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The Executive Guide

to Understanding
and Implementing
Employee
Engagement
Programs
Also available from ASQ Quality Press:

The Executive Guide to Understanding and Implementing Quality Cost


Programs: Reduce Operating Expenses and Increase Revenue
Douglas C. Wood

The Executive Guide to Understanding and Implementing the Baldrige Criteria:


Improve Revenue and Create Organizational Excellence
Denis Leonard and Mac McGuire

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

Quality Makes Money: How to Involve Every Person on the Payroll in a


Complete Quality Process (CQP)
Pat Townsend and Joan Gebhardt

Leadership for Results: Removing Barriers to Success for People, Projects,


and Processes
Tom Barker

Everyday Excellence: Creating a Better Workplace through Attitude, Action,


and Appreciation
Clive Shearer

WordSuccess: Why and How to Express Yourself to the Good Life


Pete Geissler

The Certified Manager of Quality/Organizational Excellence Handbook,


Third Edition
Russell T. Westcott, editor

The Quality Improvement Handbook, Second Edition


ASQ Quality Management Division and John E. Bauer, Grace L. Duffy, and
Russell T. Westcott, editors

The Executive Guide to Improvement and Change


G. Dennis Beecroft, Grace L. Duffy, and John W. Moran

Principles of Quality Costs: Principles, Implementation, and Use, Third Edition


Jack Campanella, editor

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call 800-248-1946, or visit our Web site at http://qualitypress.asq.org.
The Executive Guide
to Understanding
and Implementing
Employee
Engagement
Programs
Expand Production Capacity,
Increase Revenue, and Save Jobs
The ASQ Quality Management Division
Economics of Quality Book Series

Patrick L. Townsend and Joan E. Gebhardt

ASQ Quality Press


Milwaukee, Wisconsin
American Society for Quality, Quality Press, Milwaukee 53203
© 2007 by ASQ
All rights reserved. Published 2007
Printed in the United States of America
13 12 11 10 09 08 07 5 4 3 2 1

Library of Congress Cataloging-in-Publication Data

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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Table of Contents

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

Measure, Measure, Measure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46


Process Analysis As a Precursor . . . . . . . . . . . . . . . . . . . . . . . . 48
A Timeline for Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Recognition, Gratitude, and Celebration . . . . . . . . . . . . . . . . . . 52
The Cost of Disengagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Appendix A The Baldrige and Leadership: Then
and Now . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Appendix B Doing It . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Appendix C OK, Define 100 Percent . . . . . . . . . . . . . . . . . . . . . 69
Making Sure Everyone Knows the Details . . . . . . . . . . . . . . . . 70
Depending on Teaching . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
A Passport to Excellence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
What We Have Here Is Good Communications. . . . . . . . . . . . . 71
Continual Improvement Is a Family Trait . . . . . . . . . . . . . . . . . 71
“Build It and They Will Come” . . . . . . . . . . . . . . . . . . . . . . . . . 71

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

quality costs, employee involvement, quality management information sys-


tems, globalization/supply chain, data-driven decision making, and quality
in project management.
In addition to sharing their expertise through books like this one, the
committees contribute to business journals and speak at quality and busi-
ness conferences.
You can find out more about the Quality Management Division through
the American Society for Quality Web site: www.asq.org. As a member
of the Society and Division you will benefit from the professional con-
tributions of our technical committees and other subject matter experts.
The Division publishes a peer-reviewed journal, The Forum, that provides
in-depth application guidance to improving all types of organizations. As
a member you will also have the opportunity to attend our annual con-
ference dedicated to quality and organizational improvement. Our goal is
to help make all organizations, and broader society, a better place to work
and live.
William H. Denney, PhD
Vice Chair, Technical Committees
Quality Management Division
American Society for Quality
1
Democracy in Action

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.

MAKING THE LEADERSHIP LINK


The quality “movement” was slow to fully appreciate the role of leadership
in the quest to improve an organization’s internal operations. This is largely
because the earliest attempts were inspired by quality control. Executives
who were looking to statistical tools for a solution often failed to under-
stand that quality, like leadership, is both rational and emotional. Despite
the teaching of luminaries such as Dr. W. Edwards Deming about the abso-
lute need to ensure the dignity of the individual employee and to draw on
the ideas of every person on the payroll, day-to-day mechanics/consultants
(to include virtually all of those who called themselves “Deming disciples”)
began by stressing number-crunching procedures—usually to the near-total
exclusion of leadership or emotional considerations.
Democracy in Action 3

Such single-minded focus on the relatively easy half of the equation


led to failure after failure and, eventually, to discrediting the word “qual-
ity” in some circles. This began to change in 1988, when in the initial set of
criteria for quality as determined by the Malcolm Baldrige National Qual-
ity Award the leadership category accounted for 150 points out of the 1000
total points available, and 390 when combined explicit and implicit ques-
tions concerning leadership were taken into account. At that time, leader-
ship concepts were little seen outside of the “Leadership Criteria” section
of the Baldrige application.
By 2006, the Criteria for Performance Excellence in the Baldrige
Award makes 120 points available in the leadership category, but 630 points
of the 1000 total are from leadership-based questions, including points in
every one of the seven Criteria. (See Appendix A of this book for a com-
plete breakout of the leadership aspects of the current Baldrige Criteria.)
As a starting place for understanding the relationship between quality
and leadership, consider this brief definition of leadership:

Leadership is the creation of an environment in which others can


self-actualize in the process of completing the job.

In this definition, self-actualization is, in large part, the emotional com-


ponent. Self-actualization, a phrase associated with Maslow’s hierarchy of
needs, means briefly that an individual is enabled to reach his or her fullest
potential. Please note that this self-actualization in the corporate environ-
ment does not occur in a vacuum: completing the job, the rational compo-
nent, is still the first priority. What the definition does point out, however, is
that an employee’s well-being, while not quite a coequal consideration, can
not be ignored. Leaders create the balance—the environment—that makes
it possible for the goals of quality to be achieved through the growth of their
employees.
The exact relationship of quality to leadership can also be stated
another way:

Quality + Leadership = Performance excellence

This highlights the importance of using the tools of quality to increase the
value of the output of the organization—and using them wisely.

THE OPPORTUNITY IS THERE


It is no doubt true that, as Mao is credited with saying, “The journey of a
thousand miles begins with but a single step.” If, however, that first step
is onto the wrong path, there is going to be a lot of energy wasted and the
4 Chapter One

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

choose not to behave as active, informed leaders, their positions of author-


ity will not protect them from having to bear the responsibility for failure.
In fact, such a loss of credibility is perhaps the greatest risk faced by
executive teams considering bringing a quality effort such as that laid out
in this book into their organization. The up-front financial investment nec-
essary is, when compared to that required by other (partial) solutions, rela-
tively small. The real investment is personal.
One way to greatly increase the chances for success is for the orga-
nizational leadership—and the folks specifically in charge of the quality
effort—to be clear from the start: everyone must understand that this effort
to improve everything taking place is now “part of who we are” rather than
being just one more unwelcome burden added to an already overcrowded
agenda. Leaders must articulate this frequently, and everyone must observe
behavior (and structure) that supports this assertion.

GETTING STARTED OR GUN-SHY?


This book is one of several being published by the Quality Management
Division of the American Society for Quality under the collective name of
the Economics of Quality Book Series. The name of the series reflects a
simple truth: quality makes—and conserves—money. In terms of the bot-
tom line, that’s why it is worth doing. The fact is, however, that quality
accomplishes far more than that. The other benefits of quality will also
become apparent.
The purpose of this series can perhaps be best explained by imagining
a person who knows that his or her home is in need of a variety of improve-
ments and who calls a friend to ask for help. The request is never, “Please
bring a tool,” it is, “Please bring a toolbox with all of the tools that might be
needed.” After all, if the only tool you have is a screwdriver, all you can do
is screw things down. Or up.
This book, and the other books of the Economics of Quality Book
Series, will present ideas on how an organization can work on aligning
its mission, quality efforts, and corporate culture in ways that are in the
best interest of the organization. It may be necessary for an organization to
guide a change in corporate culture. It may take a little un-training, depend-
ing on how explicit past management has been about their, “You’re paid
to work, not think” directives and the resulting work habits. And since
it now seems so obvious, it may require an understanding of why so
many companies have ignored the 100 percent involvement option over the
last 25 years.
6 Chapter One

