TOTAL QUALITY MANAGEMENT AND TOTAL ORGANIZATION EXCELLENCE:Measurement

<< OVERVIEW OF QUALITY MANAGEMENT:PROFESSIONAL MANAGERIAL ERA (1950)

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Total Quality Management MGT510

Lesson # 02

TOTAL QUALITY MANAGEMENT AND TOTAL ORGANIZATION EXCELLENCE

TRADITIONAL MANAGEMENT AND QUALITY MANAGEMENT:

Twentieth-century management has been strongly influenced by Taylor's scientific management and

Weber's theory of bureaucracy. These approaches have led managers to work within functional

hierarchies, with their responsibilities divided according to specialized activities, such as accounting,

marketing, engineering, and manufacturing. Economic principles for competing in well-defined markets

emphasized economies of scale, efficiencies, mass production, and technological innovation.

While there had been competition, competitors often played according to a "live and let live" strategy.

Because monopolies were precluded by law, companies had little incentive to completely drive

competitors from the marketplace.

Even when new product technologies created new markets, such as plastics in the 1950s, management

practices changed very little. Managers set goals for productivity, efficiency, and profitability, using

management set goals for productivity, efficiency, and profitability, using management by objectives

(MBO) to link strategy and operations through the hierarchy. Managers motivated employees to fulfill

those goals by inducements such as profit sharing, stock options, and bonuses, or other rewards such as

job enrichment or participative management. However, the job of management remained much the

same: set goals, define roles, provide technologies, and motivate employees. Accounting, marketing,

engineering, and manufacturing practices also did not change. Occasionally, new techniques were

introduced within the traditional functions, such as quality control in manufacturing. But such changes

went largely unnoticed by the rest of the organization.

No one challenged this approach to management as long as it served society well. While managers in

Japan were rewriting the rules of business practice and management and planning to win the world

markets by focusing on quality management, U.S. managers continued in the stage of normality. The

US, and western society in general, was focused on another agenda: the cold war in the 1950s and

1960s.

The Stage of Replacement: A New Paradigm

The stage of replacement means shifting to a new paradigm. Managers must shift to a new paradigm for

managing organizations because of the anomalies that threaten their survival and prosperity. To make

this shift, however, they must understand the new paradigm and how it differs from the old paradigm.

To initiate this understanding, we will contrast the new (but still emerging) paradigm with the old

paradigm.

Themes of the New Paradigm

The differences between the new and the old paradigm are organized around three themes:

customer value strategy, cross-functional systems, and continuous improvement.

Theme 1: Customer Value Strategy

Customer value is defined as the combination of benefits derived from using a product ( or service) and

the sacrifices required of the customer. The customer value strategy is the business plan for offering

value to customers, including product characteristics, attributes, mode of delivery, support services, and

so on. The theme of customer value strategy may be addressed in many topics, including quality,

measurement, positioning, key stakeholder, and product design.

Total Quality Management MGT510

Topics

Old Paradigm

New (emerging) paradigm

Quality

Meeting specifications, inspected into One component of customer value,

product, make tradeoffs among quality, managed

into

process,

seek

cost, schedule

synergies among quality, cost,

schedule.

Measurement

Internal

measures

efficiency, All measures linked to customer

productivity, costs, and profitability, not value

necessarily linked to customers

Positioning

Competition

Customer segments

Key stakeholder

Stockholder, boss

Customer segments Customer (other

stakeholders are beneficiaries)

Product design

Internal, sell what we can build

External, build what customers need

Quality

In the old paradigm, managers define quality in terms of meeting specifications. Quality is assured by

weeding out the "bad" products before they are shipped to customers. Managers make tradeoffs among

quality, cost, and scheduling under the assumption that relationships among these outcomes are fixed.

By contrast, in the new paradigm, managers recognize that product quality is only one component of

customer value, and managers seek synergies among quality, cost, and schedule, not just tradeoffs. For

example, improving quality by reducing variation in outputs reduces defects, reduces costs, and makes

performance to schedule more predictable. Further, quality is more broadly defined than just product

quality. Quality applies to every aspect of the organization. It must be managed into processes and

systems, and not jut inspected into products. System thinking included to think of all interdependent

parts of the system into one whole.

