STRATEGIC QUALITY MANAGEMENT

Strategic

quality management

Strategies

provide a game plan for the future.

Strategic quality management is the process of
establishing long-range customer-focused goals and
defining the approach to meeting those goals.
Strategic quality management becomes an integral
part of the overall strategic plan of an organization and
is developed, implemented, and led by upper
management.
The basic elements of strategic management are

Define the mission and critical success factors.

Study the internal and external environments, and identify
the strengths, weaknesses, opportunities, and threats to
the organization.

Define a long-term, ultimate goal (a "vision").

Develop key strategies to achieve the vision.
Develop strategic goals (long term and short term).
Subdivide the goals and develop operational plans and
projects ("deploy the goals") to achieve the goals.
Provide executive leadership to implement the strategies.
Review progress with measurements, assessments, and
audits
Note that these elements cover both the development and the
deployment of strategies

Typically,

strategy covers a five-year span in broad

terms, with the first year in more detail, and with
annual updating of the five-year strategy.

 A successful

strategic quality plan will have the

following ingredients

A focus on customer needs.

Continuous improvement to all processes in the
organization (big Q)
Understanding the key customer, market, and operational
conditions as input to setting strategic direction.
Leadership by upper management
Translation and deployment of strategies into annual
business plans
Adequate resources where people have the knowledge,
skills, authority and desire to decide, act and take
responsibility for the result of their actions and for the
contribution to the success of the company.

 The

Japanese use a similar approach to strategic

management, called hoshin planning(or policy
development), which is built around the classic
management cycle of plan, execute and audit(or plan,
do, check, act).
Key Aspects of hoshin planning include a focus on the
planning process, company targets known by all
employees, individual initiative, self-audit, and
documentation and communication.
Mission,

environmental analysis, vision

A mission

is a statement of the organization's

purpose and the scope of its operations, ie., "the
business we are in.

 A vision

statement defines the desired future state of

the organization. A vision can be viewed as the
ultimate goal that may take five years or more to
achieve.
In practice, mission statements focus on "what our
business is now"; vision statements emphasize "what
our business will be later." Sometimes one statement
covers both the present and the future.
Developing
A strategy

strategies

is a guide on how to pursue the

organization's mission and vision.
Strategies set direction by identifying the key issues or
activities that help develop specific goals and plans.

Strategies must contribute significantly to the vision.

In developing strategies and goals, we need the leadership of
upper management and the participation of middle
management. This scope provides a source of valuable ideas
and also encourages ownership for implementation.
With respect to quality, there are usually a small number of
strategies, say three to five.
Strategies can aim at both operational effectiveness and
achieving a competitive advantage.
Operational effectiveness means performing similar activities
better than the competition does (e.g., conducting operations
with less waste); achieving a competitive advantage means
not performing the same activities as competitors perform or
performing similar activities in different ways .
Strategies must then be supported with goals, operational
plans, and projects.

 Development
A goal

of goals; competitive benchmarking

is a desired result to be achieved in a specified

time. ("A goal is a dream with a deadline"
Anonymous.)
Goals often have different names: The overall
organization goal is sometimes called a "vision; longrange company goals (say, five years) are called
"strategic goals"; short-range goals (say, one year) are
"tactical goals"; goals at various levels may be called
"business goals," "objectives," or "targets.
Formulation of Quality Goals
Quality goals can be identified from several inputs.
The most important sources are cost of poor quality,
market standing on quality, quality culture, and the

 These

studies identify the strengths, weaknesses,

opportunities, and threats.
Other inputs to help formulate goals include

As

Pareto analysis of repetitive external alarm signals,

Proposals from suggestion schemes, Field study of users'
needs, costs and
Proposals from managers, supervisors, professionals etc.

in formulating policies, analysis of these inputs

requires a mechanism that gives managers the
opportunity to participate in setting goals without the
burden of performing the detailed staff work.
Quality engineers and other staff specialists are
assigned the job of analyzing the available inputs and
of creating any essential missing inputs.

This analysis point to potential projects that are then proposed.

