution to the post-war Japanese economy. The urge to win the ‘prize’ has propelled the management of applicant companies to take steps that

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STRATEGIC ENABLER 381 has enabled them to become competitive and achieve unprecedented/dazzling growth. The Deming Prize assesses the efficiency with which TQM philosophies are deployed across all management and operating areas including improvement in quality, application of statistical techniques, and stress on research. The annual prize is not limited to manufacturing companies only; rather it is open to all sorts of organizations in diverse fields where the TQM philosophy can be applied. Some examples are construction firms, hotels, banks, insurance, brokerage houses, software, call centers, airlines, etc. who have all benefited by initiating steps to qualify for the Deming Prize. The Deming Prize for individuals is also awarded annually to individuls who have made remarkable contributions to TQM research, education, and specially in development and dissemination of theories relating to statistical quality control. The other categories of the prize include specific prizes for the division, smaller enterprise or factory with the best quality control. Latest update regarding the categories of prizes including those for overseas countries can be had from JUSE. Companies in the midst of TQM implementation or even companies starting TQC/SQC can apply to the Deming Prize Committee who provides the general guidelines. Thereafter within four to five years of the introduction of TQM (including SQC activities) the experts from the Deming Prize Committee undertake an audit the company (including its plants, branches offices, and corporate headquarters) from the end of July to the end of September. The experts examine the various aspects of company working including the current state of company’s implementation in all its plants, branches, total quality control paying particular attention to the efficacy of statistical quality control. The examiners based on their evaluation assign grades, to qualify for one of the prizes the company as a whole must have scored 70 points or more, the top management must score at least 70 points, and none of the units investigated may score less than 50 points. Successive years the norms of assessment are made stricter than the previous year to keep the standards high and to ensure that the efforts are not diluted. Even if the applicant does not win the Prize, the sheer effort spent on complying with the norms has an immense impact on the company’s culture and performance. Continued effort to win this coveted Prize acts as a driving force towards further improvement and brings about the much needed paradigm shift for organizational transformation. Tables 13.4 to 13.10 describe the chracteristics & Table 13.4: Corporate Policy and Objectives Characteristics and features to be evaluated Policy towards Business in general. Corporate policy towards total quality control (TQC). z Contents of policy and objectives. z Deployment and implementation of the policies. z Utilization of statistical methods. z Relationships among long-range and short range plans.

Illustrative checkpoints Methods used to establish policies and objectives. Appropriateness and consistency of the contents of objectives. z Method and effectiveness of deployment. z Effectiveness of the statistical techniques deployed.

z

z

z

z

z

Monitoring of achievements.

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382 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS Table 13.5: Organization and its Operations Including Administration Characteristics and features to be evaluated

Illustrative check points

Clarity of roles and responsibilities. Coordination and communication between divisions, committees and small group activities. z Utilization of staff. z Coordination and administration of SQC.

Appropriateness of function boundaries. Delegation of authority or decision making. z Effectiveness of cross-functional organization structure and systems. z Activities of QC circle. z Effectiveness of SQC.

z

z

z

z

Table 13.6: Education and its Dissemination Characteristics and features to be evaluated Planning of education including training on statistical concepts and methods. z QC. Circle activities. z Suggestion schemes. z Education to vendors and sub-contractors. z Education support from external sources. z

Illustrative checkpoints Level of consciousness towards quality, management and QC. z Evaluation of permeation of education and training imparted. Number of proposals for improvement. z Effectiveness of whole education plan. z Ability to understand the effects. z

Table 13.7: Overall Assessment and Audit to Assure Effective Deployment of TQC in all Areas Including R & D, Design, Purchasing, Manufacturing, Inspection, Sales and Service, etc. Items to be checked (i) Profit management. (iv) Production-process control. (vii) Personnel administration. (x) New product development (xiii) Grievance handling procedure. (xvi) Customer services.

(ii) Cost control. (iii) Purchase and inventory control. (v) Facility management. (vi) Instrumentation control. (viii) Labour relations. (ix) Education programs. (xi) Research management. (xii) Vendor relations. (xiv) Use of consumer information.(xv) Quality assurance (QA). (xvii) Customer relations.

features likely to be evaluated and illustrative checkpoints that should help the companies to prepare thoroughly before the initial assement audit by the Deming Prize Committee. The great momentum to progress provided by the Deming Prize is what makes this award so prestigious. Even going through the application procedure the selfrejuvenation of management is possible. Even if they do not win the award, the applicant organizations stand to gain tremendously from the audit reports prepared by the Deming Prize Committee, whose suggestions will aid course-correction. This QC audit can be considered a milestone in the never-ending journey of TQM.

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STRATEGIC ENABLER 383 Table 13.8: Specific Audit for the Areas that are Critical to the Success of TQM Implementation Areas

Characteristics and features to be evaluated

Information gathering and collation from outside sources. z Disseminating information between divisions and departments. z Speed of information analysis and dissemination. (ii) Analysis z Selection of important problems and themes. z Use of statistical methods, its appropriateness. z Analysis of process and quality. z Positiveness of suggestions for improvement. z Tying in with in-house engineering technology. (iii) Standardization z System of choosing standards. z Administration of standards. z Adherence rate of established standards. z Application of statistical methods. z Stabilization of standards.

(i) Gathering, collating, and disseminating information.

(iv) Control

(v) Quality Assurance

z

System for quantity, quality and cost control of products. z Application and utilization of statistical methods. z General acceptance of statistical thinking. z Procedures/methods to develop new products. z Analysis and reliability of design. z Product liability prevention. z Process capabilities. z Quality assurance system -- its effectiveness. z Process control and improvements. z Practical conditions of quality assurance. z

Illustrative checkpoints Communication systems between divisions and departments. z Use of computers. z Statistical analysis of information. z

Analysis method and its appropriateness Statistical techniques deployed. z Application of analytical results. z Effective deployment of suggestions and analyzing the results. z Reviewing the gains of using in-house technology. z z

How standards are established, followed and revised. z Records of establishment, revising and withdrawal of standards. z Content of standards consistency among standards. z Effects upon technology. z Control point and control items. z Use of control charts. z Contribution by quality circles. z Actual condition of control systems and activities. z

Effectiveness of quality function deployment. z Design review. z Product safety. z Application and utilization of statistical methods. z Evaluation and audit of quality. z Efficacy of measurement and inspection. z Control of facilities, equipments, purchasing, sub-contracting, services, etc. z

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384 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS Table 13.9: Effects or Results Characteristics and features to be evaluated Impact of TQC on quality, cost, safety, environment and profits. z Intangible benefits. z Compatibility between prediction of effects and actual effects. . z

Illustrative check points Quantitative results and visible effects. List of invisible or intangible effects and justification thereof. z Market perception. z State of morale of employees. z State of human-relations. z Development of new markets. z Complaint trends. z Cycle time reduction etc. z z

Table 13.10: Future Plans Characteristics and Features to be evaluated Clarity and understanding of current status -SWOT analysis. z Plans to carry TQC program forward z

Illustrative check points z z

Measures for solving problem areas Integration of TQC with long-term planning

It is, however, up to the top management to accept the challenges of such close scrutiny audits.

Malcolm Baldrige National Quality Award The US Congress in 1987 instituted Malcolm Baldrige National Quality Award (MBNQA) to motivate American companies to strive towards performance excellence. Basically though the award is for US based (or its territories) business, the organizations elsewhere in the world can adopt the concepts and criteria for performance excellence to measure their own TQM or change management efforts. Annually six awards are declared; two awards each for manufacturing, service, and small business. Manufacturing includes such wide coverage as agriculture (crops and livestock), forestry, food products, etc. while service category includes communication, communicating services, health services, recreational centers etc. Small businesses include complete businesses with no more than 500 full-time employees. There are certain restrictions on eligibility criteria and acceptance for review for the award is an elaborate process. The award is administered on three stage review process viz. (a) evaluation of a written examination (b) site visits to the companies who have recorded high points in examination (c) final competition and assessment of overall results. These and other details of the program can be

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STRATEGIC ENABLER 385 obtained from the National Institute of Standards and Technology (formally known as the National Bureau of Standards), Gaithersburg, Maryland 20899, USA. The Award criteria are built upon the following core values and concepts: z z z z z z z z z

z

Customer-driven quality Emphasis on problem-prevention through design quality Continuous improvement Management by fact based on data analysis Fast response through reduction of cycle-time Development of long-range strategies and plans Leadership of senior management Full participation of all employees Partnerships developed between: z labor and management z management and suppliers z management and customers Satisfaction of public responsibility, such as meeting the health and safety requirements

The basic concept and administration of the Malcolm Baldrige National Quality Award has been explained through schematic presentations and tables. The whole concept and working methodology of the award has been presented schematically in Figure 13.1. The extent of institutionalization of the above core values and concepts are assessed through seven categories, incorporated in four main elements viz. the driving force, improvement system, measures of progress (quality and operational results), and the ultimate final goal i.e. customer focus and customer satisfaction. Figure 13.2 depicts the integrated result oriented system approach of the award by creating cause-effect linkages among the seven categories and four main elements. The feedback loop of the system ensures exchange and interaction between process and results. In reality, the feed back mechanism is kept alive through cycles of learning having four clearly defined stages viz. (a) Planning that includes process design, selection of measures, and deployment of requirements, (b) evaluation of execution, (c) Review of progress taking both internal impact and external results, (d) Revision and course-correction based on the experiential learning, new inputs, and new requirement. The scoring guidelines indicate not only the three distinct assessment dimensions viz. approach, deployment, and results, but also specifies the key factors necessary to assess against each dimension. The examination categories and sub categories along with scoring guidelines (1992 model) is given in Table 13.11. Since the focus is on results, and not on process the MBNQA does not prescribe any particular procedure, tools, techniques or systems—they are left purely to the organizations to design their own systems or chose particular tools or techniques. There are some major basic differences of approach between Deming Prize and

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386 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS

MBNQA

Recognizes: Performance Excellence

Understanding of requirements for Performance Excellence and Competitiveness Sharing of information on successful performance strategy Realization of benefits derived from deploying these strategies

Eligibility open to Five Categories (US based Organizations) Manufacturing Service Small Business Health care Education

Seven categories Framework for Award evaluation 1.Leadership 2Customer and Market Focus 3.Strategic Planning 4. Information and Analysis 5.Focus on Human resource development 6. Proces management 7.Business results includes Quality

Results Focus primarily on seven Key areas of business (includes financial) Performance; results are composite of all of them: Customer satisfaction / retention Market share and new market development Productivity, operational efficacy, and responsiveness Human resource performance and development Supplier performance and development (includes partnering) Public responsibility / corporate citizenship (Needs of the nation)

Figure 13.2

Embracing and imbibing set of Core values and concepts (Listed earlier in this chapter)

Examination For

Evaluation Guidelines for awarding Point values for the Seven principal categories Sl. Examination Point No Category Value 1 Leadership 90 2 Information 80 and analysis 3 Strategic quality 60 planning 4 Human resource 150 development and management 5 Management of 140 process quality 6 Quality and 180 operational results 7 Customer focus 300 and satisfaction TOTAL POINTS 1000 For the points of sub categories please see the table given in the following paragraphs.

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STRATEGIC ENABLER 387

DRIVER

X

SYSTEM

X

Information and analysis

X

MEASURE OF PROGRESS

X X

Planning

X

X

Human resources

X

X

Quality process

GOAL

Customer satisfaction

Results

Leadership X

X

Figure 13.3 Table 13.11: Examination categories for Malcolm Baldrige Award (1992 Model) Examination category

Sub-category

Point Value

1.0 Leadership

2.0 Information and analysis

1.1 Senior executive leadership 1.2 Management for quality 1.3 Public responsibility 2.1 Scope and management of quality and performance data and information 2.2 Competitive comparisons and benchmarks 2.3 Analysis and uses of company level data

45 25 20 15

90

25 40

80

35 25 20 40 40 25 25 40

60

3.0 Strategic Quality planning

4.0 Human resource development and management 5.0 Management of process quality

3.1 Strategic quality and company performance planning process 3.2 Quality and performance plans 4.1 Human resource management 4.2 Employee involvement 4.3 Employee education and training 4.4 Employee performance and recognition 4.5 Employee well-being and morale 5.1 Design and introduction of quality products and services 5.2 Process management: product and service production and delivery processes 5.3 Process management : business processes and support services 5.4 Supplier quality 5.5 Quality assessment

150

35 30

140

20 15 (Continued)

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388 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS Table 13.11: (Continued) 6.0 Quality and 6.1 Product and service quality results operational results 6.2 Company operational results 6.3 Business process and support service results 6.4 Supplier quality results 7.0 Customer focus 7.1 Customer relationship management and satisfaction 7.2 Commitment to customers 7.3 Customer satisfaction determination 7.4 Customer satisfaction results 7.5 Customer satisfaction comparison 7.6 Future requirements and expectations of customers TOTAL POINTS

75 45 25 35 65 15 35 75 75 35

180

300

1000

MBNQA despite commonality in certain areas like continuous effort for improvement of quality, total involvement of all levels of employees, etc. The MBNQA is focused on result-orientation i.e. great emphasis on the outcome, the Deming approach stresses importance on process and application of statistical quality control. Deming prize guidelines are not detailed specific; they depend quite a lot on subjective assessment of experienced professionals. The MBNQA stresses on ‘Management of Outcomes’, which are evaluated through detailed and specific water-jacketed systems of ‘indicators’ and ‘points’. Readers may note that Dr Deming had been critical of ‘management of out-comes’, his apprehension was that such approach give rise to manipulation to achieve short-term goals. Since the business situation is dynamic, the consortium responsible for administration of the ‘MBNQA’ updates the indicators annually keeping the spirit of continuous improvement. The ‘MBNQA’ has also extended guidelines for ‘selfevaluation’ .The latest guidelines on self-evaluation or the Award can be obtained from the National Institute of Standards and Technology, USA.

European Quality Award (EQA) The principal aim of European Quality Award (EQA), a competitive award instituted in 1991, is to promote business excellence through TQM. The non-prescriptive model can easily be applied to all types of businesses or organizations, whether for profit making or not for profit. The EQA has two categories: (a) the EQA award for the best exponent of TQM (b) European Quality Prizes, for those companies which excel in TQM as a fundamental process of continuous improvement. The framework of the model has nine criteria—5(Five) ‘Enablers’ and 4 (Four) ‘Results’. The criteria clubbed under ‘Enabler’ category are primarily concerned with the organization’s quality management system and ‘how’ all the various activities are performed. The ‘result’ criteria indicate what the company is achieving from the point of view of the four key stake holders viz. the customers, people of the organization, society, and the share-holders/owners. The model considers the trend of ‘results’ over a period of 3 to 5 years, and compares them with the

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STRATEGIC ENABLER 389

People Satisfaction 90

People Management 90 Process Policy and Strategy 80

Customer Satisfaction 200

140

Impact on Society 60

Resources 90 Enablers 500

X

X

L E A D E R S H I P 100

B U S I N E S S Results 150

Results 500

X

X

The guidelines to assign scores 0 per cent

Hardly effective

25 per cent

Some evidence of scant approach/result

50 per cent

About half the criterion covered by sound approach and results

75 per cent

Strong positive results from good systems

100 per cent Excellent, ‘best in class’ systems and results Figure 13.4

internal targets, competitors, and best in class organizations. Figure 13.4 graphically depicts the model. The analysis of weightage with respect to total 1000 points reveals some interesting information: Factor Weightage Customer satisfaction 20% Total people factor 28% (People management 9% + people satisfaction 9% + leadership 10%) Process management 14 % Customer satisfaction + total people ‘factor’ 48 % The analysis clearly brings out the basic philosophy of the model: (a) It is the people and the way the people are lead by top management (leadership) makes a company successful. People (employee) satisfaction is an important element. (b) It is customer satisfaction, which leads to better business results thus ensuring survival and growth of an organization. Impact on society is also an important factor.

