Leadership through Quality

Subash K Bijlani Tradition of Excellence We often forget that excellence in what we do has been deeply ingrained in our history. We belong to a great tradition of quality, reflected in the feats of craftsmanship. Everywhere we look, we find outstanding examples of commitment and quality. You have to think of the Taj Mahal, Konarak, the temples in the South and the handicrafts, if nothing else. The muslin made by our textile workers hundreds of years ago was the envy of the world. The secrets of the Ashoka Pillar, the purity of its iron, remain unravelled to this day. The spirit of quality has lived in our culture for centuries. But, somewhere down the road, we seem to have lost our way and, with it, our position of eminence. `Made in India is not a label we carry with pride. How can we regain that position? How can we meet with the challenges of becoming a global player? Our Position in Global Perspective It is important to see where we stand before we talk of where we want to go. Over the last four decades we have brought ourselves to believe that our achievements have been outstanding. A proud person, a satisfied person, does not feel the urge to change. Some degree of impatience, certain dissatisfaction with oneself, is often necessary before we decide that we want to move, that we want change. My generation has grown up believing that, since our independence we have done very well: we kept telling ourselves that we have the third largest scientific and technical manpower in the world, that we have built up our technical base from nothing that now we make a great variety of industrial goods. This comparison of our achievement with ourselves put into our minds that we have been rather successful. I want to question that because, in comparison with others, we have lagged behind badly. In the comity of nations, the place we should rightly occupy, is nowhere in sight. The recent World Bank data shows that, on what the economists call the `purchase power parity', we are the fifth largest economy in the world. In 10 years, we will become the fourth. In gross national product, we are 12th in the world. That sounds good.

But when you convert these figures into GNP per capita, we are 147th in a list of 185 countries. Among the 41 countries whose products and services were ranked in a World Competitive Report recently commissioned by the World Economic Forum, we occupied 28th place on price to quality parameter. On global benchmark of TQM practices within companies, our position ranked 38th. The sad realisation is that Indian business is mired in mediocrity. In a sheltered, in a greenhouse like environment, where artificial, not real, conditions are created for survival and growth, increased sales and operating profits of the companies are by no means the real indicators of excellence. The worrying thing is that when we look at just about any indicators, as a nation we are in the top league in brute, absolute, terms but in terms of productivity levels - output in terms of inputs - our position remains abysmally low. ! In milk production we are number two in the world, after the U S. In 5 years time, we will be number one. We think what a great achievement this is. But when you look at the yield per cattle, we are amongst the lowest in the world (350 kg per annum against the US of 5000 kg per annum). In coal, the output is measured in tonnes per man shift worldwide. Indian output is 0.9 tonnes per man shift. It is 3 in Australia. Britain and China are much higher. In cement, manpower per million tonnes is 1500 in India, the average is 15. We use ten times more manpower to produce same amount of cement. In aluminium, power consumption per tonne kilowatt-hours is 18,000, world average is 13,000. Energy used in printing per tonne is 14 KW in India, 5 KW is worldwide average.

The rates of growth of productivity in Thailand and Indonesia and in Pakistan are higher today than in India. This too is a sad realisation. These performance levels are the

result of application of technology, the systems, and the manpower development training. In short, all that total quality stands for.

and

These figures are also an eloquent testimony of the impact the application of science and technology, the improvement of total quality, can have on our position as a dominant economic force in the world. These figures represent an enormous potential for improvement and growth. In recent years, we have seen one country after another come up from behind and overtake us. For years, we said it was the West - who had the advantage of history. They have beaten us because we do not have that advantage. We say industrial revolution took 150 years to bring Europe where it is. The implication of that observation seems to be that given 150 years, we too would get there. But our Asian neighbours -Malaysia, Thailand, Indonesia, Philippines, now China, and I do not mention Singapore - are outperforming us. Compared to Asian neighbours we have become insignificant. The total manufacture of Indian industry is US $65 billion. The sales of just two South Korean companies exceed this figure. Even Vietnam, a war-ravaged country that fought the French, the Americans and the Chinese for over 30 years, still under communist regime, has opened up and is vibrantly developing its economy. I am talking of the countries which were nowhere on the economic horizon when I was your age and I don't wish that at my age you talk of Vietnam, Cambodia and Myanmar to the younger generation and tell them how better they have done than us! I want to drive the point home that we need to see ourselves in the correct perspective before we talk about the demands of quality and leadership. The fall-out of Economic Reforms The first sign of opening up of the economy in India came in 1978, the year the Chinese started with their radical reforms. 1985 was the first year in India when the long-term fiscal policy (LTFP), a 3-year perspective of the budget, was brought out. But it was in July 1991 that the major shake up came. That was a watershed year for our economy but, by then, we had lost 13 years of initiative to the Chinese. It is now

