QUALITY MANAGEMENT

Within American management “quality” was a minor concept relegated to an interest primarily by  statisticians until events of the 1970's when the issue of quality management is thrust dramatically into the American business consciousness. The transformational events begin with the invasion of Japanese automobiles after the 1973 and 1979 “oil crisis” and the demise of American TV and consumer electronics between 1970 and 1980. The quality and pricing of Japanese automobiles and electronic consumer goods threatened American international competitiveness.

American business management and Schools of Business researchers turned to Japan to learn how the Japanese by the 1980’s were surpassing American manufacturing in consumer goods. While some researchers found inspiration in the unique culture of the Japanese firm, the search for a rationale of manufacturing high quality goods at low costs centered on production techniques and quality control. Widely credited for leading the Japanese quality revolution was an American, W. Edwards Deming, who along with many other American scientists had gone to Japan to help with post-War II reconstruction.  In 1947 and 1950 Deming served as statistician for the Supreme Command of the Allied Powers in Tokyo. This entry led to his consultancy with Japanese industry from 1950 through the 1960’s in association with the Union of Japanese Scientists and Engineers.  After a series of Deming’s lectures on quality control through statistical analysis another American Joseph Juran followed in 1954 with a series of lectures on managing for quality beginning the “Japanese manufacturing revolution”.

By the 1980’s “total quality management” and “quality assurance” based on Deming’s and Juran’s practices began to dominate the discussion about American business. The concept of quality management views the firm as an integrated system oriented to the satisfaction of internal (workers, management and owners) and external clients (suppliers and customers). To accomplish this the practice of quality management relies on every day efforts by all employees and managers to improve, develop, and maintain quality, cost, delivery, and morale through:

• continuous improvements of products and processes
• maintenance cycles
• changing the organizational culture to one that emphasizes quality and value-added activities
• an integrated data and information system

In the past few decades Quality Management has become one of the key concepts in management, although the literature has lately focused on international manufacturing standards. The dominant figures to arise in the quality management movement are:

William Edwards Deming

Background-

Born in Sioux City, Iowa in 1900, Deming spent his early years on a farm in Wyoming. He graduated from the University of Wyoming at Laramie in electrical engineering; earned a M.S. from the University of Colorado, and completed the PhD at Yale University in mathematics and mathematical physics. On completion of his doctorate Deming left academia to work for the U.S. Government as a statistician. Returning to academia at New York University Dr. Deming continued to hold advisory positions with the Government.

In 1946 Deming began an international career as statistician for the Allied Mission to observe elections in Greece and, later, as a consultant to the Government of India. He joined the Supreme Command of the Allied Powers in the reconstruction of Japan in 1947 where he became teacher and consultant to the Union of Japanese Scientists and Engineers until 1965. Across his career, Deming provided consulting to Mexico, Germany, Turkey, Taiwan, and the UN, in addition to lecturing at numerous universities.

In 1943 Deming’s book Statistical Adjustment of Data was published, followed in 1950 by Some Theory of Sampling and the seminal work for Japanese quality practices, Elementary Principles of the Statistical Control of Quality.  

Deming’s contributions to Japanese industry were recognized in 1960 when the Prime Minister and Cabinet awarded him the Second Order of the Sacred Treasure, the highest national award for a non-citizen. This recognized that Deming was prominently responsible for turning Japanese manufacturing from an “imitator of cheap products” to a quality maker and marketer of a wide range of manufactured goods using statistical methods.

Dr. Deming died at his home in Washington, DC, on 20 December 1993.

Deming’s Views-

To Deming there are two ways to improve processes: changing the “common causes”, that is the recurring and systematic flaws that stem from worker practices, machines, or te product itself, and “special causes” that are flaws in specific workers or activities. The systemic prolems, “common causes”, were the responsibility of management to correct. The worker could not correct design flaws, purchase raw matyerials, create company policy, or train supervisors. “Special causes” had to be corrected by the operators themselves. 

The key tool in quality management was statistical process control (SPC), invented by Walter Shewhart at Bell Laboratories in the 1930’s. The premise is that errors will occur in any process. It simply is not likely that each product will be exactly like another due to random errors. The problem is to identify which errors are attributable to systematic causes and which are attributable to random phenomenon. Statistical sampling of parts, goods in process, and finished goods can identify tolerances or acceptable errors, and identify errors that needed investigation.  Once unacceptable errors were corrected, attributed to “special causes”,  the system itself had to be improved to lower tolerances and improve the product by eliminating “common causes”.

