TQM AND MALCOLM BALDRIGE: A PRACTITIONER'S APPROACH
TQM CONFERENCE
BABSON COLLEGE
BABSON PARK, MASSACHUSETTS
JUNE 2, 1994 AND JUNE 3, 1994
STEVEN F. HODLIN
VICE PRESIDENT, QUALITY
PENRIL DATABILITY NETWORKS
GAITHERSBURG, MARYLAND 20878
(301) 921-8600
TOTAL QUALITY
A. INTRODUCTION
My talk today is about expectations--customer expectations--and meeting them consistently. It is about making money, too. It is a story about Penril DataComm Networks and the concepts I am about to talk about resulted in an economic turnaround for the company. I hope it will benefit you and your organizations.
To give you a little background on Penril and our products, Penril (renamed Penril Datability Networks after an acquisition) is located in Gaithersburg, Maryland where we design, manufacture, and market data from international sales. Our products include modems, multiplexes, bridges routers, T1 channel banks, terminal servers and network management systems. We have a product development and service location in Carlstadt, New Jersey and a product evelopment site in Natick, Massachusetts.
1. What is Total Quality?
Total Quality means building an organization that can consistently meet internal and external customer requirements and expectations in every transaction. It involves everyone in an organization in a systematic long- term endeavor to develop process that are customer oriented, flexible and responsive, and constantly improving in quality. There are six facets in the transformation of an organization toward total quality principles. These six facets are:
1. Quality is priority number 1
2. Customer Focus
3. Emphasize Prevention and Continuous Improvement
4. Manage by Data
5. Total Employee Involvement
6. Cross Functional Teams
7. A seventh principle, Mutual Trust and Respect, could be added because it is the cornerstone of Total Quality.
1) Quality is Priority Number 1
For most organizations, quality has been given lip service, but when the pressure is on, or end of the month shipment dates are looming, quality takes second or third priority to costs or schedule. "Ship it; maybe the customer won't notice", has too often been the principle that has guided management action in the United States.
The Total Quality revolution requires that quality become the first priority, not only in words, or in the company philosophy statement, but the first priority when actions are taken, decisions are made, or resources are allocated.
Your standards are set by the decisions you make and the actions you take, not by what you say. If you refuse to accept anything but the very best you very often get it. This is a shift from short-term to long-term thinking. It is rooted in the belief that quality is the best way to assure long-term profitability. Research supports this conclusion. In a study using the PIMS data base (Profit Impact of Marketing Strategies), companies were ranked by an index of perceived quality. Firms in the top third showed an average return on assets of 30%, compared to 5% for firms in the bottom third. Making quality the number one priority pays off handsomely. As Richard Schonberger has said "repeat this a hundred times every morning while shaving or putting on your makeup: Profit is a result. Profit is a result. Profit is a result."
2). Customer Focus
Quality, by definition, requires a customer focus. Quality is "meeting customer requirements and expectations consistently". To meet customer expectations, we must know who our customers are, and what they require. Its is hard to see the picture when you are inside the frame. An example of this, in practice, is the approach taken by Toyota in the design of the new Lexus. A design team lived in California for several months to understand the way, potential customers drove, what "luxury car" meant to them, and what features were important. Ford used an extensive data collection process to identify design features for the Taurus/Sable line. I doesn't take a rocket scientists or consultant to tell you what your customer will tell you for free.
Adopting a customer focus is both a shift in perspective and a shift in practice. Think of the comments you hear within our organizations when people talk about customers. "The customer is unreasonable." "They don't know what they want!" "If the customer would use it right, it would work." Manyorganizations display tremendous arrogance toward their customers, and often view them with indifference or contempt. Total Quality requires a shift in practice. It requires an organization to build the "voice of the customer" into all aspects of the business. This shift must take place not only with respect to the external customer, but with the internal customer as well. Each individual employee must view the next process in the organization as his/her customer. This requires getting managers to view their subordinates as customers, getting staff groups to view operations as their customers, etc. There is a sign in a Miliken plant that appropriately states "Quality is not the absence of defects as defined by management, but the presence of value as defined by customers. Milliken was a winner of the Malcolm Baldrige National Quality Award in 1989. Tom Peters goes on to say "We can no longer merely satisfy the customer. To win today, you have to delight and astound your customers-with products and services that far exceed their expectations."
