When I ask quality professionals why their organizations are investing money in improving quality, I get quite a range of answers. The most common include competitiveness, increased customer satisfaction, customer demands, reduced waste, registration requirements and improved employee morale.
With my next question--What are you doing to improve quality?--I'm usually surprised at the mismatch between the organization's reasons for improving quality and the steps it's taking to do so. The only exceptions to this are organizations that have invested in ISO 9000 registration because their customers require it.
Of course, all of these responses are legitimate incentives, but none of them represent the true reason organizations invest in quality improvement. An organization's president will open his or her wallet for a quality initiative when it results in short- and long-range performance improvements. Increased customer satisfaction, reduced costs and competitiveness all rank as secondary motivations. A quality initiative succeeds when it brings about a measurably improved performance.
Top management is responsible for reviewing all available improvement opportunities and investing a fixed amount of resources in initiatives that will produce the biggest impact on an organization's performance. Put yourself in the president's role. You have two improvement opportunities: One is to implement a new inventory control software package; the other is to install statistical process control in the manufacturing process. You have enough money to do one but not both. How does the president decide which improvement will best serve the organization? This is not a farfetched example; tough decisions are a way of life at the executive level.
Given this dilemma, it becomes obvious that quality professionals must understand not only how to measure performance but also how quality improvement affects key performance measurements.
I like to take a simplistic approach to measuring organizational performance. Organizations improve when the following three measurements improve: return on assets, value-added per employee and customer satisfaction.
In some organizations the third measurement, customer satisfaction, is replaced by market share or added as a fourth measurement. To do our jobs well, we must design quality initiatives to improve the three key performance measurements and analyze the results.
I have seen organizations form and train numerous work teams without producing any positive impact on value-added per employee. Or organizations will install SPC throughout manufacturing without improving customer satisfaction or return on assets. We often implement quality initiatives that eliminate waste and/or increase productivity rather than decrease the number of employees needed to accomplish a set amount of work. Instead of eliminating these costs, we engage the surplus employees with other work that doesn't really need doing.
It is up to the quality professional to ensure that quality initiatives have a positive impact on an organization's performance. The starting point is evaluation: Is your organization's performance improving or slipping backward? Here again, the lack of data and sophistication that quality professionals labor under while making this evaluation surprises me. At the very minimum, they must consider short-term performance change (e.g., the last 12 months) and long-term performance change (e.g., five years). Next, they must consider how the organization's performance improvements compare with its competitors'.
Quality initiatives must be based on improving an organization's performance. In today's environment, quality improvement goes far beyond the processes covered in ISO 9000 or even QS-9000. It includes all processes, from new hiring to product disposal. Once quality professionals understand their organizations' performance strengths and weaknesses, they can select effective quality initiatives that will have the greatest positive impact on their organizations.
Focusing on performance improvement provides the quality professional with an approach that captures upper management's attention. This approach also ensures that initiatives with the greatest value receive top priority. If you want upper management's support and active involvement in a quality initiative, quantify how the organization's performance will improve when the initiative succeeds.
About the author
H. James Harrington is a principal at Ernst & Young and serves as their 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.