Professional Documents
Culture Documents
to Understanding
and Implementing
Employee
Engagement
Programs
Also available from ASQ Quality Press:
The Executive Guide to Understanding and Implementing Lean Six Sigma: The
Financial Impact
Robert M. Meisel, Steven J. Babb, Steven F. Marsh, and James P. Schlichting
Townsend, Patrick L.
The executive guide to understanding and implementing employee engagement
programs : expand production capacity, increase revenue, and save jobs / Patrick L.
Townsend and Joan E. Gebhardt.
p. cm.—(The asq quality management division economics of quality book series)
Includes bibliographical references and index.
ISBN: 978-0-87389-718-1 (soft cover : alk. paper)
1. Total quality management. 2. Management—Employee participation. 3. Leadership.
4. Organizational effectiveness. I. Gebhardt, Joan E. II. Title.
HD62.15.T688 2007
658.4'02—dc22 2007017955
ISBN: 978-0-87389-718-1
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of the publisher.
ASQ Mission: The American Society for Quality advances individual, organizational,
and community excellence worldwide through learning, quality improvement, and
knowledge exchange.
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Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Chapter 1 Democracy in Action . . . . . . . . . . . . . . . . . . . . . . . . . 1
Making the Leadership Link . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Opportunity Is There. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Getting Started or Gun-Shy? . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Chapter 2 From the Background to the Foreground . . . . . . . . 9
The Intersection of Leadership and Participation . . . . . . . . . . . 13
Anyone Can Do It . . . But Doesn’t . . . . . . . . . . . . . . . . . . . . . . . 16
The Biggest Risk of All . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Chapter 3 How Does a Complete Quality Process Impact
Cost or Revenue?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Keeping Score. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Increasing Capacity for Work. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Calculations from UICI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Comparison to a Contemporaneous Effort. . . . . . . . . . . . . . . . . 28
The Best-Case Scenario . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
The Terrible Truth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Engaging Everyone in the Effort . . . . . . . . . . . . . . . . . . . . . . . . 32
But What About the Naysayers? . . . . . . . . . . . . . . . . . . . . . . . . . 34
A Whole Lotta Shakin’ Goin’ On. . . . . . . . . . . . . . . . . . . . . . . . 36
Chapter 4 How Do I Implement . . . ? . . . . . . . . . . . . . . . . . . . . . 39
At Your Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
The Cost of Leadership-Driven, 100 Percent Employee
Involvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
vii
viii Table of Contents
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Introduction
I
f, as it is often said, we are what we eat, then it may follow that we are
also what we read. If nothing else, books that broaden our knowledge
are indeed food for the brain.
That is the purpose of The ASQ Quality Management Division’s book
series on the economics of quality—to stimulate thought on how differ-
ent quality methods can be used to influence the financial position of an
organization.
A manager may want to know about a popular business topic, an engi-
neer responsible for cost control may need a good business tool, or a per-
son new to the quality profession wants to understand more about the many
different approaches that drive organizational success; what we all seek are
answers to two simple questions, What is it? and How do I get started? This
book series has those answers.
The Economics of Quality Book Series is written by subject matter
experts from business, academia, consulting, and not-for-profit organiza-
tions. They represent the best minds on the subject about which they write.
This series is not intended to be a collection of application guides. It
is introductory material to point us in the right direction so we know what
the capabilities of a method are. These books are intended to arm us with the
right questions so that if we want to deploy a particular methodology, we
know what to ask in order to move to the next step in the implementation
process.
The subject matter experts of the Quality Management Division are
members of a variety of Technical Committees who have specific and in-
depth knowledge about methods such as Baldrige, ISO, Lean Six Sigma,
ix
x Introduction
T
he goal is clear: to define, implement, and sustain a performance
excellence system with the understanding that it will make (or, in the
case of a nonprofit or government organization, conserve) money.
The question remains: Where to start? Or, more paradoxically, how to
recover from failed efforts? There is a deceptively simple answer.
Take this case in point: In a world of emerging democracies, no one
seriously assigns that designation to any nation that disenfranchises—or
excludes from voting—a substantial portion of its population. “One indi-
vidual one vote” is taken so much for granted that anything else is auto-
matically dismissed as fraudulent. Few people, however, stop to consider
that even the Founding Fathers of the United States were not sold on direct
democracy, going so far as to establish a republic with checks and bal-
ances. It was almost as if the Founding Fathers had asked “Who should we
involve?” when framing the Constitution. By answering the question the
way that they did, that only those having a financial stake in running
the country—read “white male property owners of a certain age”—would
be allowed to vote, they excluded one whole gender and one whole race and
quite a number of other citizens.
It took over 150 years, a long and bloody civil war, and a few Con-
stitutional amendments to get things straightened out. Today, the United
States of America is still a republic—but a republic with a 100 percent fran-
chise. No American would settle for anything less. And yet, ironically, the
first question asked by thousands of corporations when beginning a quality
1
2 Chapter One
effort has been analogous to the one asked by the Founding Fathers: “Who
should we involve in our effort to improve what we do?”
A senior management team intent on improving its organizational prac-
tices has a choice of models to emulate. They can follow the 18th century
model and ask, “Who should we involve?” or they can go directly to the
21st century model and ask, “Who can we afford to exclude?” By choos-
ing the 21st century question—with its obvious answer of “Nobody”—
leaders can give their organizations the opportunity for greatness. Mak-
ing 100 percent involvement the prerequisite for improvement is somewhat
unconventional, but what passes for conventional thinking in this area has
pretty much run its course. By settling for what seems a comfortable solu-
tion up front—a small-group or one-tool approach—executives make long-
term misalignment and disenchantment inevitable.
This then is the answer to the original question: 100 percent involve-
ment in any continual improvement, or performance excellence, effort is
essential. It is also one of the two tenets central to the approach to quality
described in this book. The other, the companion concept, is leadership.
Leadership provides the framework, the intellectual orientation, and checks
and balances—the Constitution, if you will—that makes 100 percent par-
ticipation not only possible, but successful.
Examples in this book tend to be from companies that are the size of
most companies in America—a few hundred to a couple thousand employ-
ees. What of a larger, particularly much larger, business? If the size seems
clumsy, then the organization can be broken into parallel efforts. Because
the staffing for a complete quality process (CQP) effort is relatively small
and because computers make it easy to share data across boundaries, these
parallel efforts can serve as idea resources for each other while remaining
manageable in size.
This highlights the importance of using the tools of quality to increase the
value of the output of the organization—and using them wisely.
goal may never be reached. But once you concur that the right step is to get
everyone involved through effective leadership, what are the mind-set and
the conditions that allow that to happen?
The intent of this book is to describe and discuss the whys and hows
of 100 percent employee involvement in improving everything an organi-
zation does, as well as the integral and all-important role of leadership in
achieving 100 percent participation. These ideas will be presented in such a
way as to make it evident that success is possible and that positive results
are within reach through the theory and tools presented.
For many, it must be said, this approach to performance excellence will
require a willingness to rethink their approach both to other people and to
the workplace. Once you head down this path, everything changes.
First of all, remember that when the nonmanagement employees—and
the lower management folks such as supervisors and the like—go home
at night, they refer to the place where they work as “my company.” They
express an ownership about the place where they spend a large chunk of
their conscious life—and they would like to be able to take pride in that
organization. So why shouldn’t a senior management team attempt to capi-
talize on the ego-involvement that is already there and establish ways to
take advantage of all that brainpower? Start by assuming that employees
bring their brains into the building every morning and work from there.
Next, recognize that every company has a corporate culture. That’s
inevitable. It may be as implicit as the collection of habits in place and it may
be as explicit as a well-crafted (and implemented) corporate statement. The
phrase, “Mission, quality, culture: mission is what we do, quality is how we
do it, culture is how we work together to get it done” encompasses a great
deal. To make the phrase a reality takes work. It won’t be easy or immedi-
ate, but any president or CEO who subscribes to that phrase—coined by the
president of a company, the UICI Insurance Center, with a very successful
100 percent employee involvement effort—can make it happen.
If the boss—the president of the company or whoever is seen as the
power behind the “how this business is going to run” decisions—considers
the pursuit of perfection to be someone else’s job, the improvement effort
will fall far short of its potential. It is that simple. If the person at the top of
the particular heap is not willing to get involved with the details and, more
important, with the people who make up his or her organization, there may
well be improvement—but it will be nowhere near its potential.
