Quality in its total business concept

Thinking about this we need to be clear about what the word quality actually means. What relevance does it have for the future of leading and managing whole organizations?

If we are to understand quality as a total business concept it helps to accept the definition of the word 'quality' in a quite different way from that in common use. It is the one word which can unite management professionals in Europe, the far east and the Americas in describing the transforming efforts to improve efficiencies, effectiveness, flexibility and environmental impacts.

However, 'quality' is also a dangerous word, because so many badly planned and executed quality improvement programmes have disappointed those who participated in and paid for them. This has led to new names for such efforts, for instance business process reengineering, lean and six sigma as well as total quality management. Many of these programmes were poorly planned and executed, so some thinkers have reverted to quality as the one word to unite the field. It carries the potential to be truly global since, as well as the Chartered Quality Institute in the UK, there is the Japanese Society for Quality Control, the American Society for Quality, and dozens of other national or regional associations.

Attendance at any quality conference, particularly in Asia, will present opportunities to listen to hundreds of presentations on the application of quality to every conceivable part of society. Quality is the umbrella term; six sigma and lean are seen as aspects of it.

So let us not blame the word for the programmes that carry its name. The same, incidentally, should apply to other programme names - they need understanding before judgement. Instead, let's see how to bring discipline and constructiveness to the quality improvement arena, as was always intended by the movement's founders.

Quality in its total business or organization context was defined by Genichi Taguchi in the early 1960s as: 'On target with minimum variation'.

These five words provide the basis for defining what you are trying to accomplish, how you will know if a change is improvement, and implementing changes that will produce the improvement (Nolan and Provost 1994)

The business concept - models and value chains

Dr W Edwards Deming described a system as 'a network of interdependent components that co-operate in order to achieve the aim of the system' (New Economics 1993). As part of his system of profound knowledge (described in the New Economics), he contended that all organizations should be seen as a system, whether the aim is the continuing production of a product or service, or the development and implementation of change such as a capital investment project, or the improvement process itself.

Deming first proposed models for representing the organization as a system in 1950, and many methodologies have been developed since. Suffice to say it is essential to be able to represent and communicate the components, their interactions and dependencies. Leaders and participants need to be able to see what part of the system creates value for the customers, what is necessary to enable those parts to function effectively, and what research, development and leadership processes will direct and develop it.

Quality methodologies have been shown to be effective in addressing all aspects of defining and transforming these systems.

Sustaining the quality drive

The quality drive started in the late 1920s when Shewhart conducted his work at Western Electric. It has built momentum over the decades, based entirely upon the evidence of its effectiveness as experienced by leaders and practitioners who have been close to the methods. The best known demonstration of organization-wide quality is Toyota, which applies quality principles and methods across every part of the system. Its leadership has been dedicated to the 'Toyota way', as they call their quality system, for over five decades – a truly strategic theme and business concept.

Quality in the west, however, has generally been seen as a tactic rather than a strategy. It has been characterised by a series of programmes that have been dominated by training (TQM, six sigma) or local activities (lean). In many cases there has been a reluctance to learn from previous experience. Newness is the appeal, not wisdom.

In spite of the intermittent nature of such quality programmes, there is a continuing inherent momentum toward the goal of customer delight, capable processes, and the use of improvement tools. This is because of the experience of many participants in the programmes. Those who participate in good programmes appreciate the tools if they are well taught and supported. The question for the early 21st century is 'how to build upon the experience of success and disappointments and create a sustained effort that produces improved business results and becomes unstoppable?'

The answer to sustaining the quality drive lies in responding to these questions:

• what has been the experience? What has worked in our environment, what has been less successful?
• what are the results that need improving? How will we know if any effort is leading to improvement?
• what results are we getting? How can we ensure that everyone, from owners to staff, knows what the payback is and what the other benefits are?

Implicit in all of these questions is the application of the PDSA cycle (more of which later), which demands study, followed by planning and prediction, and a dispassionate reading of the evidence in order to challenge one's assumptions.

When participants in a programme see that the organization is engaged upon a systematic and applied learning process, the drive can be sustained, the feedback becoming constructive and positive.