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390 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS (c) ‘People through process’ produce results. (d) It is the leadership that drives the TQM movement through appropriate policy and strategy, people management, resource management, and process oriented systems and culture. To apply for the European Quality award and prizes, organization have to complete the self-assessment file based on European Model for Total Quality Management and would complete a report of no more than 75 pages. After initial assessment and study of the applications by team/s constituted for the purpose, the Award Jury selects a number of companies to visit in order to verify and monitor the quality practices. The self-assessment can be done either for the whole organization or for its business unit. The self-assessment can be conducted in several different ways depending upon the maturity level of TQM in the organization, available resources, and the degree of details required in the assessment. Steps for selfassessment has been given in the flow chart outlined in Figure 13.5. Whether amongst the winners or not, the most valuable benefit of applying is the feedback report stating where the organization presently stands with regard to imbibing TQM culture and pointing out areas for improvement. An enlightened management will then take necessary course corrections against identified weaknesses and through continuous improvement strives to win ultimately the coveted award. However, winning the Award is only a step—sustaining the achievement is the real challenge. [Interested readers and professionals may refer to the EQA brochure for further information on the components of feedback reports, scoring profiles, self-assessment and the various approaches to improvement.]

The CIII-EXIM Excellence Awards Instituted jointly by the Confederation of Indian Industry (CII) and Export-Import Bank of India (EXIM) in 1994, the CII-EXIM Excellence Award is one of the most coveted business excellence awards in India. The intention is to establish a guide or model for Indian companies to implement TQM. The award is administered by CII with technical support from the EFQM; the support includes educating and training the assessors and the jury on quality management. The assessment process and the feedback report provide an opportunity to applicant companies to learn about their current TQM status. The scoring profile released by CII at the end of each year’s award process sets a new benchmark for companies to compare themselves against. The framework of the CII-EXIM Award is a self-assessment model that encompasses all aspects of business management. The CII office provides case studies and information on various approaches to self-assessment. CII has adopted the EFQM model for CII EXIM Excellence Award. Readers are requested to see the outline of the EFQM model given earlier in this chapter. The Award assesses the performance of an organization under nine criteria, which are further divided into

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STRATEGIC ENABLER 391

X

X

Develop Commitment

X

Plan Self-assessment

ΠCommitment of senior management to use the model ΠEducate own self ΠUsing it as a driver for continuous activity ΠIdentify and select appropriate business units as a pilot project with defined boundaries, plan, and instructions.

X

Establish Team(s) to perform self-assessment & impart education

ΠAssemble teams and give them necessary training. ΠIdentify strengths/areas for improvement

X

Communicate Plans

ΠDetermine communication message, media and target.

X

Review Progress

X

ΠConsult guideline brochure.

Conduct Self-assessment

X

Establish Action Plan

X

Implement Action Plan

ΠAssign priorities. ΠArrive consensus on responsibilities & milestones. ΠCommunicate action plan and strategic direction.

ΠImprovement teams take up allotted jobs. ΠProvide appropriate resources and support.

X

Figure 13.5: Steps for Self-Assessment—The European Quality Model for Business Excellence Source: Guideline Brochure on Award

32 parts. These nine criteria and some of the salient action points against each criterion are given in Table 13.12. CII annually awards the prizes to deserving large, medium and small scale organizations. The model has four levels of recognition: (a) the Award, (b) Prizes, (c) Commendations for significant achievement, and (d) Commendations for commitment to TQM. All members of the CII as well as sub-units of member organizations (if they are self-sufficient separate entities) can compete for this award. An organization wanting to apply has to follow a fixed procedure to establish its eligibility. Once declared eligible, the organization must prepare a report summarizing the organization’s practices and results in response to the above-mentioned

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392 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS Table 13.12: Nine criteria for the CII EXIM Award Sl No

Criteria

Award Model: Focus on the Nine Criteria Significant Assessment Points

1

Leadership

z

How vision, mission and values are developed? How are they deployed to ensure appropriate behaviors and actions? z How long term success is facilitated? z Personal involvement in developing and implementing systems z Relevant policies, strategies, plans, processes and targets to ensure implementation of organization’s vision and mission and assigning of stake-holder’s interests. z People development policies and initiatives to utilize the full potential of people z The process that assures people development, involvement, and effective contribution z Management of external partnerships z Management of internal resources z Long-term policies to augment long-term resources z Increasing value to the customers and stake holders z Overall efficacy to support the organizational vision/mission z

2

Policy and strategy

3

People management

4

Resources

5

Design and management of process Customer results People results Society results

6 7 8 9

Key performance results

z

Achievements in relation to external customers

Achievement in relation to its people Organizational achievement and contribution to the society with respect to its obligation to local, national and international areas z Achievement with respect to its planned performance z z

criteria and submit this report for assessment. The objective of this Award is to promote excellence as an important element of business in this competitive market.

BALANCED SCORE CARD The Balanced Score Card (BSC), some call it Balance Scorecard, is a performance management technique that helps organizations drive business performance towards excellence through balanced measures. In 1992, Robert S. Kaplan and David P. Norton wrote an article in the Harvard Business Review called ‘The Balanced Scorecard: Measures that Drive Performance’.1 The article stressed the importance of not relying solely on financial measures to assess organizational success. It stressed the importance of balance between short-term and long-term objectives, financial and non-financial measures, leading and lagging indicators, and internal and external performance measures.

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STRATEGIC ENABLER 393 Mere concentration on traditional financial accounting measures like return on investment or earnings per share can no longer tackle the complexities of modern business, rather the BSC concept gives a fresh approach of having a fine balance between traditional financial accounting measures with appropriate new operational and financial measures. Kaplan and Norton stressed that long-term improvement in overall performance was unlikely to happen through technology only, and hence placed greater emphasis on organizational learning and growth which implies integrated development of employees. The BSC concept gives a practical ‘framework’ that rediscovers and livens the basic concepts of TQM. The two key BSC components are based on TQM hypotheses: (a) what gets measured gets done, and (b) financial measures are not enough to achieve excellence or even sufficient to manage an organization. BSC uses an inter-connected model focused on four distinct perspectives of measuring performance—finance, customers, internal process, and innovation and learning. By monitoring a balanced combination of financial and non-financial aspects of the inter-related metrics for four key business perspectives (see Table 13.13), the long-term organizational goals can be aligned with the day-to-day action enabling to measure progress, and take corrective actions. Usually, by the time a set of objectives flows down from the CEO’s office to frontline employees, they tend to become incompatible or incongruent. The BSC successfully sets the cascading effect in motion—here the first task of management is to set the objectives (goals) of the top two perspectives in the scorecard, i.e. the financial and the customer perspectives, followed by finalizing the measures to be taken. After this the objectives and measures for its internal processes are identified, and lastly, learning and growth objectives are finalized. This exercise establishes the links between objectives and measures at each level. Table 13.13: A Brief Outline of a Balanced Scorecard Balanced Scorecard Financial Perspective Goals ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ Internal Process Perspective Goals ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈

Measures ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ Measures ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈

Customer Perspective Goals Measures ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ Innovation and Learning Perspective Goals Measures ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈ ≈≈≈≈≈≈≈≈≈≈

The typical steps followed by a medium-sized company are presented here to help the readers better understand the BSC methodology:

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394 TOOLS, TECHNIQUES AND STRATEGIC ENABLERS

Step 1 The senior management of the company sets the general strategy for customer orientation. Example: One of the management goals is to become customers’ supplier of choice through partnership with them. The middle managers then convert the goal into several (maybe four or five) specific goals, with appropriate measures for each. Example: The specific goal set by one of the middle managers is to become the preferred supplier of the customer, and the identified key measures would be -- Share of key accounts purchases --Ranking by key accounts

Step 2 Management defines strategy, and goal for internal measures needed to focus on processes that would deliver the expected customer expectation. The operating people translate that strategy into operational goal and measures. Example: Management thrust on internal measures is for achieving manufacturing excellence. The operating people sets measure of reducing cycle time and unit cost and improvement of yield to achieve the goal of achieving manufacturing excellence.

Step 3 As external environment is changing constantly, the parameters and targets for success is also changing. Therefore in tune with today’s business environment management need to clearly spell out its strategy with regards for innovation, improvement, and learning so as to develop new products and processes. Example: The company’s stand on innovation and learning is to tap the company’s ability to rapidly develop and manufacture standard products. In turn the operating management documents its goal and measures against the innovation and learning perspective: Innovation and Learning Perspective Goals Measures z Technology leaderships Time to develop next generation z Manufacturing learning Process time to maturity z Product focus Percent of product that equals 80% sales z Time to market New product introduction vs. competition

Step 4 The financial strategy developed by the management is translated into goals and measures by the operation units. Example: FINANCIAL STRATEGY

Profitability Growth Value to shareholders

BALANCED SCORECARD Financial Perspective Goals Measures Survive Increased cash flow. Succeed Quarterly growth in operations and sales. Prosper Increased market share and ROE.

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STRATEGIC ENABLER 395 Note: For some of the measures, information could be generated internally. Others need to be confirmed with customers externally, to ensure that the company clearly understands customer requirements and expectations. BSC has significant difference with the traditional management concept of MBO i.e. management by objectives; in BSC is objective-driven throughout multiple levels of the organization, it has the cascading effect percolating from the CEO’s vision and objectives down into various hierarchical level of organization. The objectives of each level or department is linked to the key objectives of the next higher hierarchical level. Balance scorecard acts as a ready action reckoner for each level of employees, thus making the communication of organizational strategy clear and unambiguous to the employees. If the strategy is only known and restricted to the executive level, it will never be wholly executed or fully realized.

Benefits The major benefits of using the BSC are: z

z

z

z

Balance scorecard identifies specific areas centred on company’s strategy that should be measured for balanced action towards achieving the goals and vision. Focusing the whole organization on the few key things needed to create breakthrough performance that is forward looking. It is concise, does not lead to information overload. Helping to integrate various corporate programs, such as quality, re-engineering, and customer servicing to execute integrated winning strategy. Breaking down strategic measures to local levels that unit managers, operators; employees at different levels clearly understand their role and execute them with enthusiasm and excitement.

Weaknesses The methodology of BSC is so broadly drawn out that there are chances that certain vital issues like the changes in shareholder’s interest or business environment may be ignored. The process also risks becoming a bureaucratic trap (like MBOmanagement by objectives) laden with overly dictatorial scorecards. Similarly, pressure to achieve results may lead to compromises and manipulation of data. Management must be vigilant to avoid such possibilities, instead of brushing unpalatable strategic issues under the carpet.

Note 1. Robert S. Kaplan and David P. Norton, ‘The Balanced Scorecard: Measures that Drive Performance’, Harvard Business Review, Vol. 70, no. 1, January–February, 1992, pp. 71–79.

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IV P A R T

Few Cases and Quotes

Case studies are real. Names of the organizations and persons have been altered due to obvious reasons. Efforts have been made to refer Indian cases as much possible. Indian cases will also represent the typical dilemma of developing countries. The cases bring out the dilemma faced in business & organizational transformation universally though the extent & magnitude of problems encountered by the developing countries are much more than those faced by developed countries. In many cases readers will find dichotomy between the theoretical exposition and practical reality. Professionals through their own practical experience may be able to equate the difference between hypocrisy, and earnestness in following the principles of TQM. The in-depth analysis of case studies and quotes should help to assert the long-term perspective, reinforce the conviction, and embolden the courage to implement the TQM way of organizational transformation. The Ten Commandments is a useful simple ready reckoner and checklist as reminder to the top management.

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14 CHAPTER

Dare to Dream A COMPANY SONG WRITTEN BY THE CHAIRMAN OF THE COMPANY kira Sueno, the founder and chairman of Showa Boeki, a Japanese packaging company, never looked at his employees as mere employees; he rather considered them as company members and this reflected in the values he held. Sueno spent his valuable time and effort to ensure that his company members imbibed the company values and ideals. He took the task upon himself and composed a song that was well received by the employees. They are delighted to begin each day by assembling to sing this song, as well as to sing it on various other occasions. In his book Entrepreneur and Gentleman.1 (translation of the original Japanese book Waga Shokon ni Nashi2), Akira Sueno discusses the dream he had when he penned the essence of his philosophy in this lyrical poem. He says, ‘It is to spur people’s self-realization that I have written the company song, a composition which, in an easily digested form, aims at coordinating ways of thinking at the company level. Three important ethical principles—faith, sincerity, and perseverance—occupy a dominant position in each of the three stanzas of the poem. Sueno was anxious to keep it simple and easy to remember. In his book Sueno further says, ‘The ideas embodied in the company song are not borrowed from elsewhere, but represent our own unique administrative concepts; these phrases are not directed generally towards all young people in the world but are specifically intended to inspire the members of Showa Boeki.’ The poem succeeded in inspiring the company members to work with steadfast and unshakeable devotion and faith. Sueno was a dreamer; he visualized a globally renowned company and his dream is reflected in the poem. He paraphrased his dream in a lyric to share his dream with his employees, or company members, as he preferred to think of them; a few lines (in translation) are mentioned here:

A

We cherish dreams of flourishing in business new and wide, We dream of building a company for all lesser ones a guide.

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400 FEW CASES AND QUOTES We shall be renowned afar for our sincerity, Equally for perseverance we shall take our pride. On the ocean of great accomplishments.3 Many may wonder, what is the big deal about a poem written by the founder/chairman? This is an example of how the owner-chairman takes up the initiative of involving his work force in the task of transforming a small family business into a large institution, and should inspire everyone.

