Jun 12, 2010

Total Quality: TQM, business process reengineering and successful management

Quality is a word from which few managers can hope to escape for long these days. That's not quality meaning 'goodness, beauty, luxury, brightness or excellence' (to quote guru Philip Crosby), nor even meaning a product free from fault. Fault-free products result from true quality, though: paying unceasing attention to the continuous, measured improvement of all processes - those of service as much as manufacture - and responding fully to feedback from those being served.

Managers must lead this improvement in more senses than one: for management is a service itself. Unlike the lilies of the field, managers do toil, but they don't do much in the way of spinning. However, their toil is as susceptible to improvement as anybody else's, starting at the straightforward levels (very important in quality work) of on-time performance and responsiveness. Thus one top manager, compiling a list of personal quality criteria, included punctual arrival at meetings and answering his phone within five rings.

He asked for feedback on his quality performance from colleagues. At first, they looked at him askance. But before long, they were all using similar lists. Consequently, one day everybody arrived for a 9am meeting by 8.45. So they started there and then - and finished before the meeting had officially begun. Don't imagine that such standards are trivial. One chief executive we worked with was apparently unreachable by phone, thought nothing of arriving half-an-hour late without apology (even for meetings with outsiders present), and often paid no attention to his subordinates' proposals.

By no coincidence, that man nearly ruined the company with awful one-man decisions. He was rightly deposed. The better boss with his checklist had grasped two essential truths. First, just as athletes can raise their games, every manager can raise his or her own quality of management in ways which are instantly apparent to others: and on which others are the best source of help. Second, all quality programmes must be led from the top: personal example reinforces the initiation and follow-through on which success depends - and success has eluded all too many earnest seekers after quality.

That's partly because they haven't emulated one successful seeker, the Belgian steel-wire firm, Bekaert, which began its total quality programme, not on the shopfloor, but in the boardroom. As any honest director will tell you, many companies pay more attention to the quality of the board's lunch than to that of its processes. What's the purpose of the meetings? Is it the right purpose? Does the process enable the right purpose to be translated into effective action in the speediest, most efficient way?

Further, how is the board helping the managers to change from giving orders to 'counselling groups, providing resources for them, helping them think for themselves'. Though that's General Electric's Jack Welch speaking about the future, this is no pie in the 21st century sky. It's a precise description of the manager's role, at all levels, in quality companies with genuine quality of management. That in turn depends on listening to what everybody involved in the whole activity has to say.

Then you enlist their support - as in total quality management (TQM) and business process reengineering (BPR) - in devising and implementing better ways of getting results. James Champy blames failures in BPR, not on poor support lower down, but on 'poor alignment of management.' Three of his colleagues expand on what this means:

'The changes inherent in reengineering - the reinvention of the company around key processes like order fulfilment, for example - are so radical that they cannot happen without the cooperation of all the major functions in the company that are affected by the effort.'

Before that alignment can even be launched, however, you've got to get 'absolute agreement' from the executive team on a couple of key issues. They need a vision of how the company will operate in the future 'so powerful that it creates a competitive advantage in the marketplace.' That vision also must be 'so strong that it motivates the team to bridge the unknown gulf from the current ways of operating to the compelling new view of the business.'

The team must also be dissatisfied with the present...'The team must have the common view that the current way of doing business will weaken - perhaps even put at risk - the company's future.' The two-part necessity is no different from Geoff Cooke's formula for lifting the England XV from the slough of the Eighties to its unprecedented run of success. It hinges on involving people in efforts to achieve improvement, by asking for their help and paying attention to their concerns.

That's the essence of TQM. Companies engaged in TQM may well embrace all the other fashionable waves in management technology: especially BPR, and the closely related benchmarking, which seeks to match or excel the best standards in any other organisation for particular processes. All these approaches lead to various forms of participative management, in which the entire team tackles problems and comes up with solutions - and results.

The operative word, again, is 'results'. There have been all too many management fashions, fads and theories; but total quality differs in kind, not least in this emphasis on achievement. That's not all. Unlike, say, Management by Objectives (with which there are similarities), total quality is a philosophy, built around attending to, responding to and using the talents of individuals, alone and in teams. Unlike most philosophies, though, total quality is eminently practical.

