Businesses that have implemented a total quality management strategy have subsequently recorded impressive growth, improved efficiency and increased profit margins
There are few boardrooms in the world whose inhabitants don’t salivate at the thought of engaging in a little aggressive expansion. After all, there’s little room in a contemporary, fast-paced business environment for any firm whose leaders don’t subscribe to ambitions of bigger factories, healthier accounts and stronger turnarounds. Yet too often such tales of excess go hand-in-hand with complaints of a severe drop in quality.
Food and entertainment markets are riddled with cautionary tales, but service sectors such as health and education aren’t immune to the disappointing by-products of unsustainable growth either. As always, the first steps in avoiding a catastrophic forsaking of quality begins with good management.
There are plenty of methods and models geared at managing the quality of a particular company’s goods or services. Yet very few of those models take into consideration the widely held belief that any company is only as strong as its weakest link. With that in mind, management consultant William Deming developed an entirely new set of methods with which to address quality.
Deming, whose managerial work revolutionised the titanic Japanese manufacturing industry, perceived quality management to be more of a philosophy than anything else. Top-to-bottom improvement, he reckoned, required uninterrupted participation of all key employees and stakeholders. Thus, the total quality management (TQM) approach was born.
Similar to the Six Sigma improvement process, TQM ensures long-term success by enforcing all-encompassing internal guidelines and process standards to reduce errors. By way of serious, in-depth auditing – as well as some well-orchestrated soul-searching – TQM ensures firms meet stakeholder needs and expectations efficiently and effectively, without forsaking ethical values.
By opting to reframe the way employees think about the company’s goals and processes, TQM allows CEOs to make sure certain things are done right from day one. According to Teresa Whitacre, of international consulting firm ASQ, proper quality management also boosts a company’s profitability.
“Total quality management allows the company to look at their management system as a whole entity — not just an output of the quality department,” she says. “Total quality means the organisation looks at all inputs, human resources, engineering, production, service, distribution, sales, finance, all functions, and their impact on the quality of all products or services of the organisation. TQM can improve a company’s processes and bottom line.”
Embracing the entire process sees companies strive to improve in several core areas, including: customer focus, total employee involvement, process-centred thinking, systematic approaches, good communication and leadership and integrated systems. Yet Whitacre is quick to point out that companies stand to gain very little from TQM unless they’re willing to go all-in.
“Companies need to consider the inputs of each department and determine which inputs relate to its governance system. Then, the company needs to look at the same inputs and determine if those inputs are yielding the desired results,” she says. “For example, ISO 9001 requires management reviews occur at least annually. Aside from minimum standard requirements, the company is free to review what they feel is best for them. While implementing TQM, they can add to their management review the most critical metrics for their business, such as customer complaints, returns, cost of products, and more.”
The customer knows best: AtlantiCare
TQM isn’t an easy management strategy to introduce into a business; in fact, many attempts tend to fall flat. More often than not, it’s because firms maintain natural barriers to full involvement. Middle managers, for example, tend to complain their authority is being challenged when boots on the ground are encouraged to speak up in the early stages of TQM. Yet in a culture of constant quality enhancement, the views of any given workforce are invaluable.
AtlantiCare in numbers
Profits before quality improvement strategy was implemented
Profits after quality improvement strategy
One firm that’s proven the merit of TQM is New Jersey-based healthcare provider AtlantiCare. Managing 5,000 employees at 25 locations, AtlantiCare is a serious business that’s boasted a respectable turnaround for nearly two decades. Yet in order to increase that margin further still, managers wanted to implement improvements across the board. Because patient satisfaction is the single-most important aspect of the healthcare industry, engaging in a renewed campaign of TQM proved a natural fit. The firm chose to adopt a ‘plan-do-check-act’ cycle, revealing gaps in staff communication – which subsequently meant longer patient waiting times and more complaints. To tackle this, managers explored a sideways method of internal communications. Instead of information trickling down from top-to-bottom, all of the company’s employees were given freedom to provide vital feedback at each and every level.
