QUALITY MANAGEMENT

Gift R. Janaso
gjanaso@commerce.uz.ac.zw
+263774077712
Department of Business Studies
Faculty of Commerce
University of Zimbabwe
THE HISTORY OF TQM/THE TOTAL
QUALITY PIONEERS CONT’D
2. The American Exportation of TQM to Japan
 As part of the post-war reconstruction, the US Civil
Communication Section engineers were tasked with
bringing Japan's telephone system up to world class
standard.
 W. Edwards Deming, Joseph M. Juran, and Armand V.
Feigenbau were American quality experts who assisted
the Japanese with TQM expertise after WW11
THE HISTORY OF TQM/THE TOTAL
QUALITY PIONEERS CONT’D
3. The Japanese Development Period
 After the devastation of World War II, the national focus in Japan
was the attempt to return to the world market place and their
previous standard of living.
 Through their commitment to quality improvement, Japan
wished to erase the world's perception of Japan as the producers
of "cheap" and "shoddy" goods.
 The Japanese proceeded to train 20,000 engineers in statistical
methods within 10 years after being introduced to Deming and
the other American quality experts
COSTS OF QUALITY
 Prevention costs - Costs of preparing and
implementing a quality plan.
 Appraisal costs - Costs of testing, evaluating, and
inspecting quality.
 Internal failure costs - Costs of scrap, rework, and
material losses.
 External failure costs - Costs of failure at customer
site, including returns, repairs, and recalls
UNIT 2 MODELS & FRAMEWORKS FOR TQM
 The famous ‘gurus’ of quality management
include W. Edwards Deming, Joseph M. Juran &
Philips B. Crosby
 Deming and Juran made tremendous
contributions to the building of Japan’s
manufacturing industry
 They later came up with ideas to assist
organizations achieve success
DEMING: 14 POINTS
Came up with 14 points that guide management in
TQM:
1. Create constancy of purpose toward improvement of
product and service, with the aim to become
competitive and to stay in business, and to provide
jobs.
2. Adopt the new philosophy. We are in a new
economic age. Western management must awaken to
the challenge, must learn their responsibilities, and
take on leadership for change.
3. Cease dependence on inspection to achieve quality.
Eliminate the need for inspection on a mass basis by
building quality into the product in the first place.
DEMING CONT.
4. End the practice of awarding business on the basis of price
tag. Instead, minimize total cost. Move toward a single supplier
for any one item, on a long-term relationship of loyalty and
trust.
5. Improve constantly and forever the system of production and
service, to improve quality and productivity, and thus constantly
decrease costs.
6. Institute training on the job

7. Improve leadership. The aim of supervision should be to help

people and machines and gadgets to do a better job.

8. Drive out fear, so that everyone may work effectively for the
company.
DEMING: CONTINUED….
9. Break down barriers between departments.

10. Eliminate slogans, exhortations, and targets for the

work force asking for zero defects and new levels of
productivity without providing methods.

11. Eliminate work standards (quotas) that prescribe

numerical quotas.

12. Eliminate barriers that stand between the worker &

his pride of workmanship
DEMING CONT.
 13. Institute a vigorous programme of
education and self-improvement.
 14. Put everybody in the company to work to
accomplish the transformation. The
transformation is everybody's job.
JURAN’S 10 STEPS FOR QUALITY
IMPROVEMENT
1. Build awareness of the need and opportunity for
improvement
2. Set goals for improvement
3. Organize to reach the goals
4. Provide training
5. Carry out projects to solve problems
6. Report progress
7. Give recognition
8. Communicate results
9. Keep score of improvements achieved
10. Maintain momentum by making annual improvement
part of the regular systems and processes of the company
PHIL CROSBY’S 14 STEPS TO QUALITY
Established the 4 absolutes;
 Definition-conformance to requirements
 System –prevention
 Performance standard-zero defects
 Measurement-price of non-conformance

The 14 steps for improvements:

 Step 1: Management Commitment
 Step 2: Quality Improvement Team
 Step 3: Quality Measurement
 Step 4: determine cost of Quality Evaluation
 Step 5: Quality Awareness
 Step 6: Corrective Action
 Step 7:Establish a Committee for the Zero Defects Programme
PHIL CROSBY’S 14 STEPS TO QUALITY
CONTINUED…
 Step 8: Supervisor Training
 Step 9: Establish Zero Defects Day
 Step 10: Goal Setting
 Step 11: Error Cause Removal
 Step 12: Recognition-awards
 Step 13: Quality Councils-regular meetings
 Step 14: Do It Over Again-continuous
QUALITY AWARD MODELS
Companies developed interest in quality frameworks to use in 3
ways:
 For awards
 Self-assessment
 ‘what-needs-to-be-in-place’ model

1. THE DEMING PRIZE

-earliest approach established in Japan and named after Deming

for his contribution towards Japan’s total quality management
activities.

