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8/9/2019 Ten Mistakes Ceos Make About Quality
1/6
nsights
from
Baldrige
ward
winn ers and
top
quality
firms
by
Willard
I
Zangwill
HE WINNERS OF THE MALCOLM BALDRIGE
National' Quality Award and other fmns
noted for excellent quaJity programs
think differently about quality than most
firms. A professor
of
management sci
ence and students,at the University of Chicago
interviewed executives at a number
of
firms that
have excellent quality programs. These interviews
revealed 1 mistakes thatmany corporate executive
officers (CEOs) make that inight prevent their com
panies from e v ~ l o p i n g excellent quality programs.
Mistake Failing to
lead
When CEOs strive to be leaders and to inspire
their employees to excel, many adopt an approach
that almost always fails. They recall movie scenes
in which great leaders give powerful and highly
motivating speeches, such as Knute
Rockne inspiring his football, team or
Gen. George' Patton spurring his troops
to success. Leadership to these CEOs
becomes management by exhortation
and inspiration. Speeches, high goals,
slogans, and campaigns are supposed
to motivate employees and propel the
organization toward competitive victory
This misguided Hollywood style
of
leadership almost always
fails.
Jack Stack EO
of
Springfield
. Remanufacturing, which remanufac
tures engines in Springfie ld
MO,
recalls when he took over a division
and gave a powerful speech designed
to
rouse and inspire the workers. At the
end of the speech, he asked if there
were any questions, and one worker
in the back yelled out, How old are
you, anyhow? The workers had often
been exhorted with motivational
speeches and campaigns, slogans, and
goals. They were cynical because of
repeated failures and knew from experi
ence that little real change would occur
Although speeches and exhortations
might produce.a brief flurry of
activity,
soon p o p ~ o back to the same man-
agement, systems, and procedures as before.
Repeatedly, CEOs make speeches, set goals, wage
a big campaign, and then wonder why this leader
ship produces little lasting change.
Movies, in an effort to create a dramatic effect,
confuse the issue. Prior
to
their speeches, Rockne
and Patton thoroughly planned
.
organized
equipped, trained, and prepared their men. That
was the main substance
of
their l e ~ e r s h i p and cre
ated the success. The motivational speech was the
final encouragement and, perhaps, was not even
necessary.
Good leadership must produce results, which
means that the actual work done in the offices or
factory must change. Exhortations rarely accom
plish that. Change requires a new infrastructure in
which the organization's steps, procedures, and
Quality
Progress une
1994
8/9/2019 Ten Mistakes Ceos Make About Quality
2/6
~ e c l m i 9 e s a r e i m I ? f ~ v e d
This
i e q u i r e ~ new
systems,
plarming,
mcentlves, and trammg. Improvement in the·way work is done
is what quality systems accomplish and is the substance
of
real
leadership.
Mistake
Thinking
th i planning
devolves from
financial or
marketing
goals
~ l a r m i n g · i n many organizations, starts with top management
settmg goals for financial growth (profit, earnings per share, and
return
on
investment) and market growth (sales). These overall
financial and sales goals then
get
broken down into specific
goals and budgets for each department or area.
What is often neglected in these goals, however, is the cus
tomer, who
~ k e s
the purchase and pays the bills. Planning
should start
WIth
the customer, and the centerpiece of plarming
should
be
customer satisfaction. This is true
of
the Baldrige
Award winners.
Westinghouse
Commercial
Nuclear
Fuels
Division, for example, has quality goals that.directly relate to
~ s t o m e r
satisfaction issues. The senior management level has
eIght goals, which are divided into subgoals in lower levels
of
the organization. Even the individual worker
or
work team has
goals that relate to the overall customer satisfaction goals. Each
month, Xerox Business Systems sends out 40,00psurveys to its
customers and to people who bought from the competitors, and
the data from these surveys strongly influence corporate goals.
~ o t o r o l .has overa:ching goals for improving quality and cycle
tIme, whIch are dIrectly derived from customer satisfaction
issues. All of the Baldrige Award winners examined, such as
GlobeMetallurgical, IBM Rochester,· and Federal Express, have
systems to ensure that customer satisfaction drives their goals. .
