Amity Business School

Strategic Quality Management

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Semester III 40 Contact Hrs. 4 Credits

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Transition from Old to New age Policies

Philosophy of integrating market driven focus elements for continuous improvement in all work processes of the enterprise becomes necessary due to: Customer driven market revolution Fierce global competition Unpredictable market, changing expectations & moving targets Need to develop a customer focused culture Integrate market driven culture Focus on quality, cost, productivity Customer loyalty & Change Management

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Evaluation of Competitive Capabilities

What is that you do that the customers value better than the competition Evaluation of your resources is of no value unless done in respect to your competitors If you are not the best in a critical activity, you are sacrificing the competitive advantage by continuing to do what you are doing with old practices Only the firms that are able to continually build new strategic assets faster and cheaper than the competition will earn superior customer value and returns over long period

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Focus Elements of a Market Driven Enterprise

Commitment to customer satisfaction Human Resource Development Total Quality Culture Error Prevention Philosophy Zero Error Solutions Design & Product Quality Quality Services Quality of Management & Services People Development Productivity, efficiency and effectiveness Process & Technologies for continuous improvement

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Total Quality Management

concepts & understanding

TQM is a philosophy that represents a set of guiding principles that lays the foundation of a continuously improving and customer driven organization

The first job we have is to turn out quality merchandise that consumers will buy and keep on buying. If we produce it efficiently and economically, we will earn a profit, in which you will share. - William Cooper Procter

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TQM IS Encompassing and mobilizing entire organization to satisfy the customer Improving each individual and groups within the organization Integrating the philosophy and practices in day to day approach to work Influencing all product, services, systems, process & technology Long term and continuous and is sensitive to the social responsibilities of the enterprise Supporting High Performance Culture through teamwork, trust & leadership IT IS NOT A program, that has a beginning & an end. It is a continuous journey.

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History
Craftsmen Early days, generations learning, own inspector. Early 20th Century Unskilled repetitive, start of interchangeability. Ford Story. Standardization, concepts for quality, Mass Mfg. Post War.. American Society for Quality 1944
Safety, Public interest producer beware

Dr. Joseph Juran & Dr. Edward Demming story

Pioneering work in Total Quality ( in Japan ) Demming returns to US (1980-1993)

Product Quality to Performance Excellence

Quality of Management as important as Management of Quality

American Society for Quality identifies future challenges Partnering, Learning system, Adaptability and speed of change Environmental Sustainability, Knowledge Focus, Globalization Customization & Differentiation, Shifting Demographics

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Journey to TQM.

TQM All Employees involved Empowerment Teamwork Quality Strategy

Quality Assurance Quality Systems ISO Quality Planning Quality Policy Quality Controls Problem Solving

Quality Control

Quality Standards Statistical Controls Process Performance Treat Quality Problems

Inspection Error Detection Rectification Unhappy Customer

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History of Quality ( Contd.)

Quality awareness in U.S. manufacturing industry during 1980s: from Little Q to Big Q - Total Quality Management
Malcolm Baldrige National Quality Award (1987) Disappointments and criticism

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History of Quality ( Contd.)

Emergence of quality management in service industries, government, health care, and education
Evolution of Six Sigma Current and future challenge: keep progress in quality management alive

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Contemporary Influences on Quality

Partnering Learning systems Adaptability and speed of change Environmental sustainability Globalization Knowledge focus Customization and differentiation Shifting demographics

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Definitions of Quality
Transcendent definition: excellence
Product-based definition: quantities of product attributes

User-based definition: fitness for intended use

Value-based definition: quality vs. price Manufacturing-based definition: conformance to specs

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Quality Perspectives
transcendent & product-based user-based

needs

Customer
value-based

Marketing

products and services

Design
manufacturingbased

Manufacturing Distribution
Information flow Product flow
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Paradigm Shift
From.