However, sustaining this drive will always call for efforts and resources from the very top management. All organizations owe their culture and performance to their leaders, and if there is a need to improve performance then line leaders will have to lead the changes in culture and operations.

The context - contribution from supporting functions

The quality of goods or services is a consequence of the quality of the processes of the whole system. This includes all of the support or enabling functions or processes. All of them can be improved or transformed through the same methodologies, principles and philosophies that have applied to the value-adding, or core, processes.

Examples of support functions that have strong, if indirect, impact on the customer include:

• recruitment and development of staff, which controls the competence of employees in carrying out their roles
• forecasting sales and capacity needs, which enables good work to be done in a planned way
• managing the databases of customers and staff, which are essential for effective communication and record keeping

Support functions have suffered in the last few years. Some of them have grown too much as the need for control has dominated, for instance in accounts or conformance. In this case they can think the world has to move at their pace. Others have shrunk under pressures to reduce central overheads, for instance training and product or market research, and may now be under-resourced.

Quality improvement programmes must therefore address every support function. Some may be holding back core process performance, others may have the potential to make core processes much more effective and thus radically improve the customer experience.

Analysis of any system of support functions will produce a list of up to 40 distinct enabling processes, far too many to be directly and rapidly addressed by an improvement programme. The programme team should approach the development of enabling processes in several ways:

• prioritize to understand those processes that have major impact and whose performance is poor
• provide exemplary support and training to the improvement teams on such projects
• use this small number of key projects to demonstrate how the organization is ready to adopt change in the centre; usually the most resistant functions are the most central
• ensure that good people from support functions are integrated with improvement activity in core, customer-facing, processes

Integrating the improvement programme in these ways brings many benefits, not least in demonstrating the real meaning of 'total' quality.

The more that central function directors experience the reality of process transformation or improvement on their own work, the more ready they are to support it elsewhere.

A quality transformation struggle

Corporate vs. departmental management

Quality programmes and attitudes, under whatever label they are promoted, should lead to a more process-focused approach to management and Leadership. People in every walk of life, and every level of seniority, come to appreciate that what should be important is how things are done in order to please customers, rather than how a story is told to the bosses or owners.

Thus the programme management, and ultimately the organization's leadership, will find themselves asking new questions about the role of corporate offices. On the one hand will be increased resistance to meaningless planning and reporting, whilst on the other will be the realisation that an effective corporate resource should include many processes currently not done well. These can include development of standards for operation and for such matters as health and safety, engineering, market research and personnel management.

Leaders should therefore take every opportunity to review the balance between the centre and outlying parts of the organization. It is not enough to target some arbitrary percentage of cost or employment, or compare with others and try and copy. Every organization needs a different balance of skills and approaches. The benefit of the quality programme that addresses the whole organization as a system is that choices can be made in a meaningful and public open way. If innovation is seen to be vital, then knowledge and skills development will need a systematic effort that only makes sense if it is led and coordinated from the centre.

Department vs. process management

Every new organization starts by just doing things, whether it is repairing leaking roofs or writing computer games software. They may not express these actions in quality terms, but actually, they are developing processes. The quality of what is done - how much value is added - will determine the future of the organization.

If this activity is seen to be useful by its customers, and the organization grows, departments become necessary. They are an inevitable price to pay for size, and to enable people to recognize each other as individuals, to make basic arrangements abut pay, holidays and so on. However, the department often assumes too high a role in people's lives in comparison with the distant customer.

Quality programmes frequently demonstrate that departmental management has itself become the key factor in too many people's lives, their functional manager the focus for attention, the customer unknown or forgotten about.

A major part of any quality improvement programme is therefore to make the processes the focus of the organization. Processes must be optimised in the context of the whole system. This will demand a new role of the process owner, with overall accountability for the capability, standardization and improvement of a process, and with authority to resist pressures for undisciplined change. Such people have to learn new skills in process understanding and improvement, and in how to exert their influence in a collaborative and supportive way, often without executive authority.

Departments still have a role to play in a process focused organization, but they must see their contribution in terms of adding value for their customers rather than defending their turf in competition with others.