Put like that, how can any sentient manager argue against the quality ideals? They can't: which means that opposition has to centre on the practice, and on the several TQM failures - notoriously, two American prizewinners, Florida Light & Power and Wallace, which fell flat on their TQM faces. But specific failure doesn't invalidate a management philosophy, any more than specific success validates a theory.

TQM, though, doesn't purport to be theoretical. It's a practical methodology for continuously improving all business processes. But does that include the processes which determine the future of the firm? At both the US quality flops, top management took fundamentally wrong decisions. However much every process in the business has been improved, the higher ecehelons can swamp all the gains with, say, one ill-advised 'strategic' swoop - or gross tactical error.

Thus, Business Week reports that the vacuum systems unit at Varian Associates improved on-time delivery from 42% to 92%. The pressure to meet the deadlines, though, stopped the staff from answering phone calls from customers, who retaliated by taking away market share. As it happens, failure to reply to phone calls and letters (the ultimate in inattention and unresponsiveness) is a common and especially infuriating fault of many companies which avow their dedication to quality. But that isn't the most serious form of inattention. Why wasn't customer satisfaction being properly tracked?

The same question can be asked of Federal Express, a quality prize-winner, which also put the emphasis on speed - with the result that misdirection of parcels rose as promptness improved. Each error cost a disastrous $50 to correct. At another delivery operation, United Parcels Service, the drivers were also hustled for speed, only to find that customers valued talks with the drivers more than speed, and that the harrassed fellows no longer had the time to talk.

Unless attention is properly directed, management can't know what the customer or the employee wants, or what the latter can do in response to the former's needs. Moreover, while the three companies no doubt involved employees in making the abortive changes, none of them (unlike Sir Colin Marshall at British Airways) made sure that somebody consulted the operatives about the value of the changes to the customer. Unless management quality is much higher than in these cases, the best-intentioned of quality efforts must misfire.

As noted, some leaders (not only Bekaert, but Motorola) have recognised this from the start, beginning with an exercise on the quality of the board and its working processes. Others (like Royal Mail) have included crucial areas, like how they determine strategy, later in the day. Sooner (very preferably) or later, the top must right itself, if top people sincerely want successful reform. But whether they change themselves or not, and whether they're driven by logic or customer insistence or (foolishly) fashion, many more boardrooms will be choosing some kind of quality route.

That being so, managers had better brush up their quality knowledge. They're likely to need it for the sake of their careers - and for that of the whole British economy. Poor attention to customers, employees and processes, and inadequate response to clear evidence of deficiency in all three areas, has had predictably bad consequences for economic growth. That is almost taken for granted: not one eyebrow was raised by an unpublished DTI report that found British manufacturing's management to be inferior - along with its products and productivity.

That was in 1993. But the same message has been delivered by report after report ever since the Second World War ended: even during the war, so Corelli Barnett's research has found, manufacturers were steeped in sin. Is the sin original? Does some genetic disorder in the British, their education system, their class structure or their history doom their factories to incompetent management? That theory is no more valid than the idea that English rugby teams could never beat those from the Southern hemisphere.

Our visits to several companies have uncovered managements which, by modern, intelligent and hard-working means, have improved operations to world-class standards. Some are service companies, but that doesn't affect the issue. The proportion of 'manufacturing' employees actually engaged in manufacture has fallen even faster than the share of manufacturing in the total economy. The fact remains that individual managers and firms, within the overall gloom, shine out - and would shine in any country.

A possible argument, however, is that the supply of able, attentive, responsive managers is so limited that a few lucky employers nab the best, while most companies make do with dross. That theory requires a corollary: that too much talent (of which Britain must have the normal share) gets siphoned off into other sectors. Finance and the civil service are the usual candidates. But confidence is not inspired by the City's long record of disasters - like spending £400 million on a Stock Exchange computer system that never worked, and never could.

As for the civil servants, the summit of their profession is the Treasury, which can't escape its share of blame for the national under-performance. The mandarins, true, can fairly blame the politicians - which leaves hardly any sectors where the brightest and best can claim the brightest and best results. In sport, though, you rapidly learn that making excuses and blaming others doesn't win matches. The same is true in economics. What distinguishes the world-class, right-stuff Britons is that their companies are pointed in the right direction.