3) Emphasize Prevention and Continuous Improvement
Detecting defective products or errors in a process and fixing them is not true quality control. True quality involves reforming designs, modifying policies and procedures, training people in correct practices, and insuring that customer expectations are known and built into every process step. Such activities insure that no defective products or services are produced. This is especially true in the case of performing a service, because you don't have the luxury of detecting defects prior to them reaching the customer. True quality, therefore, means a focus on prevention. Preventions result in major cost savings. With each step in the process, it costs approximately 10 x more money to fix the problem. So if it costs $10 at the beginning of the design process to rework something, it will cost $100 at the end of the design process, $1000 in manufacturing, and $10000 in the field. When organizations calculate their cost of poor quality, they identify three sets of costs: failure, appraisal, and prevention. Typically, this produces a cost of poor quality that falls between 25-30% of sales when not monitored. Most companies only consider the cost associated with manufacturing or operations, such as scrap, rework, inspection, etc. Rework in departments other than manufacturing are not accounted for, for instance. As you can see there is a potential for an even bigger number out there. Quality improvement activities can reduce that number by shifting activities from failure and appraisal to prevention. There seems little question that the path toward Total Quality requires a strong focus on preventing errors in all aspects of operation and continuous quality improvement. Most organizations find that the greatest potential for prevention activities is in the "white collar area" such as engineering, finance, marketing, and general management. These areas are usually an untapped resource, a gold mine waiting to be dug.
Be sure to recognize those who do the proper planning and do things right the first time, rather than the "hero" that solves a crisis. Recognizing heroes provides an incentive to create crisis. The result is an environment that creates arsonists. People will do what gets rewarded. If creating a crisis and being a hero by solving it will get rewarded, that is what will happen. Your "nonheroes" are your team players. You must continuously focus on improving quality. Is 99.9% defect free good enough? At 99.9% there would be:*20,000 wrong drug prescriptions per year *15,000 newborn babies accidentally dropped in hospitals per year. *Unsafe drinking water 1 hour/month *2 short or long landings at airports each day *500 incorrect surgical operations/week *2000 lost articles of mail/hour *If an airline gets you there 99 times out of 100--would you fly? *Cardiac arrest 9 hours a year Be careful when focusing on improving processes. You need to ask "why" five times to get to the root cause. Eliminate the band-aid approach. If you burn your toast, you don't solve the problem by scraping the burnt part off the toast. You need to ask "why " five times to get inside the toasting process and determine the "true" root cause.
An incident at a southern electric utility serves as an example. This utility had the most disruptions of service in the industry. They discovered that the problem wasn't due to electrical storms as they first thought. It was caused by poles being knocked down by cars. A decision had been made to put the poles outside the curb. The solution was to move the poles inside the curb. Someone listened and got the facts. The "root cause" was addressed. The electrical storms continue, the service outages don't.
4) Manage by Data
The systematic use of facts and data to guide decision making is a cornerstone of total quality. This approach is not natural for many managers and specialists. Our training and much of our reinforcement comes from solving problems or "putting out fires". The idea that one should collect data before taking action, while logical, is unnatural for action oriented American mangers. Your motto should be "In God we trust; all others bring data." Peter Drucker once said, "Just as a human beings needs a diversity of measures to assess his or her health and performance, an organization needs a diversity of measures to assess its health and performance." Data should be used to identify problems and to help determine when and if action should be taken. Your processes speak to you through data. Find out what is important to your customers, internally and externally, and understand where your strengths and weaknesses are. This approach to managing by data needs to be driven from the highest level of the organization. Senior management must take the lead in using data for the problem identification and analysis. They must also avoid the tendency to "shoot the messenger" when problems are surfaced, which leads organizations to create false data. In addition, management that does not have an understanding of process variation may over react to a single data point, become angry, and ultimately lead subordinates to create false data to keep information away from the boss.
Education in statistical techniques and techniques of data collection are necessary to enable an organization to manage successfully. However, the measurement system must not only be simple and understandable, but is must be primarily designed for the employees who are actually doing the work. Get the frontline employees involved in the design. To every possible extent make it their system-measuring their product or service, their outputs, their quality, and providing their rewards for outstanding achievement.
You must have ways to measure progress throughout your processes. Otherwise, you don't know whether the process is performing well and meeting the customer need efficiently. When you take actions to improve, without measurements, you don't know whether its doing any good or not. And you don't know when to take mid-course actions either. Progress is what any management system should be all about. If companies don't know whether they are making progress, and where they are and where they aren't, the management system is not a system at all. Peter Drucker once said, "If you want it, measure it. If you can't measure it, forget it."
5) Total Employee Involvement and Commitment
The most decisive factor in the competition for quality leadership is the rate of quality improvement. If you are improving quality, but your competitor is improving at a faster rate, we will fall farther behind in the eyes of the customer. The mechanism for continuous improvement is total involvement. Everyone in the organization must be involved in and committed to resolving and preventing problems. With each employee involved in quality improvement, the rate of improvements will be maximized. Total involvement requires a shift in management style that includes delegation of authority. Information about the business (goals, performance levels, competitive pressures, etc.), knowledge of problem solving techniques and statistical methods, and recognition must accompany this delegated authority. In a participative organization the role of the non-management employee changes from doer to planner, doer, and problem solver. In addition, management must not just get involved and wait for things to happen. They must be committed.