useful to reflect on what it has meant for India to make that U-turn, what that historical shift in direction has meant to us. The hallmark of 1991 was that we moved from gradualism to sudden changes. The famous economist, Prof Raj Krishna, coined the term the `Hindu Rate of Growth' that lingered around 2 to 3% in India. The 1991 reforms pulled us out of that groove. The sweeping changes include reduction of industrial licensing and a greater freedom to import. The changes brought about a great dismantling of the walls of the customs duties. From an average of 230%, they now hover around 45% and 50%. Under WTO, these duties will reduce further. There have also been significant fiscal reforms. But don't get carried away by the talk that we are now a `global' player, that we are a `liberalised' economy. We often do not appreciate just how much insulated and protected our businesses even today are. Our customs protection at 45 to 50% compares with 5 to 9% in developed countries. GATT has exempted us from making drastic reductions in duties because the acknowledged figures of our GDP per capita is below $1000, giving us relief under the rules to go slow with duty reductions. This, of course, does not include our `parallel' economy, which is estimated to be two to three times the `official economy, and we are happy that official statistics keep us classified as a developing country for the purposes of special privileges under GATT. Some of our businesses are still not ready for the real world. The debate on insulating some of sectors in India for a "little more time" is still raging. Producers, not by consumers, stoke its fires. It is not in consumer interest that there should be a lack of choice to buy world-class quality. It is the producers argument that they are not ready to produce quality. It is the organised labours argument that they should not be upset in their jobs even if their output includes 5% scrap when the demands world-wide are no more than a few parts per million. I want to emphasise this point because aversion to face the world prevents us from pursuing excellence. It is an argument that, in effect, says: "Do not disturb me. If you want to bring in change do it for my neighbour. This is not for me, at least not yet". You cannot talk of world-class quality of leadership in the same breath if you take that position.

In our earlier days, producing imperfect products was okay. If there was a problem in selling, we tried to get the Directorate General of Supplies & Disposals (DGS&D) rate contract. And if customer was too demanding we went to the government and said, "do not allow him to import. Its waste of `scarce foreign exchange'. It is against our national interest". We were nicely protected by the cosy regimes of the Directorate General of Technical Development (DGTD) the `No Objection Certificates', the Chief Controller of Imports Exports (CCI&E). We lived in an incubator. In Indian industry, at nearly 50 years after independence, some of us are still in it and have been heard saying "Mummy, please do not take me out of this life support system". Can we talk about quality and leadership with this attitude? Quality movement begins when we want to be the best in our class. Indeed, not just in our class, but also in comparison with other classes. The concept of Just in Time (JIT) came up when Taiichi, Ohno, the Toyota Chairman saw replenishment of stocks in a departmental store. He noticed that as soon as an item was sold, it was replaced on the display shelf immediately and he thought "I run a large corporation which is competitive in the world markets. We don't manage our inventory like that". Here, the benchmarking was with an altogether different system. Not with another automobile company, say a General Motor or a Ford, but with a departmental store. The quality movement catches on when you resolve to be better than others. To aspire for leadership, I said earlier we couldnt compare ourselves with ourselves. Now you see we cannot even compare ourselves with others in our class. New Face of Competition Till recently, competition meant race between domestic suppliers: Hindustan Motors vs. Premier Automobiles vs. Maruti. If you exported, then competition meant dealing with the producers abroad. But now there is a new twist. Even if you do not export, you may have international competition at your doorstep. Take Titan watches. Who is the competition? Is it HMT? No, it is Citizen or Seiko or Piaget. Why? Because they are now available in India. If you want to buy a music system, who is the competitor to Philips? Its Sony or Akai or Samsung. The domestic producers, for the first time, are staring at a new face of competition. You no longer have to be an exporter to face international competition. You do not have to be an exporter for the demand of worldclass quality on your products and services.