The proposals are reviewed by managers at progressively
higher organizational levels.
At each level, there is a summary and consolidation until the
corporate level is reached. The foregoing process is similar to
that used in preparing the annual financial budget.
Several alternative criteria may be used to define quality goals:
historical performance, engineering analysis, competition or
some absolute value (e.g., six sigma).
Companies aspiring to excellence often set goals beyond
those that are clearly attainable to encourage people to
generate unusual approaches to achieving excellence. These
are "stretch goals." Sometimes, the results can be remarkable,
indeed extraordinary. All goals require a strong follow-through
of goal deployment and assignment of resources.

 Competitive
Competitive

Benchmarking

benchmarking is "the continuous process

of measuring products, services, and practices against
the company's toughest competitors or those
companies renowned as industry leaders.
A benchmark is simply a reference point that is used
as a standard of comparison for actual performance.
Benchmarks serve not only as a standard of
comparison but also as a means of self-evaluation and
subsequent improvement.

 The

benchmarking process applies to subjects such

as products, customer services, and internal
processes.
The steps in the process are

Identity the benchmark subjects.

Identify benchmark partners (organizations that will serve
as benchmarks).
Determine the data collection method and collect the data.
Determine the competitive gap (comparing our company
to the benchmark partners).
Project the future performance of the industry and our
company.
Communicate the results.
Establish functional goals.
Develop action plans.
Implement plans and monitor results.
Recalibrate the benchmarks (repeat the benchmarking
process, typically every three to five years depending on

Benchmarking also provides sources of ideas for improvement

along with the evidence that better practices not only exist but
also must be instituted to be competitive.

Deployment of goals

Broad goals do not lead directly to results; they must first be

"deployed."
Deployment means subdividing (aligning) the goals and
allocating the goals to lower levels for conversion into
operational plans and projects. Thus goals must be deployed
from the organizational level to the process level and to
individual jobs.
Each goal is specific, observable, and measurable. Specific
projects were then set up to achieve these goals.
Vision, strategies, and goals provide direction, but specific
projects and other forms of action supply the methods to
achieve results.

 Provide

executive leadership to implement the

strategies
The

most important factor in implementing quality

strategies is the personal leadership of upper
management.
The organizational mechanism used is the quality
council
Although upper management leadership is essential,
the development of strategy and plans should involve
both top-down and bottom-up viewpoints.
This process requires two-way communication
between top management and lower levelsthe
Japanese call this concept "catch ball."

The key elements are

Communication of what top management proposes as the key

focus areas for strategic planning.
Nominations by managers at lower levels of additional areas for
attention.
Decisions on strategies, goals, and resources for deployment

Quality Policies
A policy is a broad guide to action. It is a statement of
principles or values.
Policies have to be specific enough to provide useful
guidance.
Policies were prepared to provide guidelines for

(1) planning the overall quality program and

(2) defining the action to be taken when personnel request
guidance.

 Policies

states (1) a principle to be followed or (2)

what is to be done but not how it is to be done.
Review progress with measurements, assessment, and
audits
Once goals have been set and deployed into
subgoals, business plans, and projects, then key
measurements must be established.
At the strategic level, measurements should be
developed for each strategic goal defined in the
strategic plan.
The measurements usually include areas such as
product performance, competitive performance, quality
improvement, cost of poor quality, performance of
business processes, customer satisfaction, and

 The

learning organization

"A learning

organization is an organization skilled at

creating, acquiring, and transferring knowledge, and at
modifying its behavior to reflect new knowledge and
insights.
The concept is based upon five "learning disciplines"
that involve lifelong efforts of study and practice.
These disciplines have linkages to strategic
management and is shown in the figure

 Obstacles
Lack

to achieving quality goals

of leadership by upper management

Lack of an infrastructure for quality
Failure to understand the skepticism about the "new
quality program."
An assumption by management that the exhortation
approach will work.
Failure to "start small" and learn from pilot activities.
Reliance on specific techniques as the primary means
of achieving quality goals.
Underestimating the time and resources required.

DEVELOPING A QUALITY
CULTURE
Technology

and culture

To

become superior in quality, we must pursue two

courses of action:

1.Develop technologies that meet customer needs.