AtlantiCare decided to ensure all new employees understood this quality culture from the onset. At orientation, staff now receive a crash course in the company’s performance excellence framework – a management system that organises the firm’s processes into five key areas: quality, customer service, people and workplace, growth and financial performance. As employees rise through the ranks, this emphasis on improvement follows, so managers can operate within the company’s tight-loose-tight process management style.
After creating benchmark goals for employees to achieve at all levels – including better engagement at the point of delivery, increasing clinical communication and identifying and prioritising service opportunities – AtlantiCare was able to thrive. The number of repeat customers at the firm tripled, and its market share hit a six-year high. Profits unsurprisingly followed. The firm’s revenues shot up from $280m to $650m after implementing the quality improvement strategies, and the number of patients being serviced dwarfed state numbers.
Hitting the right notes: Santa Cruz Guitar Co
For companies further removed from the long-term satisfaction of customers, it’s easier to let quality control slide. Yet there are plenty of ways in which growing manufacturers can pursue both quality and sales volumes simultaneously. Artisan instrument makers the Santa Cruz Guitar Co (SCGC) prove a salient example. Although the California-based company is still a small-scale manufacturing operation, SCGC has grown in recent years from a basement operation to a serious business.
SCGC in numbers
Craftsmen employed by SCGC
Custom guitars produced each year
Owner Dan Roberts now employs 14 expert craftsmen, who create over 800 custom guitars each year. In order to ensure the continued quality of his instruments, Roberts has created an environment that improves with each sale. To keep things efficient (as TQM must), the shop floor is divided into six workstations in which guitars are partially assembled and then moved to the next station. Each bench is manned by a senior craftsman, and no guitar leaves that builder’s station until he is 100 percent happy with its quality. This product quality is akin to a traditional assembly line; however, unlike a traditional, top-to-bottom factory, Roberts is intimately involved in all phases of instrument construction.
Utilising this doting method of quality management, it’s difficult to see how customers wouldn’t be satisfied with the artists’ work. Yet even if there were issues, Roberts and other senior management also spend much of their days personally answering web queries about the instruments. According to the managers, customers tend to be pleasantly surprised to find the company’s senior leaders are the ones answering their technical questions and concerns. While Roberts has no intentions of taking his manufacturing company to industrial heights, the quality of his instruments and high levels of customer satisfaction speak for themselves; the company currently boasts one lengthy backlog of orders.
A quality education: Ramaiah Institute of Management Studies
Although it may appear easier to find success with TQM at a boutique-sized endeavour, the philosophy’s principles hold true in virtually every sector. Educational institutions, for example, have utilised quality management in much the same way – albeit to tackle decidedly different problems.
The global financial crisis hit higher education harder than many might have expected, and nowhere have the odds stacked higher than in India. The nation plays home to one of the world’s fastest-growing markets for business education. Yet over recent years, the relevance of business education in India has come into question. A report by one recruiter recently asserted just one in four Indian MBAs were adequately prepared for the business world.
RIMS in numbers
Increase in test scores post total quality management strategy
Increase in number of recruiters hiring from the school
Increase in the salary offered to graduates
Rise in placement revenue
At the Ramaiah Institute of Management Studies (RIMS) in Bangalore, recruiters and accreditation bodies specifically called into question the quality of students’ educations. Although the relatively small school has always struggled to compete with India’s renowned Xavier Labour Research Institute, the faculty finally began to notice clear hindrances in the success of graduates. The RIMS board decided it was time for a serious reassessment of quality management.
The school nominated Chief Academic Advisor Dr Krishnamurthy to head a volunteer team that would audit, analyse and implement process changes that would improve quality throughout (all in a particularly academic fashion). The team was tasked with looking at three key dimensions: assurance of learning, research and productivity, and quality of placements. Each member underwent extensive training to learn about action plans, quality auditing skills and continuous improvement tools – such as the ‘plan-do-study-act’ cycle.