Business process change

Processes are the way that things get done, so improvement programmes are always about changing processes. Since the late 1970s in North America and Europe, quality programmes have been used to try to create these changes, but with very mixed success. Understanding the lessons from this experience is fundamental in planning and implementing business process change and transformation.

Here are some of the lessons of business process change, in the context of quality - you may care to compare them with your own experience.

Improvement programmes work when, and only when:

• they are seen as the means to achieve the business goals
• line leadership is really engaged
• there is a coherent change plan/strategy
• appropriate people are selected for the roles involved (sponsors, leaders, facilitators, and experts, as well as team members)
• systematic, consistent, methods are used
• all training, no matter who for, is meaningful for the work that people are required to do at the time or in the near future
• projects are properly selected
• leaders feel accountable but supported
• achievements and learning are recognized and communicated

All of these subjects need to be addressed by developing processes with clear purposes, explicit inputs, and deliverables, and recognition of the interdependencies. It is the job of top line leadership to drive these processes. They cannot be delegated without loss of the essential commitment that enables change.

Many leading organizations around the world have researched the best ways to drive strategic business process improvement and transformation. Examples from keynote conference presentations include Toyota (1999), Honda (1996), GE (2004) and Motorola (2004). Whilst some of the western organizations use names such as six sigma, and the Japanese tend to use acronyms or long standing proprietary labels such as the Toyota way, the common theme is the quality methodology.

The best model for those seeking to lead or understand business process change and transformation remains Dr Deming's System of Profound Knowledge (1993) (see below)

Decision making

The quality approach is a great help in decision making. We can define this as the process of arriving at the best option for the system as currently understood. A reliable concept that can improve decision making is the PDSA cycle.

The first stage in PDSA should always be study. Look carefully at whatever the particular issue you're tackling is, how wide-reaching the effects of it are and who and what it impacts upon. Obviously, the length of time devoted to this will depend on the scale of the problem you seek to address, but it creates the foundations for taking action.

Following the study, the next stage is to make sense of the data and information, in the planning stage. The individual leading the project must ask some key questions:

• what are we trying to accomplish?
• how will we know that any change is an improvement?
• what changes shall we make that will result in an improvement?
• what resources will it require, in terms of people, time and money?

These questions form a sensible basis for decision making at every level, from the boardroom to the local team. Providing initial answers helps to prioritize amongst the alternatives. Once they have been addressed, a test should be arranged on a small scale to see if the proposed changes will be as effective as desired, rather than risking the changes throughout the organization. Carry out the test and gather data and observations on the results.

This brings the circle back to study again. Compare what actually happened with what was predicted or expected. If the results correspond with predictions, then it is safe to put the changes into full-scale effect. If, however, the results differ from expectations, the original theory did not hold water and it's time to go back to the drawing board.

So, depending on how the test turned out, the next step is to implement the changes in full, look again at the original theory and adapt it, or perhaps even abandon the project if it doesn't appear to merit further attention

Benchmarking

When a team or an individual has developed a thorough understanding of the system or processes they are working on, and has implemented some changes, it may be useful to compare with other organizations. In these circumstances they could be seeking to avoid making the same mistakes as others, to appreciate that radically different approaches may be available, or that there may be some prior solution that could be transferred.

Benchmarking is a word that has been adopted for this kind of approach. However, it is another word in the improvement field that means different things to different people.

It should mean the study of other systems that may offer insight into the improvement of one's own system. It should not mean visits to organizations that may be exceptional performers in order to see what can be copied. Copying without theory invites disaster, as countless initiatives in business and government bear testimony.

It can be salutary for leaders to experience radically better performance than their own system is providing, but it is rarely very useful from a practical point of view. Such performance may well have deep roots that cannot be easily transplanted.

Improvement programmes should not start with external benchmarking. The resources at that stage are much better spent on understanding the current system, the customer experience, and learning how to plan and implement improvements. When the team has developed this capability it will be able to select from a wide variety of opportunities to learn from others, including:

• other parts of the organization
• suppliers
• customers
• competitors (perhaps through trade associations)
• professional organizations, chambers of commerce etc
• conferences

The quality methodologies and tools provide a reliable discipline for these studies. Using process flowcharts to assess what is happening, and asking strcutured questions about customers, results and process measures, and how problems are addressed enables people to create theories on which to judge what they see, and which are essential in getting beyond the superficial impressions.

