Strategic Quality Planning

中国经济管理大学

Strategic Quality Planning

Strategic Quality Planning

Chapter Outline:

• Strategy Content

• Importance of Time in Quality Improvement

• Leadership for Quality

• Quality and Ethics 

• Quality as a Strategy

• Quality Strategy Process

• Deploying Quality (Hoshin Kanri)

• Does Quality lead to Better Business Results? 

• Supply Chain Strategy 

Overview 

Quality is strategic. This may seem somewhat obvious, but the actions of companies implementing quality measures often obscure this fact. This is especially true when a company is in a reactive mode and does not use effective planning. In this chapter aspects of strategic quality planning are discussed. 

Strategic planning has two important dimensions. These are content and process. Strategic content answers the question of what is to be contained in the strategic plan. Strategy process consists of the steps used to develop the strategy.

The chapter discusses quality from the perspective of strategy.  One of the fundamental themes of this text is that quality improvement is a managed process.  Although this may seem obvious now, a framework is needed to help achieve desired results.  The chapter provides a strategic framework for this to occur.

The chapter discusses various strategic issues relating to strategy content and process.  Two processes are discussed: the forced-choice model and Hoshin plan.  It also discusses the results associated with quality.  Results are of strategic importance because they help us to determine if we have accomplished what we wanted to.

Discussion Questions

 1. Recently, the Malcolm Baldrige Award changed the name of the

“Strategic Quality Planning” category to simply “Strategic Planning.” Why was this change made? Do you agree or disagree with the committee’s rationale?

Traditionally, quality was an adjunct effort. Quality inspections were made as the product went out of the door. The philosophy expressed by Deming, Juran, and others is that strategy is integrally attached to the entire process. Strategic planning implies long-term planning. The Malcolm Baldrige Award stresses that continuous quality control is part of the entire process. Changing the name from “Strategic Quality Planning” to “Strategic Planning” emphasizes this point.

It is generally understood that to ensure an organization is competitive, a strategic quality planning process is required.  However, when discussing strategic quality planning (SQP), many authors describe strategic quality planning as a separate entity from the generalized strategic planning process.  This creates the erroneous impression that SQP is a separate process from strategic planning.  For this reason, the Malcolm Baldrige Award recently changed the name of the Strategic Quality Planning category to a simpler strategic planning.  

2. A study by the U.S. General Accounting Office reported that, on average, a firm takes 3.5 years to see significant results from a quality improvement program. Why do you think it takes so long to see significant results? Please make your answer as substantive as possible.

In the play Macbeth (V, v, 19) the character Macbeth says: Tomorrow, and tomorrow, and tomorrow, creeps in this petty pace from day to day to the last syllable of recorded time.  Our lives are governed by time.  Our lives are also governed by habit; we grow accustomed to the manner in which we function both at work and at leisure.  Any change to either work or leisure is naturally resisted. 

In the section The Importance of Time in Quality Improvement, the length of time that it takes for implementing an effective quality program is discussed.  The estimates vary from 3.5 years (US General Accounting Office) to 25 years (Shigeo Shingo).  In the discussion, however, the point is made that a slower process is more effective than a rapid one.  The Management by Dictate model is discussed: in this case, management specifies a time frame and an expected level of accomplishment. On page 87 the text says 

According to Donald Wheeler, a quality expert, when goals such as these are set, one of three things will occur:

1. People will achieve the goals and incur positive results.

2. People will distort the data.

3. People will distort the system.

The text states that for the process to be successful, firms need to put in place a process that will allow learning to occur. Allow people to be a part of the change. 

Quality improvement, if it is successful, is a change to the culture of the company. On page 87 Deming said that continuous quality improvement was a slow process that required commitment of resources and time.

3. According to the quality literature, without top management leadership, quality improvement will not occur. Why do you believe this is the case?

The text maintains that Leadership Equates with Power. This power is defined as:

• Power of expertise 

• Reward power

• Coercive power

• Referent power 

• Legitimate power 

The text also states that for the employees to feel empowered, power must be shared. This establishes an environment where a leader can effectively influence the organization through mutual trust.

Employees also must trust that if they make recommendations for improvement, the recommendations will be taken seriously and considered for implementation by management. Nothing can damage a quality improvement effort faster than management’s failure to consider implementing changes that employees recommend. Employees may begin to think, “nothing will really change.” Quality specialists who find themselves in companies not implementing a majority of employee suggestions need to work with management to increase the percentage.

This all implies that direction, in the form of strategic planning, must originate from the top. In an environment where the mutual trust has been established, the line will then follow along.

4. Explain the hazards of the “management by dictate” model.

Management by dictate typically involves setting goals and insisting that the goals be met.  For example, as illustrated in the chapter, a top management team might set the goals of "a 50% reduction in defects during the next year."  This is a numerical goal for lower-level managers to meet.  