2.Stimulate a "culture" throughout the organization that
continually views quality as a primary goal.

Quality

culture is the pattern of human habits, beliefs,

values, and behavior concerning quality. Technology
touches the head; culture touches the heart.
Quality problems are mostly management controllable.
Thus cultural issues apply to all levelsupper
management, middle management, supervisors,
technical specialists, business specialists, and the
workforce.

 Theories

of motivation

Hierarchy

of Human Needs

Under the theory (Maslow, 1987), human needs fall into

five fundamental categories in a predictable order of
priorities. The figure shows this "hierarchy of human
needs" together with the associated forms of motivation for
quality.

 Job

Dissatisfaction and Satisfaction

Job dissatisfaction is the result of specific dislikes
the pay is low, the working conditions are poor etc.
It is possible to eliminate these dislikes raise the
pay, change the working conditions.
Employee basic needs (e.g., wages) must be met
before employee training needs (e.g., quality training)
can be met successfully.
Job satisfaction depends on what the worker does.
Satisfaction comes from doingmotivation comes
from factors such as job challenges, opportunities for
creativity, identification with groups, and responsibility
for planning.

 Corporate

culture

Corporate

culture consists of habits, beliefs, values,

and behavior. Management needs to define and
create the culture necessary for business success.
The eight "primary values" that promote employee
loyalty, productivity, and innovation are

1.Purpose.
2.Consensus
3.Excellence.
4.Unity.
5.Performance.
6.Empiricism
7.Intimacy
8.Integrity.

 An

innovative approach to organizational culture is

called "appreciative inquiry."
Here, discussions are held with employees to discover
what practices in the organization are "most liberating
to the human spirit.
As these practices are identified, the focus then
becomes planning and building the future to capitalize
on these practices.

 Quality

culture

Quality

culture is an integral part of corporate culture.

Quality culture can be of two types

An

Negative quality culture

Positive quality culture

important starting point is to determine the current

quality culture.
Culture can be changed. We need to provide goals
and measurements, evidence of upper management
leadership, self-development and empowerment,
participation, and recognition and rewardscritical
success factors for achieving a positive quality culture.

 These

paths are the means to drive changes in

actions that lead to changes in attitude and finally to
changes in quality culture.
Above all, there must be a sense of urgency and
initiative on quality throughout all levels of the
organization.
Provide

quality goals and measurements at all

levels
To

ensure action on quality, a starting point is to

provide quality goals and measurements at all levels.
In this process, we develop goals and measures that
are aligned with the mission, the critical success
factors, and the quality strategy of the organization.

 Clear

quality goals for individuals are important stimuli

for inspiring superiority in quality.
Human beings commit themselves in two different
ways: external and internal.
Under external commitment, management defines the
goals for employees and also the tasks required to
achieve those goals.
Under internal commitment, management and
employees jointly define goals, and the employees
define the tasks to achieve the goals. Management
must foster an environment of internal commitment.

 At

the upper management level, creating an

awareness of quality is best done in the language of
money.
A presentation of the company's current status should
be accompanied by an explanation of the benefits that
can be expected from a new approach to quality.
At middle management and lower levels, sometimes
we can translate the impact of quality directly into the
language of job security. When this step can be based
on data, the result can be dramatic.

Quality Measurements as a Continuous Focus

The message on quality must be sustained through continuous
reinforcement. One form of reinforcement is quality
measurement.
Reports and scoreboards of quality measurements can be
highly effective, but caution must be exercised.
Where the measurements show an unfavorable level of
quality, the distinction between management-controllable and
worker-controllable causes must be recognized.
When the problem is mostly management controllable (the
typical case), management must clearly be responsible for
taking action.
For problems that are mostly worker controllable, the
publishing or posting of the data must be accompanied by
showing the workers exactly what steps they must take
personally to improve their quality of output.

 Provide
To

Evidence Of Management Leadership

inspire action within a company, the most important

element is management leadership in qualitywith
the evidence to prove it.
The leadership role of upper management includes
establishing, aligning, and deploying quality goals and
strategies and then serving on a quality council to lead
the quality effort.
In brief, upper management must initiate and support
a vision of a total quality culture.
Some upper management groups have chosen to be
highly visible in the quality process by leading quality
training.

