Drivers of Strategic Choices
Strategic Management of Quality
The 21st century has seen the introduction of major shifts in business paradigms. Ease of access of information globally, as well as its transmission from single or multiple points dispersed geographically on a real-time basis, have impacted the heart and soul of organizations. At the core of every organization, the development of a strategic plan for survival and growth drives the entity. Once the plan has been developed, its implementation is influenced by the internal and external environment within which the company prevails. The paradigm changes in the current century have had an effect on the formulation of strategic plans since some of the fundamental assumptions of the prior century have changed. In addition, the implementation of strategic plans have been affected by revolutionary changes in information technology that have changed the volume and speed at which information is collected, stored, and transmitted. Because of such changes, a fresh perspective is needed for the strategic management of the quality function.
When one considers the quality management philosophies developed in the 20th century, three names come to mind: W. Edwards Deming,1 Philip B. Crosby,2 and Joseph M. Juran.3 Deming's approach advocated a cultural transformation, where everyone (management and associates) accepts and follows a path to quality improvement. At the heart of Deming's approach is the acceptance of the language of statistics. Statistical tools such as statistical process control are fundamental to data-driven decision making. Deming conceptualized "fourteen points for management" since he viewed that the majority of the problems could be solved by action on the part of management. Crosby identified four absolutes of quality management that deal with the definition of quality, a system for achievement of quality through defect prevention, a performance standard of zero defects, and a performance measurement system, which represents the cost of "unquality." Juran defined a quality trilogy that consists of quality planning, quality control, and quality improvement. Within each of these three phases, a process for managing quality is described. A discussion of these three philosophies and a comparative analysis is found in Mitra.4
The formulation and implementation of the quality function serves as a driver for setting the strategic and operational tone of the organization. It plays an integral role in defining the company's vision and mission and thereby its strategic plans. The quality policy is sometimes what bonds the various entities of the organization. For example, the quality slogan used by Ford Motor Company, "Quality is Job 1," conveys the thrust of the corporation and reflects its organizational culture. Figure 9.1 depicts the central theme of the quality function in an organization.
The function impacts the long-term focus on selecting strategic plans that are consistent with the company mission. Moreover, it influences the implementation of the strategic plans through the setting of goals and objectives. All of these are set, however, in the context of the relative strengths of the organization with respect to those of competitors. The customer is also a critical element since the identification, meeting, and exceeding of customer needs is fundamental to the successful implementation of quality initiatives.
Although the quality function is a main driver in setting the strategic and operational tone, the other dimensions that form the "organization wheel" are subdrivers. Each may impact the other, and do so in a dynamic context. This implies that actions associated with the subdrivers may change as a function of time. For example, customer satisfaction regarding product reliability may have improved in the past month; thus some other functional attribute of the product may now have to be addressed to further improve market share. Feedback on customer needs may identify what the unmet needs are. Such information may then impact the choice of appropriate quality initiatives that will assist in meeting the unmet needs. An important dimension of Figure 9.1 is the two-way flow of information between the "quality function" and the various subdrivers of the organization. Just as customer expectations or desires impact the quality function and the associated quality initiatives derived from it, so also do the adopted quality initiatives influence the degree to which customer needs and/or desires are fulfilled.
Figure 9.1. The Role of the Quality Function in an Organization
Another message from Figure 9.1 is the importance of feedback and its impact on strategic and operational decision making within the organization. The outer organizational wheel represents the sequential steps that take place within the organization. A company sets it vision, broadly stating what it wants to be. This influences how the mission statement is defined and the development of the strategic plan needed to accomplish the mission. Goals and objectives help to define specific metrics or performance measures that can be monitored to track the progress of the company, and thus drive corresponding adjustments.
The steps just described may collectively constitute the formulation and development of a corporate strategy. Following these steps, however, are processes that may have an effect on the implementation of the strategy. Identification of the relative competitive position of the company is vital to the successful accomplishment of the company mission. Implicit in this step is the determination of the core competencies of the organization. Is the company a leader or does it exhibit best business practices in certain areas? Where does its expertise lie? What are some niche areas in which the company has the best technical talent? In what areas does the company allocate a majority of its resources? With respect to intellectual property such as patents, what is the company known for? Answers to these questions will influence what the company wants to do, be it in a manufacturing or service context. Depending on the defined core competencies, other functions that also need to be performed may be described as supporting and be considered for outsourcing. It then becomes incumbent to identify an appropriate partner or partners to which the supporting functions are to be outsourced.