On page 89, the text’s definition of leadership is: 

Leadership is the process by which a leader influences a group to move toward the attainment of super-ordinate goals.

Achieving the goals is what management hopes for.  However, the text also states that effective management involves sharing power.  It is this sharing of power that makes success possible.  Management by dictate infers that all power is directed downward.  All management theories address the inefficiency of this attitude. 

5. Trust has been identified as a very important attribute for leaders who are initiating quality improvement efforts. Why do you believe trust is such an important attribute?

As quality becomes a continuing part of the line, the worker is, by default, more visible. For a genuine quality environment, an employee must feel that he is part of the solution, not the problem.  An employee who feels that he is not trusted might not show the initiative to suggest methods for ongoing quality improvement.  On page 90, the text states: 

Employees must trust that if they make recommendations for improvement, the recommendations will be taken seriously and considered for implementation by management. Nothing can damage a quality improvement effort faster than management’s failure to consider implementing changes that employees recommend. Employees may begin to think “nothing will really change.”

7. Discuss some of the ways leaders resolve conflict in organizations. Which of these ways have you found to be most effective? Why?

Conflict has been present in relationships as long as people have been around. While our knee-jerk reaction to conflict is that it is unhealthy, when properly managed and encouraged, conflict can help improve product or service quality.  Table 4-1 identifies the set of leader skills.  

Phase 2: Communication deals with conflict.  The point being subtly made is that negative conflict is a subset of poor communications.  It is a commonly held concept that while in a conversation, most people spend more time formulating their reply than they do listening to each other.

Conflict arises when two people have different ideas about a topic.  If they pursue their ideas without understanding the other person’s thoughts, destructive conflict arises.  It is management’s responsibility to establish an environment where all ideas are considered 

8. Do you agree with the statement “quality is good ethics”? Please explain your answer.

On page 92 the following statement is made: 

Reliable products and low defect rates reflect an ethical approach of management’s care for its customers. This ethic is stated in the well-known mission statement of a New Bedford, Massachusetts, shipbuilder; “We build good ships. At a profit if we can, at a loss if we must. But, we build good ships.”

While literature is filled of examples of the destructive nature of poor ethics, the case of Enron and Arthur Andersen demonstrate the problem that arises from disregard to ethics.

9. Why do companies that focus on their customers often develop a set of ethics that includes valuing employees? Please make your answer as substantive as possible.

Question 9 can be formulated from page 92 of the textbook. The text goes on to state:

This is reflected in education, training, health, wellness, and compensation programs that show empathy for the employees … Integrity gets down to honesty. Are we honest to our customers, employees, colleagues, family members, and ourselves? This must be the basis for business. There is not a new business model that obviates the need for integrity… It is true that companies that focus on their customers often develop a set of ethics that includes valuing employees.  Perhaps this is true because a company that focuses on it customers, in effect develops a culture of focusing on people, which in the end include its customers, employees, and other stakeholders.

10. Discuss the concept of prevention cost. Why is prevention cost such a pervasive consideration in quality programs?

An old nursery rhyme says:

For want of a shoe the horse was lost.

For want of a horse the rider was lost.

For want of a rider the battle was lost.

For want of a battle the kingdom was lost.

And all for the want of a horseshoe nail

Or as Benjamin Franklin said: An ounce of prevention is worth a pound of cure.

Prevention costs are those costs associated with preventing defects and imperfections from occurring.  Prevention costs include:

• The cost of setting up, planning, and maintaining a documented quality system

• Quality planning

• Quality and process engineering (including preventive maintenance)

• Calibration of quality related production equipment

• Supplier quality assurance (including supplier assessment)

• All training

• Defect data analysis for corrective action purposes

• Time spent on quality system audits

Compare these costs with the cost of not selling your product or service. 

11. Describe the difference between external and internal failure costs. Is one cost more important than the other? Explain your answer.

The following two tables illustrate the situation:

They are associated with product failure after the production process.  External failure costs include failure after the customer takes possession of the product.  While the cost of failure may vary across circumstances, common sense says that external failure costs are the most expensive.  It is always better to catch mistakes as soon as possible.  The worst possible scenario is to find out that a part is defective after the customer has already started using it.

The Lundvall-Juran model illustrated below is a simple economic model.  It shows the difference in expenditures between internal and external expenditures.

12. What are the quality costs incurred when your hard disk crashes?

The costs should be minor.  The text makes the point that planning is an essential part of quality.  If a company is planning properly, then backup and restore should be an integral part of the plan. 

With today’s technology, loss of more than a couple of hours of data is unforgivable.

13. Think of a product you buy that is differentiated through quality. Do you believe the manufacturer’s strategy to differentiate this product through quality is sustainable, or will the manufacturer eventually have to find other ways to attract you to the product? Explain your answer.