P e t e r s o ~ Products, a metal stamping firm near Chicago, IL,
was about to launch a marketing campaign to elevate sales.
n s t e a ~ i t d e c i d e d
to
improve on-time delivery to the customer.
When the percentageof o n ~ t i m e delivery went up, the salespeo
ple.were ecstatic because for the first time they could promise
delIvery. Sales rose.25 because the customers.were getting
what
they
wanted, and Peterson
was
able to drop the plan for
the marketing m p i g n ~
Another example is Cooper Tire in Findlay, OR. Building a
reputation as a reliable supplier with modem plants, it aimed its
marketing. directly at the customers. It has doubled its market
share and enjoys
a·profit
growth rate
of
pe r year
According to
th w
York imes it is the envy
of
giants like
Goodyear, Bridgestone, and Michelin.
In
most
firms, planningis a vertical process that is driven
from the top down
or
from the bottom up. Planning should
be
a
horizontal process, however, starting from the
customer
and
working inward. Financial goals are also necessary,· but
the
cus
tomer
should
drive goal-setting process, and every depart
ment.and functional group should have goals that positively
.affect customer satisfaction. As
Bob
LaBant,
IBM
vice·presi
dent,· said,· My·goal is .to· make our customers successful. I
had onemeasure, i twould
be
their success. 3
Mistake elieving
that
being
close
to
thie
customer
and
planning
for customer satisfaction issuni ient
. ..The .top executives
at
many companies believe
that
their
firms have a strong customerfocus. They might have oriented
t h ~ i r planlling_ sys tems to better. satisfy.
the
customer.
They
mIght·
also
maIntaIn complaint·hotlines, have extensive war-
44
Quality Progress
une
1994
,ranties, and conduct customer satisfaetioll surveys. h s te
·niques, while helpful, still do not constitute·a total custom
focus· because customer satisfaction is not something that c
cerns only some parts
of
the firm. Each and every group
in
firm should have goals and incentives that are tied into enha
ing customer satisfaction. This requires a carefully conceiv
management system that
involves
all
p·arts
of the firm
improving customer satisfaction.
Why
is this done so infrequently? Perhaps themost pervas
reason is that many companies lack a systematic approach
customer satisfaction. The executives believe that a system is
needed
and
that they already understand the customers a
know what they want. Almost always, however, that belie
false. Motorola, for example, is well aware of thi s f ac t a
requires its executives to visit its customers firms. The exe
tives are required to speak notjust to the firms executives,
also
t? the
workers who actually use the
Motorola
produ
Expenence has shown that almost everyone has distorted id
about what customers truly think, and a systematic approach
needed to overcome this.
Steps to
overcome
the problem
Row should such an approach be developed? The first step
to
conduct an
analysis of all of the interactions a
custom
might have with the organization. Most organizations coll
customer satisfaction information
on
the products
or
servi
they provide, an organization provides far more than jus
product
or service. It also provides a complicated se tof inter
tions with the customer, all of which should
be
top notch. F
example, a firm must have 1qlowledgeable salespeople, on-ti
delivery, accurate information, error-free invoices, courteo
and helpful employees who quickly answer phones, and acc
rate and understandable technical manuals. Data should
be
c
lected on all customer interactions because·total customer sat
faction means meeting.
or
exceeding customer expectations
all areas.
Once the data are collected, the infonnation must
be
used
i ~ p r o v e the system. For example, the complaint departm
mIght handle a customer s complaint well, but once the c
tomer s specific problem is resolved, a deeper issue arises abo
what happens next. Many firms do not try to find the cause
the complaint and change the system to prevent the probl
from recurring. Using customer information merely to resol
the immediate problem
or
error is not sufficient; the underlyi
systemmust
be
improved. . .
The
fai lure to
properly use customer information oft
occurs the design
of
a new product. The marketing depa
ment mIght collect a great deal
of
customer-related informatio
but the design engineers might not use it. For instance, mark
ing might discover that customers want a carwith good accel
ation, but the engineers need to know whether that means acc
eration for passing on a highway, acceleration from°o
miles per hour,
or
acceleration to make the tires squeal. Ea
s i ~ a t i o n requires different engineering design choices, but m
ketmg often does not obtain infonnation in a
fonn
that the en
neers can use. -
. One way to overcome this problem is to give the right peop
dIrect access to the customers. Ingersoll Rand in Pittstown, N
did this in the design of a new hand-held air grinder. A cro
functional new product development team was fonned consi
ing
of
people from the marketing, engineering, and
m a n u f a c t u
8/9/2019 Ten Mistakes Ceos Make About Quality
3/6
ing departments. This team conducted focus groups with cus
tomers throughout the country.