In addition to the nature of the function being outsourced and the technical competence of the vendor in performing that function, there are other considerations that an organization should take into account when selecting a vendor. There must be compatibility in the organizational cultures of the parent organization and the vendor. In a departure from past norms, the vendor can no longer be viewed as merely a company that can deliver the goods or services according to a technical specification. The value system that prevails in the vendor company must be aligned with that of the parent company. Indeed, to use a concept from Deming's philosophy, the selected vendor should be viewed as part of an "extended process" of the organization that is being outsourced.5 Information flow between the parent organization and the vendor must be seamless and timely. As updates are made to processes within the parent organization based on changing customer needs, such information must be communicated to the vendor in a proactive manner. The two organizations should in fact work collectively to improve processes for the good of the entire extended process. It is even possible and sometimes advisable for the parent company to involve representatives from the vendor in their strategic and operational decision making.
To create an effective and efficient implementation of the strategic plan, one has to address the various issues described at the process, employee, and organizational levels, and determine the appropriate needs of each entity. A holistic approach must be adopted to address these needs with the optimization of organizational performance in mind. As stressed in earlier quality management philosophies in an effective system, the whole is greater than the sum of the parts.6 In other words, optimization of the performance of individual units/entities may not necessarily lead to optimal performance of the organization. Some of the needs may be in conflict with one another, and achieving an appropriate balance is not necessarily a simple task. However, it is an important task that cannot be overlooked.
Process needs are perhaps the easiest to delineate. These could be in terms of equipment or technical requirements of suppliers. Employee needs may involve both tangible and intangible components. Although monetary rewards are important, beyond a certain point, certain intangible rewards such as recognition, support, and opportunities for personal development and team building may merit attention. Questions such as what motivates a person to put forth his/her best effort, what drives a person to strive for excellence, and what attributes inspire an individual to work toward fulfillment of the goals of the organization need to be asked and corresponding needs taken into account. The current business environment has also generated another category of needs, labeled organizational needs. This might include needs driven by social responsibility toward the well-being of the community in which the organization resides, and could take the form of assistance in meeting the educational needs of local children. There could also be a need for corporate responsibility and accountability toward employees and other stakeholders. An organization's quality initiatives will have to be framed to satisfy these diverse needs.
Consideration of the needs of the customer no doubt plays a major role in influencing the quality initiatives that are part of the adopted quality function. Similarly, the quality initiatives embraced by management will impact those customer needs that are unmet. An important concept in this context is the ability to satisfy some "excitement" needs of the customer. These are needs that, if met, satisfy the customer beyond their normal expectations. Satisfaction of these needs does more than merely help an organization to maintain market share, it can help them to increase market share. Customers brag about the product or service when needs in this category are satisfied.
According to the Kano model, customer needs and desires can be organized in three categories: basic needs, performance needs, and excitement needs.7 Basic needs represent those that are taken for granted. Not meeting these needs will cause customer dissatisfaction and thus a loss of market share. Meeting these needs, however, may not necessarily increase customer satisfaction. Performance needs are associated with meeting customer expectations. The better these needs are met, the more satisfied the customer will be. This leads to the maintaining and possibly increasing of market share. Excitement needs are those that the customer does not necessarily expect to be met. However, when they are met, an exponential increase in customer satisfaction results leading to increased market share. As competition becomes more global in the 21st century, it is becoming harder to increase market share. Organizations that are able to identify these unmet excitement needs and identify processes to meet them will thus be at a competitive advantage. Such needs are not necessarily identified during routine customer surveys since the customer may not express them. The ability to go beyond the normal responses and identify product/service trends that will be of value in the future is what will distinguish the companies that will perform well in the current environment.
There are other distinguishing features of the role of the quality function shown in Figure 9.1. Note, for example, the feedback and feed-forward nature of the structure. Information flow from both of these streams will have an impact on the measures/action items adopted in a given phase. Thus, for example, a particular company vision may impact the necessary quality initiatives, in the quality function, to accomplish the vision. These quality initiatives will influence the degree to which customer needs will be met. Further, the unmet customer needs will also have an impact on the quality initiatives that should be chosen to meet these needs. Based on feedback regarding unmet needs, the quality initiatives may be modified, which in turn, may have an impact on the company vision. The degree to which customer needs are met could also influence the company vision as the satisfaction of needs is not necessarily static. A change in the company vision would then influence the mission statement. A similar phenomenon can be described for the other issues in the outer loop of the organizational wheel represented in Figure 9.1.
Another feature to observe in Figure 9.1 is the information flow that may occur in any of the subcycles. The traditional task phases in an organization may follow the outer loop, that is, formation of a company vision that leads to a mission statement, development of a strategic plan based on the mission statement, and identification of measurable goals and objectives based on the strategic plan. Each of these task phases is linked to the quality function through information flows that may take place in either direction. Consider the subcycle consisting of the task phases of strategic plan, goals/objectives, relative competitive position, quality function, and strategic plan. Based on the relative strengths of the company with respect to competitors, an appropriate set of quality initiatives may be chosen that emphasizes the development of core competencies. The choice of quality initiatives may itself cause a change in the strategic plan itself. This, in turn, may influence the selected goals and objectives, which must now be chosen to reflect the core performance measures based on what the organization decides to adopt and what it chooses to outsource.