Measurement

In the old paradigm, measurement systems are focused on internal measures of efficiency, productivity,

costs, and profitability. This is the tradition of management by objectives. Managers do not necessarily

understand how these internally focused measures are related to customer value. In the new paradigm,

managers may use internally focused measures, but they are linked to customer value in a broader

measurement system. Managers interpret measures in terms of the impact on customer value in the long

term and short term.

Positioning

In the old paradigm, managers make strategic positioning decisions based primarily on warfare models

on the competition. In the new paradigm, managers make strategic positioning decisions with a focus

on market segmentation and customer needs, wants and demands.

Key Stakeholder

In the old paradigm, the key external stakeholder is the stockholder, and the key internal stakeholder is

one's boss. All other stakeholders, such as customers, employees, suppliers, and business partners, are

pawns to serve the goals of the key stakeholders. In the new paradigm, the key stakeholders are

customers, both internal and external customers. Providing value to customers is the key to serving all

other stakeholders over the long term.

Product Design

In the old paradigm, the product design process is internally driven, based on the assumption that "we

know what is bet for the customer." Managers enact a "push" strategy that aims to "sell what we can

build." In the new paradigm, managers develop products after first determining what customers need.

Total Quality Management MGT510

Managers both react to improve products in existing markets and actively seek to create new markets

with new products.

Theme 2: Organizational Systems

Organizational systems are the means that provide customer value. These systems broadly include

material and human inputs, process technology, operating methods and work practices, streams of work

activity, information flows, and decision making. The approaches to managing these systems in the old

and new paradigms are discussed below.

Topics

Old Paradigm

New (emerging) paradigm

Cross-functional

Negotiation across functional interfaces

Cross-functional systems defined,

approach

to obtain cooperation

owned, and optimized

Technology

To deal with complexity, to eliminate

To reduce complexity, source of

people problems

optimization for customer value

Employee

Focused on hygiene factors

Focused on strategic factors

involvement

Human resource

Regarded as a staff responsibility,

Regarded as a critical resource,

management

administration of personnel hiring, firing,

managed as system input

handling complaints

Role definition

Task and job descriptions set limits

Vision inspires flexibility

Culture

Social and emotional issues are

Connect with individual sense of

suppressed, politics and power dominate

purpose, emotions, and social

meaning

Structure

Specialization, tall hierarchy with

Integration, flat hierarchy with team

functional emphasis

emphasis

Cross-Functional Approach

The old paradigm does not acknowledge systems that cut across functional or unit boundaries.

Managers simply negotiate across functional interfaces to obtain minimal cooperation. In the new

paradigm, managers define, own, and optimize cross-functional systems for customer value.

Technology

In the old paradigm, managers use technology to help them deal with the overly complex systems that

have grown up in the organization. Also, they use technology to eliminate people problems (robots

don't talk back). In the new paradigm, managers prefer to eliminate complexity rather than automate it

or computerize it. Managers use technology only to optimize systems for customer value.

Employee Involvement

In the old paradigm, employee involvement programs are implemented without a focus to contribute to

systems. Employee involvement in improvement programs tends to focus on quality of work life issues

and some limited operational changes. In the new paradigm, employee involvement is strategically

focused and contributes to system purposes.

Human Resource Management

In the old paradigm, managers regard human resource management (HRM) as a staff responsibility. HR

specialists process paperwork to hire and fire, and handle personnel complaints. In the new paradigm,

line managers regard human resources as critical resources and strategically manage them as inputs to

systems.

Total Quality Management MGT510

Role Definition

In the old paradigm, managers use task and job descriptions to prescribe and set limits to personal

responsibilities. In the new paradigm, managers convey a vision to lead and inspire flexibility.

Employees participate in any activities required to provide superior value to customers.

Culture

In the old paradigm, managers suppress social and emotional issues that are regarded as irrational and

sources of distraction away from goals and objectives. Power and politics dominate the culture, with

individuals jockeying for personal gain. In the new paradigm, managers connect organizational mission

and purpose with each individual's sense of purpose, emotions, and social meaning. Individuals channel

their needs for pride in workmanship toward strategic purposes.

