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Chapter 1Chapter 1

Introduction to Quality and Performance Excellence

Defining Quality

Perfection

ConsistencyEliminating waste

Fast delivery

Compliance with policies and procedures

Providing a good, usable product

Doing it right the first time

Delighting or pleasing customers

Total customer service and satisfaction

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Formal Definitions of QualityFormal Definitions of Quality

• The totality of features and characteristics of a product or service that bears on its ability to satisfy given needs – American Society for Quality – Fitness for use– Meeting or exceeding customer

expectations– Conformance to specifications

Performance Excellence

• An integrated approach to organizational performance management that results in – delivery of ever-improving value to

customers and stakeholders, contributing to organizational sustainability,

– improvement of overall organizational effectiveness and capabilities, and

– organizational and personal learning.

Importance of Quality

• THE buzzword among business in the 1980s and 1990s

• Quality problems still abound in many industries, such as automotive

• Consumer expectations are high• “We’ve made dependence on the quality of

our technology a part of life” – Joseph Juran

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History of Quality Assurance (1 of 3)

History of Quality Assurance (1 of 3)

• Skilled craftsmanship during Middle Ages

• Industrial Revolution: rise of inspection and separate quality departments

• Early 20th Century: statistical methods at Bell System

• Quality control during World War II

• Post-war Japan: evolution of quality management

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History of Quality Assurance (2 of 3)

History of Quality Assurance (2 of 3)

• Quality awareness in U.S. manufacturing industry during 1980s: from “Little Q” to “Big Q” - Total Quality Management

• Malcolm Baldrige National Quality Award (1987)

• Disappointments and criticism

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History of Quality Assurance (3 of 3)

History of Quality Assurance (3 of 3)

• Emergence of quality management in service industries, government, health care, and education

• Evolution of Six Sigma

• Current and future challenge: maintain commitment to performance excellence

Quality Dimensions in Manufacturing

• Performance – primary operating characteristics

• Features – “bells and whistles”

• Reliability – probability of operating for specific time and conditions of use

• Conformance – degree to which characteristics match standards

• Durability - amount of use before deterioration or replacement

• Serviceability – speed, courtesy, and competence of repair

• Aesthetics – look, feel, sound, taste, smell

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Quality Dimensions in Services

• Time – how much time must a customer wait?• Timeliness – will a service be performed when

promised?• Completeness – Are all items in the order included?• Courtesy – do frontline employees greet each

customer cheerfully?• Consistency – are services delivered in the same

fashion for every customer, and every time for the same customer?

• Accessibility and convenience – is the service easy to obtain?

Differences Between Manufacturing and Services

• Customer needs and performance standards are often difficult to identify and measure

• The production of services typically requires a higher degree of customization

• The output of many service systems is intangible• Services are produced and consumed simultaneously• Customers often are involved in the service process and

present while it is being performed• Services are generally labor intensive• Many service organizations must handle very large

numbers of customer transactions.

New Frontiers of Quality

• Health care

• Education

• Government

• Not-for-Profits

Deming Philosophy

The Deming philosophy focuses on continual improvements in product and service quality by reducing uncertainty and variability in design, manufacturing, and service processes, driven by the leadership of top management.

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Deming Chain Reaction

Improve quality

Costs decrease

Productivity improves

Increase market share with better quality and lower prices

Stay in business

Provide jobs and more jobs

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Deming’s System of Profound Knowledge

• Appreciation for a system

• Understanding variation

• Theory of knowledge

• Psychology

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Systems

• Most organizational processes are cross-functional

• Parts of a system must work together

• Every system must have a purpose

• Management must optimize the system as a whole

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Variation

• Many sources of uncontrollable variation exist in any process

• Excessive variation results in product failures, unhappy customers, and unnecessary costs

• Statistical methods can be used to identify and quantify variation to help understand it and lead to improvements

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Theory of Knowledge

• Knowledge is not possible without theory

• Experience alone does not establish a theory, it only describes

• Theory shows cause-and-effect relationships that can be used for prediction

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Psychology

• People are motivated intrinsically and extrinsically; intrinsic motivation is the most powerful

• Fear is demotivating

• Managers should develop pride and joy in work

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Deming’s 14 Points (Abridged) (1 of 2)

1. Create and publish a company mission statement and commit to it.2. Learn the new philosophy.3. Understand the purpose of inspection.4. End business practices driven by price alone.5. Constantly improve system of production and service.6. Institute training.7. Teach and institute leadership.8. Drive out fear and create trust.

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Deming’s 14 Points (2 of 2)

9. Optimize team and individual efforts.10. Eliminate exhortations for work force.11. Eliminate numerical quotas and M.B.O. Focus on improvement.12. Remove barriers that rob people of pride of workmanship.13. Encourage education and self-improvement.14. Take action to accomplish the transformation.

www.deming.org

Juran Philosophy

Juran proposed a simple definition of quality: “fitness for use.” This definition of quality suggests that it should be viewed from both external and internal perspectives; that is, quality is related to “(1) product performance that results in customer satisfaction; (2) freedom from product deficiencies, which avoids customer dissatisfaction.”

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Juran’s Quality Trilogy

• Quality planning

• Quality control

• Quality improvement

www.juran.com

Crosby Philosophy

Quality is free . . . “Quality is free. It’s not a gift, but it is free. What costs money are the unquality things -- all the actions that involve not doing jobs right the first time.”

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Crosby’s Absolutes of Quality Management

• Quality means conformance to requirements

• Problems are functional in nature

• There is no optimum level of defects

• Cost of quality is the only useful measurement

• Zero defects is the only performance standard

www.philipcrosby.com

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Principles of Total Quality

• Customer and stakeholder focus• Process orientation• Continuous improvement and learning• Employee engagement and teamwork• Management by fact• Visionary leadership and a strategic

orientation

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Customer and Stakeholder Focus

• Customer is principal judge of quality

• Organizations must first understand customers’ needs and expectations in order to meet and exceed them

• Organizations must build relationships with customers

• Customers are internal and external

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Process Orientation

• A process is a sequence of activities that is intended to achieve some result

Cross-functional Perspective

Continuous Improvement and Learning

• Incremental and breakthrough improvement– Products and services– Work processes– Flexibility, responsiveness, and cycle time

• Learning – why changes are successful through feedback between practices and results

Learning Cycle

1. Planning

2. Execution of plans

3. Assessment of progress

4. Revision of plans based upon assessment findings

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Employee Engagement and Teamwork

• Engagement – workers have a strong emotional bond to their organization, are actively involved in and committed to their work, feel that their jobs are important, know that their opinions and ideas have value, and often go beyond their immediate responsibilities for the good of the organization

• Teamwork must exist vertically, horizontally, and interorganizationally

Management by Fact

• Organizations need good performance measures to drive strategies and change, manage resources, and continuously improve

• Data and information support analysis at all levels

• Typical measures: customer, product and service, market, competitive comparisons, supplier, employee, cost and financial

Visionary Leadership and a Strategic Orientation

• Leadership is the responsibility of top management

• Senior leaders should be role models for the entire organization

• Leaders must make long-term commitments to key stakeholders

• Quality should drive strategic plans

TQ and Agency Theory

• Agency relationship: a concept in which one party (the principal) engages another party (the agent) to perform work

• Key assumption: individuals in agency relationships are utility maximizers and will always take actions to enhance their self-interests.

