QUALITY IN PROJECT MANAGEMENT:Value-Based Perspective, Customer-Driven Quality

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Project Management MGMT627

LESSON 34

QUALITY IN PROJECT MANAGEMENT

BROAD CONTENTS

What is Quality?

Quality from Different Perspective

Quality Dimensions

Competitive Advantage

Quality Evolution and Quality Stages in Japan

TQM (Total Quality Management) and Its Philosophy

34.1

WHAT IS QUALITY?

Quality is by no menus a new concept in modern business. In October 1887, William Cooper

Procter, grandson of the founder of Procter and Gamble, told his employees, "The first job we

have is to him out quality merchandise that consumers will buy and keep on buying. If we

produce it efficiently and economically, we will earn a profit, in which you will share." Procter's

statement addresses three issues t h a t are critical to managers of manufacturing and service

organizations: p r o d u c t i v i t y , cost, and quality. Productivity (the measure of efficiency defined as

the amount of output achieved per unit of input), the cost of operations, and the quality of the

goods and services t h a t create customer sa t is fa c ti o n all contribute to profitability. Of these three

determinants of p r o f i t a b i li t y , t h e most s i g n i f i c a n t factor in d e t e r m i n i n g the long-run

success or f a i l u r e of any organization is q u a l i t y . High q u a l i t y goods and services can

provide an o r g a n i z a t i o n w i t h a c o m p e t i t i v e edge. High q u a l i t y reduces costs due to

returns, rework, and scrap. It increases p r o d u c t i v i t y , p r o f i t s , a n d o t h e r measures of

success. Most i m p o r t a n t l y , h ig h q u a l i t y generates s a t i s f i e d customers, who reward the

organ i z a t i o n w i t h c o n t i n u e d patronage and word-of-mouth advertising.

Quality can be a confusing concept, p a r t l y because people view q u a l i t y in relation to

d i f f e r i n g criteria based on their i n d i v i d u a l roles in the production-marketing value

chain. In addition, the meaning of q u a l i t y continues to evolve as the quality profession

grows and matures. Neither consultants nor business professionals agree on a universal

definition. A study t h a t asked managers of 86 f i r m s in the eastern United States to define

q u a l i t y produced several dozen different responses, including the following:

Perfection

Consistency

Eliminating waste

Speed of delivery

Compliance w i t h policies and procedures

Providing a good, usable product

Doing it right the first time

Delighting or pleasing customers

Total customer service and satisfaction

Thus, it is important to understand the various perspectives from which q u a l i t y is

viewed in order to f u l l y appreciate the role it plays in the many p a i l s of a business

organization.

The concept of quality is subjective and difficult to define. While certain aspects of quality can

be identified, ultimately, the "judgement of quality" rests with the customer.

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Figure 34.1

QUALITY FROM DIFFERENT PERSPECTIVES:

34.2

· J u d g m e n t a l Perspective:

One common notion of q u a l i t y, used by consumers, is t h a t it is synonymous wit h

superiority or excellence. In 1931 Walter Shewhart f i r s t defined q u a l i t y as t h e goodness

of a product. This v i e w is referred to as the transcended (to rise above or extend notably

beyond ordinary lim its), d e f i n i t i o n of quality. In this sense, q u a l it y is "both absolute

and u n i v e r s a l l y recognizable, a mark of uncompromising standards and high

achievem e n t." As such, it cannot he defined precisely--you j u s t know it when you see

i t . It is o f t e n loosely related to a comparison of f e a t u r e s and characteristics of products

and promulgated by m a r k e t i n g e f f o r t s aimed at developing q u a l i t y as an image

v a r i a b l e in the minds of consumers. Common examples of products a t t r i b uted w i t h

t h i s image are Kolex watches and BMW and Lexus automobiles.

Product-Based Perspective:

Another definition of q u a l i t y is t h a t it is a f u n c t i o n of a specific, measurable variable and

t h a t differences in q u a l i t y reflect differences in q u a n t i t y of product a t t r i b u t e , such as

in the number of stitches per i n c h on a s h i r t or in the number of cy linders in an engine.

This assessment i m p l i e s t h a t higher levels or amounts of product characteristics are

equivalent to higher quality, As a result, quality is o f t en mistakenly assumed to be

related to price: t h e higher t h e price, the higher the quality. J u s t consider t h e case of a

F l o r i d a man who purchased a $262,000 Lamborghini o n l y to find a leaky roof, a b a t t e r y

t h a t q u i t w i t h o u t notice, a sunroof t h a t detached when the car hit a bump, and doors t h a t

jammed " However, a product refer to either a m a n u f a c t u r e d good or a service--need not

be expensive to be considered a q u a l i t y product by consumers. Also, as w i t h t he n o t io n of

excellence, the assessment of product a t t r i b u t e s may v a r y considerably among

individuals.

