Course Code: BA 1

Description: Operation Mgt. (TQM)

Course-Yr. & Blk: MM-1D, MM-1E, MMI-F, MM-IH,MM-1G
Course Description: This course provides learners with an understanding of quality
control and improvement systems. The course includes study of topics related to quality
management approaches, design and implementation of quality-related procedures, and
related technologies. The focus of the course on enhancing goods, services, and the
business environment.
Objective (Prelim): at the end of the prelim period, the students should be able to
understand:
 The importance of quality
 Several definition of Quality
 Various perspective from which quality is viewed
 Principles of Total Quality
 Quality in Practice
 Case analysis

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College Instructor

TOTAL QUALITY MANAGEMENT

Module 1
Chapter 1
Introduction to Quality
According to William Cooper Procter, grandson of the founder of Procter &
Gamble, told his employees, their first Job is to turn out quality that consumers will by
and keep on buying. If they can produce efficiently and economically, they will earn
profit. There are three issues that are critical to the managers of manufacturing company
and service organization:
a. Productivity- the output achieved per unit of input
b. Cost – cost of operations
c. Quality of goods and services that create satisfaction of the customer.
In determining the success and failure of an organization is Quality. High reduces
rework, returned scrap. Most importantly high quality generates satisfaction to
the customers.
Ford Motor Company become highly profitable business during 1980s
however, on January 12, 2002 a newspaper headline , Ford to cut 35,000
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 jobs close 5 plants, CEO William Ford is cited as stating “ we may have
underestimated to growing strength of your competitors. They were some
strategies that were poorly conceive, and we just didn’t execute on the basic
of our business.” There were some strategies that were poorly conceived,
and they didn’t execute on the basic of their business.

In United States there are several dozen responses of definition of quality:

1. Perfection
2. Consistency
3. Eliminating waste
4. Speed of delivery
5. Compliance with policies and procedures
6. Providing a good, usable product
7. Doing it right the first time
8. Delighting or pleasing customers
9. Total customer service and satisfaction

Thus, it is important to understand the various perspectives from which quality is viewed
to fully appreciate the role it plays in the many parts of a business organization.

Judgmental Perspective
One common notion of quality, often used by consumers, it that it is synonymous or
excellence. In 1931 Walter Shewhart first denied quality as the goodness of a product.
This view is referred to as the transcendent (transcend, “to rise above or extend notably
beyond ordinary limits”) definition of quality. In this sense, quality is “both absolute
and universally recognizable, a mark of uncompromising standards and high
achievement. As such, it cannot be defined precisely- you just know it when you see it.
It is often loosely related to a comparison of features and characteristics of products and
promulgated by marketing efforts aimed to developing quality as an image variable in
the minds of consumers. Common example of products attributed with this image are
Ritz-Carlton hotels and Lexus automobiles.

Product-Based Perspective
Another definition of quality is that it is a function of a specific, measurable variable and
that difference in quality reflect differences in quantity of some product attribute, such as
in the number of stitches per inch on a shirt or in the number of cylinders in an engine.

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This assessment implies that higher levels or amounts of product characteristics are
equivalent to higher quality. As a result, quality is often mistakenly assumed to be
related to price: the higher the price, the higher the quality.

User-Based Perspective
A third definition of quality is based on the presumption that quality is determined by
what a customer wants. Individuals have different wants and needs and, hence, different
quality standards, which leads to a user-based definitions. Quality is defined as fitness
for intended use, or how well the product performs its intended function. Both Cadililac
sedan and a Jeep Cherokee are fit for use, for example, but they serve different needs
and different groups o customers. If you want a highway-touring vehicle with luxury
amenities, then a Cadililac may better satisfy your needs. If you want a vehicle for
camping, fishing, or skiing trips, a Jeep might be viewed as having better quality.

Value-Based Perspective
A fourth approach to defining quality is based on value-that is, the relationship of
usefulness or satisfaction to price. From this perspective, a quality product is one that is
as useful as competing product and is sold at a lower price, or one that offers greater
usefulness or satisfaction at a comparable a comparable price.

Manufacturing-Based Perspective
A fifth view of quality is manufacturing based and defines quality as the desirable
outcome of engineering and manufacturing practice, or conformance to specification.
Specifications are targets and tolerances determined by designers of products and
services. Targets are the ideal values for which production is to strive; tolerances are
specified because designers recognize that it is impossible to meet targets all of the tie in
manufacture.

Integrating Perspective on Quality

Although product quality should be important to all individual throughout the value
chain, how quality is viewed may depend on one’s position in the value chain-that is,
whether one is the designer, manufacturer or service provider, distributor, or customer.

Customer-Driven Quality
The American Nations Standards Institute (ANSI) and ASO standardized official
definition of quality terminology in 1978. These groups defined quality as “the totality
of features and characteristics of a product or service that bears on its ability to satisfy

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given needs.” This definition draws heavily on the product-and-user-based approaches
and is driven by the need to contribute value to customers and thus to influence
satisfaction and preference.
Quality is meeting or exceeding customer expectations.

To understand this definition, one must firs understand the meanings of “customer.”
Most people think of a customer as the ultimate purchaser of a product or service, for
instance, the person who has an automobile for personal use or the guest who registers at
a hotel is considered an ultimate purchaser. These customers are more precisely referred
to as consumers. Clearly, meeting the expectations of consumers is the ultimate goal of
any business. Before a product reaches consumers, however, it may flow through a
chain of many firms or departments, each of which adds some value to the product. For
example, a automobile engine plant may purchase steel from a steel company, produce
engines, and then transport the engines to an assembly plant. The steel company is a
supplier to the engine plant; the engine plant is a supplier to the assembly plant the
engine plant is thus a customer of the steel company and the assembly plant is a
customer of the engine plant. These customers are called external customers.
Every employee in a company also has internal customers who receive goods or
services from suppliers within the company. An assembly department, for example, is
an internal customers of the machining department, and managers are internal customers
of the secretarial pool. Most business consist of many such “chains of customers.”
Thus, the job of an employee is not simply to please his or her supervisor; it is to satisfy
the needs of particular internal and external.

QUALITY AS A MANAGEMENT FRAMEWORK

In the 1970s a General Electric (GE) task force studied consumer perception of the
quality of various GE product lines. Lines with relatively poor reputations for quality
were found to deemphasize the customer’s viewpoint, regard quality as synonymous
with tight tolerance and conformance to specifications tie quality objectives to
manufacturing flow, express quality objectives as the number of defects per unit, and use
formal quality control systems only in manufacturing. In contrast, product lines that
received customer praise were found to emphasize satisfying customer expectation;
determine customer needs through market research; use customer-based quality
performance measures; and have formalized quality control systems in place for all
business functions, not just for manufacturing. The task to conclude that quality must not
be viewed solely as a technical discipline, but rather as a management discipline. That
is, quality issues permeate all aspects of business enterprise: design, marketing,

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manufacturing, human resource management, supplier relations and financial
management, to name just a few.

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

continual increase in customer satisfaction at continually lower real cost. TQ is a total
system approach (not a separate area or program) and in integral part of high-level
strategy; it works horizontally across functions and departments, involves all employees,
top to bottom, and extends backward and forward to include the supply chain and the
customer chain. TQ stresses learning and adaptation to continual change as keys to
organization success.
The foundation of total quality is philosophical: the scientific method. TQ
includes system, methods, and tools. The systems permit change; the philosophy stays
the same. TQ is anchored in values that stress the dignity of the individual and the
power of community action.

Procter & Gamble uses a concise definition: Total quality is the unyielding and
continually improving effort by everyone in an organization to understand, meet, and
exceed the expectations of customers.

Actually, the concept of TQ has been around for some time. A.V. Feigenbaum
recognized the importance of a comprehensive approach quality in the 1950s and
coined the term total quality control.. feigenbaum observed that the quality of
products and services is directly influenced by what the terms the Ms: markets,
money, management, man and women, motivation, materials, machines and
mechanization, modern information method’s and mounting product
requirements. Although he developed his ideas from and engineering perspective,
his concepts apply more broadly to general management.

The Japanese adopted Feigenbaum’s concept and renamed it companywide

quality control Wayne S. Reiker listed five aspects of total quality control
practiced in Japan.
1. Quality emphasis extends through market analysis, design and customer
service rather than only the production stages of making a product.
2. Quality emphasis is directed toward operations in every department from
executives to clerical personnel.
3. Quality is the responsibility of the individual and the work group, not some
other group.

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 4. The two types of quality characteristics as viewed by customers are those that
satisfy and those that motivate. Only the latter are strongly related to repeat
sales and a “quality” image.
5. The first customer for a part or piece of information is usually the next
department in the production process.

Principles of Total Quality

Whatever the language, total quality is based on three fundamental principles:

1. A focus on customers and stakeholders
2. Participation and teamwork by everyone in the organization
3. A process focus supported by continuous improvement and learning.

Customer and Stakeholder Focus. The customer is the principal judge of quality.
Perception of value and satisfaction are influenced by many factors throughout the
customer’s overall purchase, ownership, and service experience. To accomplish this
task, a company’s efforts need to extend well beyond merely meeting specifications,
reducing defects and errors, or resolving complaints. They much include both designing
new products that truly delight the customer and responding rapidly to changing
consumer and market demands. A company close to its customer knows what the
customer wants, how the customer uses its products and how to anticipate needs that the
customer may not even be able to express. It also continually develops new ways of
enhancing customer relationship.
Participation and Teamwork Joseph Juran credited Japanese managers’ full use of the
knowledge and creativity of the entire workforce as one of the reasons for Japan’s raped
quality achievements. When managers give employees the tools to make good decisions
and the freedom and encouragement to make contribution; they virtually guarantee that
better quality products and production processes will result. Employees who are
allowed to participate-both individually and in teams-in decisions that affect their jobs
and the customer can make substation contributions to quality.

Process Focus and Continuous Improvement the traditional way of viewing an

organization is by surveying the vertical dimension-by keeping an eye on an
organization chart. However, work gets done (or fails to get done) horizontally or cross-
functionally, not hierarchically.
According to AT&T, a process is how work creates value for customers. We
usually think of procession the context of production: the collection of activities and

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operations involved in transforming inputs (physical facilities, materials, capital,
equipment, people, and energy) into outputs (products and services). Common types of
production processes include machining, mixing, assembling, filling orders, or
approving loans. However, nearly every major activity within an organization. Involves
a process that crosses traditional organization boundaries.

