Lesson # 19

OVERVIEW OF TOTAL QUALITY APPROACHES

“A company that claims that it cannot standardize and must rely on experience is a company without
technology.”
Kaoru Ishikawa

The Total View of Quality

The concept of customer value represents a dramatic improvement over the traditional approach to
quality, the ―conformance to specified standards‖ approach. It extends the concept of quality to include
user perceptions and use consequences. However, it still falls short of the concept of Total Quality,
which stresses the importance of quality in every aspect of an organization.

Perhaps the Japanese best express this broader and more holistic view of quality, Ishikawa states:
―Narrowly interpreted, quality means quality of product. Broadly interpreted, quality means quality of
work, quality of service, quality of information, quality of process, quality of division, quality of people
including workers, engineers, managers, and executives, quality of system, quality of company, quality
of objective, etc.‘‖ This view of quality may at first seem to be too idealistic. However, managers who
are committed to this view of quality have pragmatic solutions for translating the word ―quality‖ into
organizational realities.

As Imai suggests, it all begins with the ―quality of people.‖ He states:

There is very little agreement on what constitutes quality. In its broadest sense, quality is anything that
can be improved. When speaking of ―quality‖ one tends to think first in terms of product quality.
When discussed in the context of kaizen strategy nothing could be further off the mark. The
foremost concern here is with the quality of people. The three building blocks of a business are
hardware, software, and ―human ware.‖ Only after human ware is squarely in place should the
hardware and software aspects of a business be considered. Building quality into people means
helping them become kaizen conscious.

This total view of quality includes all of the above quality themes we have already seen, integrating
them into a comprehensive approach to continuous improvement.

The Future of Quality Management

In an article for Quality Digest, another quality pioneer Armand Feigenbaum explains several trends that
will shape the future of quality management. Those trends are as follows:

Demanding global customers. The provision of quality begets an ever-increasing demand for
quality. Today‘s customers share two common characteristics: (a) they are part of regional trade
alliances such as the Americas, Europe, and Asia: and (b) they expect both high quality and
added value.
Shifting customer expectations. Increasingly, today‘s global customer is interested not just in
the quality of a product provided but also the quality of the organization that backs it up.
Customers want an excellent product or service from an organization that also provides accurate
billing, reliable delivery, and after-purchase support.
Opposing economic pressures. The global marketplace exerts enormous, unrelenting pressure
on organizations to continually improve quality while simultaneously reducing the prices they
charge for goods and services. The key to achieving higher quality and lower prices for
 customers is the reduction of the expenses associated with satisfying unhappy customers –
expenses that amount to as much as 25% of the cost of sales in many companies.
New approaches to management. Companies that succeed in the global marketplace have
learned that you manage budgets, but lead people. The old approach of providing an occasional
seminar or motivational speech for employees without making any fundamental changes in the
way the organization operates will no longer work.

The total in total quality indicates a concern for quality in the broadest sense – what has come to be
known as the ―Big Q.‖ Big Q refers to quality of products, services, people, processes, and
environments. Correspondingly, ―Little Q‖ refers to a narrower concern that focuses on the quality of
one of these elements or individual quality criteria within an individual element.

Which Q Approach?

QMS implementation has to be a systemic approach but which system to choose depends where you are
and how far the management is committed for quality. Each QMS requires companies to deploy various
quality tools for the improvement of quality.

INTERNATIONAL QUALITY AWARDS

A focus on total quality has permeated organizations throughout the world. Numerous countries and
regions of the world have established awards and award criteria.

The Malcolm Baldrige National Quality Award (MBNQA) has been one of the most powerful catalysts
of total quality n the United States, and indeed, throughout the world. More importantly, the Award‘s
Criteria for Performance excellence establishes a framework for integrating total quality principles and
practices in any organization. Many other award programs are similar in nature to the Baldrige criteria.

THE DEMING PRIZE

The Deming Application Prize was instituted in 1951 by the Union of Japanese Scientists and Engineers
(JUSE) in recognition and appreciation of W. Edwards Deming‘s achievements in statistical quality
control and his friendship with the Japanese people. The Deming Prize has several categories, including
prizes for individuals, factories, and small companies, and the Deming application prize, which is an
annual award presented to a company or a division of a company that has achieved distinctive
performance improvements through the application of Company-wide Quality Control (CWQC). As
defined by JUSE, CWQC is

A system of activities to assure that quality products and services required by customers are
economically designed produced and supplied while respecting the principle of
customer-orientation and the overall public well-being. These quality assurance
activities involve market research, research and development, design, purchasing,
production, inspection and sales, as well as all other related activities inside and outside
the company. Through everyone in the company understanding both statistical concepts
and methods, through their application to all the aspects of quality assurance and
through repeating the cycle of rational planning, implementation, evaluation and action,
CWQC aims to accomplish business objectives.

The judging criteria consist of a checklist of 10 major categories: policies, the organization and its
operations, education and dissemination, information gathering, communication and its utilization,
analysis, standardization, control/management, quality assurance, effects, and future plans. Each major
category is divided into subcategories, or ―checking points.‖ For example, the policy category includes
policies pursued for management, quality, and quality control; methods for establishing policies;
appropriateness and consistency of policies; utilization of statistical methods; communication and
dissemination of policies; checks of policies and the status of their achievement; and the relationship
between policies and long- and short-term plans. Each category is weighted equally.
Hundreds of companies apply for the award each year. After an initial application accepted as eligible
for the process, the company must submit a detailed description o its quality practices. Based on review
of the written descriptions, only a few companies believed to be successful in CWQC are selected for a
site visit. The site visit consists of a company presentation, in-depth questioning by examiners, and an
executive session with top managers. Examiners visit plants and are free to ask any worker any question.

The Deming Prize is awarded to all companies that meet the prescribed standard. However, the small
number of awards given each year is an indication of the difficulty of achieving the standard. The
objectives are to ensure that a company has so thoroughly deployed a quality process that it will
continue to improve long after a prize is awarded. The application process has no ―losers.‖ For
companies that do not qualify, the examination process is automatically extended up to two times over
three years.

European Quality Award

In October 1991, the European Foundation for Quality Management (EFQM) in partnership with the
European Commission and the European Organization for Quality announced the creation of the
European Quality Award. The award was designed to increase awareness throughout the European
Community, and businesses in particular, of the growing importance of quality to their competitiveness
in the increasingly global market and to their standards of life. The European Quality Award consists of
two parts: the European Quality Prize, given to companies that demonstrate excellence in quality
management practice by meeting the award criteria, and the European Quality Award, awarded to the
most successful applicant. In 1992, four prizes and one award were granted for the first time.

The award process is similar to the Deming Prize and Baldrige Award. The assessment is based on
customer satisfaction, business results, processes, leadership, people satisfaction, resources, people
management, policy and strategy, and impact on society. Like Baldrige, results – including customer
satisfaction, people (employee) satisfaction, and impact on society – constitute a high percentage of the
total score. These are driven by ―enablers‖ – constitute a high percentage of the total score. These are
driven by ―enablers‖ – the means by which an organization approaches its business responsibilities.
The categories are roughly equivalent to those in Baldrige. However, the results criteria of people
satisfaction, customer satisfaction, impact on society, and business results are somewhat different. The
impact on society results category focuses on the perceptions of the company by the community at large
and the company‘s approach to the quality of life, the environment, and the preservation of global
resources. The European Quality Award criteria place greater emphasis on this category than is placed
on the public responsibility item in the Baldrige Award criteria.

Canadian Awards for Business Excellence

Canada‘s National Quality Institute (NQI) recognizes Canada‘s foremost achievers of excellence
through the prestigious Canada Awards for Excellence. NQI is a nonprofit organization designed to
stimulate and support quality-driven innovation within all Canadian enterprises and institutions,
including business, government, education, and health care. The Canadian Awards for Business
Excellence quality criteria are similar in structure to the Baldrige Award Criteria, with some key
differences. The major categories and items within each category are:

1. Leadership: strategic direction, leadership involvement, and outcomes.

 2. Customer focus: voice of the customer, management of customer relationships, measurement,
and outcomes.
3. Planning for improvement: development and content of improvement plan, assessment, and
outcomes.
4. People focus: human resource planning, participatory environment, continuous learning
environment, employee satisfaction, and outcomes.
5. Process optimization: process definition, process control, process improvement, and outcomes.
6. Supplier focus: partnering and outcomes.

Australian Business Excellence Awards

The Australian Quality Awards (now called Business Excellence Awards) were developed
independently from the Baldrige Awards in 1988. The awards are administered by the Australian
Quality Awards Foundation, a subsidiary of the Australian Quality council. Four levels of awards are
given.

1. The Business Improvement Level: encouragement recognition for ―Progress Toward Business
Excellence‖ or ―Foundation in Business Excellence‖;
2. The Award Level: representing Australian best practices; recognition as a winner or finalist;
3. The Award Gold Level: open only to former award winners; represents a revalidation and
ongoing improvement;
4. The Australian Business Excellence Prize: open only to former award winners; represents
international best practices evident throughout the organization.

As with Baldrige, the framework emphasizes the holistic and interconnected nature of the management
process. The criteria are benchmarked with the Baldrige criteria and the European Business Excellence
Model. One of the distinctive aspects of Australia‘s program is solid union support.

ISO 9000: what it is

The International Organization for Standardization (ISO) is a federation of the national standards bodies
of nations from around the world. ISO 9000 is about standardizing the systemic approach organizations
everywhere take to managing and improving the processes that ultimately result in their products and
services. Specifically, ISO 9000 establishes the requirements for quality management systems (QMS)
that must be employed by all organizations registered to the standard. Registered organizations should
enjoy:

Wider customer acceptance of products and services

Improved effectiveness and reliability of its processes
Improved quality of products and services
Improved organizational performance and competitiveness

Since ISO 9000 was first released in 1987, it has evolved through three revisions, the first in 1994, the
second at the end of 2000 and the most recent in November, 2008. This evolution has aligned it more
closely with the Total Quality Management philosophy. It seemed too many observers, including the
authors that the 1987 and 1994 versions shied away from association with TQM, or from acknowledging
its existence. Even the 2000 version, which borrows heavily from TQM, scarcely acknowledges it. The
fact is, of course, that with the tutelage of W. Edwards Deming and Joseph Juran, the Japanese started
the development of the management system we now know as TQM in 1950. Over the years several
Japanese experts – Kaoru Ishikawa, Shigeo Shingo, Taiichi Ohno, and others – emerged, and by the
early 1970s TQM had been widely accepted in Japan. By 1980 the Western world began taking note. By
the time ISO 9000: 1987 was released, TQM was a mature management system, well understood by
many in the West. It is clear that ISO‘s Technical Committee 176 (TC 176), which was charged with
ISO 9000‘s development, borrowed some TQM elements, most notably its documentation requirements.
ISO 9000: 1994 moved a bit closer to TQM, at least mentioning (though not requiring) continual
improvement. But any acknowledgement of TQM‘s influence or superiority seemed to be deliberately
avoided. ISO 9000:2000 made a giant leap in comparison, especially in the area of continual
improvement, which has gone from receiving just cursory treatment to becoming a firm requirement.
Lesson # 20
BUSINESS EXCELLENCE MODELS

Excellence starts with ‘Marketing’

The ‗marketing‘ function of an organization must take the lead in establishing the true requirements for
the product or service. Having determined the need, marketing should define the market sector and
demand. This will determine product or service features such as the grade, price, quality, timings, etc.
For example, a major hotel chain, before opening a new hotel or refurbishing an old one, will need to
consider its location and accessibility, before deciding whether it will be predominantly a budget, first
class, business or family hotel.

Marketing will also need to establish customer requirements by reviewing the market needs, particularly
in terms of unclear or unstated expectations or preconceived ideas held by customers. Marketing is
responsible for determining the key characteristics which determine the suitability of the product or
service in the eyes of the customer. This may, of course, involve the use of market research techniques,
data gathering, and analysis of customer complaints.

Excellent communication between customers and suppliers is the key to total organizational excellence.
This will eradicate the ‗demanding nuisance/idiot‘ view of customers, which pervades some
organizations. Poor communications often occur in the supply chain between organizations, when
neither party realizes how poor they are. Feedback from both customers and suppliers needs to be
improved, where dissatisfied customers and suppliers do not communicate their problems. In such cases
non-conformance of purchased products or services is often due to the customer‘s inability to
communicate their requirements clearly. If these ideas are also used within an organization, then the
internal supplier/customer interfaces will operate much more smoothly.

Marketing must also establish systems for feedback of customer information and reaction, which should
be designed on a continuous monitoring basis. Any information pertinent to the product or service
should be collected and collated, interpreted, analyzed, and communicated to improve the response to
customer experience and expectations. These same principles must also be applied inside the
organization for continuous improvement at every transformation process interface to be achieved. If
one department has problems recruiting the correct sort of staff, and ‗HR‘ have not established
mechanisms for gathering, analyzing, and responding to information on new employees, then frustration
and conflict will replace communication and co-operation.

Excellence in all functions

For an organization to be truly excellent, each part of it must work properly together. Each part, each
activity, each person in the organization affects and is in turn affected by others. Errors have a way of
multiplying and failure to meet the requirements in one part or area creates problems elsewhere, leading
to yet more errors, yet more problems and so on. The benefits of getting it right first time everywhere
are enormous.

Everyone experience – almost accepts – problems in working life. This causes people to spend a large
part of their time on useless activities, correcting errors, looking for things, finding out why things are
late, and checking suspect information, rectifying and reworking, apologizing to customers for mistakes,
poor quality and lateness. The list is endless and it is estimated that about one-third of our efforts are
wasted in this way. In the service sector it can be much higher.

Quality, the way we have defined it as meeting the customer requirements, gives people indifferent
functions of an organization a common language for improvement. It enables all the people, with
different abilities and priorities, to communicate readily with one another, in pursuit of a common goal.
When business and industry was local, the craftsman could manage more or less, himself. Business is
now so complex and employs so many different specialist skills that everyone has to rely on the
activities of others in doing their jobs.

Frameworks for Quality and Performance Excellence

The philosophies of Deming, Juran, and Crosby provide fundamental principles on which total quality is
based. Business firms tend to be highly individualized. As a result, it is difficult to apply one specific
philosophy. Company leaders must understand the differences and commonalties in the three
philosophies and tailor an approach that fits their unique culture. Some of the most successful firms,
such as Texas Instruments and Dana Corporation, have done this aspect of implementation.

None of thee philosophies, however, provide a framework for how to implement total quality within an
organization or a means of assessing total quality efforts relative to one‘s peers or world-class
companies. Award criteria and certification procedures fill this important role. The two most prominent
frameworks for quality that have had world-wide influence are ISO 9000 and the Malcolm Baldrige
National Quality Award Criteria.

The Malcolm Baldrige National Quality Award

In this section we present an overview of the Award, the Criteria, and the Award Process. The Baldrige
Award recognizes U.S. companies that excel in quality management practice and performance. The
Baldrige Award does not exist simply to practice and performance. The Baldrige Award does not exist
simply to recognize product excellence, nor does it exist for the purposes of ―winning.‖ Its principal
focus is on promoting high-performance management practices that lead to customer satisfaction and
business results. Up to three companies can receive an award in each of the categories of manufacturing,
small business, service, nonprofit health care, and nonprofit education. Health care and education award
categories were established in 1999.

The purposes of the award are to:

Help stimulate American companies to improve quality and productivity for the pride of
recognition while obtaining a competitive edge through increased profits;
Recognize the achievements of those companies that improve the quality of their goods and
services and provide an example to others;
Establish guidelines and criteria that can be used by business, industrial, governmental, and
other enterprises in evaluating their own quality improvement efforts; and
Provide specific guidance for other American enterprises that wish to learn how to manage for
high quality by making available detailed information on how winning enterprises were able to
change their cultures and achieve eminence.

THE CRITERIA FOR PERFORMANCE EXCELLENCE

The award examination is based upon a rigorous set of criteria, called the Criteria for Performance
Excellence, designed to encourage companies to enhance their competitiveness through an aligned
approach to organizational performance management that result in:

1. Deliver of ever-improving value to customers, contributing to marketplace success.

2. Improvement of overall company performance and capabilities
3. Organizational and personal learning

The criteria consist of a hierarchical set of categories, items, and areas to address. The seven categories
are:
1. Leadership: This category examines how an organization‘s senior leaders address values,
direction, and performance expectations, as well as their focus on customer s and other
stakeholders, empowerment, innovation, and learning. Also examined is how an organization
addresses its responsibilities to the public and supports its key communities.
2. Strategic Planning: this category examines how an organization develops strategic objectives
and action plans. Also examined are how chosen strategic objectives and action plans are
deployed and how progress is measured.
3. Customer and Market Focus: This category examines how an organization determines
requirements, expectations, and preferences of customer s and markets. Also examined is how
the organization builds relationships with customers and determines the key factors that lead to
customer acquisition, satisfaction, and retention and to business expansion.
4. Information and Analysis: This category examines an organization‘s information management
and performance measurement systems and how the organization analyzes performance data
and ensures hardware and software quality.
5. Human Resource Focus: This category examines how an organization motivates and enables
employees to develop and utilize their full potential in alignment with the organization‘s overall
objectives and action plans. Also examined are the organization‘s efforts to build and maintain a
work environment and an employee support climate conducive to performance excellence and
to personal and organizational growth.
6. Process Management: This category examines the key aspects of an organization‘s process
management, including customer-focused design, product and service delivery, key business,
and support processes. This category encompasses all key processes and all work units.
7. Business Results: This category examines an organization‘s performance and improvement in
key business areas – customer satisfaction, product and service performance, financial and
marketplace performance, human resource results, and operational performance. Also examined
are performance levels, relative to those of competitors.