User-Based Perspective:

A third definition of q u a l i t y is based on the presumption t h a t q u a l i t y is determined by

what a customer wants. I n d i v i d u a l s have d i f f e r e n t wants and needs and, hence, d i f ferent

quality standards, which leads to a user-based definition: q u a l i t y is defined a s f i t n e s s f o r

intended use, or how well t h e product performs its intended function. Both a Cadillac

sedan and a Jeep Cherokee arc f i t for use, for example, but they serve different needs and

d i f f e r e n t groups of customers. If you want a highway-touring vehicle w i t h lu xu r y

amenities, then a C a di ll a c may b e t t e r s a t i s f y your needs. If you want a vehicle for

camping, fishing, or skiing trips, a Jeep might be viewed as h a v i n g better quality.

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Value-Based Perspective:

A fourth approach to d e f i n i n g q u a l i t y is based on value; t h a t is, the relationship of

usefulness or satisfaction to price. From this perspective, a q u a l i t y product is one that is

as useful as competing products and is sold at a lower price, or one that offers greater

usefulness or s a t i s f a c t i o n at a comparable p r i c e . Thus, one might purchase a generic

product, rather t h a n a brand name one, if it performs as well as the brand-name

product at a lower price. An example of t h i s perspective in practice is evident in a

comparison of t h e U.S. and Japanese a u t o m o b i l e markets. A Chrysler marketing

executive noted "one of t h e main reasons t h a t t h e l o a d i n g Japanese brands--Toyota

and Honda--don't offer t h e huge incentives of t h e big Three (General Motors, Ford,

and Chrysler) is t h a t they have a much better reput ation for long-term durability." In

essence, incentives and rebates are payments to customers lo compensate for lower

quality.

Manufacturing-Based Perspective:

A f i f t h view of q u a l i t y is manufacturing-based and d e f i n e s q u a l i t y as the desirable

outcome of engineering and m a n u f a c t u r i n g practice, or conformance to specifications.

S p e c i f i c a t i o n s are t a r g e t s and tolerances determined by designers of products and

services. Targets are t h e ideal values for w hi c h production is to strive; tolerances are

specified because designer's recognize t h a t it is impossible to meet targets a l l of the

t i m e in manufacturing. For example, a part dimension might be specified as "0.236 i

0.003 cm." These measurements would mean t h a t t h e t a r g e t , or ideal value, is 0.236

centimeters, and t h a t the allowable v a r i a t i o n is (MHB centimeters from the target (a

tolerance of 0.006 cm.). Thus, any dimension in t h e range 0.233 to 0.239 centimeters is

deemed acceptable and is said to conform lo s p e c i f i c a t i o n s . Likewise, in services,

"on-time a r r i v a l " for an a i r p l a n e might be specified as w i t h i n ' 15 minutes of th e

scheduled a r r i v a l time. The target is the scheduled time, and the tolerance is specified

to be 15 minutes.

Integrating Perspectives on Quality:

Although product q u a l i t y should be important to a ll i n d i v i d u a l s throughout the value

chain, how q u a l i t y is viewed may depend on one's p o s itio n in the v a l u e chain, that is,

whether one is t h e designer, manufacturer or s erv i ce provider, distributor, or

customer. The customer is the driving force for the production of goods and services,

and customers generally v i e w quality from either the transcendent or the product-

based perspective. The goods and services produced should meet customers' needs;

indeed, business organizations' existences depend upon meeting customer needs. It is

the rule of the marketing function to determine these needs. A product that meets

customer needs can rightly be described as a quality product. Hence, the user-based

definition of quality is meaningful to people who work in marketing.

The manufacturer must t r a n s l a t e customer requirements into detailed product and

process specifications. Making this translation is the role of research and devel-

opment, product design, and engineering. Product specifications might address such

attributes as size, form, finish, t as t e , dimensions, tolerances, materials, operational

characteristics, and s a f e t y featu res . Process specifications indicate the types of

equipment, tools, and facilities to be used in production. Product designers must

balance performance and cost to meet marketing objectives; thus, the value-based

definition of quality is most useful at this stage.