It
w as a bl e to develop the new
g rind er in
one-third
th e
usual
development
cycle time.
Th e
g ri nd er h as sol d w ell ·
and wo n an award
from the Industrial
Design Society of America.
4
While exposing decision makers to customers is a good first
step, more fonnal techniques should
be
developed to drive the
customer infonnation throughout the company. Quality func
tion
d ep lo ym en t Q FD ) i s
u se d b y
a number of companies,
including Hewlett-Packard, Ford,
an d
General Motors.
QF D
obtains detailed lifestyle
infonnation
.from the·customer. This
infonnation
is. t he n d ep lo ye d t hr ou gh ou t t he p ro du ct d esig n
process to e n s u r ~ thatthe final product fits the lifestyle of the
cust0
et, \ ¥ h o t h e n \ V ~ l feel comfortable with it.
good
custolller satisfaction
system
d oe s f ar
more
than
obtain i I I f o f 1 1 1 a t i ~ l . · It gets the right infonnation to the right peo
pl e
and ensurestllatthe infonnation is used not just to correct a
specific error, but to improve the underlying process.
Whenlhe sySlembreaks down
Even avery·g )odsystem· might·not
be
sufficient under times
st r ess
an d
s t r a i n ~ h e s y st em i s o ft en · a b an d on ed a nd
customer-oriented goals are sacrificed to achieve other business
objectlves. To m e ~ t e n d o f p e r i o d g oa ls, f or e xa mp le , a g re at
rush often t4kes place
in
which defective products are shipped
or services are cut. This happens because·executives are driven
t o r ea ch t he ir n um er ic al g oa ls, t o shi p a spe ci fi ed a mo un t of
product, or to make a certain profit.
When
a c ru nc h c om es a nd
the numbers might not
be
reached, the customer-oriented stan
dards are likely to
be
abandoned·first.
What
c an be· d on e a bo ut t hi s? Rob er t G al vi n, c ha ir ma n of
Motorola s executive committee, said
one of
his most important
roles was to stand
up
for quality.
5
He
served as the guardian and
maintained the status
of
quality and customer f ocu s e ve n i n
times
of
stress
an d
pressure, when others would have sacrificed
them. That is a role that top management cannot delegate, and it
is the foundation
of any successful total customer satisfaction
system. Only the CE O can ensure, even in times
of
great pres
sure, that quality and customer satisfaction are preserved.
istake
: elieving thatqualitymeans inspection
Many
executives view quality narrowly and believe that it
refers only to manufacturing process control and inspection.
Inspection, however, is the antithesis
of quality. In fact,·quality s
ultimate goal is to eliminate inspection. Inspection should not
be needed if the process is successful in producing the product
withotit defects.· Inspection is ·only necessary
if the production
process is faulty and producing defects. In this circumstance,
final inspection might
be
necessary,
but it
should
be
viewed
only as an interim procedure.
There are three problems with inspection.
Th e
fi rst i s t ha t
inspection only eliminates a percentage of the defects. Joseph
M. Juran, W Edwards Deming, and others suggest
that
inspec
t io n wi ll, as a r ul e of thumb, eliminate
8
of the defects, and
2
of the defects will still·get through to the customer.
6
Second, inspector might
be
able to find defects·when the
d ef ec t r at e is a t a f ew p er ce nt , but·w h en t he re i s
on e
defect per
25,000, he or she cannot hope to find a defect. Today s market
place demands such high quality levels, often a few defects per
million that
final
in sp e ction is
no t a
practical
method for
achieving those levels.
Th e third
major
p ro bl em w it h f in al i nspe ct io n i s t ha t
it
is
expensive; the cost of inspectors, equipment, and correcting
th e
defects at the final stage is high.