Some industries have understood this. They are aspiring for excellence. Many sectors, such as capital goods, have opened up. There the customers have the freedom to import them from anywhere in the world. But we still do not have the choice to import, say, two wheelers and there are many such sectors that continue to be insulated from competition. Some of the people in these sectors are still saying India is not `ready for global competition. But the consumers are. They want goods and services that get them value for money. Consumer is a truly universal citizen. They respect no nationality. They alone level the playing field and performance standards for producers. A Mutative change In this process, the concept of quality has undergone a radical change. The very idea of quality as we understood say, 5 years ago, is not the same as the idea of quality today. What is it? On production lines of Motorola, the American telecommunication equipment manufacturer, engineers are labouring to attain 99.99997 defect-free manufacture, that is 30 parts per million. In India, same plants are struggling to keep the rejection rate at 5% i.e., 50,000 parts per million (ppm). Our text books, the quality manuals, the training programmes still talk in terms of percentages of scrap in production processes when world-wide the talk is of pip. There is a story about a Japanese company who received an order for supply of some automobile components from United States. The order stipulated stringent quality standards and said that the rejection should be 3,000 parts per million. When the shipment reached the United States, the buyer was surprised to find two consignments. One had a million pieces and the other 3000 with a note that `this is a separate invoice for 3000 pieces because you asked them to be outside the specifications. We had to tool up for these components because our production processes cannot produce out-of-spec pieces'. Japanese did not know why the buyer should have asked for 3000 rejections out of a million! India's total industrial production has been estimated at Rs.1200 crores. A 5 %

rejection means Rs. 6000 crores worth of production goes down the garbage bin every year. This cost is only a small fraction of the total wastage. There are huge invisible costs. Because we do not produce right first time, companies spend money to make

sure that products conform to the standard. Besides cost of inspection and rework, there is the cost of lost opportunity, of wasted management time, loss of morale, delayed deliveries, lost customers, the goodwill and reputation. These are simply immeasurable. With such rejections, can we battle in the global markets and talk of leadership? You hear that currently the figures of balance of payment (BoP) situation in India are comfortable. We have US$17 billion surplus. But it is the balance of trade what really counts. This is what we get from our exports minus what we have to pay for our imports. Balance of trade for 1994-95 was negative at Rs.4300 crores for India. Our exports still do not support our import requirements. Let us therefore be cautious in rejoicing at our balance of payment figures. Technology and quality are what drive our products into world markets. The New Focus Poor quality drains away profits in ways unseen by even the most demanding accounting systems. One estimate in India is that 25% of the manufacturing sectors profits are eroded by quality problems. Therefore, the focus on quality has moved from inspection - always a `post-event' action - to prevention of errors. The new thrust is to improve our work processes and capabilities by discovering the hidden potential that lie beneath the layers of imperfections. . When Swaraj Mazda set up its Light Commercial Vehicle (LCV) plant in Ropar Dist in Punjab, the Japanese team came to visit the site. When they enquired of the size of the proposed Quality Control Department, The local team proudly said `we shall ensure international quality. We have planned 200 quality control people in the factory'. The Japanese were staggered, "You expect to produce that many errors in this factory that you need so many people? The strength of `Quality Control' department in India and Japan turned out to be 10:1.

The old approach was `tougher the inspection, better the quality'. `Put more policemen on the job, and we'll all drive safely? That thinking on quality has taken a severe beating. Today we talk of empowerment, of self-inspection, of error-free production. We question the very need of inspection.