 A further

form of evidence is upper management

quality improvement teams. Each team, consisting
solely of upper management members, addresses a
problem that requires attention at its level.
The visibility of upper management taking such
training and then conducting such projects sets an
example for other levels to follow.
A particularly sensitive issue that has a major impact
on quality culture is job security. The turmoil of
downsizing and outsourcing understandably causes
major apprehensions among employees. Upper
management should ensure job security.

 Provide

for self-development and empowerment

Inspiring

people to take positive steps in quality is

greatly influenced by the nature of the work performed
by those people.
Self-Control and Job Design
People must have knowledge of what they are
supposed to do, feedback on their performance, and
the means of regulating their work if they are failing to
meet the goals.
The lack of one or more of these three elements
means that quality problems are management
controllable.
Placing workers in a state of self-control is a
prerequisite to using behavioral approaches to

 Self-Directed

Teams
A special form of job enlargement is that applied to a
group of workers, i.e., a self-directed team.
Two elements are emphasized: (I) each worker is
trained to have a variety of skills, thereby permitting
rotation of tasks, and (2) the team is given formal
authority to execute certain job-planning and
supervisory tasks.
Empowerment
Empowerment is the process of delegating decisionmaking authority to lower levels within the
organization.
It means encouraging people to take the initiative and
broaden their scope; it also means being supportive if

 Performance Appraisal

Performance

appraisal is the process by which an

organization periodically evaluates an employee's
behavior and accomplishments.
An associated approach is the 360-degree appraisal
process.
In this approach, several individuals who frequently
interact with the employee participate in the appraisal
process.
Anyone who has significant contact or useful
information about the employee's performance may be
included.
In the ideal 360-degree process, the individuals
participate in both goal setting (at the beginning of a

Selection and Training

Selection and training of personnel clearly have an important
influence on people's development

Provide participation to inspire action

By personally participating in quality activities, people acquire

new knowledge, see the benefits of the quality disciplines, and
obtain a sense of accomplishment by solving problems. This
participation leads to lasting changes in behavior.
Participation at all levels is decisive in inspiring action on
quality. Participation should include the officers of labor
unions. Competitive economic challenges faced by most
organizations require that management and unions find ways
to work together for their mutual benefit.

 Provide

recognition and rewards

Recognition

is defined as public acknowledgement of

superior performance of specific activities.
Rewards are benefits (such as salary increases,
bonuses, and promotions) that are conferred for
generally superior performance against goals.
Such expressions of esteem play an essential role in
inspiring people on quality.
Recognition through public acknowledgment of
superior activity can be provided at several levels
individual, team, and business unit.

 Forms

of Recognition
Forms of recognition range from a simple verbal
message for a job well done (often overlooked in the
rush of daily activities) to modest, or "token," awards.
Token awards may be tangible (e.g., a savings bond,
time off, a dinner) or intangible (sending a letter of
praise, sending an employee to a seminar or
conference, letting an employee be boss for a day).
Forms of Rewards
Rewards for quality-related activities are increasingly
becoming part of the annual performance evaluation
of upper managers, middle managers, specialists, and
first-line supervisors.

 Forms

of reward may include changes in base pay,

merit increases, incentives, skill-based wages, a
bonus, and stock plans.
Upper management must change the reward system
to inspire middle management to make breakthroughs
to improved quality levels.
A clear trend in management compensation is the
increased use of variable compensation programs,
i.e., monetary rewards above a base salary. These
rewards include various incentive plans, gainsharing,
pay for mastering additional skills, and profit sharing.
Some organizations, large and small, use
"gainsharing" to distribute savings from improvement
activities.

UNDERSTANDING CUSTOMER
NEEDS
Quality
In

and competitive advantage

the competitive world, all organizations aspire to

have a unique competitive advantage. Such an
advantage can be achieved by price, by ability to meet
customer needs on short notice, and by quality.
By identifying customers, analyzing their needs, and
understanding our quality status relative to
competition, we can establish new product quality
goals that will lead to a competitive advantage.