Put another way, the men and women who occupy the highest positions
in an organization beginning the effort to define, implement, and subse-
quently maintain a new program for performance excellence must under-
stand and accept at the outset that if the effort fails, it is their fault. If they
Democracy in Action 5
This book will establish the toolbox and place in it the two tools with
the widest possible impact: 100 percent employee involvement and lead-
ership. Given the proven return on investment of an effective 100 percent
employee-involved continual improvement effort in terms of time alone, this
presents the only logical, intelligent, and defendable approach. The other
books in this series will fill the toolbox with more of the quality instru-
ments such as Lean Six Sigma and cost of quality. Exactly how the tools
fit together and how much emphasis a particular company puts on one tool
versus another will vary with the perceived or understood needs and chal-
lenges of each organization. Each Constitution will be slightly different.
It may be of interest to readers to know that the authors of this book
have been active in the field of quality since 1983. They have seen it go
from strict quality control to a brief period in the late 1980s when the idea
of quality as a vibrant, people-focused process was ascendant to the 1990s
retreat to quality control under fancier names. They have hope that the pen-
dulum will swing back as we progress into the 21st century.
Who then is the audience for this book and, by extension, the remain-
der of the books in this QMD series? In general, the answer is anyone who
is currently in a position to impact the future of an organization—or anyone
who hopes to be in position to lead or support such an effort in the future. In
particular, leaders of any operation that is in a position to go from “good” to
“better” or even to “best” will benefit most. This includes not only for-profit
business enterprises, but any organization. Performance excellence efforts
are most effective when groups are already doing okay. When organiza-
tions are sliding downhill, there is usually too much panic for improvement
processes to have the desired impact.
And even though beginners can avoid the worst pitfalls by acquiring
these tools and understanding the philosophy behind their use, this book
is especially well suited for the “once burnt, twice shy” crowd. Make no
mistake: the numbers of the twice-shy crowd are legion. Over the last few
decades, there has been an enormous amount of money spent on incom-
plete “quality solutions”: reengineering, Six Sigma, and ISO, to name a few.
While powerful tools, the implementation of each of these often suffered
from the shortcoming cited above. The authors of the popular text on reen-
gineering, for example, admitted in their follow-up book that they “had for-
gotten about the people” in their first best-seller.
These and other approaches that avoided anything that bordered on
the emotional have been heavily touted by various magazines and societ-
ies as the be-all and end-all of quality improvement—usually by those who
reaped financial benefits by offering classes in these partial solutions. It
is easy to suspect that one-dimensional “quality consultants” and “quality
instructors”—individually and as institutions or societies—have, in total,
Democracy in Action 7
been paid more money than American companies have provably saved. No
wonder that there are skeptics when the conversation turns to quality.
Companies that spent big bucks only to have short-lived, ineffectual
programs got what they paid for: incomplete methodologies, systems that
only addressed one part of the puzzle and used only some of the people and
tools available and needed. Despite exaggerated claims, such approaches
shouldn’t have been expected to solve everything. It was a case of hiring a
child to do an adult’s work—and then being disappointed at the result.
The Economics of Quality Book Series is designed to illuminate a mul-
tidimensional approach to the effort to continuously improve everything an
organization does. Admittedly, it will not be the only book—or series of
books—that will ever be needed. Additional books, articles, classes, and
discussions about leadership will be vital as managers work to become lead-
ers and ensure that their organization enjoys the maximum benefit from its
quality procedures. Technical knowledge of what reengineering (or process
analysis) is and how to do it, or of what the mechanics and applicability of
ISO are, may necessitate additional input. Or it may become apparent that
adding a quality professional with a particular expertise to the staff would
benefit an organization.
What these books will do is point out where each of the other dis-
ciplines fit into a complete template and discuss how a quality process
impacts organizational culture. Using the Economics of Quality Book
Series, readers will be able to construct, and intentionally vary, a cohesive
approach to quality improvement. Collectively, the series institutionalizes
common sense.
What follows then is a system for continual improvement that incorpo-
rates the best features of virtually all quality methodologies available in the
marketplace of ideas—plus the concept of 100 percent employee involve-
ment. Actively enrolling everyone can be the difference between an organi-
zation trying to achieve only an agreed-upon minimum and an effort in which
personal and organizational maximum achievement levels can be reached
. . . before raising the bar again.
Two caveats are necessary: One is that some of the steps will seem too
obvious and too easy. In truth, the methodology is not particularly complex.
As a result, many executives and quality professionals dismiss it, failing to
realize that “simple” and “easy” are not the same. There is a vast differ-
ence. Something can be quite simple and still require a great deal of atten-
tion and effort. Quality falls into that category. There is not a minute of any
day where quality is optional. While not complex, it is difficult. Executives
who do not make the distinction between simple and easy will continue to
put quality into the “too easy” pile on their desks, where it will languish
as flashier approaches come, fail, and go.
8 Chapter One
The other caveat is that this is not a “how to” book in the sense of spell-
ing out a “Quality for Dummies” step one, step two, step three sequence.
When factors such as personalities and emotions are assumed (that is, when
humans are involved), it simply isn’t that neat. All of the ingredients are
identified and one successful sequence is described.
If someone wants to vary the ingredients, they are very welcome—
although they do so at their own risk. To be blunt, you cannot ask your
Aunt Liz for her famous apple pie recipe and then make a lot of substitu-
tions and expect it to taste the same. If you want pie like Aunt Liz makes,
you are going to have to invite her to the party. On the other hand, there is
nothing to say that you can not make a pie that tastes just as good—or a
little better.
In the following chapters, the primary source of examples will be the
first five years of the Quality First process at the UICI Insurance Center in
North Richland Hills, Texas. The process there was led by one of the authors
of this book (Pat) who also was a coauthor of the book Commit to Quality
(Townsend and Gebhardt 1986). The process at UICI was an adaptation of
what had happened at the Paul Revere Insurance Group—detailed in the 1986
book—and impacted by lessons and experiences gained during 12 years on
the speakers’ circuit. The resulting combination of personal experience and
theory tempered by conversations and observations in several countries
and throughout the United States is a process that can be replicated and is
worth the investment. During the first five years of the quality effort at the
UICI Insurance Center, the return on investment (ROI) was in excess of
eight to one.
If any manager who is hesitant to “buy into” a CQP can devise a pro-
cess with a consistent ROI in excess of eight to one and that impacts the
entire organization, he or she should step forward. If he or she can not, it
is time to begin thinking of the pursuit of quality as a worthy investment of
time and other resources.
2
From the Background to
the Foreground
A
lthough both employee participation and leadership are standard
indices on all worthwhile organizational assessment instruments
available today, this has not always been the case. As late as 1985,
the publisher John Wiley and Sons removed a chapter on leadership from
Commit to Quality (a book on service quality) because the editors “found
no link.” In 1988, the Malcolm Baldrige Criteria made the link explicit.
Why the discrepancy? What were the conditions that inspired the authors
of the criteria to recognize the importance of leadership and participation
while the editors at Wiley did not?
Two words: global economy. Arguably, the writers of the Criteria were
more aware of the economic conditions worldwide. The editors, however,
were in the majority in not recognizing that times had changed. The shift
in economic conditions built slowly at first, proceeding inexorably and
at an accelerating pace. Before the advent of the global economy, most enter-
prises didn’t have to worry about competition from all over the world. Since
then, thanks to everything from lowered tariffs to the Internet, very few
companies enjoy even regional monopolies. Consumers have more options
and are determined to get value for their money. And very few companies
can remain competitive with only a few brains contributing to their prog-
ress. Every company must find a way to capture the knowledge and talent
of everyone on the payroll if they wish to remain competitive.
As a result, there has been an interesting, and natural, evolution of
thinking in the workplace with regard to who exactly is to decide what and
what can and should be done in the way of change and improvement. This
9
10 Chapter Two
evolution has not been particularly smooth; agreement on the best way to
achieve involvement has not been reached.
Pre-quality, employee involvement was rarely seen as an issue. Con-
ditions were virtually the same in all organizations: individuals at the top
of the hierarchical ladder made the decisions, those in the middle trans-
lated those decisions for the rank and file and made sure of their imple-
mentation, and most employees only had to do exactly as they were told.
There were some notable exceptions: National Cash Register and Kodak,
to name two.
The corporate hierarchy was a simple and straightforward approach
and, in a world of little or no competition, effective enough. For the most
part, the folks at the top got where they were because they came up through
the ranks and knew their business or had received specialized training. And
one of the bedrock, even if usually unspoken, assumptions was that only
individuals at or near the top of an organization (read “white male property
owners of a certain age” for the most part—sound familiar?) knew enough
or cared enough to assure the company’s well-being.
