Creating a Cultureof Quality

byAshwin Srinivasan and Bryan Kurey

I n most industries, quality has nevermattered more. New technologieshave empowered customers to seek

out and compare an endless array ofproducts from around the globe. Shop-pers can click to find objective data com-piled by experts at organizations suchas Consumer Reports and J.D. Poweriind go online to read user-generated re-views at sites such as Amazon; together,these sources provide an early warningsystem that alerts the public to qualityproblems. And when customers are un-happy with a product or service, theycan use social media to broadcast theirdispleasure. In surveys, 26% of consum-ers say they have used social media toair grievances about a company and itsproducts. And this issue isn't limited tothe consumer space—75% of B2B cus-tomers say they rely on word of mouth,including social media, when makingpurchase decisions.

But just as companies' margin forerror has decreased, the likelihood oferror has risen. In many industries, cy-cle times are compressing. During therecovery from the Great Recession, out-put gains have outpaced employmentgrowth, and employees report straining

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As a result of these pressures, managersmust find a new approach to quality—onethat moves beyond the traditional "totalquality management" tools of the pastquarter century. For two years CEB has con-ducted research exploring how companiescan create a culture in which employees

"live" quality in all their actions—wherethey are passionate about quality as a per-sonal value rather than simply obeyingan edict from on high. We define a "trueculture of quality" as an environment inwhich employees not only follow qualityguidelines but also consistently see otherstaking quality-focused actions, hear otherstalking about quality, and feel quality allaround them.

We interviewed the quality functionleaders at more than 60 multinational cor-porations, conducted an extensive reviewof academic and practitioner research, andsurveyed more than 850 employees in arange of functions and industries and at alllevels of seniority. Some of what we learnedsurprised us. Most notably, many of the tra-ditional strategies used to increase quality-monetary incentives, training, and sharingof best practices, for instance—have littleefFect. Instead, we found, companies thattake a grassroots, peer-driven approachdevelop a culture of quality, resulting inemployees who make fewer mistakes—emd the companies spend far less time 2indmoney correcting mistakes.

Going Beyond RulesWhat embeds quality deep in a company'sculture? And how, precisely, does an orga-nization benefit as a result? These ques-tions were at the heart of our "culture ofquality" survey.

A minority of the employees we sur-veyed believe their company has succeededin making quality a core value: Roughly 60%said they work in an environment without aculture of quality, especially when it comesto having peers who go "above and beyond."Such companies are missing out on signifi-cant benefits. Employees who ranked theircompany in the top quintile in terms ofquality reported addressing 46% fewer mis-

24 Harvard Business Review Apri l 2014

takes in their daily work than employees inbottom-quintile companies. In our surveys,employees report that it takes two hours, onaverage, to correct a mistake. Assuming anhourly wage of $42.55 (the median for CEBclient companies), a bottom-quintile firmwith 26,300 employees (the median headcount) spends nearly $774 million a yearto resolve errors, many of them prevent-able—$350 million more than a top-quintüefirm. Although figures will vary accordingto industry and company, here's a broadrule of thumb: For every 5,000 employees,moving from the bottom to the top quintilewould save a company $67 million annually.

We also studied quality-improvementactions in eight different categories andconducted regression analyses to under-stand the relationship between those ac-tions and employees' appraisals of how rig-orously their company focuses on quality.We found httle or no correlation between

A company with a highlydeveloped culture ofquality spends, on average,

$35Qless annually fixing mistakesthan a company with apoorly developed one.

the use of standard tools and the achieve-ment of a culture of quality. We are notsuggesting that companies abandon thosetools; however, they should use them tosupport rules-based quality measures, notas the underpinnings of a true culture ofquality.

We pinpointed four factors that drivequality as a cultural value: leadershipemphasis, message credibility, peer in-volvement, and employee ownership ofquality issues. Our research indicates thatcompanies could do much better with allfour. Nearly half the employees surveyedreported insufficient leadership emphasison quality, and only 10% found their com-pany's quality messages credible. Just 38%reported high levels of peer involvement,while 20% said that their company has cre-ated a sense of employee empowermentand ownership for quality outcomes.

We have identified clear actions thatcan help companies improve in each of thefour areas.

Maintaining a leadership emphasison quality. Even when executives havethe best intentions, there are often gapsbetween what they say and what they do.As a result, employees get mixed messagesabout whether quality is truly important.

Seagate, a $14 billion provider of mediastorage solutions, uses a series of leader-ship engagement mechanisms to help ex-ecutives identify inconsistencies betweentheir actions or decisions and the compa-ny's ideal culture. Company leaders beginby agreeing on what would constitute anideal culture and what behaviors wouldbe needed to achieve it. Next, the qualityand HR teams compared their definitionsof "ideal culture" with employees' obser-vations, which revealed areas for improve-ment. The leaders then attended work-shops that helped them spot behaviorsthat might be impeding their stated goal.Simulations made the lessons from theworkshop concrete and memorable.