-now used to evaluate an applicant’s ability to properly

implement TQM in order to achieve company objectives
DEMING PRIZE CONT.
To assess organizations, the following aspects are
considered:
 Top management leadership
 TQM frameworks (organization structure and its
operations; daily management; TQM promotion and
operation; policy management; ISO certification etc)
 Quality Assurance System (new product & new technology
development; process control; purchasing, subcontracting
and distribution management; activities covering the
whole life cycle; test, quality evaluation and audits)
 Management systems for business elements ( cross –
functional activities management and its operations;
quantity/delivery management; cost management;
safety, hygiene and work environment management; etc.)
DEMING PRIZE CONTINUED….
 Human resources development (education and training;
respect for people’s dignity; positioning of people in
management)
 Effective utilisation of information (positioning of information
in management; support for analysis and decision making;
standardization and configuration management; information
systems)
 TQM concepts & values (quality; maintenance &
improvement; respect for humanity)
 Scientific methods (understanding & utilisation of scientific
methods to solve problems)
 Organizational powers (core technology; speed; vitality)
 Realization of corporate objectives (stakeholder relations –
customers, suppliers, shareholders, etc.; realization of
corporate mission; continuously securing profits)
MALCOLM BALDRIGE NATIONAL QUALITY
AWARD (MBNQA)
 Widely used framework for TQM & organizational self-
assessments
 Is presented annually to recognize companies in the USA
that have excelled in quality management & quality
achievement
 Now called the Baldrige National Quality Programme
Criteria for Performance Excellence and its objectives are:
-to help improve organizational performance practices,
capabilities and results
-facilitate communication and sharing of best practices
information
-serving as a working tool for understanding and managing
performance and for identifying opportunities for learning.
MBNQA continued….
The award criteria are built on the following set of
interrelated core values and concepts:
 Visionary leadership
 Customer-driven excellence
 Organizational and personal learning
 Valuing employees and partners
 Agility
 Future orientation
 Innovation
 Fact-based management
 Corporate social responsibility
 Focus on results and value creation
 Systems developments
MBNQA continued….
The aforementioned are all grouped into 7 categories
which are:
Leadership – organizational leadership and CSR
Strategic planning – strategy development and
deployment
customer and market focus – customer and market
knowledge; customer relationship and satisfaction
information and analysis – measurement and analysis of
organizational performance, information management
MBNQA continued….
human resource focus – work systems; employee
education, training and development; employee well-being
and satisfaction
process management – product and service processes;
business processes; support processes
business results – customer focused results; financial and
market results, human resource results; organizational
effectiveness results
BALDRIGE CRITERIA FOR PERFORMANCE
EXCELLENCE FRAMEWORK
EUROPEAN FOUNDATION FOR QUALITY
MANAGEMENT (EFQM)
 Europeans developed interest in the 1990s as a result of the
impressive results from the Baldrige Award
 Was the first one to include ‘business results’ and to represent
the whole business model
 The model recognises that improvement in performance is
achieved by improving the processes by involving people
(management & employees)
 Customer results, employee results and societal results are
achieved through leadership (leaders drive enablers eg policy &
strategy, partnerships, resources & processes)
EFQM EXCELLENCE MODEL
A NEW MODEL FOR TQM
The four Ps and three Cs of TQM consists of
 Planning, People & Processes - the keys to
delivering quality products and services to
customers and to improve overall Performance
 The three Cs of Culture, Communication, and
Commitment are integrated into the four Ps
framework to move organisations successfully
forward.
UNIT 3: HUMAN FACTORS IN
TQM
LEADERSHIP & COMMITMENT
 TQM should start at the top
 CEO, directors & management need to demonstrate that
they are committed to TQM
 Middle managers should be involved and their job is even
more challenging as they need to create awareness about
TQM in the organization by communicating and explaining
to their subordinates
 Middle managers also need to recognize the efforts &
commitments of their subordinates
LEADERSHIP COMMITMENT
Leadership commitment to quality is shown when:
 Material problems are corrected with suppliers
 Equipment difficulties are dealt with by improved
maintenance programmes or replacement
 Employee training is prioritized
 Change takes place
 Partnerships are built
 Continuous improvement is achieved
LEADERSHIP & CREATION AND CHANGE OF THE
CULTURE

It is leadership’s responsibility to:

 form organizational culture (beliefs, behaviours, norms,
dominant values, rules and organizational climate)
 Set Mission, Vision statements and guiding philosophy,
 Set goals and make sure that people perform their roles
to achieve the goals
 Make sure that everyone is accountable for his/her own
performance
FIVE REQUIREMENTS FOR EFFECTIVE
LEADERSHIP
1. Developing and publishing clearly documented corporate
beliefs and purpose – a mission statement.
 Executives should express values and beliefs through a
vision of what they want their company to be and its
purpose – what they specifically want to achieve in line
with the basic beliefs.
 Clearly defined and properly communicated vision and
mission statements, are essential if the directors,
managers and other employees are to work together as a
winning team.
 They should address:
 The definition of the business, e.g. the needs that are
satisfied or the benefits provided.
FIVE REQUIREMENTS FOR EFFECTIVE
LEADERSHIP CONT’D
 A commitment to effective leadership and quality
 Target sectors and relationships with customers, market
or service position.
 The role or contribution of the company, organization, or
unit, e.g. profit generator, service department,
opportunity seeker.
 The distinctive competence – a brief statement which
applies only to that organization, company or unit.
 Indications for future direction – a brief statement of the
principal plans which would be considered.
 Commitment to monitoring performance against
customers’ needs and expectations, and continuous
improvement.
FIVE REQUIREMENTS FOR EFFECTIVE
LEADERSHIP CONT’D
 The vision, mission statement and broad beliefs and objectives may
then be used to communicate an inspiring vision of the organization’s
future. Top management must then show total commitment to it.

2. Developing clear and effective strategies and supporting plans for

achieving the mission
 Achievement of the company or service vision and mission requires the
development of business or service strategies, including the strategic
positioning in the ‘market place’
 Plans can then be developed for implementing the strategies.
 Such strategies and plans can be developed by senior managers alone,
but employee participation in their development and implementation
will result in more commitment.
FIVE REQUIREMENTS FOR EFFECTIVE LEADERSHIP
CONT’D
3. Identify the critical success factors and critical processes.
 Identification of critical success factors – what must be accomplished
for the mission to be achieved (most important sub-goals of a business
or organization).
 CSFs are followed by core business processes for the organization –
activities that must be done particularly well for the CSFs to be
achieved.
4. Review the management structure
 Directors, managers, and other employees can be fully effective only if
an effective structure based on process management exists.
 Includes both the definition of responsibilities for the organization’s
management and the operational procedures they will use.
 These must be agreed best ways of carrying out the core processes.
 The review of management structure should also include the
establishment of a process improvement team structure throughout
the organization.
FIVE REQUIREMENTS FOR EFFECTIVE
LEADERSHIP CONT’D
5. Empowerment – encouraging effective employee
participation.
 It is necessary for management to get very close to
employees.
 They must develop effective communications – up, down
and across the organization – and take action on what is
communicated, and they should encourage good
communications between all suppliers and customers.
Particular attention must be paid to:
 Attitudes, abilities and participation.
EFFECTIVE LEADERSHIP SUMMARY
 Effective leadership starts with the CEO and develops into
a strategy for implementation
 Effective leaders in TQM should develop the following