Once faculty members were trained, the team’s first task was to identify the school’s key stakeholders, processes and their importance at the institute. Unsurprisingly, the most vital processes were identified as student intake, research, knowledge dissemination, outcomes evaluation and recruiter acceptance. From there, Krishnamurthy’s team used a fishbone diagram to help identify potential root causes of the issues plaguing these vital processes. To illustrate just how bad things were at the school, the team selected control groups and administered domain-based knowledge tests.
The deficits were disappointing. A RIMS students’ knowledge base was rated at just 36 percent, while students at Harvard rated 95 percent. Likewise, students’ critical thinking abilities rated nine percent, versus 93 percent at MIT. Worse yet, the mean salaries of graduating students averaged $36,000, versus $150,000 for students from Kellogg. Krishnamurthy’s team had their work cut out.
To tackle these issues, Krishnamurthy created an employability team, developed strategic architecture and designed pilot studies to improve the school’s curriculum and make it more competitive. In order to do so, he needed absolutely every employee and student on board – and there was some resistance at the onset. Yet the educator asserted it didn’t actually take long to convince the school’s stakeholders the changes were extremely beneficial.
“Once students started seeing the results, buy-in became complete and unconditional,” he says. Acceptance was also achieved by maintaining clearer levels of communication with stakeholders. The school actually started to provide shareholders with detailed plans and projections. Then, it proceeded with a variety of new methods, such as incorporating case studies into the curriculum, which increased general test scores by almost 10 percent. Administrators also introduced a mandate saying students must be certified in English by the British Council – increasing scores from 42 percent to 51 percent.
By improving those test scores, the perceived quality of RIMS skyrocketed. The number of top 100 businesses recruiting from the school shot up by 22 percent, while the average salary offers graduates were receiving increased by $20,000. Placement revenue rose by an impressive $50,000, and RIMS has since skyrocketed up domestic and international education tables.
No matter the business, total quality management can and will work. Yet this philosophical take on quality control will only impact firms that are in it for the long haul. Every employee must be in tune with the company’s ideologies and desires to improve, and customer satisfaction must reign supreme.
Because times change and organizations evolve, virtually all companies that wish to keep their doors open for a long time need to successfully undergo organizational change sooner or later.
Generally speaking, change management refers to switching up the way things are done at an organization.
Whether that means reallocating the distribution of resources or budgets or changing processes altogether depends on the organization’s specific situation.
So how can you ensure your change management initiatives are successful? Here are five real-world case studies that should provide some insight into how strong companies pivot successfully.
In July 2012, shares of Nokia were trading below $2 — far off from their highs of nearly $60 in 2000 and nearly $40 in 2007. At the time of this writing, the shares have somewhat rebounded, up more than 300% after having climbed into the $6.50 range.
At the turn of the millennium, Nokia was one of the world’s largest suppliers of mobile devices. This, of course, was before smartphone mania swept the nation (and the world).
Fast forward to 2010, and while Nokia remained profitable, the writing was on the wall. It was only a matter of time before Nokia phones, as they currently existed, would remain relevant.
Because Apple beat Nokia to market with its iPhone, the latter company missed its opportunity to lead the smartphone revolution.
Understanding this all too well — Nokia has reinvented itself time and again in its 150-plus-year history — the Finland-based company hired a new CEO to take the reins.
Ultimately, Nokia’s new management team decided to sell the company’s struggling phone division to Microsoft.
Like it has done so many times over the years (how else does a company founded in 1865 become the worldwide leader in mobile devices in the 1990s?), Nokia has changed the focus of its operations once more.
Currently, the company is building network and mapping technologies, among other initiatives.
When Asa Griggs Candler founded The Coca-Cola Company in the late 1800s, there was no way he knew his company would one day be valued at upwards of $180 billion. That’s a lot of money for a business that sells soft drinks.
But Coca-Cola didn’t become the powerful force it is today by sheer chance.
An illustration: In the 1980s, Coke’s biggest rival, Pepsi, was aggressively targeting it. This caused Coca-Cola to reevaluate its offerings. Eventually, the company decided to concoct a new, sweeter soda. They called it simply New Coke.