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

is due. This is rare. As of May 2005, the National Association of Suggestion


Systems determined that only three percent of United States companies had
“effective employee suggestion systems.”
One use of suggestion systems is to bridge the gap between noninvolve-
ment and 100 percent involvement. This was the approach taken at the UICI
Insurance Center in 2000. During the five months prior to the soon-to-
come, much-advertised 100 percent involvement structure, the 800 employ-
ees of the company submitted 251 ideas for improvement and 52 of those
were implemented. The suggestion system began the conversation about
what constituted “quality improvement” and made employees more com-
fortable about being asked to contribute their ideas.
The formal arrival of the concept of “quality” as a competitive tactic or
strategy in the American business community was accompanied by another
approach to employee involvement somewhere in the latter half of the 20th
century. Especially after the quality movement picked up steam in America
in the 1970s in the wake of the arrival of Japanese cars and electronics,
those in charge decided to enlist the help and the brainpower of the overtly
enthusiastic on their payrolls through quality circles—a methodology that
was an adaptation of the Japanese quality control circles. The motivation
for looking to the employee volunteers for ideas was simple: foreign prod-
ucts were cutting into the marketplace at an alarming rate and the Japanese
quality control circles were seen as one of the reasons why that was so.
But quality circles weren’t as effective as anticipated—both because of
the paucity of their numbers and because those corporations that employed
them usually handicapped them from the start. Enthusiasm, even when cou-
pled with appropriate schooling about how to run meetings and how to
fashion reports, couldn’t overcome the fact that quality circles didn’t change
who made corporate decisions. That all-important authority was carefully
retained at the top.
The result was predictable. Members of a quality circle knew that they
only had a limited amount of time to make their case for improvement proj-
ects and that the decision to proceed still belonged to the executives. No
one wanted to “waste” time on the small changes—the bread and butter of
a true continual improvement effort. Instead, everyone tried to “go for the
fences” whenever they got up to bat in front of the senior decision makers.
This resulted in large, sporadic improvements, but not continual improve-
ment. On the positive side, quality circles introduced the idea of nonman-
agement folks working in teams and expanded the impulse to get ideas
from nonmanagement employees.
Kaizen, a Japanese import that stressed the importance of the accumu-
lation of small improvements, was adopted by numerous American compa-
nies in the 1990s but virtually always fell noticeably short of 100 percent
12 Chapter Two

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.

THE INTERSECTION OF LEADERSHIP


AND PARTICIPATION
There is no question that involving 100 percent of the people on the payroll
requires working at polishing or acquiring leadership skills. A leader—not
a “mere manager,” but a leader—is not going to leave anybody behind. Nor
is he or she going to refuse out of hand the offered ideas of any of his or her
followers on how to ensure the possible success of their mutual enterprise.
Good leaders share several personal characteristics. They don’t just
issue orders; leaders listen. Leaders care about all of the people who have
been defined as their followers/subordinates. They are aware of people as
individuals. They make a personal connection, akin to love, that has prac-
tical results. A leader will want his or her people to grow, to become more
14 Chapter Two

knowledgeable, and to self-actualize while completing their contribution to


the overall mission of the organization. And leaders provide a way to reach
these goals.
One of the first 100 percent employee involvement efforts to succeed
was in a service organization. In 1983, the senior executives of the Paul
Revere Insurance Group in Worcester, Massachusetts, knew they needed
to change. Their stated objective was to reassess how they were doing
business and engage their employees in trying to improve the company.
One of the executives had read Philip Crosby’s book Quality Is Free and
was excited about the idea of using “quality” as the central theme for the
change process.
This was the time frame when quality as a basis for gaining a com-
petitive edge was a hot topic in the manufacturing world but not yet a
major point of discussion, much less pursuit, in service organizations—
particularly paper-and-ideas financial services companies. In fact, there
were virtually no consultants who were using the words “quality” and
“service,” much less “quality” and “financial services,” in the same sen-
tence. The executives at Paul Revere were on their own.
To get started, they formed a committee composed of the number one
or number two executive from each of the major departments and began
talking about how to do “this quality thing.” When the question of employee
involvement came up very early in the discussions, it was quickly assumed
that everyone would be involved. The decision was such a no-brainer that it
didn’t even get noted in the minutes of the meeting.
Eight months later, the Quality Has Value process was launched, with
every one of the 1250 employees on the payroll on a quality team that mir-
rored their work assignments. Teams were led by members who had been
trained in leadership, measurement, and how to facilitate meetings—and
these individuals were not automatically the senior member of the team.
Ninety minutes after launch, the first implemented idea with a positive
impact on the bottom line was recorded on their in-house-designed track-
ing system.
The quality teams were empowered to ask the question, “Are we doing
things right?” They were instructed to look at their work flow, find areas
that needed improvement (opportunities, not necessarily problems), make
the improvement, and report the result. After an idea was implemented,
analysts from the quality department double-checked all reasoning, results,
and calculations, validating the improvement. The underlying premise was
that it was better for teams to ask forgiveness rather than permission—
assuming that everyone on a team was the expert on his or her own job
and would not intentionally harm the company. Mistakes by employees—
even if working in teams—are certainly possible. One group may indeed
From the Background to the Foreground 15

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.

ANYONE CAN DO IT . . . BUT DOESN’T


The Malcolm Baldrige Criteria spawned adaptations (commonly referred
to as clones) in over 40 states and over 60 foreign countries and regions.
But while the implicit and explicit acknowledgment in the Baldrige
Criteria of the importance of the human factor in the pursuit of quality
attracted a good number of people from outside the traditional quality com-
munity, it also terrified those “quality experts” who still hadn’t found a way
to put the human factor on a chart.
From the Background to the Foreground 17

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.

THE BIGGEST RISK OF ALL


All this having been said, the question remains, “Is a leadership-driven
100 percent employee involvement process a prerequisite for success?” The
honest answer is, “It depends.” Obviously, millions of organizations over
the years have survived without such an effort, so it would be tough to prove
that leadership-driven 100 percent employee involvement is a “requisite” to
doing business in America—at least for now. Failure to address this issue at
some level, though, is an enormous risk.
It is not unlike the situation that faced college basketball coaches in the
United States (and, particularly, in the Southern states) in the mid-1960s.
Interviewed years later, coaches of that era admitted readily that recruit-
ing more African-American players was an idea that they knew at the time
would improve their teams—but few did it. In the wake of the release in
2005 of the movie Glory Road, detailing the success of the Texas Western
college basketball team that won the 1966–1967 NCAA national champi-
onship while playing only African-American student athletes in the final
game against Kentucky, one former coach said that, “We all knew it was a
good idea. Nobody wanted to go first but no one wanted to be third either.
As soon as someone did it, we all signed up.”
The chance to be among the leaders in defining, implementing, and
succeeding with a leadership-driven 100 percent employee-involved con-
tinual improvement effort is available now. Those companies who take a
chance on being “third” are wasting time and endangering their futures.
Incorporating all the “quality fads” into a cohesive whole depends on
leadership and participation—and a flexible structure customized to meet
a particular organization’s needs. The fact that, as yet, the integration of all
of the various quality tools into one process is not a widespread approach
to continual improvement means that it is available for an organization that
is looking for a long-term competitive edge. The overwhelming majority
of senior managers to whom this approach has been described have imme-
diately agreed that it sounded like a great way to assure the future of their
organization. When asked when they planned to proceed, however, reasons
why it isn’t quite “right” at this time begin to emerge.
From the Background to the Foreground 19

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

at a defendable figure in most cases, it may take several steps—and organi-


zations looking for a shortcut may be reluctant to take them. Still, it is cer-
tainly worth the effort to find a dollar amount, if only to convert (or at least
silence) critics.
Take, for example, the cost of quality. Phil Crosby made an excellent
case in his book for looking at the problem in four ways: the cost of pre-
vention, the cost of detection, the cost of correction, and the cost of fail-
ure. He argued that the company that devoted efforts to prevention, even if
there were costs associated with those efforts, saved the expense of detec-
tion, correction, and failure. Hence the title of his book Quality Is Free.
Implied was a boost to the bottom line—one that could be measured.
Deming was impatient with Crosby’s assertion because he felt that the cost
of failure—lost customers—had the biggest impact on the bottom line
and it was impossible to arrive at a dollar figure for that loss. Note that
Deming was not saying that quality is not free, only that the savings can
not be measured accurately. If anything, his criticism implies that quality
makes money by retaining customers.
While more sophisticated instruments have since been developed, add-
ing even an approximation of the cost of quality (or the cost of nonconfor-
mance) to the bottom line can be instructive. The role of cost of quality as
a training tool to sensitize everyone to the importance of doing things right
the first time is irreplaceable. The concept is easily grasped and, at a mini-
mum, it is possible to assign costs to prevention, detection, and correction,
and to see the impact of those three on the bottom line. In most organiza-
tions, these costs will run at 15 percent to 40 percent of operating expenses.
Employees who analyze their own work flow are likely to internalize this
message and act accordingly.
Even more importantly, the cost of quality creates a customer focus.
As Deming so aptly pointed out, loss of a customer is the real cost of non-
conformance. While the correlation is obvious, the cost of quality gives
everyone the vocabulary and common understanding necessary to begin
to address problems and look for opportunities. It is possible to expand the
cost of quality definition to include internal customers.
Take the case of the employees of a Marriott hotel in Chicago. House-
keeping noticed that many of its calls were for ironing boards. The staff was
not always able to deliver an ironing board and iron in what the customer
considered a timely fashion, leading to complaints. The solution required
an investment: ironing boards and irons for every room. Simple, straight-
forward. The result in customer satisfaction (both internal and external)
was immediate and Marriott got the message. In addition to high-speed
Internet, Marriott touts ironing boards on its Web site even today.
How Does a Complete Quality Process Impact Cost or Revenue? 23