LIVING UP TO THE MISSION IS AN INHERENT TRAIT OF LEADERSHIP Efficiency as an operating ideal presumes goals are settled and resources available. In reality, the goals need to be defined and the means necessary to achieve them have to be created. Creating the means also involves moulding the social character of the institution. It is the job of leadership to create this efficiency by setting the basic mission, creating the means and charting the course, as well as creating a social organism capable of fulfilling that mission. ‘Consider any great organization—one that has lasted over the years—I think you will find that it owes its resiliency not to its form of organization and administrative skills, but to the power of what we call beliefs and the appeal these beliefs have for its people.’4 —Thomas Watson, Jr

LEADERS WHO CAN MAKE A DIFFERENCE z

‘The new paragon of an executive is a person who can envision a future for his organization and then inspire his colleagues to join him to build that future.’ — Fortune Magazine5

SOME INSPIRING QUOTES IN PUBLIC DOMAIN z

z

z

‘All men dream; but not equally. Those who dream by night in the dusty recesses of their minds awake to find that it was vanity; But the dreamers of day are dangerous men. That they may act their dreams with open eyes to make it possible.’ —T. E. Lawrence ‘If you can dream it, you can do it.’ —Anonymous ‘Nothing happens unless first a dream.’ —Carl Sandburg

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DARE TO DREAM 401 z

z

z

z

z

z

‘We are what and where we are because we have first imagined it.’ —Donald Curtis ‘There is nothing like a dream to create the future. Utopia today, flesh and blood tomorrow.’ —Victor Hugo ‘Man’s mind stretched to a new idea never goes back to its original dimensions.’ —Oliver Wendell Holmes ‘We lift ourselves by our thought, we climb upon our vision of ourselves.’ —Orision Swett Marden ‘Imagination is more important than knowledge.’ —Albert Einstein ‘The only way to discover the limits of the possible is to go beyond them into the impossible.’ —Arthur C. Clarke

A FEW CRISP ONE-LINERS AND COMBINED VISION & MISSION STATEMENTS Three one-liners that changed history: ‘Liberty! Equality! Fraternity!’ ‘We shall overcome!’ ‘Workers of the world unite!’ The one-liners that inspired whole Nation: ‘Give me blood; I will give you freedom!’ —Netaji Subhas Chandra Bose, the great Indian freedom fighter.

z

z

We will put a man on the moon by the end of this decade.’ —President J. F. Kennedy

One-liner Vision/Mission statements of some renowned companies: z

z

z

z

z

‘To be the best provider of housing financial services in the UK!’ —The Leeds ‘We aim to build profitability the highest-quality car sold in Europe.’ —Nissan, UK ‘Excellence and value in meeting personal financial needs.’ —Abbey National, UK ‘We bring good things to life.’ —General Electric (GE) ‘To be the undisputed leader in world travel for the next millennium.’ —British Airways

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402 FEW CASES AND QUOTES ‘To be recognized as the best provider of quality integrated information systems, networks and services to support customers worldwide.’ —Digital Equipment Company ‘The purpose of Motorola is to honourably serve the needs of the community by providing products and services of superior quality at a fair price to our customers; to do so we need to earn an adequate profit which is required for the total enterprise to grow; and by so doing provide the opportunity for our employees and shareholders to achieve their reasonable personal objectives.’ —Motorola

z

z

The relevance of „ Vision „ Mission „ Purpose „ Values and how they are driven is pictorially depicted in Figure 14.1; the readers may ponder and mull over the importance and significance of each element and interrelationships.

Figure 14.1

Notes 1. 2. 3. 4. 5.

Akira Sueno, Entrepreneur and Gentleman (Tokyo: Charles E. Tuttle Co., 1977). Akira Sueno, Waga Shokon ni Nashi (Japan: Nihon Hoso Gijutsu Kyokai, 1971). Ibid., p. 98. Thomas Watson, Jr., A Business and Its Beliefs (New York: McGraw-Hill, 1963). Jerry Main, ‘Wanted: Leaders Who Can Make a Difference’, Fortune, 28 September 1987, p. 92.

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15 CHAPTER

Fruits of Profound Knowledge OBSERVATION OR LISTENING WITH EMPATHY GIVES INSIGHT any people may not know the Indian scientist Braja Dulal Mookherjee, who has revolutionized the worldwide perfume industry with his discovery of living flower technology. An ardent devotee of Sri Ramakrishna Paramhansa, a great Indian philosopher and religious teacher of the 20th century, Dr Mookherjee was greatly influenced by one particular anecdote concerning Sri Ramakrishna, and left him wondering about the hidden profound knowledge. One morning on his usual routine to pluck flowers for his prayers Ramakrishna noticed, as he plucked a flower, sap oozing out of the cut flower stalks. In his mind, Sri Ramakrishna Paramhansa likened it to blood, and saw God’s presence there. He discerned that plants too must have feelings like humans. Ramakrishna never plucked flowers again. Dr Mookherjee’s inspirational hypothesis came from Ramakrishna’s observation on the feelings of plants—with this profound knowledge he surmised that a dead (plucked) flower is likely to loose its signature perfume. The smell of a dead rose should be pale shadow of that of a live flower. Dr Mookherjee carried on repeated experiments and all observations, confirmed the conjecture that struck him the first time he came to know about the anecdote. His hypothesis led to the birth of the living flower technology (LFT), which has revolutionized the perfume industry throughout the world.1

M

INVESTING MORE IN HUMAN RESOURCES GIVES MANIFOLD RETURNS OVER TIME The Saturn subsidiary of General Motors (GM) was one of GM’s most troublesome plants in California besieged with quality and productivity problems. Having assumed that the phenomenal Japanese success in auto industry was due to high technology and automation GM invested a fortune in advanced technology and new highly automated machineries. Unfortunately the problems of poor quality and low productivity persisted. Anxious to leverage the Japanese secret of success in auto industry, General Motors entered into joint venture) with Toyota to produce

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404 FEW CASES AND QUOTES cars in their Saturn subsidiary in California. GM had invested a fortune in preparing this highly automated and technologically advanced plant, but the trouble was in operating it wisely to full utilization. As per the terms of the JV, Toyota took over the plant operations. In a typical auto plant in America full capacity is achieved within six months of retooling. However in case of the joint venture plant run by Toyota fewer cars were produced in the first six to twelve months than the usual ‘norm’ of GM but the ‘quality’ was the best in the whole GM system. The full production capacity was reached in 18 months, but the most significant feature was that the productivity was fifty percent higher than envisaged—more cars were produced at lower cost and higher quality. The top echelon of GM was extremely satisfied with this joint venture and had assumed that the higher productivity and quality was due to automation and high technology. However, when the GM executives visited the plant they were shocked to see that most of the new automated equipments installed by GM were not in use and some in fact were modified with older technology. It was astonishing that the same location with same set of workers and almost same equipments was now producing fifty per cent more with much higher quality of cars than ever produced at any GM plant. The strategic thrust of primacy in people development made the difference. In the initial stage the numbers took a back seat to training—for the first eighteen months management invested much more in people and their training. This was a radically different approach. The five managers from Toyota were exposed to the Deming’s theory that called for recognition of ‘profound knowledge’. Conventional wisdom stipulates that given the same capital and labour, an organization possessing better technology will produce better quality and higher quantity. But the ‘profound knowledge’ teaches us that ‘Knowledge’ is a key ingredient of quality and productivity. Given the same capital, technology and labour, the firm possessing profound knowledge will outperform the firms ignorant of profound knowledge with higher and continually improving quality and productivity. Very fortunately, the seniormost member of the Toyota team had the opportunity of attending the courses conducted by Dr Deming. With the background of their success back home the Toyota managers confidently implemented Dr Deming’s teachings in the joint venture plant prioritising the task of educating and training the work force in order to enrich their knowledge and enhance their skills base.2

ONCE BEYOND THE EMBRYONIC STAGE, THE COMPANY BELONGS MORE TO THE EMPLOYEES OR SOCIETY THAN TO THE ENTREPRENEUR OR OWNER(S) On the framework of different stages of his company’s growth and consequent concepts of management, Mr Akira Sueno, founder and President of Showa Boeki (one of the leading packaging enterprises in Japan) reflects in his book, Entrepreneur and Gentleman that when the company strength reached to 70 members, he had the

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FRUITS OF PROFOUND KNOWLEDGE 405 feeling that the company belonged more to the employees, whom he preferred to call ‘members’, than to him. When the company grew to have more than 2000 members he said, ‘I believe my awareness of the company I manage has been sublimated to the point where I regard it as a public institution.’3 This profound knowledge comes only to a man who has a lofty vision. In other words a lofty vision induces profound knowledge and missionary zeal to deploy the various aspects of the TQM philosophy. Such outlook is also necessary for understanding and assuming Corporate Social Responsibilities (CSRs).

A COMPANY DOES NOT DO A FAVOUR TO ITS CUSTOMERS; IT IS QUITE THE OPPOSITE ‘A customer is the most important visitor on our premises. He is not dependent on us. We are dependent on him. He is not an interruption to our work. He is the purpose of it; he is not an outsider to our business. He is part of it. We are not doing him a favour by serving him. He is doing us a favour by giving us an opportunity to do so.’ —Mahatma Gandhi

GAINING INSIGHT THROUGH EXPERIENTIAL LEARNING Once in a certain automobile plant in India, the gear-shift lever attached to the ‘Steering Column’ gave constant headache, gear shifting was a chronic quality problem. At times the gear-shift lever was sticky, or very hard to shift or it jumped out after being engaged and in some odd cases the gear-shift was very smooth like butter. The frequency of inspection of affected components and the sub-assembly were increased, operating practices were frequently crosschecked against respective standard operating instructions (SOP) to ensure the correctness of the operating practices, and the experienced operators and assemblers were redeployed for the concerned jobs. The design department often revised & tightened the tolerances. Despite all such corrective as well as fire-fighting actions the problem persisted. The tremendous pressure on line managers and supervisors due to persistent field complaints induced tensions and burnouts. The new divisional manager finally took it upon himself to investigate. One day while interacting with workers concerned, he found out that most of the assemblers and operators did not have a clear idea about how the gearbox and gear-shift lever mechanism actually worked. He immediately took steps to arrange a ‘section cut’ (like a sectional view of a drawing) of a finished gearbox and used this sample as a training kit to explain the working principles of the gearbox. All concerned in the relevant processes were exposed to this training; the machinists, helpers, movers, inspectors, tooling people, assemblers, inspectors, heat-treatment operators, line supervisors and the concerned manager too. Nobody even earlier thought that this exposure was important, now all concerned got insight into the working principles of gearbox and the gearshift lever. All concerned started taking care of all such issues that

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406 FEW CASES AND QUOTES could not be always put in black and white in the SOP, but could only be dealt with awareness, sense of responsibility and pride of accomplishment—like discerning the effects of the slightest of burrs, small variations in under-cut dimensions, cleaning or handling carelessness, use a steel hammer instead of a rubber mallet during assembly, etc. Everybody was enabled to take the necessary care and precautions as a result of the understanding and insight they gained through this experiential learning. Dramatically market complaints reduced and no sooner the problem disappeared. This proves that a set of standard operating instructions or conventional training alone cannot induce learning; people must understand the purpose of his job, and need in-depth knowledge to hone their acumen and skill for a perfect job.

LOYALTY TO THE CUSTOMERS IS A MANIFESTATION OF DEEP-ROOTED COMPANY CULTURE This case study aims to showcase the exemplary concern for quality and loyalty towards customers displayed by the general manager of the Machinery Building Company of India. The case is about the first delivery of indigenously designed automatic packaging machine being sold at 1.2 million Indian rupees to an important client of the company. During the final assembly and test run a major defect was found. As the machine was urgently required by the client for some urgent export jobs, the production manager, sales manager and the quality control manager unanimously concluded that the machine could be dispatched with a patch repair, hoping that the problem would not recur if the client could be convinced to run the machine at 75 per cent of its rated speed. So the machine was dispatched with an undertaking from the production manager that in case the defect recurs, a factory personnel would be sent to the spot to fix it. The general manager came to know about this quality compromise within two days of the dispatch. Extremely upset about the whole thing, he ordered the machine, which had already covered more than 500 miles by then, to be brought back. The general manager kept the managing director of the client company informed and convinced him to agree to the revised delivery date. Thereafter, the real problem was identified through proper scrutiny, two machine-parts were redesigned and manufactured anew and extensive trial runs were conducted to ensure that all performance parameters were as per the requirements specified by the customer. In addition to this, a mechanic was also sent to help the customer to install the equipment. This bold action not only earned the appreciation and goodwill of the client, it sent out a strong message to all managers and employees that no compromise with quality will be tolerated.

PROFIT ALONE CANNOT BE THE MISSION OF A COMPANY No philosophy professes moneymaking as the purpose of life. Professionals and companies engaged in the moneymaking rat race often ignore the fact that

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FRUITS OF PROFOUND KNOWLEDGE 407 short-term profits made by questionable means do not last, nor can they secure the future. Sueno says, ‘It is true that profit considerations cannot be thrown to the winds if an enterprise is to stay alive and grow, but truly, a company has no reasons at all for existence if it forgets the ideal of contributing to society and human life.’4

Notes 1. The Statesman—Science and Technology section, 29 April 2002. 2. Rafael Aguayo, Dr Deming: The American Who Taught the Japanese About Quality (New Delhi: Viva Books Private Ltd, 1990), pp. 44–45. 3. Akira Sueno, Entrepreneur and Gentleman, translated by Neal Donner (Tokyo: Charles E. Tuttle Co., 1977), p. 24. 4. Ibid., p. 93.

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Pioneering Initiatives QUALITY FUNCTION DEPLOYMENT (QFD)—NOW AN INDISPENSABLE TOOL! n the late 1960s, Dr. Mizuno, professor emeritus at Tokyo Institute of Technology, developed the concept of quality function deployment, popularly referred to as QFD. In 1972, Mitsubishi Heavy Industries Ltd., a company of Mitsubishi Corporation, Japan ventured into the first industrial application of the concept in the complex and challenging design process for shipbuilding at the Kobe Shipyards. The design requirements involved determining in great detail & with utmost importance the needs of the shipbuying customers, resolving the apparent conflicts or contradictions between the customer—expressed requirements and the unstated customers requirements. The ‘unstated’ requirements are those that the customers have not expressed or perhaps could not have recognized or would have taken the particular requirement as granted. Mitsubishi recognized the importance of such information and clarifications at the specification stage itself and made the first industrial application of the QFD concept in 1972. The company achieved remarkable success in not only meeting the needs and expectations of its customers, but also improved its overall schedule and cost efficiency. Mitsubishi’s success was instrumental in the widespread use of the concept in the other industries in Japan. Toyota, the Japanese auto major successfully used QFD in the production of mini-vans and recorded remarkable reduction in the start-up cost. From 1977, a 20 per cent reduction was recorded in October 1979, a further 38 per cent by November 1982, and a cumulative saving of 61 per cent by April 1984.1 The Toyota success was a precursor to the use of the technique in the American automobile industry, most notably in the Ford Motor Company.2 However Dr. Clausing, of Xerox Corporation, was the first to try QFD successfully in the USA in 1984. Today, QFD is one of the standard TQM tool used worldwide by many diverse industries like defence, aerospace, automobile and other high-tech industries as well as in wide spectrum of service industries.

