BUSINESS EXCELLENCE THROUGH QUALITY MANAGEMENT

ABSTRACT
The author will illustrate the importance of what he calls the Circle of Satisfaction: a concerted
effort to delight customers, satisfy employees and streamline processes. These three elements,
working in harmony, have produced improved operational and financial results leading to
business excellence for Malcolm Baldrige National Quality Award winners and ocher highly
esteemed corporations in the United States.

Introduction
In the current global economy, business excellence can be achieved by understanding quality
management principles and implementing quality management practices. Initially, we need to
make a case for quality through economic justification. Several authoritative studies of Total
Quality Management (TQM) practices in the United States and their impact on business
excellence are presented. To that end, key quality management tools and techniques are
reviewed. The author has drawn upon personal experiences from over two decades of his quality
management journey. This presentation is dedicated in the memory of lace Dr Hans Bajaria, who
left an indelible mark with his unique expertise and wit, in spreading the message of business
excellence around the globe for over three decades.

A case for quality-economic justification

The US National Institute for Standards and Technology (NIST) looks into the performance of
Malcolm Baldrige Award winners by tracking a hypothetical sum in each of the 1991-2000
publicly traded Award recipient's common stock (NIST, 2000). The 21 companies as a group
outperformed the S&P 500 Index by 2. 94 to 1.00, achieving a 322. 78% return compared with a
I 09.68% return for the S&P 500 Index. Becker & Golornski (1993) published their findings
showing that 30 companies practicing TQM for an average of 6~ years achieved higher revenues
(8.3% versus 4.2%) and better productivity (decrease in employment by 6.5% versus 8.5%
increase in US employment). A seminal study done by the US General Accounting Office (1991)
of 22 Baldrige Award winners or site visit companies (from 1988 LO 1991) showed major
improvements in customer satisfaction, employee satisfaction, and operational performance
leading to better financial performance. The above-mentioned studies imply that an organization
that uses TQM has a better chance of achieving business excellence.

Quality management principles

Definitions of quality
There are many definitions of quality. One should have a personal definition, keeping in mind
that quality is defined from the customer's perspective. Here are a few examples:
• Doing the right things right the first time around.
• Fitness for use.
• Zero defects (meet the specifications).
• Reduction in process variation, focus on target.
• Big Q: performance, cost and schedule (favorite definition used at AT&T Bell Laboratories-
need all three attributes to achieve the Big Q)
• Customer delight.
• Absence of defects, presence of value.

Customer-supplier relationship
One of the simplest principles is the customer-supplier relationship as shown in Fig. 1 (AT&T,
1998). This relationship should be viewed from two perspectives-external and internal. In order
to delight the external customer, there must be a harmony among all internal process steps to
treat each other as internal customers and suppliers. With the internal cooperation and
collaboration, it is easier to focus on delighting the external customer. Although it sounds simple,
this basic principle requires discipline and constant work co implement it. With the right focus
and dedication, a better customer-supplier relationship can be achieved.

Deming cycle
Next we look at the Deming Cycle as shown in Fig 2. This calls for four basic steps to achieve
continuous improvement. The steps are: Plan, Do, Study and Act.
Quality management model
Next let us take a look at the quality management model, as shown in Fig. 3. This is the heart of
Total Quality Management. It shows that when we have excited employees, they will improve
processes and delight the customers. This, in turn, will lead to better operational and financial
performance. The Balanced Scorecard approach of Kaplan & Norton (1996) also advocates a
similar focus on customers, learning and growth (employees), internal/ business process and
financial.

USA Malcolm Baldrige National Quality Award Program (2002)

The Malcolm Baldrige National Quality Award in the United States recognizes organizational
excellence using seven criteria (see Fig. 4). These criteria have been used extensively to assess
organizations in their Total Quality Management journey.
• Leadership
• Strategic planning
• Customer and market focus
• Information and analysis
• Human resource focus
• Process management
• Business results

Quality management practices

Leadership
Leadership is the key driver for TQM. Without the active involvement and commitment of senior
leaders, the quality management journey becomes difficult and at times impossible. The role of
the leaders in TQM organizations is to:
• Lead developing vision, mission and values;
• Listen to customers, take actions;
• Review and use customer feedback;
• Listen to employees, take actions;
• Recognize employees;
• Work with key suppliers;
• Review strategic and operational performance;
• Be a champion for improvement;
• Provide necessary resources for process improvement;
• Remove any obstacles in improvement efforts.