Contrast With TQ (1 OF 2)

• TQ views the management system as one based on social and human values, whereas agency theory is based on an economic perspective that removes people from the equation.

• Agency theory propounds the belief that people are self-interested and opportunistic and that their rights are conditional and proportional to the value they add to the organization. TQ suggests that people are also motivated by interests other than self, and that people have an innate right to be respected.

Contrast With TQ (2 OF 2)

• Agency theory assumes an inherent conflict of goals between agents and principals, and that agent goals are aligned with principal goals through formal contracts. In TQ, everyone in the organization shares common goals and a continuous improvement philosophy, and goals are aligned through adoption of TQ practices and culture.

• TQ takes a long-term perspective based on continuous improvement, whereas agency theory focuses on short-term achievement of the contract between the principal and agent.

• TQ leaders provide a quality vision and play a strategic role in the organization; leaders in agency theory develop control mechanisms and engage in monitoring.

TQ and Organizational Models

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Chapter 2Chapter 2

Frameworks for Organizational Quality

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Malcolm Baldrige National Quality Award

• Help improve quality in U.S. companies

• Recognize achievements of excellent firms and provide examples to others

• Establish criteria for evaluating quality efforts

• Provide guidance for other American companies

Malcolm Baldrige, former U.S. Secretary

of Commerce

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Criteria for Performance Excellence

• Leadership• Strategic Planning • Customer and Market Focus • Measurement, Analysis, and

Knowledge Management• Human Resource Focus • Process Management• Business Results

Baldrige Award trophy

The Baldrige Framework –A Systems Perspective

4Measurement, Analysis, and Knowledge Management

5Human

Resource Focus

3Customer &

Market Focus

7Business Results

7Business Results

2Strategic Planning

1Leadership

6Process

Management

Organizational Profile:

Environment, Relationships, and Challenges

Baldrige Web Site

• Links to award recipients and application summaries

• Updated criteria versions

• CEO issue sheets

• Other information

www.baldrige.org

Receive Applications

Judges Select for Consensus Review?

Judges Select forSite Visit Review?

Stage 1Independent Review

Stage 2Consensus Review

Stage 3Site Visit Review

Stage 4Judges Recommend Award

Recipients to NIST Director/DOC

Feedback report to applicant

Feedback report to applicant

Feedback report to applicant

No

No

Baldrige Award Evaluation Process

Scoring and Evaluation

• Approach

• Deployment

• Results

Approach

• Appropriateness of methods• Effectiveness of use of the methods.

Degree to which the approach is – Repeatable, integrated, and consistently applied– Embodies evaluation/improvement/learning

cycles– Based on reliable information and data

• Alignment with organizational needs• Evidence of innovation

Deployment

• Extent to which the approach is applied to all appropriate work units

Results

• Current performance• Performance relative to appropriate

comparisons and benchmarks• Rate, breadth, and importance of

performance improvements• Linkage of results measures to key

customer, market, process, and action plan performance requirements

Criteria Evolution (1 of 2)

• From quality assurance and strategic quality planning to a focus on process management and overall strategic planning

• From a focus on current customers to a focus on current and future customers and markets

• From human resource utilization to human resource development and management

• From supplier quality to supplier partnerships• From individual quality improvement activities

to cycles of evaluation and improvement in all key areas

Criteria Evolution (2 of 2)

• From individual quality improvement activities to cycles of evaluation and improvement in all key areas

• From data analysis of quality efforts to an aggregate, integrated organizational level review of key company data

• From results that focus on limited financial performance to a focus on a composite of business results, including customer satisfaction and financial, product, service, and strategic performance

• From organizational achievement to organizational sustainability

Self Assessment

AA primary goal of the Baldrige primary goal of the Baldrige program is to encourage many program is to encourage many organizations to improve on their organizations to improve on their own by equipping them with a own by equipping them with a standard template for measuring standard template for measuring their performance and their progresstheir performance and their progress toward performance excellence.toward performance excellence.

Boeing Airlift & Tanker Programs – 1998 winner

International Quality Award Programs

• Deming Prize

• European Quality Award

• Canadian Awards for Business Excellence

• Australian Business Excellence Award

• Chinese National Quality Award

• Many others!

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Deming Prize

• Instituted 1951 by Union of Japanese Scientists and Engineers (JUSE)

• Several categories including prizes for individuals, factories, small companies, and Deming application prize

• American company winners include Florida Power & Light and AT&T Power Systems Division

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ISO 9000:2000

• Quality system standards adopted by International Organization for Standardization in 1987; revised in 1994 and 2000

• Technical specifications and criteria to be used as rules, guidelines, or definitions of characteristics to ensure that materials, products, processes, and services are fit for their purpose.

Rationale for ISO 9000

• ISO 9000 defines quality system standards, based on the premise that certain generic characteristics of management practices can be standardized, and that a well-designed, well-implemented, and carefully managed quality system provides confidence that the out-puts will meet customer expectations and requirements.

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Objectives of ISO Standards (1 of 2)

• Achieve, maintain, and continuously improve product quality

• Improve quality of operations to continually meet customers’ and stakeholders’ needs

• Provide confidence to internal management and other employees that quality requirements are being fulfilled

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Objectives of ISO Standards (2 of 2)

• Provide confidence to customers and other stakeholders that quality requirements are being achieved

• Provide confidence that quality system requirements are fulfilled

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Structure of ISO 9000 Standards

• 21 elements organized into four major sections:– Management Responsibility– Resource Management– Product Realization– Measurement, Analysis, and Iimprovement

ISO 9000:2000 Quality Management Principles

1. Customer Focus

2. Leadership

3. Involvement of People

4. Process Approach

5. System Approach to Management

6. Continual Improvement

7. Factual Approach to Decision Making

8. Mutually Beneficial Supplier Relationships

Six Sigma• Six Sigma – a business improvement approach

that seeks to find and eliminate causes of defects and errors in manufacturing and service processes by focusing on outputs that are critical to customers and a clear financial return for the organization.

• Based on a statistical measure that equates to 3.4 or fewer errors or defects per million opportunities

• Pioneered by Motorola in the mid-1980s and popularized by the success of General Electric

Key Concepts of Six Sigma (1 of 2)

• Think in terms of key business processes, customer requirements, and overall strategic objectives.

• Focus on corporate sponsors responsible for championing projects, support team activities, help to overcome resistance to change, and obtaining resources.

• Emphasize such quantifiable measures as defects per million opportunities (dpmo) that can be applied to all parts of an organization

Key Concepts of Six Sigma (2 of 2)

• Ensure that appropriate metrics are identified early and focus on business results, thereby providing incentives and accountability.

• Provide extensive training followed by project team deployment

• Create highly qualified process improvement experts (“green belts,” “black belts,” and “master black belts”) who can apply improvement tools and lead teams.

