CHAPTER 3-TOTAL QUALITY IN ORGANIZATIONS

As noted in chapter 1, modern quality management in the United States began in the manufacturing sector. By 1990’s, many
manufacturers began to pay increased attention to service quality. They discovered that quality is as critical to retaining customers.
Pure service companies began to think in terms of “zero defections” and to explore new ways of developing customer loyalty. Today,
the concept of quality has moved far beyond its manufacturing roots. For all types of organizations, quality is absolutely vital to keep
customers, sustain profitability, and gain market share.

QUALITY AND SYSTEMS THINKING

 A production system is composed of many smaller, interacting subsystems.
Example: McDonald’s restaurant is a system that includes the order-taker/cashier subsystem, grill and food preparation
subsystem, drive-through subsystem, purchasing subsystem, and training subsystem. These subsystems are linked together as
internal customer and suppliers. Every organization is composed of many individual functions, which are often seen as separate
units on an organization chart.
 Systems thinking- according to Russel Ackoff, management should focus on the interactions of parts and of the system with other
systems, rather than the actions of parts taken separately.
…a combination of the best practices by each part of a system taken separately does not yield the best system. We may not even
get a good one. A company that has we facilities, each producing the same variations of the same type of beverage, had broken
the production process down into 15 steps (rows)… at each factory, the company tried to replace each of its steps that was not the
lowest cost with the one used in the factory that had the lowest cost. Had this succeeded, each factory would be producing with
steps that had each attained the lowest cost in any factory. It did not work! The lowest-cost steps did not fit together, the result
was only a few insignificant cosmetic changes that did not justify the cost of the exercise.

QUALITY IN MANUFACTURING
Manufacturing systems:
1. Marketing and Sales- Milton Hershey, the founder of Hershey Foods Corporation, understood the relationship between the
sales. He used to say, “Give them quality. That’s the best advertising in the world. For 68 years it was in business, Hershey Foods
did not see a need to advertise its products in the mass media. Today, marketing and sales employees have important
responsibilities for quality. These responsibilities include learning the product features that consumers want, knowing the prices
that consumers are willing to pay for them. Effective market research and active solicitation of customer feedback on product
performance are necessary for developing quality products.

2. Product and Design Engineering- Under engineered products will fail in the marketplace because they will not meet customer
needs. Over engineering can also create a complacency that leads to poor quality. Poorly designed manufacturing processes result
in poor quality or higher costs. Good design can help to prevent manufacturing defects and errors and to reduce the need for the
non-value-adding inspection practices that have dominated much of U.S. industry.

3. Purchasing and Receiving- The quality of purchased parts and services and the timeliness of their delivery are critical. The
purchasing department can help a firm achieve quality by:
 Selecting quality-conscious suppliers
 Ensuring that purchase orders clearly define the quality requirements specified by product design and engineering
 Bringing together technical staffs from both the buyer’s ad supplier’s companies to design products and solve technical
problems
 Establishing long-term supplier relationships based on trust
 Providing quality-improvement training to suppliers
 Informing suppliers of any problems encountered with goods
 Maintaining good communication with suppliers as quality requirements and design changes occur

4. Product Planning and Scheduling- A production plan specifies long-term and short-term production requirements for filling
customer orders and meeting anticipated demand. The correct materials, tools, and equipment must be available at the proper
time and in the proper places in order to maintain a smooth flow of production. Modern concepts of production planning and
scheduling such as JIT, have been shown to lead to quality improvements and cost savings.

5. Manufacturing and Assembly- The role of manufacturing and assembly in producing quality is to ensure that the product is
made correctly. Manufacturing cannot do its own job without a good product design and good process technology. Once in
production, however, no defects should be acceptable.

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6. Tool Engineering- The tool engineering function is responsible for designing and maintaining the tools used in manufacturing
and inspection. Worn manufacturing tools result in defective parts, and improperly calibrated inspection gauges give misleading
information.

7. Industrial Engineering and Process Design- The job of industrial engineers and process designers is to work with product
design engineers to develop realistic specifications. In addition, they must select appropriate technologies, equipment, and work
methods for producing quality products.

8. Finished Goods Inspection and Testing- If quality is built into the product properly, inspection should be unnecessary except
for auditing purposes and functional testing.

9. Packaging, Shipping, and Warehousing- Packaging, shipping, and warehousing – often termed logistics activities – are
functions that protect quality after goods are produced. Accurate coding and expiration dating of products is important for
traceability (often for legal requirements) and for customers.

10. Installation and Service- Products must be used correctly in order to benefit the customer. Users must understand a product and
have adequate instructions for proper installation and operation. Should any problem occur, customer satisfaction depends on
goods after-the-sale service. In addition to the function directly related to manufacturing the product, certain business support
activities are necessary for achieving quality.

11. Finance and Accounting-The finance function is responsible for obtaining funds, controlling their use, analyzing investment
opportunities, and ensuring that the firm operates cost-effectively and ideally–profitably. Finance must authorize sufficient
budgeting for equipment, training and other means of assuring quality. Accounting data are useful in identifying areas for quality
improvement and tracking the progress of quality improvement programs.

12. Quality Assurance- Because some managers lack the technical expertise required for performing needed statistical test or data
analyses, technical specialist – usually in the “quality assurance department”–assist the managers in these task. Its proper role is
to provide guidance and support for the firm’s total effort toward this goal.