The answer depends greatly upon the industry and technology.  Rolex and Rolls Royce will probably never lose the generated respect of quality.  However consumer, products usually do not have that luxury.  On page 96, the text makes the statement:

Differentiation is achieved by a competitor if the consumer perceives the product or service to be unique in an important way.  (Note: Emphasis is the author’s)

The word perception is the key to this.  Toyota and Datsun (now called Nissan) impacted the American market due to the perception of quality.  In spite of the fact that American cars improve their quality, Japanese cars still sell extremely well.  Fiat, a major brand in Europe, was saddled by a reputation of being a poor quality automobile.  Fiat no longer sells cars in America.

14. Describe the concept of core competency. Using the Prahalad and Hamel model, can quality be considered a core competency? Why or why not?

Core Competencies, according to Prahalad and Hamel, involve those competencies that remove the barriers between the various segments of the firm. They list:

• Communication

• Involvement

• Commitment to working across organizational boundaries

Core competencies are those skills that can blend the various activities into an efficient product. These are skills that will improve with use. The text states that while quality, by definition is not a core competency, the importance of long-range planning and ongoing improvement provide the foundation for these skills.

15. Describe the difference between “strategy content” and “strategy process.” Describe examples of quality-related strategy content and strategy process issues.

The word strategy has its roots in the military.  Strategy is the set of high-level plan of action that will be used to accomplish a specified goal.  Strategy content refers to that set of plans. 

Strategy content is the set of actions at which a long-range plan is aimed.  The text speaks to cost, differentiation, and focus as the base generic strategies.  This content is the basis for planning.  Strategy process identifies those steps used to develop the strategy. 

Strategic content refers to what is included in a strategic plan.  In contrast, strategic process consists of the steps used to formulate annual strategic plans.  Examples of strategic content include: time, leadership, quality costs, generic strategies, order winners, order qualifiers, and quality as a core competency.  Examples of strategic process include: forced-choice models and strategic control.  Figure 4.3 illustrates the process for constructing the strategic plan.

16. Describe the benefits of strategic planning.

On page 105, the text outlines the basic reasons for strategic planning:

The basis for assuring quality is strategic planning that prioritizes and plans quality improvement. The question is: “If we want to achieve our goals, how are we going to get there?”

Continuous quality improvement is dependant upon long-range strategic planning. 

Figure 4-5 illustrates the steps needed for supply chain strategic planning.  

The steps:

• Define

• Identify

• Observe

• Organize

• Implement

• Monitor

 They are integral for any activity. 

17. Why is the forced-choice model particularly useful for companies that are relatively inexperienced in strategic planning? Explain your answer.

The forced-choice model, illustrated in Figure 4-2, is an organized approach to strategic planning.  

It provides a road map for effective long range planning.  The process involves sequestering six to twelve managers and having them construct the plan following the steps identified.  The advantages for this are obvious.  When a company embarks on an involved process for the first time, direction becomes important without a roadmap, or documented procedure results are unpredictable at best.  Using a forced-choice model provides that direction for the first few planning efforts.

18. Should the strategic planning process consider quality concerns at every step of the process? Why or why not?

If you follow the traditional concept that quality is an adjunct, then the answer is obviously no.  However, once you agree that quality is an ongoing process at every step in the production of the good or service, then the answer is obviously yes.  Questions 10 and 11 illustrate this point.  It is cheaper to address problems early in the process.  If quality is an integral part of this process, overall quality will become more accomplishable.

19. Describe the concept of catchball.

Catchball is a process taken from the Japanese “Hoshin Kanri” school of management.  In English this is referred to as Policy Deployment. The term catchball refers to those steps that occur as control is passed between levels of management where plans are reviewed and discussed before the next lower level of management takes control of the process. Catchball refers to the interactive nature of these interfaces.

20. Juran argues that both incremental (continuous) improvements and stepwise (breakthrough) improvements are needed in a strategic framework. Do you agree with Juran’s assessment? Why or why not?

Actually, continuous and breakthrough improvements are somewhat different.  The focus of the book is an emphasis on continuous improvement.  Continuous improvement implies making quality an integral part of the entire process.  As a side effect of this action, the employee is empowered and will feel a part of the system. 

As the employee feels comfortable in his role, the employee will be willing to take risks and both identify and recommend stepwise or breakthrough improvements.  However, the reverse is most probably not true.  Most students will agree with Juran's argument: firms should simultaneously seek incremental improvements and stepwise improvements.  It is entirely appropriate to plan for both types of improvement in a strategic framework.  The enabler is the environment that a continuous improvement process creates.

Case 4-1: Ames Rubber Corporation: Realizing Multiple

Benefits through Improved Quality

1. In developing its Excellence through Quality program, Ames initially benchmarked against Xerox. Is benchmarking against another company’s quality program a good idea? What are the potential hazards and benefits involved?

