Total Quality Management as a Business Philosophy
Total Quality Management (TQM) is a comprehensive system for achieving continuous improvement in customer satisfaction. It is a philosophy of total integration of the business to achieve the required result. The goal is to achieve greater efficiency and effectiveness, lower operating cost and increased market share.
TQM practices focus on satisfying customer needs. This means making the needs of the customer the priority, expanding the relationship beyond traditional services and incorporating the customer’s needs in the company’s business plan and corporate strategy.
TQM philosophy is so called because:
- It involves every single piece of work done in the organization
- It involves everybody in the organization
- It requires total commitment.
The aim of TQM is to achieve zero defects in everything done in the organization, i.e. to do error-free work. To achieve this means everything we do must be right, first time, every time. The common theme in TQM is "get it right first time, every time’’.
TQM means changing the way people do things so as minimize the potential for defects. The TQM approach uses statistical methods to find problems that cause errors or defects. The aim is to achieve 100% in everything done in the organization i.e. we aim at perfection.
Quality systems integration requires that the business looks out for the customer while the customer looks out for the survival of the business. For, if there is no business, there will be no product. If there is no product, customers’ needs cannot be met. A simple framework for highlighting this is the business-customer integration loop developed by Badiru and Ayeni in their Practitioner’s Guide to Quality and Process Improvement.
We must aim at 100% quality because doing otherwise leads to wastage. To appreciate the effects of mistakes, consider a process that is 99% perfect. That process will produce 10,000 defects per million parts. The total yield (number of non-defective units) from a process is determined by a combination of the performance levels of all the steps making up the process.
If a process consists of 20 steps and each step is 98 percent perfect, then the performance of the overall process will be 66.7608%. Thus, the process will produce 332,392 defects per million parts.
Excellent organizations allow for no more than 3.4 defects per million parts in manufactured goods or 3.4 mistakes per million activities in a service operation. A process will need to be 99.99966% perfect in order to produce only 3.4 defects per million. This is called the six sigma approach to TQM.
Achievement of excellence requires totally committed leadership. It is the role of top management to communicate the vision of the organization, its mission and philosophy, and channel the energies of their people towards the achievement of set goals. Achievement of excellence therefore is rooted in having a clear vision, mission and philosophy.
Vision is a total concept of what an organization is trying to become. It seeks to focus the organization on the future. Vision must give focus and a sense of direction. Peter Drucker has said, "The definition of vision must be rooted in providing answers to probing questions such as ‘‘What is our business? What will it be? What should it be?’’
Mission seeks to answer the question "What are we here to do?’’ It is an umbrella statement. Anything that falls within that umbrella is what the company does, anything that does not fall within it the company does not do.
Peter Drucker has said "a business is not defined by the company’s name, statutes, or articles of incorporation. It is defined by the want the customer satisfies when he buys a product or service. To satisfy the customer is the mission and purpose of every business.’’ The question "what is our business?" can therefore be answered only by looking at the business from the outside, from the point of view of the customer and market. What the customer sees, thinks, believes, and wants, at any given time must be accepted by management as an objective fact. To the customer, no product or service, and certainly no company is of much importance. The customer only wants to know what the product or service will do for him tomorrow. All he is interested in are his own values, his own wants, and his own reality. For this reason alone, any serious attempt to answer, "what our business is" must start with the customer, his realities, his situation, his behaviour, his expectations, and his values.’’
Corporate values are the underlying beliefs about what the organization considers important in its everyday endeavor. The sum of these beliefs in an organization constitutes the organizations shared values. This is sometimes called the corporate culture and is expressed by the statement, "the way we do things around here". A management guru once said "values are the heart and soul themes around which an organization rallies, they define its main beliefs and aspirations, its guiding concept of "who we are, what we do, where we are headed and what principles we will stand for in getting there." They drive the corporate culture.
To build an excellent organization there must be a "goodness of fit" among the key variables that make the whole organization. One enduring framework you can use is the McKinsey 7S framework, once dubbed the happy atom, with shared values at the heart of the atom.
So how does all this tie in with managing your various type of businesses? Every business is a creative business. Every business is an art, not a science. We are engaged in the art of making money on the basis of grossly insufficient information. We must therefore learn to blend scientific efforts with creative skills.
Organizations pass through different growth phases. As the firm grows it should strive to preserve its original guiding principles. It should develop deeply held convictions and a simple and intelligent business philosophy. This philosophy should be guiding, but is should not be inflexible.
The organization should be outwardly focused on its clients but should be selective in choosing them. It should target its markets and control its growth. Above all, it should not try to be all things to all people.
As Marvin Bower of McKinsey once said, "a successful organization usually consists of a group of talented people who like and respect one another. The firm nurtures in its members the ambition and the determination to be outstanding at what they do. The firm encourages intellectual disagreement and interaction among its members but insists upon mutual respect. The firm tries to enable outstanding people to flourish by leveraging their skills and providing a creative environment. It never permits any relaxation of professionalism or of high standard.’’ As J. P. Morgan put it, "the goal is to do a first-class business in a first-class way."
An organization is strategy built around people, and their talents. Each person should strive to concentrate on what he or she can do best, or at least do well. This reality calls for constant communication both within and outside of the organization, relative to the goals of the organization.
A successful firm is willing to invest in technology to remain on the leading edge, and its members reflect a willingness to learn and an urge to tinker.
The list of primary goals of a successful firm does not include profit. Generally, this objective should be subordinated. If you do it well, the profits will come. Marvin Bower of Mckinsey & Co. was quoted as saying that "any service business that gives a higher priority to profit deserves to fail."
No firm can succeed without a good leader. David Ogilvy viewed the leader’s primary role as "providing an environment in which creative people can do useful work." Max Dupree in his book on leadership said that the function of the leader is "to give others the space to be what they can be." If they approach their individual potential, so will the organization.’’ He also said that "the first responsibility of the leader is to define reality, while the last is to say thank you." Warren Bennis has said that what is pivotal for the leader is "to have an overreaching vision, to set an example of passion, curiosity, integrity, and daring for the others in the organization."
For sustained success, a business must stay entrepreneurial. Often, the tendencies that come with growth are to turn inward, away from customers, to set up a hierarchy and a lot of committees, and frequently to encumber the skilled managers with too many other duties. Really good people do not wish to be actively managed. Both Peter Drucker and Joseph Schumpeter said that retaining the spirit of entrepreneurship is accomplished primarily by defying tradition, challenging orthodoxy, breaking up the old, selecting niches, and recognizing that bureaucracy and success are irreconcilable. Jack Welch said the "best way to deal with bureaucracy is to kill it."
In summary, Quality (with capital Q) is the key to business growth and success. Aim unequivocally to be the best, focus single-mindedly on your customers, hire and retain talented people and create an environment that will engender their creativity. Avoid bureaucracy, have a clear vision, develop a coherent business philosophy and stay lean. In effect strive for excellence.