Fitness for purpose

Here is yet another term that sounds sensible but can be dangerous. Consider Taguchi's definition of quality: 'On target with minimum variation'.

There is no specification in this concept, no point at which the acceptable becomes unacceptable. Taguchi's definition has underpinned the great work of the best Japanese companies, across their whole system. Engineering drawings may have no maximum and minimum dimensions - the supplier is expected to work with its customer to determine the current possibilities and technology and process, and optimise their production accordingly, whilst continually working to improve. The Toyota way seeks to provide one unit at a time, synchronised with customer demands - zero inventory is the goal, they are constantly seeking ways to improve what is done in order to get closer.

Fitness for purpose on the other hand, is another way of talking about conformance with requirements, within specification - right first time. Fitness for purpose sounds customer focused, however, as with any specification, it can be arbitrary and may not stand up to open discussion on both sides. Further, it can either limit ambition by being too easy and generalised, or it may demoralise people by seeming unrealistic and impossible.

Kano's model of customer satisfaction provides the explanation (reference: http://en.wikipedia.org/wiki/Kano_model).

1. Assumed quality describes those characteristics that we don't think to ask for, but must be provided. Doing them well is not recognized, doing them badly causes complaints. A recent example of a luxury hotel whose water heating failed, and thus became the talk of the rest of the holiday, illustrates this point. It is the suppliers' job to understand what these features are, and provide them reliably, and expect no credit for doing so.
2. Expected quality describes those characteristics that customers ask for. If the supplier responds to the requests effectively, the customer appreciates them. This is fitness for purpose in apparent action. However, after a depressingly short time such characteristics fall into assumed quality and are not appreciated. Countless consumer features from airbags in cars to central heating in homes illustrate this point. Fitness for purpose does not enhance reputations in the long term.
3. Exciting quality is a special term to summarize those characteristics that drive customer delight. They include characteristics that the supplier anticipated on behalf of the customer, thanks to a thorough knowledge of the customer's application. With this knowledge suppliers can identify a hidden want or need. Well known consumer examples include text messaging and the Sony Walkman. Exciting quality features tend to move into the expected category, and eventually into the assumed one.

So beware those who speak of fitness for purpose. Along with many phrases it sounds like common sense, but can turn out to betray limited thinking, and disappointment for those who pursue it.

Future quality developments

The quality movement holds the potential to be the fulcrum on which the world is transformed into a better place. Leaders need to have desire, persistence and energy, but the quality movement is the only way to build truly customer focussed and capable organizations. From the most trivial technique to the most profound principle, the quality concept is universal:

• the quality tools can be applied to every process across the organization, from sales to delivery, from development to accounting, from manufacturing to teaching
• improving processes improves results, nothing else does this
• system thinking enables leaders to optimise their whole system - for the customer, for safety, for the environment, for the owners. Compromise will always be needed, but no other approach brings the scientific method to bear in generating theories and providing the evidence to validate them
• the quality movement is, at its heart, an honest movement. The philosophy demands involving people who know about the process being worked on, as the tools only work in an open environment where data is made visible and is not distorted
• leading one's organization to create capability to serve its customers, and reducing its impact on the environment, is an activity amongst the most noble of human endeavours. Those who lead and participate in such efforts find fulfilment in the work and in the achievements. This is not just hype, it is the reason that the quality movement has so many enthusiasts who have learned about its potential over many years

Future quality developments need to focus upon the motivations of leaders, and on ways to get alongside those who will need to change, not to confront them and threaten them. It demands that practitioners develop a broad skill set in:

• understanding their system
• learning how to learn and describe their world accurately
• involving and motivating those who are in the system
• getting the processes on target with minimum variation in the cause of innovating and optimising the whole system

This is Dr Deming's system of profound knowledge, developed in the late 1980s after a lifetime of theory and practice around the world over the whole history of mass production and the start of globalisation. Together with the many methodologies developed by Japanese and western academics and practitioners, the quality professional has in his or her hands the approach that can improving service, reducing the impact on the environment, reducing costs and building satisfaction in the workforce. All we have to do is learn how to apply it!