Totalqualityservicemanagementbook1 090715110223 Phpapp01

2007
TOTAL QUALITY SERVICE

MANAGEMENT
Aireen Y. Clores,
M.B.A
Visayas State
University
TOTAL QUALITY
SERVICE
MANAGEMENT
Aireen Y. Clores, M.B.A
2007
VISAYAS STATE UNIVERSITY
2 Total Quality Service Management

CONTENTS
TOTAL QUALITY SERVICE MANAGEMENT..........................................................2

Aireen Y. Clores, M.B.A....................................................................................2
C O N T E N T S................................................................................................3
Introduction..................................................................................................6
Introduction to Total Quality in Organizations.................................................9
Principles of Total Quality..............................................................................12
Quality in Manufacturing............................................................................17
The Deming Management Philosophy....................................................28
Profound Knowledge..................................................................................29
Point I: Management Commitment.........................................................30
Point II: Adopt a New Philosophy............................................................30
Point III: Understand Inspection..............................................................30
Point IV: End Price Tag Decisions...........................................................31
Point V: Improve constantly of production and service..........................31
Point VII: Adopting and Instituting leadership........................................31
Point VIII: Driving Out Fear.....................................................................31
Point IX: Optimize team efforts..............................................................31
Point X: Eliminating Slogans, Exhortations, and Targets for the
Workforce...............................................................................................32
Point XI: Eliminating Quotas and MBO....................................................32
Point XII: Remove Barriers to Pride of Workmanship..............................32
Point XIII: Encouraging education and Self-improvement......................32
Point XIV: Taking Action to Accomplish the Transformation...................33
What customers want ............................................................................57
Benefits of customer service .................................................................60
To take full advantage of their employees’ skills as a key competitive
weapon, managers must have a “people perspective”. Organizations
whose managers succeed in practicing effective people skills as they
carry out their primary business functions are most likely to engender
satisfied employees and repeat customers – both of which are essential
to sustaining a competitive advantage into the 21st century. Table 6
shows the benefit of customer service...................................................60
Chapter 6 TOTAL QUALITY & ORGANIZATIONAL CHANGE..............................71
Classification of Benchmarking..................................................................76
Competitive benchmarking – focus on the products and manufacturing of a
company’s competitors..............................................................................76

Generic Benchmarking – evaluates processes or business functions against
the best companies regardless of their industry........................................76
Types of benchmarking..............................................................................76
Preface
In the last few decades, business competitiveness has become an area of
increasing interest as a consequence of economic globalization, increasing
economic integration and market liberalization. A review of theoretical
models of business competitiveness reveals the significance of two kinds of
factors in regard to this area — internal factors pertaining to the actual firm
and external factors related to the structure of the industry in which the firm
operates, as well as the economy of the country as a whole. These models

should be examined empirically, using sufficient data to identify the relative
significance of each individual factor regarding the overall improvement of
business competitiveness. However, most available studies are partial since
they focus on quantifying the effects of macroeconomic variables, the effects
of sector variables, or the effects of strictly business-oriented variables.
Quality of service has been one the most widely investigated factors among
those strictly related to business. In this context, business competitiveness is
positively related to matching the characteristics of the service to the ideal
preferences of clients, i.e. their level of satisfaction. This fact reveals the key
role of service quality on the improvement of business competitiveness, and
how this has an effect not only outside the actual firm, but also on the
variables within it. The most relevant research on this issue deals with the
theoretical study of the relationships that exist between quality and business
competitiveness or with partial empirical relationships between variables.
Nevertheless there is little empirical evidence to verify the complex
relationships between quality and economic measures.

Introduction
W hile Total Quality Management has proven to be an effective process for improving
organizational functioning, its value can only be assured through a comprehensive and well
thought out implementation process. The purpose of this chapter is to outline key aspects of
implementation of large-scale organizational change which may enable a practitioner to more
thoughtfully and successfully implement TQM. First, the context will be set. TQM is, in fact, a
large-scale systems change, and guiding principles and considerations regarding this scale of
change will be presented. Without attention to contextual factors, well intended changes may
not be adequately designed. As another aspect of context, the expectations and perceptions of
employees (workers and managers) will be assessed, so that the implementation plan can
address them. Specifically, sources of resistance to change and ways of dealing with them will
be discussed. This is important to allow a change agent to anticipate resistances and design for
them, so that the process does not bog down or stall. Next, a model of implementation will be
presented, including a discussion of key principles. Visionary leadership will be offered as an
overriding perspective for someone instituting TQM. In recent years the literature on change
management and leadership has grown steadily, and applications based on research findings
will be more likely to succeed. Use of tested principles will also enable the change agent to
avoid reinventing the proverbial wheel. Implementation principles will be followed by a review of
steps in managing the transition to the new system and ways of helping institutionalize the
process as part of the organization's culture. This section, too, will be informed by current
writing in transition management and institutionalization of change. Finally, some miscellaneous
do's and don’ts will be offered.
M embers of any organization have stories to tell of the introduction of new programs,
techniques, systems, or even, in current terminology, paradigms. Usually the employee, who
can be anywhere from the line worker to the executive level, describes such an incident with a
combination of cynicism and disappointment: some manager went to a conference or in some
other way got a "great idea" (or did it based on threat or desperation such as an urgent need to
cut costs) and came back to work to enthusiastically present it, usually mandating its
implementation. The "program" probably raised people's expectations that this time things would
improve, that management would listen to their ideas. Such a program usually is introduced with
fanfare, plans are made, and things slowly return to normal. The manager blames unresponsive
employees, line workers blame executives interested only in looking good, and all complain
about the resistant middle managers. Unfortunately, the program itself is usually seen as
worthless: "we tried team building (or organization development or quality circles or what have
you) and it didn't work; neither will TQM". Planned change processes often work, if
conceptualized and implemented properly; but, unfortunately, every organization is different,
and the processes are often adopted "off the shelf" "the 'appliance model of organizational
change': buy a complete program, like a 'quality circle package,' from a dealer, plug it in, and
hope that it runs by itself" (Kanter, 1983, 249). Alternatively, especially in the underfunded
public and not for-profit sectors, partial applications are tried, and in spite of management and
employee commitments do not bear fruit. This chapter will focus on ways of preventing some of
these disappointments.
In summary, the purpose here is to review principles of effective planned change
implementation and suggest specific TQM applications. Several assumptions are proposed:

1. TQM is a viable and effective planned change method, when properly installed;
2. Not all organizations are appropriate or ready for TQM;
3. Preconditions (appropriateness, readiness) for successful TQM can sometimes
be created; and
4. Leadership commitment to a large-scale, long-term, cultural change is necessary.
While problems in adapting TQM in government and social service organizations have
been identified, TQM can be useful in such organizations if properly modified (Milakovich, 1991;
Swiss, 1992).
P A R T
I
INTRODUCTION
TO TOTAL
QUALITY

CHAPTER 1
Introduction to Total Quality in Organizations
QUALITY
It is never and accident: it is always the result of high retention, sincere effort,
intelligent direction, and skillful execution; it presents the wise choice of many
alternatives, the cumulative experience of many alternatives, the cumulative
experience of many masters of craftsmanship. Quality also marks the search for an
ideal after necessity has been satisfied and mere usefulness achieved.
Wilma A. Foster
In this chapter we will introduce you to the basic principles of total quality.
Specifically, we will:
• Provide reasons why attention to quality should be a part of every
organization’s culture and management systems;
• Provide a brief history of the “quality revolution”;
• Provide an overview of the key principles of total quality;
• Compare and contrast quality – focused management with traditional
management practices, and;
• Discuss relationships of total quality with organizational models in
management theory.
Total Quality Management is a management approach that originated in the 1950's

and has steadily become more popular since the early 1980's. Total Quality is a
description of the culture, attitude and organization of a company that strives to
provide customers with products and services that satisfy their needs. The culture
requires quality in all aspects of the company's operations, with processes being
done right the first time and defects and waste eradicated from operations.
Total Quality Management, TQM, is a method by which management and employees

can become involved in the continuous improvement of the production of goods and
services. It is a combination of quality and management tools aimed at increasing
business and reducing losses due to wasteful practices.
Some of the companies who have implemented TQM include Ford Motor Company,
Phillips Semiconductor, SGL Carbon, Motorola and Toyota Motor Company.1
TQM Defined
TQM is a management philosophy that seeks to integrate all organizational

functions (marketing, finance, design, engineering, and production, customer
service, etc.) to focus on meeting customer needs and organizational objectives.

TQM views an organization as a collection of processes. It maintains that
organizations must strive to continuously improve these processes by incorporating
the knowledge and experiences of workers. The simple objective of TQM is "Do the
right things, right the first time, every time". TQM is infinitely variable and
adaptable. Although originally applied to manufacturing operations, and for a
number of years only used in that area, TQM is now becoming recognized as a
generic management tool, just as applicable in service and public sector
organizations. There are a number of evolutionary strands, with different sectors
creating their own versions from the common ancestor. TQM is the foundation for
activities, which include:
• Commitment by senior management and all employees

• Meeting customer requirements
• Reducing development cycle times
• Just In Time/Demand Flow Manufacturing
• Improvement teams
• Reducing product and service costs
• Systems to facilitate improvement
• Line Management ownership
• Employee involvement and empowerment
• Recognition and celebration
• Challenging quantified goals and benchmarking
• Focus on processes / improvement plans
• Specific incorporation in strategic planning
This shows that TQM must be practiced in all activities, by all personnel, in
Manufacturing, Marketing, Engineering, R&D, Sales, Purchasing, HR, etc.2
Total Quality Management is a management style based upon producing quality

service as defined by the customer. TQM is defined as a quality-centered, customer-
focused, fact-based, team-driven, senior-management-led process to achieve an
organization’s strategic imperative through continuous process improvement. TQM
principles are also known as total quality improvement, world class quality,
continuous quality improvement, total service quality, and total quality leadership.
WHAT DOES T.Q.S.M STANDS FOR?
 T – Stands for TOTAL;

 The word "total" in Total Quality Management means that everyone in the
organization must be involved in the continuous improvement effort, the word
"quality" shows a concern for customer satisfaction, and the word
"management" refers to the people and processes needed to achieve the
quality.
 Q – Stands for QUALITY;
 Means meeting or exceeding customer (internal or external)
expectation.
 It is about relationships
 Fundamental to all major business decisions
 It is everyone’s business

 S – stands for SERVICE; act of help or assistance in a manner of serving
customer
 M – Stands for MANAGEMENT mean improving and maintaining

business systems and their related processes or activities.
Total Quality Management is not a program; it is a systematic, integrated, and

organizational way-of-life directed at the continuous improvement of an organization. It is
not a management fad; it is a proven management style used successfully for decades in
organizations around the world. TQM is not an end in itself; it is a means to an
organizational end. Total Quality Management must not be the primary focus of an
organization; it should merely be the means to achieve organizational goals.
Total Quality Management differs from other management styles in that it is more
concerned with quality during production than it is with the quality of the result of
production. Other management styles have different concerns. Some major styles are
compared with TQM as follows.
Management-by-Objectives (MBO) emphasizes achieving specified objectives, under the

control of individual managers. This approach works against multi-functional process
performance and interferes with teamwork and quality. TQM is not objective-oriented,
except for its one goal of achieving continuous quality improvement.
Management-by-Results (MBR) is management by viewing past results as an indication of

future results. It has been compared to driving an automobile in a forward direction while
looking in the rear view mirror. In today’s fast-paced, quick-changing business
environment, managers cannot rely on past results as a predictor of future performance. In
contrast, TQM is only concerned with current results and ways to improve them.
Management-by-Exception (MBE) is management by identifying specific targets for

management attention and action. It produces short-term results by reacting to immediate
problems, but there is no analysis of the processes that produced the problems, so long-
term benefits are lost. On the other hand, TQM is more concerned with correcting processes
that produce problems than it is with responding to individual problems.
Total Quality Management is very different from these and other management systems. It
recognizes that quality as determined by the service provider might be much different from
quality as perceived by the service receiver. If the customer is not satisfied with a service,
then the service does not have quality and the processes that produced the service have
failed.
Total Quality Management requires an organizational transformation-a totally new and

different way of thinking and behaving. This transformation is not easy to achieve; it is not
for the weak or the statistically untrained. At first glance, many TQM techniques may seem
simple and based on common sense, but they must be understood and used correctly for
TQM to function properly. Knowing the history of Total Quality Management may help in
understanding its techniques.
Principles of TQM
The key principles of TQM are as following:3
• Management Commitment
1. Plan (drive, direct)
2. Do (deploy, support, participate)
3. Check (review)
4. Act (recognize, communicate, revise)
• Employee Empowerment
1. Training
2. Suggestion scheme
3. Measurement and recognition
4. Excellence teams
• Fact Based Decision Making
1. SPC (statistical process control)
2. DOE, FMEA
3. The 7 statistical tools
4. TOPS (FORD 8D - Team Oriented Problem Solving)
• Continuous Improvement
1. Systematic measurement and focus on CONQ
2. Excellence teams
3. Cross-functional process management
4. Attain, maintain, improve standards
• Customer Focus
1. Supplier partnership
2. Service relationship with internal customers
3. Never compromise quality
4. Customer driven standards
Principles of Total Quality

• Total quality is a people-focused management system that aims at continual
increase in customer satisfaction at continually lower real cost.
• TQ is a total system approach (not a separate area or program) and an
integral part of high-level strategy; it works horizontally across functions and
departments, involves all employees, top to bottom, and extends backward
and forward to include the supply chain and the customer chain.
• Foundation of total quality is philosophical: the scientific method: includes
systems, methods, and tools.
• A comprehensive, organizational-wide effort to improve the quality of
products and services – applies not only to large manufacturers, but t small
companies.
• A management of process and set of disciplines those are coordinated to
ensure that the organization consistently meets and exceeds customer
requirements.
• Concerned with continuous improvement in performance aimed at delighting
customers.
• Achieving quality through gaining everyone’s commitment and involvement.
• Improvement of the quality of the organizations products and services
• It is the integration of all functions and processes within an organization in
order to achieve continuous improvement of the goals and services.

Michael Dell’s Touch of Quality
Although Dell Computer Corporation’s PCs have had

some of the highest quality ratings in the industry, CEO
Michael Dell became obsessed with finding a way to
reduce their failure rates. The key, he believed, was to
reduce the number of times that each hard drive – the
most sensitive part of a PC – was handled during
assembly. Production lines were revamped, and the
numbers of “touches” were reduced from over 30 to less
than 15. Soon after, the rate of rejected hard drives fell
by 40 percent, and the overall failure rate for the
company PCs dropped by 20 percent.
Figure 1.5 E.g. of Improving Work Processes
THE IMPORTANCE OF QUALITY
 Quality drives market share.

• And when superior quality and large market share are both present,
profitability is virtually guarantee.
 Quality can also reduce costs.

