When Times Get Tough, What Happens to

TQM?
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The senior managers at Frankfurt, Germany-based Mueller Chemical Company waited for
CEO and Chairman Dieter Mueller to enter the conference room and start the meeting.
“Georg, we saw this coming 18 months ago,” whispered Horst Koblitz, MCC’s director of
total quality management. “Ameriton’s failure is no reason to abandon all we’ve built in the
last five years. We just need to stick with our original commitment to TQM and tailor the
program to a temporarily smaller organization.”

CFO Georg Becker looked at his colleague and shook his head. “I don’t think Dieter is going
to see it that way, Horst. Ameriton was our biggest customer. It represented 35% of MCC’s
sales, and we designed the TQM program to meet its demands. After the layoffs are
completed, we’re not going to have the time and resources to rework a TQM strategy. And I
don’t think Dieter will be interested in anything but a basic top-down way of running the
company.”

“But TQM has worked beautifully for the past five years,” said Division Manager Eva
Stichen. “We’ve turned our process-control system at Chem 1 into the best in the company
thanks to TQM. We’re more cost-efficient, product defects are nearly nonexistent, and our
safety record is spotless. Besides, Chem 1 never supplied Ameriton. Why should we give up
a perfectly good system now?”

“Dieter won’t go halfway on this, Eva,” answered Becker. “Either we keep TQM or we don’t.
You know how adamant he is about a focused corporate culture.”

Dieter Mueller entered the room and sat at the head of the conference table. “As you know,
the Ameriton bankruptcy has been a crushing blow to our business,” he began. “This is
not something we will recover from quickly, but we will indeed recover. There are other
customers to win over, and we will do that in time. Right now, I want to make sure we can
continue to satisfy our present customers with low cost and high quality. This means
tightening our belts and perhaps developing new processes and controls. You’ve been given
the specifics of the downsizing, and I assume there are no more questions about the layoffs.
Today I want to address only the TQM question.”

As the senior managers pulled out their notes, Mueller turned to the charts displayed on the
front wall outlining long-term productivity and the cost of quality control. He pointed to the
first increment on the time line. “Five years ago, when my father was chairman, Ameriton
demanded we install a total quality management system in our chemical plants to
upgrade the quality of our products and services. Ameriton consultants helped develop
and implement the plan, and, after a slow start, TQM proved to be well worth the
investment. Employee morale improved dramatically, as did quality and productivity.”

Mueller pointed farther up the time line. “When I took over two years ago, TQM was in full
swing. The proper measurements were in place, and total quality management had become
part of our company’s culture. MCC continued to improve, but Ameriton started to falter.
Now Ameriton is no longer a customer, and we find ourselves in a difficult situation.
Georg Becker has developed a plan for replacing TQM with a less employee-driven
system. First I’d like him to explain his reasoning, and then we can discuss the situation.
Georg?”

George:

“Before Ameriton began buying from MCC, German quality spoke for itself,” Becker said as
he turned a page of his notebook. “Our customers were satisfied and so were our employees.
With TQM, I admit a lot of change for the better occurred, but the distractions that
came with the program have taken us away from our company’s original goal—to be the
chemicals market leader in Europe. While we spent our time organizing teams, developing
measurement systems, and filling out weekly quality reports, our competitors
concentrated on sales and took away much of the European market share we had
planned for ourselves. The more we tried to please Ameriton, the more we distanced
ourselves from our other customers.

“No doubt, TQM was a great long-term approach to growth,” Becker continued. “But it
didn’t come with a plan for the situation we now find ourselves in.”

TQM didn’t come with a plan for the situation we are in now.

“I don’t hear a lot of complaining from DSI or Vonta,” Stichen said sternly. “Sure, at first we
lost some orders from them and other customers. But once we got TQM established, they
came back. The Chem 1 workers took a while to appreciate the TQM procedures, but I
know they don’t want to change now. The work teams and the pay for performance scheme
were brilliant ideas that worked even better than envisioned. Look at the productivity chart.
Those numbers prove we won’t find a better system than the one we have now.”