• Set stretch objectives for improvement.

Six Sigma as a Quality Framework (1 of 2)

• TQ is based largely on worker empowerment and teams; Six Sigma is owned by business leader champions.

• TQ activities generally occur within a function, process, or individual workplace; Six Sigma projects are truly cross-functional.

Six Sigma as a Quality Framework (2 of 2)

• TQ training is generally limited to simple improvement tools and concepts; Six Sigma focuses on a more rigorous and advanced set of statistical methods and a structured problem-solving methodology DMAIC—define, measure, analyze, improve, and control.

• TQ is focused on improvement with little financial accountability; Six Sigma requires a verifiable return on investment and focus on the bottom line.

Transactional Six Sigma

• Applications in service organizations• Issues:

– The culture of services is usually less scientific and service employees typically do not think in terms of processes, measurements, and data. The processes are often invisible, complex, and not well defined or well documented.

– The work typically requires considerable human intervention, such as customer interaction, underwriting or approval decisions, or manual report generation.

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Chapter 3Chapter 3

Performance Excellence, Competitive Advantage, and

Strategic Management

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Competitive AdvantageCompetitive Advantage

• Competitive advantage: a firm’s ability to achieve market superiority over its competitors.

• Characteristics: – Is driven by customer wants and needs– Makes significant contribution to business success– Matches organization’s unique resources with

opportunities– Is durable and lasting– Provides basis for further improvement– Provides direction and motivation

Product Quality and Business Performance - PIMS Studies

• Product quality is the most important determinant of business profitability.

• Businesses offering premium quality products and services usually have large market shares and were early entrants into their markets.

• Quality is positively and significantly related to a higher return on investment for almost all kinds of products and market situations.

• A strategy of quality improvement usually leads to increased market share but at a cost in terms of reduced short-run profitability.

• High-quality producers can usually charge premium prices.

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Quality and ProfitabilityQuality and Profitability

Improved quality of design

Higher perceived value

Increased market share

Higher prices

Increased revenues

Improved quality of conformance

Lower manufacturing and

service costs

Higher profitability

Quality and Business Results Studies

• General Accounting Office study of Baldrige Award applicants

• Hendricks and Singhal study of quality award winners

• Performance results of Baldrige Award winners

GAO Study Model

Sources of Competitive Advantage

• Cost Leadership

• Differentiation

• People

Quality and Differentiation Strategies

• Superior product and service design

• Outstanding service

• High agility

• Continuous innovation

• Rapid response

Quality and Product Design

• Understanding customer needs and expectations

• Systematic processes for design and product improvement

• Tools and techniques– Concurrent engineering– Value analysis– Design reviews– Experimental design

Quality and Outstanding Service

• Key components of service quality: employees and information technology

• Dimensions of service quality– Reliability – ability to provide what was promised– Assurance – knowledge and courtesy of

employees and ability to convey trust– Tangibles – physical facilities and appearance of

personnel– Empathy – degree of caring and individual

attention– Responsiveness – willingness to help customers

and provide prompt service

Quality and Agility

• Agility – capacity for flexibility and rapid change– Continual monitoring and sensing of

changing customer needs and expectations– Fast design changes– Rapid roll out of new products and

processes– Cross-functional cooperation and

coordination– Good supplier relations

Quality and Innovation

• Innovation is vital to competing in today’s world

• Innovation creates new customer needs and expectations and leads to higher levels of performance

• Creativity and breakthrough thinking are encouraged

Quality and Time

• Cycle time – the time it takes to accomplish one cycle of a process

• Success in today’s markets requires increasingly shorter cycle times

• Major improvements in response time often require work organizations, processes, and paths to be simplified and shortened. Simplified processes reduce opportunities for errors, leading to improved quality.

• Improvements in response time often result from increased understanding of internal customer-supplier relationships and teamwork.

Information and Knowledge for Competitive Advantage

• A supply of consistent, accurate, and timely data across all functional areas of business provides real-time information for the evaluation, control, and improvement of processes, products, and services to meet both business objectives and rapidly changing customer needs.

Need for Performance Measurement

• To lead the entire organization in a particular direction; that is, to drive strategies and organizational change;

• to manage the resources needed to travel in this direction by evaluating the effectiveness of action plans; and

• to operate the processes that make the organization work and continuously improve

Balanced Scorecard

1. Financial perspective

2. Internal perspective

3. Customer perspective

4. Innovation and learning perspective

Leading measures Leading measures Lagging Lagging measuresmeasures

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Baldrige Classification of Performance Measures

• Product and service outcomes• Customer-focused outcomes• Financial and market outcomes• Human resource outcomes• Organizational effectiveness outcomes• Leadership and social responsibility

outcomes

Strategic Planning

• Strategy – the pattern of decisions that determines and reveals a company’s goals, policies, and plans to meet the needs of its stakeholders

• Strategic planning – the process by which members of an organization envision its future and develop the necessary procedures and operations to carry out that vision

Goals of Strategic Planning

• Plan for the long term, and understand the key influences, risks, challenges, and other requirements that might affect the organization’s future opportunities and directions.

• Project the future competitive environment to help detect and reduce competitive threats, shorten reaction time, and identify opportunities.

• Develop action plans and deploy resources—particularly human resources—to achieve alignment and consistency, and provide a basis for setting and communicating priorities for ongoing improvement activities.

• Ensure that deployment will be effective—that a measurement system enables tracking of action plan achievement in all areas.

Strategic Planning Process

Mission

• Definition of products and services, markets, customer needs, and distinctive competencies

• Example - Procter & Gamble: “We will provide products of superior quality and value that improve the lives of world consumers.”

Vision

• Where the organization is headed and what it intends to be– Brief and memorable - grab attention– Inspiring and challenging - creates excitement– Descriptive of an ideal state - provides guidance– Appealing to all stakeholders - employees can

identify with

• Example – Solectron: “Be the best and continuously improve”

Values (Guiding Principles)

• Define attitudes and policies for all employees, which are reinforced through conscious and subconscious behavior at all levels of the organization.

• Example – Federal express: “We will be helpful, courteous, and professional to each other an the public. We will strive to have a completely satisfied customer at the end of each transaction.”

Environmental Assessment

• Customer and market requirements, expectations, and opportunities

• Technological and other innovations• Organizational strengths and weaknesses• Financial, societal, ethical, regulatory and

other potential risks• Changes in global or national economy• Factors unique to the organization, such as

partner and supply chain needs

Strategies and Action Plans

• Strategies are broad statements that set the direction for the organization to take in realizing its mission and vision.

• Strategic objectives are what an organization must change or improve to remain or become competitive.

• Action plans are things that an organization must do to achieve its strategic objectives.

Strategy Implementation

• Developing detailed action plans, defining resource requirements and performance measures, and aligning work unit, supplier, or partner plans with overall strategic objectives.