Customer-Driven Quality:

The American National Standards I n s t i t u t e ( A N SI ) and the American Society for

Quality (ASQ) standardized official definitions of q u a l i t y terminology in 1978. These

groups defined q u a l i t y as the t o t a l i t y of f e a t u r e s a n d characteristics of a product or

service t h a t bears on its a b i l i t y to sati sfy given needs. This d e f i n i ti o n draws heavily

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on t h e product- and user-based approaches and is d r i v e n by t h e need to contribute

v a l u e to customers and t h u s to influence s a t i s f a c t i o n and preference. By the end of the

1980s, many companies had begun u s i n g a s i m p l e r , yet powerful, customer-driven

d e f i n i t i o n of q u a l i t y t h a t remains popular today:

" Q u a l i t y is meeting or exceeding customer expectations"

34.3

QUALITY DIMENSIONS:

Following are the "principal quality dimensions":

· Performance a product's primary operating characteristics. For example: A car's

acceleration, braking distance, steering and handling.

· Features the "bells and whistles" of a product. A car may have power options, a tape or

CD (compact disk) player, antilock brakes, reclining seats.

· Reliability the probability of a product's surviving over a specified period of time under

stated "conditions of use". Examples of reliability factors could be a car's ability to start on

cold days and frequency of failures.

· Conformance the degree to which physical and performance characteristics of a product

match with the pre-established standards. For example, car's fit/finish, freedom from noises

can reflect this.

· Durability the amount of use one gets from a product before it physically deteriorates or

until replacement is preferable. If we take the example of a car its corrosion resistance and

long wear of upholstery fabric reflects this.

· Serviceability this refers to the speed, courtesy, competence of repair work. Auto owner

access to spare parts also comes under serviceability.

· Aesthetics refers to how a product looks, feels, sounds, tastes, or smells. Car's color,

instrument panel design and "feel of road" make it aesthetically pleasing.

· Perceived quality the "subjective assessment of quality" resulting from image. For

example: Advertising, or brand names. car, shaped by magazine reviews-manufacturers'

brochures.

· Affordability, Variety, simplicity etc. are also the principal quality dimensions.

34.4

COMPETITIVE ADVANTAGE:

When a firm sustains profits that exceed the average for its industry, the firm is said to possess a

competitive advantage over its rivals. The goal of much of business strategy is to achieve a

sustainable competitive advantage.

Michael Porter identified two basic types of competitive advantage:

· Cost advantage

· Differentiation advantage

A competitive advantage exists when the firm is able to deliver the same benefits as competitors

but at a lower cost (cost advantage), or deliver benefits that exceed those of competing products

(differentiation advantage). Thus, a competitive advantage enables the firm to create superior

value for its customers and superior profits for itself.

Cost and differentiation advantages are known as positional advantages since they describe the

firm's position in the industry as a leader in either cost or differentiation.

A resource-based view emphasizes that a firm utilizes its resources and capabilities to create a

competitive advantage that ultimately results in superior value creation.

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QUALITY EVOLUTION AND QUALITY STAGES IN JAPAN:

34.5

Figure 34.2: Quality Evolution and Quality Stages in Japan

34.6

TOTAL QUALITY MANAGEMENT (TQM) AND ITS PHILOSOPHY:

34.6.1

Quality as a Management Framework:

In the 1970s a General Electric (GE) task force studied consumer perceptions of

the quality of various GE product lines. Lines with relatively poor reputations

for quality were found to deemphasize customer's viewpoint, regard quality as

synonymous with tolerance and conformance to specifications, tic quality

objectives to manufacturing flow, express q u ali ty objectives as the number of

defects per unit, and use formal quality control systems only in manufacturing. In

contrast, product lines that received customer praise were found to emphasize

s ati s fy i n g customer expectations, determine customer needs through market

research, use customer-based quality performance measures, and have formalized

quality control systems in place for all business functions, not just for

manufacturing. The task force concluded that quality must not be viewed solely

as a technical discipline, but rather as a management discipline. That is, quality

issues permeate all aspects of business enterprise: design, marketing,

manufacturing, human resource management, supplier relations, and financial

management, to name just a few.

As companies came to recognize the broad scope of quality, the concept of total

quality (TQ) emerged. A definition of total quality was endorsee! In 1992 by the

chairs and CUOs of nine major U.S. corporations in cooperation w ith deans of

business and engineering departments of major universities, and recognized

consultants:

Total Quality (TQ) is a people-focused management system that aims at

continual increase in customer satisfaction at continually lower real cost. TQ

is a total system approach (not a separate area or program) and an integral

pan of high-level strategy; it works horizontally across functions and

departments, involves all employees, top to bottom, and extends backward and

forward to include the supply chain and the customer chain. TQ stresses

learning and adaptation to continual change as keys to organizational

success.

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The foundation of total quality is philosophical: the scientific method. TQ

includes systems, methods, and tools. The systems permit change, the

philosophy stays the same. TQ is anchored in values t h a t stress the

dignity of the individual and t h e power of community action.

Procter and Gamble uses a concise definition: Total quality is the unyielding

and continually improving effort by everyone in an organization to

understand, meet, and exceed the expectations of customers.