Continuous improvement refers to both incremental changes, which are small

and gradual and breakthrough, or large and rapid improvements. These improvements
may take any one of several forms:
1. Enhancing value to the customer through new and improved products and
services.
2. Reducing errors, defects, waste, and their related costs.
3. Increasing productivity and effectiveness in the use of all resources
4. Improving responsiveness and cycle time performance for such processes as
resolving customer complaints or new product introduction

QUALITY AND COMPETITIVE ADVANTAGE

Competitive advantage demotes a firm’s ability to achieve market superiority. In
the long run, a sustainable competitive advantage provides above-average-performance.
S.C. Wheelwright identified six characteristics of a strong competitive advantage.
1. It is driven by customer wants and needs. A company provides value to its
customers that competitors do not.
2. It makes a significant contribution to the success of the business.
3. It matches the organization’s unique resources with opportunities in the
environment. No two companies have the same resources; a good strategy
uses the firm’s particular resources effectively.
4. It provides a basis for further improvement.

Philip Crosby popularized this view point in his book Quality Is Free. Crosby States:

Quality is not only free, it is an honest-to-everything profit maker. Every penny

you don’t spend on doing things wrong, over or instead of, becomes half a penny right
on the bottom line. In these days of “who knows what is going to happen to our
business to tomorrow,” there aren’t many ways left to make a profit improvement. If
you concentrate on making quality certain, you can probably increase your profit by an
amount equal to 5 percent to percent of your sales. That is a lot of money for free.

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Improved quality improved quality
Of design of conformance

Higher perceived
Value higher lower manufacturing
Price and service cost

Increased market
Share increased
revenues

higher profitability

QUALITY AND PERSONAL VALUES

Today, companies are asking employees to take more responsibility for acting as the
point of contact between the organization and the customer, to be team players, and to
provide more effective and efficient customer service. Rath & Strong, a Lexigton,
Massachusetts-based management consulting firm, polled almost 200 executives from
Fortune 500 companies about activates that foster superior performance results for an
organization. They survey revealed that personal initiative when combined with a
customer orientation, resulted in a positive impact on business success and sales growth
rate. However, although 79 percent of all respondent’s indicated that employees are
increasingly expected to take initiative to bring about change in the company, 40 percent
of the respondents relied that most people in their company do not believe that they can
make a personal contribution to the company’s success. Alan Fronhman, a senior
associate with Rath & Strong, stated, “These results are significant because they suggest
that although people re being expected to take personal initiative, most organization
have not figured out how to translate those expectations into positive behavior.”
Such behaviors reflect the personal values and attitudes of individual. Employees
who embrace quality as a personal value often to beyond what they’re asked or normally
expected to do to reach a difficult goal or provide extraordinary service to a customer. A
good example involved a young girl who laid her dental retainer on a picnic table at
Disney World while eating lunch. She forgot about it until later in the day. The family

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returned to the spot, found the table cleaned up and did not know what to do next. They
spotted a custodian, told him the problem, and the custodian sought permission from his
supervisor to have the garbage bags searched by the night crew that evening. Two
weeks later, the family received a letter from the supervisor explaining that, despite their
best efforts, they had been unable to locate the retainer.
The concept of “personal quality” has been promoted by Harry V. Roberts,
professor emeritus at the University of Chicago’s Graduate School of Business, and
Bernard F. Seresketer, vice president of the Central Region of AT&/t Personal quality
may be thought of a personal empowerment, it is implemented by systematically
keeping personal checklist for quality improvement. Roberts and Sergesketter
developed the idea of a personal quality checklist to keep track of personal shortcoming,
or defect, in personal work processes. The author defended the use of a checklist to keep
track of defects:

The word “defects” has a negative connotation for some people who would like to
keep track of the times we do things right rather than times we do things wrong.
Fortunately, most of us do things right much more than we do things wrong, so it is
easier in practice to count the defects. Moreover, we can get positive satisfaction from
avoiding defects-witness accident prevention programs that count days without
accidents.

A personal quality checklist can be developed by listing eight or ten items that reflect
personal “defects” in separate lines in a column of a spreadsheet. Some examples might
be: 1) not responding phone calls or emails within 24hrs. 2) Failing to exercise at least
three times during a week. Adjacent columns for dates and checkmarks that demote
defects when items were not accomplished can be added to the spreadsheet. Note that
each item on the checklist should have a desired result, a way to measure each type of
defect, and a time frame. Both word and personal defect categories may be listed on the
sheet.
Personal quality is an essential ingredient to make quality happen in the
workplace, yet most companies have neglected it for a long time. Perhaps management,
in particular, operates under the idea that promoting quality is something that companies
do to employees, rather than something they do with employees.

QUALITY IN PRACTICE
THE EVOLUTION OF QUALITY AT XEROX: FROM LEADERSHIP
THROUGH QUALITY TO LEAN SIX SIGMA ( reflect on these case and

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comprehend their technique as well as strategy on how these companies come up from
losses.)

THE Xerox 914, the first plain-paper copier, was introduced in 1959. Regarded by many
people as the most successful business product ever introduced, it created a new
industry. During the 1960s Xerox grew rapidly, selling all it could produce, and reached
$1 billion in revenue in record-setting time. By the mid-1970s its return on assets was in
the 20 percent range. Its competitive advantages resulted from strong patents, a growing
market, and little completion. In such an environment management was not pressed to
focus on customers.

Facing a competitive Crisis

During the 1970s, however, IBM and kodak entered the high-volume copier business-
Xerox’s principal market. Several Japanese companies introduced high-quality, low-
volume copiers, a market that Xerox had virtual ignored, and established foundation for
moving into the high-volume market. In addition, the Federal Trade Commission
accused Xerox of illegally monopolizing the copier business. After negotiations, Xerox
agreed to open approximately 1,700 patents to competitors. Xerox was soon losing
market share to Japanese competitors, and by the early 1980s it ace a serious competitive
threat from copy machine manufacturers in Japan; Xerox’s market share had fallen to
less than 50 percent. Some people even predicted that the company would not survive
rework, scrap, excessive inspection, lost business, and other problems were estimated to
be costing Xerox more than 20 percent of revenue, which in 1983 amounted to nearly $2
billion. Both the company and its primary union, the Amalgamated Clothing and Textile
Workers, were concerned. In comparing itself with its competition, Xerox discovered
that it had nine times as many suppliers, twice as many employees, cycle times that were
twice as long, ten times as many rejects, and seven times as many manufacturing defects
in finished products. It was clear that radical changes were required.

Leadership Through Quality

In 1983 company president David T. Keams became convinced that Xerox needed a
long range, comprehensive quality strategy as well as a change in its traditional
management culture. Kearns was aware of Japanese subsidiary Fuji Xerox’s success in
implementing quality management practices and was approached by several Xerox
employees about instituting total quality management. He commissioned a team to
outline a quality strategy for Xerox. The team’s report stated that instituting it would

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require changes in behaviors and attitudes throughout the company and operations
changes in the company’s business practices. Kearns determined that Xerox would
initiate a total quality management approach, that they would take the time to “design it
right the first time,” and that the effort would involve all employees. Kearns and the
company’s top 25 managers wrote the Xerox Quality Policy, which states the following:

Xerox is a quality company. Quality is the basic business principle for xerox.
Quality means providing our internal and internal customers with innovative products
and services that fully satisfy their requirements. Quality improvement is the job of
every Xerox employee.

This policy led to a process called Leadership through Quality, which had three
objectives:

1. To instill quality as the basic business principle Xerox and to ensure that quality
improvement becomes the job of every Xerox person.
2. To ensure that Xerox people, individual and collectively, provide out external and
internal customers with innovative products and services that fully satisfy their
existing and latent requirements.
3. To establish, as a way of life, management and work processes that enable all
Xerox people to continuously pursue quality improvement in meeting customer
requirements.

In addition, Leadership Through Quality was directed at achieving four goals in

all Xerox activities:
1. Customer Goal: To become an organization with whom customers are eager to
do business.
2. Employee Goal: To create an environment where everyone can take pride in
the organization and feel responsible for its success.
3. Business Goal: to increase profits and presence at a rate faster than the market
in which Xerox competes.
4. Process Goal: To use Leadership Through Quality principles in all Xerox
does.

Leadership Through Quality radically change the way Xerox did business. All
activities, such as product planning, distribution, and establishing unit objectives,
began with a focus on customer requirements. Benchmarking-identifying and

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studying the companies and organizations that best perform critical business
functions and then incorporating those organizations’ ideas into the firm’s
operations-became an important component of Xerox’s quality. Xerox
bechmaked more than 200 processes with those of noncompetitive companies.
For instance, ideas for improving production scheduling came from Cummins
Engine Company, ideas for improving the distribution system cam form L.L>
Bean, and ideas for improving billing processes came from American Express.
Measuring customer satisfaction and training were important components
of the program. Every month, 40,000 surveys were mailed to customers, seeking
feedback on equipment performance, sales, service, and administrative support.
Any reported dissatisfaction was dealt with immediately and was usually removed
in a matter of days. When the program was instituted, every Xerox employee
worldwide, and at all levels of the company, received the same training in quality
principles. This training began with top management and filtered down through
each level of the. Five years, 4 million labor-hours, and more than $125 million
later, all employees had received quality-related training. In 1988 about 79
percent of Xerox employees were involved in quality improvement teams.
Several other steps were taken. Xerox worked with suppliers to impose
their processes, implement statistical methods and a total quality processes,
implement statistical methods and total quality process, and support a just-in-time
inventory concept. Suppliers that joined in these efforts were involved in the
earliest phases of new product designs and rewarded with long term contracts.
Employee involvement and participation was also an important effort.
Xerox had always had good relationships with its unions. In 1980 the company
signed a contract with its principal union, the Amalgamated Clothing and Textile.
Workers, encouraging union members’ participation in quality improvement
processes. It was the first program in the company that linked managers with
employees in a mutual problem-solving approach and served as a model for other
corporations. A subsequent contract included the provision that “every employee
shall support the concept of continuous quality improvement while reducing
quality costs through teamwork.”
Most important, management become the role model for the new way of
doing business. Managers were required to practice quality in their daily activities
ant to promote Leadership Through Quality among their peers and subordinates.
Reward and recognition systems were modified to focus on teamwork and quality
results. Managers became coaches, involving their employees in the act of
running the business on a routine basis.