When I started my working life as a technical management trainee in a manufacturing company, the question on the shop floor was always: "Do you want production or do you want quality?" It was always one or the other, always the clash. Today we know better. We have learnt that by improving one you improve the other. Actions on enhancing productivity are much the same as for quality improvement. Design We have also learnt that controlling quality through process control, through on-line control methods, through flow charts and histograms and cause-and-effect diagrams only emphasises the manufacturing aspects. We now realise that these attempts help merely to reduce the discrepancies and imperfections in manufacturing the product. Statistical quality control (SQC) techniques can never compensate for poor quality of design. Good quality of the equipment in manufacture cannot compensate for wrong design. Process control and improvement do not guarantee that the product will be reliable. From this realisation, a set of new techniques has come up which look at the robustness of design. This movement, spearheaded by Dr Genichi Taguchi of Japan. Try and put right the quality at the design stage. Service The quality paradigm is shifting also because we traditionally believed quality was confined to hardware: something we can see, something we can touch, and something we can measure. As a result, we have not talked much of the quality in the services whether in banks, in hospitals, insurance companies, educational institutions, or in Government offices. We cannot talk of leadership through quality by restricting its meaning to something on which we can put a vernier and a micrometer. We talk of zero defects in manufacture. But the service companies have their own kind of scrap: Customers and clients who do not come back, or, if they have no choice, suffer in silence and wait for the first opportunity to revolt. This `scrap' too has a cost. We have to measure it and learn to prevent it. Service sectors have to work for zero defections as the manufacturing companies work for zero defects. Our management information systems do not capture the value of a loyal customer. In fact, customer defections do more to a service company's profits than the scale of operation, the market share, the unit costs and many others. A recent

research study revealed that companies boost profits by almost 100% by retaining just 5% more of their customers. Loyal customers do a lot of publicity and drum up new sales for the company. The concept of quality now stretches further. It pervades the service sector. On-time deliveries Yet another dimension of quality is deliveries. Garments and shoes are second and fourth largest exports respectively for India. International buyers increasingly insist that the suppliers of these products from India slash delivery times from 3 months to around 2 weeks. The power to manufacture unique products in batches, of even one, without compromising on costs, speed or product standards has become the core of quality improvement programmes in many companies. It is an integral part of TQM. Certification Many companies have acquired ISO 9000 but certification itself cannot bring improvement in quality of products or services. It is like getting a marriage certificate. That alone will not bring matrimonial harmony to your home even if you enlarge it and hang it on your bedroom wall. Quality goes beyond certification. Customers demand total performance and insist on deliveries as part of quality. Vanishing Traditional Advantages All the traditional advantages this great country has enjoyed in terms of manpower, raw materials, natural resources, even brainpower, are a shrinking advantages because of this compelling requirement of quality. Value addition and quality are driving economies around the world. None of the successful countries I cited at the beginning of my talk are endowed with great natural resources. If they are, they have not succeeded on the strength of those resources. The prosperity of Malaysia is not based on tin and rubber any more. Which countries on the earth have the best natural resources? The Middle-east countries. They own the most valuable of raw materials - oil and gas. Do we count them amongst the most prosperous nations? Why are the countries, devoid of natural resources, emerging as the most progressive nations on the earth? Not because of raw materials, not because of their labour. Those of us, who pride ourselves by saying that India has a great labour