Worker commitment is inversely proportional to the degree of management centralization. The frontline employees are closest to the process customers. They are in the best position to understand that customer's requirements and they are in the best position to satisfy the customer. Empower your employees to satisfy the customer. Give more authority to the doers, linking responsibility with authority and push down to lower level of the organization. Redirect senior management or headquarters efforts away from restricting and toward facilitating the work that must be performed. Provide employees with a vision and adequate training, then trust them with the responsibility. This involves more of a decentralized organizational structure rather than a centralized one. It also means a flatter organization. Decentralizing ensures a maximum in flexibility, responsiveness, and feelings of ownership. It provides an environment that motivates people, resulting in leadership and commitment from everyone. Getting everyone involved makes it everyone's system. It will result in greater employee satisfaction and pride. Pride is the fuel of human accomplishment. The right organization-decentralized, team- based-provides the required framework for Total Quality to operate freely and effectively in every organizational element at all levels. Principles should flow from the top down and decisions should flow from the bottom up.
6) Cross Functional Teams
Organizations tend to be structured vertically, that is by function. We have marketing, manufacturing, product development engineering, quality assurance, human resources, accounting, and administration departments. However, when we look at our internal processes, such as purchasing, product development, customer billing, and employee hiring, they tend to cut across functional department boundaries.This adds a horizontal dimension. Many difficulties occur at the boundaries of vertical departments. Processes break down due to poor communications, conflicting priorities, and other "turf" issues.
Total Quality requires that boundary issues be removed. Cross functional teams and associated project teams help to break down the walls. They focus on major organizational issues, such as quality, production, and schedule compliance, from a cross functional viewpoint. Committee representatives not only represent their narrow vertical perspective of engineering, accounting, or human resources, but also the company-wide perspective. "Light is the task when many share the toil." In textiles, the horizontal and vertical threads used to produce cloth are called the warp and woof. The warp by itself remains only a thread. It is only when the woof is added and intertwined with the warp that the threads become cloth. It is also true that an organization becomes a total quality organization only by building both the vertical and horizontal dimensions.
7) Mutual Respect and Trust
An American novelist, James Allen, once said "Many are anxious to improve their circumstances, but are unwilling to improve themselves; therefore they remain bound." The team concept is absolutely dependent upon mutual trust, mutual respect, and mutual support. The entire process pivots off of respect and trust. If you violate that it breaks down completely. Before we can have trust in each other, we must prove ourselves to be trustworthy. If your organization is constantly backstopping, finger-pointing, blaming others, talking negatively about others behind their backs, working off hidden agendas, you are growing cancers within the organization that will disempower you rather than empower you. At the heart of empowerment is trustworthiness.
We develop trustworthiness by not blaming or accusing others, but by acting with integrity. Trustworthiness comes from keeping the commitments we make with each other. It is a function of character and competence. It comes with seeking positive approaches to problems that lead to win-win solutions. Win-win solutions require trust in each other.
Trust in each other is dependent on feelings trustworthiness. Trust grows out of trustworthiness.Out of trust comes empowerment. When we each understand our values and missions, and are trustworthy, we develop a culture of trust resulting in empowerment. Total Quality requires such a cultural change. The result will be that the organization is in alignment and you will be accomplishing a tremendous synergy in accomplishing your missions and satisfying your customers. Only then will you be a true Total Quality organization that is prepared to take on your competitors with a fervor and compete effectively in the world-wide marketplace.
2. Why Total Quality?
In a word, the reason for beginning the voyage toward Total Quality is survival. Competitive pressures demand higher quality products and services. In line with this, our definition is continually shifting. Traditional methods of quality control, which emphasize appraisal, may create the levels of quality required-but at a cost that cannot be tolerated in a competitive environment. Therefore, Total Quality, with its emphasis on prevention, is the only strategy that is economically viable.
Quality is a system, and it is the one system that can solve America's economic problems. It improves productivity. Productivity controls our future. Industrial productivity in the United States was essentially flat from 1973 into the 1990's. This resulted in a flat median family income. Adjusted for inflation, the average American worker actually lost money. Figures from the Bureau of Labor Statistics show that the average American worker in private industry made $187 a week in 1970. By 1989 the same worker made about $167, a loss of $20 a week in twenty years. The only way a worker can make more money and live better is for productivity to go up. Productivity is simply how much you can make or how much service you can provide can how much it costs to make it or provide the service. The more you can make or provide for less, the higher your productivity; it's that simple. As you produce quality, productivity automatically goes up and costs automatically go down. Contrary to popular belief, quality does not cost more, it costs less. Quality, in fact, is priceless. Surveys conducted with top managers of Fortune 500 companies support the conclusion that quality has become a survival issue. Many organizations, who are suppliers to Fortune 500 firms, are finding themselves increasingly under pressure from their customers to improve their quality. Customers are asking to see control charts, quality improvement plans, and even corporate plans to compete for quality awards. Thus, customer pressure is another reason to begin the Total Quality voyage. Quality is the price of admission to the business game.