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Policy Deployment (Hoshin Kanri)

Policy Deployment (Hoshin Kanri)

• Top management vision leading to long-term objectives

• Deployment through annual objectives and action plans

• Negotiation for short-term objectives and resources (catchball)

• Periodic reviews

Hoshin Planning

Linking Human Resource Plans and Business Strategy

• Changes in strategy often require changes in HR plans

• Examples– Redesign of the work organization to increase

empowerment or teamwork– Changes in labor/management partnerships– Directed training and education– Improved processes for knowledge sharing

Illustrative Example

Requirements for Effective Strategic Planning

• A definable approach for developing company strategy.

• A clear company strategy with action plans derived from it, and human resource plans related to the action plans.

• An approach for implementing action plans.• An approach for monitoring company

performance relative to the strategic plan.• Projections of strategy-related changes in key

indicators of company performance.

Case Studies

• Bronson Methodist Hospital

• Branch-Smith Printing Division

• Solectron

TQ and Strategic Management Theory

• Classic strategy formulation addresses the market environment, competitive environment, and company capabilities

• Other TQ-related factors – financial and societal risk, human resource capabilities, and supplier/partner capabilities – are addressed only indirectly in the literature

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Chapter 4Chapter 4

Quality in Customer-Supplier Relationships

The Value of Customers

• “The only value your company will ever create is the value that comes from customers—the ones you have now and the ones you will have in the future. Businesses succeed by getting, keeping, and growing customers. Customers are the only reason you build factories, hire employees, schedule meetings, lay fiber-optic lines, or engage in any business activity. Without customers, you don’t have a business.” – Don Peppers and Martha Rogers

Deming’s Emphasis on Customers

The Customer-Supplier Chain

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Business Case for Customer Focus

• “Satisfaction is an attitude; loyalty is a behavior”• Loyal customers spend more, are willing to pay

higher prices, refer new clients, and are less costly to do business with.

• It costs five times more to find a new customer than to keep an existing one happy.

• A firm cannot create loyal customers without first creating satisfied customers.

The Importance of Suppliers

• Quality of the supply chain affects the quality that customers receive

• “Superior quality, consistent service, and competitive pricing are just the price of entry to get into the game.”

• Suppliers must continually improve and align their operations with customer needs.

Principles for Customer-Supplier Relationships

• Recognition of the strategic importance of customers and suppliers

• Development of win-win relationships between customers and suppliers

• Establishing relationships based on trust

Practices for Dealing With Customers

• Collect information constantly on customer expectations

• Disseminate this information widely within the organization

• Use this information to design, produce, and deliver the organization’s products and services.

• Manage customer relationships• Exploit CRM technology• Don’t ignore internal customers

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Collect Customer Information

• Comment cards and formal surveys

• Focus groups

• Direct customer contact

• Field intelligence

• Complaint analysis

• Internet monitoring

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Understand Customer Needs – the Kano Model

• Dissatisfiers: expected requirements

• Satisfiers: expressed requirements

• Exciters/delighters: unexpected features

Disseminate Customer Information

• Share information with employees• Provide data to product designers and

service managers

Use Customer Information

Manage Customer Relationships

• Develop close relationships• Provide convenient access to information and to

employees• Train customer contact employees• Develop good service standards• Deal with complaints• Exploit CRM technology• Don’t ignore internal customers

Moments of Truth

• Every instance in which a customer comes in contact with an employee of the company.

• Example (airline)– Making a reservation– Purchasing tickets– Checking baggage– Boarding a flight– Ordering a beverage– Requests a magazine– Deplanes– Picks up baggage

Exploit CRM Technology (1 of 2)

• Segmenting markets based on demographic and behavioral characteristics.

• Tracking sales trends and advertising effectiveness by customer and market segment.

• Identifying and eliminated non-value-adding products that would waste resources as well as those products that better meet customers’ needs and provide increased value.

• Identifying which customers should be the focus of targeted marketing initiatives with predicted high customer response rates.

Exploit CRM Technology (2 of 2)

• Forecasting customer retention (and defection) rates and providing feedback as to why customers leave a company.

• Studying which goods and services are purchased together, leading to good ways to bundle them.

• Studying and predicting which Web characteristics are most attractive to customers and how the Web site might be improved.

• Streamlining processes around customers rather than traditional functions, resulting in improved flow of information and cycle times.

Guiding Principles in Supplier Relationships

• Recognizing the strategic importance of suppliers in accomplishing business objectives, particularly minimizing the total cost of ownership,

• Developing win-win relationships through partnerships rather than as adversaries, and

• Establishing trust through openness and honesty, thus leading to mutual advantages.

Practices for Dealing With Suppliers

• Base purchasing decisions on quality as well as cost

• Reduce the number of suppliers• Establish long-term contracts• Measure and certify supplier performance• Develop cooperative relationships and

strategic alliances

Relationships to Organization Theory

• Roles for customers– Resource– Worker (or coworker)– Buyer– Beneficiary (or user)– Outcome or product of value-creating transformation

activities

• Resource dependence perspective• Integrative bargaining

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Chapter 5Chapter 5

Designing Organizations for Performance Excellence

Factors Affecting Work Organization

• Company and organizational guidelines• Management style• Customer influences• Company size• Diversity and complexity of product line• Stability of the product line• Financial stability• Availability of personnel

Functional Structure

Problems With the Functional Structure

• Separates employees from customers

• Inhibits process improvement

• Functional organizations often have a separate function for quality

Redesigning Organizations for Performance Excellence

• Focus on processes• Make quality everyone’s job• Recognize internal customers• Create a team-based organization• Reduce hierarchy• Use steering committees• Develop an agile organization• Redesign work systems

Types of Processes

• Value-creation processes – those most important to “running the business”– Design processes – activities that develop

functional product specifications– Production/delivery processes – those

that create or deliver products

• Support processes – those most important to an organization’s value creation processes, employees, and daily operations

Example of Process Focus: Gold Star Chili

Make Quality Everyone’s Job

• Recognize that all jobs involve “managing quality”

• Eliminate the quality department – Example: Texas Nameplate Company

Recognize Internal Customers

• “Chains of customers” concept

• Process mapping to identify internal customer-supplier relationships

• Create links between internal customers and external suppliers

Create a Team-Based Organization

Six Sigma Project Teams

• Champions – senior managers who promote Six Sigma

• Master Black Belts – highly trained experts responsible for strategy, training, mentoring, deployment, and results.

• Black Belts – Experts who perform technical analyses

• Green Belts – functional employees trained in introductory Six Sigma tools

• Team Members – Employees who support specific projects

Reduce Hierarchy

• Eliminate layers of middle management

• Empower frontline workers

• Benefits include improved communication

• Risks include impact on morale and loss of valuable experience

Steering Committees

Develop Agile Organizations

• Faster reaction to competitive challenges and changing customer demands

• Simplification of work processes and rapid changeovers

Redesign Work Systems for High Performance

Job descriptions

Employee Involvement

Suggestion systems

Empowerment

Training and Education Teamwork and

Cooperation

Compensation and recognition

Health and safety

Flexibility

Innovation

Knowledge and skill sharing

Organizational alignment

Customer focus

Rapid response

Enhancing Work Design

• Job enlargement – expanding workers’ jobs

• Job rotation – having workers learn several tasks and rotate among them

• Job enrichment – granting more authority, responsibility, and autonomy

Case Studies

• Boeing Airlift and Tanker Programs

• VA Hospitals

• Solar Turbines, Inc.