INCREASING CAPACITY FOR WORK


Perhaps the greatest impact of 100 percent participation can be expressed
through the understanding of what might be called capacity for work. To
calculate its impact on the bottom line takes at least a two-step calcula-
tion. When ideas for improvement make it possible to eliminate a particu-
lar set of steps or to alter some sequence to speed up a process, there is a
savings. The difficulty comes in expressing that savings in a way that is
credible and has obvious value in the workplace.
Time savings are often expressed as soft dollars, as determined by
using a dollars-per-hour factor. This dollars-per-hour factor may be either
the actual hourly rate of the specific person (or people) whose routine has
been made more efficient or the factor may be a standard companywide
number, an “average hourly wage including benefits” figure that is used no
matter whose time is saved. In early 2000, at the UICI Insurance Center
(see Appendix B), the accounting department proposed a standard value
of $15 per hour as a fair representation of the average across-the-company
cost (wages plus benefits, and so on) regardless of whose time was saved. It
doesn’t matter whether there is an exact correlation by job or an estimate by
organization, the important points are that (1) time is saved and (2) there is
an agreed-upon way to express the savings in dollars.
In order to determine the impact on the organization’s capacity for
work, that is, the ability of the people on the payroll to get a job done in a
consistent manner, these time savings are normally annualized. If an idea
saves, for instance, six minutes every time a particular sequence is per-
formed, there must be an additional calculation of how many times each
hour that sequence is performed by how many people and if it is a daily
occurrence. That is, a six-minute savings in a process that is performed by
eight people 20 times a day is a 960-minute savings each day (6 × 8 × 20 =
960). In a week, that becomes a 4800-minute (960 × 5) savings or an 80-
hour (4800/60) savings every week.
If the value-per-hour being used is (as it was at the Insurance Center)
$15, this savings (80 × 52 × $15) would be listed as an annualized sav-
ings of $62,400 soft dollars for the year in which the idea is put in place—
whether the idea is implemented in January or in December. Annualized
savings are in anticipation of the fact that each change will go forward, that
the organization will hold the gain.
The eight people whose jobs were impacted by the improvement/
quality idea that saved six minutes per sequence now have a total of eighty
hours of work time available to them to do work that truly needs to be done.
Assuming a 40-hour work week, the impact of a mere six-minute savings
on the organization is the same as acquiring two experienced workers (two
24 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

Other benefits that accrue to organizations in ways that are diffi-


cult to measure at the bottom line can be expressed in terms of speed and
flexibility:
• By giving employees the tools to spot and implement money- or
time-saving improvements and the appropriate authority to put
changes in place, the company enables change to take place more
quickly. True empowerment speeds implementation of changes.
• By reducing the number of steps necessary to complete
improvements (although a commonsense level of confirmation
remains a part of the process), the change cycle is also less
expensive. A very small quality department is necessary to
coordinate the organization’s efforts.
• One of the advantages of using a team concept to implement
100 percent employee involvement is that teams tend to be
self-policing prior to actual implementation. When improvements
are made by the folks who are close to the actual problems,
corrections are likely to be appropriate. If it is subsequently
discovered that the costs to the company as a whole outweigh
the benefits of an idea for a specific quality team, the change
can be quickly reversed. The risk is minimal if the quality
department follows up in a timely fashion.
An example from the Paul Revere Insurance Group’s 100 percent employee
involvement effort can serve to illustrate these points. A quality team con-
sisting of clerks in the claims department took a long look at a form that
they used frequently. After deciding that the form asked customers for
information that was no longer used—and failed to ask for other informa-
tion that would be helpful—the young clerks looked at each other and said,
“Now what?”
The team leader and the assistant team leader asked for directions to
the legal department (on a floor of a building that the two ladies had never
before visited) and went in search of a lawyer. Having found one, they
showed him the old form and their proposed new form and asked if there
would be any problem with making the changes. He looked over the forms,
thanked them for asking, and assured them that there would be no problem.
They asked for his name and returned to their team. The modifications
were put in place that day.
In a “normal” scenario, in a company without a quality process, the
request for these changes might have taken weeks or months to drift up one
reporting chain (gathering additional questions and suggestions along the
way as each manager strove to put his or her mark on it), across to another
26 Chapter Three

reporting chain, and then, after approval, back to the originators. It is a


matter of empowerment. The team that initiated the change were the people
who had to deal with the form and who were responsible for gathering and
correctly disseminating the acquired information. The change was made
in an hour and the process was deceptively simple. Was the old way work-
ing? No. Fix it!
One of the traps that improvement efforts have fallen into in the past has
been what might be called the use of dynamite to move pebbles out of the
way. One of the early champions of quality, a former CEO who spoke about
the virtues of quality efforts to audiences throughout America, undermined
his own credibility. He told the story of a supply room crew that—with the
help of members of the company’s Quality Department using surveys and
all manner of statistical process control tools—mounted a several month–
long effort to determine the best way to keep sufficient copies of blank
reports in stock.
Every time he repeated the story, members of his audiences would
shake their heads in disbelief. He never seemed to realize that the people
he spoke to saw this as an example of building a mole hill into an elegant,
but unnecessary and expensive, mountain. Months after the gentleman was
removed from his position as CEO, the company’s 100-member quality
department was disbanded and the organization’s efforts to improve started
all over again with a four-person quality department.

CALCULATIONS FROM UICI


Looking at the bottom line results of UICI Insurance Center is suggestive
of the power of leadership-driven, 100 percent employee involvement. Very
specific attention was paid to “mission–quality–culture” during a five-year
period beginning in 2000. The Quality First process officially began on
September 14, 2000. Here are the numbers:
Insurance policies in force:
• At the end of 2000: 201,141
• At the end of 2004: 351,546
• Growth: 74.3 percent
Annualized value of premium for new policies received:
• In 2000: $346,680,474
• In 2004: $860,376,799
How Does a Complete Quality Process Impact Cost or Revenue? 27

• Growth: 148.2 percent


Profits for the period:
• In 2000: $65,952,773
• In 2004: $251,299,870
• Growth: 281 percent
Granted, nothing happens in a vacuum. The financial growth at the UICI
Insurance Center during the first five years of its Quality First process did
not come solely because of the quality efforts. Other factors in the gen-
eral economic climate must be taken into account along with evolution-
ary upgrades in computer hardware and software, but it would be foolish
not to credit the environment created by having an ongoing 100 percent
employee-involvement improvement effort with some of the gains.
What makes it likely that the attention to quality and leadership had an
impact is that the number of employees over that period increased from 800
to 950—only 18.8 percent. Virtually the same number of employees were
handling a vastly increased workload. Over the same period, employees
had logged 12,747 ideas on the tracking system with a total value of almost
$47,000,000—and the process analysis figures are not part of these totals.
These numbers are testimony to the real-world impact of an increase
in capacity for work and of what happens when the approach to productiv-
ity is one of finding out what the workforce is capable of. The increase in
profits, for instance, can be traced in large part to the fact that the annual-
ized value of premium for new policies had grown at a far faster pace than
had the expense of hiring employees to handle all of those policies and
that income. And, too, instead of firing employees to raise productivity, the
continual improvement of the company’s procedures made it possible for
the employees who were already with the company to successfully take on
more business.
It is also important to note that during this same period, customer satis-
faction climbed steadily, employee morale climbed steadily, and employee
turnover dipped to less than a third of what it was prior to initiation of the
quality process. Employee turnover is an especially powerful indicator of
effective leadership. When employees feel valued they stick around. The
turnover rate at UICI dropped from almost 40 percent to 11.7 percent—half
of the regional rate for financial service companies—from 2000 to 2004.
This meant, too, that the training department could devote its resources to
a more complex curriculum instead of a steady stream of employee orien-
tation programs. (Surprisingly, there are still organizations that do not see
turnover as a problem: after all, new employees are paid less.)
28 Chapter Three

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

million accomplished in eight months by the second operation. The profit


record of the UICI Insurance Center can be found above. The insurance
company with the Six Sigma effort declared bankruptcy in 2004.
The credibility of a quality effort receives a severe blow when the
senior management team turns to quality as a last resort, which was very
likely the case in this example. If an organization is in serious trouble, call-
ing in “the quality guys” will most likely ensure that the chairs are lined
up neatly on the deck as the ship slips under the waves, but that’s about it.
There’s just too much going on with too many people trying to save their
own reputations and financial futures for anyone to pay attention to the
impact of hundreds of small ideas.
The fault in this case, however, is not with Six Sigma. All quality tools,
used correctly, can reduce the costs of running an operation. The Executive
Guide to Understanding and Implementing Lean Six Sigma, another of
the books in the Economics of Quality Book Series, explores the power
of Six Sigma when used correctly. What makes an all-inclusive effort such
as that described in this series of books of particular value is that it can
use whichever tool(s) are appropriate to the particular challenges facing an
organization.

THE BEST-CASE SCENARIO


The best case for beginning a leadership-driven, 100 percent involvement
quality improvement effort occurs in a company that is doing well—or, at
least, well enough—but that wants to be an industry leader. Even better,
of course, is an organization that is already near the front of the pack and
wants to figure out how to pull ahead. The knowledge and dedication of the
folks who currently make decisions and contribute to the determination of
the future have already served the company well and serve as a foundation
to tap into the knowledge and enthusiasm and desire to excel of everyone on
the payroll. In such a case, quality doesn’t just make money, it makes buck-
ets and buckets of money.
And as part of the “best-case scenario,” in addition to every other savings
already detailed or mentioned, everyone can become involved quickly.
For an organization of 3000 or fewer people, if the time lapse between
the informed decision by the senior leadership team to define and imple-
ment a leadership-driven, 100 percent employee-involved effort and the
day that process is in place, with every single person formally enrolled and
bottom-line benefits being recorded, is in excess of six to eight months,
either the dedication of the boss or the competence of the consultants and
quality experts involved can rightfully be called into question.
30 Chapter Three

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.