• Provides an additional competitive edge
• Types of quality: customer – driven quality and conformance or internal
specifications quality.
 As quality improves, so does cost, resulting in improved market share

and hence profitability and growth.
• Provides a means for further investment in such quality improvement
areas as research and development. The cycle goes on. See Figure 1.1
The quality circle.
• Rewards of higher quality are positive, substantial, and
pervasive. Findings indicate that attaining quality superiority produces
the following organizational benefits:
1. Greater customer loyalty
2. market share improvement
3. higher stock prices
4. reduced service calls
5. higher prices

6. Greater Productivity
History of TQM
Total Quality Management was developed in the mid 1940s by Dr. W. Edward Deming who
at the time was an advisor in sampling at the Bureau of Census and later became a
professor of statistics at the New York University Graduate School of Business
Administration. He had little success convincing American businesses to adopt TQM but his
management methods did gain success in Japan.
After World War II, General MacArthur took 200 scientists and specialists, including Dr.
Deming, to Japan to help rebuild the country. While working on the Japanese census, Dr.
Deming was invited by the Japanese Union of Scientists and Engineers to give lectures on
his statistical quality techniques. One of the attendees was a past professor to many of
Japan’s CEOs. After attending the lectures, the professor told his CEO students that, if they
wanted to turn Japan’s economy around in five years, they should attend Dr. Deming’s
lectures on using statistics to achieve quality at a reduced cost. Many of the CEOs took the
professor’s advice and attended the lectures. Eventually, many Japanese manufacturing
companies adopted Dr. Deming’s theories and were able to produce quality products at
reduced costs.
While the Japanese business world was concentrating on producing quality products,
businesses in the United States were more concerned with producing large quantities of
products. Their emphasis on quantity at the expense of quality let the Japanese, with their
inexpensive, high quality products; gain a substantial foothold in American markets.
In the 1970s and 1980s, many American companies, including Ford, IBM, and Xerox, began
adopting Dr Deming’s principles of Total Quality Management. This gradually led to their
regaining some of the markets previously lost to the Japanese. Although Total Quality
Management gained its prominence in the private sector, in recent years it has been
adopted by some public organizations.
So far, this chapter has defined Total Quality Management, explored its origin, and
explained how it emphasizes quality during production. Since quality is so important to any
discussion of TQM, the next section explores this key element in detail.
Deming Chain of Reaction:

“As quality improves, cost will decrease costs; cost will decrease and
productivity will increase, resulting in more jobs, greater market share, and
long-term survival”
FREDERICK TAYLOR
 Developed his system of scientific management, which emphasized

productivity at the expense of quality.
 Centralized inspection departments were organized to check for quality at
the end of the production line.

 The control quality focused on final inspection of the manufactured
product, and a number of techniques were developed to enhance the
inspection process.
 Taylor summarized his thoughts in 1951 as:
 Management is science – not rule of thumb
 Management is harmony – not discord
 Management is cooperation – not individualism
 Management is maximum output – not restricted output
 Management is development of each man and to his greatest
efficiency and prosperity.
WALTER SHEWART, HAROLD DODGE, GEORGE EDWARDS

• Developed new theories and methods of inspection to improve and
maintain quality.
KURT LEWIN
• Provided us with an understanding of how to make large scale
organizational change.
Douglas McGregor
• Has tremendous impact on what later became Total Quality Management.
• Detailed the Theories of Management (Theory X and Theory Y). Theory X
states that employees will not work if left to their own devices; employees
are inherently bad and must be forced and coerced into work. Theory Y
states that employees find work as natural as play and will work diligently
to the firm’s aims if assumptions follow later.
Fred Emery
• Australian disciple of Lewin and Eric Trist.
• Apply open systems thinking to social change, pointed out that optimal
results could be achieved only when social systems, which obey the laws of
biology, psychology, and sociology are designed integrative with technical
systems following the laws of physics, chemistry and engineering.
• The social technical approach required that those who do not work get a
great deal more authority, control, skills and information than is customary
under scientific management.
JOSEPH M. JURAN
• Introduces the managerial dimension of planning, organizing and
controlling and focused on the responsibility of management to
achieve quality and the need for setting goals.
• Defines quality as fitness for use in terms of design, conformance,
availability, safety and field use.
• Promotes concepts known as Managing Business Process Quality – a
technique for executing cross functional quality improvements.

ARMAND FEIGENBAUN
• Achieved visibility through his work in Japanese Management for total quality
improvement.
• Used a total quality control approach that may very well be the forerunner of
today’s TQM
• Promoted a system for integrating efforts to develop, maintain and improve
quality by the various groups in an organization.
PHILIP CROSBY
• Author of the popular book Quality is Free.
• Argues that poor quality in the average firm costs about 20% of revenues;
most of which could be avoided by adopting good quality practices.
THE CONCEPT OF QUALITY
Definition of quality:
1. Perfection
2. Consistency
3. Eliminating waste
4. Speed of delivery
5. Compliance with policies and procedures
6. Providing a good, usable product
7. Doing it right the first time
8. Delighting or pleasing customers
9. Total customer service and satisfaction
Today most managers agree that the main reason to pursue quality is to satisfy
customers. The American National Standards Institute (ANSI) and the American
Society for Quality (ASQ) define quality as “the totality of features and
characteristics of a product or service that bears on its ability to satisfy
the given needs.”
TQM GOAL: CUSTOMER SATISFACTION
Figure 1.1 TQM GOALS

The view of quality as the satisfaction of customer needs is often called fitness
for use. In highly competitive markets, merely satisfying customer needs will
not achieve success. To beat with competition, organizations often must exceed
customer expectations. Thus, one of the most popular definitions of quality is
meeting or exceeding customer expectations.
HOLLYWOOD CASINO RESORT

Tunica, Mississippi
Hollywood Casino Resort/Tunica is a place

where guests feel invited and welcome.
We provide the highest levels of
personalized service and products for our
guests, who always enjoy a fun-filled
experience. Everyone at Hollywood Casino
does the right thing the first time, and puts
the needs and wants of our guests in the
forefront of every decision we make.
Figure 1.2 Vision Statement of Hollywood Casino Resort
Managers of manufacturing and service functions deal with different types of

quality issues; the following sections provide a brief overview of these issues.
Although the details of quality management differ between manufacturing and
service industries, the customer-driven definition eliminates these artificial
distinctions and provides a unifying perspective.
Quality in Manufacturing
• Quality systems focused primarily on technical issues such as equipment

reliability, inspection, defect measurement, and process control.
• Transition to a customer – driven organization has caused fundamental
changes in manufacturing practices, changes that are particularly evident in
areas such as product design, human resource management, and supplier
relations.
Quality dimensions:
Manufactured products have several quality dimensions including the
following:
1. Performance: a product’s primary operating characteristics.

2. Features: the “bells and whistles” of a product.
3. Reliability: the probability of a product’s surviving over a specified period
of time under stated conditions of use.
4. Conformance: the degree to which physical and performance
characteristics of a product match pre-established standards.
5. Durability: the amount of use one gets from a product before it physically
deteriorates or until replacement is preferable.
6. Serviceability: the ability to repair a product quickly and easily.
7. Aesthetics: how a product looks, feels, sounds, tastes, or smells.
8. Perceived quality; subjective assessment resulting from image,
advertising, or brand names.
Quality control in manufacturing is usually based on conformance, specifically

conformance to specifications. Specifications are targets and tolerances determined
by designers of products and services. Targets are the ideal values for which
production strives; tolerances are acceptable deviations from these ideal values.
A lack of defects has constituted quality in manufacturing for many years.
However, the lack of defects alone will not satisfy or exceed customer expectations.
Many top managers have stated that good quality of conformance is simply the
“entry into the game”. A better way to achieve distinction and delight customers is
through improved product design. Thus, manufacturers are turning their attention
toward improved design for achieving their quality and business goals.
Quality in Services:
Service can be defined as “any primary or complementary activity that does

not directly produce a physical product – that is, the non-goods part of the
transaction between buyer (customer) and seller (provider).” A service transaction
might be as simple as handling a complaint or as complex as approving a home
mortgage. A Service orientation places customer needs ahead of organizational
needs. Table 1 – 3 provides examples of how the four dimensions of service quality
apply to various industries. In this context, a physical product is simply the medium
used to facilitate the other services and a service rather than product
orientation becomes the focus. Customer’s needs take precedence over
organizational needs. In contrast, when quality programs are product oriented, it is
often the case that a higher priority is placed on process (and bottom – line)
performance than on customer satisfaction. Trying to squeeze and the ounce of
performance” from its internal business processes, a company can lose touch with
its customers and what they can value.
INDUSTRY PHYSICAL SERVICE SERVICE SERVICE

PRODUCT PRODUCT ENVIRONME DELIVERY
NT

Auto
manufacturing Vehicle Pricing Showroom Test drive &
Co. sales pitch
Hotel Room Supplies Pricing & Room Front Office/

Quality Bellman
Performance
Food & Restaurant & Chef, waitress,

Beverage Bar bartender
Service performance
Airline Pricing
Food & Cleanliness of
Beverage Transportation Airport facilities aircraft
Service & flight Safety in-flight
Ticket entertainment service
Baggage
Handling
Table 1.3 COMPONENTS OF SERVICE: Some Industry Example:
How do customers make choices based on value judgments?

• Customers compare alternative service providers on the basis of value.
• Customers perform a gap analysis between what they expect and what
perceived is the value received.
• Evident in service industries where a customer’s satisfaction is often
based on such intangible factors as assurance, empathy, reliability, and
responsiveness.
VALUE STREAM AND ITS CUSTOMERS

 “QUALITY” is about people
 Value stream – all the resources required to take production inputs and
transform them into a suitable mixture of products or services constitutes.
 Customer – can be used to describe anyone who benefits from goods or
services anywhere along the value stream.
 Internal customer – its suppliers share the same production system.
Internal customers are linked together through the design of the value
stream and the output of the value stream becomes an output to an
external customer’s system.
 External customer – its suppliers are members of different systems.
Most research dealing with the effects of quality on business competitiveness

generally falls into one of two categories, depending on the kind of relationships
under study. The first encompasses those studies analyzing the external effects of
quality on competitiveness, while the second includes those that focus on the
internal effects. External effects show the impact of changes in the quality
perceived by clients on business competitiveness. These effects have their source in

changes in client behavior and their level of satisfaction which, ultimately, will have
a positive or negative impact on the volume of sales and market share due to
variations in clients' willingness to pay, their purchase intentions or level of
expenditure within the hotel.
Internal effects refer to the influence quality has on competitiveness due to
changes in the firm's production processes. Such changes have an influence on
productivity and, therefore, on the firm's production costs
SERVICE QUALITY vs. PRODUCT QUALITY
 As a strategic issue, customer service can be considered a major dimension of

competitiveness.
 People will go out of their way and more for good service, which indicates the
importance place on service by customers.
 The behavior of the service provider becomes a factor in service delivery.
 The service recipient has the final say regarding quality.
 Service requires contact (directly or via telephone) between the service provider
and the service equipment.
 The image of the organization shapes the perception of customers.
 The customer is present during the production process and performing the final
inspection.
 The measure of output is difficult to define.
 Quality can mean different things to different people given the same experience.
 Quality is defined in the context of the totality of the experience.
DIMENSIONS OF SERVICE:
The important dimensions of service quality include the following:
• 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?
• Accuracy: is the service performed right the first time?
• Responsiveness: Can service personnel react quickly and resolve
unexpected problems?

Service organizations must look beyond product orientation and pay significant attention
to customer transactions and employee behavior. Several points that service organizations
should consider are as follows:
• Customer Perceptions – example are speed of service is an

important quality characteristics, yet perceptions of speed may differ
significantly among different service organizations and customers.
• Behavior – quality of human interaction is vital in every transaction that involves

human contact; e.g. Friendliness of front desk clerks.
• Image – shaping customer expectations of a service and in setting

standards by which customers evaluate that service.
• Service standards – value judgment, customer attitudes and

employee competence.
• Quality control supervision – calls for training of employees and

self-management.
Figure 1.4 Service Orientations
Advantages of TQM
 Long-term benefits that may be expected from Total Quality Management are higher
productivity, increased morale, reduced costs, and greater customer commitment.
These benefits may lead to greater public support and improvement of an
organization’s public image.

 Eliminating errors and doing things right the first time saves time and resources. The
savings may then be used for expansion of services or made available to employees
in their efforts to increase service quality.
 Total Quality Management may create an organizational atmosphere of excitement

and sense of accomplishment through the rewarding of creativity. When
experimentation-oriented failures are accepted as a part of the learning process,
employees feel free to use their creative energies to develop new ideas.
 Total Quality Management’s extensive use of teamwork gives employees the

experience of problem solving and using their knowledge and experiences in a
collaborative effort. As employees gain experience with team problem solving, they
may be used to form cross-sectional ad-hoc "mega teams" that can attack larger
organization-wide problems. TQM gives an organization greater problem-solving
flexibility and increases the quality of work life for all employees.
 Total Quality Management may be a "profit generator," even for public organizations.
It does not actually create profit for the organizations, but if implemented properly, it
may identify costly processes and cost-saving measures. Once fully implemented,
the only expense of TQM is the cost of routine operations. In public organizations,
saved resources may be viewed as "profits."
Total Quality Management does have some detractors who have pointed out some of the
disadvantages of TQM.
Disadvantages of TQM
 Long-range plans advocated by TQM may limit an organization’s flexibility and
agility.
TQM teaches that a long-term plan is required to achieve a complete quality
transformation, but a long-term plan that has been pursued for a long period
may become an end unto itself. Completion of the plan becomes the ultimate
goal. Objectives the plan was designed to accomplish are forgotten; achieving
the transformation becomes the most important objective. Instead of
maintaining continuous change, the organization may reach a stable point
and stagnate. To produce continuously high quality services, an organization
must react quickly to changes in the community and not be restricted by its
management style.
 TQM detractors also argue that although Total Quality Management calls for
organizational change, it does not demand radical organizational reform.
Real quality improvement requires radical structural change, such as
flattening organizational structures. It requires liberation of employees from
stifling control systems and the tyranny of functionalism, both of which stifle
teamwork.
 Total Quality Management calls for the elimination of the goals and objectives
required by Management-by-Objectives.
Critics of TQM claim that this may negatively affect motivation. They claim
that having established production goals gives employees increasingly higher
goals to reach, which motivates them to find new ways to reach the goals.
When there are no established production goals, some employees will only
produce the minimum required to keep their job.