“Chem 2 and Chem 3 won’t mind giving it up,” said Paul Hebert, Chem 2 division
manager. “Not having to show Ameriton the quarterly cost-of-quality reports it demanded is a
blessing. It’s true that TQM improved our output, but my people never really
appreciated working under Ameriton’s constant watch. They thought a Japanese system
implemented by an American company had no place in a German factory. And that
intercompany, Baldrige-like award they suggested was scoffed at, especially when the
Ameriton orders started drying up. The last few months, with little to do, the Chem 2 and 3
teams began to tear each other down. They knew the ax was going to fall, and they tried to
position themselves so it didn’t fall on them.

“Unfortunately, the empowerment idea got way out of hand. We gave too much
authority to employees who have now been laid off. I think it’s pretty obvious that we’re
going to have to go back to basics. Top-level managers will now have to step in to make the
decisions the teams used to make. I think that Georg is right, it’s impossible for us to function
under TQM in this kind of environment.”

Stichen cleared her throat. “Maybe losing Ameriton is the best thing that could have
happened to MCC. Our European customers like our quality system, and now they’ll get even
more attention with Ameriton out of the picture. Besides, Chem 2 and 3 have always had
problems with inventory, morale, and profitability. The performance appraisals for the
Chem 1 teams were always higher than those of the other divisions, and we didn’t need
Ameriton’s scrutiny to make TQM work effectively. Face it, Chem 1 is making MCC
money, and Chem 2 and 3 can no longer do that.”

“What are you getting at, Eva?” Paul demanded.

“Maybe, Paul, you need to rethink the way you manage those divisions before you blame
everything on TQM. We have a chance here to rebuild Chem 2 and 3 around the same
customers Chem 1 supplies, using Chem 1 as a model.”

Mueller cut in. “What do you think, Horst? It’s been your program from the start.”

Koblitz looked around the room. “There is no doubt that our current level of TQM efforts
will be difficult to maintain with these cutbacks. And I understand the bitterness felt toward
Ameriton by the remaining Chem 2 and 3 workers. I’ve heard them say, ‘If TQM is so great,
why didn’t Ameriton practice it itself?’ But many of those grumbling were doing so
because they thought they were going to lose their jobs. Remember, they might not have
liked the reporting that came with it, but these workers were all for TQM when the chemical
plants were going full speed.

“Our TQM program isn’t why Ameriton went under. Ameriton did that all by itself. You
know that, and so do our shareholders. I believe installing a radically new program at MCC
during the restructuring could be catastrophic. We can’t let our customers or our shareholders
think we are panicking over this loss. We just need to meet the needs of the European market
and retool TQM for our smaller organization.”

“I’m not so sure the European customers will stick with us that long,” Becker said. “Bringing
costs down with our reduced output is not going to be easy. They’ve left us before, and
there are plenty of other suppliers out there for them to turn to.

“You say TQM empowers employees,” Becker continued. “But, Horst, you don’t understand
the cost of managing that empowerment. We’ll have to create new teams, which will mean
some retraining, while at the same time assuring employees that they won’t be laid off further
down the road. I agree that TQM didn’t fail, Ameriton did. But getting the remaining workers
to believe that might prove impossible.

“I’m sorry, Horst,” Becker said. “We just don’t have time for fine-tuning. Besides, Ameriton
installed our TQM program. Who here has the experience to make it work in a smaller
organization? You? No, we’d have to bring in someone, and we’re in no position to hire.”

“That’s a good point, Georg,” Mueller said as he stood up from the table. “You’ve all made
good points. This is obviously going to take further discussion. I’m going to meet with the
board later this afternoon to go over the cutbacks and what we’ve discussed here. Let’s meet
again at six this evening to go over the reorganization, and then we’ll decide if TQM will be
part of it.”

Can TQM Survive in the Downsized Mueller Chemical Company?

Keith Ferrazzi specializes in bringing about radical change in organizations for Deloitte and
Touche in Chicago, Illinois.