Consider the impact of poor quality. Statistics show that only 1 in 25 unhappy customers complain. The rest just don't come back. It is six times more expensive to find a new customer than it is to keep an existing one.
It gets worse, though. Each satisfied customer tells three people. But, each dissatisfied customer tells 10 people. That's not all. Let us consider the original 25 unhappy customers. If they are telling 10 people then 250 people have actually heard about the unpleasant experience. Ah, but it doesn't stop there. These 250 people could be telling another 10 people. Now 2,500 people know about the bad experience. This can be very unhealthy to your business.
We are in a world-wide market that requires world-class quality in order to compete. certification to ISO 9000 international quality system standards is becoming a requirement more and more in order to do business in the European community. We all know what the Japanese have done in the European community. We all know what the Japanese have done in the area of quality. The Germans are renowned for the quality of their products. So, the competition is no longer just domestic.
A bottom-line perspective comes from the previously mentioned study, which shows that organizations that are perceived as having high quality show considerably higher return on assets compared to companies whose quality is perceived as low. This shows that, over the long-term, quality leads to quality process. At IBM, if IBM eliminated scrap, never wrote off assets before the end of its useful life, if inventory arrived just in time--- IBM would achieve a great opportunity. Profitability would improve by 10 points (if profit was 10%, it would be 20%) and return on assets would improve by 16 points (if ROA was 15%, return on assets would have grown to 31%). These have been identified as a cost benefit of IBM's six sigma quality process. Recently, the General Accounting Office conducted a study of companies that have implemented TQM to the level where they were competitive for the Malcom Baldrige National Quality Award. The analysis demonstrated that these companies improved profits, while increasing market share by 14%. In nearly all cases, companies that used total quality management practices achieved better employee relations, higher productivity, and greater customer satisfaction. theses companies also reduced employee turnover, lowered their manufacturing costs, improved delivery time, and changed their customers' perceptions of their product or service.
A final reason for beginning the journey to total quality is that it creates an organization which is better for people. The principles and values underlying total quality create a workplace where humanity is respected. It is workplace that allows people to grow, make use of their abilities, and contribute to society. People are what make or break a company. They are a company's most important asset. They should be treated as such.
B. How do you approach implementation of TQM?
First of all, let me say, there are many ways. You pick what works best for your organization, considering its culture. Quality is like golf swings. We can all stand on the first tee, use the same clubs, wear the same shoes--but, we will all hit the ball a different way. We each have a different hand-eye coordination, different height, etc. If you went to an optometrist because you were having trouble seeing, you wouldn't expect him to give you his glasses because they have worked well for him all these years. You would expect a diagnosis first. One approach to implementing TQM however is the following, which worked for Penril.
Strategic quality management is a systematic approach for setting and meeting quality goals throughout the company. The methodology of SQM is quite similar to that long used to establish and meet other broad company goals, notably financial goals.
Most companies manage for finance by use of a structured, coherent approach that can be described as company-wide financial management. This approach consists of establishing financial goals, planning to meet the goals, providing the needed resources, establishing measures of performance, reviewing performance against goals, and providing rewards based on results. With financial management, there is a hierarchy of goals. The major financial goal-the corporate budget-is supported by a hierarchy of financial goals at lower levels, such as divisional and departmental budgets, sales quotas, cost standards, and project cost estimates. The financial control process includes systems for data collection and analysis, financial goals is usually given substantial weight in the system of merit rating and recognition. Quite obviously, the approach used to establish company-wide financial management is applicable to the establishment of company wide quality management. The basic trilogy of processes (planning, control, and improvement) is identical. The generic features inherent in managing for finance are likewise applicable to managing for quality. To apply such a generic approach to managing for quality involves profound changes. The major changes include:
1. A customer orientation is essential. Satisfying internal external customers through meeting their requirements and value expectations must be the primary task of every employee. Quality is judged by the customer.
2. Accountability measures for Total Quality must be established, reported, analyzed, and effectively used. The establishment of broad quality goals as part of the company's business plan must be accomplished and employee contribution to the Total Quality process must be weighted in the performance appraisal process. Including them in the compensation formula along with financial goals provides incentive.
