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by H. James Harrington and Thomas McNellis

Since their early years, when they were known only as bastions of statisticians and inspectors, quality departments have developed into some of the most influential and integrated operations in international business. How has this come about? How are the eye-popping expectations demanded by today's CEOs met by successful quality leaders? They all have similar approaches to building upon change to develop both their individual values and their quality operations' increasingly important roles in pursuing customer satisfaction. Inherent in this process is the ability to adapt quickly and advantageously to change.

You might compare organizational change to driftwood washing onto the shore. With each new wave, expectations arise as to where this driftwood (change) will land. If it's somewhere expected, then someone skilled in the quality trade might pick it up and transform it into something valuable. But the driftwood might just as readily float back out to sea, carried away by strong undertows of resistance. The business world can be just as rough and unpredictable as the sea.

Organizations constantly face the need to change. New organizational paradigms, supply chain management, customer-relationship management and continuous strategic improvement initiatives are just a few examples of corporate changes that have transformed the way businesses operate.

SixKey Values

One area that has grown significantly during this change is the quality operation. No longer labeled a department, quality is woven into every aspect of a business and involves everyone from mail clerks to CEOs. It's not unusual for one quality initiative to deliver tens of millions of dollars in savings, which directly affects a company's bottom line. That kind of success was unheard of in years past.

What makes quality professionals successful in today's rapidly changing environment, where expectations flow and resources ebb? They follow a simple operational excellence equation that adds up to creating pure quality value. During the past three years, we've studied a number of successful quality professionals from international companies and discovered that the secret of top performers lies in their methods to harness change and implement innovative ideas. We've identified six characteristics that add up to quality value. By developing these characteristics, quality professionals can realize significant gains in value for themselves, their teams and their operations.

Developing Personal Value

Analyze areas of change within the organization at specific intervals.
Personally assess your strengths.
Determine how you might use your strengths to enhance performance.
Note if there are gaps in knowledge that can hinder your effectiveness.
Take training courses in areas in which knowledge is lacking.
Pursue certification in areas that provide personal value.
Maintain certification with courses that can result in greater efficiency.
Develop a personal action plan to improve yourself.
Use change as an opportunity for innovation.

Developing personal value

As the world changes, so does the quality professional's role. Yesterday's standards for success are no longer relevant, and current business models are replaced by tomorrow's ideas. Markets are international, and the Internet has collapsed the space-time "virtual business" continuum to the point that operating

models are launched for future competitive states. Although larger companies are no longer limited by previously defined business boundaries, they're still catching up to their smaller, more nimble competitors by optimizing the Internet's full potential. Partnerships and mergers have complemented product lines to provide customers with a "one-stop shopping" experience. Because quality professionals must monitor and report business-survival metrics while implementing competitive advantage via improvement projects, it's imperative that they maintain pace with this whirlpool of constant change.

Quality professionals convert change into an opportunity to develop personal value by aligning their skills and capabilities to the changing organization. No longer spectators, they must manage their own destinies by building on their strengths and filling in the gaps that change creates.

Both education and certification are essential for developing personal value, but neither happens on its own. In fact, certification has become such an important conduit for business optimization that some companies are developing their own quality certification programs. In some cases, certification is as important as a college degree, and employees are denied promotion until they complete minimal certification requirements. Such policies guarantee that a professional has reached a level of expertise in an area that's critical to conducting business. Process improvement, project management, certified quality manager and Six Sigma Black Belt certifications are strong opportunities for developing and maintaining personal value.

To maintain certification, the professional must continue to improve by taking training classes between recertification dates. Additional training and/or education offers an opportunity to meet instructors who've researched areas of change. Discussions and class exercises provide knowledge to those who are filling the gaps caused by change. Knowledge enables new channels of perception and discovery and is the only asset that can be shared with a co-worker without depleting any personal reserve.

For example, one of the principal components of ISO 9001:2000 is a greater emphasis on management's role in enabling process efficiency. The quality professional must understand how the new standard affects the business initiative to avoid tarnishing the company's reputation. The cost of this education should be viewed as an investment in a critical asset of the company: the quality professional.

Developing Strategic Value

Develop a flexible business structure.
Customize products and services so change can become an add-on to the product.
Partner with innovators.
Assimilate change immediately.
Communicate the benefits of change to employees, suppliers and customers.
Understand process steps and modify immediately to benefit customers.
Place knowledge on an intranet for general access by those who need it.
Create alliances with outsourcing partners who absorb the change for you.
Develop metrics to monitor effectiveness of change.

Developing strategic value

In the virtual world, change is both inevitable and continuous. Sales transactions are conducted at the speed of light, and enterprises must focus on market opportunities over the Web, cost-cutting through outsourcing and integrating systems--whether they involve suppliers or customers. This environment challenges organizations to turn change into advantage as quickly as possible, which is why quality operations pay such close attention to company strategy. Quality professionals know that customers are demanding more personalized service. In fact, process improvement projects usually begin by defining how the tactical schedule will align with strategic goals.