It is apparent that Mueller Chemical Company lacks a facility for smooth and rapid change.
As CFO Georg Becker complains, MCC’s TQM initiative “didn’t come with a plan for
the situation we now find ourselves in.” If there had been a plan, the strategic change that
MCC now faces would have been foreseen, and there would have been no need for such a
reactive meeting over the fate of TQM. The TQM initiative could have been refocused and
adapted to the emerging environment as it began to unfold 18 months ago when
Ameriton started to falter. People at MCC, especially those in sales, must have known what
lay ahead for Ameriton. There is little excuse for the decision makers at MCC who were
caught unawares. And now they must call on the principles of reengineering and TQM to get
MCC back on track and to position the company so that it is never caught like this again.

MCC’s senior managers, led by Dieter Mueller, must commit themselves to the creation of
what some of us at Deloitte and Touche have called an “adaptable company.” This combines
the principles of a properly implemented TQM initiative and the urgency of reengineering to
bring about the flexibility required in today’s marketplace.

The situation at MCC is similar to one at a U.S. plastics company that found itself near
bankruptcy and recently sought Deloitte and Touche’s help in performing an emergency
downsizing. After working with the company, we discovered what many companies are
finding out this year—downsizing is only a small part of the transition back to profitability.
The plastics company needed an immediate and radical reengineering of the way it delivered
its products and services. Like MCC, it could not afford to wait the rhetorical five years that
many claim is necessary for tangible results. It also had at least one less committed
executive, like MCC’s Becker, who didn’t see how TQM’s implementation could be
closely tied to the ever-changing external business environment. Some at the plastics
company believed that a reengineering initiative during a downsizing would be too difficult
and that the restructuring was causing such an uproar that the philosophies of TQM could not
possibly be implemented in time to help the company. But we found that a restructuring is
often the best time to begin creating this adaptable company. Company systems are already
under scrutiny, and, as is now the case at MCC, the urgency is already acknowledged by
everyone. People are aware of the outside forces working against the company and will band
together to save it.

A restructuring is often the best time to create an adaptable company.

Becker suggests that implementation speed at MCC would increase in a less employee-driven
system, but quite the opposite is true. Decisions can certainly be made more quickly in a
hierarchical and authoritarian structure. But the validity, acceptance, and ultimate
implementation of a decision are realized more quickly when the decision is understood and
welcomed by employees. The employees also need to feel accountable. At the plastics
company, we witnessed management’s natural inclination to rein in authority during a crisis.
A number of difficult decisions needed to be made at the executive level, and exercising
control was certainly necessary. But it is too easy to go Becker’s way and resort to bad habits
in a crisis. Over several years prior to the crisis, the plastics company had succeeded in
raising the responsibility and accountability of its frontline employees, resulting in substantial
cost reductions and decreased employee turnover. Violating that trust would have set
management back several years in its employee relations. Instead, communication paths were
kept open at all costs and the successful empowerment initiative was refocused to help
facilitate the difficult changes that needed to be made. In fact, the company allocated many of
the organizational design decisions to the general managers, allowing a more rapid response
to customer information, which was better understood at that level.

Horst Koblitz is absolutely right; Ameriton’s failure is no reason to abandon all that MCC has
built in the last five years. The principles of TQM apply in an organization of any size. Once
employees are familiar with the tools of TQM, they need to know where to focus their efforts
and be motivated to do so without the fear of losing their jobs. This is focused empowerment,
and it worked at the plastics company.

MCC can refocus its TQM initiative relatively quickly to concentrate on a smaller
organization, cost containment, overhead reductions, and the increasingly important
European customers. This becomes an internal communication challenge. Once everyone
understands the new direction of the company and some trust is rebuilt after the
reorganization, MCC can use its existing TQM tools to build a strategy that includes focused
process improvement teams, directed measurement, and pay for performance systems.
Successes like those in Chem 1 could give hope to the rest of MCC.

X-----------------------------------------------------------------------------------X

Now that the immediate TQM question is being addressed, MCC should concentrate on
making itself adaptable by taking the following four steps. Implemented individually, each
has led to positive results for many of our clients. But it is the interrelationship of all four that
brings about the changes necessary to make a difference in today’s business environment.