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 From the initiation of Leadership Through Quality until the point at which
Xerox’s Business Products and Systems organization received the Malcolm
Baldrige National Quality Award in 1989, some of the most obvious impacts of
the Leadership Through Quality program included the following:
1. Reject rates on the assembly line fell from 10.000 parts per million to
300 parts per million.
2. Of supplied parts, 95 percent no longer needed inspection, in 1989, 30
U.S. suppliers went the entire year defect-free.
3. The number of suppliers was cut from 5,000 to fewer than 500.
4. The cost of purchased parts was reduced by 45 percent.
5. Despite inflation, manufacturing costs dropped 20 percent.
6. Product development time decreased by 60 percent.
7. Overall product quality improved 93 percent.
Xerox taught that customer that customer satisfaction plus employee
motivation and satisfaction resulted in increased market share and
improved return on assets. In 1989 president David Kearns observed
that quality is “a race without a finish line.”

Crisis and Quality Renewal

Throughout the 1990s. Xerox grew at a steady rate. However, at the turn of the century,
the technology downturn, coupled with decreased focus on quality by top corporate
management, resulted in a significant stock price drop and a new crisis.
A top management shake-up, resulting in new corporate leadership, renewed the
company’s focus on quality, beginning with “New Quality” in 2001 and leading to the
current “Lean Six Sigma” initiative.
The New Quality philosophy built on the quality legacy established in the 1983
Leadership Through Quality process. Soon afterward, as Six Sigma became more
popular across the United States, this approach was refined around a structured, Six
Sigma-based improvement process with more emphasis on behavior and leadership to
achieve performance excellence. The new thrust, established in 2003 and called “Lean
Six Sigma” includes a dedicated infrastructure and resource commitment to focus on key
business issues: critical customer opportunities, significant raining of employees and
“black belt” improvement specialist, a value-driven project selection process, and an
increased customer focus with a clear linkage to business strategy and objective. The
basic principles support the core value “We Deliver Quality and Excellence in All We
do” and are stated as follows:

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  Customer-focused employees, accountable for business results, are fundamental to
our success.
 Our work environment enables participation, speed, and teamwork based on trust
learning, and recognition.
 Everyone at Xerox has business objective aligned to the Xerox direction. A
disciplined process is used to assess process toward delivery of results.
 Customer-focused work processes, supported by disciplined use of quality tools.
Enable rapid changes and yield predictable business results.
 Everyone takes responsibility to communicate and act on benchmarks and
knowledge that enable rapid change in the best interests of customers and
shareholders.

QUALITY IN PRACTICE
BRINGING TOTAL QUALITY PRINIPLES TO LIFE AT KARLEE
KARLEE is a contract manufacturer of precision sheet metal and machined components
for telecommunication, semiconductor, and medical equipment industries located in
Garlan, Teas, KARLEE provide a vertically integrated range of services that support
customers from initial component design to finished, assembled product. Their services
include the following:
Advanced design engineering support
Prototype production
Manufacture and assembly of precision machined an sheet metal-fabricated
products
Product finishing (painting, silk screening, plating)
Value-added assembly integration (cabling, power supply and backplane
installation, and electrical testing)
KARLEE exemplifies the principles of total quality that we introduced in this chapter
in number of ways, which are discussed next.
Customer and Stakeholder Focus
KARLE made a strategic decision to carefully select customers that support their
values, which include a systematic approach to business and performance
management, a desire for long-term partnerships, and global leadership. Senior
executive leaders (SELs) work with each customer to establish current requirement
and future needs, and each customer is assigned a two-person customer service team
that is on call 24hrs a day for day-to-day production issues. One member is an
estimator who provides quotes for the customer. The second member is a customer
service representative (CSR) who provides liaison support in communicating
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 delivery, scheduling, order entry, and other requested information. The customer
service representatives for three of KARLEE uses a mobile phone system that
includes voicemail email, and radio communications to make CSRs accessible
whenever they are away from their office. In the event they are unavailable, a private
voicemail ca be left for any team member. Home phone numbers of customer service
representatives are given to customers as well.
KARLEE develops and ensures customer loyalty by providing a full range of
manufacturing, engineering, and customer support series, maintaining a committed
“can do” attitude and being able to rapidly meet changing requirements. Their ability
to vertically integrate processes and provide engineering support form design
conception through production strengthens the bond they have with customers and
ensures continued relationships. Additional methods of building and sustaining long-
term relationships with customers include the following:
Learning customers; business challenges and using this information to seek
opportunities to better support their performance
Providing proactive cost-management solutions, remaining responsive and
flexible to schedule changes, and maintaining capacity and resources to adjust
to customer growth requirements.
Maintaining open communications at each business level
Supporting major customer initiatives, such as lean manufacturing
Sharing detailed cost information to assist customers in joint cost reductions

Participation and Teamwork

The entire workforce is organized into operational, administrative, and support teams to
encourage decisions taking at the individual and team levels. A management team
leader (MTL) or an operational team leader (OTL) leads each team. OTLs are charged
with daily couching and delivery, with corporate needs, such as lowering scrap and
rework. Team members are empowered to take initiative and contribute in many ways,
including setting performance targets and monitoring and improving their processes.
Production and delivery processes are designed around teams of manufacturing
cells. Each cell is responsible for knowing its customer’s requirements. KARLEE
promotes cross-training and job rotation to foster flexibility and learning and to enable
rapid response to changing customer demands. These concepts are deployed throughout
all teams. For example, accounting team members rotate to train in different accounting
positons after mastering their primary job responsibilities. Job rotation provides a
flexible response to peak loads in a work area, while enhancing job diversity and skill
knowledge.

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 KARLEE helps team members develop and use their full potential by creating an
environment of empowerment and opportunity for growth. Team members are
empowered to take ownership of, and are held accountable for, the processes within their
work area. During strategic planning, objective and targets are development for the
operational, administrative, and support teams across the company each team is
empowered to change its recommended targets and requires additional measure if they
believe it will help them achieve higher performance. Team members plan and execute
their own improvement activities to meet those targets. Teams are empowered to
schedule work, manage inventory, and design the layout of their work areas. Any team
member can stop production if the process is not performing to customer requirements
or process specification. KARLEE fosters a team culture based on genuine caring and
support among leader and team members.
KARLEE stresses the importance of mutual trust, honesty, respect, and team
member will-being. The support climate is also enhance through the following means;

The KARLEE Cares Team, which members formed to meet catastrophic needs of
their fellow workers and the community
The Cultural Advisory Committee, which recommends ways to better fulfill
company values, vision, ad mission
The “KARLEE Super Kids” and scholarship programs, which recognize and
reward the students of team members for scholastic achievement
Team Resources, which provides a Welcome Bag to all new team members an
sponsors social activities such as holiday lunches, picnics, and parties on a regular
basis.

EVALUATION:
1. Describe the three fundamental principles of total quality.
2. What did PhilipCrosby mean by “Quality is free”
3. Why is it important to personalize quality principles?
4. Explain the role of quality in improving a firm’s profitability
5. Explain the various definition of quality. Can a single definition suffice? Why or
why not?
6. What factors have contributed to the increased awareness of quality in modern
business?
7. How does quality support the achievement of competitive advantage?

Cases

16
I. Skilled Care Pharmacy

Skilled Care Pharmacy, located in Mason, Ohio, is a $25 million privately held
regional provider of pharmaceutical products delivered with the long-term care,
assisted living, hospice, and group-home environments. The following products are
included within this service:
 Medication and related billion services
 Medical records
 Information systems
 Continuing education
 Consulting services to include pharmacy, nursing, dietary, and social services
The key customer groups that Skilled Care provides services to include the senior
population housed within the extended and long-term care environments. Customers
within this sector depend on Skilled Care to provide their daily pharmaceutical needs
at a competitive rate. Because of the high risk factor of its business, these needs
require that the right drug be delivered to the right patient at the right time.
Moreover, depending on the environment being served, different medication-
dispensing methods may be used such as vials, multi dose packaging, or unit dose
boxes. Also, depending on the customer type, specific delivery requirements may be
implemented to better serve the end user.
Skilled Cares dedication and commitment to continuous quality improvement is
evident throughout its internal and external operations. By reflection on the
principles needed to attain quality success across all levels of customers, Skilled Care
adopted the quality policy statement.
Skilled Care’s employee population include 176 culturally diverse associated
committed to a substance-free workplace. The team includes associated with all
levels of educational training representing many of the following disciplines:
associated with all levels of educational training representing many of the following
disciplines: pharmacists, pharmacy technician, medical data entry, accountants,
billing specialists, nurses, human resources, sales/marketing, purchasing,
administrative and administrative assistance, deliver, customer service representative
assistance, deliver, customer service representative, and IT (information technology)-
certified personnel.. at times, multifaceted work teams are formed through cross-
functional approaches to complete the task(s) at and.
Skilled Care’s deliverables are generated from its sole 24,00sqaure foot location in
Mason, Ohio. The pharmacy, which is open 24 hours a day, 365 days a year, is
secured by a Honeywell alarm system. The company’s primary technology rests
17
within its pharmacy software. Rescot. This system enables Skilled Care to process,
bill, and generate pertinent data critical to the overall operations of the company.
Other partnerships have also been established within Skilled Care’s multdosed
packaging capabilities and wholesaler purchasing interface.
Skilled Care Pharmacy uses the Internet for publishing pertinent information and
news and a Web-enable customer service application called Track-It to report
specific information about customer issues for companywide resolution. Advantages
of e-commerce include quicker customer-serve response time for all areas of service
including placing the order, pharmacist’s review, deliver, and billing or the product.
Skilled Care Pharmacy faces key strategic challenges from the rapidly evolving
financial structure of health care, a shortage of licensed, medical practice, and
employee retention at all levels. These as well as future challenges are always
balanced with the responsibility to the stakeholders.

Answering the case study:

I. Identify the problem
II. Specify Alternatives course of Action (ACAs)
III. Recommendation

Identify the problem- you should be able to describe the problem of issue in on or two
sentences. The problem should be specific. Problems should be in bulleted form.
You will need to explain why the problem occurred. Does problem facing the
company comes from a changing environment, new opportunities, inefficient internal
or external business processes?
Specify Alternative Courses of Action- list the courses of action the company can take
to solve its problem or meet the challenge it faces. For information system-related
problems do these alternatives require a new information system or the modification
of an existing system? Are new technologies, business processes, organizational
structure, or management behavior required? What changes to organizational
processes would be required by each alternative? What management policy would be
required to implement each alternative?
Remember, there is a difference between what an organization “should do” and
what that organization actually “can do”. Some solutions are too expensive or
operational difficult to implement, and should avoid solutions that are beyond their
organization’s resources, identify the constraints that will limit the solutions available.
Is each alternative executable given these constraints?
Recommend the best course of action

18
State your choice for the best course of action and provide a detailed explanation of
why you made this selection. You may also want to provide an explanation of why
other alternatives were not selected. Your final recommendation should flow
logically from the rest of your case analysis and should clearly specify what
assumptions were used to shape your conclusion. There is often no single “right”
answer, and each option is likely to have risks as well as rewards.