I

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PIONEERING INITIATIVES 409

CRAZE FOR SIX SIGMA The craze for Six Sigma is due to the wildfire spread of success stories in making organizations competitive, much improved customer relationship, reduction of cycle time, waste reduction, and saving millions of dollars by improving all facets of operation and services. The pioneering unprecedented success at Motorola and then at General Electric really set the trend. A short compilation of the success stories of Six Sigma at Motorola and General Electric will be an excellent overview for professionals and management students.

Motorola—The ‘Inventor’ of the Concept in the Year 1987 Management pundits attribute the very existence of Motorola largely linked to the business transformation achieved through implementation of Six Sigma. In early 1980s Motorola was besieged with quality problems that was badly hurting the bottom line and raising doubt about the survival of the company. The Six Sigma project transformed the organizational culture in the way of customer servicing and support, radical improvements in process management and measurements and administrative and transactional processes. The turnaround has been just astonishing; Motorola was honoured with the coveted Malcom Baldrige National Quality Award only two years after launching Six Sigma. The remarkable achievements between beginning of 1987 and 1997 include the following: z z z z

Five-fold growth in sales Profits climbing nearly 20 per cent per year Cumulative savings $ 14 billion attributable to Six Sigma efforts Stock price compounded to an annual rate of 21.3 per cent

The Six Sigma again came to the rescue in facing the tough challenge in late 1990s due to serious setbacks cellular and satellite telephone businesses, and by the end of 1999 the upward swing to revival started. Today Six Sigma has become the number one component in Motorola’s culture, and through Motorola University spreading the Six Sigma concept throughout the company and around the world.

‘Passionate’ Commitment at General Electric General Electric (GE) was having quality problems with its products, and it was identified as key area needing management’s immediate attention. The chairman Jack Welch while initiating (1995) Six Sigma effort announced, ‘We want to make our quality so special, so valuable to our customers, so important to the success that our products become their only real value choice’. He pledged GE’s commitment to Six Sigma as total and urged his senior colleagues to become ‘passionate lunatics’ about Six Sigma. This passion and drive produced exciting positive results. To serve the customers effectively, the company as part of Six Sigma methodology took initiatives to break down barriers and establish ‘Boundarylessness’ to

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410 FEW CASES AND QUOTES improve teamwork all across the organization and with business partners so as to understand of the real needs of end users, and ensure smooth flow of work through supply chain and its own processes. The Six Sigma initiative indeed brought GE gains in billions, in less than four years. The contribution amounted to more than 300 million dollars to the operating income as compared to their 1977 annual report. The payoff thereafter increased to 750 million dollars by the end of 1998, 1.5 billion dollars the following year and still higher contributions thereafter. The most visible evidence of financial contribution made by Six Sigma can be gauged by the fact that since the launch of the initiative the operating margins steadily went up from 10 per cent to beyond 15 per cent. In the field of medical systems business the Six Sigma initiative increased the life and efficiency of CT scanners and X-ray tubes ten times. With these improved machines, the level of patient care and the resultant profits at hospitals and other healthcare centres has also gone up. A patient can now get a full body scan done in half a minute, instead of three minutes or more with previous technology. The Six Sigma team at GE’s lighting unit succeeded in reducing invoice errors and disputes by 98 per cent for one of its top clients, Wal-Mart. This not only resulted in speedier payments but also improved the productivity of both companies. With an improved yield, the Six Sigma initiatives ensured a decade’s worth of capacity without the need for any further investments to the GE’s industrial diamond production business—’Super Abrasives’ which quadrupled its return on investment without spending a nickel more on plant or equipments. With the proper streamlining of the contract review process at GE Capital business services, an annual savings of $1 million was recorded. This resulted in faster sealing of deals as well as helped them become more responsive in their services to the customers. The rail car leasing business recorded a 62 per cent reduction in its turnaround time with Six Sigma improvements at their repair shop, which made them two or three times faster than their nearest rival. Thereafter, in the next phase the whole process was redesigned to reduce the cycle time further by 50 per cent. All these also helped significantly in productivity gains for their railroad and shipping customers. With a system developed to understand the customer requirements more comprehensively, improved documentation and new power-supply equipments the GE’s Power Systems Group was able to address all major issues with its utility supplies. GE and the supply chain companies have saved hundreds of thousands of dollars in a year by responding effectively to the needs of their regulatory agencies and consumers. By deploying the Six Sigma process, an additional capacity of 300 million pounds was achieved—it was equivalent to having an additional plant! This approximately saved 400 million dollars worth of investment. The projected savings in 2000 was another 400 million dollars. Analysing the processes at one of its top performing branches, GE Capital Mortgage listed the best practices they observed and implemented them across the other 42 branches. This improved their responsiveness to customers; the rate of callers reaching GE representatives over the phone increased from 76 to 99 per cent. The improved process is translating into million of dollars in new business.

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PIONEERING INITIATIVES 411 GE has institutionalised Six Sigma—now it is mandatory for all managerial and executive level employees to have appropriate training in Six Sigma philosophy, methodology and tools. An article on Six Sigma in USA Today states that nobody gets promoted to an executive position at GE without adequate training in Six Sigma.3

Notes 1. Dale Besterfield, Carol Besterfield-Michna, Glen Besterfield and Mary Besterfield-Sacre, Total Quality Management, 2nd Edition (Singapore: Addison Wesley), p. 283. 2. Joseph and Susan Berk, Total Quality Management: Implementing Continuous Improvement (New York: Sterling Publishing Company), p. 148. 3. Jones, ‘Firms Air for Six Sigma Efficiency’, The USA Today, 1998, referred in Forrest W. Breyfogle III, Implementing Six Sigma (New York: John Wiley & Sons, Inc.), p. 6.

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CHAPTER

People Orientation—A Myth? TRADITIONAL PERFORMANCE EVALUATION SYSTEM STILL IN VOGUE! espite exposure to TQM philosophy most management unfortunately still continue with traditional systems of performance evaluation that in reality instil fear instead of helping people development. This point can be explained through a simple experiment that stimulates a constant cause system.

D

Objectives The objectives of this experiment are: (a) To understand variation. (b) To appreciate the natural performance variation within a stable system. (c) To understand the folly of having a differential reward system based on performance. (d) To understand the role of management in people development.

Materials Required for the Experiment (a) A plastic jar with a wide-open mouth. (b) White plastic beads or marbles—3200 numbers. (c) Red plastic beads or marbles—800 numbers. Note: Red beads/marbles total to 20 per cent of the total beads/marbles numbering 4000. Diameter of beads may be restricted to 30 cms approximately for sake of convenience. (d) Opaque black cloth of an appropriate size to blindfold a person. (e) A table to keep the plastic jar on. (f) A container or plate to keep the beads/marbles after they are taken out of the jar. No of participants: Six

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PEOPLE ORIENTATION—A MYTH? 413

Methodology A supervisor should conduct the experiment and he must give exactly the same instructions to all participants. (i) All beads are poured into the plastic jar (ii) One person is blindfolded to ensure that he cannot see the beads. (iii) The blindfolded person has to stir the mixture of beads/marble thoroughly by hand for one minute. (iv) The blindfolded person draws 50 beads/marbles from the jar, with the objective to extract as many white beads as possible as red beads/marbles are not acceptable. (v) The blindfold is removed upon completion of the task. The number of white and red beads/marbles drawn are counted by the supervisor and recorded in a tally-sheet. (vi) Next the rest five participants turn by turn take part in the experiment in exactly the same manner and sequence (i) to (v), and the respective results are also recorded in the tally sheet. See Table 17.1. (vii) The results of this stimulated system are statistically analysed using a simple statistical formula. The calculation of the upper and lower limits, shown in Figure 17.1 is based on average performance of the participants who performed the experiment independently.

Conclusion It is now obvious from the analysis that performance of all six persons falls written within the calculated limits of variation and the performance difference could be attributable to inherent chance variation within this stable system. Since everybody performed well within the limits of variation of the system, their performance should be treated at par, and recognized or rewarded accordingly. There is no evidence from the data that Jayanta will in the future be a better performer than Amar. Also, it is waste of time to try to find out why Amar took out 15 red beads or why Jayanta could only take out 4 red beads. Someone not understanding this characteristic of a stable system or chance variation may seek a

Table 17.1: Results of the Tally Sheet Participants 1. Jotin 2. Amar 3. Pradip 4. Kamalesh 5. Jayanta 6. Subir TOTAL

Number of red beads/marbles picked 9 15 8 5 4 10 51

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414 FEW CASES AND QUOTES

Average nos. of red beads/person = Average proportion red bead =

51 = 8.5 6

51 = 0.17 6 × 50

Upper Limit ⎫ = 8.5 ± 3 8.5 × (1 − 0.17) ⎬ Lower Limit ⎭= 8.5 ± 3 8.5 × 0.83 Therefore, Upper limit = 16 Lower Limit = 1 Figure 17.1

cause, but an action on his pseudo-answer will make the system unstable and make things worse. The moral of the experiment is that the elementary reason in difference between people’s performance is attributable to the design of the system, not to the people. All professionals must imbibe this ‘profound knowledge’. Only a ‘special cause’ can be the factor of anybody’s performance falling outside the system variation resulting in poor or outstanding performance. The special cause could be the person himself, people that he works with, variations in material, equipment, supervision, or environmental factors, and similar other factors not considered in the system, etc. Poor or outstanding performance may be attributed only to someone whose performance, by appropriate calculation, falls outside the limits of variation of the system often creating a pattern; it is important to note that negative or positive impact of variation or pattern indicate poor or outstanding performance respectively. The causes of outstanding performance should be incorporated in the system while the root causes for the factors responsible for poor performance must be identified and eliminated. The person with outstanding performance should be recognized or rewarded as appropriate, while others should be treated at par & encouraged by improving the system. And the persons identified as poor performers i.e. those falling beyond the system variation limit should be given enough support to correct their personal drawbacks. This approach is radically different than the common supposition that it is possible to rate people based on their performance. The traditional performance evaluation system is based on this erroneous assumption and its integrated reward, reprimand or punishment rules induce fear psychosis amongst the employees, fear of unknown breaks the morale of the people and even turns a stable process into chaos. Nobody doubts the good intentions of the traditional appraisal or reward/reprimand systems, but the lack of knowledge of variation has led to faulty design of the systems. The challenge for management, as stands out in the most elementary exercise described above, is to improve the system to make it possible for all people to make more white beads, fewer red beads.

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PEOPLE ORIENTATION—A MYTH? 415

FEAR INDUCES MANIPULATIONS! A publicity-hungry chairman-cum-managing director of a large company had once in a burst of confidence predicted an increase in company earnings by 10 per cent for the coming financial year at a luncheon meeting with some financial analysts. He boasted of the new program of management by objectives, which he had initiated last year. A week later, at the company’s budget meeting, the top echelons including the Divisional Managers got together to gauge the possibilities of achieving the chairman’s public commitment. What the chairman wanted in this meeting was to reconfirm the abilities of all divisions to accomplish this task. While Divisional Managers of divisions A and B concurred with the enhanced sales and profit figures, Mr Avesh Chaturvedi the Divisional Manager of division C dared to express not only his doubts regarding the enhanced sales and profit targets but also anticipated a loss in market share owing to chronic quality problems, recently launched better competitive products and depressed market. He also referred to a continuing strike at the factory of their major customer that could worsen the situation. Avesh was about to raise further apprehensions when the chairman curtly interrupted him to say, ‘I don’t want to listen to your ‘ifs’ and ‘buts’. I hired you to obtain results and I don’t want men in my company who take refuge in excuses. I want competent managers. Understand?’ As a professional manager Avesh Chaturvedi should have honestly explained to the chairman why the 10 per cent increase by next year could turn out to be an over-commitment but the target could be achieved over the next three years by investing in technology, process improvement and people development. However, the implicit threat in chairman’s words that he wanted results left Avesh Chaturvedi with no choice. Threatened with losing the job in this sluggish market, he counselled himself that he cannot take a suicidal step and as such, resolved to get the results dictated by the chairman, by hook or by crook. Thereafter, the Divisional Manager Avesh Chaturvedi and his other senior managers had to manipulate the system unhealthily to find that extra profit and save their skin. They instructed the sales department to sell more regardless of what it takes and if necessary, to cajole dealers into lifting extra materials with tacit assurance that unsold material could be returned in the next financial year. The purchase managers of major customers were lured in to ward off the threat from competition. The plant manager was told to defer all improvement initiatives. Annual maintenance contracts were nullified, further preventive maintenance delayed, recruitments against budgeted vacancies were put on hold, there was an embargo on advertising, etc. Even the budgeted expenses for research & development and training programs were slashed. Thus the quality and long-term interests of the company were jeopardized for a whimsical short-term target.

ATTAINING GOALS BY DETRIMENTAL MEANS People often employ means detrimental to the company to meet their goals without caring for future effects. One personnel director was entrusted with the objective

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416 FEW CASES AND QUOTES of reducing the employee attrition rate and increasing the frequency of training programs to improve the skill of the work force. To that effect, noticing that people with lesser education and potential tend to stay with the firm longer than others, she made a concerted effort to particularly hire those with the least educational qualification. She also repeatedly subjected the employees to the same old training programs instead of designing newer and more effective ones. She met both her objectives, but only superficially with dubious strategy. However, the management did not bother to analyse the process deployed to attain the objectives given to the personnel director. The chairman on the contrary, congratulated her for an outstanding job.

ONE MANIPULATION LEADS TO ANOTHER For the fear of being tagged inefficient and reprimanded, the management of a plant that couldn’t meet its production quota resorted to fudging the numbers. They earned accolades for meeting the budget, but this manipulation created another problem, every time the inventory was counted, and it was found to be lower than it should have been. Top Management thought it had a theft problem, so it installed an elaborate security system. The problem of less inventory persisted. Not having the guts to tell the top management that target was too stiff, the plant management continued to fake the numbers as they thought this way the only way to survive. There was no problem with theft, just a management problem overlooked by the top management.