Management of Quality
to

Quality of Management

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Malcolm Baldrige
Criteria
Leadership Strategic Planning Customer & Market Focus Information & Analysis Human Resources Development & Planning Process Management Business Results

Weightage 12% 8% 8% 8% 10% 10% 44%

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Understanding of Criteria
1. Leadership Leadership System.. How the senior leaders guide the company in setting directions and in developing and sustaining an effective leadership system. Company Responsibility & Citizenship How the company addresses the its responsibility to the public and how it practices good citizenship. Strategic Planning Strategy Development Process.. How the company sets strategic directions to better define and strengthen its competitive position and how the development process leads to action plan for deploying and aligning key plan and performance requirements. Company Strategy.. How the performance requirements and measures align with the human resource plan and how the plans project the cos future as compared to the competitors and key benchmarks. Customer & Market Focus Customer & Market Knowledge.. How the company determines the long term requirements and preference of target and potential customers and market and anticipate needs to develop business opportunities . Customer Relationship & Satisfaction Enhancement..How the company determines and enhances the satisfaction of customers to strengthen relationships to improve current offerings and to support customer and market related planning.

2.

3.

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Understanding of Criteria (contd.)

4. Information & Analysis Selection & Use of Information & DataHow the co. selects, manages and uses the information and data needed to support key company process and improve the cos performance. Selection & use of comparative information & data.. How the company selects, manages and uses comparative information data to improve cos competitive position. Analysis & Review of Companys Performance..How the co. analyses and reviews overall performance to assess the progress relative to plans to identify key areas of improvement. 5. Human Resources Development & Management Work Systems.. What is the companys work & job design and its compensation and recognition approaches to enable and encourage all employees to contribute effectively to achieve the cos performance and learning objective. Employee Education Training & Development.. How the cos training and education addresses its plan and needs including building knowledge & capabilities & contribute to improved employees performance and development. Employee Well-Being & Satisfaction..How the company maintains its work environment and work climate to support the well-being, satisfaction and motivation of all its employees

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Understanding of Criteria ( Contd.)

6. Process Management Management of Product & Service Processes..How the significantly modified and customized products and services are designed. How the product/services delivery systems are designed, implemented and improved. Management of Support Process.. How the cos key support processes are designed, managed and continuously improved. Management of Supplier and Partnering..How the cos supplier and partnering processes, performance and relationships are managed and improved. 7. Business Results Customer Satisfaction Results..How the co. performance on Customer Satisfaction Financial & Market [Link] key financial & marketplace performance Human Resource ResultsCos Human Resource results including employee wellbeing, satisfaction, development and work system performance Supplier & Partner ResultsCos supplier and partner results Company-Specific ResultsHow the companys key operational performance and results significantly contribute to key company goals- customer satisfaction, operational effectiveness and financial/market place and performance.

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Leadership
The ability to positively influence people and systems under ones authority to have a meaningful impact and achieve important results

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The Baldrige Leadership Triad

Strategic Planning

Leadership

Operations

Customer and Market Focus

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Executive Leadership
Defining and communicating business directions Ensuring that goals and expectations are met Reviewing business performance and taking appropriate action Creating an enjoyable work environment Soliciting input and feedback from customers Ensuring that employees are effective contributors Motivating, inspiring, and energizing employees Recognizing employee contributions Providing honest feedback

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Key Idea
Effective leadership requires five core leadership skills:
vision

Empowerment
Intuition self-understanding and value congruence.

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Leading Practices Leadership

Create a customer-focused strategic vision and clear quality values Create and sustain leadership system and environment for empowerment, innovation, and organizational learning Set high expectations and demonstrate personal commitment and involvement in quality Integrate quality values into daily leadership and management and communicate extensively Review organizational performance Create an environment and governance system that fosters legal and ethical behavior Integrate public responsibilities and community support into business practices
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Leadership System
Leadership System .. how decisions are made, communicated, and carried out at all levels; mechanisms for leadership development, self-examination, and improvement Effectiveness of Leadership System depends in part on its organizational structure

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Key Idea
An Effective Leadership System respects the capabilities and requirements of employees and other stakeholders, and sets high expectations for performance and performance improvements.

