Chapter 1

Introduction to Quality
and Performance
Excellence
 Outline
 Explain the concepts of quality and performance
excellence

 Provide reasons why they are important

 Provide a brief history of the “quality revolution”

 Describe quality in manufacturing, service, health care,

education, and government

 Explain the principles and practices of quality and

performance excellence

 Discuss relationships of quality with organizational

models in management theory

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 Defining Quality
Perfection Fast delivery
Providing a good, usable product
Consistency
Eliminating waste
Doing it right the first time
Delighting or pleasing customers

Total customer service and satisfaction

Compliance with policies and procedures 3
 Formal Definitions of
Quality
 The totality of features and characteristics
of a product or service that bears on its
ability to satisfy given needs – American
Society for Quality
 Fitness for use
 Meeting or exceeding customer
expectations
 Conformance to specifications
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 Performance Excellence
 An integrated approach to organizational
performance management that results in
 delivery of ever-improving value to
customers and stakeholders,
contributing to organizational
sustainability,
 improvement of overall organizational
effectiveness and capabilities, and
 organizational and personal learning.
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 Importance of Quality
 THE buzzword among business in the 1980s
and 1990s
 Quality problems still abound in many
industries, such as automotive
 Consumer expectations are high

 “We’ve made dependence on the quality of

our technology a part of life” – Joseph Juran

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 Examples of Successful Quality-
Focused Organizations
1. Nestlé Purina PetCare Co. (NPPC) has had sustained
revenue growth, and met its sales goal during the nation’s
economic downturn and when the U.S. pet population grew
only marginally.

2. Business satisfaction with the city of Coral Springs, Florida,

rose from 76 percent to 97 percent over a four-year period.
The city was named as one of the “Best Places to Live.”

3. PRO-TEC Coating Company consistently achieves the

quality expectations of its customers by delivering products
with a defect rate of less than 0.12 percent. Its return on assets
has had a sustained upward trend.
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 Examples of Successful Quality-
Focused Organizations
4. The overall Net Promoter (NP) scores (a loyalty metric defined
by the level of repeat sales and referrals) for MEDRAD, a
manufacturer of medical imaging devices, were consistently 60
percent or higher compared to the 50 percent or higher marks for
other organizations nationwide.

5. AtlantiCare, a nonprofit health system in southeastern New

Jersey, saw its system revenues grow from $280 million to $651
million over an eight-year period, reflecting an 11 percent
compound annual growth rate, compared to a state average of 5.6
percent.

6. Although its per-pupil operations expenditures are among the

lowest in North Carolina, Iredell-Statesville Schools is ranked
academically in the state’ s top ten school systems.
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 History of Quality Assurance
(1 of 3)
 Quality assurance in Ancient China

 Skilled craftsmanship during Middle Ages

 Industrial Revolution: rise of inspection and

separate quality departments
 Early 20th Century: statistical methods at Bell
System
 Quality control during World War II

 Post-war Japan: evolution of quality management

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 History of Quality Assurance
(2 of 3)

 Quality awareness in U.S. manufacturing

industry during 1980s: from “Little Q” to
“Big Q” - Total Quality Management
 Malcolm Baldrige National Quality Award
(1987)
 Cynicism and criticism among some
business executives
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 History of Quality Assurance
(3 of 3)

 Emergence of quality management in

service industries, government, health
care, education, and non-profits
 Evolution of Six Sigma

 Current and future challenge: maintain

commitment to performance excellence

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 Future Influences
 Global responsibility

 Consumer awareness

 Globalization

 Increasing rate of change

 Workforce of the future

 Aging population

 21st century quality

 Innovation

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 Quality in Manufacturing
 Performance – primary operating characteristics

 Features – “bells and whistles”

 Reliability – probability of operating for specific time and

conditions of use

 Conformance – degree to which characteristics match

standards

 Durability - amount of use before deterioration or

replacement

 Serviceability – speed, courtesy, and competence of repair

 Aesthetics – look, feel, sound, taste, smell

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 Quality in Services
 Time – how much time must a customer wait?

 Timeliness – will a service be performed when promised?

 Completeness – Are all items in the order included?

 Courtesy – do frontline employees greet each customer

cheerfully?

 Consistency – are services delivered in the same fashion for

every customer, and every time for the same customer?

