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The Quest for Quality

“The Quest for Quality”

TQM may no longer be the flavor of the month, but it can still boost your productivity and profits.

Business paradigms come and go. In the ’80s, total quality management (TQM) was the beloved prototype, preaching customer satisfaction, continuous improvement and employee participation. Yet TQM waned in the ’90s, displaced by new paradigms such as re-engineering and six sigma.

Though TQM may not be making headlines, it remains a viable management model that can do wonders for your company’s market position and bottom-line health (see sidebar).

The ABCs of TQM

Quality guru W. Edwards Deming is credited for pioneering TQM, though he didn’t actually coin the term. He believed that management shortcomings (rather than employees) caused defects; he advocated a proactive approach to quality instead of trying to catch mistakes at the end of the assembly line.

TQM dedicates your entire organization to a relentless pursuit of quality. It’s a systemic approach that impacts your leadership, strategic planning, customer and market focus, information and analysis, human resources, process management and business results. Some hallmarks of TQM include the following:

  • Knowing precisely what your customers want and trying to exceed or, at least, meet their expectations.
  • Having well-defined processes to translate customer requirements into action.
  • Measuring and monitoring your processes, products and services to prevent problems and perpetuate continual innovation.
  • Management by fact instead of anecdotes.
  • Sharing information with employees so they can better serve your partners and customers; providing them with opportunities for growth and development.

U.S. business owners too often view quality as a cost, an expensive proposition. Ironically, TQM’s initial focus may be on quality, but it ultimately leads to stronger financials:

  1. Greater market share and increased revenues.
  2. Stronger margins, asset utilization and competitive position due to less waste and greater productivity.

TQM is a backdoor to bolstering your bottom line. It improves productivity and profitability because it works at both ends of the pipeline — seeking to deliver the highest value to the customer with the lowest costs to the company.

Many large companies such as Motorola, Federal Express, Xerox and Solectron have seen positive results from their quality-management efforts. Yet TQM is especially appropriate for second-stage companies. As revenues start to exceed $1 million, it’s time to take steps to manage quality and growth.

Tuning in to customers

Just claiming "the customer is No. 1" doesn’t cut it. That value must be internalized into a system that pervades your company’s processes, metrics and decision-making.

One of the biggest mistakes that companies make is thinking that they know what customers want.

Case in point: At Texas Nameplate Co., a Dallas-based manufacturer of identification plates for equipment, CEO Dale Crownover used to think that on-time delivery was the most important thing to his customers. But when a survey indicated that customers cared more about nameplates being defect-free, Crownover launched a TQM initiative.

"What it led to was learning to do it right the first time," explains Crownover. He talked to workers in every department at Texas Nameplate, asking what could be done to stamp out defects. Using that input, proactive procedures were developed, and Texas Nameplate sliced its rate of defects in half — from 10% to 5% — in just three months. The company’s continued quest for quality resulted in customer satisfaction jumping 70%, and in 1998 Texas Nameplate won the Malcolm Baldrige National Quality Award for small business.

Business owners agree that customers rarely volunteer information about their expectations; you have to draw it out of them.

Danny O’Neill, founder of The Roasterie, a distributor of specialty coffee in Kansas City, Mo., that generated $3.6 million in revenues last year, says: "I use every chance I get to ask people what they think about our coffee — and how we can improve it."

Among customer-satisfaction measures, O’Neill uses an outside marketing company to conduct an annual customer-satisfaction survey. "A year and a half ago, we learned we were doing well in every area except customer service, so we instituted training and hired more people. Those marks really jumped this year," says O’Neill.

O’Neill also reaches out to customers with a quarterly newsletter that lists his home and cell-phone numbers, making it easy for customers to contact him. The Roasterie participates in numerous community and charity events, and on Saturday mornings, the company is open for public tours.