FALLACY OF PERFORMANCE APPRAISAL SYSTEM In a large automobile company twenty odd people were working in the tool control department headed by Tool Controller. It was the responsibility of the tool control department to supply tools to the production lines. The department had to raise timely indents for standardized and imported tools so that purchase department could procure them in time. In case of the non-standardized tools as per plant’s own design, the department had to decide on ‘make’ or ‘buy’ decisions taking into account the capability & capacity availability of in-house tool-room. The department was also responsible to help the purchase department to develop local sources to manufacture specialized tooling as per the company in-house designs. Two years after modernization, there were severe shortage of some imported tools due to import restrictions imposed all of a sudden and failure of the purchase department to arrange licenses as per the old licensing policy. This greatly endangered the assemblies of engines, gearboxes, transmissions and steering columns. The situation got further aggravated due to breakage of few broaches, hobs, and specialized tool holders, and excessive consumption of throwaway cutting tools. As a result, the tool engineers had to work day and night to salvage the worn-out

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PEOPLE ORIENTATION—A MYTH? 417 and broken tools and find out alternative tooling. The leadership of the tool controller and the ingenuity of tool engineers finally helped to overcome the crisis situation with minimum stoppages in the production and assembly lines. Shop management raised hue and cry regarding production interruptions and justified excess ‘overtime’ payment due to non-availability of tools in time and time losses for trying out new tooling. Unfortunately, the annual performance review of the tool engineers was conducted against the prescribed appraisal norm of number of interruptions & lost hours booked by the production shops against non-availability of tools. The management ignored the fact that the excessive tool breakage by the shops also contributed to the shortages in supply. Also the fact that the timely availability of imported tooling was affected due to amendment of Government policies was ignored during the annual appraisal. Astonishingly the management gave no credit to the genuine & innovative efforts put in by the tool engineers to maintain the production volume against all odds. Instead of recognition, the tool engineers were reprimanded as their performance evaluation was based blindly on the loss-hours punched against non-availability of tools. None of the tool engineers including the tool controller get any annual increment. Ironically, the purchase department was not penalized because it was argued that they had no control over government policies. It was a task-cut out for the tool controller to maintain the morale of his men and keep the team motivated.

TRAPS OF THE REWARD SYSTEM This is a case study involving a reputed Indian multinational company that had market monopoly for many years. Suddenly the company found itself under the pressure of competition from cheaper alternatives produced by unorganised sector. To retain its market-share and improve the bottom line, the company had initiated a productivity drive designed to increase production volume, improve quality, and reduce costs, one would hardly find fault with this approach. The design of this management initiative was based on monthly or quarterly internal competitions with clear stipulation that the improvements must be beyond the mandatory targets fixed in the three-year bipartite agreement with the recognized union. The winner and runner-up are to be recognized with General Manager’s certificate and in-house publicity, and each team member to get a material reward earmarked for the degree of improvement. Rewards included holiday trips, blankets, modern cooking utensils, refrigerators, etc. In the initial stage the program was a hit, the management was happy so were the concerned workmen. But the success of the program could not be sustained despite initial enthusiasm, as the workers having got used to materialistic inducement voiced their expectation for the material rewards even to produce as per the targets stipulated in the bipartite agreement with the union. Soon the environment got vitiated. The management was caught in a Catch-22 situation; it could neither yield to the unreasonable demand, nor could it withdraw this management initiative. The stalemate had adverse impact—the

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418 FEW CASES AND QUOTES production fell much below the stipulated targets of the three-year agreement. Approaching the union did not help as the union told in no uncertain terms that the management itself created the problem and that union has no control over this situation either. The company went through a period of turmoil, despondency, and even faced a violent labour situation. The lesson learn from this case study is simple and straightforward. Allurement through carrot of material rewards to attain ‘quick-fix’ results is a ‘deadly disease’ distorts the work-culture, and the sporadic success through such programs cannot be sustained.

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CHAPTER

Management of Change CONCEPTUAL AND EXPANSIVE THINKING POWER he late K. V. K. Raju, founder of the Nagarjuna Group, India, used to meet his senior executives informally each alternate weekend at his guesthouse on the outskirts of the city. Just a white board and marker pens were used. The executives together reviewed the market scenario and exchanged ideas and concepts about the future of the group and individual units. Raju never dictated terms at these meetings; he rather facilitated the discussions and encouraged everybody to dream big and contribute to the collective thinking process. The process ensured that everybody indulged in conceptual thinking. Concrete concepts and critical missions used to emerge out of these meetings. Some of the major expansion projects of the group were conceived at these informal off-site weekend meets. Such exercises promote thought expansion and set the tone of sharing common aspirations. Listening to each other’s dreams is an important tool for out-of-the-box thinking and breeds new insights and possibilities.

T

COLLECTIVE EXPECTATION Akira Sueno understood how critical employee involvement is. Besides meeting his top executives regularly, Sueno made it a point to meet all his employees in small batches or individually to share their thoughts regarding the company goals and values. In his book Entrepreneur and Gentleman, Sueno talks about the conversations he used to have with his employees, ‘Sometimes the man has such an ardent enthusiasm and love for the company that I am swept up and forget the time, listening to him eagerly tell his story late into the night.’ Apart from learning their views and suggestions, he would utilize these informal meets to share his dream with them: ‘We have a bright future before us if only we will strive, and we strive because we have this dream. Put your hearts in your work, and we will embrace the dream together!’1 It is prudent to involve all employees in the envisioning exercise before putting an official seal on the mission statement. Involvement can be encouraged through

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420 FEW CASES AND QUOTES a combination of informal and formal methods. It is an arduous process that demands time, money and patience, but it is worth the trouble as the success TQM depends a lot on active participation from each employee. At the end of this envisioning exercise, the participants will relate their individual aspirations with the vision statement. Management of expectation is vital but involvement of all is crucial for the success of any TQM initiative. If in the ‘expression’ stage we do not involve the employees to express their dreams or expectations, how can we ensure that the vision statement expresses the collective expectations?

SHED EGO TO EMBRACE TRADE UNION LEADERS AS PARTNERS IN CHANGE MANAGEMENT Sanjib Rangrass, branch manager of the Kidderpore plant, ITC Ltd, India had what it took to mould the toughest of union leaders into ardent proponents of change management. This case study reveals how a plant that was doomed to closure, besieged with labour problems, poor quality, low productivity and high unit cost of production, metamorphosed into the most productive factory of the ITC family. This unbelievable reorientation in the work culture was carried out with support and involvement from the union in all change management programs initiated by the management. Combined training (managers, supervisors and workmen) for productivity improvement was inaugurated jointly by the Branch Manager and General Secretary of the Union and conducted at the union office. This unique feat had a salutary effect Co. The secretary and other union officials started worrying about cost, quality maintenance, delays, absenteeism etc. They proved more vociferous about the future than the floor or middle-level managers, because they came to realize that these managers may be transferred or leave the company for better opportunities, but for the general employees the factory was the only source of their livelihood, and they must act rationally to secure their future within it. This paradigm shift laid the foundation for the management of change in the factory. In a system unthinkable in most organizations, here the Branch Manager and the Union Secretary jointly issue all notices related to change management initiatives and this epitomizes the success of partnership between management and trade union. . . What ITC, or rather Rangrass, achieved in the Kidderpore plant was a miraculous feat, considering the labour militancy and vitiated industrial climate of West Bengal in those days. For another set of case studies, readers are recommended to read the book Maverick to see what Ricardo Semeler achieved at his plants in Brazil.2

LEADERSHIP AND INVOLVEMENT: PREREQUISITES FOR TRANSFORMATION The Machinery Building Company of India was a subsidiary owned by a large multinational conglomerate, and they manufactured and sold printing and packaging

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MANAGEMENT OF CHANGE 421 machineries. The demand for these slow speed old-generation machineries was drying up. The low priced industrial packaging machines that they used to make for small-scale sectors were outdated and the product range was too narrow to have any significant market share. Further, abysmally low productivity at the factory compounded the problem of continuing heavy financial losses. Manufacturing these machines was not commercially viable any more, and technology to manufacture high-speed next-generation machinery was not available, nor was any effort made to acquire it or get foreign collaboration. Heavy monthly losses incurred by the machinery business could no longer be supported by the parent company and even the holding operation at the subsidiary was becoming increasingly difficult. Ideally the management would have liked to close down the ‘Machinery’ business but dared not to risk it in view of worsening political situation. Since such an action would have affected the operations of other businesses, the top management had to continue the holding operations at machinery subsidiary. This is when the new general manager of the machinery business stepped in and envisioned a profit-making future for the unit in two years’ time to prove to them that the neglected machinery unit and its condemned work-force could perform well again. He identified constant neglect from the parent company as one of the principal reason for the current state of affairs. He foresaw low productivity as an opportunity for growth and weaved his dream around the creativity of his people, doing things differently. The GM articulated his vision almost daily several times in his meetings and interactions with managers and all levels of the work force. This involvement not only raised the bar of collective expectation but also induced self-confidence and determination. His visible commitment to save the division caught the imagination of his people. The unions came forward, people were retrained, and multiple skills and flexibility were encouraged. Ambitious targets were set but no one gave up. Things started improving on a very fast track as the whole workforce got involved in the change management process; indiscipline, low productivity, nagging industrial relation problems, etc. were things of the past, and even the corporate management started believing that turnaround was possible. The new GM requested marginal investment from the corporate management to acquire some machines with latest CNC technology, and fortunately corporate headquarters sanctioned the amount. Engineers were sent to Japan for training, to learn how to complete pre-delivery inspection and ensure speedy delivery. The order finalization time for new machines and equipments was optimised and delivery was ensured in record time. Engineers, who were sent to Japan for training, completed pre-delivery inspection ensured speedy delivery. The foundations of the machines were made ready, and installed and commissioned in record time, this seriousness of purpose had tremendous impact on people. Soon productivity soared to touch 85 per cent. Process improvements that were earlier thought to be impossible were achieved; procurement time, setting time, throughput time, assembly time, etc. were reduced and optimised. Involvement, creativity and dedication accomplished what looked like a miracle. So long only

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422 FEW CASES AND QUOTES two printing machines and four cartooning machines were being produced per year but now the factory started producing 30 printing machines and 40 cartooning machines per year. New cartooning applications that even the German technical collaborators had turned down as unfeasible were now being developed in-house. Also a first-of-its-kind strapping machine was designed and manufactured in the same facility. Against the backdrop of refusal by foreign collaborators to part with their technology, this achievement gave the company a lot of self-esteem and confidence. Innovative sales strategies paid dividends for both printing and packaging machines. Machine operators and factory supervisors were deputed to the market to understand the needs and quality expectations of the customer. Customer seminars were held on factory premises and nominated personnel of the customers were trained free-of-cost. The credit for the successful launch and marketing of this machine went to the teamwork and inherent talents of all the workers and the able guidance that put the vision together for them. The people became self-confident and ongoing process and inspection improvements became an integral part of the work culture. Negotiations with the unions were no longer necessary to facilitate operational and productivity improvements. The suppliers also participated and cost reductions were achieved through supply-chain relationship management. The Division was bubbling with energy and planned a series of activities on all fronts. Due importance was given to training in multiple skills. The employees and the unions rallied behind the leader. The division registered its first-ever operating profit within eighteen months. The remarkable turnaround was the result of unflinching pursuit of the shared dream, it also a manifestation of dynamic leadership, people’s inherent talent and power of teamwork.

PEOPLE ORIENTATION IS NOT A MYTH Infosys, the IT company in Bangalore, India, is a living example of how a bunch of young people without money or family connections made millions through sheer commitment and hard work, and made their start up company one of the most respected IT company in India and the world. What they did changed conventional wisdom on many things, beginning with the idea that a company is all about its employees, not employers. The multi-billion dollar IT powerhouse reached dizzying heights by keeping all its focus on human capital and growth opportunities for employees. The company is an inspirational model of success for millions of young professionals and aspiring entrepreneurs. In 2004, Infosys got a million applications for 10,000 posts.3 As Thomas Watson Jr wrote based on his experiences at IBM, ‘I believe the real difference between success and failure in a corporation can very often be traced to the question of how well the organization brings out the great energies and talents of its people. What does it do to help these people find common cause with each other?’4

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MANAGEMENT OF CHANGE 423

Notes 1. Akira Sueno, Entrepreneur and Gentleman (Tokyo: Charles E. Tuttle Company, Inc, 1977), pp. 53, 55. 2. Ricardo Semeler, Maverick (London: Arrow Books Ltd, 1993). 3. Article published in Sunday Times, 18 April 2004–Sunday edition of The Times of India. 4. Thomas Watson Jr, A Business and Its Beliefs (New York: McGraw-Hill, 1962).

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Mirage HYPOCRISY

A

TQM consultant once helped a company draw up their vision, mission and value statements. He conducted two off-site sessions, from morning to late evening, over a period of 5 days. In the first session, he assisted them to think strategically and ensured that the session was quite participative despite the initial interruptions by the MD to bulldoze his viewpoints. After prolonged discussions on the divergent viewpoints, the group finally reached a consensus on the company’s vision, purpose, and values. . . In the second session, held after two months, the mission statement was drafted after due consideration of the critical strategic parameters of each area and function. The group agreed upon the strategic initiatives needed for the management of change. It was agreed that the union and all employees down the line would be involved to share the vision, values and strategic missions to ensure their willing participation for smooth implementation. On invitation from the MD, the consultant visited again after a gap of two years. He expected changes, if not radical at least there ought to be some visible improvements. He did find the vision/mission/value statements hung on the wall, but literally covered with cobwebs, on asking, he was told that it was difficult to clean the frames regularly as the ceiling was high. Looking around he was utterly disappointed, the drooping shoulders told him everything. On being quizzed about the progress in implementing their resolve to become a world-class organization in its category of business, he got different and contradictory explanations from managers and other employees but all indicating to the virtual abandonment of TQM implementation. It became clear that the TQM implementation was in reality a whim that occurred to the MD’s mind, which ended with the annual jamboree two years back. Engrossed in their daily routine to meet quarterly targets, senior managers did not have much choice. The message was clear the senior managers had no courage to raise the question of TQM implementation with the MD, a proud man with an inflated ego having no patience to listen to his senior managers. Upon meeting with the consultant, the MD emphasized that the company vision still was to become a world-class organization right now his focus was to achieve

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MIRAGE 425 somehow the quarterly targets as the company was struggling to maintain its bottom line in this fiercely competitive environment. He clarified that this time he had sought the consultant’s advice for some other purpose. In this trying situation his main concern was to weed out the unintelligent managers to make a homogeneous management team competent enough to meet the quarterly and annual targets. When the consultant queried about process improvements, the MD bluntly asked him not to bother about operational details but to give him a confidential report on the intelligence quotient of his managers, based on the Brigg-Myers test—a concept he had recently come across. The MD thought the solution lies there. The consultant refused to undertake the assignment, realizing that TQM could never operate under such a hypocrite. Unfortunately, such intellectual hypocrisy is quite commonly found among top management.

LOSING THE WAY Armed with maps, binocular, compass, etc., a tourist was in search of an exalted shrine in a dense jungle, it was his cherished desire to visit the shrine. He was unsure where to find it, but with help from other tourists and the jungle-guide he found the path to his cherished destination. After a few days, however, the man was found still struggling to find his way. When asked, he said that many other shrines he came across on the way had confused him and as such could not recall anymore the mental image of the shrine he wanted to visit. This can also happen in business, where plotting a course becomes an exercise in futility unless one is clear about the destination. Envisioning should not become a hypothetical exercise.

