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Creating Business Excellence

LECTURE#26TQM

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What is Quality?• To understand total quality, one must first understand quality. • Customers that are business organizations will define quality very

clearly using specifications, standards, and other measures. • This makes the point that quality can be defined and measured. • Although few consumers could define quality if asked, all know it

when they see it. • This makes the critical point that quality is in the eye of the

beholder. With the total quality approach, customers ultimately define quality.

• People deal with the issue of quality continually in their daily lives. • We concern ourselves with quality when grocery shopping, eating

in a restaurant, and making a major purchase such as an automobile, a home, a television, or a personal computer.

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What is Quality?

• Perceived quality is a major factor by which people make distinctions in the market place.

• Whether we articulate them openly or keep them in the back of our minds.

• We all apply a number of criteria when making a purchase. • The extent to which a purchase meets these criteria

determines its quality in our eyes.• One way to understand quality as a consumer-driven

concept is to consider the example of eating at a restaurant.

• How will you judge the quality of the restaurant?

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What is Quality?• Most people apply such criteria as the following:

– ♦ Service– ♦ Response time– ♦ Food preparation– ♦ Environment/atmosphere– ♦ Price– ♦ Selection

• The example gets at one aspect of quality – the results aspect. • Does the product or service meet or exceed customer

expectations? This is a critical aspect of quality, but it is not the only one.

• Total quality is a much broader concept that encompasses not just the results aspect but also the quality f people and the quality of processes.

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Chain Reaction and Profitability• Deming stresses that higher quality and improvement in

quality leads to higher productivity, which in turn leads to long-term competitive strength.

• The Deming “chain reaction,” shown in Figure below, summarizes this view.

• This theory states that improvements in quality lead to lower cost because of less rework, fewer mistakes, fewer delays and snags, and better use of time and materials.

• Lower costs, in turn, lead to productivity improvements. • With better quality and lower prices, the firm can achieve a

higher market share and thus stay in business, providing more and more jobs.

• Deming states emphatically that top management has the overriding responsibility for quality improvement.

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Chain Reaction and Profitability

Improve Quality

Costs decrease because of less rework,fewer mistakes, fewer delays and snags,and better use of time and materials,

Productivity improves

Capture the market with better qualityand lower price

Stay in business

Provide jobs and more jobs

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SIPOC Analysis:

• A fundamental step in improving a process is to understand how it functions from a process management perspective.

• This can be seen through the analysis diagram of the process to identify the Supplier-Input-Process-Output-Customer (SIPOC) linkages.

• It begins with defining the process of interest and listing the outputs that the process creates that go to the customers.

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What is a SIPOC Diagram (High-Level Process Map) and how is it Used in Six-Sigma?

• A SIPOC diagram, also known as a high-level process map is a tool used in the Six Sigma methodology.

• In order for your company to receive a Six Sigma certification, you must first complete a project that demonstrates your ability to follow the Six Sigma process and show that you understand how to use the tools.

• The reason you would want to map your company's current process is so that you can put yourself in a position to be able to quickly define, document, analyze, prioritize and recommend solutions and follow-up plans to move the company toward its financial and customer-focused goals.

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What is a SIPOC Diagram (High-Level Process Map) and how is it Used in Six-Sigma?

• Before beginning a process improvement project, you must first identify all the relevant elements.

• You use a SIPOC Diagram to help define these. It is typically used at the Measure phase of the Six Sigma DMAIC (Define, Measure, Analyze, Improve, and Control) process.

• A SIPOC diagram helps to identify the process outputs and the customers of those outputs so that the voice of the customer can be captured.

• The SIPOC diagram includes a high-level map of the process that "maps out" its basic steps.

• Through the process, the suppliers (S) provide input (I) to the process. The process (P) your team is improving adds value, resulting in output (O) that meets or exceeds the customer (C) expectations.

• These can be better defined as: • Suppliers: Significant internal/external suppliers to the process

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What is a SIPOC Diagram (High-Level Process Map) and how is it Used in Six-Sigma?

• Inputs: are the significant inputs to the process. • This would include things such as materials, forms, information, staff,

etc.• Process: One block representing the entire process.• Outputs: are the significant outputs to internal/external customers. This

would be anything the business unit distributes. • Frequency/timing is listed along with the output. Examples of outputs

would be reports, ratings, products, documents, etc.• Customers: are the significant internal/external customers to the

process. • This would include anyone who receives outputs. It is important to note

that the customer must get the output directly from the business unit and does not necessarily have to be a user of the output.