At
worst, the defective product
must
be
scrapped, totally wasting the item. Even when the item
ca n
be
salvaged, the rework and repair adds substantially to the
cost.
Quality improvement efforts in many companies have shown
that inspection is an inadequate approach.
It is much better and
less expensive to produce the product correctly in the first place.
The key to this is error cause removal, which means identifying
the cause of the defect
or
error and then eliminating it.
Once
the
cause
i s e li mi na te d, t he d ef ec t
cannot
occur. Systematically
d on e, t hi s a pp ro ac h i s f ar le ss e xp en si ve a nd i s t he b est w ay t o
achieve virtually zero defects.
Fo r example
billing invoices fo r
domestic
pagers from
Motorola had
45 0
errors out of 22,000 total invoices.
Th e
errors
included wrong
or
omitted serial numbers, freight amounts,
or
carriers. I n jus t· o ne year, t he error rate was c ut t o n in e o ut of
20,000. This would have been impossible to do
by
inspection.
Instead, the causes of t he defe ct s w er e r oo te d o ut o ne by one.
Th e
team
working
on
this problem noticed that
some
of
the
infonnation was already in the computer and did no t need to be
recopied, which eliminated the possibility of error in that step.
Other infonnation was available from the ba r coding system,
and fonn simplification cut the remaining e r r o r s ~
7
A no th er e xa mp le i s f ro m t he Peo pl e s Bank of Bridgeport,
CT, which· ha d a h ig h e rro r rate for its tellers i n t he p roo fi ng
department.
Fo r
e ac h e rr or f oun d, a spe ci al c or re ct io n n ot ic e
ha d to be issued, which was.expensive. To solve the problem,
extra
inspection, training,
an d
management·
encouragement
were attempted, but that did not help the situation. Finally, the
bank tried to eliminate the root causes of the errors. It
d i s c o v ~
e re d t ha t t he t el le rs h ad t o k no w h ow t o d o 7 8 o pe ra ti ons. T he
bank
standardized documents and reorganized the system so
that the tellers needed to do only 12 operations.
Th e
errors vir
tually disappeared.
Whether
in
manufacturing
or
service activities, defects are
rarely
c ut b y
increasing inspection. Getting rid
of
the root caus
es
of
the errors is usually cheaper and more effective.
istake : elieving that quality improvement
is
too
expensive
Many executives believe that quality
improvement
is too
expensive when, in fact, the opposite is true-quality
cuts costs.
Q ua li ty r eq ui re s d oi ng t he r ig ht jo b r ig ht t he fi rs t t im e, a nd
d oi ng t he r ig ht job ·is c he ap er t ha n do ing t he w ro ng j ob . A ny
task that must be redone or product that must be reworked adds
cost. Any infonnation that is incorrect and must be revised adds
cost.
An y
waste
of
people s
time, s uch as h avi ng to w ai t
an
excessively long time for top management to make a decision,
adds to t he cost. T he m or e righ t things that are do ne r ig ht the
first t ime , t he m or e m on ey that is saved. T ha t i s
wh y
quality
saves money, and all of the Baldrige Award winners have docu
mented proof of this.
On e
of the curious facts about quality is that costs tend to go
d ow n m or e
r a pid ly th an
e xp ec te d. T hi s i s because
quality
improvement in one area often cuts costs in other areas, thereby
reaping multiple
savings.
For e xa mple a
firm
d ec id ed t o
improve the quality of the information generated
by
its comput
erized inventory system.
8
Its computers would show that a prod
uct was in inventory when, in fact, there was no such product on
Quality Progress June 1994
8/9/2019 Ten Mistakes Ceos Make About Quality
4/6
, ,
:
_
_. _ ::
, • ,: < ;
~ ~ ~ ~ _
~ ; : ~ : < r : ~
: ,
. . ,
_ .
,
the shelf, or they would show that a product was unavailable
when there were still several in stock. Even though this hap
pened only a small percentage of.the time, people often had to
call the warehouse to check whether an item was in stock ornot.
To
improve this system, the finn set up a special team to get
rid of the defects. Any time a problem arose, the team would
count the inventory and check out what had gone wrong. Many
problems were found and resolved. Part numbers were simpli
fied and corrected, storage was rearranged, and the computer
software was improved. After a couple months of effort, the
computerized inventory system was made reliable, dependable,
and aGcurate.An 'immediate savings was in the elimination
of
phone calls checking whether an item was in stock.