-beliefs and objectives in the form of mission statement

-clear and effective strategies
-plans to support strategies
-critical success factors( CSFs)-what must be accomplished
for a mission to be achieved
-core processes(activities to be done for the CSFs to be
successful)
-appropriate management structure
-employee participation through empowerment-employees
must be trained to:
EFFECTIVE LEADERSHIP
Employees must be trained to:
 E Evaluate-the situation & define their objectives
 P Plan-to achieve objectives fully
 D Do-implement the plans
 C Check-that the objectives are being achieved
 A Amend-take corrective actions if there are problems

-this process is called disciplined management which

leads to THE HELIX OF NEVER-ENDING IMPROVEMENT
HELIX OF NEVER ENDING
IMPROVEMENT
P
E D

A C
EXCELLENCE IN TQM LEADERSHIP
Borrowing from the Oakland TQM model, the main items (4Ps & 3Cs)
for attention to deliver excellence in TQM leadership include:
 Planning

-develop vision, mission, policy, strategy, align structure with

strategy
 Performance

-results should be measured, reviewed & improved, let employees

know their performance against performance goals and customer
needs
 Processes

-ensure an effective system and procedures and continuously

improve
 People

-empower employees & enforce teamwork to motivate employee

creativity and innovation
-train, support, recognise employees and respond to their needs
 EXCELLENCE IN TQM LEADERSHIP
 Customers
-build relationships with customers and other stakeholders
-understand customers (internal & external) needs and
promptly respond
 Commitment

-be actively involved in TQM activities

 Culture

-develop values and norms for TQM culture

-ensure creativity & innovation and learning
 Communications

-communicate the vision, mission, values, objectives, policy

and strategy of the organisation
-encourage communication & collaboration
-be accessible and listen
EMPLOYEE EMPOWERMENT & INVOLVEMENT
According to O'Cass (2015), employee empowerment refers
to
 making people feel valued by involving them in decisions,
 asking them to participate in the quality improvement
activities across the organisation,
 praising them, and
 continually providing adequate training and support.

It is about giving your employees the opportunity to

contribute to the company ‘s business goals and objectives
EMPLOYEE EMPOWERMENT & INVOLVEMENT
Empowering the employee also means
 Enhancing the employee’s role he or she becomes a
process-owner.
 As process-owner, the employee is now both
individually and collectively responsible and
accountable, along with fellow team members
participating in the same process, for accomplishing
desired outcomes.
EMPLOYEE EMPOWERMENT & INVOLVEMENT
The following pointers could be very useful to employee
empowerment in any quality improvement initiatives:
 Involve your employees in the decision-making processes
 It is very important that decision making should be left to the
employees and managers closer to the customer experience and
not to the CEO and senior management team.
 You can keep morale high and empower your employees by
involving them in business decisions that directly relate to them.
 Allow for mistakes
 support employees even after they have made mistakes.
 The importance of learning from mistakes must be emphasized.
 Create a non-threatening environment
 employees must be given the freedom to pursue their interests
and supported by senior management.
EMPLOYEE EMPOWERMENT & INVOLVEMENT
 develop a sense of competence and confidence
 praise them for their performance
 encourage them to take risks and acknowledge their
accomplishments, no matter how small.
 Never ignore employee suggestions for quality improvement
 the senior management team should create a culture within
the organization for employees to come up with ideas for
improving process and service quality.

-If an idea is not appropriate, discuss the rationale with the

employee
Is there empirical evidence to show the benefits of employee
empowerment ?
 O'Cass’ (2015) study found that companies that empower their
employees stay ahead of competitors in delivering quality services,
which ultimately contributes to the achievement of superior
financial outcomes
 Antony (2015) found that employee empowerment is one of the ten
commandments of quality
 Benn, S., Teo, S. T., & Martin, A. (2015) showed that employee
participation is directly associated with higher levels of employee
engagement with the organization, higher rating of their
organization’s performance, and lower intention to quit. 
 Marchington & Kynighou (2012) revealed that
firms that engaged their employees during
financial crisis of 2009 succeeded in dealing
with the crisis
 David Morgan & Rachid Zeffane ‘s(2003) study
indicates that the more employees are
involved in decision making, the more they
trust their management
TEAMS AND TEAMWORK
 Ellis and Bell (2005) posit that teamwork is the process “where two
or more employees interact interdependently toward a common
and valued goal or objective, and who have each been assigned
specific roles or functions to perform”
 Leading edge firms place great emphasis on value of people
working together in teams

Attributes of successful teams

 Clear & agreed objectives
 Openness and confrontation-members freely state their views,
differences of opinion, interests and problems, without fear of
ridicule or retaliation
TEAMS AND TEAMWORK
 Support and trust
Co-operation and conflict-trust is critical, information
should be shared rather than hidden, listening to other
people’s ideas
-conflicts are viewed as necessary and useful part of the
organizational life
-conflict prevents teams from becoming complacent and
lazy and generates new ideas
 Good decision making
 Appropriate leadership
 Continuous review of team processes-how the team makes
decisions, deals with conflicts
 Sound intergroup relationships
 Individual development opportunities
IS TEAMWORK PRODUCTIVE OR
COUNTERPRODUCTIVE?
Empirical evidence shows conflicting results
 A study of benefits and problems with student teams by Randall
S. Hansen (2006) found mixed results
 Epstein (2014) found that collaboration among health
professionals improve patients outcomes
 Benders and Hootegem (2014) report that teamwork leads to
creativity and innovation
 Well functioning teams make few mistakes than do individuals
especially when the roles are clearly spelt out (Brady, Battles
and Ricciardi, 2014)
TRAINING & DEVELOPMENT
 Training is a learning process in which employees get an
opportunity to develop skills, competency and knowledge
as per the job requirement.
 Learning with earning is known as training. It helps the
employees to know the complete job requirements.
 Development is an educational process in which the
personnel of the organization get the chance to learn the
in depth application of theoretical knowledge for their
overall growth.
TRAINING & DEVELOPMENT
 Training is short term, focuses on the present & the job while
development is long term, focuses on future and the career
TRAINING METHODS
 Demonstration eg basketball coach,
 skill practice-perform the task as taught and must be done
under supervision,
 lectures,
 discussion,
 tutorials,
 Audio Visual Aids
 case studies,
 role playing,
 projects,
  workshops
A MODEL OF TRAINING