• General Electric Bayamon

• The San Diego Zoo

Comparisons to Organizational Theory

• Structural Contingency Theory– Mechanistic vs. organic– Choice depends on organizational

environment and technology

• Institutional Theory– Structure legitimizes purpose, even if they

may not provide value– ISO 9000 and Six Sigma

136

Chapter 6Chapter 6

Designing, Controlling, and Improving Organizational

Processes

Process Management

• Planning and administering the activities necessary to achieve a high level of performance in key business processes, and identifying opportunities for improving quality and operational performance, and ultimately, customer satisfaction.

AT&T Process Management Principles

• Process quality improvement focuses on the end-to-end process.

• The mind-set of quality is one of prevention and continuous improvement.

• Everyone manages a process at some level and is simultaneously a customer and a supplier.

• Customer needs drive process quality improvement.• Corrective action focuses on removing the root cause of

the problem rather than on treating its symptoms.• Process simplification reduces opportunities for errors and

rework.• Process quality improvement results from a disciplined and

structured application of the quality management principles

Process Design: Motorola Approach

1. Identify the product or service: What work do I do?2. Identify the customer: Who is the work for?3. Identify the supplier: What do I need and from

whom do I get it?4. Identify the process: What steps or tasks are

performed? What are the inputs and outputs for each step?

5. Mistake-proof the process: How can I eliminate or simplify tasks? What “poka-yoke” (i.e., mistake-proofing) devices (see Chapter 13) can I use?

6. Develop measurements and controls, and improvement goals: How do I evaluate the process? How can I improve further?

Design for Agility

• Close customer relationships

• Empower employees

• Use effective technology

• Maintain close supplier and partner relationships

• Breakthrough improvement

Service Processes

• Outputs not as well defined as in manufacturing

• Higher interaction with customers

Service Process Design

• Three basic design components:– Physical facilities, processes and procedures– Employee behavior– Employee professional judgment

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Key Service DimensionsKey Service Dimensions

Customer contact and interaction

Labor intensity

Customization

Process Control

• Control – the activity of ensuring conformance to requirements and taking corrective action when necessary to correct problems and maintain stable performance

Components of Process Control Systems

• Any control system has three components:

1. a standard or goal,

2. a means of measuring accomplishment, and

3. comparison of actual results with the standard, along with feedback to form the basis for corrective action.

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Control vs. ImprovementControl vs. Improvement

Kaizen

• Kaizen – a Japanese word that means gradual and orderly continuous improvement

• Focus on small, gradual, and frequent improvements over the long term with minimum financial investment, and participation by everyone in the organization.

Importance of Process Improvement

• Customer loyalty is driven by delivered value.• Delivered value is created by business

processes.• Sustained success in competitive markets

requires a business to continuously improve delivered value.

• To continuously improve value creation ability, a business must continuously improve its value creation processes.

Structured Problem Solving

• Redefine and analyze problems

• Generate ideas

• Evaluate ideas and select a solution

• Implement the solution

Eastman Chemical Improvement Process

• Focus and pinpoint• Communicate• Translate and link• Create a management action plan• Improve processes• Measure progress and provide

feedback• Reinforce behaviors and celebrate

results

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The Deming Cycle

Plan (1 of 2)

1. Define the process: its start, end, and what it does.

2. Describe the process: list the key tasks performed and sequence of steps, people involved, equipment used, environmental conditions, work methods, and materials used.

3. Describe the players: external and internal customers and suppliers, and process operators.

4. Define customer expectations: what the customer wants, when, and where, for both external and internal customers.

5. Determine what historical data are available on process performance, or what data need to be collected to better understand the process.

Plan (2 of 2)

6. Describe the perceived problems associated with the process; for instance, failure to meet customer expectations, excessive variation, long cycle times, and so on.

7. Identify the primary causes of the problems and their impacts on process performance.

8. Develop potential changes or solutions to the process, and evaluate how these changes or solutions will address the primary causes.

9. Select the most promising solution(s).

Do

1. Conduct a pilot study or experiment to test the impact of the potential solution(s).

2. Identify measures to understand how any changes or solutions are successful in addressing the perceived problems.

Study

1. Examine the results of the pilot study or experiment.

2. Determine whether process performance has improved.

3. Identify further experimentation that may be necessary.

Act

1. Select the best change or solution.2. Develop an implementation plan: what needs to

be done, who should be involved, and when the plan should be accomplished.

3. Standardize the solution, for example, by writing new standard operating procedures.

4. Establish a process to monitor and control process performance.

DMAIC Methodology

1. Define

2. Measure

3. Analyze

4. Improve

5. Control

Define

• Describe the problem in operational terms

• Drill down to a specific problem statement (project scoping)

• Identify customers and CTQs, performance metrics, and cost/revenue implications

Measure

• Key data collection questions– What questions are we trying to answer?– What type of data will we need to answer the

question?– Where can we find the data?– Who can provide the data?– How can we collect the data with minimum

effort and with minimum chance of error?

Analyze

• Focus on why defects, errors, or excessive variation occur

• Seek the root cause

• 5-Why technique

• Experimentation and verification

Improve

• Idea generation

• Brainstorming

• Evaluation and selection

• Implementation planning

Control

• Maintain improvements

• Standard operating procedures

• Training

• Checklist or reviews

• Statistical process control charts

Lean Production and Six Sigma

• The 5S’s: seiri (sort), seiton (set in order), seiso (shine), seiketsu (standardize), and shitsuke (sustain).

• Visual controls• Efficient layout and standardized work• Pull production• Single minute exchange of dies (SMED)• Total productive maintenance• Source inspection• Continuous improvement

Breakthrough Improvement

• Discontinuous change resulting from innovative and creative thinking, motivated by stretch goals, and facilitated by benchmarking and reengineering

Benchmarking

• Benchmarking – “the search of industry best practices that lead to superior performance.”

• Best practices – approaches that produce exceptional results, are usually innovative in terms of the use of technology or human resources, and are recognized by customers or industry experts.

Types of Benchmarking

• Competitive benchmarking - studying products, processes, or business performance of competitors in the same industry to compare pricing, technical quality, features, and other quality or performance characteristics of products and services.

• Process benchmarking – focus on key work processes

• Strategic benchmarking – focus on how companies compete and strategies that lead to competitive advantage

Benchmarking Process

1. Determine what to benchmark

2. Identify key performance indicators to measure

3. Identify the best-in-class companies

4. Measure the performance of best-in-class and compare to your own performance

5. Define and take actions to meet or exceed the best performance

Reengineering

• Reengineering – the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed.