 MCC should recognize that it has everything it needs to open up rapid and accurate
communication between itself and its customers. The company needs to utilize its
front-line employees to their fullest capacity. These employees know what customers
expect and when those expectations change. They knew when Ameriton first started
to sputter but apparently were not trained well enough to alert management to the
impending disaster—or management was not trained to listen. MCC must train
employees to recognize what is important to the customer and to MCC and then
develop systems to communicate changes in customer expectations to the people who
make strategic decisions.

 MCC needs frictionless and rapid responses to information received from the
customer. The company must provide the appropriate culture and avenues to
communicate the designated strategic direction throughout the organization. At the
plastics company, we used the software tool Culture Print to identify the various
facets of the company’s culture and to explore how they meshed with the open culture
needed to promote adaptability. New avenues for communication ranged from
newsletters, town meetings, and information technology systems to open-door
policies and the practice of “management by walking around.” Installing such avenues
at MCC will allow the company to focus employees on TQM and other important
activities and will prevent precious resources from being wasted or misdirected.

 MCC should facilitate daily change by bridging or eliminating the functional barriers
across processes performed within the company. MCC should hold employees
accountable for their actions and relationships with both their internal and external
 customers. Internal customer-supplier relationships are seldom successful unless they
have teeth. At the plastics company, relationships were tied to compensation and
promotions, with immediate and profound results. Once the barriers are lowered
internally, MCC should lower the external barriers. The entire value chain, from the
suppliers to the customers, should be considered part of one interrelating company
working for everyone’s benefit. Real partnering is necessary, not just tacit
agreements. The plastics company went so far as to bring the customer and supplier
physically into the strategic planning and service design process.

 When the company is ready to rebuild, MCC should create a hiring profile based on
its most successful employees and target reduced employee turnover as a key
management success measure tied to compensation. Because there will be some
dissatisfied employees in this more dynamic and demanding environment, MCC
should be prepared for some short-term reaction to these changes.

The creation of an adaptable company at MCC will take time, but it must begin immediately.
MCC’s goal is to reach a position in the marketplace that is equal to or above that of its
competitors. Achieving this goal will enable MCC not only to adapt quickly but also to
develop a culture that welcomes positive change. This combination of reengineering and
continuous improvement has allowed the plastics company to thrive.

Jeff Haley is a systems engineer and Peter Cross is a systems group leader at an East Coast
engineering consulting firm whose internal TQM training program was derailed by a crisis
similar to MCC’s.

Like Mueller Chemical Company, our firm lost its direction implementing TQM. The owners
viewed TQM as a marketing tool, enabling them to tout our company as being part of the
fashionable total quality movement. But an empty TQM effort is worse than none at all.

The announcement was made that we were to “go TQM.” Management started the process by
hiring a consultant to enlighten the work force on total quality concepts. We would be
“empowered” and a new culture would emerge. The concepts are obviously sound; it’s
difficult to argue against quality. So at the beginning, things went fairly well. Trust was
growing between employees and company owners, and employee involvement was taking
root. But three months into the program, the bottom fell out. The company was faced with an
acute cash-flow problem compounded by insufficient revenue to cover fixed costs. Owner
reaction to the crisis was a sudden and unexplained reduction in the company’s work force
and a return to a standard hierarchical management system.

Of course, these actions went against the communication credo of TQM. The company
announced that the TQM process would continue, but it was in name only. Customers could
be satisfied that our company was flying the total quality banner, but internally, mistrust of
the owners and poor morale reigned supreme. The owners chose not to participate in the
“open” discussion sessions conducted in the TQM culture development phase, and thus they
did not support the resolution of issues uncovered there. They just wanted us to “do TQM” as
if it meant flipping on a switch, while they went about business as usual.