THE TERRIBLE TRUTH


So that’s the rosy scenario. But there’s one phrase that should give one
pause: “with good leadership practices in place.” That’s not always a given.
It may not even be the norm. What an organization does when good leader-
ship has not been in practice is its biggest challenge.
Too often, the image of leadership being heartily practiced at every
level conjures up understandably scary images in the minds of folks in
senior positions. Autocratic managers especially tend to think of leadership
only in terms of their own limited experience of being able to issue orders
for others to follow. The idea of having virtually anyone making “do this”
proclamations based on his or her parochial view of an inter- or intradepart-
mental challenge can cause nightmares.
One of the hurdles for middle and senior managers to overcome is the
realization that leadership is a behavior, not a position. Virtually everyone
on the payroll has ideas that middle and senior managers have never even
thought of and there must be a way for the person with the idea to take
the lead. “Leadership at every level” is a common enough phrase and it is
certainly a laudable goal, but it is a practical concept only when everyone
understands the relationship between leaders and followers. What helps is
to think in terms of behavior; instead of leaders and followers, think leader-
ship and followership—then add teamship.
But leadership and followership are not disjointed opposites. They are,
rather, different points on the same continuum, with teamship being the
bridge that describes the spectrum of working relationships. That’s what
gives quality teams their power. The leader of the team may not be the
How Does a Complete Quality Process Impact Cost or Revenue? 31

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

In articulating the togetherness of the UICI culture, Myhra recognized


the human aspect. Employees bring both their hearts and their minds into
work with them each day and the more fully they can be engaged on both
levels, the better it is for the individuals and for the organization. Being sen-
sitive to the culture of the organization, to the habits and traditions and pref-
erences that manifest themselves on a daily basis, is an example of trying
to establish the best possible corporate/working environment. Good lead-
ership practices can in fact guide changes in a company’s culture just as
surely as can poor leadership practices.

ENGAGING EVERYONE IN THE EFFORT


The phrase “100 percent employee involvement” must be taken literally—
by everyone, from the outset. Nonvoluntary membership on a quality
team is one way to accomplish this. Even so, not every employee will leap
happily to the task. Enlisting as a member of a quality team is only the
beginning. Some folks will drag their feet, and excuses are legion: They
are too busy. They have too much going on at home. They don’t like their
immediate boss. They don’t think this will last. They don’t think the recog-
nition scheme is generous enough. They submitted an idea once months or
years ago and nobody ever responded to it.
Reaching these laggards will require well-designed and executed
communications and training programs. Through one-on-one conversa-
tions and a steady stream of written efforts at communicating (of both the
paper and electronic kind), the chief quality officer (CQO) needs to work
continually to round up the ones who are staying out of the action. At the
same time, by encouraging the president/CEO—and every other senior
executive—to include commentary about the quality process, the compa-
ny’s need for it, and its successes, in every presentation or at every meeting,
the CQO can raise awareness even higher.
The basic point is that there are only 168 hours in a week. Of those,
assume that seven are used for sleeping each night—or 49 per week. That
means that the average person has 119 conscious hours each week. Assum-
ing that a person actually only works 40 hours a week, a CQP effort offers
them the means to exercise a far higher degree of control over a little more
than one-third of their conscious life. Take the weekends out of the calcu-
lations and the percentage rises to almost 50 percent! Make the workweek
50 hours and it is well over 50 percent. Forgetting any positive impact that
their ideas may have for their boss or for the organization, it is possible to
generate excitement about seizing control of those hours.
How Does a Complete Quality Process Impact Cost or Revenue? 33

There is an evolution of thought that accompanies a 100 percent


employee-involvement process and both individuals and units can go
through it. Where an individual or team is in this evolution determines who
the biggest current source of ideas is during any specific period of time.
When a quality process is initiated, the first question that occurs to
most individuals is, “What can you do for me?” In fact, the questioner’s
thoughts might be more accurately stated, “Thank heavens for this process.
Maybe now those folks will stop making my job so hard.” Some individuals
and groups hurry through this stage in the first days of the process. Others
stay at this point for months. In either case, there is at least the recognition
that, thanks to this new system, it is possible for individuals and units to
improve whatever it is they do. This stage, however, is passive, waiting
to react to what others do.
The next stage of understanding and acceptance is characterized by
the question, “What can I do for me?” That is, “In what way can I take
advantage of this new, powerful tool to make my job less frustrating, more
accurate, more productive?” It’s a more active understanding. People
concentrate on upgrading whatever product, service, or piece of infor-
mation they pass along. They begin to initiate changes to procedures that
they have personally questioned—perhaps quietly—for years. Again, the
amount of time spent at this step varies widely from person to person, and
from unit to unit.
The third stage is, “What can I do for you?” Having gotten his or
her own world under control, having eliminated many of the things that
made the workday difficult, it is possible for the questioner to reach out to
customers both inside and outside the organization, looking for new oppor-
tunities of which they are currently unaware. Individuals in this stage are
aggressively seeking opportunities.
The fourth stage is, “What can we do together?” Partnerships, formal
and informal, begin to form throughout the company—both long-term and
short-term—as quality teams find common ground and work together to
solve problems and improve processes that cross internal corporate bound-
aries. At the corporate level, this is called partnering, a term coined by
Motorola. It requires an additional degree of cooperation and planning.
The sequence presented is one of adding new possibilities for ideas
for improvement, and one stage is not mutually exclusive of another. Fully
mature quality teams may well be investigating ideas for improvement at
all four levels simultaneously. Having individuals buy in to the idea of par-
ticipation at different speeds is just one of the ever-changing aspects of a
continual improvement effort. The challenge is to encourage active par-
ticipation. The neatest and quickest way to achieve it is, as noted above,
34 Chapter Three

to simply mirror the organizational wiring diagram. If a group of ten


people work together on a daily basis, sharing many of the same chal-
lenges, the group is a good candidate for being a quality team. At the out-
set, again for the sake of speed and simplicity, their work unit boss would
be a good candidate to be the team leader. Some preparation is desirable.
Send the supervisor first to a leadership workshop and second to a quality
team leader course. This will prepare him or her to guide the group along
the path of continual improvement more capably than he or she would have
been able to do just months before. And advertise the quality process during
that same period so that teammates will also be prepared.
Over time, teams mutate. There will be some teams that are comfort-
able and productive right from the start. In those cases, the unit boss was
most likely already a good leader and the group was eager to take advantage
of the opportunity afforded by the quality process. With most teams, there
will be an annual change of team leaders. This is most frequently initiated
by the current team leader asking, “Okay, who wants to give this a try for
the coming year?”
The only absolute requirement is that each employee is on a team—
or teams. Someone may be invited to join a different or a second team
because the team members want that person’s direct input. Sometimes,
special teams intended to be in existence for a limited period of time
might be formed. In those cases, members may retain their membership
on their original teams while also contributing to solving the particular set
of challenges that were the catalyst for forming the new team. Whatever
works is good.
Union environments present another challenge. The irony is that CQP
offers employees virtually everything that unions were originally created
to fight for: respect for the employees’ knowledge and ability, recognition
for their accomplishments, and a supportive, cooperative working relation-
ship with management at all levels. Unfortunately, previous experience with
various productivity efforts cloaked in the word “quality” (such as reen-
gineering) have taught union leaders to be understandably hesitant.
Education and trust are needed—and they won’t be automatic.

BUT WHAT ABOUT THE NAYSAYERS?


Management has made it clear: Part of who we are as a company, part of
what we do, is to get better every day. Everyone is on a team. If you are
accepting a paycheck from us, if you want to be defined as part of this
How Does a Complete Quality Process Impact Cost or Revenue? 35

organization, look for ideas for improvement. So everything is hunky-dory,


right? Not necessarily.
No matter what the structure or how well done the communications
efforts are leading up to the introduction of a quality improvement effort,
no matter who presents the information or how good the examples offered
by senior managers, no matter how unassailable the arguments for engag-
ing 100 percent of the employees in order to ensure the organization’s suc-
cessful future, there will be some individuals who—some more loudly than
others—say “No, thanks. I’m not going to take part.” What about them?
If the 100 percent methodology chosen is based on quality teams,
merely assigning Chris a team won’t automatically create an enthusias-
tic, bottomless source of ideas for improvement. There is, however, a very
important benefit of having Chris formally listed as a member of a quality
team: it makes it easy for Chris to see the light. Once Chris figures out that
he or she can take control of a portion of the workday by putting forth an
idea, all Chris has to say is, “Hey, I’ve got an idea.” That’s a far cry from
having to ask permission to contribute when the light bulb goes on. The
need to first admit one’s mistake—in not seeing the potential of a quality
process from the first—will prevent many people from making the move
from nonparticipant to participant.
Peer pressure also comes into play to help make contributing a part of
the organization’s culture. Teammates will attempt to pull outriders into
conformance. If, for instance, a quality team is rewarded for some achieve-
ment (more on the theory and mechanics of saying “Thank you” in the next
chapter), every team member receives the same award—be it money, phys-
ical items, a meal, time off, or whatever. When a nonparticipating team
member accepts the gifts, the odds are that there will be a remark or two
by his or her peers. Those remarks have a far higher probability of nudging
the gift recipient into contributing than would a stern word by a supervisor
or a solemn proclamation by the CQO or CEO. And people who are vastly
uncomfortable with the new corporate culture tend to quit—or make it pos-
sible for supervisors to document reasons to fire them.
The fact is that on any given day there will not be 100 percent of
the folks on the payroll thinking constructive thoughts about how to
improve some facet of what the company does. A percentage of employees
will immediately grasp the possibilities of the quality teams and be a source
of ideas as soon as the process is turned on. Happily, about the time that
this group begins to slow down to catch its breath, the more cautious
employees—having seen the success of the first group—will begin surfacing
ideas. Over a stretch of months, the percentage of folks who take part in some
36 Chapter Three

way in the improvement of the company will approach, perhaps even reach,
100 percent.