That will have been achieved by successful leaders who, both inside and outside the organisation, have asked, listened and taken action. There's no other way of developing the correct ends and means, of developing focused, motivated and productive people who agree to the ends and have mastered the means. If the players/managers either don't know what's expected of them, or disagree with the demands, or can't cope with those demands, the side/company will be defeated.

In business, if the whole organisation is heading fast down the wrong lane of the motorway - a bank over-lending to property companies, say, or a government defending sterling at DM2.95 - nobody's reputation will survive the crash. The trouble is that, much too often, crashes appear to be required before organisations alter course: just as so often its only humiliation that spurs sportsmen to mend their losing ways. For instance, Rolls-Royce Motors in 1993 pushed through a praiseworthy drive to modernise its methods and reduce its costs - but only under the spur of horrendous losses that had nigh crippled its parent, Vickers.

The actions that had become desperately essential were always desirable. Why weren't they desired - and done? The answer is that, with sales topping 3,000 lush Rollers annually, as they once did lush profits also rolled in. But what if the reform programme had been executed during those good times? With the breakeven point forced down to the present much lower levels, Rolls-Royce would have generated the cash to finance what was equally essential for long-term survival: new model development.

British products and productivity have fallen behind, not because managers were unable to keep them ahead, but because they weren't asked to do so by 'the company'. But what's the company? Other, more senior managers. It's far better for them to be embarrassed into changing direction by impertinent juniors than by incontinent losses. Pay attention to those actually doing the work, and you will invariably find that major savings are possible.

James Champy cites an insurance company which took 24 days to issue a standard policy. The actual process needed between 10 and 30 minutes. The delay arose because 13 to 14 HQ departments took a hand in the transaction. Another set of departments in the field also got involved. And overlaying functions were required simply to find out where the policy had got to in its meandering journey around the organisation. Had their heads been put (or knocked) together, everyone involved would surely have perceived the system's total nonsense

Total quality argues that, once inefficiency has been spotted, it must be eliminated. In most companies that doesn't always happen, of course. Departmental bosses can dig their heels in and protest that nothing in the defective process can be changed without endangering the whole company. In fact, that's what's at stake - the whole company. Such horrors don't happen in isolation. They are symptoms of systemic failure and have to be treated as such. Tracing the problem back, TQM-style, to root causes will surely unveil a counter-productive culture of checking and double-checking, overmanning and over-regulation, bureaucracy and form-filling.

Champy won't countenance any of that: 'There should be only three levels of hierarchy in a reengineered organisation.' At the top are the enterprise managers. Below them are the people/process managers, who control the rest - all of them 'self-managers'. There may also be 'expertise managers' responsible for specific areas, mostly to do with technology of all kinds. In other words, the reengineer seeks to install an organisational form radically different from any that's likely to exist - we recently worked in one insurance company, for example, which had 15 levels of hierarchy.

But where does reengineering stop? What if the standard insurance policy is an inferior product? What if the range of policies being offered is too narrow - or too broad? What if the whole sales operation is geared to maximising turnover and commissions, rather than to fundamental values? The last question is especially painful for British insurers, which in their rush to grab personal pension business notoriously unleashed armies of ill-trained ruffians who misled the customers. The result has been, not only acute embarrassment, but heavy fines and the very real threat of huge compensation payments.

If strategies are misplaced, the company will fall into the trap of doing the wrong thing for the wrong purpose: even if that's done in the right way, little good will result. That's what happens to companies, to use a Champy phrase, which are not 'living in the future.' The greatest danger of even the best reengineering is that managers will concentrate so hard and so proudly on the present operations which they're changing so radically that they will succumb to management's biggest weakness: living in the present, and sometimes in the past,

To break away from that mind-set, though, requires no less a sea-change in attitudes than TQM. The criticism and professed disillusion with both TQM and BPR really stem from reluctance to undertake top-to-toe revision of the corporate being. Without question, the analytical skills and executive ability needed to manage British firms to world-class standards exist in quantity. By the same token, there was seldom any shortage of top-class players in the long doldrums of English Rugby. If the quality doesn't match the quantity, it's because leaders haven't got the best from the highly capable and usually experienced people around them. Being truly attentive and responsive to other managers (and to everybody else in the business system) is the essence of interaction and the precondition of top management's own success.

Source: www.thinkingmanagers.com

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