As we tried harder to work within the TQM guidelines, meetings increased in frequency and
length, but ideas for improvements in the way we did business went nowhere. We knew that
an awareness of internal and external customer satisfaction meant delivering high-quality
services and products and that to be more efficient, more profitable, and to expand our
customer base we had to continue to improve. We could pinpoint the problems, but we were
unable to implement the solutions to them. That requires guidance and leadership, not step
teams and ad hoc committees to map the process and chart the progress.

The general concepts of TQM can be applied in most companies. But there is no reason to
force a standard structure or mechanism to the quality improvement process. Each program
must be carefully tailored to each company by managers and employees. A company’s
problems can be resolved by consensus if basic guidelines are combined with enlightened
leadership. Crisis teams should be established to resolve short-term problems. These teams
must be aware of requirements established by other teams working on their company’s long-
term problems and vision. That way, a company can avoid or at least effectively respond to
the situation MCC finds itself in now. The teams’ performance in achieving results becomes
a measurement of success and can be used to redirect and refocus efforts.

TQM does not work at our company, and it might not work at MCC. The fact that MCC’s
managers are considering scrapping TQM proves they have not created a total quality
company. It takes complete commitment to the process to make it successful and to safeguard
it against a crisis like the Ameriton bankruptcy. “Total quality” certainly sounds nice, but
TQM is not the savior many think it is, and it cannot be implemented merely as a fashion
statement. It takes hard work and commitment from everyone in the company. TQM is a
risky venture, and the failure to implement it correctly can leave a company much worse off
than it was before it even considered the process.

TQM cannot be implemented merely as a fashion statement.

Our company’s owners have yet to recognize that the TQM process is not now, and probably
never will be, in place. But when asked if we are a total quality company, the answer is
always a resounding yes.

James L. Broadhead is chairman and chief executive officer of Florida Power & Light
Company in Juno Beach, Florida.

Mueller Chemical Company has had an uneven experience with TQM since its introduction
five years ago. Chem 1, which never supplied Ameriton, has successfully utilized TQM to
lower costs, reduce product defects, improve safety, and enhance employee morale. In this
division of the company, TQM has evolved beyond the developmental stage, which
emphasizes process, to a mature and more effective phase that gives employees many more
opportunities for innovation and creativity.

Companies must advance beyond the developmental phase to gain the benefits of TQM.

Chem 2 and Chem 3, on the other hand, were pushed by Ameriton to adopt a particular
system not suited to their needs or culture. Furthermore, Ameriton caused these divisions to
overemphasize the mechanics of TQM and to focus on reports and presentations. It even
pressured them to compete for a “Baldrige-like award” (which, unfortunately, several well-
intentioned American companies are doing with their suppliers). This emphasis on process
and format is typical of many organizations in the developmental stages of TQM.
Unfortunately, many companies never advance.
I recommend that MCC continue with TQM, using Chem 1 as a model for evolution. Our
experience at Florida Power & Light (FPL) emphasizes the need to move promptly to the
mature phase of TQM. FPL’s extensive preparation for the Deming Prize examination unduly
prolonged the developmental stage’s emphasis on process and structured reporting, creating
frustration and resentment. Our employees and even the Japanese Deming examiners urged
that employees be allowed to apply more freely the problem-solving methods they had
learned from the program without being criticized for not following specific procedures or
formats. Following changes in our approach to allow greater freedom and creativity, our
employees have introduced countless improvements and helped us achieve ever-higher levels
of productivity and customer satisfaction.

I also suggest that MCC seek immediate assistance from consultants or successful
practitioners of TQM to address the problem that TQM is not understood at the highest levels
of the company. Georg Becker’s comments about the great cost of TQM, the difficulty of
using it in a downsized organization, and how TQM would divert the organization from
meeting the needs of its customers were perhaps a reaction to the Ameriton-type approach.

The truth is that TQM, properly applied, will reduce MCC’s costs. TQM has enabled FPL to
be particularly successful in controlling costs and thereby in controlling the price of
electricity. Our prices have remained stable since 1985, even as the consumer price index
rose 30%. And for each of the last three years, our unit costs have declined.