Then came an unexpected twist. Twice a year the finn took
physical inventory and counted everything in stock. Soon after
the computerized inventory system was corrected, a physical
count was made. The numbers from the physical count, howev
er, were different from those that the computer reported. The
physical count showed the computer count to be wrong. The
quality team was upset and felt demoralized. After all
of
the
effort to improve the computerized inventory system, the team
members thought that it had failed.
The. quality team, however, decided to check the physical
count. Since everyone in the finn helped do the physical count,
it turned out that many people made errors because they did not
understand the parts number system or the storage system.. The
physical count, therefore, was·wrong, and the computer count
of the inventory was more accurate. The biannual physical
inventory was stopped since it was not as accurate as the com
puter system,·and the computer data were then used for al l
fmancial reporting.
In addition, th e accounting department had two computer
programmers developing software for the physical count, which
was.
necessary because
of
the finn's changing product mix, con
sisting
of
a variety
of
electronic test and computer equipment.
Now, with the physical count eliminated, the programmers were
no longer needed for that task.
The people who ha d started the project
of
correcting the
errors in the computer system had no concept that other.savings
would result. Phone calls from people trying to fmd out what
was in stock, physical counts of inventory, andthe need,
fOf
revi
sions to the inventory computer program were eliminated.
Most systems consist of many parts or steps in which one
part feeds information or material to the next.. As the quality
of
one part of the.system improves, it sends higher-quality infor
mation or material to the subsequent steps in the process. That
higher-quality input produces a cost reduction in those steps.
Since the interconnection
of
systems is often complex, some
t imes , as in the inventory example, i t is dif ficult to foresee
exactly where the cost reductions will occur.
Bu t
as quality
improves in one operation, costsalmost always drop not only in
that operation, but also in other operations.
ist ke
n ging intuition and
not
f ct
Most CEOs strongly believe in their judgment. After all, that
is the essence
of
being a CEO-having the background, judg
ment, and intuition to make good decisions. Research, however,
tells a different story. Many behavioral science studies have ver
ified that intuition and judgment are not nearly as sound as we
are led to believe. effect, people's brains lie to them and tell
them their judgment is much better than it really is
46 Quality Progress
June
1994
The book e ision r ps by 1. Edward Russo and Paul 1
Schoemaker, for example, details some of the fallacies that p
ple s
brains tell them.
9
In December
of
one year, executi
were asked to predict sales for the following year. More tha
year later and after the actual annual sales figures were sha
with everyone, the executives were asked to recall their pred
tions, and they remembered them as being much closer to
actual outcome than they really were. essence, once the ac
al figures were known, the brain subconsciously distorted
recalled the predictions as closer to the actual outcome.
Once a person knows an out
'come, his
or
her brain adjusts
its memory.
Th e p erson
then
thinks that his or her judgment
was far bet ter than i t actually
was. Judgment also gets distort
ed because the brain tends to
p ay m or e
attention to recent,
unusual, or emotional events.
Management
by fact
no t
intuition, strives to
surmount
this predicament.
On e
of the
m o st c om m on
areas for mis
judgment is i n a s su m in g to
know the needs
of
customers.
Almost. all presumptions about
customers are wrong. Whitman Corporation in Chicago,
was concerned that its customers were upset because of dama
to goods during shipment. It launched a project to reduce
shipping damage and succeeded after some effort. Only la
did it learn that the customers were disappointed and thou
the old shipping method was better. Although the new pack
ing protected the contents well, it was extremely hard for
customers to open.IO
At
First National Bank
of
Chicago in lliinois, the manag
thought that the most important thing to customers was fa
courteous service. When the customers were surveyed, how
er, that i te m ra nk ed fourth in importance. Th e c ust ome
biggest concern was employees who said they would get ba
to them on an issue, but then did not.