Tolerances, or a level of acceptable error, means that a product is not ideal. To correct the errors that product this kind of error meant that there had to be a concerted and integrated effort involving purchasing, engineering, R&D, marketing, operations, and, well, everyone. While statistical sampling would help to identify that a problem existed, to isolate causes more sophisticated techniques were required, to include:

Pareto analysis – Errors are analyzed to determine key causes: 80% of the problem stems from 20% of the sources of error. For an example see this webpage.

Ishikawa (“fishbone”) cause and effect diagrams – This is the analysis of “fuzzy systems”, meaning the causes are not obvious. The technique requires the identification of errors and their probable causes through a brainstorming session. For an example see this webpage or this webpage. 

Histograms and Scatter diagrams – Visually analyzing the statistical data by categories (histograms) and simple analysis of the statistical errors graphically at various times, activities, or any other useful unit can rule-in or rule-out probable causes.

Flow charts – This is visualization of how the activities are connected to form the system. By seeing linkages across activities the system can be analyzed for possible sourses of errors or for achieving greater efficiencies. For an example see this webpage.

While statistical analysis is useful to identify the reasons for lack of quality, the remedies for systematic error lay with management. In Deming’s view the responsibility for quality lays with management and the need for management to be totally committed to it in changing the way that business is conducted. He summed up his views in 14 Principles:

Josph Moses Juran

Background-

Joseph Juran was born in 1904 in Romania. His father was a village shoemaker who immigrated in 1909 to America. Juran’s early life was one of poverty, hard work, and ridicule, but in school he excelled in math and physics. This aptitude earned him entry to the University of Minnesota, where he gained recognition for his chess competitions. With his B.S. in electrical engineering in 1924 he joined Western Electric, working in the Inspection Department of the Hawthorne Works plant near Chicago.   

The Western Electric Hawthorne plant in 1926, as every student of management knows, was the location of major studies leading to insights on modern motivation and leadership theory. A Hawthorne plant research team from Bell Laboratories included major figures in early quality management,  Don Quarles, Walter Shewhart and George Edwards. The team formed an Inspection Statistical Department selecting Juran as one of the two analysts. This experience led to Juran’s publication of a training manual in quality methods in 1928, a seminal work in the area. During this time Juran also completed a law degree at Loyola University.

By the late 1930’s Juran’s reputation promoted him to the Western Electric corporate office where he provided consulting for the company and for clients. In a consulting visit to General Electric he introduced the Pareto principle into business practices. By the 1950’s Juran had taken leave of Western Electric to work for the Government where he began to develop his thinking on process engineering and cost efficiencies.

By 1945 Juram had set up his own consulting firm and assumed an academic post at New York University as Chair of the Department of Administrative Engineering. After the publication of his Quality Control Handbook in 1951, Juran had established an international reputation in quality management and by 1954 was lecturing at the the Union of Japanese Scientists and Engineers, following Deming’s lectures on statistical quality control – later receiving recognition from Japan with the Order of the Sacred Treasure.  

Juran’s Views-

Quality is comprised of two aspects: the features that satisfy customer wants and the absence of defects.  While achieving perfection is difficult, the Pareto principle operates: managers must separate the “useful many” features from the “vital few” – these guidelines provided what Juran termed “fitness for use”. Simply, a product should do what it is supposed to do, and be reliable in doing it.

“Fitness for use” has five major considerations:

1.      Quality of design, meaning design concept and specifications of the product should be flawless

2.      Quality of conformance, product engineering and design should match the intended use 

3.      Availability, meaning the product should be reliable and easy to maintain

4.      Safety, assessed by risk of injury and hazards

5.      Field use, when in the hands of the customer the product should work as intended

To obtain quality the entire chain of activities from raw materials to customer use had to be analyzed, using statistical techniques. He also introduced the concept of the “Cost-of-Quality” to account for the costs associated with defective products. These costs included: internal failure costs (the costs of making products that could not be sold), external failure costs (the costs of replacing defective products that were shipped), appraisal costs (the costs of evaluating products and processes for failure), and prevention costs (the amount of money it takes to product defect-free products).  As the first two costs (the costs of repair, replacement, and warranty) typically exceed the costs of quality management, Juran provided a powerful argument for quality programs in American businesses.

To Juran “zero-defects” did not make much sense in business. The costs of managing for quality had to be less than the costs associated with defects. When the costs of ensuring quality begins to match the costs of defects, quality management had achieved its limits, and further refinement in quality was not justified.

