20th Century Business Requires an Eclectical Approach to Management

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As early as , such visionaries as electrical engineer Homer Sarasohn spoke about controlling variation and monitoring process to produce better deliverables. As a result, in the s, quality became the byword for Japanese manufacturing. Quality concerned not just management, but all levels of a company. In the s, quality circles began appearing in Japanese workplaces to allow employees the opportunity to discuss problems and consider solutions, which they then presented to management. Starting on the factory floor, quality circles spread to other functional departments. The company-wide focus on quality may also provide a clue to the origin of the phrase total quality.

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By the s, the term made in the USA was no longer a badge of pride. Since the end of WWII, the main effort in American factories was to produce a large quantity of items, maintain the production schedule, and save money. Usability and durability seldom mattered until concerns about lack of product quality reached a fever pitch. Influential businessmen like Philip Crosby championed the trend. Navy guidelines articulated the principles that customer requirements should define quality and continuous improvement should pervade an entire organization.

What should be contained in the system audit protocols and procedures?

Congress established the Federal Quality Institute in to highlight the need for quality management in business and reward organizations for successful implementations. But by the s, TQM was superseded by ISO International Standards Organization , which became the standard for much of continental Europe, and by another methodological response of the s to quality concerns, Six Sigma. TQM lives on in data-driven methods for a data-driven age.

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  8. Much of our current understanding of the value and pursuit of quality traces back to William Deming. This American statistician, engineer, and management consultant laid many foundations for the use of statistics in production and work management. He introduced statistical process methods to the US Census Bureau in the early s, marking the first time they were used in the business or service sector.

    During WWII, he advised US business and government on statistical methods to help with planning for wartime manufacturing. After the war, Deming was recruited by no less than General Douglas MacArthur to advise Japanese officials on census models to assess war damage and plan for rebuilding. Deming distinguished himself among many of the occupying forces by showing a genuine interest in Japan and its culture. Because Japan lacked abundant natural resources, Japanese leaders viewed the exportation of goods worldwide as their main path to financial success.

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    Their post-war reputation for low-quality products posed a particular challenge to this goal. Japanese products were gradually recognized for usability and durability. By the s, Japanese exports surpassed those of the United States. By contrast, American goods gained a reputation for poor design and defects.

    As early as , Juran remarked that producing goods and meeting deadlines took priority, with quality being relegated to the final inspection. Deming believed that as soon as the war was over, US industry lost interest in statistical methods for pursuing quality. That is total profit, and it multiplies several times. He gained a reputation for bluntness and fearlessness in the presence of senior executives. Legend has it he told senior Ford staff that 85 percent of quality issues resulted from poor management decisions. Some companies rejected him. However, on his advice, Ford conducted user surveys before designing and building the Ford Taurus.

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    In , the Taurus became the number one selling car in the US. In his book, Out of the Crisis , he discussed his 14 Points for Management. The following year, at the age of 87, he was awarded the National Medal of Technology. In , the year of his death, he established the Deming Institute. Nichols says that TQM tools and principles acquire power not when an organization creates a dedicated quality department, but when it includes the whole company in the pursuit of high quality.

    An example is the quality circle, in which workers directly involved in a process brainstorm to discover solutions. In addition to tapping a native resource, implementing a TQM philosophy can help an organization:. A fundamental tenet of TQM is that the cost of doing things right the first time is far less than the potential cost of re-doing things. There are also residual losses when customers abandon products and brands for quality reasons.

    Some schools of thought view quality as having a cost which cannot be recouped. Juran, Deming, and Feigenbaum held a different view. For advocates of TQM, the cost of quality really describes the cost of not creating a quality deliverable.

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    There are four primary cost categories:. Although TQM does not possess one universally recognized body of knowledge, organizations do pattern their efforts after a few formal models, including several industry entities and awards. Winners have included Ricoh, Toyota, Bridgestone Tire, and many others.

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    As a result of its rigorous analysis of labor techniques, many functions that once were accomplished in the United States are now performed overseas. Scientific management measured the most effective and cost efficient manners to produce goods and services. Frequently, because of the high labor costs in America, companies moved production of goods and provision of certain services to India, China, Korea and other countries, where labor costs and taxes are much lower. Total quality is a direct result of scientific management.

    Many principles of quality improvement and the Six Sigma method of quality management trace their origins to scientific management. The philosophies of continuous improvement, constantly seeking better ways to improve quality, are also directly related to scientific management. Japanese management, which led to the quality movement, traces many of its principles to scientific management. The automotive industry and the military have also greatly improved the quality of their products and services by stressing quality improvement techniques.

    Dividing work between workers and supervisors is another direct result of scientific management. Employees must understand thoroughly what the company is trying to achieve through ABC as well as how to use it in their jobs. They must be convinced that ABC can succeed and that it is worth the effort. To win over employees, each company needs a carefully crafted rollout that takes into account its culture and operating idiosyncrasies. Finally, other management systems need to be overhauled to ensure that employees fully incorporate ABC into their work practices and do not retreat to their old practices in times of stress and selfdoubt.

    The old accounting system has to be rooted out as quickly as possible. Measurement and incentive systems have to be tied to the ABC numbers. And the daily decision-making process—including which managers are involved in making decisions and how they make them—often must be significantly altered, too. A major reason so few efforts have succeeded is that managers fail to take all those steps. Admittedly, they are difficult steps to take.


    A Quality Principle: Everything You Need to Know about Total Quality Management

    Like any major organizational-change program, ABC invariably runs up against employee resistance. Indeed, in the companies we have worked with, employee resistance has been the single biggest obstacle. Such resistance is natural. Managers of a unit—whether a function, a division, or a plant—are understandably nervous about revealing detailed information that could be used to attack their practices or undermine their authority. And after having been downsized, TQMed, and reengineered, managers and nonmanagers alike, not surprisingly, often greet ABC as the latest threat to their jobs.

    When managers adopt activity-based management, they use ABC to find answers to questions such as the following: What should a given product or process cost?

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    What are the non-value-adding activities that contribute to its current cost? If a given distribution channel or market is unprofitable, where can the company reduce costs to make it profitable? If the company eliminates an unprofitable product or customer, how much will it save in costs? If the company lowers the price of a product to increase sales volume, what will the impact on the cost per unit be?

    And what can the company do during the design and engineering stages of a product to avoid unnecessary costs in the first place? For many managers, the standard approach for improving a business is to benchmark each function or process against the company they think is the best in that function or process.