II. A Tale of Two RESTAURANTS

TIM Kelly founded Kelly’s Seafood Restaurant about 15 years ago. The restaurant is
very profitable because of its excellent quality of good, but lately it has been having
problems with consistency because of numerous suppliers. The restaurant operations
are divided into front-end (servers) and back-end (kitchen). The kitchen has Post-t
notes to boost employee morale, employees are cross-trained in all areas, and the
kitchen staff continually seeks improvements in cooking. Servers, however, have
few perks and minimal wages, and turnover is a bit of a problem. Tim’s primary
criterion for selecting servers in their ability to show up on time. Little
communication takes place between the front-end and back-end operations, other
than fulfilling orders. Tim makes sure that the servers refer any complaints to him
immediately.
The restaurant uses no automation because Tim believes it would get in the way of
customers’ special request. ‘This is the way of customers’ special requests. “This is
the way we’ve done it for the past 15 years and how we will continue to do it,” was
this response to a suggestion of using a computerized system to speed up orders and
eliminate delays. Tim formerly held staff meetings regularly, but recently he went
from one each week to one every five or six months. Most of his time is spend
focusing on negative behavior, and he can often be heard to say, “You can’t find
good people anymore.”
Jim’s Steak House is a family-owned restaurant in the same state. Jim uses only
the freshest meats and ingredients from the best suppliers and gives extra-large
portions of food to customers so they feel they are getting their money’s worth. Jim
pays his cooks high wages to attract high-quality employees,. Servers get 70 percent
of tips, bussers 20 percent, and the kitchen staff 10 percent to foster teamwork. Many
new hires come from referrals from current employees. Jim interviews all potential
employees and asks them many pointed questions relating to courtesy, responsibility,
and creativity. The restaurant sponsors bowling nights, golf outings, picnics, and
holiday parties or its employees. At Jim’s, birthday customers receive a free dinner,
children are welcomed with balloons, candy, and crayons, and sports fans are

19
 entertained with big screen TV’s. Jim walks around and constantly solicits customer
feedback. Jim visits many other restaurants to study their operations and learn new
techniques. As a result of these visits, Jim installed computers to schedule
reservations and enter orders to the kitchen.

Answering the case study:

I. Identify the problem
II. Specify Alternatives course of Action (ACAs)
III.Recommendation

References: Total Quality Management, James R. Evans & William M. Lindsay,

www.citewrite,qut.edu.

Course Code: BA 1
Description: Operation Mgt. (TQM)
Course-Yr. & Blk: MM-1D, MM-1E, MMI-F, MM-IH,MM-1G
Course Description: This course provides learners with an understanding of quality
control and improvement systems. The course includes study of topics related to quality
management approaches, design and implementation of quality-related procedures, and
related technologies. The focus of the course on enhancing goods, services, and the
business environment.
Objective (Midterm): at the end of the prelim period, the students should be able to
understand:
 Understand the background of three philosopher’s (Demings, Juran, and Crosby).
 Foundations of the Deming Philosophy
 Deming’s Profound Knowledge
 Deming’s 14 Points

20
  Juran’s three major quality process
 Crosby’s “Absolutes of Quality Management and the “Basic Element of
Improvement”.
 ISO 9000:2000
 Quality and Systems Thinking
 Quality in Manufacturing
 Quality in Education
 Quality in small Businesses and not-for-profits
 Quality in Practice Service Quality at the Ritz-Carlton Hotel Company
 Case Study

Chapter 2 Philosophies and Frameworks

In the 1890s, Caesar Ritz defined the standards for luxury hotel; these evolved
into the quality responsibilities of the employees-the “ladies and Gentlemen Serving
Ladies and Gentlemen”-of today’s Ritz-Carlton Hotel Company; anticipating the wishes
and needs of the guest, resolving their problems, and exhibiting genuinely caring
conduct toward guest and each other. The Ritz-Carlton management recognized that the
key to ensuring that these responsibilities are realized was to create a “skilled and
Empowered Work Force Operating with Pride and Joy.” This quality focused philosophy
led the company to be a two-time recipient of the Malcolm Baldrige National Quality
Award.
The “pride and joy: in work-and its impact on quality-is one the foundations of the
philosophy for the late W .Edwards Deming. Deming, along with Jospeh M. Juran and
Philip B. Crosby, are regarded as true. “management gurus” in the quality revolution.
Their insight on measuring, managing and improving quality have had profound impacts
on countless managers and entire corporations around the world. The Quality Profiles
on the following page highlight two companies that reflect these philosophies.

The Deming Philosophy

No individual has had more influence on quality management than Dr. W. Edwards
Deming (1900-1993). Deming received a PH.D in physics and was trained as a
statistician, so of his philosophy can be traced to these roots. He worked for Western
Electric during its pioneering era of statistical quality control in the 1920s and 1930s.
Deming recognized the importance of viewing management processes statistically.
During World War II he taught quality control course as part of the U.S. national

21
defense effort, but he realized that teaching statistics only to engineers and factory
workers would never solve the fundamental quality problems that manufacturing needed
to address. Despite numerous efforts his attempts to convey the message of quality to
upper-level managers in the United States were ignored.
Shortly after World War II Deming was invited to Japan to help the country take a
census. The Japanese had heard about his theories and their usefulness to U.S.
companies during the war. Consequently, he soon began to teach the statistical quality
control. His thinking went beyond meres statistics, however, Deming preached the
importance of top management leadership, customer/supplier partnerships, and
continuous improvement in product development and manufacture processes. Japanese
managers embraced these ideas, and the rest, as they say, in history Deming’s influence
on Japanese industry was so great that the Union of Japanese Scientist and Engineers
established the Deming Application Prized in 1951 to recognize companies that show a
level of achievement in quality practices. Deming also received Japan’s highest honor.
The Royal Order of the Sacred Treasure, from the emperor. The former chairman of
NEC Electronic once said. “There is not a day I don’t think about what Dr. Deming
meant to us.”
Although Deming lived in Washington, D.C., he remained virtually unknown in
the United States until 1980, when NBC telecast a program entitled “if Japan can… Why
Can’t We? The documentary highlighted Deming’s contribution in Japan and his later
work the Nashua Corporation. Shortly afterward, his name was frequently on the lips of
U.S. corporate executive Companies such Ford, GM, and Procter & Gamble invited him
to work with them to improve their quality. To their surprise, Deming did not lay out “a
quality improvement program” for them his goal was to change entire perspectives in
management, and often radically. Deming worked with passion until his death in
December 1993 at the age of 93, knowing he had little time left to make a difference in
this home country. When asked how he would like to be remembered, Deming replied,
“I probably won’t even be remembered.” Then after a long pause, he added, “Well,
maybe … as someone who spent his life trying to keep America from committing
suicide.

Deming’s Profound Knowledge system consists of four interrelated parts.

1. Appreciation for a system
2. Understanding of variation
3. Theory of knowledge
4. Psychology

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System The components of any system must work together if the system is to be
effective. Traditional organizations typically manage according to the functions in
vertical organization charts. However, when interaction occur among the parts of a
system (for instance, among function and department in an organization), managers
cannot manage the system well by simply managing the parts in isolation; they must
understand the processes that cross functional boundaries, align these processes toward a
common vision or goad, and optimize their interactions. Sub optimization (doing the
best for individual components) results in losses to everybody in the system. According
to Deming, it is poor management, for example, to purchase materials or service at the
lowest price or to minimize the cost such inferior quality that they will cause excessive
costs in scrap and repair during manufacture and assembly. Minimizing the cost of
manufacturing alone might result in products that do not meet designers; specifications
and customer needs. Such situations lead to a win-lose effect. Purchasing wins,
manufacturing loses; manufacturing wins, customers lose; and so on. To manage any
system, managers must understand the interrelationships among the systems;
components and among the people who work in it.
Deming stressed that system must be focused toward a purpose. Stockholders can
realize financial benefits, employees can receive opportunities for training and education
that will enhance their joy in work, customers can receive products and services that
meet their needs and create satisfaction, the community can benefit from business
leadership, and the environment can benefit from responsible management.
Systems thinking applies to man ageing people also. Pitting individual or
departments against each other for resources is self-destructive to an organization. The
individuals or departments will perform to maximize their own expected gain, not that of
the entire firm. Therefore, optimizing the system requires internal cooperation.
Similarly, using sales quotas or arbitrary cost-reduction goals will not motivate people to
improve the system and customer satisfaction; the people will perform only to meet the
quotas or goals and optimize their individual rewards. Traditional performance
appraisals do not consider interactions within the system. Many factors affect an
individual employee’s performance, including the following:
The training received
The information and resources provided
The leadership of supervisors and managers
Disruption on the job
Management policies and practices
Variation the second part of Profound Knowledge is a basic understanding of statistical
theory and variation. We see variation everywhere, from hitting golf balls for the meals

23
and service in restaurant. A device called a quincunx illustrated a natural process of
variation. In a quincunx, small balls are dropped from a hole in the top and hit a series of
pins as they fall toward collection boxes. The pins cause each ball to move randomly to
the left or the right as it strikes each pin on its way down. Note that most balls end up
toward the middle of the box. Note the roughly symmetrical bell shape of the
distribution. A normal distribution is bell-shaped. Even though all balls are dropped
from the same position, the end result shows variation.
The same kind of variation exists in any production and service process, generally
due to factors inherent in the design of the system, which cannot easily be controlled.
Today, modern technology has improved our ability to produce many physical parts with
very little variation; however, the variation that stems from human behavior and
performance continues to hamper quality efforts. Deming suggested that management
first understand and then work to reduce variation through improvement in technology,
process design and training. With less variation, both the producer and consumer benefit.
The producer benefits by needing less inspection, experiencing less scrap and rework,
and havening more consistent human performance, resulting in higher productivity ad
customer satisfaction. The consumer has the advantage of knowing that all products and
services have similar quality characteristics and will perform or be delivered
consistently. The advantage can be especially critical when the consumer is another firm
using large quantities of the product in its own manufacturing or service operations.
Theory of Knowledge The third part of Profound Knowledge is the “theory of
knowledge “the branch of philosophy concerned with nature and scope and knowledge,
its presumption and basis and the general reliability of claims to knowledge. Deming’s
system was influenced greatly by Clarence Irving Lewis, author of Mind and the World,
who stated, “There is no knowledge without interpretation.” If interpretation, which
represents activity of the mind, is always subject to the check of further experience, how
is knowledge possible at all?... An argument from past to future at best is probable only,
and even this probability must rest upon principles which are themselves that affect the
future should be effective. Any rational plan, however simple, requires prediction
concerning conditions, behavior, and comparison performance, and such predictions
would be grounded in theory.
For example, it is easy to learn a “cookbooks” approach to statistics-being able to
run a computer program or a Microsoft Excel procedure. Doing so, however, runs the
risk of using the tools inappropriately. Understanding the assumptions and theory
behind statistical tools and techniques is vital to ap-plying them correctly. Countless
managers use a similar cookbook approach to managing be reading the latest self-help
book and blindly following the author’s recommendations. Many companies jump on