3. Training must be provided to assure that each employee understands, supports, and contributes to achieving Total Quality. If you think education is expensive, what's the price of ignorance?
4. All employees must participate in establishing and achieving Total Quality improvement goals. Would you let one third of your assets sit idle? Participation leads to ownership which leads to commitment.
5. All employees should be motivated to achieve Total Quality through trust, respect and recognition. The most neglected form of compensation is the six-letter wordTHANKS.
6. A major change in culture is required, resulting in a focus on big Q (extension of quality responsibility to all employees) instead of little Q (quality is the responsibility of a quality department or manufacturing).Management must establish a value system in which individual and group actions reflect a "total Quality First" and appropriately innovative attitude and direction to meet established world-class requirements.
7. Verbal and non-verbal communications are two-way, clear, consistent, and forceful. Communications is the glue that holds TQM together. A leader's vision has power only to the extent it is shared by those who are asked to carry it out.
8. Required information is available and it is clear, complete, accurate timely, useful, accessible, and integrated with products, services, processes, and procedures. Collecting data, analyzing it, monitoring trends, and then taking action is absolutely essential to the quality improvement process. If you can't measure it, it isn't worth doing it. You can't get there from here if you don't know where "here" is.
9. Products and services are appropriately innovative and are reviewed, verified, produced, and controlled to meet customer requirements.
10. Processes and procedures used to create and deliver products and services are developed as and integrated, verified, and statistically controlled system using appropriate technology and tools.
11. Suppliers are considered partners that are selected, measured, controlled, and recognized based upon their potential and actual value contributions to meeting requirements for total quality.
12. Executive management participation in managing for quality, to an unprecedented degree, is required. Management leadership is the foundation of total quality. Strategic business and financial planning recognizes total quality as a primary business objective. Broad quality goals need to be established as part of the business planning, along with goals for sales.
The areas I have just mentioned are the "conditions of excellence for total quality". Any weakness in these variables will negatively impact the total quality process, and ultimately your business.
Quality management is the total of ways of ways through which we achieve quality. It includes all three processes of the quality trilogy-quality planning, quality control, and quality improvement.The quality planning activity involves communication between internal customers and vendors where the needs of the customer are expressed and agreed to. There is interrelation between quality planning and quality improvement. It is well described by the plight of the manager who was up to his waist in alligators. Under that analogy, each live alligator is a potential quality improvement project. Each completed improvement project is a dead alligator. If the manager succeeded in exterminating all alligators, then quality improvement would be complete- for the moment. However, the manager would not be finished with alligators. The reason is that the planning process has not changed. The manager is fire fighting. In effect, the quality planning process is a dual hatchery. A malignant hatchery produces new alligators. Quality improvement takes care of the existing alligators, one by one. However, to stop the production of new alligators requires shutting down the malignant hatchery. Few people plan to fail, they just fail to plan.
C. THE PENRIL STORY
In five years, we came from the brink of financial disaster to excellent financial health. We came from an autocratic work environment to a participative one that utilizes everyone's brain. We progressed from quality being 100% inspection and a manufacturing-only process, to a company- wide process consisting of process audits, cross-functional improvement teams and internal customer relationships. All Penril employees are empowered to do what it takes meet customer expectations. Our total quality mission is to build an environment where internal and external customer expectations re met in every transaction. We are guided by the seven principles. We began getting serious about our TQM journey in 1987. Management looked at the iceberg of the cost of poor quality as a percentage of profits. We were appalled. One third of what we were producing in manufacturing was being reworked or scrapped. We performed 100% inspection at these points, but they were not being compiled into information.
We weren't listening to our processes.The total quality management journey started with the establishment of a company quality policy which emphasized prevention and continuos improvement, rather than appraisal. This policy was introduced to employees at a Penril Quality Day. The Quality Day, held during National Quality Month (October), was a major event. There were "Quality First" balloons flying through-out the company. Everyone wore a "vote for quality" button. We purposely had a lot of hoopla, because we wanted each employee to remember the day as a special one. It was different from any other day they had experienced at Penril. The idea came from the writings of Philip Crosby and his text "quality is free." Things were going to be different from now on. And have they ever! Each employee attended briefings on their role in the internal vendor-customer relationship. Each employee signed a proclamation dedication themselves to quality, which served as a constant reminder of their renewed commitment. We have integrated the concepts of Dr.'s Deming, Juaran and Maryland's Mr. Quality Dr. Tom Tuttle, as well as Philip Crosby and Arman Feigenbaum into our TQM process. Most of their messages are similar. It doesn't matter which philosophy you choose. Choose what will work best in your organization.