 Total Quality Management calls for the elimination of performance assessments that
rate employees in relation to each other.
Critics fear that without performance assessment managers would have too
much power over employees and may be use it capriciously. Many managers
feel performance assessments let them document employee performance for
possible reward, but some employees fear the assessments might be used
against them in some disciplinary actions. Performance assessments may give
employees with grievances the documentation they need to prove managers
are treating them unfairly. Without them, managers could make unfair
accusations about an employee’s performance and the employee would not
have the documentation to counter the claims.
Some argue that the claims of success by TQM supporters are not supported by facts but by
anecdotes and stories. They argue that TQM proponents tell heart-warming stories about
how teamwork makes everyone happy, but that they cannot back up their claims with hard
data.
Critics maintain that TQM focuses manager attention on internal processes rather than on
external results. When this is taken to an extreme, managers may become too preoccupied
with internal issues, such as the documentation required by TQM methods, and ignore the
shifting perceptions of customers. Managers become so concerned with the process of TQM
that they neglect the needs of the customer, which was the initial reason for implementing
TQM.
Total Quality Management calls for its implementation to be immediate and complete. Some
contend it does not make sense to try to create quality improvement in the entire
organization from the very beginning. They argue that all processes are not equally good or
bad, all departments do not function equally well, and all services do not measure up to the
same quality standard. Because of this, they contend that quality should be introduced
incrementally and only in the specific areas that need it most.
Some critics claim Total Quality Management’s focus on setting and maintaining standards
makes work life unexciting and boring. When employees are bored, their poor attitudes may
cause customer dissatisfaction with the quality of service received from them. In addition,
when too much emphasis is placed on standardization it precludes the constant internal
changes needed to keep up with external changes.
Total Quality Management develops its own bureaucracy. TQM detractors contend its
statistical burden and committee structure is cumbersome, slows organizational momentum,
and consumes too much time and resources.
Opponents of Total Quality Management maintain that it appeals to egotism. After receiving
some TQM training, some employees consider themselves TQM "experts" who have the
answers to everyone else’s problems. They claim their department is doing everything right
according to TQM principles and find fault with every other department. Some managers,
instead of viewing achievement as a joint effort where every participant deserves praise,
apply for awards for self-gratification or to benefit the organization’s public relations image.
Some detractors posit that TQM is an emotionally cold way to manage people. Its analytical,
detached programs are often devoid of human emotion that inspires attachment to the
organization and its customers.
Total Quality Management calls for a cultural transformation. Some argue it creates a
process-crazed organization, similar to a cult, where the impression is that only total
commitment to TQM can save the organization from ruin. Just as in a cult, all the decisions
in TQM are related to the "vision." No one wants to claim individual credit for success;
instead, success is attributed to the TQM philosophy. Results become less important than
performing the proper TQM techniques. Just as in a cult, periodic evangelism by TQM
experts is used to maintain a missionary zeal for TQM. If an employee is not a TQM believer,
he or she considered an outcast who does not care about the organization’s success. Even
with its problems, Total Quality Management may still be the best choice as a successor to
the militaristic, authoritative management style.
Exercise NO. _____

Introduction to TQM
Name _____________________________ Course & Year _______________________

Subject time/Day ____________________ Date: _____________ Instructor________
Case 1.1
APPLYING TQM TO EVERYDAY TASK
Pauline Knowlton has worked for Matt Pantusa for nearly three months. Pauline
really likes Matt because he practices what he preaches and is a good supervisor.
But sometimes Matt can be a little overbearing, especially now that he is really sold
on Total Quality Management.
For example, Matt is the publicity person for the local Computer Enthusiasts
Club. He sends out 5,000 copies of a brochure each month that advertises the next
month’s meeting of the Club. Pauline usually is the one to make sure the flyers are
copied, folded, addressed, and mailed on time. The advertisement that Pauline
mailed a few weeks ago announced last week’s monthly meeting on quality
productivity tools for computers.
When Matt went into the office the morning after the meeting, he called
Pauline into his office. He told Pauline that over 600 people had attended the
meeting – a record crowd. Pauline congratulated Matt for such a successful
meeting. She was pleased that had had a part in making the meeting a success.
But Matt didn’t seem pleased as he gave her two copies of the flyer that had been
given to him by his friends who received his mailing. One flyer was folded a little
crooked and the other has a mailing label that was affixed at the slightly downward
angle. Matt asked her to be more careful with these details as she did future
mailings.
Pauline like her work and wants to please Matt. She thinks, however, that
he’s gone a little bit overboard with this TQM. Does anyone really care if a flyer is
perfectly folded or a label is a little askew? And having time to think about their
conversation, Pauline can’t understand why Matt is making such a big deal about
the mailing. After all, more people showed up at the monthly meeting than had
ever been there before.
RESPONDING TO THIS CASE:

1. Do you think Matt is taking the TQM philosophy too far? Why or why not?
2. Pauline feels that if the customer is satisfied, why Matt shouldn’t be please.
Discuss the pros and cons of her rationale.
3. Is there a lesson that Pauline could learn from this incident?
4. What advice would you give to Matt in Supervising Pauline and here
employees?
Exercise NO. _____

Introduction to TQM
Name _____________________________ Course & Year _______________________

Case 1.2
The Reservation Nightmare
H. James Harrington, a noted quality consultant, related the following story in

Quality Digest magazine:
I called to make a flight reservation just an hour ago. The telephone rang five
minutes before a recorded voice answered. ‘’Thank you for calling ABC Travel
services,’’ it said. ‘’To ensure the highest level of customer service, this call may be
recorded for future analysis.’’ Next I was asked to select from one of the following
choices: ‘’ If the trip is related to company business, press 1.Personal business,
press 2. Group travel, press 3.” I pressed 1.
I was then asked to select from the following choices: “If this is a trip within
the United States, press 1.International, press 2.Scheduled training, press 3.
Related to conference, press 4.” Because I was going to Canada I pressed 2.
Now two minutes into my telephone call, I was instructed to be sure that I
had my customer identification card available. A few seconds passed and a very
sweet voice came on, saying, “All international operators are busy, but please hold
because you are a very important customer.’’ The voice was then replaced by
music. About two minutes later, another recorded message said, “Our operators
are still busy, but please hold and the first available operator will take care of you.’’
more music. Then yet another message: ‘’ Our operators are still busy, but please
hold. Your business is important to us.’’ more bad music. Finally the sweet voice
returned, stating, ‘’to speed up your service, enter your 19-digit costumer service
number.’’ I frantically searched for their card, hoping that I could find it before I
was cut off. I was lucky; I found it and entered the number in time. The same sweet
voice came back to me, saying, ‘’ to confirm your service number, enter the last
four digits of your customer service number, enter the last four digits of your social
security number.” I pushed the four numbers on the keypad. The voice said: ‘’
Thank you. An operator will be with you shortly. If your call is emergency, you can
call 1-800-CAL-HELP, or push all of the buttons on the telephone at the same time.
Otherwise, please hold, as you are a very important customer.” This time, in place
of music, I heard a commercial about the service that the company provides.
At last, a real person answered the telephone and asked,’’ Can I help you? ‘’ I
replied, ‘’ Yes, oh yes.’’ He answered, “Please give me your 19-digit customer
service number, followed by the last digit of your social security number so I can

verify who you are.’’ (I thought that I gave these numbers in the first place to speed
up service. Why do I have to rattle them off again?
I was now convinced that he would call me Mr. 5523-3675-0714-1313-040.
But, to my surprise, he said: “Yes, Mr. Harrington. Where do you want to go and
when?” I explained that I wanted to go to Montreal the following Monday morning.
He replied: ‘’ I only handle domestic reservations. Our international desk has a new
number: 1-800-1WE-GOTU. I’ll transfer you.’’ A few clicks later a message came on,
saying. ‘’All of our international operators are busy. Please hold and your call will be
answered in the order it was received. Do not hang up or redial, as it will only delay
our response to your call. Please continue to hold, as your business is important to
us.”
DISCUSSION QUESTIONS
1. Summarize the service failures associated with this experience.
2. What might the travel agency have done to guarantee a better service
experience for Mr. Harrington? How do your suggestions relate to the TQ
principles?
Case 1.3
A Tale of Two Restaurants
Kelly’s Seafood Restaurant was founded about 15 years ago by Tim Kelley, who
has run it from the start. The restaurant is very profitable because of its excellent
food quality, but lately has been having problems with consistency because of
numerous suppliers. The restaurant operations are divided into front-end (servers)
and back-end (kitchen). The kitchen has notes to boost employee morale,
employees are cross-trained in all areas, and the kitchen staff continually seeks
improvements in cooking. Servers, however, have minimal wages and few perks,
and turnover is a bit of a problem. Tim’s primary criterion for selecting servers is
their ability to show up on time. There is little communication between and front-
end and back-end operations, other than fulfilling orders. Tim makes sure that any
complaints are referred to him immediately by the servers.
The restaurant has no automation, as Tim believes that it would get in the way of
customers’ special requests. “this is the way we’ve done it for past 15 years and
how we will continue to do it,’’ was his response to a suggestion of using a
computerized system to speed up orders and eliminate delays. Tim used to hold
staff meetings regularly, but recently they have dropped from each week to one
every five or six months. Most of the time is spent focusing on negative behavior,
and Tim has often said “You can’t find good people anymore.’’
Jim’s Steakhouse is a family-owned restaurant in the same state. Jim uses only
the freshest meats and ingredients from the best suppliers and gives extra large
portions of food to customers, who feel they are getting their money’s worth. Jim
pays his cooks high wages to attract quality employees. Servers get 70 percent of
tips, bussers 20 percent, and the kitchen staff 10 percent to foster team work. Many
new hires come from referrals from current employees. Jim interviews all potential
employees and ask them many pointed questions relating to courtesy,

responsibility, and creativity. The restaurant sponsors bowling nights, golf outings,
picnics, and holiday parties for its employees. At Jim’s, birthday customer receive a
free dinner, children are welcomed with balloons, candy, and crayons, and big
screen TV’s caters to sports fans. Jim walks around and constantly solicits customer
feedback. Jim visits many restaurants to study their operations and learn new
techniques. As a result of these visit, Jim installed computers to schedule
reservations and enter orders to the kitchen.
1. Contrast these two restaurants from the perspective of TQ. What conclusions can
you make and what advice would you give to the owners?
2. What type of management model (mechanistic, organismic, or cultural) do you
think each organization represents?
CHAPTER 2
APPROACHES TO TOTAL QUALITY
TOTAL QUALITY PARADIGMS
Adopting a TQ philosophy requires significant changes in organization design,
work processes, and culture. Organizations use a variety of approaches.
A paradigm (pronounced "pair-a-dime") is a set of beliefs about

phenomenon around us that constrains and guides our thinking. For example,
consider yourself to be in Spain or Portugal in 1492. You believe the sun rises in the
East and sets in the West. When you look westward out over the ocean, you see a
straight line where water meets the sky. You are familiar with straight edges where
the plane meets the sky. If you walk off the plane of a roof, you fall. Therefore, ships
must fall off the earth if they travel too far. N'est-ce pas?
Paradigms are shared by people creating schools of thought. The ancient

mariners of the late 1400's all believed the same perceived facts and, thus, never
ventured too far from land. Paradigms change when first an anomaly appears. The
late 1400's brought additional facts to bear, such as: at first you see the top of a
mast, then the whole mast, then the top of the ship hull, and then the full hull as a
ship approaches from far out to sea. This is similar to what you see when a person
climbs over a small hill. Perhaps the ocean is like a hill and there is no edge.
Experimentation occurs to verify the anomaly and seek out new relationships
and causes. People who explore anomalies may be considered outcasts by those
who staunchly support the existing paradigm. Columbus was considered a "strange
and touched" sailor by many who were sure they would never see him or his ships
again. Paradigm shifts occur when the anomaly is perceived to be a violation of the
natural laws.

The Quality Philosophies of Edward Deming
The Deming Management Philosophy
Deming stresses that higher quality leads to higher productivity, which in

turn leads to long-term competitive strength. Deming’s “chain of reaction,” shown
in Figure 2.1, summarizes this view. This theory states that improvements in
quality lead to lower costs because of less rework, fewer mistakes, fewer delays and
snags, and better use of time and materials. Lower costs, in turn, lead to
productivity improvements. With better quality and lower prices, the firm can
achieve a higher market share and thus stay in business, providing more jobs.
Deming’s states emphatically that top management has the overriding
responsibility for quality improvement. Deming has summarized his philosophy in
what he calls “A System of Profound Knowledge.”
Figure 2.1 THE DEMING CHAIN REACTION
Improved quality
Costs decrease
because of less
rework, fewer
mistakes, fewer delays
and snags, and better
Productivity Improves
Capture the market

with better quality and
lower price.
Stay in business
Provide jobs and more

jobs

Profound Knowledge
Four parts of profound knowledge: (1) appreciation of a system, (2) knowledge
of the theory of variation, (3) theory of knowledge, and (4) psychology.
Systems
• A set of functions or activities within an organization that work together to
achieve organizational goals. For example, a McDonald’s restaurant can be
viewed as a system. It consists of the order-taker/cashier subsystem, grill and
food preparation subsystem, drive-through subsystem, and so on.
• Factors within a system that affect the individual performance of an
employee;
 Training received
 Information and resources provided
 Leadership of supervisors and managers
 Disruptions on the job
 Management policies and practices
Variation
• It is the difference in the reproducibility of a particular action. It is the
difference between a particular action and the target outcome.
• Variation increases the cost of doing business
Theory of Knowledge
• It is a branch of philosophy concerned with the nature and scope of
knowledge, its pre-suppositions and bases, and the general reliability of
claims to knowledge.
• Theory establishes a cause-and-effect relationship that can be used for
prediction. Theory leads to questioning and can be tested and validated – it
explains why.
Psychology
• Helps to understand people, interactions between people and circumstances,
interactions between leaders and employees, and any system of
management. People differ from one another.
• We must understand how people are intrinsically motivated. It is through
intrinsic motivation that people find joy in work and excitement in application
of new knowledge. True innovation in a company only comes at the discretion
of the employees. Think about this saying: "you can lead a horse to water but
you cannot make him drink." A professor of
leadership/motivation/management once told a class, "you don't get paid to
get a horse to drink, and you get paid to motivate him to float on his back in
the pond!"
Within the concept of knowledge of psychology, we must understand how

people react to change. You have heard it said that people resist change. This is
absolutely untrue. People have welcomed change throughout history AS LONG AS
they understood the benefit of change to them. Management's responsibility in
using profound knowledge is to market change so as to be exciting and desirous by
employees.