The seven categories form an integrated management system. The umbrella over the seven categories
reflects the focus that organizations must have on customers through their strategy and action plans for
all key decisions. Leadership, Strategic Planning, and Customer and Market Focus represent the
―leadership triad,‖ and suggest the importance of integrating these three functions. Human Resource
focus and Process Management represent how the work in an organization is accomplished and leads to
Business Results. These functions are linked to the leadership triad.

Malcolm Baldrige National Quality Award Criteria Framework

Baldrige Award Criteria Framework A Systems Perspective

Organizational Profile:
Environment, Relationships, and Challenges
 2 5
Strategic Human
Planning Resources
Focus

7
1 Business
Leadership Results

3 6
Customer Process
and Market Management
Focus

4
Information and Analysis

Each category consists of several items (numbered 1.1, 1.2, 2.1, etc.) or major requirements on which
businesses should focus. For example, the Leadership Category consists of the following items and areas
to address:

1.1 Organizational Leadership

a. Senior Leadership Direction
b. Organizational Performance Review

1.2 Public Responsibility and Citizenship

a. Responsibilities to the Public
b. Support of Key Communities

The Senior Leadership Direction area asks organizations to answer the following questions:

How do senior leaders set and deploy organizational values, short-and longer-term directions, and
performance expectations, including a focus on creating and balancing value for customers and
other stakeholders? Include how senior leaders communicate values, directions, and expectations
through your leadership system and to all employees.
How do senior leaders create an environment for empowerment, innovation, organizational agility,
and organizational and employee learning?

One thing the criteria do not do is prescribe specific quality tolls, techniques, technologies, systems, or
starting points. Companies are encouraged to develop and demonstrate creative, adaptive, and flexible
approaches to meeting basic requirements. Many innovative approaches have been developed by
Baldrige winners and are now commonly used by many other companies.
Baldrige Award Item Point Values

2008 Categories/Items Point Values

1. Leadership 120
1.1 Senior Leadership 80
1.2 Governance and Social Responsibility 40
2. Strategic Planning 85
2.1 Strategy Development 40
 2.2 Strategy Deployment 45
3. Customer and Market Focus 85
3.1 Customer and Market Knowledge 40
3.2 Customer Relationships and Satisfaction 45
4. Measurement, Analysis and Knowledge Management 90
4.1 Measurement, Analysis, and Improvement of Organizational Performance 45
4.2 Management of Information, Information Technology, and Knowledge 45
5. Workforce Focus 85
5.1 Workforce Engagement 45
5.2 Workforce Environment 40
6. Process Management 85
6.1 Work Systems Design 35
6.2 Work Process Management and Improvement 50
7. Results 450
7.1 Product and Service Outcomes 100
7.2 Customer-Focused Outcomes 70
7.3 Financial and Market Outcomes 70
7.4 Workforce-Focused Outcomes 70
7.5 Process Effectiveness Outcomes 70
7.6 Leadership Outcomes 70
Total Points 1,000

ISO 9000 (2000) International Quality Management System

As quality became a major focus of businesses throughout the world, various organizations developed
standards and guidelines. Terms such as quality management, quality control, quality system, and
quality assurance acquired different, and sometimes conflicting meanings from country to country,
within a country, and even within an industry. As the European Community moved toward the European
free trade agreement, which went into effect at the end of 1992, quality management became a key
strategic objective. To standardize quality requirements for European countries within the common
market and those wishing to do business with those countries, a specialized agency for standardization,
the International Organization for Standardization, founded in 1946 and composed of representatives
from the national standards bodies of 91 nations, adopted a series of written quality standards in 1987,
which were revised in 1994, and again (significantly) in 2000. The most recent version is called the ISO
9000:2000 family of standards.

ISO 9000 is an international quality standard for goods and services. The term quality standard tends to
be misleading. For example, ISO 9000 does not set any specifications for quality. Rather, it sets broad
requirements for the assurance of quality and for management‘s involvement. The emphasis is on
prevention rather than inspection and rework. In fact, this emphasis is placed not only on the production
process but also on the product design process. The ISO 9000 approach is completely compatible with
the total quality philosophy, though it is not as all encompassing. ISO 9000 is composed of three
standards:

ISO 9000:2000 Quality Management Systems – Fundamentals and Vocabulary

ISO 9001:2000 Quality Management Systems – Requirements
ISO 9004:2000 Quality Management Systems – Guidelines for Performance Improvements

ISO 9000 Can Improve Operations in a Traditional Environment

By ―traditional environment,‖ we mean an organizational environment that has persisted in companies
for decades, until the Total Quality Management movement began to change things. A traditional
organizational environment is one which still operates according to the ―old way of doing things‖
rather than according to the principles of Total Quality Management.

When ISO 9000 is implemented by a traditional organization, the company should be the better for it.
We will not go so far as to say it will be the better for it, because much depends on the organization‘s
reasons for adopting ISO 9000 and the degree of executive-level commitment to it. Put another way, if
ISO 9000 is approached inappropriately and for the wrong reasons, it can become nothing more than a
marketing ploy, and the organization‘s functional departments might develop even more problems than
they had before ISO 9000.

ISO 9000 May be Redundant in a Mature TQM Environment

Just as ISO 9000 should help traditional organizations, it should also benefit TQM organizations.
However, in an organization that has achieved a high level of maturity in its total quality journey, say in
the 400-600 range on the Baldrige scale of 1,000 points, all ISO 9000 criteria may already be in place.
In such a case, the only compelling reason for registration under ISO 9000 would be for marketing
purposes. What would a company such as Toyota gain from ISO 9000 registration, probably nothing? It
already does everything required by ISO 9000. Its products and processes are recognized as world class.
Consequently, it wouldn‘t gain even a marketing advantage. However, there are many fine TQM
organizations that are not as well known as Toyota. Such organizations, even though they may already
meet or exceed the requirements of ISO 9000, may find it necessary to register in order to let potential
customers know that their products or services satisfy the international standard.

For Software and IT companies, the standard which is more acceptable and regarded worldwide is called
CMMI levels 1-5.

ISO 9000 and TQM are not in Competition

This is not case of one or the other. Organizations can adopt TQM or ISO 9000, or both. While there
may be those who advocate one to the exclusion of the other, in the larger scheme of things, the two
concepts fit well with each other. Both have worthwhile and similar aims. Our view is those not only are
TQM and ISO 9000 compatible; they actually support each other and are complementary. There are
good reasons for using both in a single management system.

Management Motivation for Registration to ISO 9000

Management motivation for adopting either ISO 9000 or TQM can vary widely. There are both
appropriate and inappropriate motives. For example, if a company seeks ISO 9000 registration to obtain
a marketing advantage, its motive is inappropriate. As a result, the organization will likely give mere lip
service to adopting the standard. Appropriate motives for adopting ISO 9000 include the following:

To improve operations by implementing a quality management system that satisfies the ISO
9000 requirements for management responsibility; resource management; product realization;
and measurement, analysis, and improvement.
To create or improve a quality management system that will be recognized by customers
worldwide.
To improve product or service quality r the consistency of quality.
To improve customer satisfaction.
To improve competitive posture.
 To conform to the requirements of one or more major customers (although adoption would be better
motivated by internal consideration, such as the preceding five).

What we are saying here is that, ideally, management will adopt ISO 9000 as a way to make real
improvements in the company‘s operations, serve its customers in a more responsible way, and, as a
result, be more successful. This approach is more likely to assure commitment and participation by top
management. Approaching ISO 9000 from a strictly marketing perspective may result in a negative
reaction t the amount of work required by the functional departments, ad only enough management
commitment to do the bare minimum for registration. In other words, if ISO 9000 is viewed as a
necessary evil that one must adopt to compete in certain markets, every dollar and every hour spent on
ISO 9000 will be seen as a burden to be endured rather than an investment in the organization‘s future.
By definition, a burden is a load that is difficult to bear; the connotation is negative. When negative
feelings abound among employees, commitment to ISO 9000 will suffer. It may be possible to fool the
ISO 9000 registrar‘s auditor, but we guarantee that customers will not be fooled – at least not for long.
Newfound markets will soon wither and disappear. If ISO 9000 is to have a real and permanent effect, it
must be approached with a positive attitude and the unwavering commitment of top management.
 Lesson # 21
DESIGNING ORGANIZATIONS FOR QUALITY

For design, development and implementation of a QMS, the ISO 9000 approach is completely
compatible with the total quality philosophy, though it is not as all encompassing. ISO 9000 is
composed of three standards:

ISO 9000:2000 Quality Management Systems – Fundamentals and Vocabulary

ISO 9001:2000 Quality Management Systems – Requirements
ISO 9004:2000 Quality Management Systems – Guidelines for Performance Improvements

ISO 9001 and ISO 9004 are known as Consistent Pair and are based and follow PDCA methodology.
ISO system is about standardizing the approach organizations everywhere take in managing and
improving the processes that ultimately result in producing better quality products and services.
Specifically, ISO 9001(2000) establishes the requirements for quality management systems (QMS) that
must be employed by all organizations registered to the standard. Registered organizations should enjoy:

Wider customer acceptance of products and services

Improved effectiveness and reliability of its processes
Improved quality of products and services
Improved organizational performance and competitiveness

By the time ISO 9000: 1987 was released, TQM was a mature management system, well understood by
many in the West. It is clear that ISO‘s Technical Committee 176 (TC 176), which was charged with
ISO 9000‘s development, borrowed some TQM elements, most notably its documentation requirements.
ISO 9000: 1994 moved a bit closer to TQM, at least mentioning (though not requiring) continual
improvement. ISO 9000:2000 made a giant leap in comparison, especially in the area of continual
improvement, which has gone from receiving just cursory treatment to becoming a firm requirement. In
addition, the standard now incorporates eight quality management principles that come directly from
TQM. They are:

1. Customer focus – understanding customer‘s needs, striving to exceed their expectations.

2. Leadership – establishing direction, unity of purpose, and a supportive work environment.
3. Involvement of people – ensuring that all employees at all levels are able to fully use their
abilities for the organization‘s benefit.
4. Process approach – recognizing that all work is done through processes, and managing them
accordingly.
5. System approach to management – expands on the previous principle in that achieving any
objective requires a system of interrelated processes.
6. Continual improvement – as a permanent organizational objective, recognizing and acting on
the fact that no process is so good that further improvement is impossible.
7. Factual approach to decision making – acknowledging that sound decisions must be based on
analysis of factual data and information.
8. Mutually beneficial supplier relationships – to take advantage of the synergy that can be
found in such relationships.

By design, as a result of ISO 9000, any organization supplying products or service is able to develop and
employ a quality management system that is recognized by customers worldwide. Customers around the
globe who deal with ISO 9000-registrered organizations can expect that purchased goods or services
will conform to a set of recognized standards.
ISO 9001‘s requirements for quality management systems are generic in nature, and are applicable to
organizations in any industry or economic sector. Whether the organization manufactures a product or
provides a service, whether it is a company or a governmental agency, whether it is large or small, ISO
9000 can apply, and be used to advantage.

To be registered the organization must go through a process that includes the following steps:

1. Develop (or upgrade) a quality manual that describes how the company will assure the quality
of its products or services.
2. Document procedures (or upgrade existing documentation) that describe how the various
processes for design, production, continual improvement, and so forth, will be operated. This
must include procedures for management review/audits and the like.
3. The organization must provide evidence of top management‘s commitment to the QMS and its
continual improvement.
4. The organization‘s top management must ensure that customer requirements are determined and
met.
5. The organization must hire an accredited registrar company to examine its systems, processes,
procedures, quality manual, and related items. If everything is in order, registration will be
granted. Otherwise, the registrar will inform the company of which areas require work (but will
not inform the company specifically what must be done), and a second visit will be scheduled.
6. Once registration is accomplished, the company will conduct its own internal audits to ensure
that the systems, processes, and procedures are working as intended.
7. Also once registered, the outside registrar will make periodic audits for the same purpose. These
audits must be passed to retain registration.

An important point to understand about ISO 9000 is that the organization has to respond to all ISO 9000
requirements and tell the registrar specifically what it is going to do and how. ISO does not tell the
organization. Assuming the registrar agrees with the organization‘s plan, registration is awarded. To
retain that registration, the organization must do what it said it would do.

Before the advent of the year 2000 release, ISO 9000 was concerned only with the standards which an
organization could build its own version of a quality management system. ISO 9000:2000 has closed
much of the gap that existed with TQM. The primary remaining difference between ISO 9000 and TQM
is in the degree to which the total organization is involved, ISO 9000 does not require the QMS to
include functions and levels that do not play a direct role in the management and execution of the
product/service realization processes. Functions that are typically not involved under the QMS include
human resources, finance (accounting), sales, and marketing.

Characteristics of Total Quality Management ISO 9000:2000 TQM

Customer focus (internal and external)
Obsession with quality
Scientific approach to problem solving
Long-term commitment Partial
Teamwork
Continual process and product improvement
Education and training intensive
Freedom through control
Unity of purpose
Employee involvement and empowerment Partial

Total Quality Management Characteristics Compared with ISO 9000

In comparison, the ISO 9000 quality management system is designed to ―provide the framework for
continual improvement to increase the probability of enhancing customer satisfaction and the
satisfaction of other interested parties. It provides confidence to the organization and its customers that it
is able to provide products that consistently fulfill requirements.‖ ISO claims that beyond customer
satisfaction, cost and risk-management benefits will also accrue to the organization. These benefits
translate to improved competitiveness – the same as TQM‘s objective. ISO claim these benefits result
from emphasizing the eight quality management principles on which the standard is based. Following
table provides a comparison of ISO‘s eight quality management principles with Deming‘s Fourteen
Points and TQM.

ISO 9000’s Eight Quality Management Principles Deming’s 14 Points TQM

1. Customer focus 2. Leadership #1, #2, #7 3. Involvement of
people 4. Process approach
5. System approach to management 6. Continual
improvement #5
7. Factual approach to decision making
8. Mutually beneficial supplier relationships #4

ISO 9000 is Compatible with, and can be viewed as a Subset of, TQM

Clearly, TQM and ISO 9000 is not quite the same thing. However, there is nothing inherent in ISO 9000
that would prevent it from becoming part of a larger Total Quality Management environment. There are
many examples today of companies that have:

ISO 9000‘s Quality Management Principles versus Deming‘s Fourteen Points and TQM successfully
included ISO 9000 as part of a larger total quality effort. Organizations that are already at some level of
TQM maturity or CMMI level 3 maturities have typically found it easy to implement ISO 9000. This is
because a TQM environment with its infrastructure of top management commitment, documented
processes and procedures, continuous improvement, obsession with quality, and so on, easily supports
the requirements of ISO 9001(2000).

Designing an ISO 9000 QMS Can Improve Market Perception in Global Post WTO World

A traditional organizational environment is one which still operates according to the ―old way of doing
things‖ rather than according to the principles of Total Quality Management and the technology based
networked post WTO world. In Pakistan, you might say, an organization being run as an autocratic, non-
participatory and ―SAITH‖ like organization as many in Sialkot, Gujranwala, Faisalabad, Lahore, and
Karachi, etc.

When ISO 9000 is implemented by a traditional organization, in its real spirit but much depends on the
organization‘s reasons for adopting ISO 9000 and the degree of executive-level commitment to it. Let us
take a look from a different view, if ISO 9000 is designed and developed for the wrong reasons, it can
not become a good marketing tool, and the organization‘s functional departments especially operations
and QA, might develop even more problems than they had before ISO 9000. Once again QMS
principles are taken in its letter and spirit.

The eight quality management principles are defined and detailed in ISO 9004:2000, Quality
management systems Guidelines for performance improvements.

Principle 1 Customer focus

Principle 2 Leadership
 Principle 3 Involvement of people
Principle 4 Process approach
Principle 5 System approach to management
Principle 6 Continual improvement
Principle 7 Factual approach to decision making
Principle 8 Mutually beneficial supplier relationships

Principle 1: Customer focus:

Organizations depend on their customers and therefore should understand current and future customer
needs, should meet customer requirements and strive to exceed customer expectations

Key benefits:
Increased revenue and market share obtained through flexible and fast responses to market
opportunities.
Increased effectiveness in the use of the organization's resources to enhance customer
satisfaction.
Improved customer loyalty leading to repeat business.

Applying the principle of customer focus typically leads to:

Researching and understanding customer needs and expectations.
Ensuring that the objectives of the organization are linked to customer needs and
expectations.
Communicating customer needs and expectations throughout the organization.
Measuring customer satisfaction and acting on the results.
Systematically managing customer relationships.
Ensuring a balanced approach between satisfying customers and other interested parties (such as
owners, employees, suppliers, financiers, local communities and society as a whole).

Principle 2: Leadership:

Leaders establish unity of purpose and direction of the organization. They should create and maintain
the internal environment in which people can become fully involved in achieving the organization's
objectives.

Key benefits:
People will understand and be motivated towards the organization's goals and objectives.
Activities are evaluated, aligned and implemented in a unified way.
Miscommunication between levels of an organization will be minimized.