13. Legal Services- A firm’s legal department attempts to guarantee that the firm complies with laws and regulations regarding such
things as product labelling, packaging, safety, and transportation; designs and words its warranties properly; satisfies its
contractual requirements; and has proper procedures and documentation in the place in the event of liability claims against it.

QUALITY IN SERVICES-A service might be as simple as handling a complaint or as complex as approving a home mortgage. The
North American Industry Classification System (NAICS) describes service organization as those primarily engaged in providing a
wide variety of services for individuals, business and government establishment and other organizations. The definitions of quality
that apply to manufactured products apply equally to service products.

Components of Services System Quality

Many service organizations such as airlines, banks, and hotels have well-developed quality systems. These systems begin with a
commitment to the customers.

1. Employees- Customers evaluate a service primarily by the quality of the human contact. America’s biggest complaints about
service employees are sales people who fail to show up when you have stayed home at scheduled time for them; sales people who
are poorly informed; or cannot describe how a product works. The company credo is stated as People, Service, and Profits. All
potential decisions in the company are evaluated on their effects on the employee, on their customers, and the company’s
financial performance.

2. Information Technology- Information Technology incorporates computing, communication, data processing, and various other
means of converting data into useful information. Intelligent use of IT improves quality, productivity and competitive advantage,
particularly when technology is used to better serve the customer and to make it easier for customers to do business with the
company.

QUALITY IN HEALTH CARE

One service industry that faces continuing pressure to improve quality– and one with the fastest growing interest in quality – is health
care. Quality has been a focus for the industry for some time. In 1910, Ernest Codman, M.D., proposed the “end result system of
hospital standardization.” A hospital would track every patient it treated long enough to determine whether the treatment is effective.
Several types of quality problems in health care.
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  Avoidable errors
 Underutilization of services
 Overuse of services
 Variation in services

QUALITY IN EDUCATION
Education represents one of the most interesting and challenging areas for quality improvement. One of the earliest and most widely
publicized stories of the successful use of quality in education is that of Mt. Edgecumbe High School in Sitka, Alaska. Mt. Edgecumbe
is a public boarding school with some 200 students, often from problem homes in rural Alaska.
1. Koalaty Kid-Principles:
a. Reading is the key areas of all learning and observed that students didn’t read much
b. Students are handling numerous errors they could easily correct.
c. Observation that the most successful students are those who are most confident of their abilities and comfortable with
themselves.
d. Excellent papers were displayed in bulletin boards and students are recognized in their koalaty wok and become koalaty
kids.
2. Active Involvement- school administrators, teachers, sponsors, parents, and the students themselves working together on teams
that are empowered to make decisions and implement change. It means that everyone who is ultimately affected by a school has
an opportunity to influence its success.
3. Committed leadership- schools can change if their designated leaders are committed to improvement. Change occur quickly if
these administrators are also capable of inspiring the faculty, students, parents, sponsors, and other administrators to work with
them. Leaders inspire others in school community because of the depth and sincerity of their belief and commitment.
4. A system for continuous Improvement- uses total quality principles- establishing consistent standards of excellence, setting and
communicating clear expectations, continuous improvement (as opposed to finding fault and blaming), looking at a work task as
a process, involving all who have a stake in the outcome in the improvement process, measuring results, and recognizing and
rewarding success- for bringing about change.
5. Environment that Celebrates Success- is focused on celebrating student successes, large and small. Displays of papers that
meet or exceed requirements, photos of students recognized for exemplary behavior, and rosters of student achievement adorn
classroom bulletin boards and school hallways.

QUALITY IN SMALL BUSINESSES AND NOT-FOR-PROFITS

Small businesses and not-for-profits have generally been slow to adopt quality initiatives. In most cases, this lag is a result of a lack of
understanding and knowledge of what needs to be done and how to do it, because managers were wrapped up In entrepreneurial
activities that typically focus on sales strategies and market growth, day-today cash flow problems and routine fire-fighting. Small
business firms and not-for-profit often lack the resources needed to establish and maintain more formal quality systems. Most small
businesses live or die from their customer relationship practices, but other two TQ principles – teamwork and participation.
TQ Principles:
1. New technologies to reduce the potential for human errors.
2. Restructuring and increasing the level of quality assurance staff.
3. Creating a more streamlined and comprehensive training system
4. Re-engineering the core manufacturing process to make them more efficient and simplified so as to reduce and prevent
errors
5. Investing in facilities to enable more efficient and effective adoption of new technology

QUALITY IN THE PUBLIC SECTOR

1. Quality in the federal government- productivity and improvement for the Federal Government in 1988. The order required the
senior manager to monitor and improve both quality and productivity. It is also encouraged them to use employee involvement,
training and participation indecision making, along with the more traditional methods of incentives, recognition, and rewards, to
enhance the process.
2. State and local quality efforts- approach initiated joint efforts of government agencies; and city workers continued to invent
service improvements for internal and external customers. Through training staff developed a set of common values, language,
and tools. Formal training sessions were held for management and staff. Employees studied how the office worked, from the
budgeting process to personnel policies. As a result significant service time improvements were made. Employees leaned to treat
people as customers, with smiles, greetings, and a “thank you” as they left. Employees acted as professionals by owning
problems and finding solutions.

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