 IDENTIFY

THE CUSTOMERS

A customer

is anyone who is affected by the product

or process.
Three categories of customers then emerge:

1.External customers, both current and potential.

2.Internal customers.
These customers include all functions affected by the
product at both the managerial and workforce levels.
3.Suppliers as customers

Note

that customers include both current and potential

customers and that it is often useful to identify
segments of customers.

Customer behavior

Customer needs are the basic physiological and psychological

requirements and desires for survival and well-being.
Customer expectations are the anticipated characteristics and
performance of the goods or service. The three levels of
customer expectations are

1. Expected level
The "expected" level of quality represents the minimum or
"must be" attributes.
2. unitary (or desired) level
At the "unitary" (or desired) level, better performance leads
to greater satisfaction but (in a limited time period) usually in
small increments.
3. attractive (or surprising) level
For the "attractive" (or surprising) level, better performance
results in delighted customers because the attributes or the
level of performance are a pleasant surprise to the
customers.

 Customer

satisfaction is the degree to which the

customer believes that the expectations are met or
exceeded by the benefits received.
Customer expectation has a strong influence on
satisfaction.
Customer perception is the impression made by the
product. Perception occurs after a customer selects,
organizes, and interprets information on the product
Customer perceptions are heavily based on previous
experience.

 Scope

of human needs and expectations

In

planning to collect information on customer needs,

we must go beyond the search for obvious needs to
the more subtle ones that present opportunities for
innovative new-product designs.
Some needs are disguised or even unknown to the
customer at the time of purchase.
Customer needs may be clear or disguised; they may
be rational or less than rational. To create customers,
we must discover and serve their needs.
Sources
Market

of market quality information

quality information includes quality alarm

signals arising from a decline in sales and also from
field failure reports, customer complaints, claims,

 For

inexpensive products, complaint rates are a poor

indicator of customer satisfaction.
A product may be failure free and yet not be salable
because a competitor's design is superior or has a
lower price.
A second source of market quality information is the
vast array of published data available relative to
quality.
Some of these data are internal to the company. Many
are published external to the company.
Market research studies can be used to collect market
quality information.

 Market

research in quality ("voice of the

customer")
Market

Research is defined as "the function which

links the consumer, customer, and public to the
marketer, through informationinformation used to
identify and define marketing opportunities and
problems; generate, refine, and evaluate marketing
actions; monitor marketing performance; and improve
understanding of marketing as a process.
The voice of the customer (VOC) is a continuous
process of collecting customer views on quality and
can include customer needs, expectations,
satisfaction, and perception.
The emphasis is on in-depth observing, listening, and

Purposes of Market Research in Quality

The broad purposes are mainly to

Determine customer needs.

Develop new features.
Measure current customer satisfaction.
Analyze customer retention and loyalty issues.

We ask customers directly what their needs are and also

methodically study how customers currently use the product;
then we analyze their total system of use to identify hidden
needs.
This process provides specific ideas for modifying current
products and helps to discover opportunities for new products.
Needs must be periodically evaluated because today's new
needs become routine expectations tomorrow.

 Measurement

of current customer satisfaction also

involves several elements.
First, the term quality must be translated into specific
attributes that customers say are important. We also
need to learn the relative importance of these
attributes to the customer and how our product
compares to the competition
Finally, we must ask customers whether they would
purchase from us again or recommend us to friends.
Using market research for customer retention and
loyalty starts with the distinction between customer
satisfaction and customer loyalty.
Some levels of customer satisfaction do not achieve a
high level of customer loyalty. The research must

Critical Incident Technique

The technique was developed by J. C. Flanagan during
World War II to improve the performance of fighter pilots.
End users (customers or potential customers) are asked
to identify specific incidents which they experienced
personally and which had an important effect on the final
outcome.
The emphasis is on incidents rather than on vague
opinions. The context of the incident may also be
elicited. Data from many users are collected and
analyzed.
A critical incident allows us to determine the
competencies that were present or lacking in that
particular situation.