Applying the principle of leadership typically leads to:

Considering the needs of all interested parties including customers, owners, employees, suppliers,
financiers, local communities and society as a whole.
Establishing a clear vision of the organization's future.
Setting challenging goals and targets.
Creating and sustaining shared values, fairness and ethical role models at all levels of the
organization.
Establishing trust and eliminating fear.
Providing people with the required resources, training and freedom to act with
responsibility and accountability.
Inspiring, encouraging and recognizing people's contributions.
Principle 3: Involvement of people:

People at all levels are the essence of an organization and their full involvement enables their abilities to
be used for the organization's benefit.

Key benefits:
Motivated, committed and involved people within the organization.
Innovation and creativity in furthering the organization's objectives.
People being accountable for their own performance.
People eager to participate in and contribute to continual improvement.

Applying the principle of involvement of people typically leads to:

People understanding the importance of their contribution and role in the organization.
People identifying constraints to their performance.
People accepting ownership of problems and their responsibility for solving them.
People evaluating their performance against their personal goals and objectives.
People actively seeking opportunities to enhance their competence, knowledge and
experience.
People freely sharing knowledge and experience.
People openly discussing problems and issues.

Principle 4: Process approach:

A desired result is achieved more efficiently when activities and related resources are managed as a
process.

Key benefits:
Lower costs and shorter cycle times through effective use of resources.
Improved, consistent and predictable results.
Focused and prioritized improvement opportunities.

Applying the principle of process approach typically leads to:

Systematically defining the activities necessary to obtain a desired result.
Establishing clear responsibility and accountability for managing key activities.
Analyzing and measuring of the capability of key activities.
Identifying the interfaces of key activities within and between the functions of the
organization. Focusing on the factors such as resources, methods, and materials that will
improve key activities of the organization.
Evaluating risks, consequences and impacts of activities on customers, suppliers and other
interested parties.

Principle 5: System approach to management:

Identifying, understanding and managing interrelated processes as a system, contributes to the

organization's effectiveness and efficiency in achieving its objectives.

Key benefits:
Integration and alignment of the processes that will best achieve the desired results.
Ability to focus effort on the key processes.
Providing confidence to interested parties as to the consistency, effectiveness and efficiency
of the organization.
Applying the principle of system approach to management typically leads to:
Structuring a system to achieve the organization's objectives in the most effective and efficient
way.
Understanding the interdependencies between the processes of the system.
Structured approaches that harmonize and integrate processes.
Providing a better understanding of the roles and responsibilities necessary for achieving
common objectives and thereby reducing cross-functional barriers.
Understanding organizational capabilities and establishing resource constraints prior to
action.
Targeting and defining how specific activities within a system should operate.
Continually improving the system through measurement and evaluation.
Principle 6: Continual improvement:
Continual improvement of the organization's overall performance should be a permanent objective of the
organization.

Key benefits:
Performance advantage through improved organizational capabilities.
Alignment of improvement activities at all levels to an organization's strategic intent.
Flexibility to react quickly to opportunities.

Applying the principle of continual improvement typically leads to:

Employing a consistent organization-wide approach to continual improvement of the
organization's performance.
Providing people with training in the methods and tools of continual improvement.
Making continual improvement of products, processes and systems an objective for every
individual in the organization.
Establishing goals to guide, and measures to track, continual improvement.
Recognizing and acknowledging improvements.

Principle 7: Factual approach to decision making:

Effective decisions are based on the analysis of data and information

Key benefits:
Informed decisions.
An increased ability to demonstrate the effectiveness of past decisions through reference to
factual records.
Increased ability to review, challenge and change opinions and decisions.

Applying the principle of factual approach to decision making typically leads to:
Ensuring that data and information are sufficiently accurate and reliable.
Making data accessible to those who need it.
Analyzing data and information using valid methods.
Making decisions and taking action based on factual analysis, balanced with experience and
intuition.

Principle 8: Mutually beneficial supplier relationships:

An organization and its suppliers are interdependent and a mutually beneficial relationship enhances the
ability of both to create value

Key benefits:
 Increased ability to create value for both parties.
Flexibility and speed of joint responses to changing market or customer needs and
expectations. Optimization of costs and resources.

Applying the principles of mutually beneficial supplier relationships typically leads to:
Establishing relationships that balance short-term gains with long-term considerations.
Pooling of expertise and resources with partners.
Identifying and selecting key suppliers.
Clear and open communication.
Sharing information and future plans.
Establishing joint development and improvement activities.
Inspiring, encouraging and recognizing improvements and achievements by suppliers.
Lesson # 22
DEVELOPING ISO QMS FOR CERTIFICATION

Development, Implementation and Registration

The ISO 9000 standards originally were intended to be advisory in nature and to be used for two-party
contractual situations (between a customer and supplier) and for internal auditing. However, they
quickly evolved into criteria for companies who wished to ―certify‖ their quality management or
achieve ―registration‖ through a third-party auditor, usually a laboratory or some other accreditation
agency (called a registrar). This process began in the United Kingdom. Rather than a supplier being
audited for compliance to the standards by each customer, the registrar certifies the company, and this
certification is accepted by all of the supplier‘s customers.

The registration process includes document review by the registrar of the quality system documents or
quality manual; pre-assessment, which identifies potential noncompliance in the quality system or in the
documentation; assessment by a team of two or three auditors of the quality system and its
documentation; and surveillance, or periodic re-audits to verify conformity with the practices and
systems registered. During the assessment, auditors might ask such question as (using management
responsibility as an example): Does a documented policy on quality exist? Have job descriptions for
people who manage or perform work affecting quality been documented? Are descriptions of functions
that affect quality been documented? Are descriptions of functions that affect quality available? Has
management designated a person or group with the authority to prevent nonconformities in products,
identify and record quality problems, and recommend solutions? What means are used to verify the
solutions?

Re-certification is required every three years. Individual sites – not entire companies – must achieve
registration individually. All costs are borne by the applicant, so the process can be quite expensive.

Perspectives on ISO 9000:2000

ISO 9000 provides a set of good basic practices for initiating a quality system, and is an excellent
starting point for companies with no formal quality assurance program. In fact, it provides detailed
guidance on process and product control. Thus, for companies in the early stages of developing a quality
program, the standards enforce the discipline of control that is necessary before they can seriously
pursue continuous improvement. The requirements of periodic audits reinforce the stated quality system
until it becomes ingrained in the company. Thus, using ISO 9000 as a basis for a quality system can
improve discipline, process, productivity, decrease costs, and increase customer satisfaction.

ISO 9000 AS A QUALITY JOURNEY AND NOT AS A DESTINATION

How to get started is always an issue for organizations just beginning their total quality journey.

The ISO 9000 development effort will benefit by having the following components: an executive-level
steering committee, a vision with the guiding principles, a set of broad objectives, baselines on
employee and customer satisfaction, an objective view of the organization‘s strengths and weaknesses,
and an indication of which employees at all levels can be counted on for support during the
implementation. In addition, the organization will have a well thought out means of communicating with
employees and all other stakeholders to keep them apprised of the changes taking place, why they are
happening, and what they will mea to everyone.

The development and implementation of an organization's quality management system is influenced by

its varying needs, its particular objectives, the products it provides, and the processes it employs. It is
not the purpose of this ISO to imply uniformity of quality management systems.
The selection of the appropriate quality related processes described in this ISO Standard and the extent
to which these processes are adopted and applied by an organization depends upon factors such as its
size and structure, the market being served and the resources available.

The purpose of an organization is:

a) To identify and meet the needs and expectations of its customers and other interested parties
(i.e. employees, suppliers, owners, society), to achieve competitive advantage, and to do this in
an effective and efficient manner;
b) To achieve, maintain, and improve overall organizational performance and capabilities.

The application of quality management principles not only provides direct benefits but also makes an
important contribution to managing costs and risks. Benefit, cost and risk considerations are important
for the organization, its customers and other interested parties. These considerations on overall
performance may impact on the following:

a) Revenue (turnover), profits and market share; these may be increased by such aspects as
leadership, increased efficiency, improved employee performance, and employee and customer
satisfaction;
b) Costs due to resources needed for business; inadequate resource funding is likely to cause losses
and be a competitive disadvantage through the sale of deficient products.

Process approach

The ISO-9001(2000) Standard encourages the adoption of a process approach to quality management.
Any activity which receives inputs and converts them to outputs can be considered as a process. For
organizations to function effectively, they have to identify and manage numerous inter-linked processes.
Often the output from one process will directly form the input into the next process. The systematic
identification and management of the processes employed by an organization, and the interactions
between such processes, may be referred to as the 'process approach‘.

Following Figure is a conceptual illustration of one of the process approach. The model recognizes that
customers and other interested parties play a significant role in defining inputs. Monitoring the
satisfaction of customers and other interested parties is necessary to evaluate and validate whether the
requirements of customers and other interested parties have been met. This model does not reflect
processes at a detailed level, but covers all the contents of the ISO Standard.
The purpose of ISO 9001 is to define the minimum Quality Management System requirements needed to
achieve customer satisfaction by meeting specified product requirements. Compliance with ISO 9001
may be used by an organization to demonstrate its capability to meet customer requirements.

CONTINUAL IMPROVEMENT OF THE

QUALITY MANGEMENT SYSTEM
S I
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Resource Measurement, t E
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improvement o
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P r
A
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Product R
R m Input Output
realization Product T
T e
I
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S
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Terms and definitions

For the purposes of this ISO 9001(2000) International Standard, the terms and definitions given in ISO
9000:2000, are applied in following way.

Supplier --------- >Organization ---------- >Customer (Interested Parties)

The term ―organization‖ replaces the previously used term ―supplier‖, to mean the unit to
which this International Standard applies. The term ―supplier‖ is now used instead of the
previous term
―subcontract‖. The changes have been introduced to reflect the vocabulary used by
organizations.

Product as a result of a Process

There are four agreed generic product categories as per ISO-9000:

Hardware,
Software,
Services,
Processed materials.

Most products are combinations of some of the four generic product categories.
Whether the combined product is then called hardware, processed material, software or service depends
on the dominant element.
Following is one of the model methodology which can be used to develop the documentation for QMS
and to get ready for certification by implementing clause by clause requirements (in the box) as given in
ISO 9001(2000) as the minimum requirement for certification and one can also take help from the
guidelines given in ISO-9004(2000) as presented below after the boxes.

ISO Quality Management System – Requirements/Guidelines

ISO 9001:2000 - Quality management systems -.Requirements

General requirements

The organization shall establish, document, implement, maintain a quality management and continually
improve its effectiveness in accordance with the requirement of this International Standard.

The organization shall:

a) Identify the processes needed for the quality management system and their application
throughout the organization;
b) Determine the sequence and interaction of these processes;
c) Determine criteria and methods needed to ensure that both the operation and control of the
processes are effective;
d) Ensure the availability of resources and information necessary to support the operation and
monitoring of these processes;
e) Measure, monitor and analyze these processes, and
f) Implement action necessary to achieve planned results and continual improvement these
processes.
These processes shall be managed by the organization in accordance with the requirements of this
International Standard.

Where an organization chooses to outsource any process that affects product conformity with
requirements, the organization shall ensure control over such processes.
NOTE Processes needed for the quality management system referred to above should include processes
for management activities, provision of resources, product realization and measurement.

Quality management system guidelines

Managing systems and processes

Leading and operating an organization successfully requires managing it in a systematic and visible
manner. Success should result from implementing and maintaining a management system that is
designed to continually improve performance by addressing the needs of all interested parties. Managing
an organization encompasses quality management, among other management disciplines.

The quality management system of an organization is an important part of the overall management
system. Organizations should define their systems and the processes contained within them to enable the
systems and processes to be clearly understood, managed and improved. Management should ensure
effective operation and control of processes and the measures and data used to determine satisfactory
performance. The management of the organization should closely monitor the movement toward
performance improvement. The activities and processes that can lead to performance improvement
should be described and defined by the management. In general, to fulfill the requirements of ISO
standard;
First, Company should state (write/document) what do they want to do
Second, do the work as was stated and documented
Third, check them, weather the work is being carried out as was stated. See if there are any gaps.
Fourth, Show and prove to an external auditor that work is really being done as was stated in the first
place.

So what in terms of documentation required is a manual altogether in one volume to be called as ISO
9000 QMS Manual or can be separated into following manuals:

1. Quality Policy Manual

2. Quality Procedures Manual
3. Quality Work Instructions
4. Quality Records Manual or Quality Data Collection Manual

Documentation and records may be in any form or in any media suitable for the needs of the
organization.

Requirements for documentation and records may arise from:

contractual requirements from the customer or other interested parties,

acceptance of international, national, regional and industry sector
standards, relevant statutory and regulatory requirements, or decisions
by the organization.

ISO 9001:2000 – Quality management systems -Requirements

Documentation Requirements
General

The quality management system documentation shall include:

a) Documented statements of a quality policy and quality objectives;

b) A quality manual;
c) Documented procedures required by this International Standard;
d) Documents needed by the organization to ensure the effective planning, operation and control

Use of quality management principles

ISO 9001:2000 – Quality management systems -Requirements

Documentation Requirements
Quality Manual

The organization shall establish and maintain a quality manual that includes:

a) The scope of the quality management system, including details of and justification for any
exclusion,
b) The documented procedures established for the quality management system, or reference to
them, and
c) A description of the interaction between the processes of the quality management system.
Control of Documents

Documents required by the quality management system shall be controlled. Records are a special type of
document and shall be controlled according to the requirements.

A documented procedure shall be established to define the controls needed.

a. to approve documents for adequacy prior to issue,
b. to review and update as necessary and re-approve documents,
c. to ensure that changes and the current revision status of documents are identified,
d. to ensure that relevant versions of applicable documents are available at points of use,
e. to ensure that documents remain legible and readily identifiable,
f. to ensure that documents of external origin are identified and their distribution controlled, and
g. to prevent the unintended use of obsolete documents, and to apply suitable identification to
them if they are retained for any purpose.

Control of Records

Records shall be established and maintained to provide evidence o conformity to requirements and of
the effective operation of the quality management system. Records shall remain legible, readily
identifiable and retrievable. A documented procedure shall be established to define the controls needed
for the identification, storage, protection, retrieval, retention time and disposition of records.

Documentation and Records

Management should define the documentation needed to support the quality management system. The
nature and extent of the documentation should support the needs of tile organization. The defined
documentation should provide for implementation, maintenance and improvement of the system.

This documentation typically includes:

policy documents including the quality manual,

documentation for control of processes, work
instructions for defined tasks, standard formats for
collection and reporting of data and quality records.

The primary purpose of quality documentation is to express the quality policy and to describe
the quality management system. This documentation serves as the basis for implementation and
maintenance of the system. Suitable documentation should be available to achieve the effective
operation of the quality management system.

Documentation control should be defined and implemented to ensure that correct documents arc used.
All obsolete documents should be promptly removed from all points of issue and use, or otherwise
prevented from unintended use.

Documents to be retained, and records of quality performance, should be controlled, maintained and
protected.

The organization should ensure that sufficient records be maintained to demonstrate conformance to
requirements and verify effective operation of the quality management system. These records can also
provide know1edge for maintenance and improvement of the quality management system.
Quality records should be analyzed to provide inputs for corrective and preventive action, and process
improvements. Analysis of records may also provide information for use in the improvement of the
Quality management system.
Lesson # 23
ISO 9001(2000) QMS MANAGEMENT RESPONSIBILITY

Management Responsibility - Requirements

ISO 9001:2000-Quality management systems -Requirements
Management commitment

Top management shall provide evidence of its commitment to the development and implementation of
the quality management system and continually improving its effectiveness by:

a) Communicating to the organization the importance of meeting customer as well as statutory and
regulatory requirements;
b) Establishing the quality policy;
c) Ensuring that quality objectives are established;
d) Conducting management reviews; and
e) Ensuring the availability of resources.

Needs and expectations of interested parties

Management responsibility – Guidelines
General guidance

Top management should establish policies and strategic objectives consistent with the purpose of the
organization. Leadership, commitment and the involvement of the top management are essential for
developing and maintaining an effective and efficient quality management system to achieve benefits
for all interested parties. The key to achieving benefits for interested parties is to sustain and increase
customer satisfaction. The deployment of the policies and implementation of plans to achieve the
objectives are the responsibility of management. Management should involve everyone in the
organization in these actions. Top management responsibilities include:

setting policies and objectives and leading the

organization, provision of organization structure and
resources, maintenance of current performance, and
achievement of continual improvement.

Top management should define an approach for measurement of the organization's performance in order
to verify that strategic objectives are achieved. This approach could include:

financial measures, measures of process performance, and

assessment of satisfaction level of customers and other interested
parties.

This performance information should be used as input to management review in order to ensure that
continual improvement is the driver for organizational development.

Issues to be considered

Issues to consider when developing, implementing and managing the organization‘s quality
management system, include the use of the quality management principles.
Based on these principles, the following activities should be considered:

promoting policies and objectives to increase awareness, motivation and involvement of people,
identifying realization processes which add value for the organization, planning for the future
of the organization and management of change,
setting and communicating directions related to achieving satisfaction of interested parties.

The quality management system should be appropriate for the organization's size and structure. It should
be focused on the achievement of the organization‘s quality objectives. Top management should
consider its approach to performance improvement through both continual improvement and radical
change. It should consider the resources and communication needed to ensure that the quality
management system is maintained and developed as the organization structure changes.