This basic combination of circumstances (with the exception of ethnic
distinction) had, in fact, worked worldwide for hundreds or even thousands
of years. So long as competition was kept to a minimum, either intention-
ally or through the economic facts of life, doing things the way the boss(es)
decreed worked for most organizations.
National Cash Register and Kodak were early proponents of the grand-
father of employee-involvement programs in the business world, the sug-
gestion system. Dating back to England in the 19th century, these systems
normally applied to all nonmanagement employees, and the procedures are
well known: if an employee had an idea that he or she believed the company
should implement, he or she filled out an appropriate form (or more rarely
spoke to a supervisor) to forward the idea.
Suggestion systems are still in use today and have at least one major
drawback. This approach automatically excludes a noticeable percentage of
the employee base, including all those who hesitate to put their spelling and
grammar skills on display. Formal instruction on how to present an idea can
make this less of a problem, but it still exists. Perhaps the biggest barrier to
the use of the system is the gap between the conception of an idea and its
implementation. The employee experiences a loss of ownership as the idea
moves deeper into the system. The lack of feedback can make a suggestion
system frustrating and ineffective.
Suggestion systems can, however, unearth ideas that might otherwise
be overlooked by traditional decision makers in the hierarchy of the orga-
nization as long as there are appropriate rules that insure timeliness in the
handling of submitted suggestions and well-publicized credit where credit
From the Background to the Foreground 11
involvement. It shares with CQP the notion of the potential for improvement
that is held by the employees of an organization but stops short of being an
overarching concept.
Experimenting with 100 percent employee involvement, organizations
turned to “empowerment,” a term used to indicate to employees that they
were responsible for their own areas of the workplace. The singular failure
of many empowerment approaches was that the responsibility was rarely
accompanied by sufficient authority—leading to “all blame, no gain.” In
contrast, there was the advice to “turn the pyramid upside-down,” indi-
cating that executives were there to “serve” employees, making decisions
only after (somehow) gathering information from the majority. Or organi-
zations “flattened” their hierarchy, removing middle management from its
traditional role, freeing employees to operate without “interference.” Some
organizations even made these approaches work, but mostly these buzz-
words fell into disuse when the next buzzword came along.
Other updated versions of quality that struggled to create 100 percent
employee involvement included total quality management (TQM) and total
quality leadership (TQL)—the Navy’s attempt to upgrade TQM. The idea
was to train more employees, to get more folks involved, and to push a
little power down the chain of command. Unfortunately, if truth in label-
ing had been more of a factor, it would have been called “partial quality
management” since the typical percentage of employees actually engaged
was deliberately set at less than 20 percent, and the amount of power shared
or leadership demonstrated was minimal. But it was a move in the right
direction.
Perhaps the fad that did the greatest damage was reengineering. It came
along in the late 1980s and allowed senior management groups to radically
downsize organizations in the name of “improved quality.” For the most
part, by not considering the full impact of the recommended changes on
its people and anticipating the future, the long-term quality of the organi-
zation’s products and services was diminished. Reengineering—a concept
credited primarily to Michael Hammer—prepared a company to handle the
world it faced the day, or week, that the workshop took place. When tomor-
row arrived, the reengineered company was unable to cope.
Other management tools were cast as the solution to employee involve-
ment. ISO, Six Sigma, Ishikawa fishbone, hoshin kanri, poka-yoke, lean,
Lean Six Sigma: these and other approaches proclaimed their usefulness
for everyone in the organization—which supposedly translated into true
involvement. Perhaps their creators had them in perspective when they first
introduced them to the world, but sales folks and one-trick consultants have
declared each in turn to be “the solution.”
From the Background to the Foreground 13
Still, while none of the above approaches are perfect, all of them were
moving in the right direction. All of them sought to enlist the talents of
everyone on the payroll. But all of them fell short in one way or another.
Is there an ideal approach? Any approach will work as long as it has
several characteristics:
• There is a structure in place that answers the question, “Where
do I go with a good idea?”
• The rules for using the structure are clearly communicated.
• The structure is not passive (unlike suggestion systems), but
sets aside time on a regular basis.
• People operate in the areas for which they are responsible day
to day.
• They have the input of their peers.
• They have the authority to make changes (unlike quality circles
and many work-related teams).
• Results are documented and shared so that best practices prevail.
• Recognition comes in the form of thank-yous, not incentives (and,
yes, there is a difference—no one elicits an invitation to a dinner
party by promising to bring flowers).
It sounds like a tall order, and that is where the role of leadership
comes in.
implement an idea that makes life easier for their unit of the organization
at the expense of the processes and/or accuracy of one or more other units.
Such missteps will be limited to well-intentioned errors and will be quickly
caught and corrected. If malicious errors are discovered, firing the miscre-
ants is certainly an option to be considered. Of the 25,000 ideas logged on
the tracking system in the first five years at Paul Revere, several were cali-
brated incorrectly but only five had to be undone.
For most organizations, the trust demonstrated in the Paul Revere
directive is the greatest stumbling block. One telephone company presi-
dent went so far as to say, “We can’t trust our employees.” Although not
as extreme (but maybe just as honest), executives as a rule are reluctant to
part with authority. They envision employees running rampant, deciding
on everything from the plants in the atrium to the labeling on the product.
There is, however, a huge difference between being asked if you have any
suggestions on something that somebody else does and being told to act
on your own ideas. Asked for a “to do” list for someone else, folks waver
between doing nothing and being overly creative. Being offered the oppor-
tunity to change the way that you perform your own job focuses thinking
into useful and practical channels.
By setting up teams that work together and having them make improve-
ments in their areas of responsibility, Paul Revere has demonstrated that con-
cerns about empowerment are baseless. And the benefits far outweigh the
risks. In addition to the quality improvements, employee morale improved
and turnover rate dropped. In addition, teams in this structure are encour-
aged to work with other teams, to call for as much help as they believe they
need, and to work on ideas of all sizes.
A secondary question at Paul Revere, “Are we doing the right things?”
was addressed through reengineering. After all, to do the right things badly
makes little more sense than doing the wrong things well. Management met
in workshops to decide on changes in work flow. Their intent was to stream-
line operations without reducing the workforce. No jobs were lost. The
assumption was that increased capacity would be used to meet the demands
of an increase in customers. This expectation turned out to be correct.
The combination of quality teams and reengineering yielded an unex-
pected benefit: quality teams made it possible to cope with major changes
in the work flow as a result of reengineering. Teams provided a mechanism
to introduce and incorporate change, provide feedback about the changes to
management, and initiate additional changes.
Five years later, Paul Revere Insurance Group applied for the 1988
Malcolm Baldrige National Quality Award in its inaugural year. Its appli-
cation yielded a site visit and was subsequently the subject of three Harvard
Business School case studies.
16 Chapter Two
Two things stand out from that visit: When the Baldrige examiners
asked a group of quality team leaders how they were sure that teams held
the gains logged onto the tracking system, there was a moment of stunned
silence. Finally, one of the team leaders blurted, “Why would we go back? It
was our idea to change.” It’s a valid point: when every improvement is put in
place by quality team members who subsequently work with the improved
processes every day, any anomalies are likely to be spotted immediately
and summarily dealt with.
Secondly, the Baldrige examiners found a great deal to praise in the
impact Quality Has Value had on strategic planning. Senior executives
benefited greatly from 100 percent employee involvement when it came to
deciding on the future of the company. When every person has the means
to contribute to the thinking about how the company should be going about
its day-to-day work, an upward flow of information is created that can—
if listened to—greatly enrich the thinking going into the formation of the
strategic plan.
In such an environment, any decisions made by the executives are more
likely to be rooted in facts than on wish-based hypotheses about what they
imagine the company should be able to do. Standing, functioning teams
involving all employees provide a continuous flow of pragmatic informa-
tion. This information provides a more complete picture than that gained
through periodic fact-gathering conversations between executives and
employees. The latter assume that employees (1) will have ideas at the time
the executive is asking for them, and (2) will have the courage to speak up
and present an idea that has not been talked over with others (the team).
Sometimes that is the case, but it isn’t the way to bet.
No matter how information is gathered, executives in an organization
that practices leadership-driven 100 percent employee involvement have far
greater opportunities to sharpen their abilities to “listen down” and develop
a strategic plan that is both ambitious and achievable.