A WHOLE LOTTA SHAKIN’ GOIN’ ON


In the immortal words of Jerry Lee Lewis, if a process such as the one
described in this book—and the others in this series—is well-defined
and implemented, there’ll be a “whole lotta shakin’ goin’ on.” Imagine
trying to read this chapter and the appendices simultaneously. It isn’t pos-
sible. But once you’ve read both, you can access any of the information on
any page at any time.
It’s much the same with a well-crafted approach to quality. Getting
ready to implement quality is linear, like reading one thing at a time. After
that, everything happens at once, any piece of information is available at
any time. That’s why it should only be a matter of months between the
informed decision to begin and the ability to launch a process, and why
impressive results are possible so quickly. Since an organization normally
does a lot of things at the same time, it only makes sense that an effort to
improve everything an organization does should also involve doing a lot
of things at the same time. If the senior leadership team has embraced the
idea that their human resources department is in the habit of hiring think-
ing adults, this corporate multitasking won’t put them off.
One of the hidden benefits of doing everything at once is that there
is so much simultaneous activity that it will be virtually impossible for mid-
dle or senior managers to micromanage the progress. They will be forced,
instead, to do the jobs they are paid to do. In fact, for them to attempt to
micromanage would be both counterproductive and obvious. Having execu-
tives concentrate on the jobs they were hired to do is another strong feature
of a quality improvement process that adds dollars to the bottom line.
You doubt it? Consider this scenario: You have just been promoted.
The person who has your old job comes to you with a problem. It’s about
an aspect of your old job that he/she has not been trained for. It’s easier just
to do whatever it is yourself than to answer endless questions. So you do it.
Unlikely? In truth, executives take on tasks that aren’t appropriate to
their level every day. Sometimes it’s as simple as retaining a favorite task
from an old position; sometimes it’s a simple case of doing what’s comfort-
able. In less benign situations, it is micromanaging pure and simple. In any
case, such behavior is costly. The organization pays more in wages than it
receives in value. And when executives become aware of their behavior and
strive to correct it, they find that they have gained a valuable commodity:
more time. And time can be valued in dollars.
How Does a Complete Quality Process Impact Cost or Revenue? 37

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

consulting firm and then—perhaps after sending an appropriate number of


folks off to an expensive school for a week or two—turning the oversight
of the effort over to someone else.
In short, a company determined to improve both what it does and how
it does it must retain control of the definition and implementation of its per-
formance excellence process as well as its long-term maintenance. Rather
than finding a consultant or training source that seems “almost right” and
then adjusting the company’s ideas to fit the predetermined model, the lead-
ership of the organization needs to define its process and then put together
a collection of resources each of which can competently provide one tool
and that together will make it possible to proceed in the way that best fits
the organization. It can be a difficult period—but it is one that will result
in a unique process.
This is good news because the act of researching the philosophy and
tools best suited to the organization can be the visual aspect of top manage-
ment commitment within the organization. Make the search obvious: Put
together a reading list of books that everyone should read and make sure that
the list of books is known within the company. Take field trips to observe
companies that have solid employee quality practices. Talk with employees
about what’s coming, about the benefits of an improvement effort, and how
they will fit into the effort. In short, the design phase is a golden opportu-
nity to let the company know that quality improvement is important.
There will, however, have to be someone whose sole job it is to get
the ball rolling. This fortunate person will have to have easy access to the
president/CEO and his or her direct reports. This person can be responsible
for setting the schedule and agenda for presentations and conversations, on
a group level or one-on-one. This is the phase where everyone will come
to understand that this time the phrase “senior management commitment”
means far more than the occasional (and, essentially, optional) affirmative
nodding of the head.
The first job of the chief quality officer (or whatever title is chosen)
is to communicate to and educate the senior leadership about what com-
mitment is involved and to convince them to be personally involved—an
involvement far beyond that of other, more “traditional” approaches. If the
president/CEO understands what he or she is getting into and is willing
to make the commitment, it is, strictly speaking, only necessary to have a
healthy majority of the other senior execs in concurrence, with one caveat.
The holdouts must be capable of feeling a degree of shame and, down the
line, of admitting that they were slow to catch on. As in many fields, enthu-
siastic converts can often be of more benefit than those who have been
signed on from the beginning.
How Do I Implement . . . ? 41

What is everyone getting into? What does their commitment mean in


terms of hours and personal involvement for senior managers?
• Participation in (not simply attendance at) the series of meetings
at the outset that lay out what a quality process is in theory and
how it might be implemented in the organization.
• Membership on and active involvement in a committee that defines
the details (the initial working mechanics of the organization’s
improvement effort) once a decision has been made to proceed.
These mechanics will evolve over the years and that can be taken
care of, for the most part, by the quality department, but the initial
concept needs to receive an informed endorsement from the top in
order for subsequent changes to be understood and supported when
they come from elsewhere.
• Acquisition of sufficient knowledge about the concepts of quality,
continual improvement, and leadership in general and the tools
in use at his or her organization to make it possible to take part in
random conversations with employees.
• Readiness to spend personal time and corporate time and money
(as appropriate) to further the effort.
• Participation that is both active and obvious in the agreed-to
process, to include personal involvement in improving his or her
own day-to-day work procedures.
• Involvement on a regular basis in recognition ceremonies for
deserving teams and/or individuals.
• Willingness and ability to play, to have fun. The importance of
this is not immediately obvious. Whether in the course of small
recognition ceremonies or in large organizationwide celebrations
and communication opportunities, executives have to be able to
take pleasure in the successes of employees.

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

lean, Six Sigma, Baldrige, employee involvement, globalization, supply


chain management, quality in project management, ISO, and quality man-
agement information systems. It provides an ideal quality reference library.
Look at the appendices of this book. A complete quality process (CQP)
is described in Appendix B; Baldrige-winning variations of successful 100
percent employee involvement schemes are described in Appendix C. Steps
to be taken during the definition and establishment of a complete quality
process are described in greater detail in Quality Makes Money (Townsend
and Gebhardt 2005). One of the major benefits of the Economics of Quality
Book Series, however, is that the plan for an organization’s first year of
activity can be enriched by the introduction of more tools than can be
described in a single book.
In addition to publications, the American Society for Quality also has a
plethora of both in-class and online courses available on many of the tools
that will be component parts of the final process at an organization—with
the exception of the explicit idea of 100 percent employee involvement. The
same can be said of the group of consulting/training firms who include
the words “quality” or “performance excellence” in their brochures.
Information and instruction on tools that are heavily rational (for exam-
ple, Six Sigma, ISO, lean) are readily available. The only caution is that any
training course should be examined in advance and the instructors should
be made aware that they are teaching a to-be-integrated component of a
much larger effort. Agreements with training companies should include
the option of buying the course so that it can be brought in-house. In that
way, the course can be modified before being taught—or taught again. The
latter will be in response to comments such as, “We never used that thing
they spent three hours on” or “Would you like a real-life example to illus-
trate that one point?” This is part of retaining control of your own process.
Leadership instruction options are also numerous; there are a plethora
of consultant/training companies who offer leadership workshops. Lead-
ership classes that actually contribute to the introduction and conduct of a
process such as the proposed one are, however, nowhere near as numerous.
Solicit bids and determine whether a training company truly understands
the leadership–quality connection. If they don’t agree that leadership is
both rational and emotional (as is quality) and that leadership and follower-
ship are points on the same continuum (as discussed above), it will be time
to check out the next training company on the “possibles” list. Look also to
see if the training materials support this definition of leadership: “Leader-
ship is the creation of an environment in which others can self-actualize in
the process of completing the job.” With that definition in place, the concept
of “leadership at every level” becomes a practical, understandable one.
How Do I Implement . . . ? 43

Instruction or consulting help in the area of 100 percent employee


involvement is going to be hard to find. The good news is that a commit-
tee of creative and reasonably intelligent managers and employees can very
likely put together a workable approach if their charter is to answer the
question, “Who can we afford to exclude from this effort to improve every-
thing we do?” with a one word reply, “Nobody.” Once they have built a
framework, it will be easier to find professional training for specific pieces
such as how to run a meeting, use of simple measurement tools, and the spe-
cifics of record keeping for the organizations’ quality effort.
An obvious place to look for inspiration is the Malcolm Baldrige
National Quality Award Criteria. The Criteria can be a powerful diagnos-
tic tool for companies wondering what path to take. There have been com-
panies that apply for the Baldrige, aware that their chances of winning are
nil, because the application process and response is the cheapest consult-
ing available on an integrated quality process. The Baldrige Web site also
gives information on Baldrige winners and announces workshops where the
winners share their experiences and knowledge. State quality awards can
serve the same function, pointing toward local resources. These, too, are
either low-cost or cost-free.