However, the TQM framework employed at Penril follows the Malcolm Baldrige National Quality Award model. We have a driver, a system, measures of progress, and a goal. The The DRIVER is leadership. Leadership is from the top down. This is essential. It is the foundation of the total quality process. Senior executive leadership creates the values, goals, and systems, and guides the sustained pursuit of customer value and company performance improvement. Our president, Dave Johnson, chairs and Executive Quality Council consisting of his vice presidents that leads the TQM process. Each process improvement team has a member of the executive team as sponsor. The sponsor is held accountable for the success of the team. In addition, leadership is rewarded at Penril through a quality leadership award process.
The SYSTEM comprises the set of well-defined and well-designed processes for meeting Penril's customer, quality, and performance requirements. It consists of information and anlysis, strategic quality planning, human resources development, and management of process quality. Each vice president, each department in Penril, has key fiscal year quality measurements and goals for improvements. Each team has goals and measurement. Measurements are set up by agreements between internal customers and vendors. They determine the feedback that is useful to ensure expectations are met. In the area of planning, the executive team meets offsite for strategic planning twice a year. One of those times are devoted to the TQM process. The TQM plan is part of the company's overall business plan.
In the area of HUMAN RESOURCES, employees are encouraged to communicate with their internal customers and understand the expectations. They are empowered to do what it takes to meet those needs. We have a full-time trainer who is continuously educating our employees. We also practicecascading training where we utilize the train-the-trainer concept. Training includes job skills, TQM concepts, statistics, SPC, group dynamics, conducting an effective meeting, problem solving skills, presentation skills, communication skills, etc. We also recognize successful teams and individuals with banners, luncheons, a wall of fame, the "Quality Network" newsletter, the "DataLine" employee newsletter, the Great Chefs of Penril (where executive management cooks for all employees to thank them for their efforts in the past year), the Employee of the Quarter Award, and the Quality Leadership Award. The company utilizes flex time to accommodate varying employee personal schedules. We develop our employees, favor promotion from within, and publicize open positions within the company. We conduct employee satisfaction surveys every two years and we are considering making it an annual event. Communications is enhanced by the cross-functional teams, a communications board which displays meeting minutes, and the "Quality Network" and "DataLine" newsletters. Employees are prepared to provide presentations regarding the quality improvement efforts in their areas and they re randomly selected to talk to management, customers, and vendors. Cross-section employee focus meetings are also held, where employees meet with top management and talk about anything.
Management of Process Quality and Quality Assurance of products and services is achieved by approaching quality management much as we would financial management. Quality planning = budgeting. In this process customers are identified, expectations are determined, a process to consistently meet these expectations is developed, feedback measurements are identified, and improvements goals are set.
Quality control = financial improvement. Here we select quality improvement project teams, who analyze the problem and drive corrective action. Measures of progress provide a result oriented basis of channeling actions to deliver ever improving customer, quality, and performance requirements. In the area of MEASURES OF PROGRESS, we have the results. The results of our TQM journey at Penril, thus far, have been outstanding. Over the first five years, revenues increased by 95%. This was achieved while reducing the price of some of our products to our customers. Units produced and shipped increased by 37%, while direct labor levels remained relatively constant. This was achieved through greater efficiencies and less rework. In the first five years on the TQM journey, work-in-process inventory was reduced from many months supply to three days supply. Inventory required on hand per dollar of revenue decreased by 54%.
Defects per unit produced decreased by 83% and has resulted in the elimination of the in-process inspection requirement. Process and quality system audits, and statistical process control are now used to monitor and control the process. The inspection function has been removed from the labor standards, serving to reinforce to employees that defects are not expected.
Out of box failures, which are failures in the first three months in the field, decreased by 92%. In-warranty service repairs, which are failures in the first year, decreased by 73%.
By forming vendor partnerships, we have achieved vendor yields in excess of 99%, and we have reduced the incoming inspection requirement. A ship-to-stock process is currently being implemented to take advantage of this improvement. An audit team, consisting of representatives from Penril's quality, purchasing, and manufacturing groups visit supplier sites to evaluate their quality systems and processes. The supplier's administrative quality, and delivery history are also reviewed. If the supplier receives an outstanding rating, incoming inspection is waived and the material goes directly to the Penril work center for processing, resulting in savings to Penril. Response time to customer order was reduced from as much as 10 weeks to 3 days. this measure is reflection of our just- in time concept and flexible manufacturing process.
Engineering changes due to design errors, inadequate market, research, and/or documentation errors decreased by 56%. Much of this improvement can be contributed to a concurrent engineering approach to product development, including external customers and suppliers. Profits per employee increased by 1266% during that same period.