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Governance
Governance . The system of management and controls exercised in the stewardship of an organization.
Approving strategic direction Monitoring and evaluating CEO performance Succession planning Financial auditing Executive compensation Disclosure Shareholder reporting

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Leadership and Social Responsibilities

Ethics Health, safety, and environment Community support

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Key Idea
Practicing good citizenship refers to leadership and supportwithin the limits of an organizations resourcesof publicly important purposes, including improving education, community health, environmental excellence, resource conservation, community service, and professional practices.

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Leadership
Definition

..TQM relevance

Traditional Leadership for Quality Assortment of behaviors vision, hope, stimulation, mission, transformation dreams to reality, stewardship, Integration, courage, communication, consensual, conviction, empowering deploying, motivating, motivating and tenacity. Executive Leadership-not the only one Changed Business Scenario & New Economy demanding Unit, Team, Project and Transformational Leadership No more the one or few men show Strategic Plan Integration Quality is the key element to strategic planning for Quality management and Performance Excellence under the current business environment Identification of such competitive advantages that is driven by customer and market.

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Leadership
Effective Leadership

..TQM relevance

Five Core Skills vision, empowerment, intuition, self-understanding & value congruence

Leadership Practices
Customer Focus, Strategic vision, Quality value Creating sustainable leadership, environment, empowerment, innovate Setting high expectations, demonstrate substantial personal commitment and involvement, missionary zeal and constancy of purpose Integrating quality values in daily values, extensive communication Integrate public responsibility and community support in business practices

TQ Leadership Contrasts.. Details Leadership & Public Responsibilities

Public Health, safety & environment Compliance Corporate Citizenship, Community education, welfare, conservation Industry Obligation to Community

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TQ Leadership Contrasts
Traditional
Plan Projects Make plans Organize resource Preach M.B.O Push Products Lip service to quality Sell to customer Perform R&D Control People Control through systems Reward conformance punish deviation Maintain status QUO

TQ Leaders
Practice Envision the future Optimize the resource Participative management Produce Exemplary quality Service the customer Innovate Motivate people Development, talent & system Reward effort, skill development and empower Continuous improvement

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Strategic Planning
The process of envisioning organizations future and developing necessary procedures and operations to shape and achieve that future

Concept
Plan that integrates an organizations major goals Policies and actions sequences in alignment and supporting the goals Marshalling and allocating organizations resources into an unique and viable posture Based on ones relative strengths and competencies and anticipated changes in the environment Counter measures and actions anticipating contingent moves by intelligent opponents

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Strategic Planning

Influence of TQ culture

Leading Practices Top management, employees & even customers actively participate in the planning process Systematic planning process for strategy development and deployment including measurement, feedback and review. Gathering and analysis of variety of data external & internal factors Alignment of short-term action plans with long term strategic objectives. Derive human resource plans from strategic objectives and action plans

Vision Mission Guiding Principle

Strategy Development

Environmental Scan

Strategies

Objectives

Action Plans

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Mission
Definition of products and services, markets, customer needs, and distinctive competencies

Solectron: to provide worldwide responsiveness to our customers by offering the highest quality, lowest total cost, customized, integrated, design, supply chain, and manufacturing solutions through long-term partnerships based on integrity and ethical business practices.

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Vision
.Where the organization is headed and what it intends to be.
Brief and memorable - grab attention Inspiring and challenging - creates excitement Descriptive of an ideal state - provides guidance Appealing to all stakeholders - employees can identify with

Solectron:
Be the best and continuously improve

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Values (Guiding Principles)

Defines attitudes and policies for all employees, which are reinforced through conscious and subconscious behavior at all levels of the organization.