 Accessibility and convenience – is the service easy to obtain?

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 Differences Between
Manufacturing and Services (1 of 2)
 Customer needs and performance standards are often
difficult to identify and measure

 The production of services typically requires a higher

degree of customization

 The output of many service systems is intangible

 Services are produced and consumed simultaneously

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 Differences Between
Manufacturing and Services (2 of 2)
 Customers often are involved in the service process
and present while it is being performed

 Services are generally labor intensive

 Many service organizations must handle very large

numbers of customer transactions.

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New Frontiers of Quality
 Health care

 Education

 Government

 Not-for-Profits

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 Principles, Practices, and
Techniques
 Principles are the foundation of the
philosophy
 Practices are activities by which the
principles are implemented
 Techniques are tools and approaches that
help managers and employees make the
practices effective
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 Quality Management Principles
 Customer focus

 Leadership

 Involvement of People

 Process Approach

 System Approach to Management

 Continual Improvement

 Factual Approach to Decision Making

 Mutually Beneficial Supplier Relationships 19

 Customer Focus
 Customer is the principal judge of
quality
 Organizations must build relationships
with customers and increase customer
engagement
 Organizations must understand
customer needs and obtain feedback
 Customers are internal and external
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 Customer-Focused Practices
 Researching and understanding customer needs and
expectations;

 Ensuring that goods and services are linked to customer needs

and expectations;

 Communicating customer needs and expectations throughout

the organization;

 Measuring customer satisfaction and using the results to

improve;

 Systematically managing customer relationships; and

 Ensuring a balanced approach between satisfying customers

and other stakeholders

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 Leadership
 Leadership is the responsibility of top
management
 Senior leaders should be role models for
the entire organization
 An organization cannot sustain quality
initiatives without strong leadership

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 Leadership Practices
 Considering the needs of all stakeholders in decisions;

 Establishing a clear vision of the organization’ s future;

 Setting challenging goals and targets;

 Creating and sustaining shared values, fairness, and ethics at

all levels of the organization;

 Establishing trust and eliminating fear;

 Providing workers with adequate resources, training and

freedom to make customer-focused decisions; and

 Inspiring, encouraging, and recognizing worker’ s

contributions.
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 Involvement of People
 A company’ s success depends increasingly on the
knowledge, skills, and motivation of its workforce.

 Engagement – workers have a strong emotional bond to

their organization, are actively involved in and committed
to their work, feel that their jobs are important, know that
their opinions and ideas have value, and often go beyond
their immediate responsibilities for the good of the
organization

 Empowerment – having the authority to make decisions

 “A sincere belief and trust in people”

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 People-Focused Practices
 Understand the key factors that drive workforce engagement,
satisfaction, and motivation

 Design and manage work and jobs to promote engagement

 Create an environment that ensures and improves workplace

health, safety, and security

 Develop an effective performance management system

 Assess workforce engagement and satisfaction

 Assess workforce capability and capacity needs

 Make appropriate investments in development and learning

 Manage career progression and succession planning

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 Teamwork
 Vertical—teamwork between top
management and lower-level employees.
 Horizontal—teamwork within work
groups and across functional lines (often
called cross-functional teams).
 Interorganizational—partnerships with
suppliers and customers

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 Process Approach
 A process is a sequence of activities that is
intended to achieve some result

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Cross-functional
Perspective

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 Process-Focused Practices
 Systematically defining processes that create desired outcomes;
establishing clear responsibility and accountability for managing
key processes;

 Analyzing and measuring of the capability of processes;

 Identifying the interfaces of key activities within and between

the functions of the organization;

 Focusing on the factors such as resources, methods, and

materials that will improve processes; and

 Evaluating risks, consequences and impacts of activities on

customers, suppliers, and other stakeholders.

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 Systems Approach to
Management
 Synthesis means looking at an organization as a whole and
building on key business attributes, including core
competencies, strategic objectives, action plans, and work
systems.

 Alignment means ensuring consistency of plans, processes,

measures, and actions across the organization.

 Integration builds on alignment, so that the individual

components of the organizational system operate in a fully
interconnected manner and deliver anticipated results.