Lastly, profound knowledge requires an understanding of transformation from
competition to collaboration. Negotiators have long understood that cooperation
and mutually satisfying results start by someone taking a risk and offering another
something that is desired.
Deming's Fourteen Points
Edward Deming created Fourteen Points of management based upon three

principles. The first one is customer orientation. The second element is continuous
improvement. The last principle is to recognize that quality is determined by the
system, which is the inputs and the manner in which the previous two aspects are
processed.
1. Management commitment
2. Adopt the new philosophy.
3. Understand inspection.
4. End price tag decisions
5. Improve constantly of production and service.
6. Institute training.
7. Institute leadership.
8. Drive out fear.
9. Optimize team efforts
10. Eliminate slogans, exhortations and targets for the work force.
11. Eliminate quotas and MBO
12. Remove barriers to pride of workmanship.
13. Institute education and retraining.
14. Take action to accomplish the transformation.
Point I: Management Commitment

• The main message that Deming is trying to express under this point features
two key aspects. These are customer obsession and strategic planning. These
two ideals converged under this first point to establish the appropriate
direction for businesses to focus their attention.
• They should concentrate more on pleasing the customers than defeating any
of their competitors. Competition will always be present if the business
remains successful and manages to stay at the top of production, yet the
only way such will be feasible is if they continue to maintain customer
satisfaction.
Point II: Adopt a New Philosophy

• This new philosophy is nothing more than businesses taking the time to
notice and prevent the further production of defective products or services,
which in effect will lead to increase profits in the long-term.
• Deming summarizes under this point, defects are expensive, unnecessary,
and not inevitable.
Point III: Understand Inspection

• Inspection cannot put quality into a defected product. It can only stop the
defected product from advancing further.
• When many inspectors are hired to inspect the individual products the
problem of passing defective products to consumers worsens because nearly
every inspector assumes to some degree that a minimum inspection of so
many products is enough. The usual mindset to a certain extent is that a past
inspector should have already found the defect or future inspectors should
find it if he or she had missed the mistake
Point IV: End Price Tag Decisions

• Deming suggests that businesses should minimize their long-term costs
rather than minimize the initial cost
• Least cost is not necessarily the best cost. Buying form a supplier based on
low cost rather than a quality/cost basis defeats the need for a long-term
relationship. Vendor quality can be evaluated with statistical tools.
Point V: Improve constantly of production and service

• Improving every process concerning planning, production, and service
provides better products for the consumer and higher profits for the business.
• Search for quality is never ending and results from studying the process
itself, not the defects detected during inspection.
Point VI: Institute Training

• Deming urges that every level of the system be trained for its specific tasks.
The laborer responsible for performing the manual tasks may misunderstand
it, despite how it might seem easily to be understood by the requester in
management.
• When new employees are hired they should receive total quality
management training in groups at the company, departmental, and local
level before they begin working alone in order to prevent such
misunderstandings
Point VII: Adopting and Instituting leadership

• Deming rationalized that at the expense of leadership, management had
over-expressed organizational control, thus devoting a majority of their time
worrying only about outcomes. He pushes them to concentrate their efforts in
improvements by making company visions actual actions of the corporation.
Corporate leaders should center their attention on finding the source of any
problems and correcting them in the system rather than blaming certain
individuals for these inefficiencies
Point VIII: Driving Out Fear

• Employees need to feel secure in order for quality to be achieved.
• Fear of asking questions, reporting problems, or making suggestions will
prevent the desired climate of openness.
Point IX: Optimize team efforts

• The employees from each level of the corporation must work well with the
other levels in order for the company to function at its best potential. This
includes understanding the problems among the various branches of the
business at each level. Only after a high level of awareness and commitment

exists between them can change initially develop because cooperation
requires this earnest fundamental transition.
• When managers share information with employees, they recognize that a
complication exists that inhibits employees from providing statements,
presenting opinions or ideas, and asking questions in large group settings.
Once realized, the managerial staff can prompt the specific brand of trust and
interest needed by the certain group of individuals to promote an honest
exchange of ideas between levels without these barriers of communication.
Point X: Eliminating Slogans, Exhortations, and Targets for the Workforce

• A pointless sign hanging throughout the company in an attempt to promote
corporate objectives is useless to employees and a waste of money to the
business. Providing employees with company policies and purposes is
essential but doing so in a tactful manner in memos and letters is less
insulting and ignored than are the tacky posters dispersed throughout the
organization in no particular order (Anschutz, 1995, p. 25).
• Presenting such necessary information in the latter manner only proves
failure of the management to express company goals and objectives
adequately and professionally, thus using signs to speak to employees rather
than by personal confrontations (Anschutz, 1995, p. 30).
Point XI: Eliminating Quotas and MBO

• Eliminating numerical quotas for the staff and numerical goals for the
management increase quality because each employee is no longer based on
the statistical average worker but on their own performance without
comparative judgments making it easier for management to advance
individuals who work to the highest potential. This in effect encourages the
actual above-average half especially to work to their full potential at all times
rather than merely work to meet the proposed numerical objective before
halting their efforts or working slower than is necessary to prevent reaching
the set number before the desired time (Drummond, 1992, p. 35).
Point XII: Remove Barriers to Pride of Workmanship

• Abolishing annual performance appraisals promotes self worth and pride in
employees because it creates improved ways for individuals to receive
increases in pay. Instead of basing the pay increase on achieved results
without taking into account the possible barriers outside the control of the
employees or overseeing their work, the increase is solely based on how
much it would cost to hire a new employee with the same skills to replace the
position.
• Handling pay increases in this manner prevents unneeded competition
between workers and promotes teamwork since all will reap the benefit of the
increase rather than a few favorites In addition, by eliminating the annual
rating or merit system, tension is relieved creating room for pride in
workmanship, which contributes to further improvements.
Point XIII: Encouraging education and Self-improvement

• Deming advises that businesses should promote the institution of vigorous
programs of education and self-improvement for every employee at all levels.

• Employees who have a career within a certain corporation are more than
likely to change positions due to newly created jobs or the decline of out-of-
date ones rather than changing to gain an increase in pay. This is the main
reason why there will presumably always remain a need for educating
employees.
• As employees advance in knowledge both within and outside the criteria of
their jobs, they gain satisfaction in this opportunity, which adds increased self
worth and dignity that in effect brings forth improvements in them and the
company as well.
Point XIV: Taking Action to Accomplish the Transformation

• It basically sets forth the motivation to implement the previous thirteen
points with vital patience. He emphasizes that change takes time, but its
long-term outcomes are worth the initial costs and wait.
• An organization that wants to establish a culture based on quality needs to
emphasize the preceding 13 points on a daily basis.
• This usually requires a transformation in management style and structure.
Deming’s Seven Deadly Diseases

• Lack of consistency of purpose
 A company that is without constancy of purpose has no long – range
plans for staying in business. Management is insecure, and so are
employees.
• Emphasis on short-term profits
 Looking to increase the quarterly dividend undermines quality and
productivity.
• Evaluation by performance, merit rating or annual review of
performance
 The effects of these are devastating – teamwork is destroyed, rivalry is
nurtured.
 Performance rating build fear and leave people bitter, despondent and
beaten. They also encourage defection in the ranks of management.
• Mobility of Management
 Job hopping managers never understand the companies they work for
and are never long enough to follow through on long-term changes
that are necessary for quality and productivity.
• Running a company on visible figures alone
 The most important figures are unknown and unknowable – the
“multiplier” effect of a happy customer, for example.
• Excessive medical cost for employee health care, which increase the
final costs of goods and services.
 Reduce Cost on tests and treatments on medical expenses of
employees.
• Excessive costs of warranty, fueled by lawyers who work on the
basis of contingency fees.
Deming’s Obstacles

 “Hope for instant pudding”
 the idea that “improvement of quality and productivity is accomplished
suddenly by affirmation of faith”
 “Search for examples”
 Which companies undertake to find a ready-made recipe they can
follow when they must instead map their own route to quality?
 “Our Problems are different”
 The pretext managers rise to avoid dealing with quality issues.
 “Our quality control department takes care of all our problems for
quality”
 Another excuse managers use to avoid taking responsibility.
 “We would installed quality control”
 yet another excuse that lets top management off the hook
 “The supposition that is only necessary to meet specifications”
 Not only may products meet specifications yet vary in quality, but in
addition, “the supposition that everything is all right inside the
specifications and all wrong outside does not correspond to this world.
DEMING’S MISCELLANEOUS PRINCIPLES

• The 85-15 Rule:
The 85 – 15 rules holds that 85 percent of what goes wrong is with the
system, and only 15 percent with the individual person or thing. In this
connection, we do well to remember that in any group of people, not all, nor
even the majority, can be above average. In fact, exactly half will be below
average.
• Know Thy Customer:

In quality-minded organizations, the word “customer” describes more than a
relationship in which money merely changes hands. It describes the
exchange of services as well. For any given enterprise, there are two sets of
customers, external and internal. The external customer is the end user of a
product or service. The internal customer is the person or work unit that
receives the product or the service of another within the same company.
Too often one department does not understand how its work is used by the
next, and thus cannot learn what things are important in carrying out its
tasks. The notion of internal customers lends relevance to each employee’s
job and is absolutely critical to quality transformation.
CROSBY’S PHILOSOPHY: THE 14 POINTS:

The essence of Crosby’s quality philosophy is embodied in what he calls the
Absolutes of
Quality Management and the Basic elements of Improvement.
• Quality means conformance to requirements not elegance.

 Quality is simply the feeling of “excellence”.

 Requirements must be clearly stated so that they cannot be
misunderstood.
• There is no such thing as a quality problem.
 Problems must be identified by the individuals or departments that
cause them.
 The quality departments should measure conformance, report results,
and lead the drive to develop a positive attitude toward quality
improvement.
• There is no such thing as the economics of quality: it is always cheaper to do
the right job the first time.
 Quality is free. What costs money are all the actions that involve not
doing jobs right the first time.
 Similar to Deming’s Chain of Reaction message.
• The only performance measurement is the cost of quality.
 The cost of quality is the expense of nonconformance.
 Quality cost data are useful in calling problems to management’s
attention, selecting opportunities for corrective action, and tracking
quality improvement over time.
• The only performance standard is Zero Defects.
 A performance standard of the craftsperson regardless of his or her
assignment…The theme of ZD is do it right the first time.
 Concentrating on preventing defects rather than just finding and fixing
them.
Crosby’s Basic Elements of Improvements:

1. Determination – Top management must be serious about quality
improvement.
2. Education – absolutes should be understood by everyone only through proper
training & education.
3. Implementation – Every member of the team must understand the
implementation process.
THE JURAN’S PHILOSOPHY:
Juran defines quality as “fitness for use”. This is broken down into four categories:
 Quality of Design -focuses on market research, product concept, and design
specifications
 Quality of Conformance - includes technology, manpower and management
 Availability - focuses on reliability, maintainability, and logistical
support.
 Field service - comprises of promptness, competence, and integrity.
JURAN’S TEN STEPS TO QUALITY IMPROVEMENT:

1. Build awareness of opportunities to improve.
2. set goals for improvement
3. Organize to reach goals.
4. Provide Training
5. Carry out projects to solve problems

6. Report Progress
7. give recognition
8. communicate results
9. keep score
10.Maintain momentum by making annual improvement part of the regular
systems and processes of the company
FRAMEWORKS FOR QUALITY AND PERFORMANCE EXCELLENCE

Two most prominent frameworks for quality that have had world-wide influence:
 The Malcolm Baldrige standard provides an internationally comparable

framework and criteria for assessing organizational performance. It is a
template for competitiveness based on the principles of Total Quality
Management.
 ISO 9000:2000
The Malcolm Baldrige standard: Standard Dimensions:
• APPROACH: The methods (policies, procedures, processes) used to address

the requirements of the operations.
• DEPLOYMENT: Extent (number of users and consistency of use) to which

the approach is used by all appropriate work units.
• RESULTS: The outcomes (trends, measures, KPIs) of the organization’s

approach and deployment.
The Malcolm Baldrige standard
Categories and Items Point

Values
1. Leadership 120
2. Strategic Planning 85
3. Customer and Market Focus
85
4. Measurement, Analysis, and Knowledge
Management 90
5. Human Resource Focus 85
6. Process Management
85

7. Business Results 450
TOTAL POINTS 1000
Figure 2.2 The Malcolm Baldrige Standard
CRITERIA FOR PERFORMANCE EXCELLENCE

• Designed to encourage companies to enhance their competitiveness through
an aligned approach to organizational performance management that results
in:
1. Delivery of ever-improving value to customers, contributing to market
place success.
2. Improvement of overall company performance capabilities
3. Organizational and personal learning.
• The seven categories are:
1. Leadership – examines how an organization’s leaders address values,
direction, and performance expectations, as well as their focus on
customers and other stakeholders, empowerment, innovation, and
learning.
2. Strategic planning – examine how the organization develops strategic

objectives and action plans.
3. Customer and market focus – examines how an organization

determines requirements, expectations, and preferences of customers
and markets.
4. Information and analysis – examines and organization’s information

management and performance measurement systems and how the
organization analyzes performance data and ensures hardware and
software quality.
5. Human resource focus – examines how an organization motivates and
enables employees to develop and utilize their full potential in
alignment with the organization’s overall objectives and action plans.
6. Process management – examines the key aspects of an organization’s

process management including customer-focused design, product and
service delivery, key business, and support processes.
7. Business results – examines and organization’s performance and

improvement in key business areas – customer satisfaction, product
and service performance, financial and marketplace performance,
human resource results, and operational performance. Also examined
are performance levels relative to those of competitors.
Figure 2.3 MALCOLM BALDRIGE NATIONAL QUALITY AWARD CRITERIA FRAMEWORK

A Systems Perspective Framework
ISO 9000:2000
• Terms such as quality management, quality control, quality system, and
quality assurance acquired different, and sometimes conflicting meanings
from country to country, within a country, and even within an industry.
• ISO 9000 is a family of standards for quality management systems. ISO 9000
is maintained by ISO, the International Organization for Standardization and
is administered by accreditation and certification bodies. Some of the
requirements in ISO 9001 (which is one of the standards in the ISO 9000
family) would include:
a) a set of procedures that cover all key processes in the business;
b) monitoring processes to ensure they are effective;
c) keeping adequate records;
d) checking output for defects, with appropriate corrective action where
necessary;
e) regularly reviewing individual processes and the quality system itself
for effectiveness; and
f) facilitating continual improvement

• A company or organization that has been independently audited and certified
to be in conformance with ISO 9001 may publicly state that it is "ISO 9001
certified" or "ISO 9001 registered." Certification to an ISO 9000 standard does
not guarantee the compliance (and therefore the quality) of end products and
services; rather, it certifies that consistent business processes are being
applied.
History of ISO 9000
Pre ISO 9000
During WWII, there were quality problems in many British high-tech industries
such as munitions, where bombs were exploding in factories during assembly. The
adopted solution was to require factories to document their manufacturing
procedures and to prove by record-keeping that the procedures were being
followed. The name of the standard was BS 5750, and it was known as a
management standard because it did not specify what to manufacture, but how to
manage the manufacturing process. According to Seddon, "In 1987, the British
Government persuaded the International Organization for Standardization to adopt
BS 5750 as an international standard. BS 5750 became ISO 9000."
1987 version
ISO 9000:1987 had the same structure as the UK Standard BS 5750, with
three 'models' for quality management systems, the selection of which was based
on the scope of activities of the organization:
• ISO 9001:1987 Model for quality assurance in design, development,
production, installation, and servicing was for companies and organizations
whose activities included the creation of new products.
• ISO 9002:1987 Model for quality assurance in production, installation, and

servicing had basically the same material as ISO 9001 but without covering
the creation of new products.
• ISO 9003:1987 Model for quality assurance in final inspection and test
covered only the final inspection of finished product, with no concern for how
the product was produced.
• ISO 9000:1987 was also influenced by existing U.S. and other Defense
Standards ("MIL SPECS"), and so was well-suited to manufacturing. The
emphasis tended to be placed on conformance with procedures rather than
the overall process of management — which was likely the actual intent.
1994 version
• ISO 9000:1994 emphasized quality assurance via preventative actions,
instead of just checking final product, and continued to require evidence of
compliance with documented procedures. As with the first edition, the down-
side was that companies tended to implement its requirements by creating

shelf-loads of procedure manuals, and becoming burdened with an ISO
bureaucracy. In some companies, adapting and improving processes could
actually be impeded by the quality system.
2000 version
• ISO 9001:2000 combines the three standards 9001, 9002, and 9003 into one,
now called 9001.
• Design and development procedures are required only if a company does in
fact engage in the creation of new products.
• The 2000 version sought to make a radical change in thinking by actually
placing the concept of process management front and centre. ("Process
management" was the monitoring and optimizing of a company's tasks and
activities, instead of just inspecting the final product.)
• The 2000 version also demands involvement by upper executives, in order to
integrate quality into the business system and avoid delegation of quality
functions to junior administrators. Another goal is to improve effectiveness
via process performance metrics — numerical measurement of the
effectiveness of tasks and activities. Expectations of continual process
improvement and tracking customer satisfaction were made explicit.
Future Version: 2008

• TC 176, the ISO 9001 technical committee, has started its review on the next
version of ISO 9001, which will in all likelihood be termed the ISO 9001:2008
standard, assuming its planned release date of 2008 is met. Early reports are
that the standard will not be substantially changed from its 2000 version.
• As with the release of previous versions, organizations registered to ISO 9001
will be given a substantial period to transition to the new version of the
standard, assuming changes are needed; organizations registered to
9001:1994 had until December of 2003 to undergo upgrade audits.
Certification
ISO does not itself certify organizations. Many countries have formed
accreditation bodies to authorize certification bodies, which audit organizations
applying for ISO 9001 compliance certification. Although commonly referred to as
ISO 9000:2000 certifications, the actual standard to which an organization's quality
management can be certified is ISO 9001:2000. Both the accreditation bodies and
the certification bodies charge fees for their services. The various accreditation
bodies have mutual agreements with each other to ensure that certificates issued
by one of the Accredited Certification Bodies (CB) are accepted world-wide.
The applying organization is assessed based on an extensive sample of its
sites, functions, products, services and processes; a list of problems ("action
requests" or "non-compliances") is made known to the management. If there are no
major problems on this list, the certification body will issue an ISO 9001 certificate
for each geographical site it has visited, once it receives a satisfactory improvement
plan from the management showing how any problems will be resolved.
An ISO certificate is not a once-and-for-all award, but must be renewed at
regular intervals recommended by the certification body, usually around three
years. In contrast to the Capability Maturity Model there are no grades of
competence within ISO 9001.