However, companies must do more than focus on products and services to meet their customers' day-to-day needs. To strengthen the value equation and react quickly to market changes, they must build very flexible business models. Because business tactics align with corporate strategy, misalignment can result from business models that don't take change into account. With misalignment come negative effects such as unproductive resources, nonvalue-added tasks and expensive process steps, which contribute to misguided team ventures, inordinate time constraints and budget overruns.

 

Turning Change Into Advantage

This phenomenon also tends to reflect unfavorably on the production cycle, depleting revenue rather than generating it and exposing competitive vulnerabilities. To provide greater value, a business strategy should be broken down into discrete project components that include both short- and long-term elements. This way, the strategy is nimble enough to transform change into tactics that reduce defects, reduce cycle time and increase customer satisfaction. As companies downsize into seamless models, strategy will be based more on customer needs and individualized advantage. Through industry benchmarking, the quality professional is in an ideal position to notice change. The quality operation can help the company develop strategic flexibility by identifying where change should be used to enhance market position.

Developing Organizational Value


Break down barriers that prevent fresh ideas and innovation.
Partner with innovative suppliers.
Utilize the Web for customer convenience and innovation.
Set up electronic funds transfer to enhance cash flow.
Provide EDI links for supplier efficiency.
Mentor and train everyone in quality for optimal performance.
Establish a feedback loop that promotes continuous improvement.
Develop metrics that result in performance gains.
Incorporate the benefit of change that results in gains.

Developing organizational value

The quality operation has usurped the quality department and consists of a dotted-line relationship between change agents in the field and a quality leader who works with the executive staff at corporate headquarters. Throughout the company, sponsors champion process improvement initiatives in their sphere of influence.

Organizations are also adapting to change by downsizing their processes and structures. The seamless model is now the norm for conducting business. The term "seamless" derives from the concept that silo areas are minimized, if not eliminated, and every process either touches the customer or is otherwise outsourced. This lean, suppliers-input-process-output-customers model is fully integrated and makes the most of data warehouse knowledge, concept-through-customer cycle time, Web-based transactional processes, and real-time feedback loops to monitor customer suggestions and process innovation. Barriers that prevent improvement are removed in this model. Fresh ideas that improve products and services are part of everyday team dynamics.

The quality professional's role in a seamless business model is to drive organizational value. He or she does this by monitoring metrics, facilitating continuous improvement sessions, auditing outsourcing partners and verifying supplier performance. The quality feedback loop represents the organization's pulse and nurtures innovative changes by analyzing the pace of progress. The quality professional verifies that the company fulfills customer requirements completely and profitably. Whether it's dealing with government regulations, supplier performance, input optimization, electronic process reviews, manufacturing cost assessments, product and service evaluations, or customer satisfaction, the quality organization operates as a catalyst for success.

Developing Customer Value


Enable Web transaction processes for customer convenience.
Determine value from the customer’s point of view.
Improve processes to focus on the customer’s needs.
Infuse customer short- and long-term objectives into business strategy.
Direct change toward improving the customer experience.
Listen to customer complaints, and then eliminate the pain.
Establish metrics for customer satisfaction.
Open the door to customers’ ideas via a Web suggestion box.
Focus on the customer’s interpretation of quality.
Allow suppliers and partners to learn from the customer.

 

Electronic Data Interchange


Developing customer value

Every quality professional knows that the customer is the cornerstone of the value equation. Therefore it's critical to engage the customer in business strategy. The quality organization must fully understand how the customer defines both quality and value. Many customers consider these concepts as separate entities with differing characteristics. For example, quality can be based on product or service standards and expectations, whereas value might be representative of total customer satisfaction.

Together, the two components provide insight into how well a company meets all of the customer's needs. Obtain this essential information directly from the end-user, and then compare it against the viewpoints of distributors, independent agents and internal executives to analyze misalignment between strategy and tactics. Value will usually change from customer to customer, so there must also be a way to maintain that information. A data warehouse usually fulfills this requirement.

 

Once a customer's needs are understood and fulfilled, changes in customer requirements can be easily absorbed into the flexible, short-term strategic goals. In this way, the quality professional creates a value relationship with the customer. By blending the customer's short- and long-term requirements into

business strategy and tactics, an organization improves its chances of gaining the customer's commitment and loyalty. Customer satisfaction measurements are important in maintaining the gain. These measurements should be used to further refine the company's direction of change.