Which was why ISO, whose popularity in the United States came on the
heels of the introduction of the Baldrige Criteria, was welcomed so heart-
ily. Besides being so pervasive in Europe that it was considered a neces-
sity for doing business, it came complete with numbers, charts, pre-agreed
criteria with specific numerical minimums, stopwatches, and quality folks
put in authoritarian positions. What was not to like? Add in the fact that
senior management could assign the earning of ISO registration to some
small group of enthusiastic folks (and then not have to think about it until it
was time to raise the flag) and ISO popularity went off the charts.
ISO did, and does, call for practices and documentation that are fun-
damental for a company intent on continual improvement. Essentially,
however, in order to define criteria that enough companies can reach, the
standards are minimums. A balanced quality effort that involves 100 per-
cent of the folks on the payroll invites a company to see how much it can do,
rather than determine if it can document adherence to the same minimums
as its competitors. ISO can fit nicely as a complementary piece within a
solid quality process, just as reengineering did at Paul Revere, and can pro-
duce questions that lead to innumerable improvements, but it is a tool, not
an approach. This is also true of Six Sigma, pushed to the fore in the 1990s,
winning its place on magazine covers and in book titles.
This is not to downplay the role of measurement. It is absolutely essen-
tial. How can any improvement be verified if it is not possible to tell where
the beginning was and where the process is now? Among the shortcomings
of most measurement schemes, however, is that organizations still desig-
nate a chosen few employees or consultants to move from department to
department and from unit to unit “solving problems.” After accumulating
and evaluating data, these few examine the numbers, declare the appropri-
ate fix, and then move on—assuming that the unit will implement the pre-
scribed changes. These experts notify senior management of the financial
impact of their Six Sigma project, and the savings potential is then verified
by other Six Sigma experts.
But what motivation does the unit, once freed of the overbearing strang-
ers, have for maintaining the new procedures? Even if the “strangers” are
on the company payroll and not consultants and responsibility is handed off
to the local supervisor, it’s unlikely that buy-in will be automatic. Contrast
this with the experience at Paul Revere. Holding the gains is a legitimate
question when assessing the impact of a quality process, but only a truly
empowered work team is positioned to institutionalize needed changes with
enthusiasm.
Lean, a kinder, gentler version of reengineering that was developed
in the automobile industry in the 1980s, focuses more on the reduction of
18 Chapter Two
waste and became generally popular as the 21st century got under way.
Lean presents some of the same difficulties as its reengineering predeces-
sor. It asks “Are we doing the right thing?”, but fails to provide the tools for
asking the “holding the gains” question. Nor does it involve enough people,
encouraging everyone in the organization to grow in knowledge and sophis-
tication about the business.
Why? Savvy executives immediately see that this will require the per-
sonal involvement of the senior management of the organization. They know
that it has never been enough to have “quality by proclamation,” wherein
the boss announced, “We’re going to be a quality company. Now get back
to your work stations and work smarter, not harder.” Tell an employee that
he or she should work smarter and he or she will just smile and think, “Here
they go again.” Tell an employee that you are going to actively involve every
single person and then do nothing and the reaction will be, “They lied to
us.” The management team who solicits input then fails to make implemen-
tation possible dooms the company to cynicism and mediocrity.
Refer back to Paul Revere. Executives at Paul Revere invested a great
deal of ego and time in defining and implementing Quality Has Value. First
they served on the committee to decide on the approach. Then they were all
on quality teams—often as a member, not the leader. Many were on value/
process analysis committees. And all the top executives committed to
visiting quality teams to say “thank you” for their efforts on a regular
basis—week in and week out—every time a team achieved their goals.
UICI followed a similar approach in 2000. (See Appendix B—the
UICI Insurance Center’s complete quality process.) Its starting place had
every person on the payroll on at least one quality team empowered to make
decisions and exercise authority equal to their responsibility. And it was
driven by informed and active commitment by its executives, who had been
through extensive leadership training before the process began.
3
How Does a Complete
Quality Process Impact
Cost or Revenue?
KEEPING SCORE
Peter Drucker once observed that the primary goal of every organization is
its own survival. No matter how altruistic the mission statement, the over-
riding goal is to be around tomorrow. Failing that, high-minded objectives—
or capitalistic yearnings—are irrelevant.
Each organization has only three resources to work with: personnel,
time, and money. Having the right people with the right ideas and talents in
the right positions at the right time is everyone’s dream. Organizations con-
stantly work toward making that happen, mainly (although not exclusively)
through the human resources department. Everyone in the organization,
however, can pay attention to the other two resources. In order to survive
and, in particular, to thrive, an organization needs to use and conserve both
time and money and, in the for-profit world, accumulate the latter.
These simple observations—perhaps best expressed by the phrase
“quality makes money”—are the most straightforward reason for proceed-
ing with the definition, implementation, and maintenance of a leadership-
driven, 100 percent employee involvement process. Such a process develops
people while saving time, using money wisely, and increasing revenues.
It does this in a number of ways, some of them only tenuously linked
to financial statements. Over the years, the question—or challenge—
resulting in the most damage to fledging quality processes has been, “Show
it to me on the bottom line. You say you’ve saved the company this pile of
‘soft dollars’ [or ‘hard dollars’]. How much?” While it is possible to arrive
21
22 Chapter Three
workers at 40 hours per week, or 80 hours) virtually for free. The original
eight people can now do work that would have taken ten people to do before
the idea was implemented. The bottom-line impact: $62,400, best viewed
as a decrease in cost.
The other general type of savings regularly recorded by performance
excellence teams is hard dollars. These can be either additional money
coming in the door thanks to an improvement or budgeted money unspent
because of a change in procedures. In the first case, of course, it is easy
to “show me the money” by simply comparing the new income levels to
the old.
When budgeted money is not spent for its original intent, the money
does not automatically accrue to the bottom line. Few department heads,
when realizing that they need not spend a budgeted sum thanks to some
“quality idea,” will call the CFO of the organization and say, “Good news!
You can take $10,000 [or $800 or any other sum] out of my annual budget
because my folks had some good ideas.” Instead, the typical department
head will spend the money already budgeted—money available with few
if any questions asked. The money may go for machines or programs or
people—all of which can contribute to the department’s ability to accom-
plish its tasks. The department can then do more than previously expected
without exceeding their budget. Thanks to the budget savings, there is an
increase in the capacity for work. A dollar figure may or may not be trans-
ferred to the bottom line as a result.
When streamlining processes, either through cutting costs or creating
better work flow, the goal is to increase productivity. Consider the basic
definition of productivity: outputs divided by resources. The higher the
value of this fraction—the more outputs (Y) achieved per unit of resources
(X)—the higher the productivity. The time-tested method for increasing
productivity is to reduce the resources (X – Z) while attempting to main-
tain the same level of outputs. This can be achieved most easily by firing Z
number of employees—a not uncommon tactic.
In the case of a leadership-driven, 100 percent employee involvement
process, a different question is proposed. It is not, “Who [or what] can
we do without?”, but rather, “With these resources, how much can we
increase output?” In other words, rather than reducing the denominator (X),
the focus is on increasing the numerator (Y) by, for example, Q. The result-
ing proportion (Y + Q divided by X compared to Y divided by X) also yields
a larger number, this time increasing productivity without having fired any-
one. Although lean methodology frowns on excess capacity, the experience
of organizations who pose this second question is that internal improve-
ments are accompanied by an increase in customer demand for the new and
better outputs, putting the company back in balance.
How Does a Complete Quality Process Impact Cost or Revenue? 25
The above results also support the argument that increased efficiency
creates a larger customer base. It does this in two ways: customer reten-
tion and new customers. Any company that is easy to deal with and able to
deliver on its promises is more likely to retain customers. And a company
with a customer focus is more likely to develop products and services that
appeal to new customers.
COMPARISON TO A
CONTEMPORANEOUS EFFORT
The same year (2000) that the quality process was being defined and put
into place at the UICI Insurance Center, another quality effort was in its
early stages at a larger insurance company. This second effort was a Six
Sigma process, complete with leadership by executives recruited from Jack
Welch’s much-praised GE Six Sigma operations. The relative cost and the
impacts of the two virtually simultaneous efforts are worth a look.
The second effort had a head start on the UICI effort, as reported in a
highly complimentary article in an insurance industry publication. At the
time of the article (late in 2000), the second effort had completed its first
eight months of implementation while the UICI process didn’t launch offi-
cially until September 14, 2000. The second process had an announced goal
of $100 million in annualized impact in its first year; after eight months, it
had reached a total of only $3 million. Both the goal and the accomplish-
ments for the first eight months included money saved through employee
layoffs—an approach never considered in the UICI Quality First process.