Advantages
• It is widely acknowledged that proper quality management improves
business, often having a positive effect on investment, market share, sales
growth, sales margins, competitive advantage, and avoidance of litigation.
• The quality principles in ISO 9000:2000 are also sound, according to Wade,
and Barnes, who says "ISO 9000 guidelines provide a comprehensive model
for quality management systems that can make any company competitive."
Barnes also cites a survey by Lloyd's Register Quality Assurance that
indicated ISO 9000 increased net profit, and another by Deloitte-Touché that
reported that the costs of registration were recovered in three years.
According to the Providence Business News [7], implementing ISO often gives
the following advantages:
1. Create a more efficient, effective operation

2. Increase customer satisfaction and retention
3. Reduce audits
4. Enhance marketing
5. Improve employee motivation, awareness, and morale
6. Promote international trade
Exercise NO. _____

Approaches to Total Quality
Name _____________________________ Course & Year _______________________


Case 2.1
The Reservation Clerk
Mary Matthews works for an airline as a reservation clerk. Her duties include
answering the telephone, making reservations, and providing information to
customers. Her supervisor told her to be courteous and not to rush callers.
However, the supervisor also told her that she must answer 25 calls per hour so
that the department’s account manager can prepare an adequate budget. Mary
comes home each day frustrated because the computer is slow in delivering
information that she needs, and sometimes reports no information. Without
information from the computer, she is forced to use printed directories and guides.
Discussion Questions:
1. What is Mary’s job? What might Deming say about this situation?
2. Drawing upon Deming’s principle, outline a plan to improve this situation.
CHAPTER 3
TOTAL QUALITY TOOLS AND STATISTICAL THINKING
Joseph Juran describes quality management as the “Quality Trilogy”:

planning, control, and improvement. He says that most managers devote too much
attention to control, and too little to planning and improvement - which may be the
most important activities for meeting and exceeding customer expectations and
gaining competitive advantage.
Two groups of tools in quality management:

1. Tools for planning
• Quality function deployment, concurrent engineering, and the “new
seven” management and planning tools – that are design to assist
managers in planning the quality effort and making efficient use of
information.
2. Tools for continuous improvement

• Includes Deming Cycle, tools for data analysis, poka – yoke (mistake
proofing), and bench marking.
• Use to improve the manufacturing and service systems
• Deming cycle and basic statistical tools are usually found in basic
quality training for all employees of an organization and are used by
problem – solving teams to attack specific quality problems.
QUALITY TOOLS IN QUALITY IMPROVEMENT
• Quality function deployment

» Used to measure that customer’s requirements are met
throughout the product design process and in the design and
operation of production system
» Originated in 1972 at Mitsubishi’s Kobe shipyard site which represents the
overall concept that provides a means of translating customer
requirements into the appropriate technical requirements for each stage
of product development and production
» Represents customer requirements – referred to as the “the voice of the
customer”. These are the collection of customer needs, including
satisfiers, delighters, exciters, and dissatisfiers – the “what’s” that
customers want from a product.
» Sometimes referred to as customer attributes.
THE NEW SEVEN MANAGEMENT AND PLANNING TOOLS
1. Affinity diagram/KJ method

• Gathering and organizing a large number of ideas, opinions, and facts
relating to a board problem or subject area.
• Enables problem solvers to sift through large volumes of information
efficiently and to identify natural patterns or groupings in the information.
• E.g., determining the elements of quality cost, the group will list various
elements in a random fashion. Once many ideas have been generated,
they can be grouped according to their affinity or relationship, to each
other.
2. Tree diagram
• Maps out the paths and tasks that need to be accomplished to complete a
specific project or to reach a specified goal.
• The planner uses this technique to seek answers to such questions as
“What sequence of tasks needs to be completed to address the issue?” or
“What are all of the factors that contribute to the existence of the key
problem?”

3. Interrelationship diagrams
• Map out logical or sequential links among related categories. It shows
that every idea can be logically linked with more than one idea at a time,
and allows for “lateral” rather than “linear” thinking.
4. Matrix diagram
• These are spreadsheets that graphically display relationships between
characteristics, functions and tasks in such way as to provide logical
connecting points between each item.
5. Matrix data analysis

• Takes data from matrix diagrams and seeks to arrange it quantitatively to
display the strength of relationships among variables so that they can be
understood.
• Based on “factor analysis” technique or prioritization matrix that is easier
to understand.
6. Process decision program chart

• Method for mapping out every conceivable event and contingency that
can occur when moving from a problem statement to possible solutions.
• It is used to plan for each possible chain of events that could occur when a
problem or goal is unfamiliar.
7. Arrow diagrams
• Used by construction planners in the form of CPM or PERT project planning
process.
• PERT/CPM for Program Evaluation and Review Technique. CPM stands for
Critical Path Method. The two systems, although developed separately,
have many similar features and today are blended together by most
people.
• A project consists of tens, hundreds or thousands of individual steps. Many
are dependent on other steps, some are independent. Charting the flow of
the project with a PERT/CPM diagram allows the manager to graphically
see the relationships of the elements, one to another. It shows which
steps are critical to the successful completion of the project in order that it
remain on schedule. Grouping of several steps or tasks yield sub projects
which may need additional care and supervision.
• PERT diagrams contain only one start and one end. All activity at an event
must wait until all succulents’ activity is complete. If activity can be
started prior, it represents a separate succulent.
TOOLS FOR CONTINUOUS IMPROVEMENT
Flow Chart
• A flow chart is a diagram showing the travel and interaction with people that
work entails.
• A flow chart is different than a decision chart. While decisions may be shown
on a flow chart the purpose is to show changes in direction of work.
• A flow chart documents the process, shows who is responsible for each step,
and who the internal/external customer is. Boxes, diamonds and lines are
used to show work flow.
Commonly Used Symbols in Detailed Flowcharts
One step in the process; the step is written inside the

box. Usually, only one arrow goes out of the box.
Direction of flow from one step or decision to another.
Decision based on a question. The question is written in

the diamond. More than one arrow goes out of the
diamond, each one showing the direction the process
takes for a given answer to the question. (Often the
answers are “ yes” and “ no.”)
Delay or wait
Link to another page or another flowchart. The same

symbol on the other page indicates that the flow
continues there.
Input or output
Document
Alternate symbols for start and end points
Scatter Diagrams

• Scatter diagrams help us see causal relationships. The diagram usually is
limited to two variables, one independent and one dependent variable. An
example may help demonstrate the use of a scatter diagram. Consider a
production line where plastic spoons are manufactured. Orders increased
recently and production added overtime hours each week to meet demand.
Unfortunately, defects increased as well. Examine the data below and the
diagram. What do you think?
• Useful tool to establish a potential relationship between two factors, e.g.
speed of delivery and the number of complaints.
CONTROL CHARTS
• Shows visually whether a product or activity is within normal specifications.
One a process is operating in a controlled way; random samples are taken to
monitor it for a changed output.
120
100 East
80
XY(Scatter)
60
2
40 XY(Scatter)
20 3
0
0 5 10 15

PARETO CHART
• States that 80% of results are caused by 20% of causes.
• Can be used to focus on the few (20%) causes that are responsible for the
majority (80%) of the quality problems.
no of defects per week
90
E ast
4 6. 9 West
45 . 9 45 43 . 9
38 . 6 Nor th
34 . 6
3 0. 6 31 . 6
27. 4
20 . 4 20. 4
1s t Q t r 2 n d Qt r 3 r d Qt r 4 t h Qt r
RUN CHARTS
• A running tally of data points over a specific time reference.
• Used to find critical times or periods when various problems are prone to
occur.
• For example, some problems may occur on Mondays or Fridays (Friday car
syndrome) or at certain specific times of the day.
100
90
80
70
60
50
40
30
20
10
0
1st Qtr 2nd 3rd Qtr 4th Qtr
Qtr
HISTOGRAMS
• A commonly used graph.
• The number of products in each control category is displayed using a bar. By
placing the bars next to each other, comparisons can easily be shown.

CAUSE AND EFFECT DIAGRAMS
• Known as fishbone or Ishikawa diagram, named after the Japanese quality
expert who popularized the concept.
• Constructed in a brainstorming setting; requires significant interaction among
group members. The facilitator must listen carefully to the participants and
capture the important ideas.
THE DEMING CYCLE
Description
The plan–do–check–act cycle (Figure 1) is a four-step model for carrying out change.
Just as a circle has no end, the PDCA cycle should be repeated again and again for
continuous improvement.
The PDSA Cycle:

The Plan-Do-Study-Act cycle is referred to as the Deming cycle by the Japanese. The
cycle represents work on processes rather than specific tasks.
• Plan: Identify an opportunity and plan for change.

• Do: Implement the change on a small scale.
• Check: Use data to analyze the results of the change and determine whether
it made a difference.
• Act: If the change was successful, implement it on a wider scale and
continuously assess your results. If the change did not work, begin the cycle
again.

•
• The Deming cycle is a methodology for improvement, based on the premise

that improvement comes from the application of knowledge.
• Knowledge of engineering, management, or operations may make a process
easier, more accurate, faster, less costly, safer or better suited to customer
needs.
POKA –YOKE (MISTAKE PROOFING)

• An approach for mistake-proofing processes using automatic devices or
methods to avoid simple human error.
• Developed and refined by the late Shigeo Shingo, a Japanese manufacturing
engineer who developed the Toyota production system.
• Two aspects:
o Prediction, or recognizing that a defect is about to occur and providing
a warning.
o Detection, or recognizing that a defect has occurred and stopping the
process.
• Poka – yoke techniques are also applied to the design of consumer products
to prevent in adherent user errors to safety hazards.
CREATIVITY AND INNOVATION

• Creativity is the ability to discover useful new relationships or ideas
• Innovation refers to the practical implementation of such ideas.
• Creativity is the foundation of successful problem-solving teams in the
workplace. Quality circles and other forms of teams that address quality and
productivity problems often use a “scientific” approached to solving
problems.
Four key steps: Creative approaches to problem solving:

1. Redefining and analyzing the perceived problem
2. Generating ideas
3. Evaluating ideas and selecting a workable solution, and
4. Implementing the solution.
CREATIVITY AND ORGANIZATIONAL SYSTEMS

• “There are two ways of being creative. One can sing and dance. Or one can
create an environment in which singers and dancers flourish.” (Warren
Bennis)
• Fostering creativity in an organization:
1. Remove or reduce obstacles to creativity within an organization
2. Match jobs to individuals’ creative abilities
3. Tolerate failures and establish direction
4. Improve motivation to increase productivity and solve problems
creatively
5. Enhance self esteem and build the confidence of organizational
members.
6. Improve communication so that ideas can be better shared.
7. Place highly creative people in special jobs and provide training to take
advantage of their creativity.
STATISTICAL THINKING
• Statistical thinking is at the heart of the Deming philosophy and is the basis
for good management.
• Statistical thinking is a philosophy of learning and action based on the
principles that:
1. All work occurs in a system of interconnected processes
2. Variation exists in all processes, and
3. Understanding and reducing variation are keys to success.

Exercise NO. _____
Total Quality Tools and Statistical Thinking
Name _____________________________ Course & Year __________ Subject time/Day

_________ Date: _____________ Instructor_______________ Score
____________________________________
THE HMO PHARMACY CRISIS
John Dover just completed an intensive course, “Statistical Thinking for Continuous
Improvement,” that was offered to all employees of a large health maintenance
organization (HMO). There was no time to celebrate, however, because he was already
under a lot of pressure. Dover worked as a pharmacy assistant in the HMO’S pharmacy,
and his manager, Juan de Pacotilla, was about to be fired. Pacotilla’s dismissal
appeared imminent because of numerous complaints – and even a few lawsuits – over
inaccurate prescriptions. Pacotilla now was asking Dover for his assistance in trying to
resolve the problem.
“John, I really need your help,” said Pacotilla. “If I can’t show some major
improvement or at least a solid plan by next month, I’m history.”
“I’ll be glad to help,” replied Dover, “but what can I do? I’m just a pharmacy
assistant.”
“Your job title isn’t important. I think you’re just the person who can get this
done,” said Pacotilla. “I realize that I’ve been too far removed from day-to-day
operations in the pharmacy, but you work there every day. You’re in a much better
position to find out how to fix the problem. Just tell me what to do, and I’ll do it”.
“But what about the statistical consultant you hired to analyze the data\a on
inaccurate prescriptions?” asked Dover.
“To be honest, I’m really disappointed with that guy. He has spent two weeks
trying to come up with a new modeling approach to predict the mistakes, I want to
eliminate them. I don’t think I got through, however, because he said we need a month
of additional data to verify the model before he can apply a new method he just read
about in a journal to identify ‘change points in the time series,’ whatever that means.
But get this, he will only identify the change points and send me a list. He says it’s my
job to figure out what they mean and how to respond. I don’t know much about
statistics. The only thing I remember form my course in college is that it was the worst
course I ever took. I’m becoming convinced that statistics really doesn’t have much to
offer in solving real problems. Since you’ve just gone through the statistical thinking
course, maybe you can see something I can’t. I realize it’s a long shot, but I was hoping
you could use this as the project you need to officially complete the course.”
“I used to feel the same way about statistics, too,” replied Dover. “But the
statistical thinking course was interesting because it didn’t focus on crunching numbers.
I have some ideas about how we can approach making improvements in prescription
accuracy. I think it would be a great project. But we might not be able to solve this
problem ourselves. As you know, there is a lot of finger pointing going on. Pharmacists
blame the doctors’ sloppy handwriting and incomplete instructions for the problem.
Doctors blame the pharmacy assistants, who do most of the computer entry of the
prescriptions, claiming that they are incompetent. Pharmacy assistants blame the

pharmacists for assuming too much about their knowledge of medical terminology,
brand names, known drug interactions, and so on.”
“it sounds like there’s no hope,” said Pacotilla.
“I wouldn’t say that at all,” replied Dover. “It’s just that there might be no quick
fix we can do by ourselves in the pharmacy. Let me explain what I’m thinking about
doing and how I would propose attacking the problem using what I just learned in the
statistical thinking course.”
Discussion Questions:
1. How do you think John should approach this problem, using what he has just
learned? Assume that he really did pick up a solid understanding of the concepts
and tools of statistical thinking in the course.
PART
2

TOTAL QUALITY
AND
ORGANIZATION
THEORY
CHAPTER 4 QUALITY IN CUSTOMER – SUPPLIER RELATIONS
“The customer is the most important part of the production line.”