Needs related to product features

To start, we need to identify the attributes that customers say are

important in their purchasing decision.
An important next step is to learn how our product compares with the
competition's. This task can be accomplished by using a multiattribute
study.
Customers are asked to consider several product attributes and, for
each attribute, to state the relative importance and a rating for our
product and competing products.
The relative importance of product attributes can be determined by
several methods.
The simplest is to present a list to customers and ask them to select
the most important.
In another approach, customers are asked to allocate 100 points over
various attributes.
In a more complicated method ("conjoint measurement"), customers
are presented with combinations of product attributes and asked to

Discovering Customer Needs and Marketing

Opportunities
Market research in the field provides access to realities that
cannot be discovered in the laboratory.
The conditions of use can involve environments, loads, user
training levels, misapplication, etc., all of which may be
different from the conditions prevailing in the laboratory.
Field studies can provide access to the realities of the
conditions of use and also to the users themselves.
A useful framework of five steps can be used to do the
research.

1.
2.
3.
4.
5.

Observation.
Capturing data.
Reflection and analysis.
Brainstorming for solutions.
Developing prototypes of possible solutions.

 The

methods for collecting information on customer

needs are many and varied.
Some of the common methods include focus groups,
observations at customer sites, executive interactions
with customers, special customer surveys, analysis of
complaints, participation at trade shows, and
comparing products with those of competitors.
A recent method is the monitoring of internet
messages to find out what customers are saying about
a product.

 Focus

Groups
A focus group consists of about 8 to 14 current or
potential customers who meet for about two hours to
discuss a product. Here are some key features:

1. The discussion has a focus, hence the name.

2. The discussion can focus on current products, proposed
products, or future products.
3. A moderator who is skilled in group dynamics guides the
discussion.
4. The moderator has a clear goal for the information
needed and a plan for guiding the discussion.
5. Often company personnel observe and listen in an
adjacent room shielded by a one-way mirror.

 Focus

groups can cover many facets of a product or

can discuss only quality.
Sessions can provide depth of information on
customer needs, expectations, perceptions,
satisfaction, intentions, and reactions to new concepts
or ideas.
One useful approach is to ask customers to dream
about the ideal product, e.g., the product that would
overcome customer frustrations.
A key to a successful focus group is the qualification of
the focus group moderator.

 Mass

Customization
In mass customization, the goal is to detect customers
needs first and then to fulfill these needs with an
efficiency that almost equals that of mass production.
The objective of mass customization is "to deliver
goods and services that meet individual customers
needs with near mass production efficiency."
Mass customization is applicable only to those
products for which the value of customization, to the
extent that customers are willing to pay for it, exceeds
the cost of customizing.

 Needs

related to product deficiencies

Understanding customer needs must also include the

deficiencies side of the quality definition. Clearly, the
emphasis during planning must be on prevention of
deficiencies (defects, failures, errors etc.)
An important input to such prevention efforts are the data
on field complaints. Most organizations have systems of
collecting and analyzing information on customer
complaints.
A Pareto analysis of field failures, complaints, product
returns, etc., identifies the vital few quality problems to be
addressed in both current and future product development.
Similarly, data on defects found internally must be analyzed
on the proper basis to prioritize prevention efforts, many of
which must be addressed during product development.

Measuring customer satisfaction

We must identify the attributes of the product that collectively

define satisfaction.
A sample of customers should be asked (in preliminary
research) which attributes they think constitute high quality.
Inputs from company managers, trade journals, and other
sources should also be included.
With these inputs, the list of attributes is then finalized for
research with the larger sample of customers.
Customer satisfaction measurement should also include
asking customers about the relative importance of the various
attributes.
When this information is combined with customer satisfaction
data, the resulting quadrant diagram helps to direct future
action on modifying a product to meet customer needs.

Data on customer satisfaction can be collected by various

methods, including market surveys, posttransaction interviews,
focus groups, mystery shoppers, employee reports, surveys
and interviews, call centers for complaints and other
comments, customer advisory groups, and customer segment
surveys.
Customer satisfaction data must be linked to customer loyalty
analysis.
Collecting information on customers and their needs provides
the input for the quality function deployment matrix on
customers and customer needs. The data then help us to
translate customer needs into product features.

Market research for internal customers

Market research concepts apply to both internal and external

customers.