I I
The need for management·by fact extends not just to c
tomers, but to any act ion
or
decision that
can be
made,
demonstrated in the following examples. A·finn was proud t
it had reduced its defect rates to
5
from 15 . When asked
the facts, it produced some charts that showed a 5 defect r
for several months. There was no indication, however, that
defect rate was previously 15 . When pushed further, someo
recalled that someone else had said the defect rate was at le
15
at some point last year. Someone else then recollected t
when new machines were ins talled the defect r at e s hot
briefly, and perhaps, that unique occurrence accounted for
15 .12
Another finn was proud
of
the new sales techniques its sal
people were using. When questioned, however, they could p
duce no proof of increased sales and justified it by replying t
the salespeople had only recently been trained so it was t
early for proof. When the training was investigated, it was d
covered that only 60 of the salespeople had attended the tra
in g session. When those attendees were questioned
mo
thought the training was useless and too theoretical, so th
never implemented it.
8/9/2019 Ten Mistakes Ceos Make About Quality
5/6
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.
Compaq computer also searches for facts and, according to
Vice President Hugh Barnes, continually uses sanity checks and
cross-checks.I
4
Just because_ an executive says somethIng, that
does not mean the statement is gospel. Suppose an executive
p red ict s that the sales for a prod uc t will b e 5 ,0 00 units. Tha t
statement
is
questioned, and the facts are sought. Is it the per
son s surmise? Is it based on market surveys? Is it based on firm
orders? The degree
of
validity
of
the statement is thereby deter
mined.
The mind, behavioral scientists know, searches for evidence
to confrim its beliefs and denies the validity or existence
of
con
trary or additional evidence. The best antidote to these distor
t io ns is-ma na ge me nt b y fact. The facts a re u su al ly e asie r t o
obtain and considerably-more useful than most people believe.
Baldrige Award winners tend to collect a great deal
of
informa
tion and use it extensively in their decision processes.
ist ke : Using
misguidQd
incentives and
developing
distorled culture
CEOs-often sincerely try to institute beneficial changes, such
as launching a quality program. They allocate resources, train
people, _and establish goals. But after a year of waiting, they
have gained little in return for their time and money. Why does
this occur?
O bt ai ni ng a siz ab le c ha ng e i n a n o rg an iz at io n req ui re s a
major revision in the culture, and a CEO s program to improve
quality will havelittle impact if the incentives are wrong for the
culture. This frequently occurs, for example, when managers
are encouraged to attain.monthly production quotas, even
if
it
means shipping poor-quality products.
Another common incentive is the promotion
of
managers
w ho a re d ee me d g oo d c ri si s o r fire-fi gh ti ng man ag ers. The
manager who
is
considered a star is the one who marshals the
resources, gets everyone to work overtime, and resolves crises.
Top management hears
of
these heroics and promotion occurs.
Rarely does anyone ask, however, why this manager permitted
so many crises to happen.
One important tenet
of
quality is to keep the system under
control so that defects or crises rarely occur. The best executives
follow this philosophy and work to reduce the number
of
crises
Without the crises to get top management s attention, however,
these people might work with little honor or promotion.
Trouble might also ensue
if
the overriding culture
is
based on
cost reduction. Some managers will cut back on training, main
tenance, and new product
d e v e l o p ~ e n t .
Those actions cut cost,
but they have no chance to positively influence the company.
This manager will keep costs very low, look good to top man
agement, and receive a promotion in 18 to 24 months. The man
ager after him or her, however, is left with depleted resources
and the inability to compete. Implementing a quality program
often means making careful investigation of
the cultural aspects
of
the organization that might defeat it.
ist ke 8: Changing
t rgets
e ch ye r
Most CEOs have an annual planning process, similar to man
agement by objectives, in which
goals
are established for the
n ex t year. The o ve ra ll gb al s a re set b y top mana ge me nt, a nd
then lower levels get their goals after some debate and discus
sion in-a cascading process. In theory, if managers have reason
able _goals and incentives, then
most
g oa ls w il l b e a cc om -
plished. In actual practice, however, high levels
of
accomplish
ment rarely occur.
To
chieve ny re lly impor t n t nd ch ll enging
go l
requires training, investment, management reviews, incentives,
worker involvement, and cultural changes. All of this takes time
and effort to implement.
f
new goals are instituted annually,
management gets involved with new goals and directions before
it can get fully underway on the old goals.