Downsizing presents no impediment to the practice of TQM. In fact, TQM should be used to
enable employees to map business processes and so develop more efficient ways of
operation. At FPL, teams of employees using their TQM learning and skills were, and
continue to be, a key ingredient in shaping the company to cope with a rapidly changing
external environment. As with MCC, the change in our external environment resulted in a
downsized organization. But the application of TQM has allowed us to streamline our
processes, and that improves our competitiveness.

Finally, the point of TQM is meeting customer needs. Contrary to what Georg Becker
believes, TQM is not a diversion. Properly applied, TQM focuses rather than diverts the
efforts of employees on customer satisfaction. Senior management’s understanding of these
precepts is critical to successful implementation of TQM throughout MCC.

Bernardo de Sousa is corporate quality officer at Ciba-Geigy Ltd. in Basel, Switzerland.

Except for a few visionaries, most European companies have introduced TQM because of
pressure from customers or because they were facing a crisis or saw one coming. Abandoning
TQM in a crisis rather than using total quality efforts to help the company through the crisis
would be a mistake for Mueller Chemical Company.

Because MCC sees its TQM effort as a program and not a continuous process, the company
has been practicing a quality system but not total quality management. MCC managers are
only partly committed to TQM, and where this commitment does exist, in Chem 1, the
system is successful. But a majority of the work force perceives TQM as a customer-dictated
program. And even after five years of TQM, there is no one in MCC with sufficient
knowledge to implement the process.
The biggest problem that MCC faces, however, is a lack of market orientation. MCC has
created a complete dependence on a single customer, and the company’s TQM approach
emphasizes activities like teamwork and empowerment—or “distractions,” as CFO Georg
Becker calls them—that may be fashionable but are not sufficiently goal oriented to add
value not just to one customer but to all stakeholders. MCC’s quality system has become a
goal in and of itself.

Ciba believes that a company must first have a vision and a clear strategic direction. TQM is
one of the tools to achieve the goals arising from this vision. The focal point of all activities
is the market defined by our strategies and not by just one customer. Management
commitment is crucial: our TQM effort is the responsibility of the chairman of the executive
committee of the Ciba group. This level of commitment does not exist at MCC.

TQM tends to generate many activities, measurements, and reports that do not always add
value to either the customer or the company. We define bureaucracy as the sum of activities
that do not add value, and these must be eliminated. Measurements are essential for success,
but they must be relevant to the company’s strategic goals. We firmly believe in empowering
our people to make decisions, but then they must assume responsibility for their decisions.
We realize that it is not enough merely to empower people; our experience shows that people
do not always wish to be empowered, either because they are not trained to make decisions or
they are afraid of the risks involved. Empowerment must therefore be accompanied by
appropriate training.

The resistance to TQM within MCC is normal. TQM involves a lot of hard work, including
self-analysis, discipline, and a continuous quest for improvement. It demands a change in
behavior and attitudes, putting the customer first—something that is difficult in an
individualistic society. TQM is the irritant in the oyster that produces the pearl; the fun lies in
obtaining that pearl.

TQM is the irritant in the oyster that produces the pearl; the fun lies in obtaining that pearl.

Many European and most German companies eye TQM with suspicion as an imported
philosophy with little practical value. To this suspicion is added the conviction that “made in
Europe” or “made in Germany” labels suffice to keep customers coming back. This suspicion
is justified to the extent that, in Europe, TQM has often been perceived as a slogan-producing
machine extolling the virtues of being close to the customer in catchy phrases, without
explaining precisely how this could be done. Consequently, the more product-oriented
standards set by the International Standards Organization, the ISO 9000, have met with
greater acceptance and are what MCC should focus on as a first step toward total quality.