The GOAL or vision is total customer satisfaction. In three years, we have doubled our original equipment manufacturer (OEM) customers. These are customers who get their name placed on the product, instead of Penril's. We know of no greater testimony to a company's quality than to have another company ask it to design a product for them, build it for them, and put the customer's name on it-that's confidence. If we fail, it is that customer's name and reputation that is at risk out there. We also conduct customer surveys 90 days after the sale to determine the level of customer satisfaction with our service and products. Random surveys are conducted by Quality Assurance and the Inside Sales group. In 1990, Penril was recognized by the Maryland Center for Quality and Productivity for its "Dedication to Total Quality". We also received a Certificate of Recognition from the U.S. Senate for our quality and productivity achievements.
In 1991, we were honored with the U.S. Senate Productivity Award in the area of manufacturing. In 1994, we were assessed to the International Quality System standard ISO 9001 and we were certified. This is resulting in more sales opportunities in the European community. It also resulted in more efficient process and more consistently in our output.
As you can see, by getting every employee to view the next process as customer and building an organization that can consistently meet or exceed internal and external customer expectations--throughput is increased, inventory levels are lowered, operational expenses are reduced, productivity improves, market share increases, revenues increase, profit At Penril, we no longer control quality. We define it, plan for it, demand it, measure it, improve it, master it.
D. MORE ON AWARDS
Utilizing the Malcolm Baldrige Award criteria can help you focus on improvement areas. It is an excellent framework for total quality management. Using the criteria for self- assessment can benefit your organization whether you plan to apply for the award or not. Applying for the award is a good way to receive some outside evaluation of your process and benchmark yourself against others. The criteria of the awards help you to project key requirements for delivering ever-improving value to customers while at the same time maximizing the overall effectiveness and productivity of the organization. Other useful award process are the many state award processes that are popping up. Like the Baldrige, thesestate awards, such as the U.S. Senate Productivity Award and, in Maryland, the Maryland Center for Quality and Productivity Award Processes have a manufacturing, service, and small business category. The criteria are very similar to the Malcolm Baldridge National Quality Award. In fact, while completing the U.S. Senate Award application in 1991, we used the Baldridge criteria as a guide for providing information, because are they provide an opportunity for a third party evaluation, they provide feedback, they are a benchmark tool, they serve as a working tool for planning, training and assessment, they facilitate communication and sharing among and within organizations of all types based upon a common understanding of key quality and operational performance requirements, and they help raise quality practices and expectations. They also aid in the bottom-line.
E. SUMMARY
The TQM framework consists of a driver, a system, measures, and a goal. Leadership is the driver. The system consists of information and analysis, quality planning, human resource utilization, and quality assurance of products and processes. Quality results are the measures, and the goal is customer satisfaction.
The leadership has to be from the top. If you do not have leadership and commitment from the executive management level, you might as well not waste your time and effort. Management leadership is the foundation of TQM. If this leadership is not there or is just lip service, the whole thing will come crumbling down. This means that upper management must be actively involved and visible. They must walk the talk. You can't just say "do this", then sit back and wait for it to happen. upper management must get involved, be visible, coach and lead.
An early mistake we made at Penril was starting at the middle management level. This prevented us from moving quicker. Employees will only work on what is considered to be important to their management. Those are the things that get rewarded.
There must be a customer focus. We are all living in a box. The box represents our paradigms. We wake up the same time everyday, brush our teeth with the same toothpaste, eat the same thins for breakfast, drive the same route to work, read the same paper, etc. I could go on and on. Each of our habits or routines shape the way we see the world. They shape our opinions. When listening to new ideas, we tend to filter them. We hear the ones that agree with our paradigms more than those that conflict with our paradigms. We must break out of our boxes, shift our paradigms, listen to new ideas with an open mind, break down the walls.
Each individual must view the next operation or process in the organization as his/her customer. Failure to do so, puts the next operation in the process at an immediate disadvantage in doing a quality job. Failure to view each other in the process as customers will result in the derailing of your journey to TQM.
Practice the quality trilogy--Quality planning, quality control, and quality improvement,. Identify customer, talk to your customers, identify customer expectations, develop processes to meet these expectations, develop feedback measurements, set performance goals (challenge yourselves, set aggressive goals), monitor your performance, act on variances where you have not met your goals, identify problems areas, set up cross-functional improvement teams, improve, start it all over again. Focus on prevention and improvement. Ask "why" five times to get to the root cause. It is just like peeling an onion.
Eliminate the band-aid approach. Recognize those who do the proper planning and do things right the first time, not the "hero" who saves the day. Get all employees involved to maximize the rate of quality improvement. The rate of improvement is the most decisive factor in the race for quality improvement. It is a race without a finish line. If your are improving quality, but your competitor is improving at a faster rate, you will fall farther and farther behind in the eyes of the customer. This is what happened in the case of the west versus Japan.