 Identify training needs

 Plan/design training
 Deliver training
 Evaluate the training
BENEFITS OF TRAINING AND DEVELOPMENT

 promotes fast and effective learning and adaptation to

new tasks and situations
 Employees are motivated to work hard
 Updating of obsolete skills
 increased productivity
 training equips workers with knowledge and skills to do
their present jobs
 Workers become more versatile in many tasks,
 the organization increases efficiency and productivity.
BENEFITS OF TRAINING AND DEVELOPMENT
 Retention of personnel,

 fewer accidents,

 less scrap or spoiled work,

 adaptability,

 increase productivity,

 improves organizational effectiveness and efficiency,

EMPIRICAL EVIDENCE
There is empirical evidence about the positive effects of
training and development on organizational effectiveness in
TQM
 Sung and Choi (2013) found that training and
development investments of an organization affect its
innovative performance by promoting various learning
practices.
 Manpower training and development is a pathway to
efficient organizational performance (Ologunowa,
Akintunde, 2014)
 Ken (2014) argues that If participants are engaged and
find the content of a course or workshop practical and
useful they can certainly become more creative.
EMPIRICAL EVIDENCE
 Abeguki, Odunayo, Akinrole and Ugochukwu(2014) revealed that
training and development significantly influence organizational
effectiveness as it helps to reduce waste, industrial accidents,
lateness to work, fatigue, and absenteeism
 Sultana (2015) posits that by practicing Training and
Development process, a leading telecom service provider called
Grameen Phone Pvt Ltd. in Bangladesh, after 18 years of
operation they are still the number one service provider in
terms of network, service and subscriber.
  
PERFORMANCE MEASUREMENT IN
QUALITY MANAGEMENT
In the cycle of the never-ending improvement,
measurement plays an important role in:
 Tracking progress against organizational goals
 Identifying opportunities for improvement
 Comparing performance against internal standards
 Comparing performance against external standards

Measuring performance gives information about how well

processes and people are doing and motivate them to
PROBLEMS/SHORTCOMINGS OF SOME PERFORMANCE
MEASUREMENT SYSTEMS
 Produce irrelevant or misleading information
 Track performance in single, isolated dimensions
 Generate financial measures too late
 Do not take account of the customer perspective, both
internal and external
 Distort management’s understanding of how effective the
organization has been in implementing its strategy
 Promote behavior that undermines the achievement of
the strategic objectives.
Example: Financial measures eg Return on investment (ROI)
can only be calculated after profits have been computed
for a given period
Before we use performance measurement
in the improvement cycle, we should
answer the following questions?
 Why measure?
 What to measure?
 Where to measure?
 How to measure?
WHY MEASURE?
In a quality driven, never ending improvement environment,
measurement is needed:
 To ensure customer requirements have been met
 To be able to set sensible objectives & comply with them
 To provide standards for establishing comparisons
 To provide a ‘scoreboard’ for people to monitor their own
performance levels
 To highlight quality problems and determine which areas
require priority attention
 To give an indication of the costs of poor quality
 To justify the use of resources
 To provide feedback for driving the improvement effort
 To know the impact of TQM on improvements in business
performance, on sustaining current performance and on
reducing any decline in performance
WHAT TO MEASURE
 Effectiveness
 Efficiency
 Quality
 Impact
 Productivity
WHERE TO MEASURE
There are 3 components that must be examined (the human,
technical & business components)
HUMAN COMPONENT
The measures must be:
 Understood by all the people being measured
 Accepted by the individuals concerned
 Compatible with the rewards and recognition systems
 Designed to offer minimal opportunity for manipulation

TECHNICAL COMPONENT
-the measures must be precise, correct and accurate
BUSINESS COMPONENT
- Measures should be objective, timely, and result-oriented,
must mean something to people working in and around the
process, including customers
HOW TO MEASURE?
Progress is important in five main areas:
Effectiveness, Efficiency, Productivity, Quality, Impact
EFFECTIVENESS - doing what you said you would do,
achieving the desired results, accomplishing the right things
-Measures include:
 Quality eg product grade, level of service
 Quantity eg tonnes, accounts opened, bedrooms cleaned
 Timeliness eg speed of response,
 Cost/price eg unit costs

Effectiveness=(Actual output ÷ expected output)x100

 Looks at the output side of the process
HOW TO MEASURE?
EFFICIENCY = (resources actually used ÷ resources planned to be
used) x 100
 Looks at the input side of the process
 It is possible to use resources efficiently while being
ineffective

PRODUCTIVITY
Productivity =outputs/inputs
Eg sales output per telephone operator

QUALITY
The quality measures indicate whether we are doing a good job
in terms of customer satisfaction, implementing objectives,
whether the designs, systems and solutions to problems are
meeting the requirements
HOW TO MEASURE?
IMPACT