Pepsico:

Integrity, Honesty, Teamwork, Balance, Accountability Whirlpool: Respect, Integrity, Teamwork, Trust
Leadership, Customer Passion

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Environmental Assessment
TEMPLES or PESTLE
Customer and market requirements, expectations and opportunities Technological and other innovations Organizational strengths and weaknesses Financial, societal, ethical, regulatory and other potential risks Changes in global or national economy Factors unique to the organization, such as partner and supply chain needs

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Key Idea
Strategies are broad statements that set the direction for the organization to take in realizing its mission and vision. Strategic objectives are what an organization must change or improve to remain or become competitive. Action plans are things that an organization must do to achieve its strategic objectives.

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Strategic Deployment

TQ way

Converting the strategies into small doable goals and then ultimately deployed to the right teams & people in form of SMART objectives

Balance Scorecard Hoshin Kanri or Hoshin Planning or Policy Deployment Management by Planning
Team based deployment is most suited to TQ environment

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Policy Deployment (Hoshin Kanri)

Top management vision leading to long-term objectives Deployment through annual objectives and action plans Negotiation for short-term objectives and resources (catchball) Periodic reviews
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Leadership and Organizational Structure

Basic types of organizational structures Line organization Line and staff organization Matrix organization

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Key Idea
As more and more companies accept the process view of organizations, they are structuring the quality organization around functional or cross-functional teams.

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Caliberations
Strategic Planning

What the auditor will look for

Customer & market driven quality integrated into bloodstream Integrated into the product, operations and service processes Operational Excellence to deliver on above

Deployment
Deployment to the right people with smart objectives Organizations ability to translate strategic objective into action plans TQ aspects include Empowerment Diffused Leadership Institutionalized Learning Innovation and Experimentation

Customer Driven Quality TQM way to implement strategy Operational Excellence

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Focusing on Customers
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Key Idea
To create satisfied customers, the organization needs to identify customers needs, design the production and service systems to meet those needs, and measure the results as the basis for improvement.

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Importance of Customer Satisfaction and Loyalty

Satisfaction is an attitude; loyalty is a behavior Loyal customers spend more, are willing to pay higher prices, refer new clients, and are less costly to do business with. It costs five times more to find a new customer than to keep an existing one happy. A firm cannot create loyal customers without first creating satisfied customers.
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Key Idea
Customer wants and needs drive competitive advantage, and statistics show that growth in market share is strongly correlated with customer satisfaction.

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Customer Satisfaction Model

Perceived quality Perceived value Customer complaints

Customer satisfaction Customer loyalty

Customer expectations

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Customer-Driven Quality Cycle

Customer needs and expectations (expected quality) Identification of customer needs Translation into product/service specifications (design quality) Output (actual quality) Customer perceptions (perceived quality)
measurement and feedback

PERCEIVED QUALITY is a comparison of ACTUAL QUALITY to EXPECTED QUALITY

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Key Idea
Many organizations still focus more on processes and products from an internal perspective, rather than taking the perspective of the external customer.

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Leading Practices
Define and segment key customer groups and markets Understand the voice of the customer (VOC) Understand linkages between VOC and design, production, and delivery Build relationships through commitments, provide accessibility to people and information, set service standards, and follow-up on transactions Effective complaint management processes Measure customer satisfaction for improvement

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Key Customer Groups

Organization level
consumers external customers employees society

Process level
internal customer units or groups

Performer level
individual internal customers

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Identifying Internal Customers

What products or services are produced? Who uses these products and services? Who do employees call, write to, or answer questions for? Who supplies inputs to the process?

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AT&T Customer-Supplier Model

Your Suppliers

Inputs

Your Processes

Outputs

Your Customers

Requirements and feedback

Requirements and feedback

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Key Idea
The natural customer-supplier linkages among individuals, departments, and functions build up the chain of customers throughout an organization that connect every individual and function to the external customers and consumers, thus characterizing the organizations value chain.

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Customer Segmentation
Demographics Geography Volumes Profit potential

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Key Idea
Segmentation allows a company to prioritize customer groups, for instance by considering for each group the benefits of satisfying their requirements and the consequences of failing to satisfy their requirements.