Empower your employees. Give them the tools to succeed and the freedom to fail. Allow them to make the fast decisions necessary to satisfy their customer. Manage by data. Avoid gut feel and avoid shooting the messenger. This results in false data or no data at all. Get everyone to understand process variation. this will prevent situations of over-reacting to single data points. Your motto should be "In God we trust, all others bring facts and data." Listen to your dustomers, understanding what is important to them. Through data, understand how your strengths and weaknesses align with them.
Set up cross-functional teams to improve processes. Processes are cross-functional in nature. Communications will improve, resistance to change will decrease, ownership will increase, walls will be broken down. Cross-functional teams result in decisions beneficial to the company rather than parochial decisions beneficial to a department at the expense of the company. Nurture vendor relations. Develop a partnership relation with your vendor. Upstream control of vendors is your problem. You can't be world-class if your vendors are not world-class. work with them. End up with a partner, not a vendor.
Benchmark "best in class" processes. Go to the best when you want to learn and improve. It doesn't necessarily have to be from the same industry. Motorola studied Dominos Pizza to improve its response time to the customer order. the real issue was delivery speed. The best in class happened to be a pizza maker, rather than a telecomm company. Xerox studied L.L. Bean for warehousing. Network, talk to people, and most importantly-listen to people. Share ideas and experiences. Learn from those who have been there before. Develop yourselves into trustworthy people. This will result in an environment of trust, which is the cornerstone of Total Quality.
F. CONCLUSION
Quality control only prevents things from getting worse. It maintains the status quo. Total Quality Management addresses these chronic problems. Chronic problems are the ones that cost the most money in the long run. Chronic deficiencies are inadequacies in prior planning. Chronic waste is an opportunity for improvement. Through improvement, chronic waste is driven down to a level far below that level that was originally planned for. Most quality improvements are accomplished by doing the routine things better. We need to try to hit the singles; the home runs will take care of themselves.
Total Quality concentrates on performance--in every facet of a business--as the primary strategy to achieve and maintain competitive advantage. It requires taking a systematic view of an organization--looking at how each part interrelates to the whole process. In addition, it demands continuos improvement as a "way of life". It consists of defining requirements, defining measurements, setting goals, and embarking on project by project improvements. The structure will enable you to carry out unprecedented numbers of improvement projects at an unprecedented pace. Every department and every employee will be involved. Ultimately, you will reduce the cost of poor quality, make your processes more efficient, and improve customer satisfaction. The approach will be to attack the chronic problems by fully understanding what is required of each other (understanding internal and external customer needs), developing processes to deliver these requirements right, the first time, on time, developing measurements (agreed upon between vendor and customer), setting goals, identifying variances, selecting improvement projects,developing corrective action, and implementing correctiveaction. When variances appear between actual and required, seek out and attack the root cause. Improvement must be driven and monitored. We can no longer say we won't have time for these activities. We have to make time; it is too important. It is nothing more than effective management. It is everyone's job. Where do we find the time to do things over again? Every department should be held accountable for annual quality improvement. Quality goals, which have traditionally been vague will become clear-with schedules, measurements, target dates, accountability, etc. Responsibility, which used to be vague will become clear and specific as to departments, individuals, and project teams.As you focus on quality, productivity improves, costs go down, profits increase, sales increase, there are more jobs, and cycle times are reduced.Unlike traditional attitudes about quality, the essentials of TQM assign responsibility for quality in every part of the organization, starting with the CEO and working down to the part-time employees. The message is clear: You don't "control" quality.You define it, plan for it, demand it, measure it, improve it, master it. TQM is a continuos cycle of Plan, Do, Check, Act.
It has taken Penril about 7 years to get to where we are in our never ending total quality journey, and we have a lot further to go. My advice to you is to: Be patient concerning the results. The results are long- term. Implementing TQM requires a paradigm shift. Depending on your current structure, it could mean a major cultural change. The first year of Penril's implementation was devoted to awareness training. Be impatient when it comes to action. Keep driving forward with continuous improvement. It is a race without a finish line.
Network, talk to people. Share ideas and experiences. Learn from those who have been there before. Benchmark best-in-class processes.And finally--Just Do It!!!
It impacts your bottom line and your ability to survive.
Let me close by saying a word about commitment. A women rushed up to famed violinist Fritz Kreisler after a concert and cried,
"I'd give my life to play as beautifully as you do."
Kreiser replied, "I did."
Thank you.
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BAY NETWORKS is buying the Digital Signal Processing (DSP) modem business from PENRIL DATACOMM in a complicated financial transaction. Current Penril shareholders will be left with $10.00 in Bay Networks stock and one share of Access Beyond, a remote access networking concern.
http://findarticles.com/p/articles/mi_m0UNZ/is_1998_Oct_19/ai_53098115
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