In addition, the goal and accomplishments noted included savings from
both employee/unit-implemented ideas and savings from process analysis
workshops. If both factors are considered at UICI (more about process anal-
ysis in the next chapter), the first-year total was $18.4 million for a company
of 800 employees versus the first eight months total of $3 million for a com-
pany of 14,000 employees.
So far as cost to implement, it is relevant to look at the number of
people needed to achieve the results. At UICI, the quality department had
three members and there were never more than two consultants at the com-
pany to assist with the process analysis workshops during the first year.
The tenure of these outside consultants came to an end during the second
year. At the second organization, there were 170 full-time “Six Sigma pro-
fessionals” in addition to the quality department staff.
The proportional numbers are especially telling. If the relative employee
populations are taken into account, the $18.8 million in annualized impact
at the UICI Insurance Center projects to $329 million—compared to the $3
How Does a Complete Quality Process Impact Cost or Revenue? 29
With good leadership practices in place and every person being kept
abreast of “what’s happening,” a company can react more quickly to com-
petitive challenges. When people know why a change in direction must be
taken, they are far more likely to facilitate that change. In fact, with every
person on the payroll on the lookout for competitive advantages, the com-
pany may well know about possibilities for improved products and services
far more quickly than in their pre–quality process days.
The best case—and the possibility to be expected—is that the com-
pany will reach its full potential through the definition, implementation,
and maintenance of a leadership-driven, 100 percent employee involve-
ment process. Not only will internal operations continually improve, the
resultant products and services will be produced at lower cost (thanks to
the reduction in waste and the increase in productivity) and will be well
received in the marketplace.
senior member; the least senior member can suggest and direct a course of
action. Thinking of leadership as a behavior, rather than a position, makes
it possible to understand the concept of leadership at every level.
Leadership at every level is enacted through empowerment. While out-
side the comfort zone of many middle and senior managers, empowerment
is not an open checkbook by which everyone is given license to do what-
ever they are just sure is the right thing to do. Empowerment, rather, is
defined as authority equal to responsibility. In short, if someone is going
to be blamed if a particular thing goes badly, then that someone should be
given the authority to ensure that it does, in fact, go well.
For an organization to thrive, everyone, regardless of their position,
must behave like a leader in several ways. They need to think about their
jobs analytically and they need to acquire a skill set that includes what
many see as management tools: ability to formulate and express an idea, an
understanding of measurement tools, and the will to contribute to the build-
ing and maintaining of an environment that makes it possible for others to
not only complete their jobs but also to self-actualize in the process. Even
someone in the position of being a “follower” on a specific project can dem-
onstrate leadership behavior by helping to maintain the environment neces-
sary for success and by contributing ideas toward changes for the better.
In other words, it is possible to use the same set of leadership assess-
ment criteria or guidelines for both those in positions of power and those
members of the organization with relatively little positional power. The
attributes being assessed in both instances are gradations of the same core
concept.
But what happens if leadership skills and understanding are missing at
both top and lower positions in a company or corporation? Get set for the
worst-case scenario. In it, the unit heads down the wrong path at the outset
due to poor judgment by the senior managers and continues to make wrong
turns due, in part, to poor decisions—or an absence of decisions—made by
those at the lower end of the management spectrum. And if there is solid,
informed leadership at the top but no effective empowerment or involve-
ment by people below the senior management level, the unit might start
down the right path, but it will never pick up any speed while going along
on its journey.
This is not to undervalue those in positions of leadership. The CEO or
president of a company is in a unique position to communicate the organi-
zational vision. The president of the UICI Insurance Center, Phil Myhra,
coined the phrase, “Mission is what we do, quality is how we do it, and
culture is how we work together to get it done”—or in shorthand “Mission,
quality, culture.” At the Insurance Center, the chief quality officer was also
designated as the chief culture officer.
32 Chapter Three
way in the improvement of the company will approach, perhaps even reach,
100 percent.
These changes, however, require a leap of faith on the part of the senior
leadership of the organization. A “hop of hope” will not suffice. A work-
place with a quality improvement effort in place looks vastly different
from one without. Imagine, if you will, a quality team meeting. This is the
sequence of activity when things are in place and functioning well:
• The team decides on an improvement. At their option, this can
be done with or without the assistance of anyone from the quality
department or any in-house measurement specialists.
• After the idea has been implemented, the team notifies the
quality department of its action (more on the specific mechanics
in the description found in Appendix B of the quality idea
tracking program and database).
• Working with the team leader, one of the quality analysts in
the quality department reviews the idea and its impact and
implications, as well as any measurements used to determine
the need for the change or to determine the cost and/or benefits
of the now-implemented idea.
Where is the corporate executive or middle manager in that description?
Working with their own quality team or on their own job. And that’s as it
should be.
4
How Do I Implement . . . ?
O
nce you agree that performance excellence based on leadership
and 100 percent participation is not only desirable, but also essen-
tial, the question remains, “What now?” Here’s where leader-
ship and positions of power converge. No effort will be successful without
the involvement and commitment of top management—the more senior, the
better. Without the willingness of the people in charge—the people who
are the face of the company to the employees—to invest their own time and
ego, any attempt at establishing a process such as that described in this book
will invite failure. Instead, a measurement system that can do its thing with
just the permission (rather than the active involvement) of the folks at the
helm of the organization should be settled for. The results won’t be as
ingrained or as positive, but top management commitment has to be
personal if everyone is going to be involved.
Assuming that someone were interested in pursuing the idea of a
leadership-driven, 100 percent employee-involved process of continual
improvement—while leaving themselves open to the idea of integrating, as
needed, all manner of measurement and analysis tools—where should they
go for guidance?
The bad news is that there really isn’t any one place to turn.
The good news is that there really isn’t any one place to turn.
The reason that this is both good and bad news is that the leadership
of any organization willing to believe that employees are mature enough
to handle authority equal to their responsibility is going to have to be inti-
mately involved in the design of the process. There will be no hiring of a
39
40 Chapter Four
AT YOUR DISPOSAL . . .
Top management commitment, like leadership, comes in two parts: rational
and emotional. It is acceptable to begin with a rational commitment, and
there are many ways to boost that acceptance. This book is part of the Eco-
nomics of Quality Book Series, which will cover the topics of quality costs,
42 Chapter Four
THE COST OF
LEADERSHIP-DRIVEN, 100 PERCENT
EMPLOYEE INVOLVEMENT
Some monetary investment is inevitable. Getting the budget to involve
everyone on the payroll in improving quality requires a leap of faith by the
senior executives. Fortunately, the initial budget will be smaller than virtu-
ally any other improvement effort would ask for—with a lot more potential
impact. Most of the direct costs of this effort will show up on the quality
department’s budget. In the case of indirect costs, especially time, most of
the cost will be off-line.
Chief among the financial costs are personnel and training:
• Salaries of the members of the quality department
• Expenses for any training that the quality department needs (to
include attending classes and conferences such as the annual
Baldrige “Quest for Excellence” gathering in Washington, D.C.)
• Training, both off-site and in-house, of employees in other
disciplines as needed, including leadership and measurement
44 Chapter Four
200X+2, the total impact of the good idea has been a savings of $500, but
only $250 shows up in the total calculation of the impact of the improve-
ment process. The ROI of nine to one is a low-ball figure.
Indirect costs are equally well invested. Take, for instance, the third
year of the 100 percent effort at UICI, when soft dollar savings were deter-
mined to be $5,465,117.30, or 364,341 hours. (Note: when the computation
programs are calculating the savings of single sheets of paper, it is inevita-
ble that the results are portrayed to the nearest penny.) If, for instance, every
one of the approximately 900 people in the company had spent an hour
every month (for example, two 30-minute quality team meetings) work-
ing exclusively on determining how to improve whatever it happened to
be that they did, that would have been a total investment of 10,800 hours.
Return on investment? Just under 34 to one. Teams were encouraged to
meet every week, however, so the ROI is likely closer to 17 to one . . . still
extraordinary.
Another case in point: Several years after their success as a Baldrige
winner in 1988 (the inaugural year of that award), Motorola sought to deter-
mine the amount of hard and soft dollars invested each year in their quality-
specific training. They hired an outside auditing firm to assess the impact
of that training. The results? The return on investment for their quality-
specific training in the midst of an effort that involved every person on the
Motorola payroll was 30 to one.