The Key Role of Process

Principles of Process Redesign

• Reduce handoffs

• Eliminate steps

• Perform steps in parallel rather than in sequence

• Involve key people early

Organizational Issues

• Resistance to change

• Top management support

• Diversity of human resources

• Methodological rigor

• Payoffs and benefits

Case Studies

• Chugach School District

• Froedtert Hospital

• The Walt Disney Company

• General Electric

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Chapter 7Chapter 7

Tools and Techniques for Performance Excellence

Tools for Quality Design

• Quality Function Deployment

• Concept engineering

• Design failure modes and effects analysis (DFMEA)

Quality Function Deployment

• A process of translating customer requirements into technical requirements during product development and production. QFD benefits companies through improved communication and teamwork between all constituencies in the value chain, such as between marketing and design, between design and manufacturing, and between purchasing and suppliers

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House of Quality

Technical requirements

Voice of the customer

Relationship matrix

Technical requirement priorities

Customerrequirement priorities

Competitive evaluation

Interrelationships

Building the House of Quality

1. Identify customer requirements.2. Identify technical requirements.3. Relate the customer requirements to the

technical requirements.4. Conduct an evaluation of competing products or

services.5. Evaluate technical requirements and develop

targets.6. Determine which technical requirements to

deploy in the remainder of the production/delivery process.

Example

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Quality Function Deployment Process

technicalrequirements

componentcharacteristics

processoperations quality plan

Concept Engineering

• Understanding the customer’s environment.

• Converting understanding into requirements.

• Operationalizing what has been learned.• Concept generation.• Concept selection.

DFMEA

• Design failure mode and effects analysis (DFMEA) – identification of all the ways in which a failure can occur, to estimate the effect and seriousness of the failure, and to recommend corrective design actions.

DFMEA Specifications

• Failure modes

• Effect of failures on customers

• Severity, likelihood of occurrence, and detection rating

• Potential causes of failure

• Corrective actions or controls

Tools for Quality Planning

• The Seven Management and Planning Tools

Affinity Diagram

Interrelationship Digraph

Tree Diagram

Other Planning Tools

• Matrix diagrams

• Matrix data analysis

• Process decision program chart

• Arrow diagrams

Process Decision Program Chart

Tools for Process Analysis

1. Flowcharts2. Check sheets3. Histograms4. Cause-and-effect diagrams5. Pareto diagrams6. Scatter diagrams7. Control charts

Flowcharts

• A flowchart or process map identifies the sequence of activities or the flow of materials and information in a process. Flowcharts help the people involved in the process understand it much better and more objectively by providing a picture of the steps needed to accomplish a task.

Benefits of Flowcharts

• Shows unexpected complexity, problem areas, redundancy, unnecessary loops, and where simplification may be possible

• Compares and contrasts actual versus ideal flow of a process

• Allows a team to reach agreement on process steps and identify activities that may impact performance

• Serves as a training tool

Check Sheets

• Check sheets are special types of data collection forms in which the results may be interpreted on the form directly without additional processing.

Benefits of Check Sheets

• Creates easy-to-understand data

• Builds, with each observation, a clearer picture of the facts

• Forces agreement on the definition of each condition or event of interest

• Makes patterns in the data become obvious quickly

xx xxxxxx x

Histograms

• Histograms provide clues about the characteristics of the parent population from which a sample is taken. Patterns that would be difficult to see in an ordinary table of numbers become apparent.

Benefits of Histograms

• Displays large amounts of data that are difficult to interpret in tabular form

• Shows centering, variation, and shape• Illustrates the underlying distribution of the data• Provides useful information for predicting future

performance• Helps to answer “Is the process capable of

meeting requirements?

Pareto Diagrams

• A Pareto distribution is one in which the characteristics observed are ordered from largest frequency to smallest. A Pareto diagram is a histogram of the data from the largest frequency to the smallest.

Benefits of Pareto Diagrams

• Helps a team focus on causes that have the greatest impact

• Displays the relative importance of problems in a simple visual format

• Helps prevent “shifting the problem” where the solution removes some causes but worsens others

Cause-and-Effect Diagrams

• A cause-and-effect diagram is a simple graphical method for presenting a chain of causes and effects and for sorting out causes and organizing relationships between variables.

Benefits of Cause and Effect Diagrams

• Enables a team to focus on the content of a problem, not on the history of the problem or differing personal interests of team members

• Creates a snapshot of collective knowledge and consensus of a team; builds support for solutions

• Focuses the team on causes, not symptoms

Effect

Cause

Scatter Diagrams

• A scatter diagram is a plot of the relationship between two numerical variables.

Benefits of Scatter Diagrams

• Supplies the data to confirm a hypothesis that two variables are related

• Provides both a visual and statistical means to test the strength of a relationship

• Provides a good follow-up to cause and effect diagrams

* * ** * *

Control Charts

• Control charts show the performance and the variation of a process or some quality or productivity indicator over time in a graphical fashion that is easy to understand and interpret. They also identify process changes and trends over time and show the effects of corrective actions.

Benefits of Control Charts

• Monitors performance of one or more processes over time to detect trends, shifts, or cycles

• Distinguishes special from common causes of variation

• Allows a team to compare performance before and after implementation of a solution to measure its impact

• Focuses attention on truly vital changes in the process

* * * * *

* *

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Poka-Yoke (Mistake-Proofing)

• An approach for mistake-proofing processes using automatic devices or methods to avoid simple human or machine error, such as forgetfulness, misunderstanding, errors in identification, lack of experience, absentmindedness, delays, or malfunctions

Three Levels of Mistake-Proofing

• Design potential errors out of the product or process – Eliminates any possibility that the error or defect might occur

• Identify potential defects and stopping a process before the defect is produced – Requires time to stop a process and take corrective action.

• Find defects that enter or leave a process – Eliminates wasted resources that would add value to nonconforming work, but clearly results in scrap or rework.

Common Poka-Yoke Examples (from John Grout’s Poka-Yoke Web Page)

Kaizen Blitz

• A kaizen blitz is an intense and rapid improvement process in which a team or a department throws all its resources into an improvement project over a short time period, as opposed to traditional kaizen applications, which are performed on a part-time basis.

Creativity and Innovation

• Creativity – the ability to discover useful new relationships and ideas

• Innovation – practical implementation of creative ideas

Fostering Creativity

• Remove or reduce obstacles to creativity.• Match jobs to individuals’ creative abilities.• Tolerate failures and establish direction.• Improve motivation to increase productivity and solve

problems creatively.• Enhance the self-esteem and build the confidence of

organization members.• Improve communication so that ideas can be better

shared.• Place highly creative people in special jobs and

provide training to take advantage of their creativity.