‘VISION’ HAS TO BE REDEFINED AND RELIVED Scenario A The early death of his father left eleven-year-old Shankar Mathur responsible for his family. He used to go to school in the morning and later worked a second shift as a machine-helper at a local printing establishment. At the age of fifteen, he somehow bought a second hand ‘Treadle’ machine, and developed a cheap indigenous wooden press—the sort used to hand print leaflets and pamphlets—and started his own business from one dingy rented room. By catering to small odd batches of flexible print jobs, he earned enough money to look after the family. Within two years he bought a second-hand ‘letterpress’. Shankar Mathur was a man not to be cowed down by the cruelty of fate. With initial success, young Mathur envisioned his ‘Press’ becoming the largest in the town, taking on all types of printing jobs. He was in a hurry and believed that buying second hand machines was the best route to quick growth. However, one of his trusted managers warned him against the quality issues that may crop up with second hand machines. But Mathur went ahead with his plan, as his strategy

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426 FEW CASES AND QUOTES was to capture the expanding market by quickly creating more capacity at minimal cost. And in less than ten years time Mathur realized his dream of becoming the largest printer in the town. Despite having the largest capacity in town, his delivery schedules used to falter due maintenance and quality problems with the second hand machines. High maintenance cost and financial losses due to chronic quality problems adversely affected the bottom line. The swindling order book further aggravated the financial crisis; the entrepreneur’s dream started faltering. Added to this despair, state of his heath became a matter of concern for the family and also for the business.

Scenario B His father’s failing health and dwindling profit margins prompted Prahlad, the eldest son of Shankar Mathur, a final year BA student to give up studies and take over the reins of the business. His immediate task was to survive and retrieve the company’s image as a house of quality printer. Focusing on quality as principal strategy, he was soon able to stop the rot, regain the market, plug the losses and earn profits. He now redefined his father’s vision to becoming ‘the largest printing and publishing house of the country. In order to realize this redefined vision he undertook to study the changing needs of the customer & market, and then strategize accordingly. As a part of the strategy he decided to modernise his ‘press’—he acquired a battery of sheet-fed printing machines while other printers still continued using the traditional ‘Treadle’ and Flat-bed printing machines. He was the first entrepreneur in the country to import four-colour offset machines. He thus created capacity to cater to high volume requirement as well as capability of high quality printing in both black & white and two & four colours at reasonable price and short delivery time. He opened new printing presses in several other states of the country. Having created enough printing capacity, Prahlad Mathur ventured into publishing school and college textbooks, besides promoting vernacular authors. Soon the printing press had the largest share of the growing market. Mathur, now a renowned businessman, moved into a stately mansion along with his brothers as he still cherished the old joint-family traditions, ties, and values. Several real estates that he acquired were all registered in the joint name of all brothers. He acquired real estate with his brothers. Energized by the success of his business, Mathur dreamt of becoming a business icon. He successfully acquired diversified businesses such as sugar, tea-plantation, confectionery, scientific instruments, a weekly news magazine, real estate development, etc. Pralhad Mathur was perhaps a born genius, however, he never considered introducing professional management techniques for vertical and horizontal expansion. He always used to act on instinct and tackled the requirements and problems of his diverse businesses with ease. He made an organizational structure for himself comprising mediocre persons with low ambition and high loyalty to their boss, who followed his instructions to the letter. He only employed doers, not thinkers. He paid his employees very little but being a sagacious employer hardly sacked any employee. Reprimanding was limited to cancelling their annual

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MIRAGE 427 increment. He was an autocrat in his management and never delegated any responsibility to any of his five brothers as he saw a gulf of intellectual difference between himself and others. It was true with his senior managers and worse, treated them with contempt. He also sceptical about the calibre of his only son who graduated in mechanical engineering, and entrusted him with an insignificant job of overseeing the maintenance of the main printing press. Further, his affection made him keep his brothers and son away from the complications of business. Therefore he never shared his visions and strategies with anyone, neither with his brothers who legally had equal rights in the business. The one-man show inevitably came to an end with the failing health of Pralhad Mathur. Bed ridden and marginalized by his brothers who now challenged his authority, Mathur had to helplessly witness the downfall of his business empire. Having been silent beneficiaries all this while, the brothers and his son all lacked management experience or acumen in basic management skills like strategic planning, marketing, finance, leadership, etc. The infighting amongst the brothers made the things worse, all of them were busy in hiving off money. In absence of professional management, the brothers failed to tackle the ever-growing business complexities including competitive challenges. Except for publishing and printing units all other businesses were closed or hived off, even the core business of printing and publishing lost many lucrative markets. After the death of Prahlad Mathur, disputes started erupting among his brothers who had only united to marginalize Mathur’s son. They had no common aspiration, and narrow selfish motives ruined their family and business. Even the third generation could not break free from the mistrust that had damaged the family ethos. The young brigade lacked vision and lived off the properties and residual liquidated assets of the empire built by Pralhad Mathur, instead of trying to revive it. Stories like these are not uncommon in India, or elsewhere in the world. For an organization to thrive as well as live through the generations, the founders must bring in professionalism in the management, otherwise the ‘Vision’ dies with them.

FUZZY FOCUS Metal Box India was one of the blue chip companies of India. The company grew out of a multinational giant and thrived on its virtual monopoly market. Success over the years induced arrogance and blurred their vision. The top management could not perceive the opportunities available with the new packaging technologies in a fast-emerging market. They assumed that the alternate packaging medium would not be able to replace metal containers. Discounting its own core competency in packaging, the company instead decided to venture in manufacturing & selling Ball & Taper Roller Bearings in order to fulfil its aspiration to become a conglomerate. The company had no experience whatsoever in precision engineering technology required manufacturing Ball & Taper Roller Bearings. Being the best in the manufacture of metal containers, Metal Box top management thought they could manage any technology or business with the same structure and management style

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428 FEW CASES AND QUOTES as they have been hitherto using. In its strange wisdom, the company even sold off its paper and plastics plant, citing poor margins as an excuse, when paper and plastic packaging were making its impact felt throughout the packaging world. The company made fairly large investments in the bearings plant, and some marginal investment was also made in machinery business to manufacture odd printing and packaging machines. But there were major gaps in investments with respect to actual requirements and even the product mix the new investments were haphazardly chosen ignoring the market necessity. Astonishingly neither the ‘Know-How’ nor the tools for railway bearings were procured from the foreign collaborators though the project report approved by the financial institutions clearly indicated various railway bearings as major contributors to volume and profit. The selected product mix for the Ball & Taper Roller Bearings plant was totally incomplete for the targeted industrial and automotive segments. Similarly the investments at machinery business completely ignored the ideal product-mix to serve the respective market segments. The arbitrarily selected product-mix consisted of just one single model & size each for tube filling machine and cartooning machine meant for packaging segment and one model of single colour double demy sheet-fed offset printing machine for paper printing segment. Hardly a machinery manufacturing business could be viable with this incomplete product range. Also, there was no clear thinking if the machinery business will concentrate on packaging machines or printing machines. These examples clearly show management’s total ignorance about the market realities of the new businesses, and lackadaisical approach towards investment planning. As opposed to the industry norm of several years’ gestation period for a new bearings unit, Metal Box had arrogantly considered the break-even point in the second year itself. Further, the company had assumed that they could improve the process and reduce the operational cycle times to almost half of that recommended by the collaborators, and thereby almost doubling the production capacity. These deceitful assumptions were considered in financial projections. Even before assimilating the technology, Metal Box management resorted to tinkering with the process recommended by the collaborator to reduce cycle time. This cavalier approach led to serious operating and quality problems as processes were thrown out of gear. The company ran into serious conflict with their foreign collaborators who refused further help. The mounting losses severely affected the overall health of the company. The Metal Box management neither knew about the intricacies of precision technology and bearing market nuance, nor did they realize that they required different management expertise to run a bearings plant. Even when they brought in a new GM who was experienced in precision technology, the management at Metal Box could not appreciate or understand his language, and interfered with his decisions and suggestions. Instead of working on the revival plan suggested by the new GM, the Metal Box management was busy convincing the parent company in UK, to hive off the business. The company ultimately sold off the Bearings unit, the irony being that the new owners were able to register growth and profit within two years time.

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MIRAGE 429 The businesses of manufacturing and selling bearings, and offset printing and packaging machines were not at all irrelevant to the Indian market then. Without analysing its core business competence and growth opportunities, Metal Box India had taken the wrong route to diversification. Their main business of metal containers had also started losing its ground to the other manufacturers of metal containers who were offering competitive prices as well as to the alternative packaging solutions. Ultimately the parent company in UK lost its interest in their Indian unit and sold its stake in India. Even the new owner could not revive the business and finally the company went into protracted closure.

METEORIC RISE AND ABRUPT FALL Harold Sydney Geneen was the one who turned the International Telephone and Telegraph Company (ITT) from its morbid state into one of the largest and powerful conglomerates in the world. But ironically his policies were responsible for the catastrophic collapse of the firm within a few years of his retirement. This is an interesting case study that shows the pitfalls of traditional management. Colonel Sosthenes Behn, the founder of ITT, had started by purchasing a Cuban telephone company in 1929, which set up and acquired several telephone companies in Latin America, as well as built communication networks for the US Defence Department. The company took quite a beating in World War II, as most of its operations were abroad. Things did not improve after the end of the war, and all its efforts to find a new niche in the US market or by expanding overseas failed miserably. The situation worsened as Fidel Castro nationalized the Cuban company in 1960 without any compensation. The founder could not have foreseen this catastrophe, and the telephone company managed to keep afloat on its surviving businesses in other parts of the world. Colonel Sosthenes Behn died a bitter dejected man in June 1957, unable to realize the dream of a successful global company. On 19 June 1959, Harold Sydney Geneen became the chairman of ITT. Two years after Geneen took over, the turnover was a mere 765.6 million dollars, with a wafer thin profit margin of only 29 million dollars—which included 15 million dollars from other sources of income and 3 million from selling the headquarters building in lower Manhattan. In 1977, when Geneen retired, the annual sales had reached 16.7 billion dollars, with earnings of 562 million dollars: profits increased almost twenty times. The company was rated 11th on the Fortune 500 list. Of the ten companies ahead of ITT, 6 were oil companies with tremendous resources. At 7th and 8th positions were the automobile giants General Motors and Ford respectively. This dazzling achievement within a span of only eighteen years under the leadership of Geneen epitomized the virtues of Taylorism. The strategy of ‘unified-management for a multi-product company’ pursued by Geneen was behind this phenomenal growth of the ITT. Taking the route of mergers and acquisitions, the company had brought under its fold some 350 different businesses in eighty countries and transformed them into profit-making units.

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430 FEW CASES AND QUOTES Besides its original business—manufacturing highly sophisticated telephone and telegraph equipment, and operating telephone networks—their diversified business activities now included confectionery, hotels, insurance, publishing, real estate development, manufacturing pumps and valves, lawn products, automobiles, electrical equipment, rent-a-car businesses, etc. These entities were not divisions or subsidiaries; they were large companies in their own rights with turnovers grossing over a billion dollars. Continental Baking, Avis Rent-A-Car, Sheraton Hotels, Hartford Insurance, etc. were leading brands in their own fields. ITT produced more valves and industrial pumps than any other company. Geneen bulldozed a one-track policy to keep the company growth to at least 10 per cent a year irrespective of business environment. His directive was candid that ITT had to be number one or two in the businesses under its fold. ITT achieved exactly what Geneen had aimed for; irrespective of good or bad years ITT declared profits of 10–15 per cent. Under similar market conditions, the other companies of comparable size could only increase their earnings by a maximum of 5 per cent. During the seventeen years of Geneen’s reign, ITT failed only twice to make a minimum 11 per cent gain over the previous year’s earnings—in 1974 and 1975 respectively—because of the oil embargo, energy crisis and fluctuations in the exchange rate of US dollars. Geneen always stressed that the result of first quarter sets the trend, and in pursuance of that dictum the company did establish a record fourteen and half years of increased earnings over fifty-eight consecutive quarters. This impressive showing made the company, and Geneen in particular, the favourite of innumerable investors as well as the stock exchange. Many other companies were offering to recruit ITT managers, and from late 1960 to early 1970, businesses throughout the world adored ITT for its remarkable achievements. After Geneen’s retirement, his successors continued to follow the same strategy and style that they had learned over the eighteen years of guidance received from Geneen. Conditioned by Geneen’s way of thinking, the management did not realize that they were camouflaging the long-term perspective with short-term gains. The resultant apathy towards quality, insensitivity towards the real needs of consumers, and ignorance of basic operating inefficiencies were now posing a serious threat to the company. The financial manipulation of high price-to-earnings ratio year after year destroyed the very fabric of management at ITT. The bubble of concocted success had to burst someday or other! The inevitable started to happen within a few years after Geneen retired. Quality and other problems started surfacing at almost all of their businesses. The governments of France and Puerto Rico soon nationalized their respective phone networks owing to chronic quality problems. The banks and investors, who were blinded by their apparent success all this while, could never have imagined that the astounding returns quarter after quarter were all due to financial manipulations. It was a plunge from the pedestal of fame and glory to universal condemnation by clients, investors, and bankers. Sensing irrevocable problems at some of its major subsidiaries, the conglomerate had to sell them off. Soon, ITT shrank to a fraction of its former size; it was one of the largest and most powerful conglomerates to have fallen flat hitherto.

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MIRAGE 431 Critical study of the book Managing1 written by Geneen will help to unscramble the reasons of unusual failure of the apparently obvious and rational approach followed by Harold S. Geneen. He exhorted his managers to work backwards to find out ‘what’s’ they have do to reach the end i.e. 10 to 15 per cent growth a year ‘under any conditions’. His famous three-sentence course2 on mangement, ‘You read a book from the beginning to the end. Yon run a business the opposite way. Yon start with the end, and then you do everything you must to reach it’, and his famous one line memo, ‘There will be no more long range planning’ characterize his arrogance and utter contempt towards management philosophy. Geneen did not believe in up-steam process quality—he was more interested in controlling the downside. He exhorted his managers to work backwards to find out ‘what’s’ they have do accomplish to reach the end i.e. 10 to 15 per cent growth a year ‘under any conditions’ invariably lead to sacrificing quality, manipulation, and sacrificing longterm improvement plans. After all managers wanted to save their skin as Geneen made his policy clear that all his management teams would be judged by one criterion alone—’performance.’ i.e. achievement of this stretch target. Geneen’s strategy had been purely on result orientation as opposed to TQM strategy of process-orientation. In TQM the ‘means’ of achieving a target is always given more importance than the target itself to ensure proper and continuous improvement of process, which automatically yields better end-results. But Geneen believed that meeting the quarterly targets was sacrosanct and long range planning would only divert attention from achieving these quarterly targets. While in TQM major focus is laid on customer satisfaction, people orientation and continuous process improvement, in ITT they did not have much time for these. The ‘top down’ management style of Geneen did not care for tenets or values, and absence of these characteristics led to the ultimate collapse of house of cards he built at ITT. There was no ‘institutionalised team-working’ and there was no question of teams setting team goals to meet the long-term objectives, it was rather ‘teaming-up’ to manipulate and juggle to achieve the short-term goal of meeting the quarterly budgets.

Notes 1. Harold Sydney Geneen, Managing (London: Grafton Books, A Division of the Collins Publishing Group, 1986). 2. Ibid, p. 27.