Unfortunately, the public didn’t take too kindly to the new beverage. But Coke’s executives didn’t let the mishap derail their success.
Quickly, management decided to pull New Coke and replace it with the older, established formula. Lo and behold, Coca-Cola Classic was born, and Coke maintained its market dominance.
Just as quickly as Coke changed to accommodate its customers’ sweeter palates, it changed direction again when it realized it made the wrong move.
But that’s not the only instance where Coca-Cola listened to its customers and enacted change. Again, how is a company primarily known for selling sugary drinks valued at $180 billion in 2016?
Coke doesn’t only sell sweetened carbonated beverages. In fact, the beverage king sells more than 500 brands to customers in over 200 countries.
Today, many of its offerings — like DASANI, vitaminwater, and Evian — are even considered healthy drinks.
In other words, Coca-Cola has consistently strived to diversify its product portfolio and expand into new markets. By and large, Coke has succeeded in these efforts.
In the aftermath of World War II, the Japanese auto market was nearing destruction. On the other hand, American car manufacturers like Ford and General Motors were crushing it.
Understanding that something major had to be done in order to keep pace with their Western rivals, Taiichi Ohno, an engineer at Toyota, convinced his managers to implement the just-in-time approach to manufacturing.
Instead of having to order and store an insane amount of heavy equipment and machinery, Ohno thought it made a whole lot more sense to receive supplies the moment they were ready to be used.
This way, Toyota wouldn’t have to waste any space, time, money, or energies dealing with supplies that would just collect dust until they were needed.
Additionally, Toyota would have more cash on hand to pursue other opportunities; it wouldn’t be tied up in inventory.
Toyota implemented Ohno’s suggestions, opting to take the just-in-time approach to manufacturing. Though it didn’t happen overnight, Ohno’s recommended changes ended up transforming the Japanese automaker for the better.
Ohno ended up becoming an executive.
When Jack Welch assumed the top position at General Electric in 1981, he inherited a company that had a market value of $12 billion — certainly a modest number, by today’s standards. By the time he left in 1998, GE was worth $280 billion.
While leading GE, Welch was charged with the task of making the conglomerate better by any means necessary. With his gut telling him that his company was due for a complete overhaul, Welch decided to implement Six Sigma at GE in 1995.
Six Sigma is a methodology that aims to reduce defects and errors in all processes, including transactional processes and manufacturing processes. Organizations that use Six Sigma test their processes again and again to make sure that they are as close to perfect as possible.
Five years after Welch’s decision to implement Six Sigma, GE had saved a mind-blowing $10 billion.
Welch claimed to have spent as much as half of his time working on people issues.
By assembling the right team and ingraining them with the right management philosophies, Welch successfully oversaw the transformation of GE from a relatively strong company to a true international juggernaut.
Ever since Amazon went online in 1995, the e-commerce juggernaut has undergone a slew of changes — despite being led by the same man, Jeff Bezos, during the ensuing two-plus decades.
When the Seattle-based company first launched its website, all it sold was books. Gradually, Bezos and his team expanded Amazon’s offerings to include things like CDs and DVDs.
But Amazon never really stopped changing the inventory it sold.
Bezos said he wanted his store to become the world’s largest, so he worked hard toward meeting that goal — whether that meant offering new products, launching Amazon Prime, launching Amazon Instant Video ... the list goes on and on.
Today, Amazon sells more than 200 million products to customers all over the world.
Though for years, Amazon’s detractors insisted that the company wasn’t making enough profits to justify any investments, that all changed in 2015 when the company posted back-to-back successful quarters.
The market responded kindly, and today, Amazon boasts a market valuation of more than $440 billion.
But Bezos isn’t anywhere close to done yet. There are talks of Amazon delivering packages via drone.
And if that wasn’t enough, Bezos recently said he hopes Amazon can produce as many as 16 feature films each year. In 2017, Bezos & his team took home three Oscars.
Indeed, it appears as though Amazon is a company that can be characterized as changing constantly. To date, they’ve been successful, probably because the company is always putting its customers first.
Is it time for your company to move forward with organizational change?
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