In general, benchmarking is a good idea.  It helps a firm emulate the practices of a company that is very good at a particular activity (like quality), and as a result helps a firm avoid "reinventing the wheel" every time it wants to launch a new initiative.  The downside of benchmarking is that no two firms are exactly alike.  As a result, it is naïve for one firm to think that it can exactly copy the practices of another firm.  A firm needs to learn what it can from a benchmarking experience, and then incorporate what it learns into its own corporate culture.  (Note: of course, sometimes what a firm learns is that it needs to change its culture).

2. Discuss the manner in which Ames implemented its Excellence through Quality program. Did the company place its emphasis in the right areas? Please explain your answer.

The company did an excellent job implementing its Excellence Through Quality program.  The emphasis of its initiatives seemed to be equally split on systems issues (e.g., reject tracking, cost of quality collection systems, strategy and operations review meetings) and human resource management issues (e.g., involvement groups, teamwork, training, egalitarian culture).  As discussed in previous chapters, this is the ideal combination.  To improve quality effectively, a firm must improve its quality-related systems, and must provide its employees the skills and level of motivation necessary to implement the quality improvement program.

3. Discuss the benefits that Ames Rubber achieved from its quality program. Are these benefits more encompassing than you would have expected? Why or why not?

Most students will be impressed with what Ames Rubber has accomplished, and will argue that the benefits have been more encompassing than they would have expected.  The benefits are clearly articulated towards the end of the case.  Particularly impressive is Ames' successful run for the 1993 Malcolm Baldrige National Quality Award.  The approach that Ames took to upgrade its quality serves is an excellent model for other firms.

Case 4-2:  MidwayUSA

1. How does MidwayUSA engage the customer in its focus on quality?

The company's focus on quality resulted in a customer retention rate of 98% in 2009.  In addition the company provides customers multiple opportunities to give feedback, through the complaint center, by conducting surveys and allowing customers to submit reviews of items and suggest new product lines.  

2. MidwayUSA has Incorporated quality and customer focus into its culture.  How does MidwayUSA ensure employees support the culture?  Also, how do employees contribute to quality customer service?

By adopting the Baldrige Core Values and Concepts and making them an integral part of the company’s culture, MidwayUSA has shown its employees that they are serious about quality and customer focus.  They have posted these values and concepts throughout the company.  In addition they encourage their employees to interact with the customers and offer personal insight and knowledge about products.  They encourage the workforce to join the National Rifle Association and to participate in hunting and shooting events.  This passion and level of interaction has contributed to a customer satisfaction rating of 93%.   

3. MidwayUSA wants to be the best-run company in America.  Is this a useful vision statement?  Are there benefits to this vision Instead of being the best-run company in the industry?

Although a very broad vision statement, MidwayUSA has set a goal to be the best and has involved its workforce in helping them achieve this vision.  The employees can engage in the appropriate activities to help MidwayUSA obtain its vision and can see the results as there are regular reviews of the company’s performance and results.  There are definite benefits to being the best run company in America instead of in the industry.  Being the best run company in the industry may mean that MidwayUSA is the top dog in its industry, but when compared to other companies they may find that they are way down the list.  Striving to be the best company in America is a definite worthwhile goal, but why stop there?  Why not compare themselves to the overall global economy not just America?  Are there benefits to this?  Yes.

4. Effective quality and strategic planning are not a onetime event.  In looking at MidwayUSA and other companies, what can companies do to make these a continual process?

On the MidwayUSA website (http://www.midwayusa.com/General.mvc/Index/AboutUs), the company states:

“You see, as a company grows, it's important to formalize the planning, processes, systems, training and communications; and to develop a great team of leaders throughout the organization. This is the hardest part of running a business and they don't teach it much in business school.

From the time we began to formally state our goals, Customer Satisfaction has always been #1; and at the current 93% level, it’s the highest we’ve ever recorded. There aren't many companies in our industry that measure Customer Satisfaction, so we benchmark with the best catalog/internet companies in America and I am pleased to say we are right there with them.

Great Customer Satisfaction is no accident; it's the result of planned and methodical execution of all things important – of listening to Customers and of continuously improving. At MidwayUSA, we became ISO 9000 registered in 2008, adopted the Malcolm Baldrige National Quality Award Criteria in 2006 and set a goal to apply for and improve enough to receive the award in 2009. We applied for and received the Missouri Quality Award (a Baldrige-criteria state program) in 2008, and applied for and received the Malcolm Baldrige National Quality Award in 2009, meeting the goal we set in 2006. Those of you in management, engineering or operations know the significance of ISO and Baldrige to Customer Satisfaction.”

They have adopted quality and strategic planning as an integral everyday part of running their business.  They have found the solution and more companies should adopt this approach.

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