Additional savings—even if difficult to calculate precisely—from a
100 percent involvement effort come from the reduced turnover and higher
morale of the employees. Recall that just a couple of years prior to the ini-
tiation of the UICI effort, the turnover rate had been in excess of 40 percent.
By the end of the fourth year of the process, it was down to 11.7 percent.
Reduced turnover reduces the costs to find and recruit new employees,
as well as ensuring that the work being done is being done by an increas-
ingly knowledgeable crew. At the same time, the costs for temporary help to
fill in during panic times (which, in many organizations simply come to be
routine) all but disappear, as does the need for overtime pay. For a further
enhancement to the organization, training can be pitched at a higher level
since more and more of the folks who took basic courses are still around in
the following years to pick up advanced skills.
Increased morale means fewer mistakes. Employees with high morale
look for ways to bring more revenue into “my company.” And, too, happier
employees become loyal employees and loyal employees will show up every
day, they will co-produce with the company, they will forgive the com-
pany (up to a point), they will pre-screen their friends for possible employ-
ment, and they will help to convince customers to believe in the products or
services the company is offering. (The term co-produce means more than
46 Chapter Four
doing your job; it means doing something outside your job to enhance the
company’s image. Picking up the trash in the parking lot or rearranging
the product on a shelf in a store for greater appeal are two examples.)
High morale also means that the employees project their satisfaction
with the company in all of their dealings with their public. Loyal employees
help encourage loyalty among customers. Much like loyal employees, loyal
customers will return regularly, they will co-produce with the company,
they will forgive the company (up to a point), and they will recruit other
customers. (Co-producing here means that customers let the company know
when something is wrong, but withhold that information from another cus-
tomer. It may be as simple as letting you know that the towel dispenser in
the bathroom is empty or that the merchandise had a most unexpected flaw.
In the latter case, it gives the company a chance to recover with its reputa-
tion intact.)
As a bonus, improved products and services—the inevitable results of
a quality process—sell better, and sometimes for a premium.
At UICI, an independent consulting firm was hired to teach leader-
ship classes (see Appendix B) and to conduct annual employee satisfaction/
morale surveys for three years to track the impact of the effort to improve
leadership. After the baseline year of 2000, the survey results showed
improvement on every measured factor every year through 2003.
In short, quality is not free, but it is one heck of an investment. If
the executives have the leadership capabilities—including appropriate
humility—to guide the organization through the definition and into the
implementation and constant adjustments needed to sustain the effort,
the benefits to the bottom line can be enormous.
indicate that progress is falling short of stated goals, then the data is the
starting place for more ideas for improvement. Without measurement, a
quality process has no credibility. The caution is to remember that measure-
ment is a tool and nothing more. Use of measurement is intended to contrib-
ute to the continual improvement of the organization, not to win a contest
designed to see who can collect the most data.
While it is true that numbers are emotion-free, the people who use
them are not. Learning to use measurement correctly is one of the train-
ing costs, but equally important is training managers on the effective use
of measurement. Take, for example, a case of a manager wanting to track a
statistic in order to find out why a certain problem is occurring. The man-
ager might go to Pat and say, “I would like you to record this particular
value every half hour and, at the end of each day, send the numbers to my
office.” Now suppose that, in response, Pat, being a conscientious worker,
does exactly as instructed.
At the end of three weeks the manager can show up at Pat’s worksta-
tion and say, “Well, I know where the problem is now. It’s right here and
you are obviously right in the middle of it. Shape up!” Or the manager
could say, “Pat, looking at all of these numbers you supplied me, it appears
the problem is in the process right here. You’re the one that is closest to the
problem. I need your input so that we can figure out how to correct this.
Can I count on your help?”
Note that the set of numbers is the same—as are, essentially, the state-
ments. In both cases, the manager has figured out that the problem is within
Pat’s area of responsibility and, in both cases, the manager wants Pat to be
involved in fixing the problem. It is, however, fair to say that the manager’s
first approach has not only minimized the value of Pat’s input, it has min-
imized the possibility of the manager ever again getting accurate data in
response to a request. With the second approach, Pat may not like the mes-
sage, but Pat is more likely to help and to continue to provide usable data—
as will Pat’s associates in the workplace. While it is true that the numbers
are not emotional, Pat is. And the manager is. And word gets around.
A new performance excellence process will usually begin by work-
ing with very basic statistical measures. This makes it more likely that the
process will come to life quickly and begin contributing to the bottom line.
As individual employees become familiar with the use of measurement,
more and more sophisticated tools can be introduced. Other books in the
Economics of Quality Book Series offer procedures ideally suited for par-
ticular sorts of problems, from Six Sigma to benchmarking to kanban,
poka-yoke, and ISO. ISO certification, in particular, assures an organiza-
tion that it is at least as well organized as its competitors, and can serve as
a baseline for future improvement.
48 Chapter Four
which they are being asked to operate. Your environment will be novel for
most consultants. Many are used to being the only quality activity ongoing at
a company and to operating at a considerable distance from the spotlight.
Few have been given the directive that cutting people from the payroll is not
an acceptable route to “savings.” This will also come as a disappointment
for many, since firing people is a time-tested method for quickly achieving
spectacular savings.
• Informing everyone that they will be formally involved in determin-
ing the future of the organization. This is a matter of senior management
communicating that they recognize that there is a vast warehouse of ideas
available to them—once there is a mechanism in place.
RECOGNITION, GRATITUDE,
AND CELEBRATION
Once there are results, there has to be follow-up. While very few organiza-
tions have 100 percent team-based employee involvement, every organi-
zation with any form of employee involvement has learned the importance
of saying thank-you. Recognizing the efforts of employees is an act of
leadership—and one that is absolutely basic to the long-term success of
any performance excellence effort. Much of what a president/CEO and
the CQO and his or her quality department need to know about how to
design and implement a widely varied, always-engaging program for say-
ing thank-you on small and large scales can be found in Appendix C. (Two
other books written by the authors, Quality Makes Money [Townsend and
Gebhardt 2005] and Recognition, Gratitude, & Celebration [Townsend
and Gebhardt 1997], also cover this topic.)
Thank-you programs need to say thank-you in several different ways to
each deserving person. The reason is simple: different people hear “thank-
you” in different ways. Include a variety of objects and practices to make
sure that everyone feels thanked for a very practical reason: if a person feels
thanked, if a person believes that the organization is grateful for his or her
actions and ideas, the odds are good that he or she will continue to contrib-
ute. And if the action of saying thank-you is linked to the event in a timely
fashion, it has even more power: saying thank-you six months later loses its
“wow” factor.
What are the options? For some individuals, being given money gets the
message across. This can be either in the form of cash or, preferably, some
form of gift certificate so that the odds are better of the recipients remem-
bering specifically what they purchased with their “thank-you money.” For
others, a gift of a physical item—something that he or she can use or dis-
play or show to friends and family—is what makes him or her feel thanked.
Still others react to the recognition ceremony and the simple fact that one
or more senior executives are there to say “thank-you” in person. Or they
might take the most pleasure out of seeing their name in print (physical
or electronic) as one of the folks thanked that day. Making the choice of
options even trickier, the “trigger” for a particular person will most likely
How Do I Implement . . . ? 53
change over time. It’s more effective (and more sure) to say thank-you to
everyone in a variety of ways.
An effective program for saying thank-you to all deserving employ-
ees does come with one built-in risk. Some undeserving employees will be
thanked, especially if the vehicle chosen has been to have every employee
on at least one team. The choice is simple: would the organization rather
take a chance on thanking too few people or too many? The senior execu-
tives can be assured that the undeserving recipients will be the subject of
pressure from their coworkers (and, perhaps, even their own consciences)
to begin contributing, even if belatedly. On the other hand, if it is seen (or
believed) that deserving people are not being thanked in a timely manner,
the whole process will begin to grind to a halt.
Often overlooked in a corporate environment is the need for a sense
of playfulness and creativeness. Participants will remember an event (such
as the strategic plan presented as a musical) long after it occurs when it is
more than a rational exercise. Celebrating together confirms that we are
social beings, the importance of which is just being realized in a corpo-
rate setting. Daniel Goleman, the psychologist who wrote Emotional Intel-
ligence in 1995, followed up with Social Intelligence in 2006. He stated in
a Wall Street Journal interview September 25, 2006, “Emotions are con-
tagious. We’ve all known it experientially. . . . This has caught the imagi-
nation of people who do research on the workplace and organizational life.
They have done studies that show if you put a person in a meeting who is
either purposely upbeat or downbeat, it changes the whole group’s collec-
tive mood for the better or worse.”