By showing leaders the gaps betweenthe expected and the current state of theirculture, Seagate created awareness andbuy-in. "Executive participation has been

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THE FOUR ESSENTIALS OF QUALITYIn our research, we examined tools commonly used to make employees care about quality, including training, best-practices sharing,and monetary incentives. We concluded that only four attributes actually predict a culture of quality:

LeadershipEmphasis

Managers are told that qualityis a leadership priority.

Managers "walk the talk"on quality.

When evaluating employees,bosses emphasize theimportance of quality.

MessageCredibility

Messages are delivered byrespected sources.

Workers find thatcommunications appealto them personally.

Messages are consistent andeasy to understand.

PeerInvolvement

Most employees have a strongnetwork of peers for guidance.

Peers routinely raise quality asa topic for team discussion.

Like members of a sportsteam, peers hold oneanother accountable.

EmployeeOwnership

Workers clearly understandhow quality fits with the job.

Workers are empowered tomake quality decisions.

Workers are comfortable raisingconcerns about quality viola-tions and challenging directives

. that detract from quality.

the most important factor driving culturechange," a senior development executivetold us. "Leadership has shown enthu-siasm and commitment that has trickleddown through the organization." Althoughthe company does not share its data, it saysthat quality metrics have risen since theprogram began—and it expects the gainsto continue.

Ensuring message credibility. Mostcompanies energetically promote mes-sages about the importance of quality—buttheir efforts are wasted if the messages arenot believed. One company that has beensuccessful with credible messaging is thebeverage firm Diageo, whose brands in-clude Johnnie Walker, Crown Royal, andTanqueray. Confronted with the challengeof having 21,000 employees in disparate lo-cations, Diageo identified four distinct seg-ments of employees in terms of what driveshard work and created quality messagestailored to each one. It recognized thatsome workers respond best to messagesemphasizing the reduced cost and hassle ofproducing defect-free goods, for example,while others are inspired by an emphasison customer satisfaction. Local site man-agers chose the campaign they thoughtwould most appeal at their site, and thiscustomization helped the company's mes-sages resonate.

Smart leaders realize that quality mes-saging, like any campaign, needs to berefreshed over time. Managers shouldregularly test messages with their employ-ees and use the feedback to ensure sus-tained relevance.

Encouraging peer involvement. Fos-tering peer engagement is a delicate balanc-ing act. If leaders become overly involvedin orchestration, then impact and authen-ticity suffer—but if they show too little sup-port, they miss important opportunities.

One organization that has created ef-fective peer networks is HGST (formerlyHitachi Global Storage Technologies), aWestern Digital company. It uses positivesocial pressure to encourage employees togenerate quality initiatives. The companydisplays employees' ideas on posters in abusy hallway, providing a reminder thateveryone at the company should work onquality. Managers publicly evaluate em-ployees' quality-improvement projects,highlighting not only business impact butalso softer criteria, such as participant en-thusiasm. HGST also organizes friendly

"quality competitions" that capitalize oncollective pride, not simply financial re-wards, to spark ideas. "When I first joinedthe company, I was skeptical of the wholething," a quality and customer support ex-ecutive told us. "But there's a real sense ofpride in work that people have developedas a result."

Increasing employee ownershipand empowerment. One of the definingtraits of an organization with a true cultureof quality is that employees are free to ap-ply judgment to situations that fall outsidethe rules. Providing the right level of guid-iince is key. Too much stifles creativity anddiscretionary action, while too little leavesemployees unclear about their authority tomake decisions and carry them out.

Wrigley, best known for manufactur-ing chewing gum, writes "quality in action"guidelines to help employees understandthe company's expectations. It takes greatcare to apply the guidelines only to a shortbut critical list of improvement opportu-nities—the dozen or so "quality account-abilities" that each function is responsiblefor on a daily basis—and to strive for claritywhile avoiding micromanagement. In addi-tion, Wrigley creates opportunities for em-ployees to observe and recognize qualityactions that fall outside the guidelines, andit conducts group brainstorming sessionsto determine the root causes of mistakesand identify corrective actions.

The specific actions needed to help anorganization shift from a rules-based qual-ity environment to a true culture of qual-ity will differ from company to company,but the first step in the process will alwaysbe the same: Managers must decide that aculture of quality is worth pursuing. Ourresearch unambiguously demonstratesthat it is. A culture of quality requiresemployees to apply skills and make de-cisions in highly ambiguous but criticalareas while leading them toward deeperreflection about the risks and payoffs oftheir actions. In an environment wherecustomers' tolerance for quality problemsis declining, a workforce that embracesquality as a core value is a significant com-petitive advantage. 0

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Ashwin Srinivasan is a managing director,and Bryan Kurey is a senior director, at CEB.

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