advantage and raw material advantage, better understand the new imperatives. The driver is quality, it is performance, and it is value addition. We have to re-define our vision. The way to control our destiny in a global environment of change is simple: be the highest value supplier in your market place. Technology is absolutely critical. As Chairman of the National Committee on Technology of the Confederation of Indian Industry (CII), I keep stressing the role of technology in our competitive advantage and I believe if we do not develop technological excellence, we will get nowhere. But today, we must raise the question: what use is it that we have great technology; what use that we have great inventions, that we have great knowledge and understanding if we are not able to make products of acceptable quality out of that technology and deliver on time? Quality: the Great Leveller Another major paradigm shift of quality is that quality is no longer a competitive advantage because every body is learning to produce high quality. Performance levels declared on the product are assumed to be 'given'. I have this dictaphone with me. I may buy this Dictaphone or that. But I have to take for granted that both will work satisfactorily. You can buy one walkman or the other, and you have to assume that both will give their stated performance. Lack of performance, lack of quality is no longer in question. More and more suppliers are ucing excellent quality. Zero defect companies are rising. So how can you and I as suppliers go to our customers and say that my product performs and some one elses does not? That mine is better than zero defect? Quality brings equality. My company has ISO 9001. 1800 other companies in India have ISO 9001. One day that number will be over 5000. Is it my competitive advantage? My quality' product no longer puts we on a higher pedestal. Of course, if I produce shoddy output I may not be in my business for long. `Internal Quality' When we talk of products or services, we usually mean the output we provide external to our organisations. It is what we finally deliver. But we cannot talk of external quality in isolation. Inside the company, bit by bit by bit, we take daily steps in the form of

10

hundreds of activities before ending up in a product or service. A company can deliver good product or service only when it produces quality output at every stage. There may be, say, 15 departments in an organsiation. Each department produces something for the next department. So we have the concept of "internal customer". We are `internal customers' and `internal suppliers' in our respective organisations - be it educational institutions, government offices, or hospitals - and we have to supply each other with quality output so that it finally culminates in what goes to the external customer. The performance of each department and of each individual in the organisation has therefore to be subject to same analysis, same feed back, same `customer handling' procedures, as external customers. No full stops So, where does the definition of quality end? I have said it includes deliveries, that it includes service, the `internal' working. In reality, the concern for quality does not stop anywhere. There was an article recently in the Economic Times, (3 Feb 1996) by Anirudh Dheber, a Professor of Indian origin at Sloan School of Management, MIT, USA. He was returning to United States from India and he made a stopover in Switzerland. In this article he describes the sights and the experiences in Switezerland :
It is not only that the entire Swiss transportation system promises and - importantly delivers on the committed time schedule. Quality can be seen on other dimensions as well. Riding a train one day from Wengen, the mountain village where I was staying, to the Lauterbrunnen valley, I could not help noticing the orientation of many screws on the wooden boards that collectively formed the passenger seat in front of me. To my amazement, the screws - all of them - were in perfect alignment. The notches on each and every one of them pointing in the same direction. Now you may think that bothering about the orientation of screws is going too far. But it is this attitude that leads to the well-marked sign posts on hiking trails that point in the right direction and give an accurate estimate of the remaining hike time or postage stamps that stick without a litre of gum or wetting stamps sponges in the post office that are not dry or flooded with water and the public toilets in even the remotest places clean with a flush systems working.

11

This is the attitude to quality, all embracing, that does not stop at anything. It shows up in notches on screws all pointing in the same direction even though you may argue that, functionally, it is of no damn consequence. It reflects the attitude to work of someone assembling passenger seats. You simply have to care. For physical products or for service products, in the public sector or in the private sector, for profit industries or not-for-profit organisations, the goal has to be outstanding aesthetic appeal. We debate economic reforms and talk of changes that could influence our competitiveness in the 21st century. It is just four years away and we have to make changes sooner than that. If companies do not perform consistently well then there is nothing that the government can do to save the industry from decline or from take over by better product or better services. Leadership and change Improving quality requires leadership. It calls for a a strong commitment to implement changes. How do we bring about changes inside our organisations? Talking of leaders, John Milton had declared of Oliver Cromwell : "they are guided by faith and matchless fortitude". But the opposite also seems to be true. W B Yeats' in his famous poem "The Second Coming" captures the essence of leadership today : "The best lack all conviction while the worst are full of passionate intensity." It is the best amongst us who have to have the passionate intensity. There are certain acknowledged traits of leaders who successfully bring about change in their organisations. Amongst these, the most important one is that of sensitivity.
There is a parable of a king who sent his son, the Prince, to the temple to study under the great Master. The Master was asked to teach the boy the basics of being a good leader.