To be successful, TQM must include all value-adding activities, which the ISO does not. We
believe that the criteria of both the Malcolm Baldrige National Quality Award and the
European TQM model for self-appraisal are models that enable a company to achieve
precisely that. The awards in themselves are not our main objective. Ciba uses the
opportunity they present to improve performance. The focus is on achieving results. TQM is
a tool, not a religion. Consequently, all our units worldwide are getting ready to conduct such
self-appraisals if they have not already done so. MCC will not go very far if it scoffs at the
“inter-company Baldrige-like award” and restricts its TQM efforts to the production line. It
has to go all the way.
Because the aim of TQM is to add value to all stakeholders in every activity, it must of
necessity make a company more efficient. It should lead to increased productivity, which,
along with innovation, is one of the two main ingredients of success in today’s chemical
industry. Increased productivity implies producing more with the same resources or, in a
saturated market, producing the same amounts with fewer resources. In the latter case, which
is the rule rather than the exception in the industrialized nations today, downsizing is the
inevitable consequence. TQM, when practiced properly, should lead to a continuous
alignment of resources to market conditions rather than to layoffs after a crisis has occurred,
which only worsen the crisis and imperil the very existence of the company. The choice that
the downsized MCC has is either to go all the way with TQM, with an emphasis on “total,” or
else go under.

Edward E. Lawler is professor of management and organization at the University of

Southern California Graduate School of Business Administration. He also directs the
university’s Center for Effective Organizations.

The situation at Mueller Chemical Company is neither surprising nor unusual. TQM
programs have clear strengths and weaknesses and thus may be controversial. This is
particularly true when the installation is based on a standard package of practices and
policies. Often managers and employees are told to accept these practices without being
asked what should be installed or how it should be installed. As a result, people in a company
often are not fully committed to TQM and may find that the program is not relevant to their
situation.

The current downsizing at MCC represents an opportunity to reinvent the company’s

management approach and to reenergize TQM in Chem 2 and 3. In short, the loss of business
should be used as an opportunity to analyze what has gone on in the past, decide what
practices make sense for the future, and involve management and employees in developing a
new management approach for MCC. I have little doubt that an important part of the new
approach will include significant parts of TQM. TQM may not, however, survive intact; not
only is the situation different now, but also the original program did not allow for a great deal
of customization because it was based on Ameriton’s model. TQM is not a one-size-fits-all
program. It needs to take conditions at each company into account.

MCC’s downsizing represents an opportunity to reinvent management and to reenergize

TQM.

Going back to a top-down management approach, as suggested by CFO Georg Becker, is the
wrong answer. My research suggests that in capital-intensive, process-production businesses
like the chemical business, there are many advantages to having high levels of employee
involvement. In these situations, traditional quality circles and problem-solving teams tend to
be less effective than self-managing work teams. MCC should seriously consider using such
teams. They allow employees to control quality directly, and these teams tend to reduce
management overhead because they are partially self-managing.

The answer at MCC is not to abandon employee involvement or TQM but to bring a new
approach to managing the organization. This approach should include some of the best
practices of TQM but allow considerable employee input in determining what the best
management practices are for MCC. Based on what has happened in other organizations, a
good guess is that this approach should include the use of work teams that can make most of
the important operating decisions and that need relatively little supervision. Working with
TQM often prepares workers to operate effectively in these teams because they have good
decision-making skills and understand quality and quality measurement. Once employees
begin to operate effectively in teams, the company can expect dramatic reductions in
overhead and improvements in customer satisfaction.

Ken A. Francis is executive vice president of the McDonnell Douglas Corporation in

Huntington Beach, California.

Despite what the naysayers at Mueller Chemical Company believe, implementing TQM and
downsizing are not contradictory efforts. Even in a downsized environment, producing
quality products that satisfy the customer, at lower cost, is the key to survival and market
leadership. At McDonnell Douglas Aerospace, we have been able to maintain the momentum
of our TQM program through extensive communication and employee participation. We are
implementing TQM through careful prioritization and a focus on measurable results.

We started a formal TQM program in 1989, after almost a decade of initiatives like quality
circles, white-collar productivity programs, and statistical process control. Our employee
population had peaked in 1989, and thus most of our TQM implementation has been
accompanied by continued downsizing. A recent reorganization aligned what was my
organization in 1989 (McDonnell Douglas Space Systems Company) with two other
McDonnell Douglas business units. And the new entity—still downsizing, like most of the
defense industry—is 20% smaller than the original three units were, even at their peaks.