-improvement overtime

-value added

-also include the impact on the business eg growth in sales,

assets, number of passengers
THE BALANCED SCORECARD
 An approach to measurement
 Developed by Kaplan (a Harvard Business School accounting
professor) and Norton (a consultant) in 1992.
 Was developed as a performance measurement framework
 It added strategic non-financial performance measures to
traditional financial metrics to give managers and executives
a more 'balanced' view of organizational performance.
 Previously, managers used to rely on the traditional financial
accounting measures to measure company performance eg
return on investment, earnings per share
ORIGINS OF THE BALANCED SCORECARD
 In 1990, Dr David P. Norton and Professor Robert S.
Kaplan conducted a research study project, sponsored by
KPMG Peat Marwick, into the performance measurement
systems of 12 companies.
 The emphasis of their research project was to investigate
and address the limitations of traditional financial based
systems for monitoring performance.
 It was argued that focusing on financial measures led
companies to focus on the short term and, potentially,
left them ill prepared for future competitive engagement.
 The results of the original study were subsequently
published in an article in The Harvard Business Review
(Kaplan and Norton, 1992).
ORIGINS OF THE BALANCED SCORECARD
CONT’D
 Kaplan and Norton argued that:

-“What you measure is what you get” and

-“An organization’s measurement system strongly affects the

behaviour of managers and employees”

-“traditional financial accounting measures can give misleading

signals for continuous improvement and innovation”
 To counter the tendency to rely too heavily on financial
accounting measures, Kaplan and Norton argued that senior
executives should establish a scorecard that takes multiple
measures into account
THE BALANCED SCORECARD EXPLAINED
They proposed a Balanced Scorecard that considered four types
of measures:
 Financial Measures: How do we Look to Shareholders?
 Internal Business Measures: What must we excel?
 Innovation and Learning Measures: Can we continue to
improve and create value?
 Customer Measures: How do customers see us?

The scope of these perspectives is designed to cover the whole

of the organization’s activities both internally and externally,
both current and for the future
THE BALANCED SCORECARD CONT’D
1. FINANCIAL MEASURES

Long-term shareholder value is created by:

 Improved cost structure
 Increased asset utilization
 Expanding revenue opportunities
 Enhanced customer value

-There are a plethora of measures and a considerable ongoing

debate about the most appropriate financial indicators.

- They include operating profit, return on sales, return on capital

employed (ROCE), ROI, revenue growth, unit costs, credit rating,
cash flow, share earnings etc
 THE CUSTOMER MEASURES
 In today’s competitive markets, the key emphasis for most
executives will be the customer.
Organizations should focus on:
 customer satisfaction
 identifying customer needs
 re-engineering their business capabilities from the customer
interface.
 emphasising a commitment to delighting the customer
 continually surprising customers with products which meet
customer needs
 Organisations should continually be developing Customer Value
Proposition through:
-Product/Service attributes (Price, quality, availability,
functionality)
-Relationships (service and partnership)
-Image (brand)
THE INTERNAL BUSINESS PROCESSES MEASURES
 The Internal Business Processes perspective is about
‘doing’
They include:
 Operations Management Processes

-supply, production, distribution, risk management

 Customer Management Processes

-selection, acquisition, retention, growth

 Innovation processes

-innovation and development, research and development

(R&D), design/develop, launch
 Regulatory and Social Processes

-environment, safety & health, employment, community

LEARNING AND GROWTH PERSPECTIVE
Organizations should use these three pillars

(a) Organisational capital which includes

 Organisational culture
 Leadership
 Alignment
 Teamwork

(b) Information capital-invest in information systems

(c)Human capital-invest in people training and development

 The CIMA Guide prepared by Mackay, identifies the Ten Most Popular
Performance Measures used by companies
FINANCIAL MEASURES
 Profitability
 Revenue growth
 Return on investment/capital
 Cost reduction
 Share price

CUSTOMER MEASURES
 Market share
 Customer satisfaction
 Customer service level

INTERNAL PROCESSES
 Productivity measure

LEARNING AND GROWTH

 Employee satisfaction
ADVANTAGES OF BALANCED SCORECARD
 a balanced view of company performance
 stakeholders determine the health of short, medium, and long term
objectives at a glance.
 ensuring that any strategic action implemented matches the desired
outcomes
 Customer Relationship Management
 Early Risk Detection
 Drive Future Value- both financials and other drivers for future value
creation like customer relations, process improvement, employees’
motivation and skill levels.
 Balanced Resource Allocation
 Broader Vision
WEAKNESSES
 the balanced scorecard takes forethought- is complex
 It recommends many companies to use metrics that may
not be applicable to their own situation
 Require Extensive Planning
 Demand Immense Resources
 static and rigid approach which mainly concentrates on
benchmarking internal processes
 there is no opportunity to compare industry best practices
and approaches.
BENCHMARKING
 How do we define ‘benchmarking’?
 What are its origins?
 Why do organizations benchmark?
 What benefits does it bring?
 What can I benchmark?
 How do I benchmark?
WHAT IS BENCHMARKING?
 The continuous process of measuring products, services and
practices against the toughest competitors or those companies
recognised as industry leaders (former CEO Xerox Corporation,
David Keams)
 This definition highlights that benchmarking can apply to the
products, services, and practices of an organization.
 More broadly, benchmarking can be applied to any area where
we want to compare performance and/or learn from others.
 The definition also specifies that we want to benchmark
against either our toughest competitors, so that we know
where our strengths and weaknesses are in relation to them,
or industry leaders so that we are aware of the highest
performance levels currently being achieved.
BENCHMARKING CONT’D
 A method of measuring and improving
organisational performance by comparing your
self with the best
 The process of measuring the performance of
one's company against the best in the same or
another industry
In order to clarify what benchmarking is, it helps
to consider what benchmarking is not.
 Benchmarking:

1. Is NOT industrial tourism whereby companies visit one

another, enjoy a day out, or even a trip half way around
the world but no objective comparison or analysis takes
place. However:

it IS planned research with a high return on investment.

2. Is NOT a staff appraisal tool. However:

it IS helpful to identify where and how to improve the

processes.
3. It is NOT a copy and paste activity. Copying what someone else
has done in their organization and expecting it to work assumes:
 that your organization has a similar culture, a similar
operational environment, and similar issues as the one from
which you are copying
However:
It IS a potential source of ideas, information, methods, practices,
etc. that may be appropriate to adapt, adopt, and implement.