In some sense, this isn’t news: Norman Vincent Peale wrote The Power
of Positive Thinking in 1952. What is new is the legitimacy granted by
academic circles: in 2006, there were 200 positive psychology classes in
universities. Studies investigate the benefits of emphasizing the positive
when dealing with depression, developing leadership skills, enhancing
creativity, and coping with disaster. And, increasingly, executives will have
to cope with social skills as well as intellectual ones as a part of the busi-
ness of business. In the same interview, Goleman equates social intelli-
gence with leadership skills and team membership—both foundations of
100 percent involvement (Goleman 2006).
1988 Criteria
Five points for “Describe the types of information that are
collected and assessed to indicate the extent of employee
involvement in and attitudes toward QIP (Quality Improvement
Process).”
How Do I Implement . . . ? 57
2006 Criteria
S
ince its birth in August 1987 (with the first application—for the 1988
award—available in January 1988), the Malcolm Baldrige National
Quality Award has been the subject of continual improvement. That
is only right since, whether on a national level or at a single company, a pro-
cess that urged others to change but was not itself open to change would be
quickly judged to be hypocritical at its core.
When comparing the 1988 Baldrige Criteria with the 2006 version, the
most readily apparent change is the total number of items to be addressed.
In both versions, there are seven categories; in 1988, there were 42 subcat-
egory questions (or “items”); in 2006, there were 19.
At first glance, it would appear that the emphasis on leadership,
employee involvement, and human resources has decreased because in
the 1988 Criteria the Leadership and Human Resource Utilization catego-
ries were each worth 150 points (of a total of 1000) whereas, in the 2006
Criteria, Leadership is worth 120 points and Human Resource Focus is
worth only 85.
The key is that the 2006 Criteria recognize that leadership, employee
involvement, and human resources can not be isolated from everything else
that goes on in the company. As a result, questions that relate to leader-
ship and/or human resources are now found in at least six of the seven
categories.
The increased understanding and sophistication is also apparent in the
way in which the questions are phrased.
59
60 Appendix A
For instance, in 1988 a total of five points was available for “Employee-
Related Data and Analysis” in then-Category 2: Information and Analysis.
The scoring criteria for earning those five points were:
• Trends in employee involvement
• Comprehensive stratification of the data to identify the extent
of involvement of particular groups, such as bargaining unit
personnel, field personnel, clerical support staff, and so on
• Use of information to address adverse trends
• Appropriate and effective use of employee attitude surveys
• The role of the employee suggestion program in quality
improvement
• Methods used in the plant or service facility to obtain
employee input
• Trending of data such as employee absenteeism, injury rate,
safety problems, turnover, and so on, and their correlation with
quality improvements
• Trend or volume of useful employee suggestions on quality
improvement
• Evidence that corporation utilizes appropriate employee
suggestions
• Evidence of formal recognition of employee contribution to
quality improvement
All together, these achievements were worth five points out of 1000!
In the 2006 Criteria, as a part of the 450-point category titled “Results,”
there are 70 points available for “Workforce-Focused Outcomes: What are
your human resource results?” The questions are:
• What are your current levels and trends in key measures or
indicators of work system performance and effectiveness?
• What are your current levels and trends in key measures of
employee learning and development?
• What are your current levels and trends in key measures or
indicators of employee well-being, satisfaction, and dissatisfaction?
The Baldrige and Leadership: Then and Now 61
T
he leadership-driven, 100 percent employee involvement process at
the UICI Insurance Center resulted in substantial financial gains for
the company. In 2000 (the formal kickoff for the process was Sep-
tember 14, 2000) the profits achieved by the company totaled $65,952,773.
In 2004, profits totaled $251,299,870.
To factor in the growth of the company, the dollars of revenue per
employee grew from $736,229 per employee in 2000 to $1,174,432 in
2004—an increase of 59.5 percent.
This remarkable growth in the highly regulated and punishingly compet-
itive environment of individual health insurance was only possible because
the executives of the organization bought into the idea that the people who
together made up the company could be counted on to improve the way
that they did their jobs if the leaders could, and would, create the needed
environment.
It is fair to say that not all executives of the company fully understood
the mechanics of the process when those procedures were in the talking/
defining stage nor did all of them grasp the implications of the structure
until those rules were in place and functioning. They were, however, will-
ing to trust the instincts and example of the new president of the company
and the guidance of their new chief quality officer.
One fortunate point was that the company had made no recent attempts
at implementing a single-tool quality effort. That fact alone greatly reduced
the amount of skepticism that needed to be overcome. Individual folks had
heard about failed efforts and they may even have witnessed one at another
63
64 Appendix B
organization, but the impulse to reject an effort at quality was not part of
the company DNA.
By immediately framing the basic question as “Who can we afford
to exclude from this effort?”, a great deal of discussion and hesitation was
avoided. While a person might harbor doubts about the idea that every
person who comes through the corporate doors at the start of the day is
capable of creative or straightforward problem-solving thoughts, it is the
rare person who is willing to say out loud that, “I saw someone this morn-
ing who really looked stupid and I think he (or she) should be excluded right
from the start.”
Because the process was built to formally include every person and
because the possibility of using any other quality tool available was left
open, the process was dubbed a complete quality process or CQP. See
Quality Makes Money (Townsend and Gebhardt 2005) for details.
The majority of companies who say that “All of our employees are
involved in our progress” have passive systems. That is, the process is built
to make it possible, even easy, for every person to step up and contribute if
they choose to. For some companies, particularly small ones in which peer
pressure is more difficult to escape, the passive approach does work.
Besides needing the individual to make the move on his or her own
initiative, these passive systems have the added difficulty of rarely encour-
aging team-like activity. Rather than having a group of people discuss an
idea and decide to go forward with its implementation, the normal passive
approach results in single individuals submitting ideas for someone else to
judge and implement.
At the UICI Insurance Center, every person on the payroll was always
on at least one quality team. The teams were originally made up of folks
who worked together, who dealt with the same work procedures and faced
the same problems day after day. Often, the first team leader that a team
had was the ranking person on the team, for example, the supervisor. For
most teams, it was the most comfortable way to begin. By the second year,
many of the supervisors had stepped aside to give someone else a chance at
a very real leadership opportunity.
The charter of the teams was simple: “You are empowered with author-
ity equal to your responsibility. If you want to make a change in a process,
the results of which you are to be held responsible for, do it. Then tell us
about it. If you want any help along the way, just ask.”
The link between the quality teams and the quality department was the
quality idea tracking system and database. The quality department con-
sisted of the chief quality officer and two quality analysts for the first three
years of the process. In year four, an administrative assistant was added.
Doing It 65
understand every nuance of the plan. The objective was more to let every-
one know that there was a plan (and, thus, things were happening for a
reason) and to give them, in broad strokes, an idea of what was in store for
the coming year. For many, such knowledge served as a starting point
for quality ideas.
There were six objectives in the strategic plan in 2002. A gentleman
was discovered inside the company who could compose lyrics (to go with
familiar tunes) and write a skit. Volunteers were called for to do the sing-
ing. And so a 90-minute musical was staged in which every strategic objec-
tive was explained twice: once by the “strategy owner” in normal business
talk and once by two to four singers. At the end, the newly minted “UICI
Song” was sung by the entire audience—on their feet, swaying with the
music and waving their arms.
That the employees became personally involved in ensuring the future
of the company is evident by the drop in turnover rate—from above 40
percent just prior to the initiation of the process to 11.7 percent in 2004—
as well as in the level of activity of the teams as seen in the following table
(quality year 1 ran from September 14, 2000 through September 13, 2001
and is abbreviated QY1, and so on):
The fact that the hard dollars savings in total were consistently (with the
exception of quality year 4 when both the hard and the soft dollars exceeded
$8 million) higher than the soft dollars savings catches some quality pro-
fessionals by surprise. It can be attributed to careful calculations of all
savings of budgeted dollars and the fact that everybody in the company
was involved. Virtually everyone knows of some way in which their orga-
nization is wasting money (even if only an unneeded five-page report once
a week). CQP gives them the opportunity to identify and plug the fiscal
leakage. For instance, in the first two years of the CQP at UICI, business
doubled while use of white paper decreased by four percent as lower-level
employees all over the company made changes to stop wasting paper—a big
dollar item in a paper-and-ideas service operation.