Philip B. Crosby

Background-

Crosby was born in Wheeling, West Virginia in 1926. He attended public schools in Wheeling, graduating from Triadelphia High School in 1944 and joining the Navy as a hospital corpsman. After his military stint Crosby entered entered the Ohio College of Podiatric Medicine in Cleveland, returned to Wheeling and practiced podiatry with his father.  Recalled to military service during the Korean conflict, he served as a Marine Medical Corpsman.

In 1952 Crosby went to work for the Crosley Corporation, (Richmond, Indiana) as a junior electronic test technician, joining the American Society for Quality Control where his thinking about "quality" began to form. Joining Bendix Corporation in 1955 as an inspector, his job was to assess defects in the manufactures of missles.  Offered a job as senior quality engineer by Martin-Marietta in 1957, Crosby developed his concept of “zero-defects” and began his career as author and quality management advocate. For his contribution of “zero defects” in military production, the Army awarded him the Distinguished Civilian Service Medal in 1964.  That same year he went to work for ITT as Corporate Vice President of Quality, leaving in 1979 to form him own consulting firm, Philip Crosby Associates, Inc. headquartered in Winter Park, Florida.

With publication of Quality is Free in 1980, Crosby correctly anticipated the next decade of interest in quality management. Philip Crosby Associates (PCA) quickly grew into a $100 million business with 300 employees. PCA’s “Quality College” became a major training ground for management. In 1991 PCA was sold to Proudfoot PLC for roughly $75 million. Crosby founded Career I, providing lectures and seminars for executive development. In 1997 after years of losses under management by Proudfoot, Crosby bought back PCA for the nominal sum of around $1 million. At the age that people normally retire, Crosby attempted to revitalize his consultancy firm. He died in 2001 at his summer home in Asheville, North Carolina.

Crosby’s Views-

Do it right the first time and do it with zero-defects, is Crosby’s message. “Zero-defects” means that a company should make products that conform to the company’s expectations for the product based on customer needs. Therefore, “quality” can refer to, say, a BIC pen that is inexpensive, but performs as buyers expect, or to a BMW, which is expensive, but performs to buyers’ expectations.  Zero-defects does not mean that mistakes are not made, but that the company and management expect that there will be no mistakes – it is a management standard. The ideal is to consistently make the best product, best in design for the price, best for the customer.

To achieve quality, Crosby advocated a top-down approach, beginning with the creation of a core of quality specialists. In his books and at PCA’s Quality College, Crosby’s quality management developed into a fairly structured system of “Prevention Management”. Prevention management views the company’s product as something that results from diverse, interrelated processes, and each element had to be continuously perfected to achieve zero-defects.   Continuous improvement of activities had to be based on Crosby’s Four Absolutes of Quality Management:

1.      Quality is defined as conformance to requirements, not as 'goodness' nor 'elegance'.

2.      The system for causing quality is prevention, not appraisal.

3.      The performance standard must be Zero Defects, not 'that's close enough'.

4.      The measurement of quality is the Price of Non-conformance, not indices.

These “absolutes” are achieved and communicated through 14 steps:

1.      Make it clear that management is committed to quality.

2.      Form quality improvement teams with senior representatives from each department.

3.      Measure processes to determine where current and potential quality problems lie.

4.      Evaluate the cost of quality and explain its use as a management tool.

5.      Raise the quality awareness and personal concern of all employees.

6.      Take actions to correct problems identified through previous steps.

7.      Establish progress monitoring for the improvement process.

8.      Train supervisors to actively carry out their part of the quality improvement program.

9.      Hold a Zero Defects Day to let everyone realize that there has been a change and to reaffirm management commitment.

10.   Encourage individuals to establish improvement goals for themselves and their groups.

11.   Encourage employees to communicate to management the obstacles they face in attaining their improvement goals.

12.   Recognize and appreciate those who participate.

13.   Establish quality councils to communicate on a regular basis.

14.   Do it all over again to emphasize that the quality improvement program never ends.

The process begins with the company measuring its present quality position using the Quality Management Maturity Grid:

(For an example see the Office of Auditor General of Canada’s report at this webpage.)

Crosby’s 1979 book Quality is Free made the point that quality not only does not add to cost, it provides savings and increases profits.  Crosby considered it important for managers to know the Cost of Quality to show the magnitude of the problem and to demonstrate opportunities for profit improvement. He estimated that the absence of quality costs companies between 15% and 20% of sales.  Quality was an executive responsibility because profit-making is an executive responsibility.