How can a CEO overcome this? Although some of the annual
goals can change yearly, a few should be so fundamental and
crucial that they persist into the foreseeable future. Motorola
has instituted three such goals for the entire firm: quality, cycle
time, and cost reduction. It took years to develop and implement
the systems to ensure progress on these goals and for some peo-
. pIe to realize that the CEO was really serious about them.
I
Although some goals will have to be revised annually, chang
ing too many goals too fast will confuse middle management
and employees. Instead, top management should identify the
fundamental factors that underpin the firm s success.
To
imple
ment these factors, top management should include a few cardi
nal goals as
well as the systems to achieve them training, man
agement reviews, and incentives).
ist ke 9:
F ailing to follow the best pr ctices
Near the end
of
the 1970s, Xerox was confronted by formi
dable competition from Japanese firms. The Japanese were sell
ing copiers at a cost comparable to Xerox s manufacturing cost.
Xerox s market share was plunging. After years
of
disregarding
its Japanese competition, Xerox had to confront reality.
Although Xerox launched several.programs in its counterat
tack, perhaps the most crucial was benchmarking. With bench
marking, employees in the organization determined the best
practices in the industry. -They learned about these best prac
tices, i mp le me nt ed the m, an d b ec am e the be st at the m. Al l
functions
of
the firm, not just manufacturing, were required to
benchmark, including shipping, internal auditing, treasury, and
training. Xerox, like most manufacturing
fIrmS
had most
of
its
costs not in manufacturing, but in overhead and general admin
istration. Therefore, all parts
of
the fmn had to benchmark and
learn how to become the best at what they did.
I
An important aspect
of
benchmarking is to.look for the best
practices not just i nsid e o ne s i ndu st ry b ut also o ut sid e. For
warehousing, for example, Xerox benchmarked against L.L.
B ea n. G oi ng o ut si de o ne s i nd ustry mig ht , in fact, b e e asie r
because direct competitors are less likely to share information.
IBM Rochester, a Baldrige Award winner, for example, bench
marks itself against 200 other leading fiims from both inside
and outside its industry.17
Benchmarking is a powerful concept. But despite the obvious
value
of
learning from the best, many managers will perceive
the process as threatening and deny its value. They will object
that other fmns are different and--not comparable and argue that
what another fmn does is not relevant. At Xerox, people gave
repeated rationalizations and justifications for not benchmark
ing such as the fact that the Japanese have a different culture,
g et g ov er nm en t s up po rt , a nd h av e a b et te r s ch oo l s ys te m.
Denial of the situation was rampant, and Xerox leadership had
to convince people that they could learn and improve by study
ing other organizations.
I8
The most difficult part of benchmark
ing is not the process itself, but in getting people to do it.
Benchmarking requires leadership to help people face the
Quality Progress June 1994 47
8/9/2019 Ten Mistakes Ceos Make About Quality
6/6
Acknowledgment
The author wishes to thank George Easton, University of Chica
for his extensive help in writing this paper.
Willard I.
Zangwill is a professor
of
management science at
Graduate School of Business, University of Chicago. He has a doct
ate in operations research from Stanford University in Californ
Zangwill is an ASQCmember.
References
1.
Lucien Rhodes with Patrica Amend, The Turnaround, I
August 1986, p. 42.
2. Johnathan P. Hicks, A Tire Outdistances Its Rivals, New Y
Times May 8 1990.
3. IBM Rochester, 1990Winnerof the Malcolm Baldrige Natio
Quality Award, IBM, Rochester, MN, 1990.
4. N.R. Kleinfield, How 'Strykeforce' Beat the Clock, New Y
Times
March 25,1990, p. 1.
5. Robert Galvin, chairman
of
the executive committee, Motor
Guest Lecture at Graduate School
of
Business, University
of
Chica
Feb.
13
1991.
6. Joseph M. Juran, editor in chief, and Frank M. Gryna, assoc
editor, Juran s Quality Control Handbook (New York,
NY:
McGra
Hill Book Company, 1988), Section
18.
7. Paul Noakes, vice president , Motorola,private conversati
March
18 1991 .
8. J.
Timothy Fuller and Willard Zangwill, Repealing the Law
Diminishing Returns for Quality, Report, University of Chica
Graduate School of Business, Nov. 3,1989.