 

Developing Team Member Value

Focus team member initiatives on customer satisfaction.
Consider change to be an opportunity for innovation.
Promote team members’ success through performance expectations.
Implement ideas that result in competitive advantage.
Design quality teams that consist of multiple contributors from multiple areas.
Remove barriers that prevent team performance.
Provide members with the necessary knowledge and skills to be successful.
Draw upon the greatest strengths of all team members.

Developing team member value

Quality is the essence that provides competitive advantage; change is the catalyst that promotes an opportunity to strive for a higher level of team efficiency. Increasingly, companies focus on streamlining and realigning processes explicitly so that customer satisfaction drives every aspect of business. The quality group has also undergone a transformation in the way it operates. The responsibility for quality no longer resides in one department but is evenly distributed across the company. Because quality is everyone's job, quality teams consist of transorganizational business members who monitor measurements of success and address issues of variation before they become serious.

Transorganizational quality teams have launched some of the greatest and most innovative ideas. This new model for team-member effectiveness encourages a cross-polarization of creativity and helps the organization react quickly to change. A team that comprises multiple contributors has the advantage of understanding how change might be best aligned within multiple areas of the business cycle.

To create maximum value for their efforts, members draw upon the total strengths of their quality team. It's imperative that teams have the knowledge and skills necessary to succeed at their jobs. They should also understand their roles in supporting exemplary performance. Meeting regularly to discuss best practices and lessons learned enables teams to continuously improve. When a process improvement leader draws upon so many different strengths, the team's output is usually greater than the sum of its parts.

Developing Supplier Value

Integrate suppliers into the seamless organizational design.
Establish an e-procurement file on the Web (requirements).
Establish an e-bidding file on the Web (price).
Establish an e-status file on the Web (delivery).
Establish an e-scorecard file on the Web (performance).
Pre-approve suppliers to access and bid on Web-posted requirements.
Set supplier standards for price, delivery, inventory level reduction, etc.
Post supplier scorecards on the Web.
Eliminate inventory carrying charges via vendor-managed inventory.
Share planning cycle information with suppliers.
Develop an integrated master schedule to show supplier dependencies.
Use blanket agreements where applicable.
Develop supplier accountability, trustworthiness and results.

Developing supplier value

In the past, only the purchasing department dealt directly with suppliers. If there was a need for a product or service, the procurement agent sent a stack of design details out to a multitude of suppliers and established a deadline for responses. The process was driven entirely by price, and the relationship was based on power and struggle. Company production forecasts were inaccurate, so inventory levels remained high to avoid stock-outs.

That process has since changed into a partnership founded on electronic data interchange, information-sharing, commitment and vendor management. Streamlining the supply-chain process can result in tremendous cost reductions. The new trend toward supplier management is based on the total cost of doing business, not simply the price of materials. A predetermined list of selection criteria is used to determine which suppliers are best suited for specific product areas and/or business needs. In order for the effort to be successful, however, there must be a certain amount of openness with production data, a passion to deliver product and services when needed and a commitment to getting quality right the first time. Certainly, not all suppliers are candidates for a partnership relationship, and in such cases the quality professional's role becomes critical to the value assessment's success.

The quality team is involved in all aspects of supplier analysis: selection, certification, performance ratings, facility audits and product quality assessments. Value is based on the supplier's ability to meet customer specifications. Supplier audits are periodically required in order to maintain a specific level of performance in meeting those specifications. In the case of vendor-managed inventory, a long-term contract based on a blanket purchase agreement is usually generated. Certification is based on a generally accepted quality standard, such as ISO 9001.

Once a supplier is certified, requirements should be met without the need for constant inspection. Some certification regimens, such as the Capability Maturity Model, are multitiered so that the supplier can strive for a certain level of accomplishment while providing a certain level of confidence to the customer. This way, continuous improvement is built into the systems as a supplier graduates from one level to the next.

Performance targets for cycle time, price, just-in-time delivery, internal inventory reduction levels, quality, and the ability to meet specifications and production requirements are just a few of the criteria that make up a supplier scorecard. These scorecards are posted online so that problems are recognized quickly. Tough decisions can then be made to either continue with a particular supplier or open the door to a competitor. Throughout this process, the quality professional leads the effort to eliminate waste.

Will change continue?

Absolutely. Global competition, economic belt-tightening and optimizing electronic business will force companies to downsize and continue to cut costs. Customers will demand the highest standards of quality at the lowest price. Within successful organizations, quality will become the focal point for every effort. And this means the quality team will become an even more valuable asset than it is today.

The Seamless Model

About the authors

H. James Harrington, CEO of the Harrington Institute, is considered the leading guru in performance improvement. He has written 23 books and hundreds of papers on the subject. Visit his Web site at www.hjharrington.com.

Thomas McNellis is the dean of e-learning for the Harrington Institute and is associated with research at a number of universities. He currently teaches at Temple University and the University of Phoenix. Letters to the editor regarding this article can be sent to letters@qualitydigest.com.