W. Edwards Deming (1900 - 1993)
OBJECTIVES:
Developing strong and positive relationships with customers and suppliers within
the supply chain is a basic principle of total quality. This chapter will:
• Demonstrate the importance of customer – supplier relationships to achieving

total quality;
• Identify the principles and practices of quality customer-supplier
relationships; and
• Compare the TQ approach to customers and suppliers to conventional
organizational theories.
In Japanese the same word – okyaksama – means both “customer” and

“honorable guest”. World – class organizations are obsessed with meeting and
exceeding customer expectations.
CUSTOMER – SUPPLIER RELATIONSHIPS AND TOTAL QUALITY

• Develop partnerships: customers and suppliers can build relationships that
will help them satisfy their shared customers further along the customer –
supplier chain.
Importance of customers:
• In view of customer as a buyer to increase profitability, to a view of the
customer as an active partner and the focus of all quality activities.
• Customer satisfaction translates directly into increase profits, thereby
achieving strong profitability and market share requires loyal customers –
those who stay with a company and make positive referrals.
• Quality is judge by customers. Thus, quality must take into account all
product and service features and characteristics that contribute value to
customers and lead to customer satisfaction, preference and retention.
• Poor quality leads to customer dissatisfaction.
Importance of suppliers:
• Suppliers are those companies that provide the organization with goods and
services that help them to satisfy the needs of their own customers.
• If a suppliers performance is of consistently high quality, its customer can
decrease or eliminate costly incoming inspections that add no value to the
products.
• Suppliers are viewed as partners with customers, because there usually is a
codependent relationship.
THE CUSTOMER SERVICE ATTRIBUTES
• The delivery of the service must be timely, accurate, with concern, and with
courtesy.
• All services are intangible and are a function of perception. They depend on
interpretation.
• By definition, service is perishable; it can backfire on the organization. This
relates to the acronym COMFORT.
C – CARING
O - OBERVANT
M - MINDFUL
F - FRIENDLY
O - OBLIGING
R - RESPONSIBLE
T – TACT
PRINCIPLES FOR CUSTOMER-SUPPLIER RELATIONSHIPS:

Three governing principles describe CSRs under total quality:
• Recognition of the strategic importance of customers and suppliers.

• Development of win-win relationship between customers and suppliers and;
• Establishing relationships based on trust.
Figure 4.1Customer-supplier relationship
PRINCIPLE 1: RECOGNITION OF STRATEGIC IMPORTANCE OF CUSTOMERS &

SUPPLIERS:
• Every organization must recognize that its customers and suppliers are
absolutely crucial to its success.
• Customers must be at the center of the organizational universe. Satisfying
their needs leads to repeat business and positive referrals, as opposed to one
– shot business and negative referrals.
• Suppliers must also be considered crucial to organizational success, because
they make it possible to create customer satisfaction.
PRINCIPLE 2: DEVELOP WIN-WIN RELATIONSHIP:

• Working together to increase the size of the pie, rather than competing over
how to divide it.
• The goal of building partnerships with customers and suppliers can be seen
as an extension of the teamwork principle that applies to all TQ activities.
• Fosters spirit of continuous improvement, in which larger customers often
help smaller suppliers develop their quality management system and process
capabilities.
PRINCIPLE 3: ESTABLISH RELATIONS BASED ON TRUST:

• This point is described by Juran as the “pattern of collaboration”.
• Trust is not a blind leap into the unknown; it is developed over time “through
a pattern of success by all parties to fully and faithfully deliver that which was
promised.

PRACTICES FOR DEALING WITH CUSTOMERS:
1. Collect information constantly on customer expectations
2. To disseminate this information widely within the organization, and
3. To use this information to design, produce and deliver the organization’s
products and services.
Collect Customer information

• Acquiring customer information is critical to understanding customer needs
and indentifying opportunities for improvement.
• Getting employees involved in collecting customer information improves
worker skills and learning, makes work more meaningful, and enhances
motivation.
• Monitoring customer needs and wants using the process called the voice of
the customer.
• A more formal approach to collect customer information to getting into
customers’ minds is called imprint analysis. Imprint refers to the
collection of associations and emotions unconsciously linked to a word,
concept, or experience. The stronger the emotions, the stronger the imprint.
Disseminate Customer information

• After all information is gathered about the customer needs, the next step is
to broadcast this information within the organization.
• Customer information must be translated into the features of the
organization’s products and services. The bottom line of quality customer –
supplier relations from the supplier’s point of view: giving the customers what
they want.
• Translating customer needs into product features can be done in a structured
manner using quality function deployment (QFD) which allows people to
see how aspects of their products and services relate to customer
satisfaction, and to make informed decisions about how their products should
be improved. The overall process of using information from customers to
provide quality products is summarized in figure 4.2.
Customer needs and expectations

(Expected quality)
Identification of customer needs
Feedback
Translation into product/service specifications
(Design quality)
Output

(Actual quality)
Customer perceptions
(Perceived quality)
Figure 4.2 customer-driven quality cycle
Use Customer information

• Customer feedback should be integrated into continuous improvement
activities. For example, by listening to customers suggestions, e-mails and so
on.
Manage customer relationships

• Builds customer loyalty by developing trust and effectively managing the
interactions and relationships with customers through customer – contact
employees.
• In services, customer satisfaction or dissatisfaction takes place during
moments of truth – every instance in which a customer comes in contact
with an employee of the company. Moments of truth may be direct contacts
with customer’s representatives or service personnel, or when customers
read letters, invoices or other company correspondence.
• Service standards are measurable performance levels of expectations that
define the quality of customer contact. Survive standards might include
standards such as response time, or behavioral standards.
Don’t ignore internal customers

• Internal customers contribute to the company’s mission and depend on the
departments’ or functions’ products or services to ultimately serve
consumers and external customers.
• Each employee receives inputs from others and produces some output to
internal customers.
• The linkages among internal customers build up the “chain of customers and
suppliers”, throughout the company that connect every individual and
function to the external customers and consumers.
What customers want
Delivering customer service begins with understanding what customers want.

And this understanding begins with the understanding that they do not always know
what they want, or why they want it. Traditional market research assumes that they
do.1 Regardless of how they arrived at their findings, most researchers agree on the

factors listed in Table 2 What customers want. Suppliers that meet these
requirements are likely to give their customers a satisfactory experience.

FIGURE 1 What Customer Wants
Source: Mason, Sean. Core Values Exercise. United Communication Unlimited.
[http://www.ucunlimited.com/
Category Description
Friendly, helpful, courteous
Empathetic
Knowledgeable, accurate, thorough
Resourceful, empowered
Able to recommend solutions
'''Good People Able to anticipate needs
Efficient
Trustworthy, authentic
Reliable
Responsible
Appropriate appearance and demeanor
Good selection
Good quality
In stock
'''Good Offering Available demos
Clear descriptions & pricing
Competitive prices
Financing, deferred payments
Convenient locations
Long hours
Available help, fast service
Signage that facilitates self-service
Fast checkout
'''Convenience Shipping/delivery
Installation
Phone/web support
On-site repair
Hassle-free returns
Quick resolution of problems
Clean
Organized
'''Good
Safe
Environment
Low-pressure
Energy level appropriate to clientele
In a competitive environment, however, satisfaction may not be enough. To

stay in business, firms must be at least as satisfactory as their competitors.
Moreover, firms that aim to gain profitable growth must increase the number of
their customers, while reducing the cost of customer acquisition. This is particularly
true of companies that compete in mature industries. The objective then is not
merely to satisfy customers, but to convert them into promoters (customers who
recommend a company to others). Promoters serve to increase a firm’s clientele,

without increasing its cost of acquisition – i.e. with no additional marketing or
promotional expense.
But customers do not make recommendations lightly. When they make a

recommendation, they put their own reputations on the line. Firms must earn that
recommendation through the consistent delivery of outstanding customer service.2
Benefits of customer service
To take full advantage of their employees’ skills as a key competitive

weapon, managers must have a “people perspective”. Organizations whose
managers succeed in practicing effective people skills as they carry out their
primary business functions are most likely to engender satisfied employees
and repeat customers – both of which are essential to sustaining a
competitive advantage into the 21st century.3 Table 6 shows the benefit of
customer service.
Beneficiar
Benefit
y
Higher income (more sales, repeat business, referred business)
Recognition
Personal satisfaction & fulfillment
Less stress
Providers Higher self-awareness and self-control
Greater authenticity
Happier life at work
Stronger social networks, family ties
Happier life outside work
Organizati Quality sales (more add-ons, more service sales)
ons More repeat business
More referred business
2
Mason, Sean. Core Values Exercise. United Communication Unlimited.
[http://www.ucunlimited.com/
3
Frank M. Go. Et.al. Human Resource Management in the Hospitality Industry. John Wiley &
Sons, Inc. c1996. p3.
Fewer returns
Better reputation
Higher morale, happier employees
Lower employee turnover
Higher caliber of job applicants
Fewer complaints
Higher productivity
Better work environment
Higher inventory turnover
Higher profits
FIGURE 2 Benefit of Customer Service
Adding Value to Service

The competitive success of any hospitality and tourism organization depends
largely on its capacity to deliver high quality, value – added service, which, in turn,
is dependent on the performance of the organization’s people. How people
perceive value is a function of their expectations and needs in combination with the
product’s or service’s quality and price. Because perceived value provides a
mechanism for discriminating among the services of competing organizations,
consumers rely upon it as a means by which to simplify their purchasing decisions.
If for example, a consumer perceives value in a smoke-free environment, he may be
able to simplify his decision regarding where to spend the night by eliminating from
his set of possible choices all hotels that do not offer smoke – free rooms.
The prescriptions for delivering value-added service may seem simple: “To
value for customers, service improvements should be based on what customers
perceived as important.”4 Creating value via service improvements requires
teamwork among an organization’s personnel. It often requires training personnel
throughout the organization in the new skills involved in delivering better service.
Delighting Customers
4
Frank M. Go. Et.al. Human Resource Management in the Hospitality Industry. John Wiley &
Sons, Inc. c1996. pp 3-4.
It does not matter how much emphasis is put on delivering good or excellent
customer service; what matters at the end of the day is if people and especially
front-line people in an organization have the feelings, will and commitment to serve
the customers in a delightful way. It is said that ninety percent of unhappy
customers do not complain but they do tell at least ten people about their bad
experience or inadequate service.
The Reason Customer Service Failed
Gitomer (1998) discussed that why customer service goes wrong. What
happen to unsatisfied customer? We can find out it from a variety of reliable
research.
 91% customers who leave with angry feeling will never return to your
business
 96% won’t tell you the real reason they left
 80% will do business with you again if their problem is handled quickly,
and to their complete satisfaction.
When the incident is real bad and they leave, stories about what happened
will be retold for year. Also, here are the several basic reasons service is bad, which
Gitomer (1998) mentioned,
• Failure to start friendly- Give what you want to receive. The first few words
set the tone for the entire dialog. The single most important brick in the
foundation of customer service is "Friendly." It is also the least consistent
element of the experience.
• Failure to say it in a way that the customer wants to hear it - The first
tendency of the front-line person is to make an excuse or tell why something
occurred. But that’s the last thing the customer wants to hear. Customers
want answers started in terms of them and their needs. And that is rare or
missing from front-line communication.
• Companies allow employees to be rude to customers and tell customers
“No.”- When you deny a customer, their need still exists and they are mad.
Then you add to the fire by saying, “Don’t talk to me like that, sir.” Or “I don’t
have to take this.” A complaining customer is seen as a “hassle” rather than
an opportunity.

• We are living in an era of responsibility shirkers and blamers – People do
not want to take responsibility. “It is not my job” is their credo. Responsibility
takers are so rare that they often receive awards.
• Low training budget priority. – Big companies spend more money producing
and airing one sixty-second commercial than they will spend on a customer
service program in a year. They spend more money on “lip” service than
“customer” service.
• Companies make the fatal mistake of only providing “company training”
and “policy training.”- They may provide some “customer” training, but very
few offer any “personal development” training such as positive attitude,
goals, listening, responsibility, pride, or communication skills. This is
especially fatal for front-line people.
• Companies only train once in a while instead of every day. - Fifteen to thirty
minutes of training a day will make any employee a world-class expert in five
years.
Concepts of Customer Perception and Expectation
Perceptions are frequently developed over a period and reflect the ways that
we have been treated, our values, priorities, prejudices and sensitivity to others.
Two people could share with same experience and then describe it differently.
Unfortunately, perceptions are not necessarily based on rational ideas and may be
influenced by momentary frustration and anger. It is important for the customer
service staffs to anticipate customer resistance based on the customers’ prior
interactions and always to work at providing customers with excellent service, so
that their most current perception is a positive one. Customers may not remember
every detail of an experience, but they will retain an overall feeling about it. That
“feeling,” in combination with other experiences, will create their perception of
company. It is hard to erase customers’ negative perceptions that are based on
their prior interactions, but what customer service staffs can do is to show them,
through their genuine action, that their perception is not accurate.
In addition, Harris (2000) explained expectations are our personal vision of
the result that will come from our experience. Expectations may be positive or
negative. Expectations are usually based on our perceptions. If customer’ last
experience with a company was negative, he may approach a new situation with
the expectation that he will again be dissatisfied.
Expectations can be divided into two distinct categories: primary
expectations and secondary expectations. Primary expectations are the customers’
most basic requirements of an interaction. For example, when staying at the hotel,
customers’ primary expectations are to clean room, excise room and amenities, to
someone else clean the room, and pay a reasonable price. Secondary expectations
are expectations based on customers’ previous experiences and represent

enhancements to their primary expectations. That is to say, when staying at the
hotel, their secondary expectations include good service, courtesy, prompt service
and good, tasty food. Consequently, guest experienced bad customer service in
hotel; he will not expect to get good service again and may not return to same
hotel.
Factors influencing expectations from Zeithaml, Parasuraman and Berry’s
(1990) focus group result are:
First, what customers hear from other customers-word-of-mouth
communications is a potential determinant of expectations. For instance from focus-
group findings, several respondents in product-repair focus groups indicated that
the high quality of service they expected from the repair firms they chose stemmed
from the recommendations of their friends, neighbors and associates. In addition,
Gitomer (1998) said it is estimated that more than 50% of American business is
based on this word-of-mouth ad form. If the experience was good, the customer
may not proactively say something, but if the experience was bad, she or he will
bring up the story in the first 5 minutes of a conversation. For instance, if a friend
who will go to business trip asked which hotel is good for staying, how will we
recommend it? Here is example:
A referral – “Radission Hotel is the greatest”
Nothing – “Well, I do not know, they are all about the same” or, A reverse
referral – “Anyplace but Radission hotel”
If we had bad experience, we might talk about all of bad experience
repeatedly.
Second, personal needs of customers might moderate their expectations to a
certain degree. For example, in the credit card focus groups, while some customers
expected credit card companies to provide them with the maximum possible credit
limits, other customers wished that their credit card companies were more stringent
than they were.
Third, the extent of past experience with using a service could also influence
customers’ expectation levels. Their research findings told us that more
experienced participants in the securities-brokerage focus groups seemed to have
somewhat lower expectations regarding brokers’ behavioral attributes such as
friendliness and politeness; however, they appeared to be more demanding with
respect to brokers’ technical competence and effectiveness.
Fourth, external communications from service providers play a key role in
shaping customers’ expectations. Under external communications, we include a
variety of direct and indirect messages conveyed by service firms to customers: a
bank’s print advertisement promising the friendliest tellers in town, a television
commercial for a credit card touting its acceptability around the world, a repair
firms’ receptionist guaranteeing the arrival of a service representative at an
appointed time, advertising from pizza place delivering within 30 minutes and
money back guarantee, hotel’s 100% guest satisfaction guarantee advertising.
Guarantee come back when they might not have, and positive word of mouth from
the customers who invoke the guarantee attract still more customers.