Structure

In the old paradigm, organizational structure is based on specialization of tasks. The hierarchy is tall,

with many levels of managers, and it emphasizes functional lines of authority. In the new paradigm, the

hierarchy is flat, with fewer levels of managers, and it emphasizes teamwork to serve super ordinate

objectives.

Theme 3: Continuous Improvement

To keep pace with the changes in the external environment, managers have to change the organization.

Managers have always made improvements. However, with rates of change increasing in the external

environment, managers must improve differently and more frequently than in the past. They must

pursue continuous improvement, which is a constant striving to change and make things better.

Topics

Old Paradigm

New (emerging paradigm

Occasion

Focused new product development,

Focused on broader systems,

episodic, reactive to problems, big

unending, proactive to opportunities,

breakthroughs only

big breakthroughs and small steps

Approach

Trial and error

Scientific method

Response to error

Punish, fear, cover-up, seek people fix,

Learning,

openness,

seek

employees are responsible

process/system fix, management is

responsible

Decision-making

Individual political expediency, short

Strategic, long-term, purposeful for

perspective

term

organization

Managerial roles

Administer and maintain status quo,

Challenge status quo, prompt

control other

strategic improvement

Authority

Top-driven via rules and policies

Customer-driven through vision,

enablement, and empowerment

Focus

Business results through quotas and

Business results through capable

targets

systems, means tied to results

Control

Scoring, reporting evaluating

Statistical study of variation to

understand causes

Means

Delegated by managers to staff and

Owned by managers who lead staff

subordinates

and subordinates

Occasion

In the old paradigm, the occasions for improvement were primarily new product development and

reaction to salient problems. Mangers mostly looked for big breakthroughs to get improvement. In the

new paradigm, the occasions for improvement are everywhere, every day. Managers improve

Total Quality Management MGT510

proactively at every opportunity, even in the absence of salient problems. Managers improve all aspects

of the organization's systems through both big breakthroughs and small steps.

Approach

In the old paradigm, managers accomplish improvements through trial and error. In the new paradigm,

managers use the scientific method to study proposed changes and their effects.

Response to Error

In the old paradigm, if they care at all, managers are intolerant of error. They regard error as a personal

failure, and they respond with punishment to instill fear in those blamed. The result is fear and cover-up

in the future. In the new paradigm, error is not desired; however, managers view error as an opportunity

for learning. People openly acknowledge error because managers do not assign personal blame, but seek

to fix a process or system.

Decision-Making Perspective

In the old paradigm, managers make decisions that are politically expedient or that serve short-term

personal objectives. In the new paradigm, managers make decisions that serve long-term strategic

purposes.

Managerial Roles

In the old paradigm, managers primarily administer existing systems and maintain the status quo. In the

new paradigm, managers challenge the status quo for strategic improvement to meet future demands. At

the same time, they consistently execute existing systems to meet current demands.

Authority

In the old paradigm, managers impose authority from the top down via rules and policies. In the new

paradigm, top managers still hold authority but they impose it by communicating a vision, enabling

people wit systems, and empowering them to make the vision real.

Focus

In the old paradigm, managers focus on improving business results through the imposition of quotas and

targets. They delegate responsibility, often without giving real authority to change broader systems that

constrain results. In the new paradigm, managers focus on improving business results through

improving the capabilities of systems. They focus on the means as well as the results, because they have

retained responsibility for improving systems.

Control

In the old paradigm, managers control the organization through scoring individual performance,

reviewing regular reports, and evaluating performance as either good or bad. In the new paradigm,

managers statistically study variation to understand the causes of poor performance and make changes

in systems to improve performance.

Means

In the old paradigm, managers delegate the means of improvement to staff and subordinates who must

figure out how t meet established targets. In the new paradigm, managers assume responsibility for the

means of improvement. They lead improvement by staff and subordinates.

Total Quality Management MGT510

The Relationship between Quality and Competitiveness

At each successive level of competition the quality of the competitors increased. A similar phenomenon

happens to businesses in the marketplace. Companies that used to compete only on a local, regional, or

national level now find themselves competing against companies from throughout the world. Some of

these companies find the competition to be more intense than any they have ever encountered. Only

those who are able to produce world-class quality can compete at this level. In practical terms, it is

extremely important for a country's businesses to be able to compete globally. When they can't, jobs are

lost and the quality of life in that country declines correspondingly.

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