24
the latest popular approach advocated by business consultants, only to see the approach
fail. Copying an example of success, without understanding it with theory, may lead to
disaster.
Deming emphasized that knowledge is not possible without theory, and
experience alone does not establish a theory. It one reason why Deming never gave
managers any “solution” or prescription for achieving quality. He wanted them to learn
and discover wat works and what is appropriate for their individual organizations. The
modern concept of organizational learning reflects the theory of knowledge. For
example, many project managers conduct debriefings or post mortem review upon
completion of projects.

Psychology Psychology helps us understand people, interactions between people and

circumstances, interactions between leaders and employees, and any system of
management. It is critical to designing a work environment that promotes employee
satisfaction and well-being. Much of Deming’s philosophy is based on understanding
human behavior and treating people fairly. People differ from one another. A true
leader must be aware of these differences and work toward optimizing everybody’s
abilities and preferences. Most mangers operate under the assumption that all people are
alike. However, a true leader understands that people learn in different ways and at
different speeds, and manages the system accordingly.
People are born with a need for love and esteem in their relationships with other
people. Some circumstance provide people with dignity and self-esteem. Conversely,
circumstances that deny people these advantages will smothers intrinsic motivation.
Fear does not motivate people; instead, not be productive and focused on quality
principles. Psychology helps us to nurture and preserve these positive innate attributes
of people; otherwise, we resort to carrots and sticks that offer no long term values.

Deming’s 14 Points

Date back serval decades to when many organizations were led by autocratic managers
who were driven by short-term profits and who had little regard for engaging the
workforce or interest in quality improvement. Deming was emphatic in his belief that
these managerial practices needed a radical overhaul and proposed the 14 Points for
achieving quality excellence. Although management practice today are vastly different
from when Deming first began to preach his philosophy, the 14 Points still convey
important insights for managers. We will briefly consider the key lessons of each.

25
Point 1: create a Vision and Demonstrate Commitment. An organization must
define its values mission, and vision of the future to provide long-term direction for its
management and employees. Deming believed that businesses should not exist simply
for profit; they are social entities whose basic purpose is to serve their customers and
employees. To fulfill this purpose, they must take a long-term view, invest in
innovation, training, and research, and take responsibility for providing jobs and
improving a firm’s competitive position. This responsibility lies with top management,
who must show commitment.
Point 2: Learn the New Philosophy Historical methods of management built on early
twentieth century principles of Frederick Taylor, such as quota-driven production, work
measurement, and organized this problem a long time ago and sought to change the
prevailing attitudes that ignored the importance of quality improvement. Specifically,
companies cannot survive if products of poor conformance quality or poor fitness for use
leave their customers dissatisfied. Instead, companies must take a customer-driven
approach based on mutual cooperation between labor and management and a never-
ending cycle of improvement. To effectively focus on the customers’ needs everyone,
from the boardroom to the stockroom, must learn the principles of quality and
performance excellence.
Today, many of these principles are indeed ingrained in managers and front-line
employees through training and reinforcement of organization values. However, people
change jobs and organizations generally have a short memory—both need to continually
renew themselves to learn new approaches and relearn many older ones.
Point 3: Understand Inspection Deming know that inspection had been the principal
means for quality control; companies employed dozens or even hundreds of people who
inspected for quality on a full-time basis. Routine inspection acknowledge that defects
are present, but does not add value to the product. Rather, it is rarely accurate, and
encourages the production of defective products by letting someone else catch and fix
the problem. The rework and disposition of defective material decreases productivity
and increases cost. In service industries, rework cannot be performed; external failures
are the most damaging to business.
Points 4: Stop Making Decisions Purely on the Basis of Cost. Purchasing
departments have long driven by cost minimization and competition among suppliers
without regard for quality. Yet, by tradition, the purchasing manager’s performance has
been evaluated by cost. Deming recognized that the direct costs associated with poor
quality materials that arise during production or during warranty periods, as well as the
loss of customer goodwill, can far exceed the cost “savings” perceived by purchasing.

26
Thus. Purchasing must understand its role as a supplier to production. This relationship
caused individual to rethink the meaning of an “organizations boundary”
Deming also urged businesses to establish long-term relationships with ferwer
suppliers, leading to loyalty and opportunities for mutual improvement. Management
previously justified multiple supplier for reasons such as providing protection against
strikes or natural disasters, while ignoring “hidden” cost such as increased travel to visit
suppliers, loss of volume discounts, increased setup charges resulting in higher unit
costs, and increased inventory and administrative expense. Most importantly, constantly
changing suppliers solely on the basis of price increases the variation in the material
supplied to production, because each supplier’s process is different in contrast, a reduced
supply base decreases the variation coming into the process, thus reducing scrap,
rework, and the need for adjustment to accommodate this variation. A long-term
relationship strengthens the supplier-customer and, allows the supplier to produce in
greater quantity, improves communication with the customer, and therefore enhances
opportunities or process improvement. Suppliers know that only quality goods are
acceptable if they want to maintain a longer-term relationship.

Points 5: Improve constantly and Forever Improvements are necessary in both

design and operations. Improved design of goods and services comes from
understanding customer needs and continual market surveys and other sources of
feedback, and from understanding customer needs and continual market survey and
ocher sources of feedback, and from understanding the manufacturing and service
delivery process. Improvements in operations are achieved by reducing the causes and
impacts of variation, and engaging all employees to innovate and seek ways of doing
their jobs more efficiently and effectively.
Traditionally, continuous improvement was not a common business practice:
today it is recognized as necessary means for survival in a highly competitive and global
business environment. The tools for improvement are constantly evolving and
organizations need to ensure that their employees understand and apply them effectively
which requires training, the focus of the next Pont.

Point6: Institute Training People are an organization’s most valuable resource; they
want to do a good job, but they often do not know how. Management must take
responsibility for helping them not only does training result in improvements in quality
and productivity, but it adds to worker morale, and demonstrates to workers that the
company is dedicated to helping them and investing in their future. In addition, training
reduces carriers between workers and supervisors, giving both more incentive to

27
improve further. For example, at Honda of America in Maryville, Ohio, all employees
start out on the production floor, regardless of their job classification.
Training must transcend such basic job skills, as running a machine or following
the script when talking to customers. Training should include tools for diagnosing
analyzing and solving quality problems and identifying improvement opportunities.
Today, may companies have excellent training programs for technology related to direct
production, but still fail to enrich the axillary skills of their workforce. .

Institute Leadership Deming recognized that one of biggest impediments to

improvement was a lack of leadership. The job of management is leadership, not
supervisions. Supervision is simply overseeing and directing work; leadership means
providing guidance to help employees do their jobs better with less effort. In many
companies, supervisors know little about the job itself because the position is often used
as an entry-level job for college graduate. The supervisor have never worked in the
department and cannot train the workers, so their principal responsibility to the product
out the door. Supervision should provide the link between management and the
workforce. Good supervisors are not police or paper-pusher, but rather couches, helping
worker to do a better job and develop their skills. Leadership can help to eliminate the
element of fear from the job and encourage teamwork.
Leadership was, is, and will continue to be a challenging issue I very organization,
particularly as new generations of manager replace those who have learned to lead. Tus
this Points of Deming’s will always be relevant to organizations.

POINTS 8: DRIVE OUT FEAR Driving out fear underlies many of Deming’s 14
Points. Fear is manifested in many ways fear of reprisal, fear of failure fear of the
unknown, fear of relinquishing control, and fear of change. No system can work without
the mutual respect of managers and workers. Workers are often afraid to report quality
problems because they might not meet their quotas. Their incentives pay might be
reduced, or they might be blamed for problems in the system. One of Deming’s classic
stories involved a foreman who would not stop production to repair a worn-out piece of
machinery. Stopping production would mean missing his daily quota. He said nothing,
and the machine failed, causing the line to shut down for four days. Managers are also
afraid to cooperate with other department, because the other managers might receive
higher performance ratings and bonuses because they fear takeovers or reorganizations.
Fear encourages short-term thinking.

28
POINTS 9: OPTIMIZE THE EFFORTS OF TEAMS Teamwork helps to break down barriers
between department and individuals. Barriers between functional areas occur when
manager fear they might lose power. Internal competition for raises and performance
ratings contributes to building barriers. The lack of cooperation leads to poor quality
because other departments cannot understand what their internal customers wan and do
not get what they need from their internal suppliers.

POINT 10: ELIMINATE EXHORTATIONS Many early attempts to improve quality

focused solely on behavioral change. However. Posters, slogan, and motivational
program calling for zero Defects. Do it right the First Time. Improve Productivity and
Quality and so on, are directed at the wrong people. They assume that all quality
problems are due to human behavior and that workers can improve simply through
motivational methods. Workers become frustrated when they cannot improve or are
penalized for defects.
Motivational approaches overlook he major source of many problems-the system.
Causes of variation stemming from the design of the system are management’s problem,
not the workers. If anything, workers attempts to fix problems only increase the
variation. Improvement occurs by understanding the nature of special and common
cause. Thus, statistical thinking and training, not slogan, are the best routes to
improving quality. Motivation can be better achieved from trust and leadership then
from slogans and goals.

POINTS 11: ELIMINATE NUMERICAL QUOTAS AND MANAGEMENT BY

OBJECTIVE (MBO) Many organization manage by the numbers. Measurement has
been, and often still is, used punitively. Standards and quotas are born of short-term
perspectives and create fear. They do not encourages improvement. Particularly if
rewards or performance appraisals are tied to meeting quotas. Workers may shortcut
quality to reach the goal. Once a standard is reached, little incentive remains for worker
to continue production or to improve quality; they will do no more than they are asked to
do.