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 Systems Approach Practices
 Designing the organization to achieve its objectives in the most
effective and efficient way;

 Understanding the interdependencies between processes;

 Developing approaches that harmonize and integrate

processes;

 Providing a clear understanding of the roles and

responsibilities necessary for achieving objectives and reducing
cross-functional barriers;

 Understanding organizational capabilities; defining how

specific activities and processes should operate; and

 Continually improving the system through measurement and

evaluation.
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 Continual Improvement
 Incremental and breakthrough improvement
 enhancing value to the customer through new and
improved products and services;
 improving productivity and operational performance
through better work processes and reductions in errors,
defects, and waste;
 improving flexibility, responsiveness, and cycle time
performance; and
 improving organizational management processes
through learning

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 Kano Model
 Dissatisfiers—those needs that are expected in a product
or service. Such items generally are not stated by
customers but are assumed as given. If they are not
present, the customer is dissatisfied.

 Satisfiers—needs that customers say they want. Fulfilling

these needs creates satisfaction.

 Delighters/exciters—new or innovative features that

customers do not expect. The presence of such
unexpected features, if valued, leads to high perceptions
of quality.

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 Learning
 Learning – why changes are successful through
feedback between practices and results
 Learning Cycle:

1. Planning

2. Execution of plans

3. Assessment of progress

4. Revision of plans based upon assessment findings

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 Practices for Continual
Improvement
 Deploying a systematic approach to continual
improvement across the organization;

 Providing the workforce with training in the methods

and tools of continual improvement;

 Making continual improvement of products, processes,

and systems an objective for every individual;

 Establishing goals to guide, and measures to track,

continual improvement; and

 Recognizing and acknowledging improvements.

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 Factual Approach to
Decision Making
 Organizations need good performance measures to drive
strategies and change, manage resources, and continuously
improve

 Data and information support analysis at all levels

 Typical measures:
 product and process outcomes,
 customer-focused outcomes,
 workforce-focused outcomes,
 leadership and governance outcomes, and
 financial and market outcomes.

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 Data-Driven Practices
 Ensuring that data and information are
sufficiently accurate and reliable;

 Making data accessible to those who need it;

 Analyzing data and information using valid

methods; and

 Making decisions and taking action based on

factual analysis, balanced with experience and
intuition.

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 Mutually Beneficial Supplier
Relationships
 Suppliers include not only companies that provide
materials and components, but also distributors,
transportation companies, and information, health care,
and education providers.

 Key suppliers might provide unique design, technology,

integration, or marketing capabilities that are not
available within the business and, therefore, can be
critical to achieving such strategic objectives as lower
costs, faster time-to-market, and improved quality.

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 Supplier Management
Practices (1 of 2)
 Recognizing the strategic importance of suppliers in
accomplishing business objectives, particularly
minimizing the total cost of ownership;

 Identifying and selecting key suppliers; developing

win– win relationships that balance short-term gains
with long-term considerations;

 Establishing trust through openness and honesty,

thus leading to mutual advantages;
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 Supplier Management
Practices (2 of 2)
 Pooling expertise and resources with partners;

 Having clear and open communication that

information and future plans;
 Establishing joint development and improvement
activities; and inspiring, encouraging,
 Recognizing improvements and achievements of
suppliers.

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 TQ and Agency Theory
 Agency relationship: a concept in which
one party (the principal) engages
another party (the agent) to perform
work
 Key assumption: individuals in agency
relationships are utility maximizers and
will always take actions to enhance their
self-interests.

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 Contrast With TQ (1 OF 2)

 TQ views the management system as one based

on social and human values, whereas agency
theory is based on an economic perspective that
removes people from the equation.

 Agency theory propounds the belief that people

are self-interested and opportunistic and that
their rights are conditional and proportional to
the value they add to the organization. TQ
suggests that people are also motivated by
interests other than self, and that people have an
innate right to be respected.

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 Contrast With TQ (2 OF 2)

 Agency theory assumes an inherent conflict of goals between

agents and principals, and that agent goals are aligned with
principal goals through formal contracts. In TQ, everyone in
the organization shares common goals and a continuous
improvement philosophy, and goals are aligned through
adoption of TQ practices and culture.

 TQ takes a long-term perspective based on continuous

improvement, whereas agency theory focuses on short-term
achievement of the contract between the principal and
agent.

 TQ leaders provide a quality vision and play a strategic role

in the organization; leaders in agency theory develop control
mechanisms and engage in monitoring.
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TQ and Organizational Models

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