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Epilogue eaders are once again reminded about the hypothesis emphasized in this book that total quality of management will be eluding unless a management is able to imbibe the core philosophies of TQM and act in accordance with principles. A conscientious management will pursue organizational excellence to attain longterm stability and prosperity ignoring the allurement of short-term gains. Indian economy need to continuously register healthy growth and simultaneous generation of multiple job opportunities is a must to systematically alleviate unemployment problem of the multitude. Only these two factors along with few other critical parameters can raise the living standards and improve quality of life. Consistency and constancy of efforts of politicians, businessmen, and professionals towards this integrated task of national resurrection is a prime prerequisite. The politicians, bureaucrats, intelligentsias, and academicians, particularly of the developing counties like India and others must realize that they are indeed in a new economic & social age where social obligation and responsibility cannot be wished away. In the task of national resurrection their quality of leadership and management is critical for the quantum and velocity of success. One need not search for complicated & elaborate recipe to enhance the total quality of leadership and management, rather embrace the principles of TQM to get effective and sustainable success. Correct comprehension and sincere implementation of TQM principles not only augments personal quality, but helps to institutionalize total quality of management in the leader's sphere of activities or influence. The demeanor, policies and actions of handful of persons i.e. persons at helm of affairs in governance, business, politics, and public institutions, impact the well being of society and lives of millions. Total quality of management has to be applicable to such people but there cannot be any diktat to this effect - it is only through self-realization or some sort of paradigm shift leaders or managers would embrace TQM philosophy so as to become quality persons and move towards total quality of management in their field of activities. One cannot just wish to transform one self and be a catalyst to this righteous task of national resurrection. One has to chart a process or way how to go about it. The compilation of ten essential steps is intended as guidance, and to accord due importance the ten essentials has been symbolically designated as Ten Commandments for Leaders, Businessmen and Top Management.

R

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434 EPILOGUE

Ten Commandments for Leaders, Businessmen and Top Management Embrace the philosophy Study in depth the philosophy & approaches of TQM. TQM philosophy awakens the entrepreneur and the top management about their real intrinsic role, responsibilities and obligations. Further, the philosophy provides direction as well as inspiration for the new journey.

Develop your own module, and keep it straight and simple Do not make it complicated or cumbersome. It will be wise if management can seek the help of an experienced consultant who is not biased by a particular approach. Such step should be able to bring fresh thinking.

Take extra measures to ensure total quality in whatever one does Take meticulous care even for the apparent mundane items like housekeeping, canteen facilitates, parking lot, office & factory ambience, etc create basic environment for quality. Followers or employees get inspiration from the exemplary behavior set by the leaders. Therefore, visibility of commitment of top management towards total quality is a much bigger issue than merely an issue of corporate transparency. Total quality of individual members of top management is critical as their behavior, style, compliance, commitment, and decisions have cascading effect across the organization. Top management must establish ‘quality first’ as the basic policy, prioritize quality initiatives in all facets of operations and assume leadership in bringing about changes including breakthroughs.

Think big-set high expectations and involve people in your dream Management of expectation is vital but equally crucial is involvement of all concerned. People from different backgrounds breaking the social/departmental barriers will play effective role in the management of expectations provided they also have the ownership of the dream. The crucial step therefore is the involvement of people in the process of visualizing the desired future state and this imperative calls for institutionalizing the process of sharing & documenting the vision.

Banish ego, practice humility, and respect human dignity Egotism is induced by odd successes, and positional power. Ego prevents new learning and tramples human dignity. This deadly disease deserves surgical removal. Believe sincerely in people's inherent talent & capability, and dismantle those systems and procedures that dishonor human dignity and stymie the individual drive and creativity. It is essential for leaders/top management to be more self-critical for introspection and subsequent self-improvement efforts.

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EPILOGUE 435

Be serious in self-education, have no inhibitions The leaders/top management must make conscious self-improvement effort in order to get prepared to shoulder the greater role for the society. And this necessitates vigorous training for the top management professional or leader. Unfortunately leaders/top management pay little or no attention to their selfdevelopment. They must learn through constant evaluation of their work or involvement against the own proclaimed vision.

Assiduously promote partnerships with supply and delivery chain entities Consider the supply and delivery chain entities as part of the “extended” organization and therefore take genuine interest in their growth and prosperity. Create a supportive framework to institutionalize the concept. Also the management should promote collaborative effort between different functions and departments to initiate efforts engulfing product-quality improvement, cost reduction, new product development, policy deployment, process simplification, designing distinctive service, etc.

Live Modestly The leader or top management need to be moderate in how they live and conduct themselves, they should desist from vulgar displays of wealth which insults the poverty of the less privileged. It is socially wasteful and it plants seeds of resentment in the minds of have-nots. The industry needs to dispel the perception that big business is bad and selfish and should be more sensitive to the perceptions of employees and common man in general.

Do not delegate the implementation of TQM TQM is basically an issue of management of change or transformation and as such in this new era implementation of TQM has to be the principal task of top management. Delegation in this case means virtual abdication of responsibility. Identify and develop a critical mass of people who will be the flag bearer of the movement but top management’s role should always be a vanguard in promoting total quality across the organization. Also remember that change for sake of change is playing to the gallery.

Be firm but pragmatic. Have conviction and courage to work for long-term objectives. Practice PDCA Beware of unconsciously getting trapped in developing a dogmatic approach; be pragmatic while implementing your module, you can move cautiously or step-bystep depending on your unique situation. But the most important thing is to remain firm about your conviction and have the courage to take decisions for attaining long-term objectives. Leaders and top management should routinely practice PDCA cycle so that it becomes part of their habit & culture to review the progress and undertake course-corrections. This will ensure constancy and consistency of purpose.

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Bibliography Aguayo, Rafael, Dr Deming: The Man Who Taught the Japanese About Quality (New Delhi: Viva Books Private Limited, 1992). Belasco, James A., Teaching the Elephant to Dance (New York: Crown Publishers Inc., 1990). Berk, Joseph and Susan, Total Quality Management: Implementing Continuous Improvement (New York: Sterling Publishing Company, Inc.). Besterfield, Dale, Carol Besterfield-Michna, Glen Besterfield and Mary Besterfield-Sacre, Total Quality Management (Delhi: Addison Wesley, 2001). Breyfogle III, Forrest W., Implementing Six Sigma (New York: John Wiley & Sons, Inc., 1999). Charantimath, Poornima M., Total Quality Management (Delhi: Pearson, 2003). Clarke, G. M. and D. Cooke, A Basic Course in Statistics (London: Arnold Publishers, 1992). Cocheu, Ted, Making Quality Happen (San Francisco: Jossey-Bass Publishers, 1993). Conger, Jay A., Winning ‘em Over (New York: Simon & Schuster, 1998). Cringely, Robert X., Accidental Empires (New York: HarperBusiness, 1993). Crosby, Philip B., Let’s Talk Quality (New York: Penguin Books, 1990). , Quality Is Free (New York: A. Mentor Book, 1980). , Quality Without Tears (New York: A Plume Book, 1985). , Running Things (New York: A. Mentor Book, 1989). , The Eternally Successful Organization (New York: A. Mentor Book, 1992). Davidow, Willam H. and Michael S. Malone, The Virtual Corporation (New York: HarperBusiness, 1992). Davis, Stan, and Christopher Meyer, Blur, the Speed of Change in the Connected Economy (Massachusetts: Addison-Wesley, 1998). Deming, W. Edwards, Out of the Crisis (Madras: Productivity and Quality Publishing Private Limited, 1992). Drucker, Peter F., The Practice of Management, (New York: HarperCollins Publishers, 1953). Economic Times, Kolkata, 21 March 2002. Egan, Gerard, Adding Value (San Francisco: Jossey-Bass Inc, 1993). Feigenbaum, A. V., Total Quality Control, Engineering and Management (New York: McGrawHill, 1961). Fortune, 28 September 1987. Fucini, Joseph and Suzy Fucini, Working for the Japanese—Inside Mazda’s American Auto Plant (New York: The Free Press, 1992). Fuller, George, Win–Win Management (New Jersey: Prentice Hall, 1998). Gates, Bill, Business at the Speed of Thought (London: Penguin Books, 1999). Geneen, Harold Sydney, Managing (London: Grafton Books, 1986). Gilmour, Peter and Robert A. Hunt, Total Quality Management (Melbourne: Addison Wesley, 1996).

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438 BIBLIOGRAPHY Goldsmith, Walter and David Clutterbuck, The Winning Streak Check Book (Harmondsworth: Penguin Books, 1986). Hammer, Michael and James Champy, Reengineering the Corporation (New York: HarperBusiness, 1993). Harmon, Roy L., Reinventing the Factory II (New York: The Free Press, 1992). Hazarika, Anjali, Daring to Dream (New Delhi: Response Books, 1997). Hutchins, Gregory B., Introduction to Quality (Singapore: Maxwell Macmillan International Publishing Group, 1991). Imai, Masaaki, Kaizen (Singapore: McGraw-Hill Inc., 1991). Ishikawa, Kaoru, What Is Quality Control? The Japanese Way (New Jersey: Prentice-Hall, Inc., 1985). Johansson, H. Thomas, Relevance Regained (New York: The Free Press, 1992). Juran, J. M., Juran on Planning for Quality (New York: The Free Press). , Juran on Quality by Design (New York: The Free Press, 1992). , Juran’s Quality Control Handbook (New York: McGraw-Hill, 1962). , Managerial Breakthrough (New York: McGraw-Hill, 1964). Kaplan, Robert S., and David P. Norton, ‘The Balanced Scorecard: Measures that Drive Performance’, Harvard Business Review, Vol.70, no.1, January–February 1992. Kearns, David T., and David A. Nadler, Prophets in the Dark (New York: HarperBusiness, 1993). Kotler, Philip, Marketing Management, (New Jersey: Prentice Hall, 2000). Liker, Jeffrey K., The Toyota Way (New Delhi: Tata McGraw-Hill Publishing Company Limited, 2005). Mahesh, V. S., Thresholds of Motivation (New Delhi: Tata McGraw-Hill, 1993). Mann, Nancy R., The Keys to Excellence, The Deming Philosophy (New Delhi: Viva Books Private Limited, 1992). Maslow, Abraham, ‘Theory of Human Motivation’, Psychology Review, Vol.50, Washington, 1943. Mitra, Amitava, Fundamentals of Quality Control and Improvement (New York: Macmillan Publishing Company, 1993). Moore, Geoffrey A., Crossing the Chasm (HarperBusiness, 1991). Moroney, M. J., Facts from Figures (Harmondsworth: Penguin Books, 1962). Nutt, Paul C., Managing Planned Change (New York: Macmillan Publishing Company, 1992). Pande, Peter S., Robert P. Neuman, Roland R. Cavanagh, The Six Sigma Way (New York: McGraw-Hill, 2000). Peters, Thomas J., and Robert H. Waterman Jr, In Search of Excellence (New York: Harper & Row Publishers Inc, 1982). Peters, Tom, Liberation Management (London: Pan Books Ltd, 1993). , Thriving on Chaos (New York: Alfred A. Knopf, 1988). Robbins, Anthony, Awaken the Giant Within (New York: A Fireside Book, 1992). Robson, George D., Continuous Process Improvement (New York: The Free Press, 1991). Sashkin, Marshall and Kenneth J. Kiser, Total Quality Management (Maryland: Ducochon Press, 1992). Scherkenbach, William W., The Deming Route to Quality and Productivity (New Delhi: Viva Books Private Limited, 1992). Schonberger, Richard J., World Class Manufacturing Casebook, Implementing JIT and TQC (New York: The Free Press, 1987). Secretan, Lance H., Reclaiming Higher Ground, Creating Organizations that Inspire the Soul (New Delhi: Response Books, 1996). Semler, Ricardo, Maverick (London: Arrow Books, 1994).

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BIBLIOGRAPHY 439 Senge, P. M., ‘The Leader's New Work: Building Learning Organization’, Sloan Management Review, MIT, Fall 1990b. Smith, Douglas K., Taking Charge of Change (Massachusetts: Addison-Wesley, 1996). Sueno, Akira, Entrepreneur and Gentleman (Tokyo: Charles E. Tuttle, 1981). Sunday Times, Times of India, Kolkata, 18 April 2004. Suzaki, Kiyoshi, The New Shop Floor Management (New York: Free Press, 1993). Tagore, Rabindranath, Geetobitan (Kolkata:Vishwa Bharati, 1978). Tenner, Arthur R., and Irving J. DeToro, Total Quality Management, Three Steps to Continuous Improvement (Massachusetts: Addison-Wesley, 1995). TIME, May 1987. Times Business, Times of India, Kolkata, 30 March 2010. Tregoe, Benjamin B., John W. Zimmerman, Ronald A. Smith, Peter M. Tobia, Vision in Action: A Fireside Book (New York: Simon & Schuster, 1989).