Top management should identify the organization's rea1ization processes, as these are directly related to
the success of the organization. Top management should also identify those support processes that
affect the efficiency of the realization processes or the needs of other interested parties.

To ensure all processes operate as an efficient network, the organization should analyze how all the
processes interact. Consideration should be given:

To ensuring that the sequence and interaction of processes are designed to achieve the desired
results,
To ensuring inputs, activities and outputs are dearly defined and controlled,
To managing risks and opportunities,
To monitoring inputs and outputs to verify that individual processes are linked and operate
effectively and efficiently, and
To establishing data analysis that facilitates continual improvement across all processes.

It is useful to define a process owner with full responsibility and authority to manage each process, and
to achieve process objectives.

ISO 9001:2000 – Quality management – Requirements

Customer focus

Top management shall ensure that customer requirements are determined and are met with the aim of
enhancing customer satisfaction.

NOTE When determining customer needs and expectations, it is important to consider obligations
related to product, including regulatory and legal requirements.

General

Every organization has several categories of interested parties, each with needs and expectations.

For quality management purposes, interested parties include:

customers and end users, people in the organization, owners/investors, including

shareholders, individuals or groups, including the public sector, that have a specific interest
in the organization. suppliers and partners, and society in terms of the community and the
public affected by the organization.

T o meet the needs and expectations of all interested parties, organizations should consider
 identification of the needs and expectations of all interested parties,
maintenance of a balanced response to interested parties needs and
expectations, translation of those needs and expectations into requirements,
communication of those requirements to all levels of the organization, and
improvement of all processes to create value for the interested parties.

Needs and expectations

The success of the organization depends on understanding and satisfying current and future needs and
expectations of customers (including end-users), and other interested parties. The management should
endeavor to exceed the expectations of all interested parties.

Examples of product concerns from customers and end-users include:

conformance,
dependability,
availability, delivery,
post-realization
activities, and price and
life-cycle costs.

To define customer and end-user needs and expectations, an organization should:

identify its customers, including potential customers,

determine key product characteristics for the customers and end-
users, identify and assess competition in its market, identify
opportunities, weaknesses and future competitive advantages.

The organization should also identify people's needs and expectations for recognition, work satisfaction,
competencies and development of knowledge. Such attention helps to ensure that the involvement and
motivation of people are as strong as possible.
The organization should also define financial and other results which satisfy the identified needs and
expectations of owners and investors.
Management should consider the potential benefits of establishing partnerships with suppliers to the
organization, in order to create value for both parties.
A partnership should be based on the definition of a joint strategy, sharing knowledge, risks and profits.

When establishing partnerships, an organization should:

identify key suppliers, contractors and distributors as potential partners,

jointly establish a clear understanding of customers' needs and expectations,
jointly establish a clear understanding of the partners' needs and
expectations, and set goals to secure opportunities for continuing
partnerships.

In considering its relationships with society, the organization should demonstrate responsibility for
health and safety,

consider environmental impact, including conservation of energy and natural resources,

identify applicable statutory and regulatory requirements,
 identify the current and potential impacts on society in general, and the local community in
particular, of its products, processes and activities, and define the needs and actions for
improvement in these areas.

Statutory and regulatory requirements

Management should ensure that the organization has knowledge of the statutory and regulatory
requirements that apply to its products, processes and activities.
The response to relevant statutory and regulatory requirements should not prohibit the organization from
meeting its quality objectives.

Consideration should also be given to:

benefits to interested parties from exceeding compliance,

the role of the organization in the protection of community interests, and the promotion of
ethical interpretation and effective compliance with current and prospective requirements.

ISO 9001:2000 – Quality management systems -Requirements Quality

policy

Top management shall ensure that the quality policy:

a. is appropriate to the purpose of the organization;

b. includes a commitment to comply with requirements and continually improve the effectiveness
of the quality management system,
c. provides a framework for establishing and reviewing quality objectives;
d. is communicated and understood within the organization, and
e. is reviewed for continuing suitability.

Quality policy

An organization's quality policy should be consistent with the organization's overall business policies.

In establishing the quality policy, top management should consider:

the expected level of customer

satisfaction, the needs of other interested
parties,
opportunities and needs for continual
improvement, resources needed, and
contributions of suppliers and partners.

An effectively formulated and communicated quality policy should:

be consistent witl1 a vision of the organization's future,

make quality objectives understood throughout the
organization,
demonstrate top management commitment to quality and the provision of adequate
resources for its achievement,
promote a commitment to quality at all levels of the organization, with clear leadership by top
management, and address continual improvement and customer satisfaction.
The quality policy should be periodically reviewed and revised as necessary.

ISO 9001:2000 – Quality management systems -Requirements

Planning
Quality objectives

Top management shall ensure that quality objectives, including those needed to meet requirements for
product are established at relevant functions and levels within the organization. The quality objectives
shall be measurable and consistent with the quality policy.
Planning
Quality objectives

The organization's objectives should be established during the planning process. They should be
consistent with the quality policy and capable of being measured. When establishing these objectives,
management should consider the current and future needs of the organization and the markets served.
Consideration should also be given to output from management reviews, current product and process
performance, and to the levels of satisfaction of all interested parties. Objectives should be deployed
throughout the organization with defined responsibility for their achievement and be clearly
communicated to all relevant people. People should be able to translate these objectives into their
individual contributions.

1SO 9001:2000 -Quality management systems -Requirements

Quality management system planning

Top management shall ensure that:

a) The planning of the quality management system is carried out in order to meet the requirements,
as well as the quality objectives, and
b) The integrity of the quality management system is maintained when changes to the quality
management system are planned and implemented.

Quality management system planning

Management should implement quality planning for the activities and resources needed to satisfy the
quality policy, objectives and requirements. Quality planning is an integral part of the quality
management system.

Primary inputs for quality planning include:

needs and expectations of the customers and other interested parties,

performance of the products,
performance of the quality management system processes, lessons learned
from previous experiences - opportunities for improvement, and risk
assessment and mitigation.

1S0 9001:2000 - Quality management systems -Requirements

Responsibility, authority and communication
Responsibility and authority

Top management shall ensure that responsibilities and authorities are defined and communicated within
the organization.
Management representative

Top management shall appoint a member of management who, irrespective of other responsibilities,
shall have responsibility and authority that includes:

a) Ensuring that processes needed for the quality management system are established,
implemented and maintained.
b) Reporting to top management on the performance of the quality management system and any
need for improvement, and
c) Ensuring the promotion of awareness of customer requirements throughout the organization.
NOTE The responsibility of a management representative can include liaison with external parties on
maters relating to the quality management system.

Responsibility, Authority and Communication

General

Management should define and implement a quality management system in order to provide confidence
that the organization can satisfy the needs and expectations of interested parties. The quality
management system should be consistent with the organization's size, culture and products. Outputs of
quality planning can also identify:

the responsibility and authority for execution of improvement

plans, the skills and knowledge needed,
improvement approaches, methodology and tools, .the resources
needed, alternative planning needs, indicators for performance
achievement, and the need for documentation and records.

Quality planning outputs should be reviewed regularly (as changes in the organization's
situation occur) and revised as necessary. To develop the quality management system, the management
should address

strategic objectives, quality policy and

quality objectives, needs and
expectations of interested parties,
relevant statutory and regulatory requirements, .process approach,
communication,
structure of the organization and the environment in which it
exists, resources, other management systems, and
improvement.

Top management should define and communicate responsibility and authority in order to
implement and maintain the quality management system effectively and efficiently.
All people should be given authority and responsibilities to enable them to assist in the achievement of
the quality objectives. This assignment of authority and responsibility helps to establish involvement
and commitment of people throughout the organization.

Management representative

Management representative(s) should be appointed and given authority by top management to manage,
monitor, evaluate and coordinate the quality management system processes. The goal of the
appointment is to enhance effective and efficient operation of the quality management system. The
representative(s) should report to top management and communicate with customers and other interested
parties on matters pertaining to the quality management system.

ISO 9001:2000 - Quality management systems -Requirements

Internal communication

Top management shall ensure that appropriate communication processes are established within the
organization and that communication takes place regarding the effectiveness of the quality management
system.

Internal communication
Management should define and implement processes for the communication of quality requirements,
objectives and accomplishments. Providing this information becomes a resource for improvement and
the involvement of people in achieving quality objectives.
Examples of tools for communication include:

team briefings and other meetings, notice-

boards, in-house journals/magazines, audio-
visual and electronic media.
ISO 9001:2000 - Quality management systems - Requirements
Management Review
General

Top management shall review the organization‘s quality management system, at planned intervals, to
ensure its continuing suitability, adequacy and effectiveness. This review shall include assessing
opportunities for improvement and the need for changes to the quality management system, including
the quality policy and quality objectives. Records from management reviews shall be maintained.

Review input
The input to management review shall include information on:

a. Results of audits;
b. Customer feedback;
c. Process performance and product conformity;
d. Status of preventive and corrective actions;
e. Follow-up actions from previous management reviews;
f. Changes that could affect the quality management system, and
g. Recommendations for improvement.

Review input
Management review

General and Review Input

Top management should establish a process to review the quality management system at periodic
intervals to evaluate its effectiveness and efficiency and verify that quality policy and objectives are
being satisfied. In addition, the management review process should analyze current activities that may
require change and consider opportunities for improvement of the quality management system. Inputs
for tile management review should include:

results from audits of the quality management system including internal, customer and third
party audits,
 measurements of satisfaction of the needs and expectations of interested parties,
performance of processes, analysis of product conformance, status of corrective and
preventive actions, status of action items from previous reviews, and changes in original
assumptions (for example, those arising from new technologies, outputs of research and
development, quality concepts, financial, social, environmental conditions and relevant
statutory and regulatory changes).

Additional inputs to consider include:

status and results of improvement activities,

results of self-assessment of the organization,
customer satisfaction measurements,
market place evaluation, including the performance of
competitors, results of benchmarking activities, performance of
suppliers, opportunities for improvement, status of partnership
initiatives, financial effects of quality related activities, impact
of changes to relevant statutory and regulatory requirements.

ISO 9001:2000 - Quality management systems - Requirements

Review output

The outputs from the management review shall include any decisions and actions related to:

a) Improvement of the effectiveness of the quality management system and its processes;
b) Improvement of product related to customer requirements; and
c) Resource needs.
Results of management reviews shall be recorded.

Review output

Management review activity should be set in a context of the organization's strategic planning cycle.
This placement helps to ensure quality objectives and requirements are integral to the organization‘s
overall objectives and requirements.
Results of management review should, for example, focus on:

adding value for interested parties, improved performance of

products and processes, suitability of organizational structure
and resources, ability to introduce new product on time in the
market, managing risks, compliance with relevant statutory and
regulatory requirements, and planning for future resources.

Observations, recommendations, conclusions and decisions for actions should be recorded to

facilitate monitoring of progress, and used as input to subsequent reviews.
The management review process should be evaluated for effectiveness and improved when necessary.
Lesson # 24
ISO 9001(2000) QMS (CLAUSE # 6) RESOURCES MANAGEMENT

ISO 9001:2000 – Quality management systems -Requirements

6. Resource management
6.1 Provision of resources

The organization shall determine and provide the resources needed:

 a) To implement and maintain the quality management system and continually improve its
effectiveness, and
b) To enhance customer satisfaction by meeting customer requirement.

6.1 General guidance

6.1.1 Introduction

Resources essential to the implementation and achievement of the organization's strategies and
objectives for the quality management system should be identified and made available. These may
include people, suppliers, information, infrastructure, work environment and financial resources.

Issues to be considered

Consideration should be given to:

efficient and timely provision of resources in relation to opportunities and

constraints, tangible resources such as realization and support facilities,
intangible resources such as intellectual property, resources and mechanisms to
encourage innovative continual improvement, organization structures, including
project and matrix management needs, information management,
enhancement of competence via training, education, and learning, use
of natural resources and the impact of resources on the environment,
and planning for future resources.

ISO 9001:2000 - Quality management systems - Requirements

6.2 Human Resources
6.2.1 General

Personnel performing work affecting product quality shall be competent on the basis of appropriate
education training, skills and experience.

6.2 Human Resources

Involvement of people

In order to achieve its objectives and to stimulate innovation, an organization should encourage the
involvement of its people through:

identifying competence needs for each process

activity, selection, ongoing training, and career
planning, defining responsibilities and authorities,
establishing individual and team objectives, managing performance and evaluating
results, facilitating involvement in objective setting and decision making, encouraging
recognition and reward,
facilitating open, two-way communication by continually reviewing the needs of its people,
creating conditions to encourage innovation, ensuring effective teamwork,
using information technology to facilitate communication of suggestions and
opinions, using measurements of people satisfaction for improvement, and invest,
targeting the reasons why people are leaving the organization.
Subcontracting or temporary employment of people should be considered to ensure that the objectives of
the organization are achieved.

ISO 9001:2000 - Quality management systems - Requirements

6.2.2 Competence, awareness and training

The organization shall:

a) Determine the necessary competence for personnel performing work affecting product quality,
b) Provide training or take other actions to satisfy these needs,
c) Evaluate the effectiveness of the actions taken,
d) Ensure that its personnel are aware of the relevance and importance of their activities and how
they contribute to the achievement of the quality objectives, and
e) Maintain appropriate records of education, training, skills and experience.

6.2.2 Competence, awareness and training

6.2.2.1 Competence

The organization should identify the competence needed for each, activity that affects its performance,
should assess the competence of its people to perform the activities, and develop plans to close any
gaps. The identification should be based on an analysis of present and expected needs of the
organization compared with the existing competence of its people.
Input for competence related needs may come from a variety of internal and external sources, such as:

future demands related to strategic and operational plans and objectives,

evaluation of the competence of individual people to perform defined activities, and
Legislation, Regulation, Standards, and directives affecting the organization its activities
and its resources.

6.2.2.2 Training and awareness

The organization should analyze the development needs of all its people and design training plans for
them. This is to provide people with knowledge which, together with skills and experience, leads to
competence. The organization should provide training to its people in order to achieve its objectives.
The training should emphasize the importance of meeting requirements and the needs of customers and
other interested parties. It should also include the awareness of consequences to the organization and its
people of failing to meet tile requirements.
Enhancement of competence via training, education and reaming involves:

technical knowledge and skills,

management skills and tools,
social skills, .knowledge of markets and customer needs and
expectations, relevant statutory and regulatory requirements, internal
and appropriate external standards, and documentation for
performing the work.
To increase the awareness and involvement of people, the training should cover:

the vision for the future of the

organization, the organization's policies
and objectives, organizational change and
development,
 the initiation and implementation of improvement activities,
creativity and innovation, organization's impact on society,
introductory programs for new people, and periodic refresher
programs for people already trained.

Training plans should

include: training objectives,
training programs and methodologies, training resources needed,
identification of necessary support , evaluation of training in terms of
enhanced competence of people, measurement of the effectiveness of
training and the impact on the organization.

Organizations should consider providing personal development training for their people, in
organizational development training provided.

ISO 9001:2000 – Quality management systems - Requirements

6.3 Infrastructure

The organization shall determine, provide and maintain the infrastructure needed to achieve conformity
to product requirements. Infrastructure includes, as applicable:

a) building workspace and associated utilities;

b) process equipment (both hardware and software), and
c) supporting services (such as transport or communication).

6.3 Infrastructure

Infrastructure provides the foundation for operations. Depending on the organization's products, the
infrastructure may include plant, workspace, hardware, software, tools and equipment, support services,
communication, transport and facilities.
The organization should:

a) define and provide an infrastructure in terms such as objectives, function, performance,

availability, cost, safety security and renewal;
b) develop and implement a maintenance approach, to ensure that the infrastructure continues to
meet operational needs; this approach should consider the type and frequency of maintenance
and verification of operation of each infrastructure element, based on its criticality and usage;
c) evaluate the infrastructure against the needs and expectations of ail interested parties;
d) consider environmental issues associated with infrastructure, such as conservation, pollution,
waste and recycling.

Natural phenomena that cannot be controlled may impact the infrastructure. The plan for the
infrastructure should consider associated risks and include strategies to maintain the quality of products.

ISO 9001:2000 - Quality management systems - Requirements

6.4 Work environment
The organization shall determine and manage the work environment needed to achieve conformity to
product requirements.

6.4 Work environment

The work environment of an organization is a combination of human and physical factors. These factors
influence motivation, satisfaction and performance of people, potentially enhancing the performance of
the organization.
Examples of human factors affecting the work environment include:

creative work methodologies and opportunities for greater involvement to realize the potential of
ail people, safety rules and guidance, including use of protective
equipment, .ergonomics, special facilities for people in the organization.

Examples of physical factors affecting the work environment include:

heat hygiene vibration
noise humidity pollution
light cleanliness air flow

6.5 Information

Information is a fundamental resource for the continual development of an organization‘s knowledge

base and can stimulate innovation. Information is also essential for making factual decisions. To manage
information effectively, the organization should:

identify its information needs, identify internal

and external sources of information, provide
timely access to adequate information, use
information to meet its strategies and
objectives, ensure appropriate security and
confidentiality.

The managing of information should be evaluated for its effectiveness and efficiency, and improvements
should be implemented.

6.6 Suppliers and partnerships

Organizations can benefit from establishing relationships with suppliers and partners to promote and
facilitate clear and open communication and to improve the processes that create value.