12

When the Prince arrived at the temple the Master sent him to the forest and asked him to come back after one year. When the Prince returned, the Master asked the boy to describe all that he had heard in the forest. "Master", replied the Prince, "I could hear the cuckoos sing, the leaves rustle, the hummingbirds hum, the crickets chirp, the grass blow, the bees buzz, the winds whisper and howler". When the Prince had finished the Master told him to go back to the forest to listen to what more he could hear. The Prince was puzzled with the Master's request. Had he not heard all the sounds that they were in the forest already? For days and nights on end, the young Prince sat alone in the forest listening but he heard no sounds other than those he had already heard. Then, one morning, as Prince sat silently beneath the trees, he started to discern faint sounds unlike those he had ever heard before. The more acutely he listened, the clearer the sounds became. The feeling of enlightenment enveloped the Prince. "These must be the sounds the Master wished me to discern". When the Prince returned to the temple, the Master asked what more he had heard? "Master", said the Prince reverently, "when I listened most closely, I could hear the unheard sounds of flowers opening, the sound of the sun warming the earth, the sound of the grass drinking the morning dew". The Master nodded approvingly."To hear the unheard" he said, "is a necessary discipline to be a good leader. For, only when a leader has learned to listen closely to the peoples hearts, hearing their feelings uncommunicated, pains unexpressed and complaints not spoken of, can he hope to inspire confidence in his people, understand when something is wrong. The demise of organisation comes when leaders listen only to the words and do not penetrate deeply into the souls of the people to hear the true opinions, feelings and desires".

I narrate this parable because when you set out to bring about changes in the quality levels in your organisations, this is the kind of sensitivity and awareness you need to display. Change : fire and water Managing change is not a flash in the pan. It is not a one-time effort. People think they can light fires and bring about change. But fires are set only once. A raging fire, a one13

time programme of quality improvement, can be strong and powerful. Nothing matches the might of fire, they say, and it may well conquer all that lies in its path. The quality improvement programme is more like a flowing river. It starts like a small stream in distant mountains, usually at the top with the chief executive. The width and depth of the Ganga in the plains is not the same as at Gangotri. The river flows slowly, sometimes quickly, but always it sails downwards, it goes to the other level taking the low ground as its course. It willingly permeates every crack in the earth and embraces every traverse in the land. The nature of the stream is humble. When we listen to the water it can scarcely be heard, when we touch it can scarcely be felt. So is its nature. And that is the nature of true change. In the end what is left of a mighty fire? Only a handful of ashes. For the fire is so strong that not only it destroys all in its path but destroys itself and is consumed by itself. As with nature, so it is with leaders. It is not the fire but water that envelopes all. It is not the authoritative leaders but leaders with deep reaching strength who capture peoples hearts and are springs of change in their organisations. Conclusion So let us pause to contemplate the paradigm of quality as a core competence, postulating that quality can be made the basis of every activity in daily life. It suggests that not companies, not products, not the services alone but the society itself can be transformed by the quality revolution. Our agenda for India should be quality leadership and leadership through quality - in the Government, in business in education, in all products and services. But the driver has to be in business where the economic activity is placed. At a second, most fundamental level it compels all of us to embrace quality in our respective activities and if there is a message I want to leave with you today, it is that we have to inject quality in our personal lives before we take it to workplace, before we expect the workplace to demonstrate quality to us.

14

Quality is coming back to us under the cover of global competition. I started with the examples of excellence that have pervaded our culture throughout history. There is pride in our traditions, in our skills. We need to adapt that pride in the form of a strategic movement for chief executives and young managers and engineers across the country to write their own manifestoes to unleash a total quality revolution. Use of quality concepts can revolutionise our capabilities in all sectors - in agriculture, in industry, in administration, in services. Through this movement we will gain our position of leadership - as individuals and as a nation. We need to discard our inferiority complex, stop believing that as Indians, second best is good enough for us. We need a resurgence of spirit that led to India's freedom. The mutiny against mediocrity must begin now. Thank you.

15