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

• Costs to build needed computer program support to track progress,


and so on
• Expenses of building a recognition program (to include all of the
awards given to teams and individuals)
• Communications efforts that include everything from written
material to celebratory-with-a-message programs
• Support of corporate culture–impacting events to celebrate success
A company may choose to hire any number of consultants to implement
the process, but many companies can achieve the results they want with in-
house resources. These resources are also associated with indirect costs:
• Time used by various managers in meetings of the committee that
defines and directs the implementation of the effort
• Cost of time spent by any on-call measurement specialist within
the organization
• Time spent in classes on leadership by all supervisors and above
and the time spent in team leader classes if the process is defined
as team-based
• Time spent in meetings (formal or informal, of whatever size)
to discuss potential improvements
• In-house IT assets to build and maintain some version of a
record-keeping program
• Executive time devoted to support activities such as taking part
in recognition ceremonies
Happily, the justification of these expenditures is straightforward. Com-
paring the calculated cost savings impact of just the quality ideas with the
quality department budget for the first five years of the effort at UICI shows
a return on investment of nine to one. The savings is, in fact, understated
since the annualized savings resulting from a particular idea is only listed
for the year in which the idea is put in place while the majority of the ideas
have recurring value, as illustrated below.
Looking at the calculations, if a particular process costs $1000 to
complete in year 200X but is then improved during year 200X+1 so that it
only costs $750, the quality process is credited with a $250 savings in year
200X+1. In year 200X+2, that same savings of $250 will benefit the com-
pany but it is, by then, considered to be “part of how we do things here” and
is no longer credited to the quality process. The fact is that at the end of year
How Do I Implement . . . ? 45

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.

MEASURE, MEASURE, MEASURE


A cautionary word on measurement: just because this book pays an enor-
mous amount of attention to the emotional side of the rational/emotional
combination at the heart of any improvement effort, it should not be thought
for a moment that the more rational aspects can be ignored. The attention
given to the emotional is in addition to the necessary attention paid to the
rational, not in place of it.
Verifying improvement is not possible unless it can be proved where
a process (or person or organization) used to be, where it/he/she/they are
now, how far the distance is between those two points, and which direction
the second point is from the first. That’s the job of measurement. Measure-
ments are taken (1) to gather data that can be used as the basis for improve-
ment and (2) to track progress against expectations. If the measurements
How Do I Implement . . . ? 47

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

PROCESS ANALYSIS AS A PRECURSOR


While the most obvious feature of the UICI Insurance Center approach to
performance excellence (and the way in which the fundamental commit-
ment to 100 percent employee involvement was implemented) was the qual-
ity team structure, quality teams were not the entire picture. Quality teams
focused on the question, “Are we doing things right?”, leaving the question,
“Are we doing the right things?” for process analysis (the best generic name
for this type of activity). This involves the most complex set of numbers and
measurements an organization is likely to collect, and there are a number
of approaches to determining whether an organization is correctly designed
to achieve its goals. Reengineering was one of the first attempts to provide
an answer, followed by value analysis, blueprinting, Six Sigma, and lean.
Each tool looks at the problem of how processes work in a slightly different
way, and each is appropriate under the right circumstances. If done well, all
can have a positive impact. Arranging for process analysis is a cost of per-
formance excellence, however, whether or not it is facilitated by consultants
or in-house employees.
The best way to initiate a long-lasting improvement effort, even before
defining the mechanics of 100 percent employee involvement, is to launch
a series of process analysis projects. These can be run by consultants and
precede activating the rest of the process by months. In subsequent years,
process analysis efforts, as needed, can be conducted either by the unit
leaders or by one of the members of the quality department. Both are nec-
essary: doing the right things doesn’t maximize the organization’s possi-
bilities if those right things are done badly (although it does beat doing the
wrong things badly). The goal is to do the right things well. And there is no
reason why one effort should wait for the completion of the other before it
gets started.
One process analysis option for most companies would be lean
procedures as described in The Executive Guide to Understanding and
Implementing Lean Six Sigma. There must be, of course, a very careful
communications effort so that everyone in the organization understands the
interplay between the process analysis workshops (which normally include
mostly managerial decision makers and only a few day-to-day implemen-
tation folks) and the 100 percent employee-involved structure. With a lean
approach to ensuring that an organization is doing the right things, employ-
ees, through the use of whatever 100 percent involvement structure has
been defined, can then use a variety of tools to determine how best to do
things right.
How Do I Implement . . . ? 49

A TIMELINE FOR RESULTS


If quality tools are already in use, or have been used and abandoned in the
past, a leadership committee intent on defining and implementing a lead-
ership-driven, 100 percent employee involvement process has an obvious
beginning place: “Now that the experiments—the pilot programs—have
shown some of the possibilities, it is time to get everyone involved and
reap maximum benefits.” In these cases, recovering momentum is no more
onerous than creating momentum.
In the 1980s and early 1990s, when the “quality revolution” was in its
beginning stages and several large consulting firms had much to do with
defining the direction of the efforts, the standard answer to the question,
“When will I see results?”, was “five to seven years . . . perhaps longer.”
That standard can now be ignored.
In the case of the leadership-driven, 100 percent employee-involved
improvement process at Paul Revere, the elapsed time from the informed
decision to attempt to build a process until the day that there were bottom-
line benefits being recorded was eight months. At the UICI Insurance
Center, it was less than six months. And a timeline for action along the lines
of the one below can bring results in less than a year.

Months One and Two

• Education of the president/CEO and those executives who report


directly to the president/CEO. This education can take place for the most
part in the context of a series of classes/workshops conducted by the chief
quality officer and other appropriate folks. One-on-one conversations can
be repeated over as long a period of time as is needed.
• Formal, informed consent to performance excellence by the president/
CEO and the senior leadership team. Ideally, this will be in the form of
a public vote, perhaps something as straightforward as asking, “OK, will
all those here who believe we should proceed with this attempt to define,
implement, and maintain a leadership-driven 100 percent employee involve-
ment process please raise their hand?” Once the president/CEO’s hand goes
up and the obvious majority of other hands are on their way up, the odds
are good that all hands will soon be waving in the air. Even if later an indi-
vidual senior manager has personal doubts, it will always be advantageous
to say, “Wait a minute. You raised your hand. You publicly pledged your-
self to this effort.”
50 Chapter Four

• Construction of a quality department. The people who make up the


quality department need to be part theoretician and part mechanic, as well
as being full-time communicators. At the outset, the chief quality officer
needs to identify and recruit people who are well-respected within the com-
pany and who know how the company works. These folks, in turn, need to
learn about quality, assuming they are not already well-versed in the topic.
• Hiring specialists. The next folks hired will most likely be people
who are already skilled in the application of specific tools such as Six Sigma
and/or lean. To integrate them into the company, they have to learn the the-
ory and mechanics of a broad-based effort and how their particular skills
fit into the overall scheme. With the help of the CQO, these specialists need
to earn the respect of the employee base and the senior managers. Through-
out, the CQO must ensure that he or she is not seen as a “kingdom-builder.”
If, for instance, some skills are only needed on a part-time basis, perhaps
job-sharing arrangements can be worked out with other departments.
• Establishment of a committee of middle and senior leaders to guide
the initiation of the effort. The principles and components of a leadership-
driven, 100 percent employee involvement process are consistent from one
corporate effort to another. The details of implementation, however, will
vary considerably. The committee should be composed of senior manag-
ers from every major department, as well as respected members of middle
management. For the first several months (that is, leading up to the launch-
ing of the effort and until it settles into a routine), this group would be well-
advised to meet weekly. After that, monthly meetings should suffice.

Months Three and Four


• Initiation of process analysis efforts. Determining the “right things”
to do can begin using whatever process analysis approach best fits the orga-
nization’s culture and needs. The sequence in which the effort should be
moved through the various departments will require major decisions from
the leadership committee. If it is necessary to use outside consultants (at
least until there is sufficient in-house knowledge to conduct the workshops/
studies), those consultants will have to be aware of the role of the process
analysis efforts in the context of the overall process.
Initiating a search for the “right things” should not consume a great
deal of the time of the leadership committee, the senior leadership team,
and the quality department. It should only be a matter of interviewing vari-
ous consulting organizations specializing in one form of process analysis or
another and agreeing on one that appears to understand the context within
How Do I Implement . . . ? 51

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.