• If the output is received from a third party, they are not customer s. Examples of customers could be managers, CEOs, boards of directors or other departments.

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What is a SIPOC Diagram (High-Level Process Map) and how is it Used in Six-Sigma?

• When creating a SIPOC diagram, your project team does not necessarily need begin at the beginning.

• In fact, the team should probably start in the process (P) phase and ask questions about the process itself.

• The team should label the process with the summaries of the most critical three to six steps.

• After analyzing the process, they should document what (O) is delivered to whom (C).

• The team can brainstorm and prioritize the most critical one to three customers. • They then can identify, prioritize and align the outputs most significant to those

customers. • The next step would be to verify these initial assumptions with voice of the

customer tools from the DMAIC process and/or designate as critical to quality, speed or cost.

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What is a SIPOC Diagram (High-Level Process Map) and how is it Used in Six-Sigma?

• Lastly, the team can identify what input or information (I) is needed to perform that process and who provides that input (S).

• This brainstorming and prioritization of significant inputs finishes the activities around building a SIPOC.

• In summary, there are three main reasons we many times begin the Six Sigma process by building a SIPOC diagram.

These are:• 1. A SIPOC diagram quickly and easily captures the current or "as is"

state of the organization and processes in question.• 2. The SIPOC exercise brings associates together in a non-threatening

way that builds.• 3. The SIPOC exercise allows the team to review all the processes in a

way that they can easily see which next steps can be identified.

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Quality Terminology:

• Quality: is fitness for use (Juran)• Quality Control: It is a system where the qualities of products

or services are inspected into to produce them economically to meet the requirement of the purchaser.

• It is the operational technique.• Quality Assurance: It means to assure quality in a product so

that a customer can buy it with confidence and use it for a large period of time with satisfaction.

• According to ISO, QA means, “all those planned and systematic actions necessary to provide adequate confidence that a product or service will satisfy given requirements for quality.”

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Quality Terminology:• Quality Management system : refers to the organization's

structure for managing its processes – or activities - that transform inputs of resources into a product or service which meet the organization‘s objectives,

• such as satisfying the customer's quality requirements, complying with regulations, or meeting environmental objectives.

• Total Quality Management: TQM is both philosophy and a set of guiding principles that represent the foundation of a continuously improving organization.

• It is the application of quantitative methods as well as human resources to improve the whole supply chain for customers and suppliers.

• Customer: Any one who receives or is affected by the product, service, or process.

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Quality Terminology:

• External Customer: The one outside the company walls or office/department walls or the next one in chain who receives your product, service or idea.

• Internal Customers: Staff members, employees or any one who works for the interest of a company or office or boss and expects a reward or salary or benefit from the company or office or boss.

• Investor Customer: The one who has invested his fortune and finance to build a company and expects a good return on his/her financial capital or fortune. Shareholders, Stockholders

• Social Customer: The society at large.

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Creating Business ExcellenceBefore we look at excellence models, let us see why sometime these

initiatives fail.There are many reasons for Quality Programs failures, including the

following:• The efforts were mis-focused, limited to improving only “quality of work

life” issues for employees rather than also addressing issues of strategic concern.

• The managers relied on traditional methods and assumptions, ad were not equipped with the right tools, techniques, and theory to improve quality.

• The managers were too focused on tools and techniques, and did not understand how to transform themselves, their employees, and the organization.

• The managers were too impatient, with a short-term focus, and unwilling to stay the course, overcome initial barriers, and wait for long-term gains.

• The managers never care for the culture change in organization.

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Creating Business Excellence

Consider the following ten reasons why TQM “programs” do not work for many companies:

• 1. TQM focuses people’s attention on internal processes rather than on external results An asset of TQM is that it gets managers to attend to internal processes.

• But taken to an extreme, managers can get too preoccupied with internal issues such as the controversial issue of performance measurement and ignore shifting perceptions and preferences of customers.

• 2. TQM focuses on minimum standards. • Zero defects and no rework efficiency distract people form

adding value and excitement to customers’ lives.

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Creating Business Excellence• 3. TQM develops its own cumbersome bureaucracy.

Organizational charts and reporting systems with interlocking committees, councils, and improvement teams imply a linear and predictable improvement process, rather than the chaotic and disruptive rebuilding that is often necessary.

• 4. TQM delegates quality to quality “experts” rather than to “real” people.

• Quality shouldn’t be delegated, but lived in the strategy of the company and roles of the managers.