There are various opportunities for organizations to increase value through working with their suppliers
and partners such as:

optimizing the number of suppliers and partners,

establishing two-way communication at the most appropriate level in both organizations to
facilitate rapid solution of problems, and to avoid costly delays or disputes,
cooperation with suppliers in validation of the capability of their processes, .monitoring
of supplier ability to deliver conforming products,
encouraging suppliers to implement continual improvement programs and to participate
in joint improvement initiatives,
involving suppliers in the organization's design and/or development activities to share
knowledge and improve the realization and delivery of conforming products,
Total Quality Management – MGT510 VU

involving partners in identification of purchasing needs and joint strategy development,

evaluating, recognizing and rewarding efforts achieved by suppliers and partners.

6.7 Natural resources

Consideration should be given to the natural resources that can influence the performance of the
organization. While such resources are often out of the direct control of the organization, they can have
significant positive or negative effects on its results. The organization should have plans, or contingency
plans, to ensure the availability of these resources and to prevent or minimize negative effects.

6.8 Financial resources

Resource management should include activities for determining the needs for, and sources of, financial
resources. The control of financial resources should include activities for comparing actual usage against
plans, and taking necessary action. Management should plan, make available and control the financial
resources necessary to implement and maintain the quality management system and achieve the
organization‘s objectives. Management should also consider the development of innovative financial
approaches to support and encourage improvement.

The effectiveness and efficiency of the quality management system can influence the financial results of
the organization. For example:

a) Internally, through process and product failures, or waste in material and time;
b) Externally, through product failures, costs of compensation of guarantees and warranties, costs
of lost customers and markets.

Reporting of such matters may provide a means of determining ineffective or inefficient activities, and
initiating improvement actions.

The financial reporting of activities related to the performance of the quality management system and
product quality should be used in management reviews.
Lesson # 25
ISO 9001(2000) (Clause # 7) Product Realization and Customer Related Processes

ISO 9001:2000 – Quality management systems – Requirements

7 Product realization
7.1 Planning of product realization

The organization shall plan and develop the processes needed for product realization. Planning of
product realization shall be consistent with the requirements of the other processes of the quality
management system.

In planning product realization, the organization shall determine the following, as appropriate:

a) Quality objectives and requirements for the product;

b) The need to establish processes, documents, and provide resources specific to the product;
c) Required verification, validation, monitoring, inspection and test activities specific to the
product and the criteria for product acceptance;
d) Records needed to provide evidence that the realization processes and resulting product meet
requirements

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The output of this planning shall be in a form suitable for the organization‘s method of operations.

NOTE 1 A document specifying the processes of the quality management system (including the
product realization processes) and the resource to be applied to a specific product, project or contract,
can be referred to as a quality plan.
NOTE 2 The organization may also apply the requirements given in 7.3 to the development of product
realization processes.

General guidance

The definition of quality requirements relates to how an activity is to be performed, while quality
objectives are measured by process output or achievement. This lends itself to the recognition of any
organization as a collection of processes and activities. The interdependence of processes can be
complex, resulting in a network. To ensure all processes operate as an efficient system, the organization
should undertake an analysis of how processes interrelate. The analysis should recognize that the output
of one process is often the input to another.

The principles of process management should be applied to all activities. The basic concept for a process
consists of three elements: inputs, activities and outputs.

Realization processes result in the products of the organization that add value to the organization.
Support processes, including management processes, are necessary to the organization, but do not
directly add value. Realization and support processes can include networks of sub-processes.

Issues to be considered

A process can be represented as a flow of activities. This concept can help to define inputs, specify
resources and actions and achieve desired outputs. Results from validation of processes and verification
of outputs should also be considered as inputs for a process, to achieve continual improvement and
promotion of excellence throughout the organization. Improvement of the processes will improve the
quality management system and the organization.

Documentation related to processes should support:

identification and communication of significant features of the processes.

training in the operation of processes,
sharing knowledge and experience in teams and work groups, .measurement and audit of
processes, and analysis, review and improvement of processes.

The role of people within processes should be evaluated in order:

to ensure the health and safety of people, to

ensure that the necessary skills exist, to support.
networks of processes, to provide for input of
people in process analysis, and to promote
innovation from people.

The drive for continual improvement should focus on process improvement as the means by which
beneficial results are achieved. Increased benefits, improved customer satisfaction and reduction of
waste are examples of measurable results achieved by greater effectiveness and efficiency of processes.

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7.1 Managing processes

General

The organization should identify processes needed to realize products to satisfy the requirements of
customers and other interested parties. To ensure product realization, consideration should be given to
desired outputs, process steps, activities, flows, control measures, training needs, equipment,
methodologies, information, materials and other resources. A plan should be defined to manage the
processes including:

input and output requirements such as specifications and

resources, activities within the processes, validation of the
processes, verification of products,
analysis of the process including operability and
maintainability, risk assessment and mitigation, .corrective
action, opportunities for improvement, and .control of
change.

Internal production and service operations also exist as support processes and sub-processes and should
be considered in order to achieve improved interested-party satisfaction. Examples of internal operations
include:

managing information, .training of people,

machining of components for assembly,
availability of spare and replacement parts,
realization of product for service.

7.1 Planning for process inputs, outputs and review

Process inputs should be defined and recorded in order to provide a basis for the fom1ulation of
requirements to be used for verification and validation of outputs. Inputs can be internal or external to
the organization.

Input requirements critical to the product or process should be identified in order to assign appropriate
responsibilities and resources.
Resolution of ambiguous or conflicting input requirements can involve consultation with affected
internal and external parties. Input derived from activities not yet fully evaluated should be subject to
evaluation through subsequent review, verification and validation.
The organization should identify significant or critical features of products and processes in order to
develop a plan for control and monitoring of the activities within the process.

Examples of issues to consider include:

competence of people, .documentation,

equipment capability and monitoring,
health, safety and work environment.

Process outputs should be verified against input requirements and compliance with acceptance criteria in
order to satisfy customer and other interested party requirements. For verification purposes, the outputs
should be documented and evaluated against input requirements and acceptance criteria. This evaluation
should identify necessary corrective actions, preventive actions or potential improvements in the

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efficiency of the process. Verification of the product can be carried out during operations in order to
identify process variation.
The organization should undertake a periodic review of process performance to ensure the process is
consistent with the operating plan.

Examples of issues for consideration include:

reliability and repetitiveness of the process,

identification of and prevention against potential
nonconformance, adequacy of design and/or development
inputs, adequacy of design and/or development outputs,
consistency of inputs and outputs with planned objectives,
potential for improvements, and unresolved issues.

7.1 Planning for Process validation and changes

Validation of products should ensure they meet the needs and expectations of customers and satisfy
other interested parties. Validation activities can include modeling, simulation and trials, and reviews
involving customers or other interested parties.

Issues to be considered should include:

quality policy and objectives, qualification of equipment,

operating conditions for the product, use or application of the
product, disposal of the product, product life-cycle,
environmental impact of the product, and impact of the use of
natural resources including materials and energy.

Validation should be carried out at appropriate intervals to ensure timely reaction to changes
impacting the process.
Particular attention should be given to validation of processes:

for high-value products,

where deficiency in product will only be apparent in
use, and which cannot be repeated, where verification of
product is not possible.

The organization should implement a process for the control of changes to ensure that changes benefit
the organization and satisfy the needs and expectations of interested parties. Changes should be
identified, recorded, evaluated, reviewed and controlled, depending on the effect on other processes and
the needs and expectations of customers and other interested parties.

Any changes in the process affecting product characteristics should be recorded and communicated in
order to maintain the integrity of the product and provide information for improvement. Authority for
initiating change should be defined in order to maintain control.

A product or process should be verified after any related change to ensure that the instituted change had
the r' desired effect.

Use of simulation techniques can be considered in order to plan for the prevention of failures in
processes.
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Risk assessment should be undertaken to assess the potential for, and the effect of, possible failures in
processes. The results should be used to define and implement preventive actions to mitigate identified
risks.

Examples of tools for risk assessment include:

process failure mode and effects analysis,

fault tree analysis,
reliability assessment.

ISO 9001:2000 - Quality management systems - Requirements

7.2 Customer-related processes
7.2.1 Determination of requirements related to the product

The organization shall determine:

a) Requirements specified by the customer, including the requirements for delivery and
postdelivery activities,
b) Requirements not stated by the customer but necessary for specified or intended use, where
known,
c) Statutory and regulatory requirements related to the product, and
d) Additional requirements determined by the organization.

7.2.2 Review of product requirements

The organization shall review the requirements related to the product. This review shall be conducted
prior to the organization‘s commitment to supply a product to the customer (e.g. submission of tenders,
acceptance of contracts or orders, acceptance of changes to contracts or orders) and shall ensure that:

a) Product requirements are defined;

b) Contract or order requirements differing from those previously expressed are resolved, and
d) The organization has the ability to meet defined requirements.

Records of the results review and actions arising from the review shall be maintained:
Where the customer provides no documented statement of requirement, the customer
requirements shall be confirmed by the organization before acceptance.
Where product requirements are changed, the organization shall ensure that relevant
documents are amended and that relevant personnel are made aware of the changed
requirements.

NOTE: In some situations, such as internet sales, a formal review is impractical for each order. Instead
the review can cover relevant product information such as catalogues or advertising material.

7.2.3 Customer communication

The organization shall determine and implement effective arrangements for communicating with
customers in relation to:

a) Product information;
b) Enquiries, contracts or order handling, including amendments, and
c) Customer feedback, including customer complaints.
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7.2 Processes related to interested parties

The organization should define, implement and maintain processes to ensure adequate understanding of
the needs and expectations of interested parties. These processes should include identification and
review of relevant information and could actively involve customers and other interested parties.
Examples of information sources include results from:

Processes or activities specified by the customer or other interested parties,

Market research,
Contract requirements,
Competitor analysis, .benchmarking, and
Processes due to statutory or regulatory requirements.

The organization should have a full understanding of the process requirements of the customer, or other
interested party, before initiating action to comply. This understanding and its impact should be
mutually acceptable to the participants.

ISO 9001:2000 - Quality management systems –Requirements

7.3.1 Design and development planning

The organization shall plan and control design and development of product. During the design and
development planning, the organization shall determine:

a) The design and development stages;

b) The review, verification and validation that are appropriate to each design and development
stage, and
c) The responsibilities and authorities for design and development.

The organization shall manage the interfaces between different groups involved in design and
development to ensure effective communication and clear assignment of responsibility.

Planning output shall be updated, as appropriate, as the design and development progresses.

7.3 Design and/or development

General guidance

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When designing and/or developing products or processes, the organization should consider life cycle,
safety, dependability, durability, maintainability, ergonomics, the environment, disposal, and other risks.
The organization should ensure that the needs of all interested parties can be satisfied.

Risk assessment should be undertaken to assess the potential for, and the effect of, possible failures in
products or processes. The results should be used to define and implement preventive actions to mitigate
identified risks. Examples of tools for risk assessment of design and/or development include:

design failure mode and effects analysis,

fault tree analysis,
reliability assessment,
relationship diagrams,
ranking techniques, and
simulation techniques.
ISO 9001:2000-Quality management systems -Requirements
7.3.2 Design and development inputs

Inputs relating to product requirements shall be determined and records maintained .These inputs shall
include:

a) Functional and performance requirements;

b) Applicable statutory and regulatory requirements;
c) Where applicable, information derived from previous similar designs, and
d) Other requirements essential for design and development.

These inputs shall be reviewed for adequacy. Requirements shall be complete, unambiguous and not in
conflict with each other.

7.3.2 Design and/or development guidance

The organization should identify process inputs that impact product design and/or development to
satisfy the needs and expectations of interested parties.

Examples include:

a) Internal inputs such as:

– Policies, standards and specifications,
– Skill requirements,
– Dependability requirements,
– Documentation and data on existing products, and
– Outputs from other processes;
b) External inputs such as:
– Customer or marketplace needs and expectations,
– Contractual requirements and interested party specifications,
– Relevant statutory and regulatory requirements,
– International or national standards, and
– Industry codes of practice;
c) Other inputs that identify those characteristics of the product or process that are crucial to its
safe and proper functioning, such as: – Operation, installation and application,

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– Storage, handling, maintenance and delivery, – Physical parameters and environment,

and – Disposal requirements.
It should be noted that in the design and development of software and service products, inputs on
enduser requirements, as well as direct customer requirements, could be particularly important. Such
inputs should be formulated in such a way that the product can be tested effectively through subsequent
verification and validation.

Design and/or development output should lead to realization of the product and also include information
necessary to satisfy the needs and expectations of customers and other interested parties. Examples of
the output of design and/or development activities include:

product specifications,
training requirements,
methodologies,
purchase
requirements, and
acceptance criteria.

ISO 9001:2000 - Quality management systems - Requirements

7.3.3 Design and/or development outputs

The outputs of the design and development shall be provided in a form that enables verification against
the design and development input and shall be approved prior to release.

Design and development outputs shall:

a. Meet the input requirements for design and development;

b. Provide appropriate information for purchasing, production and for service provision,
c. Contain or reference product acceptance criteria, and
d. Specify the characteristics of the product that are essential for its safe and proper use.

7.3.3 Design and development outputs

The organization should conduct periodic reviews to consider design and/or development objectives,
including:

meeting verification and validation goals,

evaluation of potential hazards or modes of failure in product
use, life-cycle data on performance of the product, and
potential impact of the product on the environment.

The organization should undertake reviews of design and/or development outputs, as well as the
process, in order to satisfy the needs and expectations of interested parties. It should be verified that the
outputs meet the design specifications and validated that they meet the needs of the customer. Sufficient
data should be generated through verification and validation activities to enable design and/or
development methodologies and decisions to be reviewed. The review of methodologies should include
process and product improvement, failure investigation, activities, and future design and/or development
process needs. Partial validation of the design and/or development outputs may be necessary to provide
confidence in their future application by means such as:

Validation of engineering designs prior to construction.

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Installation or application, .validation of software outputs prior to installation or use. Validation of

direct customer services prior to widespread introduction.

Examples of verification activities include:

comparative methodologies, such as alternative design and/or development calculations,

evaluation against similar products, testing, simulations or trials to check compliance

with specific input requirements.

1S0 9001:2000 - Quality management systems – Requirements

7.3.4 Design and development review

At suitable stages, systematic reviews of design and development shall be performed in accordance with
planned arrangement
a) To evaluate the ability of the results of design and development to meet requirements, and
b) To identify any problems and propose necessary actions.

Participants in such reviews shall include representatives of functions concerned with the design and
development stage(s) being reviewed. Records of the results of the reviews and any necessary actions
shall be maintained.

7.3.5 Design and development verification

Verification shall be performed in accordance with planned arrangements to ensure that the design and
development outputs have met the design and development input requirements. Records of the results of
the verification and any necessary actions shall be maintained.

ISO 9001:2000-Quality management systems -Requirements

7.3.6 Design and development validation

Design and development validation shall be performed in accordance with planned arrangements to
ensure that the resulting product is capable of meeting the requirements for the specified application or
intended use, where known. Wherever practicable, validation shall be completed prior to the delivery or
implementation of the product. Records of the results of validation and any necessary actions shall be
maintained.

7.3.7 Control of design and development changes

Design and development changes shall be identified and records maintained. The changes shall be
reviewed, verified and validated, as appropriate, and approved before implementation. The review of
design and development changes shall include evaluation of the effect of the changes on constituent
parts and product already delivered. Records of the results of the review of changes and any necessary
actions shall be maintained.

7.4 Purchasing
1S0 9001:2000 - Quality management systems - Requirements
7.4 Purchasing
7.4.1 Purchasing process

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The organization shall ensure that purchased product conforms to specified purchase requirements. The
type and extend of control applied to the supplier and the purchased product shall be dependent upon the
effect of the purchased product on subsequent product realization or the final product.

The organization shall evaluate and select suppliers based on their ability to supply product in
accordance with the organization's requirements. Criteria for selection evaluation and re-evaluation shall
be established. Records of the results of evaluations and any necessary actions arising from the
evaluation shall be maintained.

7.4.1 Purchasing process

The organization should identify and implement purchasing process for selection, evaluation, and
control of purchased products to ensure they satisfy its needs, total cost of purchased product to ensure
they satisfy its needs and requirements, as well as those of interested parties. Purchasing processes
should include:

identification of needs,
total cost of purchased product, taking account of performance, price and
delivery, inquiries, quotations and tendering, verification of purchased
products,
selection of suppliers, including those with unique
processes, purchase documentation, contract
administration, nonconforming purchased products,
supplier control and supplier development, and
assessment of risks associated with the purchased
product.

Process requirements and specifications should be developed with suppliers in order to benefit from
available specialist knowledge. Suppliers could also be involved in the specification of quality
management system requirements in relation to their products.

ISO 9001:2000 - Quality management systems -Requirements

7.4.2 Purchasing information

Purchasing information shall describe the product to be purchased, including where appropriate:

a) Requirements for approval of product, procedures, processes and equipment,

b) Requirements for qualification of personnel, and
c) Quality management system requirements.

The organization shall ensure the adequacy of specified purchase requirements prior to their
communication to the supplier.

7.4.2 Suppliers

The organization should establish processes to identify potential suppliers or to develop existing
suppliers and evaluate their ability to supply the required products. These processes may include:

evaluation of relevant experience,

review of product quality,
price, delivery performance and response to problems,
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audits of supplier management systems and evaluation of their potential capability to provide the
required products efficiently and within schedule, checking references for customer
satisfaction,
financial assessment to assure the viability of the supplier throughout the intended period of
supply, service and support capability, logistic capability including locations and resources.