POINTS 12: REMOVE BARRIERS TO PRIDE IN WORKMANSHIP People on the

factory floor and even in management were often treated as, in Deming’s words, “a
commodity.” Factory worker are given monotonous tasks, provided with inferior
machines, tools, or materials told to run defective items to meet sales pressures, and
report to supervisors who know nothing about the job. Salaried employees are expected
to work evenings and weekends to make up for cost-cutting measures that resulted in

29
layoffs of their colleagues. Many are given the titles of “management” so that overtime
need not be paid. Even employees in the quality profession are not immune. And
inspection technician stated “The profession always seems to end up being called the
troublemaker.” A quality engineer stated. “The managers over me now give little
direction, are very resistant to change, and do little to advance their people.” A quality
supervisor said, “Someone less qualified could perform my job…for less money.” A
quality supervisor said, “Someone less qualified could perform my jo… for less money.”
How can these individuals take pride in their work? Many cannot be certain hey will
have a job next year.
Deming believed that one of biggest barriers to pride in workmanship is
performance appraisal. Performance appraisal destroys teamwork by promoting
competition for limited resources, foresters mediocrity because objective typically are
driven by numbers and what the boss wants rather than by quality, focuses on the short
term and discourages risk taking, and confounds the “people resources” with other
resources. If all individuals are working within the system. Then they should bot be
singled out of the system to be ranked. Some people have to be “below average,” which
can only result to frustration if those individuals are working within the confines of the
system. Deming sorted performance into three categories: the majority of performances
that are the system on the inferior side. Statistical methods provide the basis for these
classifications. Superior performers should be compensated specially; inferior
performers need extra training or replacement.

POINTS 13 ENCOURAGE EDUCATION AND SELF-IMPROVEMENT. The

difference between this Points and Point 6 is subtle. Point 6 refers to training in specific
job skills; point 13 refers to continuing, broad education for self-development.
Organizations must invest in their people at all levels to ensure success in the long term.
A fundamental mission of business is to provide jobs as stated in Pont 1, but business
and society also have the responsibility to improve the value of the individual
developing the worth of the individual is a powerful motivation method.
Today, many companies understand that elevating the general knowledge base on
their work force-outside of specific job skills-returned many benefits. However, others
still view this task as a cost that can be easily cut when financial trade-offs must be
make.

POINTS 14: TAKE ACTION

Any cultural change begins with top management and includes everyone. Changing an
organization culture generally meets with skepticism and that many firm find difficult to

30
deal with, particularly when many of the traditional management practices. Deming felt
must be eliminated are deeply ingrained in the organization’s culture.

THE JURAN PHILOSOPHY

Joseph Juran (1904-) was born in Romania and came to the United States in 1912. He
joined Western Electric in the 1920s as it pioneered in the development of statistical
methods for quality. He spent much of his time as a corporate industrial engineer and in
1951, did most of the writing, editing, and publishing of the Quality Control Handbook.
This book, one of the most comprehensive quality manual ever written, has been revised
several times and continues to be a popular reference.
Like Deming, Juan taught quality principles to the Japanese in the 1950’s and was
a principal force in their quality reorganization. Juran also echoed Deming’s conclusion
the U.S. businesses face a major crisis in quality due to the huge cost of poor quality and
the loss of sales to foreign competition. Both men felt that the solution to this crisis
depends on new thanking about quality that includes all levels of the managerial
hierarchy. Upper management in particular required training and experience in
managing for quality.
Unlike Deming, however, Juran did not propose a major cultural change in the
organization, but rather sought to improve quality by working within the system familiar
to managers. Thus, his programs were designed to fit into a company’s current strategic
business planning with minimal risk of refection. He argued that employees at different
levels of an organization speak in their own “languages.” (Deming on the other hand,
believed in statistics should be the common language.) Juran stated that top
management speaks in the language of dollars; workers speak in the language things and
middle management must be able to speak both languages and translated between dollars
and things. Thus, to get top management’s attention quality issues must be cast in the
language they understand—dollars. Hence, Juran advocated the use of quality cost
accounting and analysis to focus attention on quality problems. At the operational level,
Juran focused on increasing conformance to specifications through elimination of
defects, supported extensively by statistical tools for analysis. Thus, his philosophy fit
well into existing management systems.
Juran’s definition of quality suggests that it should be viewed from both external
and internal perspectives, that is quality is related (1) product performance that results in
customer satisfaction; (2) freedom from product deficiencies, which avoids customer
dissatisfaction.” How products and services are designed, manufactured and delivered,
31
and serviced in the field all contribute to fitness for use. Thus the pursuit of quality is
viewed on two levels: (1) the mission of the firm as a whole is to achieve high design
quality; and (2) the mission of each department in the firm is to achieve high-
conformance quality. Like Deming, Juran advocated a never-ending spiral of activities
that includes market research, product development, design, planning for manufacture,
purchasing, production process control, inspection and testing and sales, followed by
customer feedback. The interdependency of these functions emphasized the need for
competent companywide quality management. Senior management must play an active
and enthusiastic leadership role in the quality management process.
Juran’s prescription focus on three major quality processes, called the Quality
Trilogy (1) quality planning – the process of preparing to meet quality goals; (2)quality
control—the process of meeting quality goals during operations; and (3) quality
improvement—the process of breaking through to unprecedented levels of performance.
At the time he proposed this structure few companies were engaging in sany significant
planning or improvement activities. Thus, Juran was promoting a major cultural shift in
management thinking.
Quality planning begins with identifying customers, both external and internal,
determining their needs, translating customer needs into specifications, developing
product features that respond to those needs, and developing the processes capable of
producing the product or delivering the service. Thus, like Deming, Juran wanted
employees to know who uses their product whether in the next department or in another
organization. Quality goals based on meeting the needs of customers and suppliers alike
at a minimum combined cost are then established. Next, the process that can produce
the product to satisfy customer’s needs and meet quality goals under operating
conditions must be designed. Strategic planning for quality similar to the firm’s financial
planning process-determines short-term and long-term goals, sets priorities, compares
result with previous plans, and meshes the plans with other operate strategic objective.

THE CROSBY PHILOSOPHY

Philip B. Crosby (1926-2001) was corporate vice president for quality at international
Telephone (ITT) for 14 years after working his way up from line inspector. After
leaving ITT. Je established Philip Crosby Associates in 1979 to develop and offer
training programs. He also authored several popular books. His first book Quality I
Free sold about 1 million copies ad was largely responsible for bringing quality to the
attention of top corporate managers is the United. States. The essence of Crosby’s
quality Philosophy is embodied in what he calls the “Absolutes of Quality Management
32
and Basic Element of Improvement “Crosby’s Absolute of Quality Management include
the following points.
 Quality means conformance to requirement not elegance. Crosby quickly
dispels the myth that quality follows the transcendent definition discussed in
Chapter 1. Requirement must be clearly stated so that they cannot be
misunderstood. Requirement act as communication devices and are ironclad.
Once requirements are established, then one can take measurements to determine
conformances to those requirements. The nonconformance detected is the
absence of quality. Quality problems become nonconformance problems, that is,
variation in output. Setting requirements is the responsibility of management.
Crosby maintained that once the requirements are specified, quality is judged
solely on whether they have been met. Therefore these requirements must be
clearly defined by management and not left by default to front-line personnel.
 There is no such thing as a quality problem. Problems must be identified by
those individual or departments that cause them. Thus, affirm may experience
accounting problems, manufacturing problem, design problem, font-desk
problems, and so on. In other works, quality originates in functional departments.
 There is no such thing as the economics of quality, doing the job right the
first time is always cheaper. Crosby supports the premise the “economics of
quality” has no meaning. Quality if free. What cost money are all actions that
involve not doing jobs right the first time. The Deming chain reaction sends a
similar message.
 The only performance measurement is the cost of quality which is the
expense of nonconformance. Crosby noted that most companies spend 15 to 20
percent of their sales dollars on quality costs. A company with a well-run quality
management program can achieve a cost of quality that is less than 2.5 percent of
sales, primarily inte prevention and appraisal categories. Crosby’s program calls
for measuring and publicizing the cost of poor quality. Quality cost data are
useful to call problems to management’s attention, to select opportunities for
corrective action, and to track quality improvement over time. Such data provide
visible proof of improvement and recognition of achievement. Juran supported
this approach.
 The only performance standard “Zero Defect (ZD) Crosby felt that the Zero
Defects concept is widely misunderstood and resisted. May though it to be a
motivational program. It is described as follows:
Zero Defect is a performance standard. It is the standard of the craftsperson
regardless of his or her assignment to them of ZD is do it right the first time. That
33
 means concentrating on preventing defects rather than just finding and fixing
them.
People are conditioned to believe that error is inevitable: thus they not only
accept errors. They anticipate it. It does not bother us to make a few error in our
work… to err is human. We all have our own standard in business or academic
life—our own points at which errors begin in bother us. It is good to get an A in
school, but it may be OK to pass with C.
We do not maintain these standard however, when it comes to our peroneal
life. If we did, we should expect to e shortchanged every now and then when we
cash our paycheck we should expect hospital nurses to drop a constant
percentage of newborn babies. We as individuals do not tolerate these things.
We have a dual stander; one for ourselves and one for our work.
Most error is caused by lack of attention rather than lack of knowledge.
Lack of attention is created when we assume that error is inevitable. If we
consider this condition carefully, and pledge ourselves to make a constant
conscious effort to do our jobs right the first time, we will take a giant step toward
eliminating the waste to rework, scrap, and repair that increases cost and reduces
individual opportunity.
Juran and Deming, on the other hand, would point out the uselessness, or even hypocrisy
exhorting a line worker to’ produce perfection because the overwhelming majority of
imperfections stems from poorly designed manufacturing systems beyond the workers’
control.
Crosby’s Basic elements of Improvement were Determination, Education, and
Implementation. Determination means that top management must take quality
improvement seriously. Everyone should understand the Absolutes, which can be
accomplished can be through education. Finally every member of the management team
must understand the implementation process.