4. Is NOT a one-off event. At best this will lead to achieving a

competitive edge today, but that is likely to be eroded as other
organizations continue to improve.
 It IS part of a culture of striving to be the best, or amongst the
best, at what the organization does.
 BENCHMARKING
 The idea started when a man first looked at a neighbour’s hut
and thought ‘That design lets in less rain than mine, perhaps I
should build one like that’; or
 when he looked at his neighbour’s crops and asked ‘Why are his
plants producing more fruit than mine? What does he do that is
different to me’?
 As industry became more developed and organized, it became
clear that large profits could be made by developing better
products, and producing goods in ways that were faster and
more efficient. Now there were companies vying for customers.
 In order to stay on top, it was necessary to be aware of the
competition – what features made the competitors’ products
more desirable; what manufacturing processes were they using
to produce their goods more cheaply; where were they getting
their raw materials, or indeed, what raw materials were they
using?
JAPANESE INDUSTRIAL VISITS
 After WWII Japanese industry was all but non-existent.
 Many of their factories had been bombed, and most had
been focusing on the war effort.
 As part of their effort to establish a vibrant manufacturing
industry Japanese industrialists visited American factories.
 This gave them both an insight into American
manufacturing practices – i.e. what their future
competition was doing and how they were doing it – and
ideas that they could use in their own factories.
 The Japanese had been warned by Dr W.E. Deming (an
American) not to simply copy what they saw, but to
understand why it worked and to adapt and improve on the
practices and ideas they discovered before adopting them.
 America and the West in general, did not perceive Japan as
a threat and were quite happy to show off their industries.
THE STORY OF XEROX
 Up until the 1970s benchmarking practices were somewhat
haphazard and certainly not widely seen as a management
improvement tool.
 The phenomenal growth of Japanese cars, radios,
computers, cameras, motorbikes forced many Western
companies out of business.
 But Xerox fought against the seemingly unstoppable
Japanese expansion and survived
 One of the few companies that sustained competitiveness
was Xerox
 Xerox developed and established benchmarking as a tool
to drive out waste, drive down costs, and drive up quality.
 Current benchmarking thinking and practices are firmly
based on what Xerox did over 30 years ago.
 Xerox developed a plan that sought to find out:
 1. Who was best at doing something (benchmark the
data).
 2. Find out how the ‘best’ achieved their superior
performance. (Learn)
 These two concepts still form the cornerstones of
benchmarking today.
 Xerox did it by a series of site visits to companies
including John Deere, IBM, Texas Instruments, Motorola
(who later popularized Six Sigma) and Burroughs.
 Robert C.Camp, who was involved in benchmarking at
Xerox wrote the first book on benchmarking:
Benchmarking: The Search for Industry Best Practices that
Lead to Superior Performance in 1989.
 His latest book was published in 2007.
 Also in 1989, BP and nine other oil and gas exploration
companies initiated a benchmarking study of wells drilled
in the North Sea.
 In the 1990s benchmarking activity increased markedly. In
the UK, for example, the report by Coopers & Lybrand,
the CBI, and the National Manufacturing Council, “Survey
of benchmarking in the UK 1994” identified that 78% of
The Times top 1000 companies claimed to be
benchmarking.
 The business models that were developed throughout the
1990s and 2000s such as the Baldridge Award and the
European Foundation for Quality Management (EFQM)
Excellence Award imply the need for or specifically
require that an organization be involved in benchmarking
activities.
 Benchmarking has now spread to all five continents.
WHY DO ORGANIZATIONS BENCHMARK?
1. As Part of an Improvement Culture
2. Becoming competitive
3.Industry best practices
4.Defining customer requirements
5.Establishing effective goals and objectives
6.Developing a true measure of productivity
7. To Solve Problems
8. Change
9. Compare
10. Challenge
11. Create improved goals and practices for the
organization
 Requirement of Business Excellence Models
 To Build up a Network of Like-Minded People
 To Target a Competitor’s Weak Points
STAGES OF BENCHMARKING
The steps can include:
 Step 1 – Plan the study

• Establish benchmarking roles and responsibilities

• Identify the process to benchmark

• Document the current process

• Define the measures for data collection

 Step 2 – Collect the data

• Record current performance levels

• Find benchmarking partners

• Conduct the primary investigation

 Step 3 – Analyse the data
• Normalize the performance data
• Construct a comparison matrix to compare your current
performance data with your partners’ data
• Identify outstanding practices
• Isolate process enablers
 Step 4 – Adapt enablers to implement improvements

• Set stretching targets

• “Vision” an alternative process
• Consider the barriers to change
• Plan to implement the changes
 The final phase of the study will be post-completion
Review

-monitor the results/improvements

-assess outcomes and lessons got from the study

-share experiences

-identify further opportunities for improving & sustaining

performance
DRIVERS FOR BENCHMARKING
(a) External drivers
 Customers continuously demand better quality, lower
prices, shorter lead time
 Competitors are constantly trying to get ahead &
steal markets
 Legislation-changes in laws demand for improvement

(d) Internal drivers

 Targets which require improvements on our
performance
 Technology- change in processes require new
technologies
 Self-assessment results-provide opportunities to learn
from adapting best practices
HOW EFFECTIVE IS BENCHMARKING
 Creating a better understanding of the current
position
 Heightening sensitivity to changing customer
needs
 Encouraging innovation
 Developing realistic stretch goals
 Establishing realistic action plans

-The evidence is irrefutable that applied

thoughtfully benchmarking does yield benefits
TYPES OF BENCHMARKING
 Internal - a comparison of internal operations
and processes
 Competitive - specific competitor to
competitor comparisons for a product or
function
 Functional - comparisons of similar functions
within the same broad industry, or to industry
leaders
 Generic - comparisons of business processes or
functions that are very similar, regardless of
the industry
CRITICISMS OF BENCHMARKING