The organization should ensure that orders for purchased product are adequate to satisfy the
input requirements of the organization's processes.

Examples of issues to be considered include:

purchasing from qualified
suppliers, logistic requirements,
product identification,
preservation of product,
traceability of product,
documentation and records,
communication, acceptance
criteria, and right of access to
supplier's premises.

The organization should establish a process for verification of purchased products to ensure compliance
with specification. The level of verification activity can vary according to the nature or the type of
product and historical performance of the supplier.

The organization should define the need for records of purchased product verification, supplier
communication and response to nonconformities in order to demonstrate its conformance to
specification.

ISO 9001:2000 - Quality management systems -Requirements

7.4.3 Verification of purchased product

The organization shall establish and implement the inspection or other activities necessary for ensuring
that purchased product meets specified purchase requirements.

Where the organization or its customer intends to perform verification at the supplier‘s premises, the
organization shall state the intended verification arrangements and method of product release in the
purchasing information.
Lesson # 26
ISO 9001(2000) QMS (CLAUSE # 7) CONTROL OF PRODUCTION AND SERVICES

ISO 9001:2000 - Quality management systems - Requirements

7.5 Production and service operations
7.5.1 Control of production and service provision

The organization shall plan and carry out production and service provision under controlled conditions.
Controlled conditions shall include, as applicable.

a) The availability of information that the characteristics of the product,

b) The availability of work instructions, as necessary,
c) The use of suitable equipment,
d) The availability and use of monitoring and measuring devices,
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e) The implementation of monitoring and measurement, and

f) The implementation of release, delivery and post-delivery activities.

7.5.1 Control of production and service provision

The organization should identify requirements for operations that realize products or deliver services in
order to ensure compliance with specifications and satisfy the needs and expectations of interested
parties. To meet these needs and expectations, the organization should review its:

ability to comply with contractual requirements,

training and competence of people,
communication, problem prevention, and
relevant statutory and regulatory
requirements.

Further considerations may include .capacity planning:

logistics,
intended use,
post- realization activities,
preservation,
training required,
product flow and
yield, automation,
and electronic
monitoring.

The infrastructure should be appropriately maintained and adequately protected in and between uses in
order to maintain operational capability.

ISO 9001:2000-Quality management systems -Requirements

7.5.2 Validation of processes for production and service provision

The organization shall validate any processes for production and service provision where the resulting
output cannot be verified by subsequent monitoring or measurement. This includes any processes where
deficiencies become apparent only after the product is in use or the service has been delivered.
Validation shall demonstrate the ability of these processes to achieve planned results.
The organization shall establish arrangement for these processes including, as applicable:

a) Defined criteria for review and approval of the processes,

b) Approval of equipment and qualification of personnel,
c) Use of specific methods and procedures,
d) Requirements for records, and
e) Revalidation.

ISO 9001:2000- Quality management systems -Requirements

7.5.3 Identification and traceability

Where appropriate, the organization shall identify the product by suitable means throughout product
realization. To organization shall identify the product status respect to monitoring and measurement
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requirements. Where traceability is a requirement, the organization shall control and record the unique
identification of the product.

NOTE in some industry sectors, configuration management is a means by which identification and
traceability are maintained.

7.5.3 Identification and traceability

The organization should establish a process and documentation for identification and traceability for
control of products to satisfy customer and other interested party requirements. The need for
identification and traceability may be due to:

status of products, including component parts,

contract requirements,
relevant statutory and regulatory
requirements, intended use or application,
hazardous materials, and risk mitigation.

ISO 9001:2000- Quality management systems -Requirements

7.5.4 Customer property

The organization shall exercise care with customer property while it is under the organization‘s control
or being used by the organization. The organization shall identify, verify, protect and safeguard
customer property provided for use or incorporation into the product. If any customer property is lost,
damaged or otherwise found to be unsuitable for use, this shall be reported to the customer and records
maintained.

NOTE Customer property can include intellectual property.

7.5.4 Customer property

The organization should identify responsibilities in relation to property and other assets owned by
customers and other interested parties and under the control of the organization, in order to protect the
value of the property. Examples of such property are:

ingredients or components supplied for inclusion in a

product, product supplied for repair, maintenance or
upgrading, packaging materials supplied directly by the
customer, customer materials handled by service operations
such as storage,
services supplied on behalf of the customer such as transport of customer property to a
third party, protection of customer intellectual property including specifications, such as
drawings.
ISO 9001:2000 - Quality management systems - Requirements
7.5.5 Preservation of product

The organization shall preserve conformity of product during internal processing and delivery to the
intended destination. This preservation shall include identification, handling, packaging, storage and
protection. Preservation shall also apply to the constituent parts of a product.

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7.5.5 Preservation of product

The organization should define and implement processes for handling, packaging, storage, preservation
and delivery that are designed to prevent damage, deterioration or misuse during internal processing and
final delivery of the product. The organization should consider the need for any special requirements
arising from the nature of the product. Special requirements may be associated with software, electronic
media, hazardous materials, specialist personnel, and products or materials which are unique or
irreplaceable. The organization should identify resources needed to maintain the product throughout its
life cycle to prevent damage, deterioration, or misuse. The organization should communicate
information to the interested parties involved about the resources needed to facilitate preservation
actions.

ISO 9001:2000 - Quality management systems – Requirements

7.6 Control of monitoring and measuring devices

The organization shall determine the monitoring and measurement to be undertaken and the monitoring
and measuring devices needed to provide evidence of conformity of product to determined
requirements.

The organization shall establish processes to ensure that monitoring and measurement can be carried out
and are carried out in a manner that is consistent with the monitoring and measurement requirements.

Where necessary to ensure valid results, measuring equipment shall:

a) Be calibrated or verified at specified intervals, or prior to use, against measurement standards

traceable to international or national measurement standards; where no such standards exist, the
basis used for calibration or verification shall be recorded;
b) Be adjusted or re-adjusted as necessary;
c) Be identified to enable the calibration status to be determined;
d) Be safeguarded from adjustments that would invalidate the measurement result;
e) Be protected from damage and deterioration during handling, maintenance and storage.

In addition, the organization shall assess and record the validity of the previous measuring results when
the equipment is found not to conform to requirements. The organization shall take appropriate action
on the equipment and any product affected. Records of the results of calibration and verification shall be
maintained.

When used in the monitoring and measurement of specified requirements, the ability of computer
software to satisfy the intended application shall be confirmed. This shall be undertaken prior to initial
use and reconfirmed as necessary.

Control of measuring and monitoring devices

The organization should define and implement methodologies for verification of products and validation
of processes to ensure interested party satisfaction. These methodologies could include surveys,
simulations, measurement and monitoring.
Measuring and monitoring devices can be used for the verification of outputs of processes against
specified requirements. The organization should ensure that where measuring and monitoring devices
are used fur verification, they are calibrated and maintained to accepted standards, giving confidence to
the results.

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The organization should consider other means to eliminate all potential errors from processes (known as
―fool-proofing‖), for verification of process outputs to minimize the need for control of measurement
and monitoring devices, and to add value for interested parties.

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Lesson # 27
ISO 9001(2000) QMS (CLAUSE # 8) MEASUREMENT, ANALYSIS, AND IMPROVEMENT
ISO 9001:2000 - Quality management systems - Requirements
8 Measurement, analysis and improvement
8.1 General

The organization shall plan and implement the monitoring, measurement, analysis and improvement
processes needed:

a) To demonstrate conformity of the product,

b) To ensure conformity of the quality management system, and
c) To continually improve the effectiveness of the quality management system.

This shall include determination of applicable methods, including statistical techniques, and the extent
of their use.

8.1 General guidance

Introduction

An organization should provide for the measurement and evaluation of its product, the capability of
processes, customer satisfaction and items required by other interested parties at appropriate intervals.
This includes the recording, collecting, analyzing, summarizing and communication of relevant data
needed to monitor and improve the organization's performance.

Measurements should be evaluated in terms of the added value provided to the organization, and should
be deployed only where the benefit can be identified. The measurement criteria and objectives should be
identified. These measurements should lead to consideration of appropriate action. They should not be
purely for the accumulation of information.

The results of measurement can show a level of achievement, but consideration should also be given to
trends and variation. The causes of trends and variation should be identified in order to ensure they are
understood. The organization should determine the need for the use of statistical techniques for
analyzing data, including verifying process operations and product characteristics. Statistical techniques
selected for use should be suitable for the application. The organization should control and monitor the
use of the statistical techniques selected.

The results of analysis of data from improvement activities should be one of the inputs to the
management review process. The information and data collected should be used throughout the
organization to support effective and efficient management.

The organization should promote the use of creative and innovative approaches for improvement
processes. Also, the organization should plan the implementation of the improvement action and provide
adequate resources. The organization should continually monitor and record the implementation of
improvement actions, which will also provide data for future improvements. Relevant comparative data
and information should be used to set realistic and challenging goals.

Continual improvement requires change within the organization. Evaluation of change requires
measurement. Measurement itself does not initiate change. Measurements should be taken for a clearly
defined purpose.

Issues to be considered
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Measurement, analysis and improvement include issues such as the following:

a) Measurement, analysis and improvement should be used to establish appropriate priorities for
the organization;
b) The measurements employed by the organization should be reviewed periodically, and data
should be verified on a continuum (basis for accuracy and completeness;
c) The benchmarking of individual processes as well as customer satisfaction should be employed
as .an improvement tool;
d) The use of measurements and the generation of information are essential for good
communication and they should be the basis for improvement and involvement of all interested
parties; such information should be current, and be clearly defined as to its purpose;
e) Appropriate tools for the communication of information resulting from the analyses of the
measurements should be implemented;
f) The effectiveness of communication to interested par1ies should be measured to determine
whether the information is clearly understood;
g) Self-assessment should be considered on a periodic basis to assess organizational performance
and to define improvement Opportunities.

ISO 9001:2000 - Quality management systems - Requirements

8.2 Monitoring and measurement
8.2.1 Customer satisfaction

As one of the measurements of the performance of the quality management system, the organization
shall monitor information relating to customer perception as to whether the organization has met
customer requirements. The methods for obtaining and using this information shall be determined.

8.2 Measurement and monitoring

8.2.1 Measurement and monitoring of system performance
General

The organization should identify the methodologies needed for identification of areas for improvement
in the overall efficiency and effectiveness of the quality management system. Examples of measurement
and monitoring methodologies include customer satisfaction measurement:

Internals audits,
Financial measurements, and
Self-assessment methodologies.

8.2.1 Measurement and monitoring of customer satisfaction

The organization should recognize that there are many sources of customer-related information, arid
should establish processes to gather analyze and deploy this information. The organization should
identify sources of customer and end-user information available in written and verbal forms, from
internal and external sources. Examples of customer- related information include:

Feedback on all aspects of product,

Customer requirements and contract information, .market needs,
Service delivery data, and
Information relating to competition.

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The organization's process for requesting, measuring and monitoring feedback of customer satisfaction
and dissatisfaction should provide information on a continual basis. It should address conformance to
requirements, meeting needs and expectations of customers, as well as price and delivery of product.
The organization should establish and use sources of customer information and should cooperate with
its customers in order to anticipate future needs. The organization should plan and establish processes
for implementing appropriate marketing activities to efficiently obtain the ―voice of the customer‖.
The organization should specify the methodology and the measures to be used and the frequency of
gathering and analyzing data for review.

The organization should plan data collection methodologies. Examples of sources of information on
customer satisfaction include:

Customer complaints,
Direct communication with customers,
questionnaires and surveys, .focus groups,
Reports from consumer organizations,
Reports in various media, and .sector studies.

ISO 9001:2000 - Quality management systems - Requirements

8.2.2 Internal audit

The organization shall conduct internal audits at planned intervals to determine whether the quality
management system:

a) Conforms to the planned arrangements to the requirements of this Internal Standards and to the
quality management system requirements established by the organization, and
b) Is effectively implemented and maintained

An audit program shall be planned, taking into consideration the status and importance of the processes
and areas to be audited, as well as the results of previous audits. The audit criteria, scope, frequency and
methods shall be defined. Selection of auditors and conduct of audits shall ensure objectivity and
impartiality of the audit process. Auditors shall not audit their own work.

The responsibilities and requirements for planning and conducting audits, and for reporting results and
maintaining records shall be defined in a documented procedure.

The management responsible for the area being audited shall ensure that actions are taken without under
delay to eliminate detected nonconformities and their causes. Follow-up activities shall include the
verification of the actions taken and the reporting of verification results.

8.2.2 Internal audit

An organization should establish an internal audit process to assess the strengths and weaknesses of the
Quality Management system. The internal audit process may also review the efficiency and
effectiveness of other activities and support processes in the organization. The internal audit process
should include the planning, implementation, reporting and follow-up activities related to internal
audits. Planning for internal audits should be flexible in order to permit changes in emphasis based on
findings and observations obtained during the audit Input from the area to be audited, as well as from
other interested parties, should be considered in the development of internal audit plans. Examples for
consideration by internal auditing include:

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existence of adequate documentation,

effective implementation of processes,
identification of nonconformance,
documentation of results, competence of
people, opportunities for improvement,
capability of processes, use of statistical
techniques, use of information technology,
analysis of quality cost data,
assigned responsibilities and authorities,
performance results and expectations,
adequacy and accuracy of performance measurement,
improvement activities, and relationships with interested
parties, including internal customers.

In addition to documenting non-conformances, internal audit reporting could also indicate areas for
improvement (with recommendations), as well as areas of outstanding performance. Examples of
follow-up activities include:

Verification of implementation, timeliness and

effectiveness of corrective action, and
Effectiveness of the internal audit process.

8.2.2 Self assessment

Organizations should consider establishing and implementing a self-assessment process. The range and
depth d the assessment should be planned in relation to the organization's objectives and priorities. The
self-assessment methodology, as well as existing quality awards criteria or other appropriate
methodologies may be used for self-assessment of the organization. Some of the advantages of using the
self-assessment methodology are that:

it is simple to understand,
it is easy to use, it has minimal impact on the use of management resources, and it
provides input to enhance the performance of the organization's Quality management
system.

The self-assessment methodology focuses on determining the degree of efficiency and effectiveness of
implementation of the Quality management system defined in this International Standard is not intended
to provide a self-assessment methodology to compete with existing models. Self-assessment
methodology should not be considered as an alternative to internal or external quality auditing. Use of
the methodology can provide an overall view of the performance of the organization and the degree of
maturity of the quality management system. It can also provide input for identifying areas in the
organization requiring improvement and can help to determine priorities.

8.2.3 Measurement and monitoring of processes

The organization should identify measurement methodologies and perform measurements to evaluate
process performance. The organization should consider how these measurements can be incorporated
into the product realization process and the role of measurement in process management. Examples of
measures of process performance include:

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accuracy,
timeliness,
dependability,
reaction time of processes and people to special internal and external
requests, cycle time or throughput, effectiveness and efficiency of
people, utilization of technologies, and cost reduction.

ISO 9001:2000 - Quality management systems - Requirements

8.2.3 Monitoring and measurement of processes
The organization shall apply suitable methods for measurement and, where applicable, measurement of
the quality management system processes. These methods shall demonstrate the ability of the processes
to achieve planned results. When planned results are not achieved, correction and corrective action shall
be taken, as appropriate, to ensure conformity of the product.

8.2.4 Monitoring and measurement of products

The organization should establish and specify the measurement requirements (including acceptance
criteria) for its products. The measurement of product should be planned and performed to verify
conformance to specified requirements.

The organization should consider the following when choosing a methodology to measure products:

a) The conformance to specified requirements of its products, and those provided by suppliers;
b) The location of each measurement point in its process sequence;
c) Characteristics to be measured at each point, the documentation and acceptance criteria to be
used;
d) Equipment and tools required;
e) Customer established points for witness or verification of selected characteristics of a product;
f) Inspections or testing that are required to be witnessed or performed by statutory and regulatory
authorities;
g) Where, when and how the organization intends, or is required by the customer or statutory and
regulatory authorities, to engage qualified third parties to perform
– type testing,
– In-process inspections or testing,
– Product verification,
– Product validation;
h) Qualification of material, product, process, people or the quality management system;
i) Final inspections to confirm that all specified inspections and testing are completed and
accepted;
j) Outputs of the measurement process of the product.

The measurement of product should be performed prior to delivery to verify that the product is in
conformance with requirements. The organization should review the approach used for measuring
products and the records of verification and make appropriate improvement. Typical examples of
product measurement records include:

inspection and test reports,

material release notices,
certificates as required, and
electronic data.

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ISO 9001:2000 -Quality management systems - Requirements

8.2.4 Monitoring and measurement of product

The organization shall monitor and measure the characteristics of the product to verify that requirements
have been met. This shall be carried out at appropriate stages of the product realization process in
accordance with the planned arrangement.
Evidence of conformity with the acceptance criteria shall be maintained. Records shall indicate the
person(s) authorizing release of product.
Product release and service delivery shall not proceed until the planned arrangements have been
satisfactorily completed, unless otherwise approved by a relevant authority and, where applicable, by the
customer.
8.2.4 Measurement and monitoring of satisfaction of interested parties

The organization should identify the measurement information required to meet the needs of other
interested parties at appropriate stages of product realization. Such information should include
measurements relating to people, owners, suppliers and society.