ISO 9000-2000
As quality became a major focus of businesses throughout the world, various
organizations developed standards and guideline. Terms such as quality management,
quality control, quality system, and quality assurance acquired different, sometimes
conflicting meanings form country to country within a country, and even within an
industry. When the European Community moved toward the European free trade
agreement, which went into effect at the end of 1992, quality management became a key
strategic objective. To standardize quality requirements for European country, a
specialized agency for standardization, the International Organization for

34
Standardization (IOS) founded in 1946 and composed of representatives from the
nations standard bodies of 91 nations, adopted a series of written quality standards in
1987. They were revised in 1994, and again (significantly 2000. The most recent
version is called the ISO 9000-2000 family of standards.
The standards were created to meet five objectives:
1. Achieve, maintain, and seek to continuously improve product quality (including
services) in relationship to requirements.
2. Improve the quality of operations to continually meet customers; and stakeholders
and implied needs.
3. Provide confident to internal management and other employees that quality
requirement are being fulfilled and that implements taking place.
4. Provide confidence to internal management and other employees that quality
requirements are being achieved in the delivered product.
5. Provide confidence that quality system requirements are fulfilled.

ISO 9000-2000 Quality Management Principles

Principles 1: Customer focus
Organizations depend on their customers and therefore should understand current and
future customer needs, should meet customer requirements, and strive to exceed
customer expectations.
Principles 2: Leadership
Leaders establish unity of purpose and direction of the organization. They should create
and maintain the internal environment in which people can become fully involved in
achieving the organization’s objectives.
Principles 3: involvement of People
People at all levels are the essence of an organization and their full involvement enables
their abilities to be used for the organization’s benefit.
Principles 4: process Approach
A desired result is achieve more efficiently when activities and related resources are
manage as a process.

Principles 5: system approach to Management

Identifying, understanding, and managing interrelated processes as a system contributes
to the organization’s effectiveness and efficiency in achieving its objectives
Principle 6: Continual Improvement
Continual improvement of the organization’s overall performance should be a permanent
objectives of the organization.

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Principle 7: factual Approach to Decision Making
Effective decision are based on the analysis of data and information.
Principle 8: mutually Beneficial Supplier Relationships
Organization and its suppliers are interdependent and a mutually beneficial relationship
enhances the ability of both to create value.

Implementation and Registration

Implementing ISO 9000 is not an easy task. The ISO 9000 standards originally were
intended to be advisory in nature and to used for two-party contractual situations
(between a customer and supplier) and for internal auditing. However, they quickly
evolved into criteria for companies who wished to “certify” their quality management or
achieve “registration” through a third-party auditor, usually a laboratory or some other
accreditation agency (called a registrar). This process began in the United Kingdom.
Rather than a supplier being audited for compliance to the standards by customer, the
registrar certifies the company, at this certification is accepted by all of the supplier’s
customer.

CHAPTER 3 Total Quality Organization

Quality and systems thinking
A production system is composed of many smaller, interacting subsystems. For
example, a McDonald’s restaurant is a system that includes the order-taker/cashier
subsystem, grill and good preparation subsystem, drive-through subsystem, purchasing
subsystem, and training subsystem. These subsystems are linked together as internal
customers and suppliers. Likewise, every organization is composed of many individual
function, which are often seen as separate units on an organization is composed of many
individual function, which are often seen as separate units on an organization chart.
However, manager need to view the organization as whole and concentrate on the
important organizational linkages among these functions.
QUALITY IN MANUFACTURING
Well-developed quality assurance systems have existed in manufacturing practices,
changes that are particularly evident in areas such as product design, human resource
management, and supplier relations. Product design activities, for example, now closely
integrate marketing, engineering, and manufacturing operations. Human resource
practices concentrate on empowering workers to collect and analyze data, make critical
operations decision, and take responsibility for continuous improvement, thereby
moving the responsibility for quality form the quality control department onto the
factory floor. Suppliers have become partners in product design and manufacturing

36
efforts. Many of these efforts were stimulated by the automobile industry as For, GM,
and Chrysler forced their network of suppliers to improve quality during the 1980s as
they did so quality efforts were pushed down the automotive supply chain.

QUALITY IN HEALTH CARE

One service industry that faces continuing pressure to improve quality –and one with the
fastest growing interest in quality is-health care. Quality has been a focus for the
industry for some time. In 1910, Ernest Codman, M.D., proposed the “end result system
of hospital standardization. Under this system, a hospital would track every patient it
treated long enough to determine whether the treatment was effective. If the treatment
was not effective, the hospital would then attempt to determine why, so that similar
cases could be treated successfully in the future. The American College of Surgeons
(ACS) developed Minimum Standards for Hospitals in 1917 and began inspections the
following year. The Joint Commission on Accreditation of Healthcare Organization
(JCAHO)-the principal accreditation agency for health care-was created in 1851 through
a collaboration of ACS and several other agencies to provide voluntary accreditation. Its
mission is “to continuously improve the safety and quality of care provided to the public
through the provision of health care accreditation and related services that support
performance improvement in health care organization.” By 1970, accreditation standards
were recast to represent optimal achievable levels of quality, rather than minimum
essential levels of quality. JCAHO issued new standard on 1992 requiring all hospital
CEOs to educate themselves on CQI (continuous quality improvement)-the term used in
the health care profession to denote quality initiatives methods. The new standards
emphasize performance improvement concepts and incorporate quality improvement
principles more fully in areas such as surgical case review, blood usage evaluation and
drug usage evaluation. Further information about the Joint Commissionmay be found at
its Web Site.
Despite accreditation and collaborative efforts aimed to quality, the industry faces
considerable challenges. A 1998 study by the President Advisory Commission on
Consumer Protections and Quality in the Heath Care Industry entitled Quality First:
better Health Care for All Americans, noted several types of quality problems in health
care. They include:
1. Avoidable errors. Too many Americans are injured during the course of their
treatment, and some die prematurely as a result. For example, a study of injuries
to patients treated in hospitals in New York State found that 3.7 percent
experienced adverse events, of which 13.6 percent led to death and 2.6 percent to

37
 permanent disability, and the about one-fourth of these adverse events were due to
negligence. A national study found that from 1983 to 1993, deaths due to
medications errors rose more than twofold, with 7,391 deaths attributed to
medication errors in 1993 alone.
2. Underutilization of services. Millions of people do not receive necessary care
and suffer needless complications that add to health care costs and reduce
productivity for example, a study of Medicate patients with myocardial infraction
found that only 21 percent of eligible patients beta blockers, and that the mortality
rate among recipients was 43 percent less than that for nonresidents. And
estimated 18,000 people die each year from heart attacks because they did not
receive effective intervention.
3. Overuse of service. Millions of Americans receive health care services that are
unnecessary increase costs, and often endanger their health. For example, and
analysis of hysterectomies performed by seven health plan estimated that one in
six was inappropriate.
4. Variation in services. A continuing pattern of wide variation continues in health
care practice including regional variations and small-area variations. This pattern
clearly indicates that the practice of health care has not caught up with the science
of healthcare to ensure evidence based practice in the United States.

The Commission’s report included more the 50 recommendation to address these issues.
These recommendations, which include the use of measurements, stakeholder
participation, error prevention, and continuous improvement, support the underlying
philosophy of total quality that we described in Chapter 1.
In 1990, SSM Health Care, profiled at the beginning of this chapter, became one
of the healthcare organizations in the United States to implement COI throughout its
entire system. Five years later, after visiting manufacturing winners of the Baldrige
Award and learning about their practices. SSM instituted a new leadership plan,
improved strategic and financial planning processes. A new conference to share best
practice’s among its hospitals, and an improved CQI model that permits rapid
identification and correction of potential problems. In 2002, SSM became the first
health care winner of the Baldrige Award. Other example include Boston’s New
England Deaconess Hospital, where teams identify problems that add unnecessary days
to hospital stays, achieving a 10 percent overall decrease in length of hospital stay in two
years; and Nash General Hospital in Rocky Mount, North Carolina, Which examined
Processed with the emergency department and was able to reduce the length of stay y
more than 50 percent.

38
 As another example, the Virginia Beach Ambulatory Surgery Center (VBASC)
built a new patient surgical facility using the principles of total quality. The center
engaged employees writing a policy and procedure manual. It continues to ask their
opinions on the quality of their work as individuals and the organization as a whole, to
encourage and support professional development, to empower employees to develop and
manage innovative programs, to listen to customer and act on their suggestions, to view
surgeon and their office staff as key customer demonstrate strong internal customer
focus to measure ad objectively assess everything it does and to hold monthly CQI
meetings.

QUALITY IN EDUCATION
Education represents one of the most interesting and challenging areas for improvement.
Attacks on the quality of education in the United States, from kindergarten through the
12 grade (K-12) and at colleges and universities provided rallying cry for education
reform during the las decade. One of the earliest and most widely publicized stories of
the successful use of quality in education is that of Mt. Edgecumbe High School in
Sitka, Alaska. Mt. EDgecumbe is a public boarding school with some 200 students,
often from problem homes in rural Alaska. Many are Native Americans, who are
struggling to keep their culture alive while learning to live and work in American society
David Langford, a teacher, brought the quality concepts to Mt. Edgecumbe after hearing
about them a meeting at MCDonnell-Douglas Helicopter Company. After reading many
books by quality gurus such as Deming, Juran, and Crosby, Langford took some students
in a computer club on a trip to Gibert (Arizone) high Schoo. There, they observed how
Delores Christiansen taught continuous improvement in her business classes. They
also visited companies in the Phoenix area that were using quality principles. The
students, with the coaching of Langford, began to use quality concepts to improve
school processes. For example, the students tackled the problem of too many tardy
classmates. By investigation the reasons for tardiness, the students persuaded the
administration to drop the punishment for tardy students, and were able to reduce the
average number of late occurrences per week from 35 to 5.
As an even more radical change, the school dropped the tradition grading system.
Instead, students use statistical techniques to keep track of their own progress. No
assignment is considered finished until it is perfect. Eliminating grades has had a
positive effect. One student, James Penemarl reported, “I found myself learning a lot
more. It’s not the teacher having to check my progress, it’s me having to check my
progress. See, however much I learn is up to me, and if I want to learn, I’m going to go
39
out and learn.” What they call CIP, or the continuous improvement proves, has been an
obvious success (approximately 50 percent of students now go on to college, yet the
messages that it’s not a “quick fix,” and (2) there’s always room for improvement.
Current information, experiences of teachers and students, and articles on applying TQ
in secondary education can be obtained at Mt. Edgecumbe’s Web site.