1. One of the criticisms of benchmarking is that it can

be considered as spying on the competition
 This is not truth. Benchmarking is not spying on the
competition but keeping up with what they and the
rest of the industry are doing.
 This is one of the ways that the Japanese are able to
keep up with and surpass others in industries such as
automobiles, motorcycles, electronics
2. Another criticism of benchmarking is that it is copycatting.
This is what many think that benchmarking is. They feel that
those who benchmark do not develop their own ideas.
 Copycatting and Benchmarking are not one and the same.
 Copycatting leads to lessened creativity and stale ideas.
 Benchmarking is not supposed to take the place of managers
bringing insight and original strategies into the organization.
 Although copycatting is an easy trap for managers to fall
into, it is important for managers to realize that
benchmarking will never be an excuse for managers to stop
being creative and innovative.
 Some organizations do not utilize benchmarking because
they feel that if it’s not broke, don’t fix it.
 When a company is doing well financially, they have a
tendency to resist change and not worry about
competitors .
 Many organizations shy away from benchmarking because
they do not understand what benchmarking is and they
feel that they do not have anything to gain.
CONTINUOUS IMPROVEMENT
 A number of tools and techniques are used in
the never ending quest for improvement
1. CAUSE AND EFFECT ANALYSIS AND
BRAINSTORMING
 A useful way of mapping the inputs that
affect quality
 Also called the Ishikawa diagram (after its
originator)
Or
 The fishbone diagram (after its appearance)
 The effect or incident being investigated is shown at
the horizontal arrow
 Potential causes are shown as labeled arrows entering
the main cause arrow
 Each arrow may have other arrows entering it as the
principal factors or causes are reduced to their
subcauses and subsubcauses by brainstorming
 The causes include:

1. PEOPLE
2. PROCEDURES
3. INFORMATION
4. EQUIPMENT AND PLANT
5. MATERIALS
 The fishbone diagram is a cause‐and‐effect diagram
that can be used to identify the potential (or actual)
cause(s) for a performance problem
 often used in needs assessment to assist in illustrating
and/or communicating the relationships among several
potential (or actual) causes of a performance problem.
 The graphical representation of relationships between
needs (i.e., discrepancies between desired and actual
results) offer you a pragmatic tool for building a system
of performance improvement interventions
 For instance, a combination of mentoring, job aids,
training, motivation, new expectations leading to
organisational commitment.
STEPS INVOLVED IN CARRYING
OUT CAUSE AND EFFECT ANALYSIS
 Agree on the problem statement (also referred to as the
effect). This is written at the mouth of the “fish.”
 Agree on the major categories of causes of the problem
(written as branches from the main arrow). Major
categories often include: equipment or supply factors,
environmental factors, rules/policy/procedure factors,
and people/staff factors.
 Brainstorm all the possible causes of the problem. Ask
“Why does this happen, -place possible causes on the
fishbone diagram).
 Again ask “Why does this happen?” about each cause.
Write sub-causes branching off the cause branches.
 Continue to ask “Why?” and generate deeper levels of
causes and continue organizing them under related
causes or categories. This will help you to identify and
then address root causes to prevent future problems.
 The value of using the fishbone diagram is to
dig deeper, to go beyond the initial incident
report, to better understand what in the
organization’s systems and processes are
causing the problem, so they can be
addressed.
ADVANTAGES
 Fishbone diagrams permit a thoughtful analysis that
avoids overlooking any possible root causes for a
need.
 The fishbone technique is easy to implement and
creates an easy‐to‐understand visual representation
of the causes, categories of causes, and the need.
 By using a fishbone diagram, you are able to focus
the group on the ʺbig pictureʺ as to possible causes
or factors influencing the problem/need.
 Even after the need has been addressed, the
fishbone diagram shows areas of weakness that ‐
once exposed ‐ can be rectified before causing more
sustained difficulties.
DISADVANTAGES
 The simplicity of a fishbone diagram can be
both its strength and its weakness. As a
weakness, the simplicity of the fishbone
diagram may make it difficult to represent
the truly interrelated nature of problems and
causes in some very complex situations.
 • Unless you have an extremely large space
on which to draw and develop the fishbone
diagram, you may find that you are not able
to explore the cause and effect relationships
in as much detail as you would like to.
Brainstorming
-a technique used to generate a large number
of ideas quickly
-each member of a group is invited to put
forward ideas concerning a problem under
consideration
-all ideas offered are recorded for subsequent
analysis
-the process is continued until all the
conceivable causes have been included
THE SIX SIGMA IMPROVEMENT
MODEL
 Six Sigma was developed at Motorola through
the efforts of Bill Smith, a reliability
engineer, in the 1980s
 The real turning point in Six Sigma’s
popularity came through the work of Jack
Welch, the then CEO of General Electric in
1995.
 Welch had observed the success experienced
through Bill Smith’s approach and intensely
championed and led the Six Sigma
methodology in General Electric.
 The term “Six Sigma” refers to a statistical
measure of defect rate within a system.
 it presents a structured and systematic approach to
process improvement, aiming for a reduced defect
rate of 3.4 defects for every million opportunities,
 Six Sigma is about helping the organization make
more money by improving customer value and
efficiency.
 It focuses on improving quality (i.e reducing waste)
by helping organizations produce products and
services better, faster and cheaper.