8.2.4 People in the organization

The organization should:

gather the opinion of its people regarding the manner in which the organization satisfies their
needs and expectations, and assess individual and collective performances and their contribution
to organizational results.

8.2.4 Owners

The organization should:

assess its capacity to attain the defined goals,

measure financial performance, measure the
impact of external factors on results, and
identify the value contributed by the actions
taken.

8.2.4 Suppliers

The organization should:

monitor the performance of suppliers and their compliance with the purchasing
policy, measure or monitor the quality of the product purchased, and measure the
performance of the purchasing processes of the organization.

8.2.4 Society

The organization should:

define appropriate measurements relative to its objectives, for interaction with society, and
periodically assess the efficiency of its actions and the perceptions of the results by relevant
parts of society.

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8.3 Control of nonconformance

General

All people within the organization should have the authority to report non-conformances at any stage of
a process. This is particularly true for those people engaged in monitoring processes and process output
verification. Prompt attention to non-conformances permits the initiation of prompt corrective action.
Authority for reaction to non-conformances should be defined to maintain achievement of product
requirements. The organization should control product identification, segregation and disposition in
order to prevent misuse. The organization may also need to consider recording information on those
non-conformances which are corrected in the normal course of work. Such data can provide valuable
information for process improvement. It is essential that all non-conformances be recorded, together
with their disposition, to assist learning and provide data for analysis and improvement activities.
8.3 Nonconformance review and disposition

The organization should have a process to provide for review and disposition of all non-conformances.
Review of non conformances should be conducted by designated persons to determine if any trends or
patterns of occurrence exist. These trends should be considered for improvement and as input to
management review. People carrying out the review should be competent to evaluate the effects of the
non-conformance and should have the authority and resource to define corrective action. Customer
acceptance of the disposition may be a contractual requirement.

ISO 9001:2000-Quality management systems – Requirements

8.3 Control of nonconforming product

The organization shall ensure that product which does not conform to product requirements is identified
and controlled to prevent unintended use or delivery. The controls and related responsibilities and
authorities for neither dealing with nor conforming product shall be defined in a documented procedure.
The organization shall deal with nonconforming product by one or more of the following ways:

a) By taking action to eliminate the detected nonconformity;

b) By authorizing its use, release or acceptance under concession by a relevant authority and,
where applicable, by the customer;
c) By taking action to preclude its original intended use or application.

Records of the nature of nonconformities and any subsequent actions taken, including concessions
obtained, shall be maintained.
When nonconforming product is corrected it shall be subject to re-verification to demonstrate
conformity to the requirements. When nonconforming product is detected after delivery or use has
started, the organization shall take action appropriate to the effects, or potential effects, of the
nonconformity.

 operational performance,
 customer satisfaction and dissatisfaction,
 satisfaction level of other interested parties,
 effectiveness and efficiency of - organization,
 supplier contribution,
 economics of quality and financial and market-related performance and,  benchmarking
of performance.

8.4 Analysis of data for improvement

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The organization should analyze data from various sources to assess performance against plans and
goals and to identify areas for improvement. The organization should plan to use statistical
methodologies for data analysis, which can help in assessing, controlling, and improving performance of
processes.

The analysis of data can help determine the cause of problems, and therefore guide effective corrective
and preventive action. This may require analysis of the product specifications, as well as analysis of
relevant processes, operations and quality records.

Information and data from all parts of the organization should be integrated and analyzed to evaluate the
overall performance of the organization. The overall performance should be presented in a form that is
suitable to different levels of management.

The results of analysis can be used to determine:

 trends,
 operational performance,
 customer satisfaction and dissatisfaction,
 satisfaction level of other interested parties,
 effectiveness and efficiency of - organization,
 supplier contribution,
 economics of quality and financial and market-related performance and  benchmarking
of performance.

ISO 9001; 2000 - Quality managements -Requirements

8.4 Analysis of data

The organization shall determine collect and analyze appropriate data to demonstrate the suitability and
effectiveness of the quality management system and to evaluate where continual improvement of the
effectiveness of the quality management system can be made. This shall include data generated as a
result of monitoring and measurement and from other relevant sources. The organization shall analyze
this data to provide information on:

a) Customer satisfaction (see 8.2.1),

b) Conformity to product requirements (see 7.2.1),
c) characteristics and trends of processes and products including opportunities for preventive
action, and
d) suppliers

ISO 9001:2000- Quality management systems - Requirements

8.5 Improvement
8.5.1 Continual improvement

The organization shall continually improve the effectiveness of the quality management system through
the use of the quality policy, quality objectives, audit results, analysis of data, corrective and preventive
actions and management review.

8.5 Improvement
8.5.1 General

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The organization should continually seek to improve its processes, rather than wait for a problem to
reveal opportunities for improvement. Potential improvements can range from continual activities to
long-term improvement projects. The organization should have a process in place to identify and
manage improvement projects.

The efficiency and effectiveness of processes should be emphasized when actions are taken. These
actions should be monitored to ensure that desired goals are met. Identification of causes of deviations
may result in changes to, the product, processes and even revision of the quality management system.

8.5.2 Corrective action

The organization should plan and establish a process for corrective action. Corrective action planning
should include evaluation of the significance of problems affecting quality. The evaluation should be in
terms of the potential impact on such aspects as operating costs, costs of nonconformance, performance,
dependability, safety and customer satisfaction. Appropriate functions should be represented in the
corrective action process.

The organization should identify sources of information, collect information and define the necessary
corrective - actions. The defined corrective action should be focused on eliminating causes of
nonconformances and defects in order to avoid recurrence.
Examples of sources of information include:
customer complaints, non-
conformance reports, outputs
from management review,
internal audit reports,
outputs from data
analysis,
relevant quality management system records,
outputs from satisfaction measurements, process
measurements and results of self-assessment.

The corrective action process should include:

a definition of the causes of non-conformances and
defects, elimination of causes of non-conformances
and defects, appropriate actions to avoid recurrence of
problems, and a record of the activity and results.

Efficiency and effectiveness of processes should be emphasized when actions are taken and the actions
should be monitored to ensure that desired goals are met.

Corrective actions should be considered for inclusion in the management review process. For example,
corrective actions with high financial impact or those that have significant potential impact on customer
satisfaction should be considered.

Root because analysis results should be verified by testing, where appropriate, in order to define
effective corrective action.

ISO 9001:2000 -Quality management systems -Requirements

8.5.2 Corrective action

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The organization shall take corrective action to eliminate the cause of nonconformities in order to
prevent recurrence. Corrective action shall be appropriate to the effects of the nonconformities
encountered.
The documented procedure shall be established to define requirement for:

a) Reviewing nonconformities (including customer complaints);

b) Determining the causes of nonconformities;
c) Evaluating the need for actions to ensure that nonconformities do not recur;
d) Determining and implementing the corrective action needed;
e) Recording results of action taken;
f) Reviewing of corrective action taken.

8.5.3 Preventive action

The organization should use preventive methodologies to identify the causes of potential
nonconformances. Examples of such methodologies include risk analyses, .trend analyses, statistical
process control, fault tree analysis, failure modes and effects and criticality analyses.

Appropriate organizational representatives should participate in the preventive actions.

The organization should identify sources of information for planning and prioritizing preventive actions.
Examples of sources are:

customer needs and

expectations, market
analysis, management
review output, outputs from
data analysis, satisfaction
measurements, process
measurements,
systems that consolidate many sources of customer information,
relevant quality management system records,
results of self-assessment, and processes that provide early warning of approaching
out-of-control operating conditions.

Preventive actions should be considered for inclusion in the management review process. This is
especially true for preventive actions with high financial impact or those that have significant potential
impact on satisfaction of customers and other interested parties.

ISO 9001:2000-Quality management systems -Requirements

8.5.3 Preventive action

The organization shall determine preventive action to eliminate the causes of potential nonconformities
in order to prevent occurrence. Preventive actions shall be appropriate to the effects of the potential
problems. A documented procedure shall be established to define requirements for:

a) Determining potential nonconformities and their causes;

b) Evaluating the need for action to prevent occurrence of nonconformities;
c) Determining and implementing action needed;
d) Records of results of action taken and
e) Reviewing preventive action taken.

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8.5.4 Process for improvement

In addition to the improvement actions described in the previous sub-clauses, the organization should
define and implement a methodology for process improvement that can be applied to all processes and
activities. Such a standard methodology for process improvement can become a tool for improving
internal effectiveness and efficiency, as well as improving the satisfaction of customers and other
interested parties.

Examples of inputs to the improvement process

include: validation data, test data,
requirements and feedback from interested
parties, financial data, product performance
data, and service delivery data.

The organization should undertake small step improvement activities integral to routine operations in
order to maintain continual improvement through involvement of people. Improvement should also be
planned for breakthrough projects to achieve specific objectives.
Lesson # 28
Quality in Software Sector and Maturity Levels

Performance Maturity Levels

The performance maturity levels used by organizations are as follows:

Maturity Performance level Guidance

1 No formal approach No systematic approach evident, no results, poor results or
unpredictable results.
2 Reactive approach Problem- or prevention-based systematic approach;
minimum data on improvement results available.
3 Stable formal system Systematic process-based approach, early stage of
approach systematic improvements; data available on conformance to
objectives and existence of improvement trends.
4 Continual improvement Improvement process in use; good results and emphasized
emphasized sustained improvement trends.
5 Best-in-class Strongly integrated improvement process; best-in-class
performance bench marked results demonstrated

Software Engineering Institute‘s Capability Maturity Model (CMMI) is also a generic model of quality
improvement and is focused on processes and systems related to IT/Software sector.

Capability Maturity Model (CMM) broadly refers to a process improvement approach that is based on
a process model. CMM also refers specifically to the first such model, developed by the Software
Engineering Institute (SEI) in the mid-1980s, as well as the family of process models that followed. A
process model is a structured collection of practices that describe the characteristics of effective
processes; the practices included are those proven by experience to be effective.

The Capability Maturity Model can be used to assess an organization against a scale of five process
maturity levels. Each level ranks the organization according to its standardization of processes in the
subject area being assessed. The subject areas can be as diverse as software engineering, systems
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engineering, project management, risk management, system acquisition, information technology (IT)
services and personnel management.

The Capability Maturity Model (CMM) is a way to develop and refine an organization's processes.
The first CMM was for the purpose of developing and refining software development processes. A
maturity model is a structured collection of elements that describe characteristics of effective processes.
A maturity model provides:

a place to start
the benefit of a community‘s prior
experiences a common language and a
shared vision a framework for prioritizing
actions
a way to define what improvement means for your organization

A maturity model can be used as a benchmark for assessing different organizations for equivalent
comparison. It describes the maturity of the company based upon the project the company is dealing
with and the clients.

Structure of CMM
Maturity Levels A layered framework providing a progression to the discipline needed to engage in
continuous improvement (It is important to state here that an organization develops the ability to assess
the impact of a new practice, technology, or tool on their activity. Hence it is not a matter of adopting
these; rather it is a matter of determining how innovative efforts influence existing practices. This really
empowers projects, teams, and organizations by giving them the foundation to support reasoned choice.)

Key Process Areas Key process area (KPA) identifies a cluster of related activities that, when
performed collectively, achieve a set of goals considered important.

Goals The goals of a key process area summarize the states that must exist for that key process area to
have been implemented in an effective and lasting way. The extent to which the goals have been
accomplished is an indicator of how much capability the organization has established at that maturity
level. The goals signify the scope, boundaries, and intent of each key process area.

Common Features Common features include practices that implement and institutionalize a key
process area. These five types of common features include: Commitment to Perform, Ability to Perform,
Activities Performed, Measurement and Analysis, and Verifying Implementation.

Key Practices The key practices describe the elements of infrastructure and practice that contribute
most effectively to the implementation and institutionalization of the key process areas.

Levels of the CMM

There are five levels of the CMM. According to the SEI,

Level 1 - Initial

At maturity level 1, processes are usually ad hoc and the organization usually does not provide a stable
environment. Success in these organizations depends on the competence and heroics of the people in the
organization and not on the use of proven processes. In spite of this ad hoc, chaotic environment,

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maturity level 1 organizations often produce products and services that work; however, they frequently
exceed the budget and schedule of their projects.

Maturity level 1 organizations are characterized by a tendency to over commit, abandon processes in the
time of crisis, and not be able to repeat their past successes again. Level 1 software project success
depends on having high quality people.

Level 2 – Repeatable

At maturity level 2, software development successes are repeatable. The processes may not repeat for all
the projects in the organization. The organization may use some basic project management to track cost
and schedule.

Process discipline helps ensure that existing practices are retained during times of stress. When these
practices are in place, projects are performed and managed according to their documented plans.

Project status and the delivery of services are visible to management at defined points (for example, at
major milestones and at the completion of major tasks).

Basic project management processes are established to track cost, schedule, and functionality. The
minimum process discipline is in place to repeat earlier successes on projects with similar applications
and scope. There is still a significant risk of exceeding cost and time estimates.

Level 3 – Defined

The organization‘s set of standard processes, which is the basis for level 3, is established and improved
over time. These standard processes are used to establish consistency across the organization. Projects
establish their defined processes by the organization‘s set of standard processes according to tailoring
guidelines.

The organization‘s management establishes process objectives based on the organization‘s set of
standard processes and ensures that these objectives are appropriately addressed.

A critical distinction between level 2 and level 3 is the scope of standards, process descriptions, and
procedures. At level 2, the standards, process descriptions, and procedures may be quite different in
each specific instance of the process (for example, on a particular project). At level 3, the standards,
process descriptions, and procedures for a project are tailored from the organization‘s set of standard
processes to suit a particular project or organizational unit.

Level 4 - Managed

Using precise measurements, management can effectively control the software development effort. In
particular, management can identify ways to adjust and adapt the process to particular projects without
measurable losses of quality or deviations from specifications. Organizations at this level set
quantitative quality goals for both software process and software maintenance.

Sub processes are selected that significantly contribute to overall process performance. These selected
sub processes are controlled using statistical and other quantitative techniques.

A critical distinction between maturity level 3 and maturity level 4 is the predictability of process
performance. At maturity level 4, the performance of processes is controlled using statistical and other
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quantitative techniques, and is quantitatively predictable. At maturity level 3, processes are only
qualitatively predictable.

Level 5 - Optimizing
Maturity level 5 focuses on continually improving process performance through both incremental and
innovative technological improvements. Quantitative process-improvement objectives for the
organization are established, continually revised to reflect changing business objectives, and used as
criteria in managing process improvement. The effects of deployed process improvements are measured
and evaluated against the quantitative process-improvement objectives. Both the defined processes and
the organization‘s set of standard processes are targets of measurable improvement activities.

Process improvements to address common causes of process variation and measurably improve the
organization‘s processes are identified, evaluated, and deployed. Optimizing processes that are nimble,
adaptable and innovative depends on the participation of an empowered workforce aligned with the
business values and objectives of the organization. The organization‘s ability to rapidly respond to
changes and opportunities is enhanced by finding ways to accelerate and share learning.

A critical distinction between maturity level 4 and maturity level 5 is the type of process variation
addressed. At maturity level 4, processes are concerned with addressing special causes of process
variation and providing statistical predictability of the results. Though processes may produce
predictable results, the results may be insufficient to achieve the established objectives. At maturity
level 5, processes are concerned with addressing common causes of process variation and changing the
process (that is, shifting the mean of the process performance) to improve process performance (while
maintaining statistical probability) to achieve the established quantitative process-improvement
objectives.
Lesson # 29
Installing an ISO -9001 QM System

ISO 9001‘s requirements for quality management systems are also generic in nature, and are applicable
to organizations in any industry or economic sector. Whether the organization manufactures a product or
provides a service, whether it is a company or a governmental agency, whether it is large or small, ISO
9000 can apply, and be used to advantage. To be registered the organization must go through a process
that includes the following steps:

1. Develop (or upgrade) a quality manual that describes how the company will assure the quality
of its products or services.
2. Document procedures (or upgrade existing documentation) that describe how the various
processes for design, production, continual improvement, and so forth, will be operated. This
must include procedures for management review/audits and the like.
3. The organization must provide evidence of top management‘s commitment to the QMS and its
continual improvement.
4. The organization‘s top management must ensure that customer requirements are determined and
met.
5. The organization must hire an accredited registrar company to examine its systems, processes,
procedures, quality manual, and related items. If everything is in order, registration will be
granted. Otherwise, the registrar will inform the company of which areas require work (but will
not inform the company specifically what must be done), and a second visit will be scheduled.
6. Once registration is accomplished, the company will conduct its own internal audits to ensure
that the systems, processes, and procedures are working as intended.
7. Also once registered, the outside registrar will make periodic audits for the same purpose. These
audits must be passed to retain registration.
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An important point to understand about ISO 9000 is that the organization has to respond to all ISO 9000
requirements and tell the registrar specifically what it is going to do and how. ISO does not tell or advise
the organization. Assuming the registrar agrees with the organization‘s plan, registration is awarded. To
retain that registration, the organization must do what it said it would do.