Actually, the concept of TQ has been around for some time. A. V. Feigenbaum

recognized the importance of a comprehensive approach to quality in the 1950s

and coined the term Total q u a l i t y control. Feigenbaum observed t ha t the

quality of products and services is directly influenced by what he terms the 9

Ms: markets, money, management, men and women, motivation, materials,

machines and mechanization, modern information methods, and mounting

product requirements. Although he developed his ideas from an engineering

perspective, his concepts apply more broadly to general management.

The Japanese adopted Feigenbaum's concept and renamed it companywide

quality control. Wayne S. Keiker listed five aspects of total quality control

practiced in Japan:

1. Quality emphasis extends through market analysis, design, and customer

service rather than only the production stages of making a product.

2. Quality emphasis is directed toward operations in every department from

executives to clerical personnel.

3. Quality is the responsibility of live individual and the work group, not

sonic other group, such as inspection.

4. The two types of q u ali t y characteristics as viewed by customers are those

that s at i sf y and those t h at motivate. Only the l a t t e r are strongly related to

repeat sales and a "quality" image.

5. The first customer for a part or piece of information is usually the next

department in the production process.

The term t o t a l q u a l i t y m a n a g e m e n t was developed by the Naval A i r Systems

Command to describe its Japanese-style approach to q u a l i t y improvement and

became popular with businesses in the United S t a t e s during the 1980s. As we

noted earlier, TQM has fallen out of favor, and many people simply use TQ.

34.6.2 Principles of Total Quality:

Whatever the language, t o t a l quality is based on three fundamental

principles:

1. A focus on customers and stakeholders.

2. Participation and teamwork by everyone in the organization.

3. A process focus supported by continuous improvement and learning.

Despite their obvious simplicity, these principles are quite different from

traditional management practices. Historically, companies did little to

understand external customer requirements, much less those of internal

customers. Managers and specialists controlled and directed production

systems; workers told what to do and how to do it, and rarely were asked for

their input. Teamwork was virtua lly nonexistent. As certain amount of waste

and error was tolerable and was controlled by postproduction inspection.

Improvements in quality generally resulted from technological breakthroughs instead

of a relentless mindset of continuous improvement. With total quality, an

organization actively seeks to identify customer needs and expectations, to build

quality into work processes by tapping the knowledge and experience of its

workforce/ and to continually improve every facet of the organization.

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Customer and Stakeholder Focus the customer is the principal judge of quality. Per-

ceptions of value and sa ti sf a c t io n are influenced by many f a c t o r s throughout the cus-

tomer's overall purchase, ownership, and service experiences. To accomplish this

task, a company's e f f o r t s need to extend well beyond merely meeting specifications,

reducing defects and errors, or resolving complaints. They must include both

designing new products t h a t tru ly delight the customer and responding rapidly to

changing consumer and market demands. A company close to its customer knows

what the customer wants, how the customer uses its products, and anticipates needs

t h a t the customer may not even be able to express. It also continually develops new

ways of enhancing customer relationships. A firm also must recognize that internal

customers are as important in assuring quality as are external customers who purchase

the product. Employees who view themselves as both

customers

and

suppliers to other employees understand how their work links to the final

product. After all, the responsibility of any supplier is to understand and meet

customer requirements in the most efficient and e f f e c t i v e way possible.

Customer focus ex te n d s beyond the consumer and internal customer relationships,

however. Employees and so ciety represent important stakeholders. An organi-

zation's success depends on the knowledge, skills, creativity, and motivation of its

employees and partners. Therefore, a TQ organization must demonstrate commit-

ment to employees, provide opportunities for development and growth, provide

recognition beyond normal compensation systems, share knowledge, and encourage

risk taking. Viewing so ciety as a stakeholder is an a t t r i b u t e of a world-class

organization. Bus-mess ethics, public health and safety, the environment, and

community and professional support are necessary a c t i v i t i e s th a t fall under social

responsibility.

Participation and Teamwork Joseph Juran credited Japanese managers' full use of the

knowledge and c r e a t i v i t y of the entire workforce as one of the reasons for Japan's

rapid quality achievements. When managers give employees the tools to make good

decisions and the freedom and encouragement to make contributions, they virtually

guarantee that b e t t e r quality products and production processes will result.

Employees who are allowed to participate--both individually and in teams--in

decisions that affect their jobs and customer can make substantial contributions to

quality. His attitude represents a profound shift in the typical philosophy of senior

management; the traditional view was that the workforce should be "managed"--or

to put it less formally, the workforce should leave their brains at the door. Good

intentions alone are not enough to encourage employee involvement. Management's

task includes formulating the systems and procedures and then putting them in place

to ensure that participation becomes a part of the culture.

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