9. J.
Edward Russo and Paul J.H. Shoemaker,
Decision Traps
(N
York,
NY:
Simon and Schuster, 1989).
10.
William Naumann, vice president, Whitman Corporation, Gu
Lecture at Graduate School
of
Business, University
of
Chica
Nov. 30, 1992.
11. Aleta Holub, vice president, First National Bank of Chica
personal interview, Jan. 18, 1992.
12. William Naumann, vice president, Whitman Corporation, Gu
Lecture at Graduate School of Business, University of Chica
Nov. 30, 1992.,
13. Tim Fuller, lecturer, Special Seminar, University of Chica
Winter 1991.
14.
Hugh Barnes, vice president, Compaq Computer, personal int
view, May 18,1992.
15. Paul Noakes, vice president, Motorola, private conversati
March 18, 1991.
16. Barry Bebb, retired vice president, Xerox, personal intervie
Jan. 29, 1992.
17. IBM Rochester, 1990-Winner of the
Malcolm Baldr
National Quality Award, IBM, Rochester, MN, 1990.
18.
Barry Bebb, retired vice president, Xerox, personal intervie
Jan. 29, 1992.
19. George Easton, professor, Graduate School
of
Busine
University of Chicago, personal interview,May 18, 1991.
Fair
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fact' that they are not the best and must therefore improve. It
also requires hard work to know one's own process thoroughly
and to understand and learn from the benchmarking process.
Most
of
all, it requires a CEO who knows that world-class suc
cess cannot be achieved with second-class operations.
Mistake 1 :
Believing Baldrige ward examiners
are stupid
The Baldrige Award
is
an award given for outstanding quali
ty to companies applying in three categories: manufacturing; ,
service, and small business (no more than 500 employees). To
apply, companies must complete the Baldrige Award examina
tion process, which requires making detailed descriptions
of
the
company's total quality systems. Many firms, however, make
the mistake
of
submitting m t ~ r i l that resembles a public rela
tions piece. This,might occur because
of
the company's natural
enthusiasm for its achievement., More likely, it is, because the
company lacks well-defined, well-documented, and measurable
quality systems.
A rule
of
thumb for determining whether a good quality system
exists is to audit the process.
An
audit will detennine whether
tpe.companY is making progress
in
a particular area and what to
dO if it is n o ~ . : i . . p o o r . s y s t e ~ , f o r example, will likely have one
ormQre
of
the.following problems: no clearly established goals,
no
means to measure progress toward the goals, and no w e l l ~
defined process of identifying and correcting problems.
Most Baldrige,Award,applicants have fairly good systems in
the.
processes', that directly generate the products and services.
The 'weak systems are generally seen in leadership, planning,
product
development, and administrative activities. The lack of
systems
in
these areas often becomes apparent in applicants'
responses to questions asking
how
these processes are
improved. The companies might respond by i n d i ~ t i n g that they
have meetings or that a particular person, such as the division
manager,has responsibility for, the activity.
Or
they might
try
a
publicrelations approach such as, We at the
Z
company are
always looking for ways to improve our strategic quality plan
ningprocess.We
believe that quality is one
of
the most impor
tant components
of
our business plan, and thus, quality is an
integral part of, our strategic planning process. The company,
however, never directly describes how the process is systemati
cally improved.
Another example
is an
organization s description
of a
process that ensures that customer service requirements are
understood and responded to throughout the company. 19
An
. inadequate response would be:
We
believe that a customer
focus is a key element in our continued success. Every customer
contact department has signs posted stating 'Service and cour
tesy are our business. ' In addition, all internal stationery for
memos has 'Treat the Customer Right' imprinted prominently
in· the letterhead. Again, there is no discussion
of
the system.
Virtually every issue addressed in the Baldrige Award criteria
asks for a description
of
the management system or process the
company uses for that issue. This means how the process, is
monitored, how it is improved, and what the results have been
both in tenns
of
improvements over time and in comparison
to
competitors and world-class companies.
When no
system
exists, it is
tempting
to resort to public relations statements
about the importance
of
quality and customer satisfaction. The
Baldrige Award examiners, however, are not stupid enough to
be
fooled.
Quality rogress
une
1994