Our goal has been to overcommunicate throughout the downsizing effort to allay employee
anxiety, maintain effective levels of morale, and maximize employee productivity in trying
times. A president’s bulletin grew out of our early efforts to address employees’ concerns
during a reorganization several years ago, and we have continued to supplement the company
newspaper with bulletins and announcements.

In our most recent reorganization, we involved as many employees in the decision-making

process as was practical. Transition teams in functional areas analyzed problems and
recommended organizational solutions. To implement TQM effectively, we are prioritizing
resources to solve the most critical problems and improve key processes. With our customers,
we have identified those areas where improvement is critical. We are using process action
teams to make the advances needed in our work-in-process flow, supplier management,
program management, quality assurance, estimating and cost control, integrated product
design, and customer satisfaction.

In addition, we are driving the application of TQM tools and approaches toward achieving
results. Improvement teams understand they are not simply going through an exercise in
understanding philosophy and applying principles and methods. The demand placed on them
is to reach the goals required for business, although it is appropriate to use the TQM tools and
approaches to achieve these goals. The message is clear: TQM is the means, not the end.
Positive results are what count.

TQM is the means, not the end. Positive results are what count.

We are getting smarter as we continue our quality journey, and our current TQM program
does reflect some changes. Fortunately, we can rely on TQM orientation and general
education in TQM tools and approaches that were provided to all employees from 1989 to
1991, and we can now focus on providing specific tools to the action teams or work groups
improving prioritized processes. We are also changing the expenditure of resources for
measuring progress on our quality journey. Although we submitted an application for the
Malcolm Baldrige National Quality Award in 1992 and made it to the second-stage review,
we will not apply for the award this year. Instead, we will be guided in further improvement
by a rigorously applied corporate internal assessment process, which we have used for the
past three years.

If MCC’s goals truly include continuing to satisfy customers with low cost and high quality
and developing new processes and controls, then the company should adhere to its TQM
philosophy to meet those goals. MCC’s management should adopt four strategies:

 Communicate effectively. Employees need to understand why Ameriton failed and

what MCC must now do. They must understand near-term data, long-term goals,
longer term visions, and the relationship of TQM to the three. TQM is not an added
effort outside the mainstream but the way to get work done. Company leaders should
display the positive results achieved at Chem 1 and communicate positive results in
all divisions as they occur.

 Involve employees. By pairing employees from Chem 1 with teams at Chem 2 and
Chem 3, MCC can easily transfer experience in TQM tools and approaches and pass
on commitment to TQM. Employees informed through an effective communication
strategy will make wise decisions about organization, resources, priorities, and
performance and will give full commitment to the decisions. Involved employees are
able to shake off more quickly the anxiety and distractions that often accompany
downsizing and threaten productivity.

 Focus on customer issues. MCC needs an aggressive plan to reacquire and retain
customers. A proactive approach, with no assumptions, is needed to understand
customers’ criteria for quality and to build strong customer relationships. Strategic
planning is necessary to extend the customer base in the depth and breadth required to
meet the company’s financial goals.

 Demand results in prioritized processes. The company should rapidly pursue tangible
benefits in inventory and productivity at Chem 2 and Chem 3. Other key processes
should be targeted for immediate improvement, with an emphasis on the results
needed through the use of TQM methods. MCC’s managers must initiate a continuous
cycle of communicating commitment and direction, followed by realizing specific
goals, and communicating the results, along with further direction.

It must be clear at MCC that TQM goes beyond a way of thinking and that TQM efforts, like
all other company activities, must be evaluated and improved. Results can be realized even in
an environment where belts, including the TQM belt, are tightened.

A version of this article appeared in the May–June 1993 issue of Harvard Business Review.
Daniel Niven is case production supervisor for the Harvard Business School Publishing
Corporation. His previous article for HBR, “The Case of the Hidden Harassment,” appeared
in March–April 1992.

This article is about REORGANIZATION

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