68 Appendix B
As a parallel effort with the team activity, an initial set of process anal-
ysis workshops was conducted in 2000–2001 in order to establish what the
“right things” were that needed to be done. Four years later, one of the qual-
ity analysts began a series of workshops to revisit the definition of “right
things,” to enable an updating of core processes.
The seven components of a complete quality process are:
1. Top management commitment
2. Leadership
3. 100 percent employee involvement—with a structure
4. Communications
5. Training
6. Measurement
7. Recognition, gratitude, and celebration
It is worth noting that there is no specific component exhorting manag-
ers to be sensitive to the changing culture of their organization or to repeat
steps as necessary. Not only does the pursuit of a complete quality pro-
cess require solid, intelligent leadership, the components are structured to
assume it.
It is as part of component #6 that many of the periodically popular
measurement-oriented quality tools become part of a complete quality pro-
cess. Reengineering and its later, softer reincarnations such as lean can be
part of the structure in component #3.
The CQP structure is explained in full in the book Quality Makes
Money (Townsend and Gebhardt 2005).
Appendix C
OK, Define 100 Percent
W
hile virtually no organization in search of improvement will
argue with a statement such as, “We need to get everybody
involved in this effort,” there is notable divergence in exactly
how to “get everybody involved.”
In the text of this book, the phrase “leadership-driven, 100 percent
employee-involved continual improvement effort” is meant to be taken
literally. The recommendation is that the leadership of an organization
devise a methodology that will ensure that every person on the payroll play
a part in the drive for performance excellence.
The approach implied in the text of this book, and described in Appen-
dix B, is to simply enroll, on a nonvoluntary basis, every person on the
payroll on a quality team and very publicly track the progress of every
team. Such an approach does not guarantee that every employee will be
wildly enthusiastic about the opportunity and begin immediately to con-
tribute innovative, money-saving ideas. What it does do is define every
employee as being a potential source of ideas and put them in position to
contribute when they are ready.
The methods used by Baldrige Award winners to benefit from the
knowledge and expertise of their employees vary considerably in their
details. The shared concept is an acknowledgement of the rich opportuni-
ties available.
69
70 Appendix C
DEPENDING ON TEACHING
The Jenks Public School District in Jenks, Oklahoma received a Baldrige
in 2005. They ensure that all teachers and members of the support staff
receive training in their continuous improvement model as well as in plan–
do–study–act (PDSA) procedures.
Throughout the school year, a theme of “exceeding your all-time best”
runs through various meetings and communications. To assure all teachers
and staff that the organization is itself focused on continual improvement,
the district surveys patrons/parents, teachers, and staff on a three-year
cycle. The results of each survey—and the resulting actions—are published
in a district newsletter.
A PASSPORT TO EXCELLENCE
At SSM Health Care—the first hospital system to win a Baldrige (in
2002)—every employee has, and always carries, a “passport” that reminds
her or him about the five characteristics of continual improvement and of
what they can do to help the progress of the organization.
In addition, every employee is urged to use continual quality improve-
ment procedures to improve whatever they control, and there is a conscious
effort to push decision making to the lowest level possible, recognizing that
their people are capable of thinking and making decisions.
OK, Define 100 Percent 71
CONTINUAL IMPROVEMENT IS A
FAMILY TRAIT
The leadership of DynMcDermott Petroleum Operations Company—
a 2005 Baldrige winner—believes that their heavy emphasis on being a
family (there are approximately 77 employees) is key to their success. There
are six or seven standing committees with voluntary membership plus other
temporary committees, also with voluntary membership. Company leader-
ship is very open about its belief that it is made up of very talented folks
who can handle being empowered.
Even if not every person is formally involved on one of the committees,
the fact is that when examiners for the Texas Quality Foundation Award (a
Baldrige clone that has been a stepping-stone to the Baldrige for several
organizations) came for a site visit, they interviewed every employee and
confirmed that all knew about the quality effort and believed in its impact.
There is an all-hands meeting once a week and people know that they
can bring up ideas and issues there or in private. Like a family, the employ-
ees of DynMcDermott work to resolve issues together. When an idea is put
forward, the person who first voices the question gets immediate feedback
and, if resolution takes more than a day, gets weekly updates on progress.
believed was necessary and all of the hoped-for ballplayers stepped onto
the field. The approach was passive in that no attempt was made to recruit
players. Rather, the situation that made it possible and attractive for them to
take part was carefully created and then they all took part.
When the goal is to have every possible person take part in the contin-
ual improvement of an organization, the company’s leaders are faced with
a very basic dilemma at the outset: how to entice their employees to take
part in the “game.”
Passive approaches to obtaining 100 percent employee involvement
can work. A high number of Baldrige winners are proof of that.
But what if you don’t “build it” perfectly—especially at first? Actively
enrolling all employees—right at the outset—in the effort to improve can
also be effective, as discussed in this book and in Appendix B. Going down
that path will require some tact. An announcement that, “We’re going to
get better and it is mandatory that everyone take part” is, for instance, likely
to be met with a great deal of stubborn resistance.
Better to make the involvement “nonvoluntary” than “mandatory.”
Admittedly, it’s a word game but it signals a recognition of the need to show
some restraint even while not taking any focus off the goal. A repeated
explanation that, “One of the things we do here is get better every day and,
since you are a part of this organization, you are naturally expected to be
part of that get-better-every-day effort” will help employees place their role
in perspective.
Backing those initial statements up with repeated statements—in every
possible venue—about the leadership’s belief in the talent and knowledge of
the employees, an energetic and well-executed training program, an under-
standable system for empowering employees (perhaps in teams) and for
incorporating employee ideas into the “way things are done around here,”
and some form of recognition, gratitude, and celebration, can rapidly put
the organization on the path to continual improvement and performance
excellence.
References
Bach, C. A. 1917. “Know Your Men, Your Business, and Yourself.” Air Clues.
(March).
Branch, David. 2006. Branch-Smith Printing Division. Conversation with authors,
September 18.
Ezell, Dana. 2006. Jenks Public Schools. E-mail to authors, September 5.
Friedman, Paula. 2006. SSM Health Care. Conversation with authors, August 14.
The Gallup Organization. New York. http://gmj.gallup.com.
Goldman, Daniel. 2006. The Wall Street Journal. (September 25).
Lewis, Tim. 2006. Dyn McDermott Petroleum Operations. Conversation with
authors, October 5.
Townsend, Patrick L., and Joan E. Gebhardt. 1986. Commit to Quality. New York:
John Wiley & Sons.
———. 1997. Recognition, Gratitude, & Celebration. Menlo Park, CA: Crisp
Publications.
———. 2005. Quality Makes Money. Milwaukee: ASQ Quality Press.
Zahrt, John. 2006. Los Alamos National Bank. Conversation with authors,
October 4.
73
Index
B cost of quality, 22
costs, of employee disengagement,
benefits, of complete quality process 53–56
miscellaneous, 25 costs, indirect, of 100 percent
at UICI Insurance Center, 26–28 employee involvement, 43–45
costs, of 100 percent employee
involvement, 43–46
C creativity, in corporate environment,
53
capacity for work, 23–26 Crosby, Philip, 22
complete quality process (CQP)
benefits, 25
sequence of activities, 37 D
simultaneous activities in, 36
and unions, 34 Deming, W. Edwards, 2, 22
complete quality process, impact on disengagement, employee, costs of,
cost and revenue, 21–37 53–56
best-case scenario, 29–30
capacity for work, 23–26
cost of quality, 22 E
engaging everyone, 32–34
and leadership, 30–32 Economics of Quality Book Series,
naysayers, handling, 34–36 5–8
UICI Insurance Center employee disengagement, costs of,
benefits, 26–28 53–56
comparison to a employee empowerment, 12, 25
contemporaneous effort, and leadership, 31
28–29 employee involvement, and Malcolm
co-production, 45–46 Baldrige National Quality
corporate hierarchy, pre-quality, 10 Award Criteria, 56–58
cost of nonconformance, 22 employee morale, 45–56
75
76 Index
L O
leader, characteristics of, 13–14 100 percent employee-involved
leadership, 30–32 improvement process
definition, 3 best-case scenario, 29–30
instruction options, 42 characteristics of successful
and Malcolm Baldrige National approach, 13
Quality Award Criteria cost of, 43–46
(Appendix A), 59–62 engaging everyone, 32–34
rational versus emotional evolution of thought, 33
considerations, 2–3 implementation, 39–58
relationship to quality, 3 Paul Revere Insurance Group case
lean (methodology), 17–18 study, 14–16
and process analysis, 48 timeline for results, 49–52
Index 77