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Index A Acceptance reality, of, 66 Acquisitions organizations, in, 126 American Society for Quality Control, 312 Analysis. See Pareto diagram Analysis of variance, 356 Analysis of variation (ANOVA), 76 Annual merit rating system. See Performance appraisal system Appraisal cost, 312 Assignable cause variations from, 72 Attribute charts types of, 349 Automation variation impact, on employees, 77 Autonomation, 187 Auxiliary customers, 140 Awards to employees and organizations, for effective of implementation of TQM CII-EXIM Excellence Award (see CII-EXIM Excellence Award) Deming prize (see Deming prize) European Quality Award (EQA) (see European Quality Award (EQA)) Malcolm Baldrige National Quality Award (MBNQA) (see Malcolm Baldrige National Quality Award (MBNQA)) B Balanced score card (BSC) components of, 393 importance of, 392 steps, 394–395 weakness of, 395 Balance of trade (BOT), 72

Benchmarking advantages of, 87 meaning of, 87 planning for, 89 types of best-in-class (see Best-in-class benchmarking) competitive benchmarking (see Competitive benchmarking) customer-driven competitive (see Customer-driven benchmarking) internal benchmarking (see Internal benchmarking) internal product benchmarking (see Internal product benchmarking) process or generic benchmarking (see Process or Generic benchmarking) usage of tools in, 89-90 Best-in-class benchmarking, 88 British Standard 6143, 312 Built-in quality, 33 Bureaucracy, 93 private sector, in, 285 Business process and quality, 164–165 Business process outsourcing (BPO), 127 Business process re-engineering (BPR) definition of, 193 Hammer and Champy stress, on keywords, 194–195 information technology role in, 199–200 principles of, 194 relevance of traditional business processes, questioning of, 193–194 C Cause-and-effect (C-E) diagram, 344–346 Check sheet requirement of, 341 CII-EXIM Excellence Award, 390-392

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442 INDEX Common cause, 73 Communication role in total quality management, 113 Company-wide quality control (CWQC), 25 Competitive benchmarking, 88 Competitive market reality of, 295 Consciousness about quality, 16 Constant cause variation from, 72 Continuous cycle, 83 Continuous process improvement (CPI) controversies, 173 cultural requirements, to institutionalise, 175–176 features of, 176 measures of, 176–177 objective of, 173 Control Taylor emphasises on, 84 Control charts, 225–226, 346 attributes, for, 226–227 purpose of, 347 types of, 224, 348 use of, 224 Corruption, 92 Cost quality, of, 41–42 reduction to improve quality of products, 296 Cost effectiveness process orientation, in, 168 Cost of poor quality (COPQ), 310–311 Cost of quality, 310–311 Creative tension principle of, 98 Culture old, 109 organization, 108 total quality management, in, 108–109 Customer-driven benchmarking, 88 Customer relationship management (CRM) objective of, 156–157 origin of, 155–156 Customer(s) classification of, 39 identification of auxiliary customers (see Auxiliary customers) direct customers (see Direct customers) indirect customers (see Indirect customers) regulation bodies, 141

secondary customers (see Secondary customers) market forces impact on (see Market, forces impact on customer) monitoring of feedback given by, 135 needs of classification, 145 cultural, 146 determination, 143–145 perceived, 146 real, 145–146 stated, 145 techniques for determination, 147–149 translation, 149–151 unintended, 146–147 opinion leaders impact on, 141 orientation of, 135, 136, 160 relationship with methods for maintaining, 159 strategic steps to maintain, 157–159 service to, 151–155 D Data collection relevance of, 216 deh-MAYihk (DMAIC), 238 De-layering management structure, of, 115 Deming prize, 380–384 Deployment quality, of, 21–22 Design of experiments (DOE) characteristics of, 358 goal of, 358 objective of, 358 principles of, 357 results of, 357 and statistical process control (SPC) (see Statistical process control (SPC) and Design of experiments) technologies in, use of, 358–360 useful tool, for organization, 356 Detrimental assignable causes. See Special cause Direct customers, 139–140 Disciplines quality, of envision of future, by organization, 12 eternal values and principles, centering on, 12 management of entropy, 13 passion about nation, 14–15 philosophical indoctrination, 13 proactive work culture, 14

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INDEX 443 self-appraisal, 15 thinking quality, 11–12 Dr Iishikawa, ‘Start with education and end with education,’ 14 E Education to professionals, of total quality management, 256–262 Efficiency, 400 Ego among employees, 93–94 shedding of to embrace trade union leaders, 420 Employee schemes for involvement, in organization activities, 276 Environment creation of listening, 114 influence on human behaviour and organizational characteristics, 112–113 proactive organizational, 115 European Quality Award (EQA), 388–390 Exhortations, 280–281 F Fear, 115, 265–269 induction of manipulation, 415 Financial control organization, by, 78–79 danger in management of, 79 lack of knowledge, on variation among managers, 79 Four-step cycle, 83 Frequency distribution, 217 contribution of, 219 meaning of, 218 uses of, 220 Fuzzy focus organization, of, 427–429 G Gaussian curve, 215 Generic benchmarking, 88 Goalpost philosophy of quality management, 81 Goals attainment through detrimental means, 415–416 Graphs, 349–350 Gross domestic product (GDP), 72 Gross national product (GNP), 72 Groups, 212

H Hassles private sector, in, 285 Hierarchy of needs, 252 Histogram, 342–343 steps for constructing, 341 utility and benefits, 342 Hoshin Kanri or planning, 370 conditions for implementation, 372 maturity of, 372 principles, 371 Housekeeping quality reflection of organization, 262–263 Human resources investment in, 403–404 Hypocrisy, 424–425 I Indirect customers, 142 Information management role in total quality management, 123–124 Innovation approach of, 205 as business imperative, 203–204 characteristics of, 205 vs. invention, 203 Intangibles significance, in total quality management, 34 Integrity system table pillars of, 273 Intellectual Property Rights (IPR), 126 Internal benchmarking, 87–88 Internal customers, 141–142 concept of, 39–40 Internal product benchmarking, 88–89 Involvement of employees, in organization mission, 419–420 Ishikawa/Fishbone diagram. See Cause-andeffect (C-E) diagram ISO 9000 standard principles, 375 and process orientation, 171–172 purpose of, 373 recommendation for effective implementation, 375–377 ISO 9001 standard acceptance by trade unions, 377 documentation of, 375 importance of, 373 ISO 9001:2000 standard, 376 clauses, 373–374 ISO 14000 standard, 378

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Page 444

444 INDEX ISO 14001:1996 standard clause 4 of, 379–380 management actions, for institutionalizing environment management system (EMS), 378 J Japanese Union of Socialists and Engineers (JUSE) constitution of committee, to develop quality check tools, 352 quality check tools recommended by (see Quality check, tools recommended by Japanese Union of Socialists and Engineers (JUSE)) Jidohka. See Autonomation Just-in time (JIT), 187 definition, 184 framework of, 185 implementation of, 188, 189 industries, in, 189 spaces for in-process stock, 188 K Kaikeyee syndrome, 92 Kaizen, 246 applied in industrial relations, 183 concentration of, 182 customer satisfaction, achievement of, 184 deployment of, 183 focus on short-term profits, 184 managerial responsibility, dimensions of, 183 meaning of, 182 Kamban meaning of, 188 Knowledge management impact of lack of knowledge on, 125 meaning of, 125 Knowledge organization relevance of, 110 L Leadership, 265–266 and involvement requisite for organization transformation, 420–422 Learning organization features of, 111 meaning of, 110 objective of, 110 relevance of, 110 restless against status quo maintenance, 111 Leveraging people potential, 247–252

Likert scale, 350 Living flower technology (LFT), 403 Loss function meaning of, 33 Taguchi’s theory of, 75–76, 81–83 development of, 82 Loyal customer, 295 Loyalty customer, to, 406 M Malcolm Baldrige National Quality Award (MBNQA), 384–388 Management by control, 95 duty to distinguish employees, 77 expectation, of, 96 Ishikawa's view on, 246 job of supervisor, to encourage suggestion from employees, 278 at operation level, 60 quotas, setting of, 272 by work standards, 271 work standard, use of, 272 Management by objectives (MBO), 59–60 Deming opposition to, 270 goal of, 271 loophole in, 271 objectives of, 269 overlooking of, constraints in system, 271 promotion of win-lose conflict, 270 Market forces impact on customer, 137–139 Means creation for organization, 400 Measurement quality, of, 56–57 total quality management, in, 205–209 Mindset, 94 Mistake(s) professionals, by kinds of, 73 Modern management philosophy opinion of managers of, 76 N Noise Taguchi’s on, 82 O On-line information organization, for, 123 Organizational actualisation, 110

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INDEX 445 Orientation towards people, 242 Over-adjustment. See Tampering Over production, 187 P Pareto diagram, 318–319 application principle of, 343–344 core of, 343 technique of using, 344 PDCA cycle, 86 application in continuous improvement, 175 categories of action in, 84–85 meaning of, 83 steps in, 83 use of, 87 People-aspect of management Deeming’s approach to, 245 People orientation policy(ies), 245–246 facets of, 253 focus of, 244 policies of, 243–244 self-esteem in, 254–255 strategies of essence of, 243 pre-requisites to institutionalizing, 243 total quality management, in, 242 Performance appraisal system, 282–285 fallacy of, 416–417 Pie chart, 350 Plan-Do-Check-Act, 84 Poor quality cost of, 297 Population meaning of, 211 Price role towards quality, 3 Price of conformance (POC), 310–311 Price of non-conformance (PONC), 310–311 Process changes to be done by top management, 168 criteria according to Juran, 163 definition of, 162–163 involvement of groups in, 163 Process benchmarking, 88 Process orientation cost effectiveness in (see Cost effectiveness, in process orientation) Crosby's approach on, 170 cultural aspects of, 172–173 for deployment of total quality management, 164 institutionalization of, 165–168

ISO 9000 standard and (see ISO 9000 standard and process orientation) Japanese industry, role in, 161 use of PDCA cycle for, 168 Product deficiency measurement of, 311–312 Product-out profit-oriented strategy, 135 Profound knowledge, 64 duties towards nation, 65 universalisation of business, 64–65 variation (see Variation) Project evaluation review technique (PERT), 89 Public domain quotes in, 400–401 Q QFD matrix, 89 Quality attributes of articles used, 8 civic discipline, 9 governance and community services, 9 housekeeping, 8 infrastructure, 8 interpersonal relationships, 7–8 management, 10 our environment, 9–10 product, 8 self, 11 services, 8 though and contemplation, 7 in transport and communication, 8–9 business process and (see Business process and quality) consciousness (see Consciousness, about quality) definition of, 15, 17, 55 as per ISO 8402:1994, 16 deployment (see Deployment, of quality) disciplines of (see Disciplines, of quality) economic compulsions towards, 18–20 evolution of, 5–7 management commitment, to improve, 57–58 measurement of (see Measurement, of quality) obstacles to, 20–21 significance of, 3–5 Taguchi methods, to improve robustness and robust design, 191 signal-to-noise ratio (S/N), 191–192 Quality check (QC) tools recommended by Japanese Union of Socialists and Engineers (JUSE) affinity diagram, 353 arrow diagram, 355

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446 INDEX matrix-data-analysis diagram, 354 process decision program chart (PDPC), 354–355 relations diagram, 353 tree or hierarchy diagram, 353–354 Quality cost, 310–311 analysis of, 318 application of, 319–320 implementation of program on, 316 measurement bases for, 313–316 prevention importance in, 317–318 Quality economics organization in, 294 useful for customers, 294 Quality first strategy, 38 Quality functional deployment (QFD) objective of, 364 stages of, 364 steps involved in, 364 use by Toyota, 408 utilization, of planning matrices, 363 Quality management Tom Peter’s steps to, 48–50 Quality policy deployment (QPD) objectives of, 362 principle of, 360, 362 structured methodology of, 361–362 Quality revolution Tom Peter’s, management principles of, 48 R Radar chart, 350 Recognition employees in organization, of, 273–276 Relative quality, 32 Reward employees in organization, of, 273–276 Reward system traps of, 417–418 S Scatter diagram, 350–351 SDCA cycle and PDCA cycle, 85 Secondary customers, 140–141 Self-appraisal quality, of, 15 Self-esteem enhancement of, 252 Six sigma aim of, 229 benefits of, 229–230 craze for General Electric (GE), 409–411 Motorola, 409

deployment of, 239 measurement of, 234–236 origin of, 228, 230 structured methodology of, 228 training on, 229 Special cause removal of, 75 variations from, 72 5-s system, 263-264 Standard operating practice (SOP) workplace, in, 174 Statistical process control (SPC) and design of experiments, 357 planning of, 227–228 Statistical quality control (SQC), 161 Statistics meaning of, 216 Supply chain management, 200–201 sourcing policy, change in, 202 Systems approach, 54 T Taguchi’s design of experiments impact of, 367 meticulous process planning, 369 orthogonal arrays (OA) by, use of, 368 strategy of, 366 and traditional system design, 368 Tampering, 74 monitoring of management, 75 Teamwork involvement of employee, 42 Thinking power employee involvement in, 419 Top management reorientation for, 289–293 Total productive maintenance (TPM), 177–179 concepts and strategy of, 179–181 implementation, practical approach for, 181 Total quality control (TQC). See Total quality management (TQM) Total quality management (TQM), 25, 275–276, 304–309 addresses basic trouble, in society and organization, 42 belief for, 107–108 business, universalisation of, 64–65 construction of culture for, 121–125 continuous improvement, in organization, 61 culture in (see Culture, in total quality management) education and training to professionals, 256–262

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INDEX 447 identification, analysis and control, of business cost, 297 involvement of people, in organization affairs, 285 nurturing, of human resources, 246 obstacles and deadly diseases, overview, 91–94 people orientation in (see People orientation, in total quality management) philosophy of built-in quality, importance of, 33 continuous improvement, 37–38 education, of human beings, 30–31 employers responsibility towards employees, 31 innovation, 38 intangibles, significance of (see Intangibles, significance in total quality management) loss function (see Loss function) loyalty, of customers, 31–32 management vision and purpose, 31 nation and society, responsibility towards, 26–27 new economic age, 27–28 orientation of people, through various training and education, 29–30 principal strategy, of quality, 28–29 problem-solving and prevention, development of new approach for, 37 process, focus on, 34–35 profit, 38–39 relative quality, importance, 32 responsibility of management, towards quality, 32 statistical techniques, 35–36 suppliers' process, 36–37 variation, importance of, 35 process orientation for deployment of (see Process orientation, for deployment of total quality management) profits in, 300–301 conceptualization of, 301–302 real proponents of, 174 responsibility of management, for problem solving, 60–61 setting up, of goals, 59–60 shaping of culture for, 128–131 statistical techniques use in, 210–211 statistics use in, 216 trade-unions role in role in total quality management (see Tradeunions, role in total quality management) variation, relevance of (see Variation, relevance in TQM)

voluntary separation schemes (VRS) in (see Voluntary separation schemes (VRS), in total quality management) Trade-unions, 272 role in total quality management, 126–128 Traditional financial management system, 302–304 Traditional management system, 275 influence by Taylorism, 272 reason for failure in, 169 Traditional systems of performance evaluation experiments towards methodology, 413 objective of, 412 requirement of material, 412 Training to professionals, of total quality management, 256–262 Training within Industry(TWI), 276 Transformation and quality improvement programmes principles for Crosby’s, views of, 50–53 Deming's principles for transformation, 43 Juran's recommendations, 50 Masaaki Imai and Kaizen, views of, 47–48 Transparency International (TI) study on corruption, 92 Triple role concept, 40 Typical re-engineered processes characteristics of change in organizational hierarchical structure, 199 combination of jobs, 195 decision-making power, on workers, 196 hybrid centralized/decentralized operations, prevalence of, 198 multiple versions, of processes, 196 performance of multi-dimension work, 198 performance of steps, in natural order, 196 reconciliation, minimization of, 197 reduction, in checks and controls, 197 U United Nations development Program (UNDP) study on corruption, 92 V Variance, 215 measurement of variation, 214 Variation(s) business, in, 69 causes, types of common cause (see Common cause)

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448 INDEX special or assignable cause, 72 due to operational decisions, 71 lacking impact, on managers, 76 lot-to-lot, 78 measures of, 221–224 as natural phenomenon, 70 processes, in, 70–71 quality characteristics and dimensional accuracy, in, 71 relevance, in TQM, 80 supplies, in, 77–78 Vedic Indian philosophy focus on Karma, 161 Vision awakening of emotion, 99 influence of, 99 mission of, 103–104

need to redefine and relive, 425–427 purpose of, 97–98, 100–103 values of, 103–105 eternal, 103–105 total quality management, 106 Voice of the customers (VoC), 363 Voluntary separation schemes (VRS) total quality management, in, 265 W Waste categories in production process, 186–187 Workplace standard operating practice (SOP) in (see Standard operating practice (SOP), in workplace) World Trade Organization (WTO), 126