• 5. TQM does not demand radical organizational reform. • Real quality improvement requires structural change (perhaps

flattened structures), and liberation of people from stifling control systems and the tyranny of functionalism which precludes teamwork.

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Creating Business Excellence• 6. TQM does not demand changes in management

compensation. • If rewarded on short-term financial gains, managers will not be

likely to attend t quality measures.• 7. TQM appeals to faddism, egotism, and quick-fixism. • Although they will not admit it, many managers have applied

for awards, like the ISO, EQA, Baldrige, for reasons of personal aggrandizement and corporate public relations, or for quick and painless profitability.

• In reality, quality requires a never ending pursuit of improvement.

• 8. TQM drains entrepreneurship and innovation from corporate culture.

• Too much emphasis on standardization and routine precludes the constant shifting needed t keep up with external changes.

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Creating Business Excellence• 9. TQM has no place for love and passion. Though this

comment seems a bit precious, • it means that the analytical, detached, and sterile

programs put in place to ensure quality are often devoid of the human emotion and soul that inspire attachment to the company by employees and to the products by customers.

• Certainly, no all TQM programs are characterized by all of these deficiencies. But many of the TQM failures suffer at least a few of these major problems.

• The underlying cause of all these TQM deficiencies is that managers failed to understand the concept of quality.

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Creating Business Excellence• Some managers define quality too narrowly as “meeting

specifications.” • Others do not define quality at all, but rely on the claim, “I

know it when I see it.”• We define quality too narrowly as “meeting specifications.”• We define quality as a principle that encourages excellence

in everything: products, strategies, systems, processes, and people.

• As you will see, there are many ways that quality can be pursued and realized.

• Some of the specific approaches that help managers realize the general principle of excellence are presented below.

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Creating Business Excellence

• To inspire purposeful change for improvement, managers must have a clear understanding of quality.

• They must understand how it relates to their roles, and how it must be integrated and connected to the organization’s strategy for providing value to customers.

• This integrated approach brings quality into the mainstream of managerial practice.

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Creating Business Excellence• Psychologists suggest that individuals go through four

stages of learning:– 1. Unconscious in competence: You don’t know that you don’t

know.– 2. Conscious incompetence: You realize that you don’t know.– 3. Conscious competence: You learn to do, but with conscious

effort.– 4. Unconscious competence: Performance comes effortlessly.

• Organizations seem to follow the same paradigm.• For organizations committed to pursuing total quality,

change is a way of life. • Organizational change is needed in implementing TQ and

constantly there after.

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Creating Business Excellence• In the initial stage, an effort must be mounted to begin to

change the culture of the organization. • Unless a culture based on customer satisfaction, continuous

improvement, and teamwork is established, TQ will belittle more than “just another one of management’s programs.”

• Indeed, this is often the cause of failure of TQ initiatives. • Once TQ is underway in an organization, continuous

improvement efforts will relentlessly create changes in product designs, standard operating procedures, and virtually every other aspect of organizations.

• One important aspect of continuous improvement is reengineering, in which the processes by which the organization operates are reexamined and redesigned to provide higher quality at lower cost.

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Elements of a Total Quality Culture

• The organizational culture needed to support TQ is one that values customers, improvement, and teamwork.

• In an organization with a TQ-friendly culture, everyone believes that customers are the key to the organization’s future and that their needed must come first.

• If two employees are having a conversation and a customer enters the shop, the conversation ends until the customer is served.

• Employees in a quality –oriented culture instinctively act as a team. If someone is away from her desk and her phone rings, another employee will answer it rather than leave a customer hanging.

• Organizations where a focus on customers, continuous improvement, and teamwork are taken for granted have a good chance of succeeding at total quality.

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Elements of a Total Quality Culture

• Most organizations do not have such a culture prior to exposure to TQ; some degree of cultural change is necessary.

• These elements, along with several others, are reflected clearly in the Baldrige, EFMD and other National Quality Program Criteria for Performance Excellence.

• The criteria are built upon a set of “core values and concepts”.– Visionary leadership,– Customer-driven excellence,– Organizational and personal learning,– Valuing employees and partners,

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Elements of a Total Quality Culture

– Agility,– Focus on the future,– Managing for innovation,– Management by fact,– Public responsibility and citizenship,– Focus on results and creating value, and systems

perspective.• These values provide a good summary of the cultural

elements necessary to sustain a total quality environment and are embedded in the beliefs and behaviors of high-performing organizations.