QUALITY IN SMALL BUSINESSES AND NOT-FOR-PROFITS

Small businesses and not-for-profits have generally been slow to adopt quality
initiatives. In most cases, this lag is a result of a lack of understanding and knowledge of
what needs to be done and how to do it, because managers are wrapped up in
entrepreneurial activities that typically focus on sales strategies and market grow, day-
to-day cash flow problems, and routine firefighting. In addition, small firms and not-for-
profits often lack the resources needed to establish maintain more formal quality
systems. However, in viewing the three principles of TQ, a focus on customs is clearly
vital to small enterprises; the company president or founder is often the principal contact
with key customer and knows them intimately. Most small businesses live or die from
their customer relationship practices, but the other two TQ principles-teamwork and
participation, and process focus and continuous improvement-are generally not well
addressed. Small business executives, especially in family-owned enterprises, often
have a “Command-and control” attitude that dominates decision making, leaving little
discretion and empowerment to employees. In addition, processes tend to be highly
unstructured and not based on adequate data and information. Simply getting by each
day often takes precedence over long-term planning and improvement activities.
Many other characteristics of small firms adversely affect the implementation of
TQ principles. These characteristics include the following.
The lack of market clout, which may impact a small firm’s ability to get suppliers
involved in quality efforts
Not recognizing the importance of human resource management strategies in
quality, and therefore experiencing lower levels of employee empowerment,
involvement, and quality related training.
Lack of professional management expertise and the short-term focus, which often
result in inadequate allocation of resources to TQ efforts
Lower technical knowledge and expertise, making it difficult forms smaller firms
to effectively use quality tools and improvement techniques
The informal nature of communication and lack of structured information system,
which inhibit implementation

40
Nevertheless, many successful small businesses have shown that quality initiatives can
be successful accomplished.

QUALITY IN THE PUBLIC SECTOR

Quality in the public sector-federal, state, and municipal government-has not achieved
growth and momentum as rapidly as in the private sector. Nevertheless, many public
sector entities have make remarkable strides to incorporate the principles of quality into
their operations.

QUALITY IN PRACTICE
SERVICE QUALITY AT THE RITZ-CARLTON HOTEL COMPANY
Caesar Ritz the concept of a luxury hotel in the 1890s. In 1992 the Ritz-Carlton Hotel
Company became the first hospitality organization to receive the Malcolm Baldrige
National Quality Award; in 1999 they became the second company to win the award a
second time, a testament to their continuous journey of improvement. The hotel industry
is a very competitive business, one in which consumer place great emphases on
reliability, timely delivery, and value. The Ritz-Carlton focuses on the principal
concerns of its main customers and strives to provide them with highly personalized
caring service attention to employee performance and information technology are two
of the company’s many strengths that helped it to achieve superior quality.
The Ritz-Carlton operates from an easy-to-understand definition of service quality
that is aggressively communicated and internalized at all levels of the organization. Its
Three Steps of Service, Motto, Employee Promise, Credo, and Basics-collectively
known as the Gold Standards and instilled in all employees through extensive training
approaches. They allow employees to think and act independently with innovation for
both the benefits of the customer and the company. The company’s approaches for
selecting and training employees were discussed earlier in this chapter.
THE Ritz-Carlton uses many sources of information to understand its customers. These
include alliance with travel partners such as airlines and credit card companies; focus
groups and customer satisfaction results; complaints, claims, and feedback from the
salesforce; customer interviews; travel industry publications and studies; and even
special psychological studies to understand what customers mean, not what they say, and
how to appeal to the customer in the language they most understand.
A formal strategic planning process sets business directions to achieve the
company’s long-term vision: “To be the Premier Worldwide Provider of Luxury Travel
and Hospitality Provider of Luxury Travel and Hospitality Products and Services” Upper
managers at the corporate and hotel feel conduct monthly performance reviews of the
41
strategic plan, focusing on key indicators that reflect employee pride and joy, customer
loyally, financial performance, and process performance. Quarterly reviews focus on
opportunities for improvement and innovation. A variety of comparative data on
competitors and other world-class organizations is used to evaluate and improve their
practices. For example, data revealed that front des turnover was higher than usual the
company found out the certain airlines were paying higher wages and attracting their
employees. The Ritz-Carlton reevaluated its compensation policy to match the airlines
and actually reduced its total costs by eliminating a supervisor who was required to
constantly monitor new employees
The Ritz-Carlton gathers and uses customer-satisfaction and quality-related data
on a daily basis. Information systems involve every employee and provide critical,
responsive data on guest preferences, quantity of error-free products and services, and
opportunities for quality improvement. The rack a set of serve quality indicator (SQI)
which represent the 12 most serious defects that can occur during regular operations.
Each day an index is computed and disseminated to the workforce and reviewed by hotel
managers.
Each production and support process is assigned an “executive owner: at the
corporate office and a “working owner” at the hotel level, who are responsible for the
development and improvement of these processes. They have the authority to define the
measurements and determine the resources needed to manage these processes. The
G”GreenBook,” a handbook for employees, describes a nine-step quality improvement
process to guide the design, control, and improvement of all processes, and is
emphasized during new employee training and continual development. The Ritz-Carlton
even has a process to overcome cultural resistance to change;: stress the importance of
the change, express confidence that the change can be made, provide a reason why
people should make the change as a group, and allow time to find an accommodation to
the change.
THREE STEPS OF SERVICE

1
A warm and sincere greeting.
User the guest name, if and
When possible
2
Anticipation and compliance with guest needs.
3
Fond farewell. Give them
A warm good-bye, if and
When possible.
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 “We Are
Ladies and
Gentlemen
Serving
Ladies and
Gentlemen”

THE RITZ-CARLTON

CREDO
The Ritz-Carlton Hotel is a place where the genuine care and
comfort of our guests is our highest mission.

We pledge to provide the finest personal service and facilities

for our guest who will always enjoy a warm, relaxed et refined
ambience.

The Ritz-Carlton experience enlivens the senses, instills well-

being, and fulfills even the unexpressed wishes and needs of
our guest.

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Ritz-Carlton Service Quality indicators

SQI Defects Points

1. Missing Guest Preference 10
2. Unresolved Difficulties 50
3. Inadequate Guestroom Housekeeping 1
4. Abandoned Reservation Calls 1
5. Guestroom Changes 5
6. Inoperable Guestroom Equipment 5
7. Unready Guestroom 10
8. Inappropriate Hotel Appearance 5
9. Meeting Event Difficulties 5
10.Inadequate Food/Beverage 1
11.Missing/Damage Guest Property/
Accidents 50
12. Invoice Adjustment 3

Case Study

TOYOTA MOTOR CORPORATION, LTD.

The Toyota brand name has earned an international reputation for quality.
The roots of Toyota Motor Corporation, founded in 1937, stem from the
Toyada Automatic Loom Works. Saichi Toyoda invented a loom with an
automatic stopping function; whenever a tread boke or the machine ran out
of thread, it stopped automatically. This approach was built into
automotive machine ran out of thread, it stopped automatically. This
approach was built into automotive assembly lines to improve quality and
productivity and led to the development of the “Toyota Production
System,” which has commonly become known s lean production. A
significant feature of lean production is the practice of continuous

44
improvement by every worker, demanding the questioning of every process
and testing of all assumptions. Errors and defects are viewed as learning
opportunities to remove waste and improve efficiency. In 1951, Eiji
Toyada instituted a system of creative suggestions based on the motto
“Good think in, Good Products,” which is prominently displayed in every
production facility: one example is the Rakuraku seat, a comfortable work
chair mounted on the tip of an arm that allows a line worker to easily get
into an out of cramped car body interiors. In 2000, more than 65000
suggestions were submitted-almost 12 per employee and 99 percent were
adopted.
At Toyota, everybody helps whenever they can. Even top and middle
managers are well-known for getting their “hand dirty” by helping workers
on the production line when necessary. Toyota uses games, competitions,
and cultural events to promote its 3C’s: creativity, challenge, and courage.
It trains workers extensively, not only in job skills, but also in personal
development that focuses on positive attitudes and a sense of responsibility.
Toyota’s education system includes formal education, on-the job training,
and informal education.
Toyota is implementing a direct monitoring system that supports
quality. For example, its French plant is connected by a broadband system
to the head office, enabling it to transit video, audio, and facility
performance data, engineering Japan can monitor the data of the plant’s
operation in real time, check machinery utilization rates, diagnose
malfunctions, and provide ideas for improvement. Information technology
and e-commerce are also used to expand relationships with suppliers and
customers. For example, customers may request quotes and gather
information that previously was only available to dealers.
Shotaro Kamiya, first president of Toyota Motor Sales, stated. “The
priority in receiving benefits from automobile sales should be in the order
of the customer, then the car dealer, and lastly the maker, the attitude in the
best approach in winning the trust of customers and dealers and ultimately
bring growth to the manufacture” The guiding principles of Toyota are as
follows:

45
 1. Honor the language and spirit of the law of every nation and
undertake open and fair corporate activities to be a good corporate
citizen of the world.
2. Respect the culture and customs of every nation and contribute to
economic and social development through corporate activities in the
communities.
3. Dedicate ourselves to providing clean and safe products and to
enhancing the quality of life everywhere through all our activities.
4. Create and develop advance technologies and provide outstanding
products and services that fulfill the needs of customers worldwide.
5. Foster corporate culture that enhances individual creativity and
teamwork value, while honoring mutual trust and respect between
labor and management.
6. Pursue growth in harmony with the global community through
innovative management.
7. Work with business partners in research and creation to achieve
stable, long-term growth and mutual benefits, while keeping
ourselves open to new partnerships

Toyota has approximately 40 production facilities in more than 20

countries and regions outside Japan. When Toyota began expanding outside
of Japan, many believed that the culture could not be copied or applied to
foreign cultures, especially in the United States. With a focus of
incorporating the best element of Japanese and local traditions, while
avoiding the weaknesses of both. Toyota s proven that its approaches and
culture can work everywhere.
One popular phrase at Toyota is “change or die.” The company
continually seeks to redefine itself to adapt to changes in society and the
business environment. Toyota recent vision is captured by the phrase
harmonious growth-harmony between man, society, and the environment.

We wish to make Toyota not only strong but a universally admired

company, winning the trust and respect of the world. We must be a company
that is accepted wholeheartedly by people around the world, who would
think it natural if Toyota became No.1 in size, since thus contribute
immensely to local communities. That is the goal of “harmonious Growth”
and what I regard as

46
Corporate video

I. Identify problems
II. Give at least 4 Alternative Course of Action
III. Give two Recommendation

CAROLINE E.
BASILAN
College
Instructor

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