Months Five and Six


• Putting a participation mechanism in place. Dividing the entire com-
pany up into quality teams (again, the name “quality teams” is optional—
any name that fits with the company’s culture is dandy) with each team
having a designated team leader is simplest. The rule of thumb: every
person on the payroll must be able to answer the question, “Where do I
go with an idea?” The answer must be consistent at all levels and in every
department, and it must be easily understood. If another approach is decided
on, that mechanism can be put in place. Warning: finding a proactive option
that does not include teams is difficult.
• Training for quality. Assuming a team approach, the designated
team leaders all need to go through some form of training that covers lead-
ership (reinforcing, for the most part, the lessons learned in the leader-
ship classes offered companywide for supervisors and above), basic quality
principles and examples, basic measurement tools, and how to use the sys-
tem put in place. Without a team approach, training will have to be more
broad-based.
• Designing a system for saying thank-you to deserving teams and for
celebrating their successes must also be agreed to (see Appendix B).
• Continuing to educate senior leadership. One option is to find
speakers from nearby companies who have been recognized for the success
of their performance excellence efforts.

Months Seven and Eight


• Police-up loose ends.
52 Chapter Four

• Launch. This includes some form of celebration that reinforces the


concepts and mechanism the company has decided on. This will be the first
event in a chain of events that includes recognition, gratitude, and celebra-
tion to bring life to the performance excellence effort.

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).

THE COST OF DISENGAGEMENT


The Gallup Management Journal has been conducting a series of polls to
determine the impact on the United States economy as a whole of having
54 Chapter Four

disengaged employees on the payroll. The methodology used is a 12-


question survey asking the following questions:
• Do I know what is expected of me at work?
• Do I have the materials and equipment I need to do my work right?
• At work, do I have the opportunity to do what I do best every day?
• In the last seven days, have I received recognition or praise for
doing good work?
• Does my supervisor, or someone at work, seem to care about me
as a person?
• Is there someone at work who encourages my development?
• At work, do my opinions seem to count?
• Does the mission or purpose of my company make me feel my
job is important?
• Are my coworkers committed to doing quality work?
• Do I have a best friend at work?
• In the last six months, has someone at work talked to me about
my progress?
• This last year, have I had opportunities at work to learn and grow?
Responses are analyzed with a proprietary formula to calculate the number
of employees in each of three categories:
• Actively disengaged—not just unhappy, but busy acting out their
unhappiness and making everyone miserable
• Not engaged—going through the paces, “checked out”
• Engaged—“work with passion and who feel a profound connection
to their company”
In the first survey in 2001, 19 percent of responses were categorized as
“actively disengaged”; in 2004, there were 17 percent in the same cate-
gory. It’s a small improvement and, unfortunately, according to GMJ, this
17 percent represents over 22 million workers who poison the workplace—
at an annual cost of over $300 billion to the U.S. economy. The actual
losses, however, are even higher: the $300 billion figure includes the cost
for missed workdays, but not the costs associated with turnover, safety, or
How Do I Implement . . . ? 55

additional healthcare. Even worse, the majority of workers in 2004 (54


percent) fall into the “not engaged” category, going through the paces, with
a corresponding lack of productivity and job satisfaction. Still, that leaves
the United States with 29 percent of its workforce engaged; a Gallup poll in
Singapore found only nine percent engaged. There, too, the vast majority of
employees (82 percent) were not engaged. That’s a large pool of untapped
talent. But why?
To quote Major C.A. Bach of the United States Army: “Remember
what I tell you. Your company will be a reflection of yourself. If you have
a rotten company it will be because you are a rotten captain.” (Bach 1917)
GMJ concluded much the same: conditions can be traced to poor leadership
practices from the top to the bottom of the organization. But in what way
does 100 percent involvement through quality teams have the potential to
ameliorate the situation?
• Do I know what is expected of me at work? If there are regular
team meetings to explore ways to improve, expectations for the
workday are made explicit.
• Do I have the materials and equipment I need to do my work right?
A quality team structure gives an employee a forum to discuss the
need for additional equipment or material (to include training).
• At work, do I have the opportunity to do what I do best every day?
A focus on performance excellence provides this opportunity.
• In the last seven days, have I received recognition or praise for
doing good work? It is significant that the Gallup organization sets
such a short lapse time between thank-yous. Teams that meet once
a week provide the opportunity for praise and when coupled with
other forms of recognition substantially increase the probability
that the answer to this question will be “yes.”
• Does my supervisor, or someone at work, seem to care about me
as a person? Any leader who lives the definition, “Leadership is
the creation of an environment in which others can self-actualize
in the process of completing the job,” projects a concern for others
that is palpable.
• Is there someone at work who encourages my development? Again,
leaders who care about self-actualization of individuals project that
concern in concrete ways. And quality team leaders are ideally
positioned to encourage teammates frequently.
56 Chapter Four

• At work, do my opinions seem to count? In a 100 percent


involvement, team-based structure, everyone is encouraged to
contribute, indeed, expected to do so. And results are documented
so teammates can see that they are taken seriously.
• Does the mission or purpose of my company make me feel my job
is important? Mission, quality, culture: mission is what we do,
quality is how we do it, culture is how we work together to get it
done. If the reality matches the articulated goal, everyone will
know how they contribute.
• Are my coworkers committed to doing quality work? It will be easy
to see that, at a minimum, most of them are—easy to see because
of the progress of the team.
• Do I have a best friend at work? This does not mean that your
best friend is at work, only that you feel strongly connected to
someone—or the someones on your team. Celebrating together
also encourages social interaction.
• In the last six months, has someone at work talked to me about
my progress? The tracking system will provide one answer to the
question of progress and, if the hierarchy is occupied by leaders,
the answer will be “yes.”
• This last year, have I had opportunities at work to learn and
grow? In the natural course of solving problems and improving
procedures, all participants learn and grow.
A combination of leadership and structure gives an organization a fight-
ing chance to answer these questions positively. It also provides answers
for questions on the Baldrige applications. These questions have changed
between 1988 and 2006 in ways that reflect an improved understanding of
how important employee involvement in daily operations can be. Compare
the 1988 and 2006 applications on the importance of soliciting and using
employee input.

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

30 points for “Describe the corporate plan and objectives for


utilization of employees in QIP.”
30 points for “Describe the means used by management to
inform employees of quality goals, progress in meeting
goals, and other significant quality improvement program
functions and results.”
30 points for “Describe how company evaluates and recognizes
employee contributions to quality improvement.”
10 points for “Describe any other unique and innovative
procedures or methods used to assure participation of all
employees in QIP and any subsequent results.”
Total = 105 points for active and passive.

2006 Criteria

70 points for “How do your senior leaders lead?”, which


includes “How do senior leaders communicate with, empower,
and motivate all employees throughout the organization? How
do senior leaders encourage frank, two-way communication
throughout the organization? How do senior leaders take an
active role in employee reward and recognition to reinforce
high performance and a customer and business focus?”
45 points for “How do you manage organizational information
and knowledge?”, which includes “How do you make needed
data and information available? How do you make them
accessible to employees, suppliers, partners, collaborators,
and customers, as appropriate?” and “How do you manage
organizational knowledge to accomplish the following: the
collection and transfer of employee knowledge. . . .”
35 points for “How do you enable employees to accomplish the
work of your organization?”
25 points for “How do you contribute to employee learning and
motivate employees?”
25 points for “How do you contribute to employee well-being and
grow employee satisfaction?
58 Chapter Four

40 points for “How do you identify and manage your support


processes and accomplish operational planning?”, which includes
“How do you determine key support process requirements,
incorporating input from internal and external customers,
suppliers, partners, and collaborators, as appropriate?”
70 points for “What are your human resources results?”,
which includes “What are your current levels and trends in
key measures or indicators of work system performance and
effectiveness?” and “What are your current levels and trends in
key measures of employee learning and development?”
Total = 310 points for active and passive.
These tallies are in addition to other leadership-related questions, but the
trend of measuring individual employee involvement is clearly there. Orga-
nizations will continue to strive for 100 percent employee involvement. Suc-
cessful ones will achieve it and reap tremendous benefits in the process.
Appendix A
The Baldrige and
Leadership: Then and Now

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

In addition to having points available throughout the categories that require


effective leadership and/or employee involvement, the questions included
in the Human Resource Focus category are far more sophisticated than
those found in the 1988 Criteria. For instance, there are 35 (of 85 for the
category) points available for item 5.1: Work Systems: How do you enable
employees to accomplish the work of your organization?
The questions asked under item 5.1 are:
• How do you organize and manage work and jobs, including skills,
to promote cooperation, initiative, empowerment, innovation, and
your organizational culture?
• How do you organize and manage work and jobs, including skills,
to achieve the agility to keep current with business needs and to
achieve your action plans?
• How do your work systems capitalize on the diverse ideas,
cultures, and thinking of your employees and the communities
with which you interact (your employee hiring and your customer
communities)?
• How do you achieve effective communications and skill sharing
across work units, jobs, and locations?
• How does your employee performance management system,
including feedback to employees, support high-performance work
and contribute to the achievement of your action plans?
• How does your employee performance management system
support a customer and business focus?
• How do your compensation, recognition, and related reward
and incentive practices reinforce high-performance work and a
customer and business focus?
• How do you identify characteristics and skills needed by potential
employees?
• How do you recruit, hire, and retain new employees?
• How do you ensure that employees represent the diverse ideas,
cultures, and thinking of your hiring community?
• How do you accomplish effective succession planning for
leadership and management positions?
62 Appendix A