 Six Sigma focuses on customer requirements,
defect prevention, cycle time reduction, and cost
savings.
 Unlike the usual cost-cutting programs which also
reduce value and quality, Six Sigma identifies and
eliminates costs which provide no value to
customers.
 The main argument of Six Sigma is that it costs
money to achieve quality but it costs more money
to correct errors
 According to Six Sigma, in the past companies could
tolerate percentage error rates (errors per hundred
opportunities), today they cannot.
THE DEMAIC STEPS
 There are five phases/stages in applying the six-
sigma approach to improving performance in a
process
 Define, Measure, Analyse, Improve & Control
(DMAIC).
1. D - Define the scope and goals of the improvement
project in terms of customer requirements and
the process that delivers these requirements-
inputs, outputs, controls and resources
2. M - Measure the current process performance-
input, output & process and calculate the process
capacity
3. A - Analyse the gap between the current and the
desired performance, prioritise problems and
identify root causes of problems. Can benchmark
against recognised standards
4.I - Generate the improvement solutions to
fix the problems and prevent them from
recurring so as to meet the required
performance goals
5. C - Implementing the improved process in a
way that sustains the gains. Standards of
operation should be documented in systems
such as ISO 9000
BUILDING A SIX-SIGMA
ORGANISATION & CULTURE
A six-sigma organisation focuses on:
 Understanding their customers’ requirements
 Identifying and focusing on core-critical
processes that add value to customers
 Driving continuous improvement by involving
all employees
 Being very responsive to change
 Basing managing on factual data and
appropriate metrics (measurement indicators)
 Obtaining outstanding results, both internally
and externally
Properly managed six-sigma strategies involve:
 top management leadership and commitment;
 a well-implemented customer management
system;
 education and training system;
 a well-implemented process management system;
 a well-developed strategic planning system;
 a well-developed supplier management system;
and
 a well-developed human resource management
system.
 Measurement of financial benefits
 Communication
 Control and sustained improvement
ROLES IN SIX-SIGMA MODEL
Martial arts-related characters are used to signify
the expertise of individuals
1. Team members-green belts
2. Team leaders or project leaders-green belts or
black belts
3. Six-sigma coaches-black belts or master black
belts
-the different levels of green, black and master
black belts recognise the depth of training and
expertise
-in addition to these martial-arts related characters,
there are other roles that may also be considered
 Executive Leadership group/steering committee
 Sponsors/process owners/champions
SIX SIGMA BENEFITS
 Reduction in process variability
 Increase in profitability
 Reduction of operational costs
 Increase in productivity
 Reduction of cycle time
 Reduction of customer complaints
 Improved sales
 Reduced inspection
IMPLEMENTING TQM
 The task of implementing TQM is a huge
responsibility to managers
 The first decision is where to begin and this
can be so difficult that most organisations
never get started
 This is referred to as total quality paralysis
THE FRAMEWORK FOR
IMPLEMENTATION OF TQM
 Organisational vision, goals and strategies should be
thought through, agreed and shared in the business
 Identify the critical success factors (CSFs) and the
key performance indicators (KPIs)
 Understanding the core processes through process
analysis to fully understand your business and
identify opportunity for improvement (gap analysis)
-self assessment and benchmarking will help identify
further improvement opportunities
 Areas that need improvement must be listed down
and actions to correct them are identified eg
training, redesign or complete revision
 Identify areas being properly run and subject
them to continuous improvement
 Feedback mechanisms need to be established
eg benchmarking and strategic planning
results
Research shows that world class organisations
are achieving world class performance and
results because of successfully implementing
TQM
WHAT ARE THE SUCCESS FACTORS FOR
SUCCESSFUL TQM IMPLEMENTATION?
 Process factors -Method of manufacture
 Type of employees

-Skill level
-Level of education
-Length of employment
-Age distribution of employees
-Employees’ experience
 Shared values

-Employees’ attitude to change

-Business performance
-Organization’s age
-Methods used
-Understanding of quality improvement need
-Salary & other perks
-Working conditions
 Management style
- Management board’s attitude towards change
-Middle management’s attitude towards change
-Junior management’s attitude towards change
-Leadership style
-Management planning
-Departmental interaction/synergy
 Organizational structure

-Organizational structure description (number

of sites)
-Stability of organizational structure
-Geographically integrated
 Employee Empowerment
 Recognition and Reward
 Customer Focus
 Continuous Improvement
 Employee Involvement
 Training
 Communication
 Teamwork

INTEGRATING TQM INTO THE POLICY &
STRATEGY
There are six steps for achieving this:
 Step 1: Develop a shared vision and mission for the organisation

Vision statement-what we want to be

-it encapsulates the ideology or guiding philosophy of a business

-it expresses the values, purpose and direction

-powerful visions should be clear, challenging, inspiring, stable

action-oriented, responsive to competition, long-term, future
oriented, flexible and purposeful(Foster and Akdere (2007:106)
The mission statement:
 Define the role of the organisation
 Contains the need to be fulfilled (reasons for
existence)
 Products/services offered
 Target market
 Stakeholders
 Benefits provided

The mission statement should be

understandable, communicable, believable, and
usable
 Step 2: Develop the mission into its critical
success factors (CSFs) to coerce and move it
forward
-what the organisation must accomplish to achieve
the mission eg financial/non-financial performance,
customer/market satisfaction, internal organisation
satisfaction, societal/environmental satisfaction
examples of CSFs
-right suppliers
-motivated and skilled workers
-new products that satisfy market needs
-new business opportunities
-high quality products
 Step 3: define the key performance
outcomes
-the KPOs are useful in monitoring progress
and as evidence of success
-the KPOs may follow the balanced scorecard
model proposed by Kaplan, which monitors
progress using the financial, customer, internal
business, and innovation and learning
perspectives
 Step 4: establish the core processes
-core processes describe what actually needs to be
done so that the organisation meets its CSFs
eg promotion, advertising, communication
 Step 5: break down the core processes into sub
processes, activities and tasks and form
improvement teams around these
Eg (1)breaking down core process (advertising into
preparing the company’s information pack
(2) One of the activities which contributes to sub
process(company’s information pack) is to prepare a
booklet eg ‘business excellence and self- assessment’
(3) One of the tasks which contributes to the activity
(preparing a booklet) is to write the detailed leaflet
for a particular seminar eg one or three day seminars
on self-assessment
 Step 6: Ensure process and people alignment
through a policy deployment or goal
translation process
-involves converting the ‘whats’ into ‘hows’-
taking action/implementation
-actions taken to achieve the goals