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Key Dimensions of Quality

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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Key Dimensions of Service Quality

Reliability ability to provide what was promised Assurance knowledge and courtesy of employees and ability to convey trust Tangibles physical facilities and appearance of personnel Empathy degree of caring and individual attention Responsiveness willingness to help customers and provide prompt service
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Kano Model of Customer Needs

Dissatisfiers: expected requirements Satisfiers: expressed requirements Exciters/delighters: unexpected features

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Key Idea
As customers become familiar with them, exciters/delighters become satisfiers over time. Eventually, satisfiers become dissatisfiers.

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Customer Listening Posts

Comment cards and formal surveys Focus groups Direct customer contact Field intelligence Complaint analysis Internet monitoring

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Key Idea
Companies use a variety of methods, or listening posts, to collect information about customer needs and expectations, their importance, and customer satisfaction with the companys performance on these measures.

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Tools for Classifying Customer Requirements

Affinity diagram Tree diagram

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Moments of Truth
Every instance in which a customer comes in contact with an employee of the company.
Example (airline)
Making a reservation Purchasing tickets Checking baggage Boarding a flight Ordering a beverage Requests a magazine Deplanes Picks up baggage

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Key Idea
An organization builds customer loyalty by developing trust, communicating with customers, and effectively managing the interactions and relationships with customers through approaches and its people. Companies must carefully select customer contact employees, train them well, and empower them to meet and exceed customer expectations.

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Customer Relationship Management

Accessibility and commitments Selecting and developing customer contact employees Relevant customer contact requirements Effective complaint management Strategic partnerships and alliances Exploiting CRM technology

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Key Idea
To improve products and processes effectively, companies must do more than simply fix the immediate problem. They need a systematic process for collecting and analyzing complaint data and then using that information for improvements.

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Measuring Customer Satisfaction

Discover customer perceptions of business effectiveness Compare companys performance relative to competitors Identify areas for improvement Track trends to determine if changes result in improvements
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Key Idea
An effective customer satisfaction measurement system results in reliable information about customer ratings of specific product and service features and about the relationship between these ratings and the customers likely future market behavior.

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Survey Design
Identify purpose Determine who should conduct the survey Select the appropriate survey instrument Design questions and response scales

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Key Idea
The types of questions to ask in a survey must be properly worded to achieve actionable results. By actionable, we mean that responses are tied directly to key business processes, so that what needs to be improved is clear; and information can be translated into cost/revenue implications to support the setting of improvement priorities.

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Performance-Importance Analysis
Performance
Low High

Low High

Who cares?

Overkill

Importance

Vulnerable

Strengths

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Key Idea
Appropriate customer satisfaction measurement identifies processes that have high impact on satisfaction and distinguishes between low performing processes low performance and those that are performing well.

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Difficulties with

Customer Satisfaction Measurement

Poor measurement schemes Failure to identify appropriate quality dimensions Failure to weight dimensions appropriately Lack of comparison with leading competitors Failure to measure potential and former customers Confusing loyalty with satisfaction

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Customer Perceived Value

CPV measures how customers assess benefits such as product performance, ease of use, or time savingsagainst costs, such as purchase price,installation cost or time, and so on,in making purchase decisions.

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CUSTOMER LOYALTY RELATIONSHIPS

Non-competitive zone Regulated, Monopoly or few substitutes. Dominant Brand Equity. High cost of switching. Powerful Loyalty Prog. Proprietary Technology. Highly competitive zone. Commoditization or low differentiation. Consumer Indifference. Many substitutes. Low cost of Switching

Relationship of Customer Satisfaction and Profitability Total Satisfaction for captive customers Tyranny of Averages Satisfying Target Segments Ultimate Source of Focus: affinity Groups

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THE IMPORTANCE OF FOCUS

Organization that have not identified the customers they are targeting have a special handicap in achieving total customer satisfaction and create many merely satisfieds.
Customer tell about only extra-ordinary experience Only on third of the dissatisfied tell but the talk alright.