Performance Improvement
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Today, management's primary focus is not on quality improvement but performance improvement.

 by H. James Harrington

The 1980s and the first half of the 1990s were exciting times for quality professionals. People's interest in quality was at its peak. Once a year, you could open Fortune magazine and find an entire section devoted to quality. Newspapers featured Tom Peters' column on quality. At conferences, presidents from major (and not-so-major) companies were preaching how important quality was to their organizations' future. They might not have understood what they were saying, but they were using the right words, and that was a big step forward.

It was almost as though top management suddenly realized the direct correlation between quality and profit, in contrast with past thinking, which related high quality to high cost. This was the golden age for quality in the developed nations. If a new methodology was touted as a way to improve quality, management would embrace it in a blind leap of faith and with a pot full of money. Total quality management, although never really defined, was ardently pursued. Customers required their suppliers to become ISO 9000-registered, regardless if it improved the delivered product quality or reduced the cost; after all, customers didn't have to pay to get their suppliers registered -- or so they thought.

The results were truly amazing. Product quality levels around the world underwent a transformation. The form, fit and function of U.S.-built automobiles matched those built in Japan. European automobiles were so close behind that average consumers couldn't distinguish the difference in quality.

But by the mid-1990s, management began to realize that the competitive advantage in improving product quality was rather less than it was in the 1980s. Added to this was a growing uncertainty as many organizations reported that TQM didn't produce the promised results. Suddenly, a black cloud settled over the quality movement. Management, while not exactly turning its back on quality, considered it with a more balanced perspective. Today, management's primary focus in the United States and Japan is not on quality improvement but performance improvement. Improvements in quality, productivity, cost and cycle time are secondary drivers to the real objective of improved organizational performance.

Performance improves under three conditions, and three conditions only:

 When productivity remains constant and quality goes up.

 When quality remains constant and productivity goes up.

 When quality and productivity go up hand-in-hand.


    Of course, it's the last condition we'd like to obtain.

   These days, people talk about quality and productivity as being two sides of the same coin. Nothing could be further from the truth. There may be some overlap, but the two concepts aren't the same. Organizations can drive themselves into bankruptcy by   focusing too much on productivity. (For example, if I measured myself on the number of words I wrote per minute, I could have gotten this article out in half the time, but it probably wouldn't have been published.) Organizations do the same thing by focusing exclusively on quality. (For example, when I reread this column, I saw changes I'd like to make. However, the column has a 900-word limit and must be turned in six weeks ahead of the publication date.)

A balance is essential between quality and productivity. Management is still buying quality improvement, but it needs to be sold differently than it was in the 1980s. Any new quality program must be justified based upon how it improves organizational performance. The key performance measurements are:

 Return on assets -- Changes in this measurement indicate how an individual program affects profitability.

 Value added per employee -- Changes in this measurement reflect how an individual program affects productivity.

 Customer satisfaction -- Changes in this measurement are key indicators of sustained long-term performance.


As quality professionals who want to improve our organizations' quality systems, we now must compete with other initiatives for management's investment of time and improvement dollars. We must provide management with data that will project how quality improvement initiatives will affect the three key performance indicators, and that impact must be greater than the competing initiatives' impact.

About the author

H. James Harrington is a principal at Ernst & Young and serves as its international quality advisor. He has more than 45 years' experience as a quality professional and is the author of 12 books.

Harrington is a past president and chairman of the board of both the American Society for Quality and the International Academy for Quality. He can be reached at 55 Almaden Blvd., San Jose, CA 95113; telephone (408) 947-6587, fax (408) 947-4971, e-mail jharrington@qualitydigest.com.


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