• How do you manage effective career progression for all employees


throughout the organization?
The other 50 points available in the Human Resource Focus category are
for Employee Learning and Motivation (25 points) and Employee Well-
Being and Satisfaction (25 points).
In total, the 1988 Criteria awarded 300 points under the Leadership
and the Human Resource Utilization categories and there were a total of
90 additional points in other categories that could reasonably be argued
as being leadership or human resources (and employee involvement) con-
nected or dependent.
In 2006, there were 205 points available under the Leadership and
Human Resource Focus categories and a total of 425 additional points
throughout the remainder of the Criteria that could be reasonably argued
as being leadership or human resources (and employee involvement) con-
nected or dependent.
Appendix B
Doing It

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

The quality idea tracking system and database was a home-grown


program that allowed every person in the company to see the progress of
every quality team and made it possible for the quality analysts to scruti-
nize every quality idea. The “database” designation was added to acknowl-
edge that the program capabilities were subsequently expanded to include
information about the process. This eventually included everything from a
description of the process mechanics to lists of awards to pictures of award-
winning teams to the biweekly quality newsletter, I See Quality (a pun
on the name of the company since many folks called it “I-C” rather than
“Insurance Center”).
The tracking portion of the program was a very sophisticated upgrade
of the program that had been used at the Paul Revere Insurance Group some
years before. A quality idea had five possible statuses:
1. A status of “1” meant that the quality team had considered this
particular question and anticipated working on it in the days
(or months, if necessary) to come. A quality team leader would
normally enter an idea as a “1” shortly after his or her team had
discussed the possibility and decided to give it a look. A frequent
starting place was having a member of the team ask, “Does
anyone know why we do this one thing the way we do?” or
“Would anyone care—or even notice—if we didn’t do this
any more?”
2. A status of “2” meant that, on consideration, the quality team
had decided to not proceed with any attempts at implementing the
idea at the present time but might get back to it in the future. The
quality analysts also used the “2” status as a “parking lot” type
of designation if they felt an implemented idea needed more
measurement or other work before being certified.
3. A status of “3” meant that the quality team had decided, for
whatever reason, to not pursue the idea. The idea was left on the
tracking system in case it could serve as a starting place (or a
cautionary tale) for some other team. Since the tracking system
did have a keyword search mechanism, it was quite possible that
another quality team, in doing research on an idea, might come
across the discarded idea.
4. A status of “4” indicated that the quality team believed that
the idea was now successfully implemented and that all
calculations of its impact were complete. To help ensure
consistency throughout the company, the tracking program
66 Appendix B

included a subprogram that helped to determine time and


money savings. The subprogram carried the values of such
things as saving a single piece of paper or eliminating a single
keystroke and carried out the appropriate number-crunching to
reveal the total annual worth of, for example, saving X number
of sheets of paper every Y minutes.
5. “5” meant the idea had been reviewed by one or the other quality
analyst and that it was agreed that the implementation of the
idea had been beneficial to the company and that any attached
calculations were correct. The vocabulary used was that the idea
had been “certified.”
The program was capable of all manner of data accumulation so it was pos-
sible to quickly determine the total number of certified ideas or of imple-
mented ideas awaiting certification or the financial impact of any set of
ideas, and so on.
Until an idea had been certified, there was no recognition or gratitude
extended to the quality team.
Recognition, gratitude, and celebration were an integral part of the CQP
effort at the UICI Insurance Center. Quality teams had a well-advertised
stair-step series of levels through which they could progress, with escalat-
ing types of recognition and gratitude. Beginning with the “classic” Bronze-
Silver-Gold sequence and then moving through multiple “Gold” levels (the
company was forced to invent its own words such as Octuple, Nontuple, and
Decituple as in “Octuple Gold,” “Nontuple Gold,” and “Decituple Gold”)
and on into Diamond and Platinum levels.
The recognition gifts could get fairly pricey (team dinners at very nice
restaurants, items worth $150 each, and so on) but they never approached
a “fair market value” of the total value of a team’s ideas, which frequently
ran into the hundreds of thousands of dollars.
At the beginning of each quality year—the twelve months beginning
on September 14, the anniversary of the original kickoff meeting on that
date in 2000—all quality teams had their “counters” reset to zero certi-
fied ideas and zero amount of financial impact. Knowing this caused many
teams to either accelerate implementation of ideas prior to the end of a qual-
ity year or to “forget” to report the implementation of certain ideas until
after September 15. Such game-playing was happily tolerated.
The celebrations that were part and parcel of the CQP were theme-
based and always well-received. Perhaps the best-remembered was the
2002 “The Strategic Plan: The Musical.” Each year the company presented
its strategic plan to the employees. The idea was not to try to teach each
employee all of the detail of that year’s plan or to expect every employee to
Doing It 67

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):

Hard dollars Soft dollars


Ideas certified savings savings
QY1 557 $3,366,450.31 $2,049,535.81
QY2 1206 $4,049,275.45 $3,482,014.73
QY3 2709 $5,465,117.30 $3,754,972.13
QY4 3708 $8,301,155.39 $9,189,186.41
QY5 4567 $4,113,678.14 $2,173,448.69

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

MAKING SURE EVERYONE KNOWS


THE DETAILS
At the Los Alamos National Bank (Baldrige winner in 2000), participation
on various teams and committees—to include “Baldrige category commit-
tees” when in the process of completing a Baldrige application—is volun-
tary. What is not voluntary is knowledge of the organization’s processes.
Prior to the recent arrival of examiners for a site visit (during Los Alamos’s
attempt to earn a second Baldrige), every bank employee was required to
read the Baldrige application.
The assumption, obviously, is that the company will benefit if every-
one knows what is being attempted and that if employees read the applica-
tion, they will spot places for further improvement. The company’s focus
on building a team atmosphere is reflected in its slogan, “When the bank
wins, we all win.”

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

WHAT WE HAVE HERE IS GOOD


COMMUNICATIONS
At Branch-Smith Printing Division, a 2002 Baldrige winner, not every one
of the 80-plus employees is specifically on a team at any given moment but
all are involved in at least three meetings a month (either one-on-one, in
small groups, or companywide huddles) in which their opinions and ideas
are solicited and their individual progress and success are discussed.
The driver of the Branch-Smith process is communications, letting
everyone know how things are going at every step of the way and offering
each individual a chance to know as much as he or she can handle and a
chance to get help with any problem areas.

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.

“BUILD IT AND THEY WILL COME”


In Field of Dreams, the 1989 movie that introduced the phrase “Build it
and they will come” into the American vocabulary, the approach implied
in the catchphrase did work. The main character of the story built what he
72 Appendix C

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

employee turnover, 27, 45 M


empowerment, employee, 12, 25
and leadership, 31 Malcolm Baldrige National Quality
Award
Criteria, 16–17
F on employee involvement,
56–58
Founding Fathers, United States, 1 in implementing continual
improvement, 43
and leadership (Appendix A),
G 59–62
leadership criteria, 3, 9
global economy, and leadership, 9–10 and Paul Revere Insurance Group
Glory Road, 18 initiative, 15–16
winners, examples (Appendix C),
69–72
H Marriott hotel, cost of quality
example, 22
hard dollars, savings, 24 Maslow’s hierarchy of needs, 3
measurement
importance of, 46–47
I role of in quality improvement, 17
micromanagement, 36
ISO, quality management systems, 17 “mission–quality–culture,” 4, 31–32
morale, employee, 45–46
Motorola, Inc., ROI in quality
J training, 45

John Wiley & Sons, Inc., 9


N
K National Cash Register, 10
naysayers, handling, 34–36
kaizen, 11–12 NCAA national championships,
Kodak, 10 1966–67, 18

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

as 21st century quality T


improvement model, 1–2
output, increasing, 24 teams
dynamics, 34
in 100 percent employee
P involvement, 25, 51
peer pressure in, 35
partnering, 33 thank-yous, 52–53
Paul Revere Insurance Group, timeline, for 100 percent employee-
25–26 involved improvement process,
case study, 14–16 49–52
top management commitment to top management commitment
quality, 19 importance in implementing
peer pressure, in team dynamics, 35 continual improvement,
playfulness, in corporate 40–41, 49
environment, 53 importance to improvement, 4–5,
positivity, in corporate environment, 19
53 rational versus emotional aspects,
president/CEO, education of, 49 41–42
process analysis, preceding total quality leadership (TQL), 12
quality improvement, 48, total quality management (TQM), 12
50–51 training, quality, 51
productivity, increasing, 24 trust, in 100 percent employee
involvement, 15
turnover, employee, 27, 45
Q
quality, relationship to leadership, 3 U
quality circles, 11
quality control circles, 11 UICI Insurance Center, 8
quality department, constructing, benefits of complete quality
50 process, 26–28
quality training, 51 comparison to a contemporaneous
effort, 28–29
employee satisfaction/morale, 46
R leadership-driven, 100 percent
employee involvement
recognition, gratitude, and process (Appendix B),
celebration, 52–53 63–68
reengineering, 12 return on investment, 45
resources, 21 suggestion system, 11
return on investment (ROI), 44–45 top management commitment to
quality, 19
unions, and complete quality process,
S 34

self-actualization, and leadership, 3


soft dollars, savings, 23–24 V
specialists, hiring, 50
suggestion systems, 10–11 voting, franchise, 1

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