Exercise NO. _____
Quality in Customer – Supplier Relationships
Name _____________________________ Course & Year _______________________

The Case of missing reservation
Mark, Donna, and their children, along with another family, traditionally attend
Easter brunch at a large downtown hotel. This year, as in the past, Donna called
and made a reservation about three weeks prior to Easter. Because half the party
consisted of small children they arrived 20 minutes prior to the 11:30 reservation to
assure being seated early. When they arrived, however, the hostess said that they
did not have a reservation. The hostess explained that guests sometimes fail to
show that she would probably have a table available for them before long. Mark
and Donna were quite upset and insisted that had made a reservation and expected
to be seated promptly. The hostess told them, “I believe that you made a
reservation, but I can’t seat you until all the people on the reservation list are
seated. You are welcome to go to the lounge for complimentary coffee and punch
while you wait.” When Mark asked to see the Manager, the hostess replied, “I am
the manager,” and turned to other duties. The party was eventually seated at
11:45, but was not at all happy with the experience.
The next day, Mark wrote a letter to the hotel manager explaining the entire
incident. Mark was in the MBA program at the local university and was taking a
course on total quality management. In the class, they had just studied issues of
customer focus and some of the approaches used at the Ritz – Carlton Hotel, a 1992
Baldrige Award winner. Mark concluded his letter with the statement, “I doubt that
we would have experience this situation at a hotel that truly believes in quality”.
About a week later, he received the following letter:

We enjoy hearing from our valued guests, but wish you had experienced the
level of service and accommodations that we strive to achieve here at our
hotel. Our restaurant manager received your letter and asked me to respond
as Total Quality Lead.
Looking back at our records we did not show a reservation on the books for
your family. I have addressed your comments with the appropriate
department head so that others will not have to experience the same
inconveniences that you did.
Thank you once again for sharing your thoughts with us. We believe in a
philosophy of “continuous improvement”, and it is through feedback such as
yours we can continue to improve the service to our guests.
Discussion questions:
1. Were the hostess’s actins consistent with a customer-focused quality
philosophy? What might she have done differently?
2. How would you have reacted to the letter that Mark received? Could the
Total Quality Lead have responded differently? What does the fact that the
hotel manager did not personally respond to the customer tell you?
CHAPTER 5
DESIGNING ORGANIZATIONS FOR QUALITY
Not many people really do know how to design an organization that is not a machine.
Charles Handy (1932 - )

Irish-born British management educator and writer.
Strategy and Business, Interview
OBJECTIVES:
• Describe the functional structure, the most common structure used at the
business unit level;
• Show how many aspects of the functional structure stand in the way of
quality and what changes are necessary to create organization structures
that support TQ;
• Compare organization design from a TQ point of view to more conventional
perspectives.
Organizational Behavior
• The way in which individuals and groups act in the organization and the
influences on these actions and behavior patterns.
• Takes account of people’s attitudes and beliefs and tries to examine the
reasons for them.
• Emphasis is on the impact of individual and group behavior on the
organization and vice versa.
The Main Influences on Organizational Behavior

• Organization Climate • Organization culture
• Motivation • Management style
• Group norms • Organization structure
• External influences (i.e., family, • Processes
background, etc.)
Elements Common in Organizations

• A common purpose • Processes for coordinating
• Some kind of structure activities
• People carrying out distinct
roles
Classifications of Organizations:
A. According to Type of AUTHORITY (By Weber)
1. Traditional Organization – where authority is established by custom
and long standing and unquestioned belief. (e.g. monarchy)
2. Charismatic Organization – where authority is derived from the
outstanding personal qualities of the leader.
3. Bureaucratic Organization – where authority is based on the
acceptance of formal rules and procedures. (e.g. military)
B. In terms of the MAIN BENEFICIARY (BY: Blau & Scott)

1. The Rank and File Members - Mutual benefit
2. The Owners or Managers - Business
3. The Public who have contact with the organization - Service
4. The Public in general - Commonwealth
C. In terms of POWER and INVOLVEMENT (By: Etzioni)

POWER – in terms of how it is INVOLVEMENT – the individuals
exercised in the organization Commitment to the organization
Three Types of Power: Three types of Commitment:
1. Coercive Power – relies 1. Alienative – where
on the use of threats or members are forced to
sanctions to enforce accept involvement
control, (e.g. prison) 2. Calculative – where the
2. Remunerative Power – members participate
relies on the use of because of the rewards
rewards and control of available to them.
resources (e.g. 3. Moral – where the
commercial enterprise) members are committed
3. Normative Power – relies to the goals and values of
on the acceptance of the the organization.
norms, values and beliefs
of those exercising power
(e.g. church)
D. In terms of MANAGEMENT STURCTURES (BY:Burns and Stalker)

1. Mechanistic Structures – (appropriate to stable conditions)
 Clear differentiation between specialized tasks
 Precise definitions of tasks and how these are carried out
 Definite hierarchy for controlling work and decision – making
2. Organismic Structures – (appropriate to changing conditions)
 Specialized knowledge and experience which contribute to the
overall objectives.
 Jobs are determined by the organization’s overall objectives
 Constant redefinition of jobs
 Network of structure and control, authority and communication
 Knowledge spread throughout the organization.
ORGANIZATIONAL DESIGN AND STRUCTURES
Basis for Establishing Organizational Relationships

 Responsibility
 authority
 accountability
FORMS OF ORGANIZATION:
1. LINE ORGANIZATION
• Clear delineation of line authority from direct superior to direct
subordinates
2. LINE & STAFF FUNCTION
• Wider scope of work with multi-level departmentalized tasks structures
3. FUNCTIONAL ORGANIZATION
• Organized according to the nature & types of work functions in an
organization
THE FUNCTIONAL STRUCTURE: Problems with the structure:

1. The functional structure separates employees from customers
 The functional structure tends to insulate employees from learning
about customer expectations and their degree of satisfaction with the
service or product the firm is providing.
 Functional structure promotes the idea that one’s boss is the customer
whom the employee must satisfy. Of course, this manager is trying to
satisfy the next-level manager, and so on.
 If chained ended at the customer, the structure might work, but this is
generally not the case.
 Managers in functional organizations are usually rewarded for
satisfying functional goals, such as meeting design deadlines and
limiting manufacturing costs, rather than for providing value to
customers.
2. the functional structure inhibits process improvement
 This process involves a large number of functions because the breakup
of the organization into functions is usually unrelated to the processes
used to deliver a product to the customer.

 This structure is likely to create complex, wasteful processes, as
people do things in one area that must be redone or undone in
another.
3. Functional organizations often have a separate function for quality;
called Quality Control or Quality Assurance
 The organization that there is a group dedicated to quality
 The QC department is generally responsible for collecting and
maintaining quality statistics, which may not seem as valid to the
departments actually doing the work.
 Organizations pursuing TQ often retain their quality assurance
departments, rather than as the group with primary responsibility for
quality.
REDESIGNING ORGANIZATIONS FOR QUALITY

 Focus on Processes
 Process is how work creates value for customers.
 Process owners are accountable for process performance and have the
authority to manage and improve their process.
 Core process drive the creation of products and services, are critical
to customer satisfaction, and have a large impact on the strategic
goals of the organization.
 Support process is critical to the operation of a business, but
generally do not add value directly to a product or service.
 Process Management involves the design of processes to develop
and deliver products and services that meet the needs of customers,
daily control, so that they perform as required, and their continual
improvement.
COMPARISON TO ORGANIZATIONAL DESIGN THEORY:
Structural Contingency Theory:

• Originated in the 1960s; two principal types of organization structures:
 Mechanistic (centralized, many rules, strict division of labor, formal
coordination across departments)
 Organic (decentralized, few rules, loose division of labor, informal
coordination across departments)
Institutional Theory:
 Based on the assumptions that organizations choose structures to help them
perform better – provide high quality, lower costs, and so forth.
 Holds the organizations try to succeed by creating structures that will be
seen as appropriate by important external constituencies – customers, other
organizations in the industry, government agencies, and so on.
_____________________________________________________________________________
Exercise NO. _____
Designing Organization for Quality

Name _____________________________ Course & Year _______________________
The State University Experience
Wow! That State University video was really cool. It has lots of majors; it’s close to
home so I can keep my job; and Mom and Dad loved it when they visited. I wish I
could know what it’s really like to be a student at State. Hmmm, I think I’ll ask mom
and dad to take a campus tour with me…..
I’m sure that we took our tour on the hottest day of the summer. The campus is
huge – it took us about two hours to complete the tour and we didn’t even see
everything! I wasn’t sure that the tour guide knew what he was doing. We went
into a gigantic lecture hall and the lights weren’t even on. Our tour guide couldn’t
find them so we had to hold the doors open so the sunlight could come in. About
three – fourths of the way through our tour, our guide said, “State University isn’t
really a bad place to go to school; you have to learn the system.” I wonder what he
meant by that?
This application is really confusing. How do I let the admissions office know that I
am interested in physics, mechanical engineering, and industrial design? Even my
parents can’t figure it out. I guess I’ll call the admissions office for some help…
I’m so excited! Mom just handed me a letter from State! Maybe they’ve already
accepted me. What? What’s this? They say I need to send my transcript. I did that
when I mailed in my application two weeks ago. What’s going on? I hope it won’t
affect my application. I’d better check with Admissions………..
You can’t find my file? I thought you were missing only my transcript. I asked my
counselor if she had sent it in yet. She told me that she sent it last week. Oh, you’ll
call me back when you locate my file? OK..
Finally, I’ve been accepted! Wait a minute. I didn’t apply to University College;
that’s a two – year program. I wanted physics, M.E., or industrial design. Well,
since my only choice is U. College and I really want to go to State, I guess I’ll send in
the confirmation form. It really looks a lot like the application. In fact, I know I gave
them a lot of the same information. I wonder why they need it again. Seems like a
waste of time…………..
Orientation was a lot of fun. I’m glad they straightened out my acceptance at U.
College. I think I will enjoy State after all. I met lots of other students. I saw my
advisor and I signed up for classes. All I have left to do is pay my tuition bill.
Whoops. None of my financial aid is on this bill. I know I filled out all of the forms
because I got an award letter from the state. There is no way my parent and I can
pay for this without financial aid. It says at the bottom, I’ll lose all my classes if I
don’t pay the bill on time….
I’m not confirmed on the computer? I sent in my form and the fee a long time ago.
What am I going to do? I don’t want to lose all of my classes. I have to go to the

admissions office or my college office and get a letter that says I am a confirmed
student. OK. If I do that tomorrow, will I still have all of my classes?......
I can’t sleep; I’m so nervous about my first day……..
1. What breakdowns in service processes has this student experienced? How

might these be a function of organizational design?
2. What types of process management activities should State University
administrators undertake?
Chapter 6 TOTAL QUALITY & ORGANIZATIONAL CHANGE
“Every organization of today has to build into its very structure the
management of change.”

Peter Drucker (1909 - 2005)
Austrian-born U.S. management consultant.
Post-capitalist Society
Psychologists suggest that individuals go through four stages of learning. Quality-related

changes in organization structure and employee responsibilities are discussed in other
chapters. This chapter will:
• Explain the importance of organizational change to TQ;
• Identify the types of changes necessary for quality;
• Provide examples of firms undertaking these changes, and;
• Explain how TQ perspective on organizational change relates to organization
theory.
Types of change
 Cultural change
 Continuous improvement
 Breakthrough improvement
 Organizational learning
Organizations can't change without people changing first
Importance of Change
 Needed in implementing TQ
 Reengineering
o The process by which the organization operates are examined and
redesigned to provide higher quality at lower cost.
Why Organizational Change is Necessary: Triggering Conditions:

1. Unstable and unpredictable world economic environment
2. Speed in technological advancement that hastens product obsolescence
3. Rise of information technology and cybernetics shifting competition towards
intelligence, networking and strategic alliances.
4. Capital rationing based on quality and security of investment returns.
5. Competitive advantage derived from lower cost and speed of reaction to
changing markets
6. Move towards flatter, leaner organizations
7. Doing more of the same no longer works
The Need to Change: When to Jump the Curve:

When the Organization…….
1. Diminishes in its uniqueness or satisfaction of relevant needs.
2. People need to operate more effectively
3. Is financially threatened
4. Must redefine its objectives, polices and structures.