Statistical Thinking

• All work occurs in a system of interconnected processes

• Variation exists in all processes

• Understanding and reducing variation are the keys to success

211

Wisdom from Texas Instruments

“Unless you change the process, why would you expect the results to change”

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Statistical Process Control (SPC)

• A methodology for monitoring a process to identify special causes of variation and signal the need to take corrective action when appropriate

• SPC relies on control charts

Control Chart Example

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Chapter 8Chapter 8

Quality Teamwork

215

Teams

• Team - a small number of people with complementary skills who are committed to a common purpose, set of performance goals, and approach for which they hold themselves mutually accountable

216

Types of Teams

• Leadership teams

• Problem solving teams (departmental or cross-functional)

• Natural work teams

• Self managed teams

• Virtual teams

• Project teams

Leadership Teams

• Steering committees

• Quality councils

• Executive leadership teams

Problem-Solving Teams

• Corrective action teams

• Quality circles– Typically composed of workers at lower levels

of the organization

Natural Work Teams

• Organized to perform a complete unit of work

• Extensive cross-training and sharing of responsibilities

• Job rotation

Self-Managed Teams

• Also known as self-directed teams or autonomous work groups

• Have broad responsibilities, including the responsibility to manage themselves

• Generally more productive than conventional teams

Virtual Teams

• Groups of people who work closely together despite being geographically separated

• Use technology to share information

• Importance because of globalization, knowledge work, and need for diverse skills

Six Sigma Project Teams

• Champions – senior managers who promote Six Sigma

• Master Black Belts – highly trained experts responsible for strategy, training, mentoring, deployment, and results.

• Black Belts – Experts who perform technical analyses

• Green Belts – functional employees trained in introductory Six Sigma tools

• Team Members – Employees who support specific projects

Cross-Functional Teamwork

• Common in leadership teams, virtual teams, and project teams

• Useful for process improvement and for implementing large-scale organizational changes

Team Effectiveness Criteria

• Teams must achieve their goals

• Teams should make progress quickly

• Teams must maintain or increase their strength as units

• Teams must preserve or strengthen their relationships with the rest of the organization

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Ingredients for Successful Teams (1 of 2 )

• Clarity in team goals

• Improvement plan

• Clearly defined roles

• Clear communication

• Beneficial team behaviors

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Ingredients for Successful Teams (2 of 2)

• Well-defined decision procedures

• Balanced participation

• Established ground rules

• Awareness of group process

• Use of scientific approach

Reasons for Team Participation

• Have a say in decisions that affect work• Enhance promotion or job opportunities• Learn more information• Enhance feeling of accomplishment• Address personal agendas• Want to genuinely help the organization• Enjoy recognition and rewards associated with

team activity• Be in a comfortable social environment

Team Processes

• Problem Selection

• Problem Diagnosis

• Work Allocation

• Communication

• Coordination

• Organizational Support

Boeing A&T Team Development Process

Teams and Organizational Behavior Theories

• Sociotechnical systems approach

• Organizational development (OD)

• Homogeneous and heterogeneous groups

• Cultural values and support/resistance

• Diversity

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Chapter 9Chapter 9

Engagement, Empowerment, and Motivation

Employee Engagement

• Strong emotional bond to their organization• Are actively involved in and committed to their

work• Feel that their jobs are important, know that their

opinions and ideas have value• Often go beyond their immediate job

responsibilities for the good of the organization

How Engagement Leads to Quality

Advantages of Employee Engagement

• Replaces the adversarial mentality with trust and cooperation

• Develops the skills and leadership capability of individuals, creating a sense of mission and fostering trust

• Increases employee morale and commitment to the organization

• Fosters creativity and innovation, the source of competitive advantage

• Helps people understand quality principles and instills these principles into the corporate culture

• Allows employees to solve problems at the source immediately

• Improves quality and productivity

Employee Involvement

• Any activity by which employees participate in work-related decisions and improvement activities, with the objectives of tapping the creative energies of all employees and improving their motivation.

Empowerment

• Empowerment – giving people authority to do whatever is necessary to satisfy customers, and trusting employees to make the right choices without waiting for management approval.

“A sincere belief and trust in people.”

Examples of Empowerment

• Managing work as individuals or teams

• Making traditional “managerial” business decisions

• Going outside of job descriptions to help customers

• Taking risks for the good of the organization even at a short-term cost

Management Action Needed for Empowerment

1. Identify and change organizational conditions that make people powerless, and

2. increase people’s confidence that their efforts to accomplish something important will be successful.

Theoretical Basis for Empowerment

• Customer satisfaction is correlated to employee satisfaction

• Employee attitudes correlate strongly to higher profits

• Empowerment leads to improved motivation and morale, as well as better quality, productivity, and speed of decision making

Principles of Empowerment

• Empower sincerely and completely

• Establish mutual trust

• Provide employees with business information

• Ensure that employees are capable

• Don’t ignore middle management

• Change the reward system

Case Studies

• DynMcDermott Petroleum Operations Company

• The Ritz-Carlton Hotel Company, L.L.C.

• Los Alamos National Bank

Reasons for Failure of Empowerment

• Management support and commitment is nonexistent or not sustained.

• Empowerment is used as a manipulative tool to ensure employees complete tasks and assignments without giving them any real responsibility or authority.

• Managers use empowerment to abdicate responsibility or task accountability, accepting accolades for successes and assigning fault to others for failure.

• Empowerment is deployed selectively, segmenting the workforce into those who are empowered and those who are not.

• Empowerment is used as an excuse to not invest in training or employee development.

• Managers fail to provide feedback and do not recognize achievements.

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Successful Empowerment

• Provide education, resources, and encouragement

• Remove restrictive policies/procedures• Foster an atmosphere of trust• Share information freely• Make work valuable• Train managers in “hands-off” leadership• Train employees in allowed latitude

Motivation

• Motivation - an individual’s response to a felt need

• Views– Extrinsic– Intrinsic

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Compensation

• Effect on motivation

• Merit versus capability/performance based plans

• Gainsharing

Recognition and Rewards

• Monetary or non-monetary

• Formal or informal

• Individual or group

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Effective Recognition and Reward Strategies

• Give both individual and team awards

• Involve everyone

• Tie rewards to quality

• Allow peers and customers to nominate and recognize superior performance

• Publicize extensively

• Make recognition fun

Work Environment

• Quality of working life

• Ancillary services

Engagement and Theories of Motivation

• Job Characteristics Theory

• Acquired Needs Theory

• Goal-Setting Theory

Hackman-Oldham Model

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Chapter 10Chapter 10

Leadership for Performance Excellence

Importance of Leadership

• Deming’s 14 Points

• Driver of performance excellence in the Baldrige Award criteria

Leadership – Some Perspectives

• vision that stimulates hope and mission that transforms hope into reality;

• radical servanthood that saturates the organization;• stewardship that shepherds its resources;• integration that drives its economy;• the courage to sacrifice personal or team goals for the

greater community good;• communication that coordinates its efforts;• consensus that drives unity of purpose;• empowerment that grants permission to make mistakes,

encourages the honesty to admit them, and gives the opportunity to learn from them;

• conviction that provides the stamina to continually strive toward business excellence

Executive Leadership

• Defining and communicating business directions• Ensuring that goals and expectations are met• Reviewing business performance and taking

appropriate action• Creating an enjoyable work environment• Soliciting input and feedback from customers• Ensuring that employees are effective contributors• Motivating, inspiring, and energizing employees• Recognizing employee contributions• Providing honest feedback

Roles of a Quality Leader

• Establish a vision

• Live the values

• Lead continuous improvement

Case Studies

• Branch-Smith Printing Division

• SSM Health Care

Leadership Theory – Mintzberg’s Model

• Interpersonal roles– Figurehead– Leader– Liaison

• Informational roles– Monitor– Disseminator– Spokesperson

• Decisional roles– Entrepreneur– Disturbance handler– Resource allocator– negotiator

Consideration and Initiating Structure

• Consideration (also known as socioemotional orientation) – taking care of subordinates, explaining things to them, being approachable, and generally being concerned about their welfare.