There are several excellent books and references available on this vital topic. Notable among
them are works by Dr Stephen Covey (1990), Max DePree ( 1989), Dr Mike McGee (2000), and
so on.

Customer delight
The first item on the quality management circle of success deals with customer satisfaction. We
all have customers, whether external or internal. Unless and until we gather their requirements
and expectations, we cannot hope to meet (let alone exceed) their expectations (Carlzon, 1989).
Over the last decade in the US, a Voice of the Customer (VOC) process has been used by many
major organizations. The following captures the premise of VOC (Goodman et al., L 996).
• Voice of the Customer (VOC) is a comprehensive Systems Approach to effectively managing
customer needs and expectations.
• VOC requires systematically listening to multiple customer voices, analysing, prioritizing and
responding to customer issues.

The VOC Model is defined as follows:

• Capture: Multiple customer voices-direct and real-time feedback.
• Analyse: Integration of multiple customer voices and prioritization of key focus areas (VOC
Projects).
• Respond: Appropriate owners performing root-cause analysis to resolve key focus areas (VOC
projects).
• Verify: Communicate VOC Project Results to customers, obtain new inputs from customers.

Customer survey
We all experience customer satisfaction surveys in our busy life. Most of the time, we do not
participate (unless extremely unhappy) because the survey instrument is too long, complicated
and ill-constructed. Here is a simpler view on Customer Surveys by limiting things co five key
categories and no more than one page.
• Produce-features, functions.
• Delivery-reliability, accuracy.
• Service---staff know how, courtesy, responsiveness.
• Value-benefit received.
• Overall-repurchase, recommendation.
• Competition-your performance compared to other alternatives.

Here are some of the Best-in-Class examples from the Malcolm Baldrige Award winners for the
customer satisfaction area:

• Eastman Chemical Company (1993 Baldrige Award, Manufacturing): From 1989-1993, 100%
shipping reliability, from 1986-91, rated outstanding on produce quality, product uniformity,
supplier integrity, correct delivery, and reliability by customers.
• Federal Express Corporation (1990 Baldrige Award, Service): I 00% service standard, 12-
component index (Service Quality Indicator).
• The Ritz-Carlton Hotel Company (1992 & 1999 Baldrige Award, Service): 75% of its
customers would not use a competitor regardless of the offer.
• Xerox Corporation Business Products and Systems (1989 Baldrige Award, Manufacturing):
Puts the customer first. Powerful competitive strategy-delight the customers.

Employee satisfaction
A clear link has been established that shows that, in an organization, unless employees are
satisfied, one cannot expect customer satisfaction (Carr, 1990). Without looking after the well-
being of your own people through trust and care, do not expect your employees to help your
customers. A study by the Gallup organization, based on over a million employee surveys and
over eighty thousand manager interviews from a broad range of companies, industries, and
countries boils down to the following for effective focus on employees.
• Select a person . . . based on talents (not simply, experience, intelligence or determination).
• Set expectations by defining the right outcomes (not the right steps).
• Motivate a person by helping him focus on strengths (nor on weaknesses).
• Develop the person by helping him find the right fit (not simply the next rung on the ladder).
Source: Buckingham & Coffman (1999)

Some of the effective human resource management practices consist of:

• Participation (effective meetings, teamwork);

• Development (education and training, new employee orientation, mentoring, performance
appraisals);
• Motivation (recognition, suggestions system, employee satisfaction) (Buckingham & Clifton,
2001);

Effective meetings
• Establish the need for a meeting.
• Define Purpose (P).
• Define Agenda (A).
• Set Limit (L).
• Designate a Scribe and a Facilitator.
• Conduct meeting evaluation.
• Provide quick meeting summary.

Teamwork
Forming, Storming, Norming, Performing.

Performance appraisals (Prince, 1994)

• More frequent (more than once a year);
• Objective (criteria: quality, customer satisfaction);
• Focus on positives;
• Constructive and developmental;
• Variety of input (360° feedback -customers, suppliers, peers, superiors, etc);
• Encourage and reward teamwork;
• Focus on systems perspective (do not blame individuals).

Recognition (Nelson, 1994)

• Day-co-day (thank you note, memo, e-mail);
• Informal (team milestone completion-memento);
• Formal (nomination, evaluation, celebration).

Suggestions system
• Employees have knowledge;
• Create a simple process to gather, acknowledge and act on suggestions;
• Recognize and reward employees whose suggestions are implemented with positive impact.