5. Must eliminate traditional roles, procedures, products and services.
6. Must create new roles, procedures, products and services
7. Must acquire new technology, specialization and markets.
Resistance to change
 Inertia - comfort with the status quo
 Timing - conflicts with other initiatives and/or priorities
 Surprise - proper groundwork has not been done so people are caught off
guard (need for change not established)
 Misunderstanding - benefits not properly understood
 Cultural pressure - some who may want to change are held back by others in
the organization
 Self-interest - conflicting personal priorities
 Differing assessment - conflicting agreement over the value of the benefits
associated with the change
CULTURAL CHANGE: NATURE AND FORMATION

 CULTURE
 a set of beliefs and values shared by the people in an organization
 first used in the 19th century by social anthropologists;
 way of life of a given group of people
 Sum total of the knowledge, beliefs, attitudes, values, practices and
behavioral patterns commonly held by members of the society and
transmitted from one generation to another.
 CORPORATE CULTURE
 The commonly held and relatively stable beliefs, attitudes and values
that exist within the organization reflected as the organization’s way of
corporate existence.
CULTURAL CHANGE: NATURE AND FORMATION
INTERACTION
People join Values, attitudes &

organizations bringing beliefs commonly
their own set of values, held/shared are:
attitudes and beliefs reinforced &
perpetuated; No
common ground:
Modified,
submerged, or
discarded.
Therefore, with or
without conscious
efforts, Corporate
Cultures do exist in any
given organization.
 Organizational culture is the specific collection of values and norms that are
shared by people and groups in an organization and that control the way they
interact with each other and with stakeholders outside the organization.
 Organizational values are beliefs and ideas about what kinds of goals
members of an organization should pursue and ideas about the appropriate
kinds or standards of behavior organizational members should use to achieve
these goals. From organizational values develop organizational norms,
guidelines or expectations that prescribe appropriate kinds of behavior by
employees in particular situations and control the behavior of organizational
members towards one another. (Strategic Management, Charles W. L. Hill, Gareth R.
Jones, Fifth Edition, 2001 Houghton Mifflin, MeansBusiness, Inc.)
Making the New Culture Permanent

 Make involvement in TQ a required part of people’s responsibilities.
 Use of existing organization to implement TQ
 Make sure everyone spends at least one hour a week working on quality issues.
 Change the measurement and information systems.
STRATEGIC CHANGE vs. PROCESS CHANGE

 Strategic Change
o Organizational changes resulting from strategy development and
implementation
 Process change
o Organizational changes resulting from operational assessment activities
Table 6.2 Strategic vs. Process change

STRATEGIC PROCESS CHANGE
PROCESS
Theme to change Shift in organizational Adjustment of
direction organizational
processes
Driving force Usually environmental Usually internal – “How
forces – market, rival, can we better align our
technological change processes?”

How much of the Typically widespread Often narrow –
organization divisional or functional
changes?
Examples Entering new markets Improving
Seeking low-cost informational systems
position Establishing hiring
Mergers and guide
acquisitions
CONTINUOUS IMPROVEMENT
Kaizen
 Japanese for "continuous improvement" is a Japanese philosophy that focuses
on continuous improvement throughout all aspects of life. When applied to
the workplace, Kaizen activities continually improve all functions of a
business, from manufacturing to management and from the CEO to the
assembly line workers. By improving standardized activities and processes,
Kaizen aims to eliminate waste.
 Kaizen was first implemented in several Japanese businesses during the
country's recovery after World War II, including Toyota, and has since spread
to businesses throughout the world.
 Key elements of Kaizen are quality, effort, involvement of all employees,
willingness to change and communication.
 Kai means literally; change (kai) to become good (zen)
The foundation of the Kaizen methods consists of 5 founding elements:

1. Teamwork
2. Personal discipline
3. Improved morale
4. Quality circles, and
5. Suggestions for improvement.
Breakthrough improvement
 Refers to discontinuous change, as opposed to the gradual, continuous
improvement philosophy of kaizen.
 Result from innovative and creative thinking; often these are motivated by
stretch goals, or breakthrough objectives.
Benchmarking:
 Benchmarking is the process of comparing the cost, time or quality of what
one organization does against what another organization does. The result is
often a business case for making changes in order to make improvements.

 Also referred to as "best practice benchmarking" or "process benchmarking",
it is a process used in management and particularly strategic management,
in which organizations evaluate various aspects of their processes in relation
to best practice, usually within their own sector. This then allows
organizations to develop plans on how to make improvements or adopt best
practice, usually with the aim of increasing some aspect of performance.
Benchmarking may be a one-off event, but is often treated as a continuous
process in which organizations continually seek to challenge their practices.
Benchmarking, originally invented as a formal process by Rank Xerox, is usually carried out by
individual companies. Sometimes it may be carried out collaboratively by groups of companies
(eg subsidiaries of a multinational in different countries).
Classification of Benchmarking
Competitive benchmarking – focus on the products and
manufacturing of a company’s competitors.
Generic Benchmarking – evaluates processes or business functions

against the best companies regardless of their industry.
Types of benchmarking
• Process benchmarking - the initiating firm focuses its observation

and investigation of business processes with a goal of identifying and
observing the best practices from one or more benchmark firms.
Activity analysis will be required where the objective is to benchmark
cost and efficiency; increasingly applied to back-office processes where
outsourcing may be a consideration.
• Financial benchmarking - performing a financial analysis and
comparing the results in an effort to assess your overall
competitiveness.
• Performance benchmarking - allows the initiator firm to assess their
competitive position by comparing products and services with those of
target firms.
• Product benchmarking - the process of designing new products or
upgrades to current ones. This process can sometimes involve reverse
engineering which is taking apart competitors products to find
strengths and weaknesses.

• Strategic benchmarking - involves observing how others compete.
This type is usually not industry specific meaning it is best to look at
other industries.
• Functional benchmarking - a company will focus its benchmarking
on a single function in order to improve the operation of that particular
function. Complex functions such as Human Resources, Finance and
Accounting and Information and Communication Technology are
unlikely to be directly comparable in cost and efficiency terms and may
need to be disaggregated into processes to make valid comparison.
The Benchmarking Process : The five process stages are as follows.
1) Determine what to benchmark. The purpose of this step is to define what

the organization wants to benchmark. After the organization defines it, it will
allocate the resources required to conduct benchmarking. The process can be
described in the following steps:
 Defining the customers for benchmarking information. This is the first step in
determining what to benchmark. To define the customers or users of the
benchmarking information one simply has to think of answers to the following
questions: who is requesting the information? and who will be using it.? If one
does not know who will be using the information, one will suffer from trying to
find the information because one does not know whom this information will be
serve. Therefore, the purpose of benchmarking might be blurring and later will
lead to failure of the process.
 Determining customer requirements for benchmarking information. The second

step toward this stage is to determine the information requirements of one’s
benchmarking customers. A thorough understanding of users helps avoid the
wasted effort of gathering useless information.
 Identifying critical success factors. The last step of this stage is to identify the
factors that will have the greatest impact on the performance of one’s
organization. Benchmarking will have the greatest impact to organizational
performance when it has applied on the bottom-line results of business.
2) Form a benchmarking team. Like other change methodology,

benchmarking should be conducted in a team effort activity. Specify roles and
responsibilities for each team member. In general, there are three types of
benchmarking teams that can be formed as defined by their structure and reporting
relationships (Spendolini, 1992).
 Intact work groups. These group members are usually located in a single
location reporting to a common manager. The manager may or may not play
the role of the team leader; usually every member participates as a
benchmarking team member. These groups are often the customers of their
own benchmarking process.
 Cross-functional, interdepartmental, and inter-organizational teams. These
types of teams are brought together to work on a specific assignment.
Members of the team are been selected to represent their departments,
locations, or divisions.
 Ad hoc teams. This type of team represents the flexibility of forming a team.
An ad hoc team can be formed by any number of employees who share the
same interests or responsibilities, which brought them together to do a
benchmarking investigation.
3) Identify benchmarking partner. Identify the information sources that the

company will use to collect the benchmarking information and pick the industry with
the best practices. The focus of this stage is on information. There are five steps
toward identify benchmarking partner as follows:
 Develop a benchmarking information network. Information obtained is a

resource that has a limited period of time in which one can use it to make a
reasonable decision. Although the information one collects fills a specific
short-term need, these referent documents and individuals that one use to
collect benchmarking information should be consider a potential long-term
resource. If one develops a benchmarking information network from these
resources, the time required to find information is reduced. The process of
collecting information for benchmarking will be easier.
Identify information resource. This step can be easily implemented by asking three
questions :
(a) Who produces the information I want?
(b) Who else uses the information I want?
(c) Who accumulates the data I want?
 By answering these three questions, one will discover the resources that are
available to support one’s process of benchmarking. Actually, the challenge
of this stage is to identify benchmarking partners that will provide useful
information to your benchmarking process.
 Design list of benchmarking partner criteria. The list of criteria should express
the requirements an ideal benchmarking partner should satisfy, and can
cover most of the issues. These issues are such as geographical location,
size, structure and organization, products and technology. The criteria might
seem to carry away when the company has list too many variables and
forget to focus on important issues. Therefore, the company should assure
that all criteria set forward are relevant.
 Identify potential benchmarking partners. Potential benchmarking partners
might not have to be best-in-class or world class. They can be only “best-in-
the local area” when the company draw the line to benchmark with
companies located in the same area. Benchmarking with these companies

can be as good as benchmarking with the world class companies, thus one
can also save the company resources.
 Selecting benchmarking partner(s). This step is to collect background
information about the potential partners and decide which of these potential
partners one will select as benchmarking partner(s).
4) Collect and analyze benchmarking information. In this stage, the

company collects and analyzes the information. Also, in this stage
recommendations are made for later action.
 Collect information.
 The step of collection information can be done by many ways such as
telephone interviews, personal meetings, site visits, surveys,
publications, media and archival research.
 Organize information.
 The step can be done by (1) writing an outline of the information, (2)
put information in comparing matrix of each company, (3) analyze
matrix and the collected information in phases, and (4) summarize all
data.
 Analyze information.
 After the information has been collected and summarized, the next
step is data analysis. The steps toward information analysis are (1)
check for misinformation, (2) identify the patterns of the data, (3)
identify omissions or displacement, (4) check for data that do not fit,
and (5) draw conclusions.
5) Take Action. In this stage, all actions that are required to change the process
that the company chose to benchmark are implemented. These actions may include
making recommendations, conducting a report or preparing a presentation to apply
to the process.
 Producing a benchmarking report

This is one of the major tasks of the benchmarking team. The report will
serve several purposes including: a report to be delivered to the
benchmarking customers, a summary of data that were collected and
analyzed, a record of the organization benchmarked and key project
contacts, and a communications product for other internal employees and
functions
 Presenting finding to benchmarking customers

This step might be provided upon customers’ request. This step offers an
opportunity to expand the audience for the benchmarking findings and
stimulate action for changes.
 Identifying possible product and process Improvements

This step is taking the action of what the company has been planned.
 Seeing the project through

 Benchmarking is required time like other changing methodologies.
Once one has started it, one has to make sure it has been carried out
through the timing period that has been plan leads to successful of
benchmarking.
 Overall, benchmarking is not a one-time change methodology. The
arrows in the Figure 3 show that effective benchmarking is a continuous
process. Therefore, an organization would have to be aware of what is
out there, and be able to improve their process in order to be able to
compete with others.
 The above model is generic in nature. However there is no assurance
that the same process model will work for all sectors of business in all
organizations. Very often organizations will have to develop their own
models, which are likely to suit their specific style of functioning.
Figure 3. The five-stage benchmarking process. (Spendolini, 1992, p. 48)
Requirements of a successful benchmarking model

(Spendolini, 1992)
There are some guidelines for developing a benchmarking model:
1) Follow a logical simple sequence of activity
 The process model should be as simple as possible. There is no need to
add stages to the process model just for the sake of numbers.
 For example
A ten-step model is not necessarily better than a 4-step model.
It’s very essential that the model have clarity. The best measure of a
process model’s level of clarity is people’s ability to describe it to others
including their ability to explain why each part of the process is important

to the process user. Another aspect of the clarity criterion is the listener’s
ability to understand the process and translate it into action.
2) Put a heavy emphasis on planning and organization

 Heavy emphasis has to be laid on planning and organizing the activities
that occur before any actual contact is made with a benchmark partner.
The types of activities included in this part of the process involve
developing a clear understanding of the benchmarking “customer”
requirements, procuring adequate resources to enable the benchmarking
team to fulfill its mission, selecting and briefing members of
benchmarking teams, using effective project planning and techniques and
establishing appropriate benchmarking protocols that define expected
behaviors toward benchmark partners.
3) Use customer focused benchmarking.

 Benchmarking is a process that produces information as a product.
Successful benchmarking organizations treat the benchmarking
information product just as they would any other type of product. The
product must meet customer requirements.
4) Make it a generic model.

 The benchmarking process must be consistent within the organization.
Although there should be some flexibility in any process to accommodate
some level of variation, there is no need for a unique benchmarking
process model for every department, division or location.
Figure 4. The benchmarking approach
(http://www.metabpr.com/ben-mark.htm)


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2007

TOTAL QUALITY SERVICE

Aireen Y. Clores, M.B.A

2 Total Quality Service Management

TOTAL QUALITY SERVICE MANAGEMENT..........................................................2

3 Total Quality Service Management

4 Total Quality Service Management

5 Total Quality Service Management

6 Total Quality Service Management

8 Total Quality Service Management

Total Quality Management is a management approach that originated in the 1950's

Total Quality Management, TQM, is a method by which management and employees

TQM is a management philosophy that seeks to integrate all organizational

9 Total Quality Service Management

• Commitment by senior management and all employees

Total Quality Management is a management style based upon producing quality

WHAT DOES T.Q.S.M STANDS FOR?

 T – Stands for TOTAL;

10 Total Quality Service Management

 M – Stands for MANAGEMENT mean improving and maintaining

Total Quality Management is not a program; it is a systematic, integrated, and

Management-by-Objectives (MBO) emphasizes achieving specified objectives, under the

Management-by-Results (MBR) is management by viewing past results as an indication of

Management-by-Exception (MBE) is management by identifying specific targets for

Total Quality Management requires an organizational transformation-a totally new and

Principles of Total Quality

12 Total Quality Service Management

Although Dell Computer Corporation’s PCs have had

THE IMPORTANCE OF QUALITY

 Quality drives market share.

 Quality can also reduce costs.

 As quality improves, so does cost, resulting in improved market share

13 Total Quality Service Management

Deming Chain of Reaction:

 Developed his system of scientific management, which emphasized

14 Total Quality Service Management

WALTER SHEWART, HAROLD DODGE, GEORGE EDWARDS

15 Total Quality Service Management

THE CONCEPT OF QUALITY

TQM GOAL: CUSTOMER SATISFACTION

Figure 1.1 TQM GOALS

16 Total Quality Service Management

HOLLYWOOD CASINO RESORT

Hollywood Casino Resort/Tunica is a place

Managers of manufacturing and service functions deal with different types of

• Quality systems focused primarily on technical issues such as equipment

1. Performance: a product’s primary operating characteristics.

Quality control in manufacturing is usually based on conformance, specifically

Service can be defined as “any primary or complementary activity that does

INDUSTRY PHYSICAL SERVICE SERVICE SERVICE

18 Total Quality Service Management

Hotel Room Supplies Pricing & Room Front Office/

Food & Restaurant & Chef, waitress,

How do customers make choices based on value judgments?

VALUE STREAM AND ITS CUSTOMERS

Most research dealing with the effects of quality on business competitiveness

19 Total Quality Service Management

SERVICE QUALITY vs. PRODUCT QUALITY

 As a strategic issue, customer service can be considered a major dimension of

• Time: How much time must a customer wait?

20 Total Quality Service Management

• Customer Perceptions – example are speed of service is an

Name _______ Course & Year _

Name _______ Course & Year _