• Initiating structure (also known as task orientation) means getting people organized, including setting goals and instituting and enforcing deadlines and standard operating procedures.

Transformational Leadership Theory

• Inspirational motivation — providing followers with a sense of meaning and challenge in their work;

• Intellectual stimulation — encouraging followers to question assumptions, explore new ideas and methods, and adopt new perspectives;

• Idealized influence — behaviors that followers strive to emulate or mirror;

• Individualized consideration — special attention to each follower’s needs for achievement and growth.

Situational Leadership

• Leadership styles might vary from one person to another, depending on their “readiness,” which is characterized by their skills and abilities to perform the work, and their confidence, commitment, and motivation to do it.

• Levels of readiness– 1. Unable and unwilling– 2. Unable but willing– 3. Able but unwilling, and– 4. Able and willing

Complementary Leadership Styles

• Directing

• Coaching

• Supporting

• Delegating

262

Chapter 11Chapter 11

Performance Excellence and Organizational

Change

Organizational Change Realities

Organizations contemplating change must answer some tough questions, such as, Why is the change necessary? What will it do to my organization (department, job)? What problems will I encounter in making the change? and perhaps the most important one — What’s in it for me?

Strategic vs. Process Change

• Strategic change is broad in scope and stems from strategic objectives, which are generally externally focused and relate to significant customer, market, product/service, or technological opportunities and challenges.

• Process change is narrow in scope and deals with the operations of an organization. An accumulation of continuously improving process changes can lead to a positive and sustainable culture change.

Strategic vs. Process Change

Cultural Change

• Culture – the set of beliefs and values shared by the people in an organization.

• Cultural values often seen in mission and vision statements

• Firms pursuing TQ often need cultural change

Elements of a Performance Excellence Culture

• Visionary leadership • Customer Driven• Organizational and

personal learning• Valuing employees

and partners• Agility

• Focus on the future• Managing for

innovation • Management by fact• Social responsibility• Focus on results and

creating value• Systems perspective

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Why Adopt a Performance Excellence Philosophy?

• Reaction to competitive threat to profitable survival

• An opportunity to improve

Requirements for Building and Sustaining Performance Excellence• Readiness for change

• Sound practices and implementation strategies

• Effective organization

Perspectives on Cultural Change

• Change can be accomplished, but it is difficult• Imposed change will be resisted• Full cooperation, commitment, and participation

by all levels of management is essential• Change takes time• You might not get positive results at first• Change might go in unintended directions

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People Roles in Organizational Change

• Senior management

• Middle management

• Workforce

Transforming Middle Managers to Change Agents

• Empower

• Create a common vision of excellence

• Create new organizational rules

• Implement continuous improvement

• Develop and retain peak performers

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Common Mistakes in Implementation (1 of 3)

• Change is regarded as a short-term “program”• Compelling results are not obtained quickly• Process not driven by focus on customer,

connection to strategic business issues, and support from senior management

• Structural elements block change• Goals set too low• “Command and control” organizational culture

274

Common Mistakes in Implementation (2 of 3)

• Training not properly addressed• Focus on products, not processes• Little real empowerment is given• Organization too successful and complacent• Organization fails to address fundamental

questions• Senior management not personally and

visibly committed

275

Common Mistakes in Implementation (3 of 3)

• Overemphasis on teams for cross-functional problems

• Employees operate under belief that more data are always desirable

• Management fails to recognize that quality improvement is personal responsibility

• Organization does not see itself as collection of interrelated processes

Building on Best Practices

• Universal best practices– Cycle time analysis

– Process value analysis

– Process simplification

– Strategic planning

– Formal supplier certification programs

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Best Practices: Infrastructure Design (1 of 3)

• Low performers– process management fundamentals– customer response– training and teamwork– benchmarking competitors– cost reduction– rewards for teamwork and quality

278

Best Practices: Infrastructure Design (2 of 3)

• Medium performers– use customer input and market

research– select suppliers by quality– flexibility and cycle time reduction– compensation tied to quality and

teamwork

279

Best Practices: Infrastructure Design (3 of 3)

• High performers– self-managed and cross-functional

teams– strategic partnerships– benchmarking world-class companies– senior management compensation tied

to quality– rapid response

Quality Engines of Baldrige Winners

Self Assessment: Basic Elements

• Management involvement and leadership• Product and process design• Product control• Customer and supplier communications• Quality improvement• Employee participation• Education and training• Quality information

Importance of Follow-Up of Self-Assessment Results

• Many organizations derive little benefit from conducting self-assessment and achieve few of the process improvements suggested by self-study

• Reasons:– Managers do not sense a problem– Managers react negatively or by denial– Managers don’t know what to do with the information

Leveraging Self-Assessment Findings

• Prepare to be humbled

• Talk through the findings

• Recognize institutional influences

• Grind out the follow-up

Knowledge Management

• The process of identifying, capturing, organizing, and using knowledge assets to create and sustain competitive advantage.

• Knowledge assets refer to the accumulated intellectual resources that an organization possesses, including information, ideas, learning, understanding, memory, insights, cognitive and technical skills, and capabilities.

Types of Knowledge

• Explicit knowledge includes information stored in documents or other forms of media.

• Tacit knowledge is information that is formed around intangible factors resulting from an individual’s experience, and is personal and content-specific.

Organizational Learning

• Create a “learning organization”– Planning– Execution of plans– Assessment of progress– Revision of plans based on assessment

findings

Key Activities of Learning Organizations

• Systematic problem solving• Experimentation with new approaches• Learning from their own experiences and

history• Learning from the experiences and best

practices of others• Transferring knowledge quickly and

efficiently throughout the organization

Internal Benchmarking

• The ability to identify and transfer best practices within the organization

• Process: – Identify and collect internal knowledge and

best practices– Share and understand those practices– Adapt and apply them to new situations and

bringing them up to best-practice performance levels.

Organizational Change for Six Sigma

• Committed leadership• Integration with existing initiatives, business

strategy, and performance measurement• Process thinking• Disciplined customer and market intelligence

gathering• A bottom line orientation• Leadership in the trenches• Training• Continuous reinforcement and rewards

Organizational Change, Learning, and Organizational Theory

• Reason for change– Traditional: productivity or job satisfaction– TQ: customer satisfaction

• Source of change– Both: top management

• Types of change– Traditional: limited in scope and duration– TQ: continuous improvement over a long period of

time

Principles for Managing Change

• Unfreeze attitudes and behavior

• Have effective leadership

• Manage interdependence

• Involve the people

• Refreeze to make gains permanent