Here are some of the best practice examples from the Malcolm Baldrige Award winners for
the employee satisfaction area (Baldrige, 2002; Bounds, 1996):

• AT&T Universal Card Services (l 992 Baldrige Award, Service): Best-in-class in employee
recognition and suggestions system (spend 2% of payroll on Recognition and Suggestions
system).
• Federal Ex-press Corporation (1990 Baldrige Award, Service): Survey/Feedback/Action
management evaluation system. From 1985-90, 91 % of employees 'proud to work for Federal
Express'.
• IBM Rochester (1990 Baldrige Award, Manufacturing): Invests heavily in Education and
Training, the equivalent of 5% of its payroll.
• Trident Precision Manufacturing, Inc. (1996 Baldrige Award, Small Business): Empowers their
employees to make process improvements using the suggestion system. 95% of the improvement
at Trident comes from its own resources and people.
Process simplification and improvement
Once we have excited employees delighting customers, the next critical step is to simplify and
continually improve key processes. There are many process improvement models in use. The
AT&T seven-step process improvement method is shown below:

Ownership
• Establish process management responsibility.
Assessment
• Define process and identify customer requirements.
• Define and establish measures.
• Assess conformance to customer requirements.

Opportunity Selection
• Investigate process to identify improvement opportunities.
• Rank improvement opportunities and set objectives.

Improvement
• Improve process quality,
Source: AT&T PQMI Guidelines, Issue J. I, 1988.
The bottom line is, if your people are motivated, they will bring innovation to their jobs and
improve your processes. Here are some of the best-practice examples from the Malcolm Baldrige
Award winners for the process improvement area (Baldrige, 2002; Bounds, 1996):
• AT&T Universal Card Services, now part of Citigroup (1992 Baldrige Award, Service): '10
most wanted' quality improvements through cross-functional teams.
• Federal Express Corporation (1990 Baldrige Award, Service): FADE process-Focus, Analyse,
Develop & Execute problem solving; Quality Improvement Process & Quality Action Teams-
better quality at low cost.
• Marlow Industries, Inc. (1991 Baldrige Award, Small Business): Integrating supplier chain into
their up-front business processes.
• Ritz-Carlton Hotel Company (1992 & 1999 Baldrige Award, Service): The team mechanism of
corporate leaders, managers and employees to improve the most critical processes.

Key quality management tools and techniques

Benchmarking (Camp, 1989)
This tool allows an organization to learn from the best of the best. Major corporations such as
Motorola, AT&T, Alcoa, Xerox, IBM and others have used benchmarking to learn from internal
and external organizations. As a result, they implemented new processes to streamline their
operations and improve their processes co achieve market dominance.

Brainstorming
This simple tool allows people to share their ideas for continuous improvement. It is critical to
conduct this session for a specific issue (problem), gather people who have knowledge about the
issue and ensure good facilitation co hear all the opinions without any criticism. Then one uses
the Affinity Diagram method in conjunction with the brainstorming, key issues get defined
leading to a starting point for a solution.

Cost of Quality
Cost of Quality is one of the vital tools chat focus on quantifying waste. when one starts tracking
the Cost of Quality (COQ), there is a large initial cost of external and internal failures with
limited appraisal costs and minimal prevention costs. The true value of this tool is that it speaks
the language of management, which is the money. Over a period of time, the failure costs start
coming down when prevention and appraisal costs go up. Any organization embarking on their
quality management journey must measure and manage their Cost of Quality. Any savings from
the waste reduction go directly into the bottom line without incurring any additional sales effort.

Pareto Principle
After completion of Brainstorming and Affinity Diagram, we identify a list of major and minor
issues. This specific cool allows the paring down of a list to a vital few from trivial many. Output
of this analysis feeds into the Fish-Bone analysis to go from critical issues to possible solutions.
Fish Bone or Root-Cause analysis
Once we have identified the set of prioritized issues from the Pareto Analysis, the Fish-Bone
or Root-Cause analysis effectively helps us move toward a solution. By focusing on five Ms
(Man, Machine, Method, Metric and Material) and one E (Environment), we can move from the
problem co a solution phase. This tool requires one co ask why, why, why, why, why (five times)
co find answers to prioritized issues.

Recipe for success

• Delighted customers.
• Excited employees.
• Simplified and improved internal processes.
• Tangible operational enhancements.
• Improved financial results.