Some other ways you can tune in to customer needs include:

  • Customer focus groups. Things may come up here that you’d never think to put in a survey.
  • Develop a complaint process. Treat customer gripes like gold; too many companies handle them as one-offs, instead of tracking and analyzing complaints to determine patterns.
  • Executive or employee field trips to your customers’ turf.
  • Competitive analysis teams. Put your feet in the customer’s shoes. Buy competitors’ products, then analyze your purchasing experience.
  • Loyalty programs. By offering rebates and rewards to top customers, you’re encouraging customers to return and capturing a database of "best customers" to study.
Quality Pays

This chart compares the average percent change in the performance of quality-award winners and benchmark firms for the post-implementation period (see "Boosting the bottom line").

Quality pays chart

Illustration: Michael Klein

Be good today, better tomorrow

TQM means never resting on your laurels, but continuously striving to improve your products, processes and service.

Caution: Experts say that one of the biggest mistakes that companies make is to pursue quality for quality’s sake. Operational improvements must link back to the customer.

Innovation is another aspect of continuous improvement. You have to keep your eye on the external market. It doesn’t really matter if you produce a top-quality widget if that widget becomes antiquated by a competitor’s product. Besides doing things right, you must also be nimble.

The key to continuous improvement lies in measuring and monitoring. Data allows you to make decisions that are based on fact rather than on anecdotes.

Use a variety of yardsticks. To pursue quality, there are three leading indicators:

  1. The voice of customers.
  2. The voice of employees.
  3. The voice of quality in your processes.

Too many companies concentrate only on financial indicators, which tell you what’s already happened. Measuring customers, employees and processes will reveal what’s going to happen and lead to financial results.

Share data with employees. After information is assembled and analyzed, make sure you distribute it throughout the company. People like to see how they’re doing, and it can have a big impact on employee morale and productivity.

Keep it simple. Don’t make your metrics so complicated that employees can’t understand them.

"Metrics always turned me off in the corporate world," says O’Neill, who spent more than a decade in sales and marketing at large chemical and packaging companies before launching The Roasterie in 1993. "But boy, do I appreciate them now. You can’t strive f
or excellence without knowing where you are — where you are relative to your customer’s expectations, to your competition and to your own goals."

As The Roasterie’s revenues have grown, metrics have become increasingly more important — and more sophisticated. On the operational side, for example, O’Neill has introduced special systems for weighing "portion packs" of coffee and analyzing their moisture content — to ensure consistent quality. "Our goal is to give the customers what they want, when they want, how they want and where they want it," explains O’Neill. "We simply cannot fulfill this without a system of metrics."

Get employees to think like owners

TQM unleashes the brainpower of your company. Instead of having employees merely operate a machine or process, you’re inviting them to participate in decision-making and innovation.

Of course, business owners must set guidelines about acceptable and unacceptable actions before empowering employees. Sit down with your managers to determine goals that are compatible with your vision, values and customer requirements. Then establish cross-functional teams, comprised of employees from different departments, to create action plans to implement those goals. (Cross-functional teams promote a holistic perspective and prevent departments from functioning like silos.)

The more employees who get involved in the planning process, the better. Collaborative decisions take less time to implement than decisions made by an individual because you don’t have to keep selling employees on the decision.

No train, no gain

Invest in training. You can’t set new goals without giving employees the necessary tools, knowledge and confidence to make the leap. Employees may not be used to making decisions on their own; they also may not understand the metrics that are being used.

Make it effective. Don’t overdo training by giving crash courses. It’s better to train in smaller doses and give workers a chance to implement what they’ve learned.

Make it meaningful. How much time and money you’re pouring into training doesn’t necessarily reflect whether it’s paying off. Instead, gauge your efforts by surveying employees immediately after completing a course to find out how relevant information was. Survey them again in a few weeks to see how much they’ve retained and applied on the job. Ask them in annual surveys about what training they need. Expect your training programs to change. Training must reflect changes in your customers’ needs and expectations, new technologies, competition and your employees’ skills.

Be patient

TQM is not a quick fix. Because it was oversold in the ’80s, many companies that tried it had unrealistic expectations and dropped the ball before they saw results.

Experts say TQM typically takes two or three years to implement, and it might be at least another year or two before you see results.

Yet for business owners who are willing to commit, total quality management leads to greater productivity and profitability. It also promotes greater innovation and a healthier culture. You simply can’t approach it as a fad diet; it’s a way of life.

Writer: TJ Becker