Implementation, AUDIT and Registration

The registration process includes document review by the registrar of the quality system documents or
quality manual; pre-assessment, which identifies potential noncompliance in the quality system or in the
documentation; assessment by a team of two or three auditors of the quality system and its
documentation; and surveillance, or periodic re-audits to verify conformity with the practices and
systems registered. During the assessment, auditors might ask such question as (using management
responsibility as an example):

Does a documented policy on quality exist? Have job descriptions for people who manage or perform
work affecting quality been documented? Are descriptions of functions that affect quality been
documented? Are descriptions of functions that affect quality available? Has management designated a
person or group with the authority to prevent nonconformities in products, identify and record quality
problems, and recommend solutions? What means are used to verify the solutions?
Re-certification is required every three years. Individual sites – not entire companies – must achieve
registration individually. All costs are borne by the applicant, so the process can be quite expensive.

Implementation and development barriers

1) Poor Planning -- The absence of a sound strategy has often contributed to ineffective quality
improvement. Juran noted that deficiencies in the original planning cause a process to run at a high
level of chronic waste. Using data collected at then recent seminars, Juran reported that although
some managers were not pleased with their progress on their quality implementation agenda, they
gave quality planning low priority.
2) Lack of management commitment -- A quality implementation program will succeed only if top
management is fully committed beyond public announcements. Success requires devotion and
highly visible and articulate champions.
3) Lack of commitment in quality management may stem from various reasons. Major obstacles
include the preoccupation with short-term profits and the limited experience and training of many
executives. Juran, for example, observed that many managers have extensive experience in business
and finance but not in quality improvement.
Top management is sometimes hesitant to initiate a far-reaching program unless forced to by
competition. The vice president of quality and training at Reimer Express suggested that the
company adopt a more proactive stance in promoting quality production and personnel training. The
vice president of quality and customer satisfaction at Xerox Canada stated that decision-makers
must risk a "step of faith." He agreed, however, that this is difficult when faced with a crisis, and
more so when a company is in a comfortable position.
4) A common problem in implementing a quality program is the lack of acceptance by middle and
lower managers. Often, line managers isolate themselves from floor workers and resist considering
their suggestions.
5) Resistance of the workforce -- A workforce is often unwilling to embrace TQM for a variety of
reasons. Oakland explained that a lack of long-term objectives and targets would cause a quality
implementation program to lose credibility. Production workers must want TQM to continue
because they recognize the real benefits to society. Lehr pointed out that at one company the

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improvement effort was sometimes misinterpreted as a motivation, productivity or cost-reduction

program.
6) Lack of proper training -- There is evidence that lack of understanding and proper training exists
at all levels of an organization, and that it is a large contributor to worker resistance. Schein, for
example, mentioned that business school failure to teach relevant process skills contributed to
manager ineffectiveness.
TQM requires a well-educated workforce with a solid understanding of basic math, reading, writing
and communication. Although companies invest heavily in quality awareness, statistical process
control, and quality circles, often the training is too narrowly focused.
7) Teamwork complacency -- Most TQM programs place substantial emphasis on teamwork and
problem-solving groups. Firms such as Xerox and 3M have several thousand such groups. Problems
arise when teams feel they have no authority, when they lack direction and purpose and when their
large number causes status confusion.
Newall and Dale found that teams are seldom fully used, and their individual members are often
complacent. They suggested these problems are caused by a lack of feedback, since few companies
have effective communication channels between senior managers and production workers. Oakland
warned of basic misconceptions concerning the status of various teams during the initial years of a
quality program. Often their roles are distorted because the workforce feels that some teams are for
workers while others are for management. In addition, communications are sometimes so poor that
many staff members are unaware of a team's existence.
8) Use of an off-the-shelf program -- Many executives learn through their mistakes that a quality
process must be adapted to, not adopted by, an organization. Companies that introduce off-the-shelf
packages often find that they do not suit their needs. Ultimately, prepackaged quality programs are
either completely rejected or modified extensively.
Lehr reported that not one single process or approach could be installed intact in two different
organizations. Each firm must custom-make its own quality program to fit the culture, and practices
and policies that are unique to that organization.
9) Failure to change organizational philosophy -- Many firms find that the transition of performance
through management controls to performance through people is arduous to accomplish. This is
facilitated by modifying the reward system to emphasize long-term goals and quality output instead
of filling short-term production quotas.
Although short-term profits are important to maintain a firm's liquidity, they should not be the final
judge of a company's performance. TQM should be a high priority with senior executives because it
pertains to the long-term success of the organization. The implementation of a successful TQM
project precipitates rapid quality improvement. However, the financial rewards are more long-term.
This leads to initial disappointment, considering the extraordinary effort and innovation required to
eliminate the last five percent of defectives.
Rewards and incentive programs are seldom shifted to favor quality improvement. When they are,
Cox warned against the use of extrinsic controls that compel behavioral changes in people. He
observed that performance measures placed on managers might lead them to take quality
improvement seriously, but only enough to meet the minimum standards. In such cases, the
company culture remains predominantly production-driven even though management may believe
that it has achieved total quality. In addition, worker incentives often cause conflict and inhibit the
cooperation needed for continuous improvement.
10) Lack of resources provided -- Newall and Dale found that despite their importance, many quality
departments were over-worked and understaffed. Juran reported that although the return on
investment for a quality improvement project is very high, many companies fail to provide the
resources necessary to achieve significant results.
11) Lack of effective measurement of quality improvement -- TQM is centered on monitoring
employees and processes, and establishing objectives that anticipate the customer's needs so that he
is surprised and delighted. This has posed a considerable challenge to many companies.

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Source: http://www.allbusiness.com/management/benchmarking-quality-improvement/436368-1.html

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Lesson # 30
Creating Business Excellence

Before we look at excellence models, let us see why sometime these initiatives fail. There
are many reasons for Quality Programs failures, including the following:

The efforts were too narrowly focused, as with statistical applications on the shop floor.
The efforts were mis-focused, limited to improving only ―quality of work life‖ issues for
employees rather than also addressing issues of strategic concern.
The managers relied on traditional methods and assumptions, ad were not equipped with the
right tools, techniques, and theory to improve quality.
The managers were too focused on tools and techniques, and did not understand how to
transform themselves, their employees, and the organization.
The managers were too impatient, with a short-term focus, and unwilling to stay the course,
overcome initial barriers, and wait for long-term gains. The managers never care for the
culture change in organization.

Consider the following ten reasons why TQM ―programs‖ do not work for many companies:

1. TQM focuses people’s attention on internal processes rather than on external results An asset
of TQM is that it gets managers to attend to internal processes. But taken to an extreme,
managers can get too preoccupied with internal issues such as the controversial issue of
performance measurement and ignore shifting perceptions and preferences of customers.
2. TQM focuses on minimum standards. Zero defects and no rework efficiency distract people
form adding value and excitement to customers‘ lives.
3. TQM develops its own cumbersome bureaucracy. Organizational charts and reporting systems
with interlocking committees, councils, and improvement teams imply a linear and predictable
improvement process, rather than the chaotic and disruptive rebuilding that is often necessary.
4. TQM delegates quality to quality “experts” rather than to “real” people. Quality shouldn‘t be
delegated, but lived in the strategy of the company and roles of the managers.
5. TQM does not demand radical organizational reform. Real quality improvement requires
structural change (perhaps flattened structures), and liberation of people from stifling control
systems and the tyranny of functionalism which precludes teamwork.
6. TQM does not demand changes in management compensation. If rewarded on short-term
financial gains, managers will not be likely to attend t quality measures.
7. TQM appeals to faddism, egotism, and quick-fixism. Although they will not admit it, many
managers have applied for awards, like the ISO, EQA, Baldrige, for reasons of personal
aggrandizement and corporate public relations, or for quick and painless profitability. In reality,
quality requires a never ending pursuit of improvement.
8. TQM drains entrepreneurship and innovation from corporate culture. Too much emphasis on
standardization and routine precludes the constant shifting needed t keep up with external
changes.
9. TQM has no place for love and passion. Though this comment seems a bit precious, it means
that the analytical, detached, and sterile programs put in place to ensure quality are often devoid
of the human emotion and soul that inspire attachment to the company by employees and to the
products by customers

Certainly, no all TQM programs are characterized by all of these deficiencies. But many of the TQM
failures suffer at least a few of these major problems. The underlying cause of all these TQM
deficiencies is that managers failed to understand the concept of quality. Some managers define quality

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too narrowly as ―meeting specifications.‖ Others do not define quality at all, but rely on the claim, ―I
know it when I see it.‖ We define quality too narrowly as ―meeting specifications.‖ Others do not
define quality at all, but rely on the claim, ―I know it when I see it.‖ We define quality as a principle
that encourages excellence in everything: products, strategies, systems, processes, and people. As you
will see, there are many ways that quality can be pursued and realized. Some of the specific approaches
that help managers realize the general principle of excellence are presented below.

To inspire purposeful change for improvement, managers must have a clear understanding of quality.
They must understand how it relates to their roles, and how it must be integrated and connected to the
organization‘s strategy for providing value to customers. This integrated approach brings quality into
the mainstream of managerial practice.

Psychologists suggest that individuals go through four stages of learning:

1. Unconscious in competence: You don‘t know that you don‘t know.

2. Conscious incompetence: You realize that you don‘t know.
3. Conscious competence: You learn to do, but with conscious effort.
4. Unconscious competence: Performance comes effortlessly.

Organizations seem to follow the same paradigm.

For organizations committed to pursuing total quality, change is a way of life. Organizational change is
needed in implementing TQ and constantly there after. In the initial stage, an effort must be mounted to
begin to change the culture of the organization. Unless a culture based on customer satisfaction,
continuous improvement, and teamwork is established, TQ will belittle more than ―just another one of
management‘s programs.‖ Indeed, this is often the cause of failure of TQ initiatives.

Once TQ is underway in an organization, continuous improvement efforts will relentlessly create

changes in product designs, standard operating procedures, and virtually every other aspect of
organizations. One important aspect of continuous improvement is reengineering, in which the
processes by which the organization operates are reexamined and redesigned to provide higher quality at
lower cost.

Elements of a Total Quality Culture

The organizational culture needed to support TQ is one that values customers, improvement, and
teamwork. In an organization with a TQ-friendly culture, everyone believes that customers are the key
to the organization‘s future and that their needed must come first. If two employees are having a
conversation and a customer enters the shop, the conversation ends until the customer is served.

Employees in a quality –oriented culture instinctively act as a team. If someone is away from her desk
and her phone rings, another employee will answer it rather than leave a customer hanging.
Organizations where a focus on customers, continuous improvement, and teamwork are taken for
granted have a good chance of succeeding at total quality. Most organizations do not have such a culture
prior to exposure to TQ; some degree of cultural change is necessary.

These elements, along with several others, are reflected clearly in the Baldrige, EFMD and other
National Quality Program Criteria for Performance Excellence. The criteria are built upon a set of
―core values and concepts‖.

Visionary leadership,
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Customer-driven excellence,
Organizational and personal learning,
Valuing employees and partners,
Agility,
Focus on the future,
Managing for innovation,
Management by fact,
Public responsibility and citizenship,
Focus on results and creating value, and systems perspective.

These values provide a good summary of the cultural elements necessary to sustain a total quality
environment and are embedded in the beliefs and behaviors of high-performing organizations.

The existence of a set of cultural values necessary for successful TQ does not mean that all organization
that wish to practice total quality must have the same culture. Many aspects of culture differ greatly
from one quality oriented company to another. Company personnel may prefer to communicate in
person or in writing; they may wear uniforms, gray flannel suits, or jeans. As long as they hold the core
values of TQ, quality can find a home in their organization.

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Lesson # 31
Creating Quality at Strategic, Tactical and Operational Level

In 1950 Deming drew the following picture on a blackboard for a handful of Japanese executives:

Design and redesign Consumer

research

Suppliers Inputs Outputs Customers

Processes

Many people see this as simply a diagram of a typical Production or Operation System that is linked to
customers and suppliers. Visionaries in the practice of TQ see this as a new model of an organization
chart from a strategic perspective.

The Functional Structure and Operations

In the functional structure, the organization is divided into functions such as operations, marketing, MIS
and maintenance, each of which is headed by a manager. In such organizations communication occurs
vertically up or down the chain of command, rather than horizontally across functions. Functional
structures provide organizations with a clear chain of command and allow people to specialize in the
aspect of the work for which they are best suited. They also make it easy to evaluate people based on a
narrow but clear set of responsibilities. For these reasons functional structures are common in both
manufacturing and service organizations at plant and business unit levels.

Problems with Functional Structure

Despite its popularity, the functional structure is designed primarily for the administrative convenience
of the organization, rather than for providing high-quality service to customers. From a TQ point of
view, the functional structure has several inadequacies.

The Functional Structure Separates Employees from Customers

Few employees in the functional organization have direct contact with customers or even a clear idea of
how their work combines with the work of others to satisfy customers. The functional structure tends to
insulate employees from learning about customer expectations and their degree of satisfaction with the
service or product the firm is providing. Being insulated from customers encourages in workers a
narrow conception of their responsibilities. This is often expressed in statements such as ―It‘s not my
job‖ or ―I just work here.‖ Even when such employees want to help customers, they often have such a
limited understanding of how their organizational system works that they are unable to do so. This often
results in demotivated workers and poor quality work.

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Functional Structure for a Manufacturing Company

President

Marketing Production Finance Engineering

Director Director Director Director

Manager Manager
Plant # 1 Plant # 2

Operations Quality Control Purchasing Accounting

Manager Manager Manager Manager

Most of us have experienced this phenomenon when we call a large organization trying to get help and
get switched to several different people before (if we‘re lucky) finding someone willing and able to help
us. If our needs as customers relate to the product or service as a whole, but the knowledge and
responsibilities of anyone with whom we deal relate only to their function, we are doomed to
disappointment.

The Functional Structure Inhibits Process Improvement

No organizational unit has control over a whole processes, although most processes involve a large
number of functions. This is because the breakup of the organization into functions is usually unrelated
to the processes used to deliver a product to the customer. This structure is likely to create complex,
wasteful processes, as people do things in one area that must be redone or undone, in another.

For example, some organization maintain a group of engineers whose sole responsibility is to redesign
products so that they can be manufactured effectively. The engineers who design the products in the first
place worry only about product performance, not manufacturability. (For another example of problems
in coordinating design and manufacturing) Worse yet, if one function tries to improve its part, it may
well make things worse (more wasted time and effort, more cost) for another part of the process.
In this environment, continuous process improvement doesn‘t stand a chance. This arrangement
obviously stands in the way of continuous process improvement. Organizations pursuing TQ often
retain their quality assurance departments, but these units act more as coaches or facilitators to
employees, rather than as the group with primary responsibility for quality. In summary, the functional
organization compromises total quality in several ways: It distances people from customers and
insulates them from customer expectations. It promotes complex and wasteful processes and inhibits
process improvement. It separates the quality function from the rest of the organization, providing
people with an excuse for not worrying about quality.

Redesigning Organizations for Quality

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Poor organization design can be devastating to a company. One of Deming‘s 14 Points is to ―break
down barriers between departments‖ because ―people in various departments must work as a team.‖
This slogan captures in a nutshell what the TQ philosophy entails for organizational design. People
cannot contribute to customer satisfaction and continuous improvement if they are confined to
functional prisons where they cannot see customers or hear their voices. Some of the more effective
ways to break down these barriers are to focus on processes, recognize internal customers, create a
team-based organization, reduce hierarchy, and use steering committees.

Focus on Processes

A process is how work creates value for customers. Common business process include acquiring
customer and market knowledge, fulfilling customer orders, purchasing, developing new products or
service, strategic planning, production or service delivery, distribution, research and development,
information management, performance measurement, and training, to name just a few. Individuals or
groups, known as process owners, are accountable for process performance and have the authority to
manage and improve their process. Process owners may range from high-level executives who manage
cross-functional processes to workers who run machinery on the shop floor. Assigning process owners
ensures that someone is responsible to manage the process and optimize its effectiveness.

Process versus Function

CEO

Functional Focus

Vice President Vice President

Department Department Department Department Department

Manager Manager Manager Manager Manager

Process A
Process Focus
Process B

Process C

Process D

Process E

A process focus, as opposed to the functional structure, is shown above. Nearly every major activity
within a business involves some form of cross-functional cooperation. A process perspective links all
parts of an organization together and increases employee understanding of the entire system, rather than
focusing on only a small part. In addition, it helps managers to recognize that problems arise from
processes, not people. By aligning the structure of an organization with the actual work processes that
the organization performs, customers may be served more effectively. Process management involves the

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design of processes to develop and deliver products and services that meet the needs of customers, daily
control so that they perform as required, and their continual improvement.

Create a Team-Based Organization

As more and more companies accept the process view of organizations, they are structuring the quality
organization around functional or cross-functional teams, each of which has the responsibility to carry
out and improve one of the organization‘s core processes. Depending on the size of the organization and
the nature of the processes, teams may include everyone who contributes to a given process or only a
representative subset. Similarly, the tams may meet continuously on a crash basis until their new process
design is complete, after which they may meet periodically or on an ad hoc basis whenever necessary.
For example, Solectron Corporation, a two-time Baldrige recipient, has a customer focus team for each
customer that includes personnel from quality, manufacturing management, project engineering, sales,
production control, test engineering, and a project buyer and program manager.

Team based Organizational Structure at one Plant

Team
Reps
Safety Council
Team

Core Process
Teams Safety
Reps
Innovation
Team

Quality
Reps

Team-Based Organizational Chart

System and Support Service

Customers

Customer ©CopyrightCust omeUniversity

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Team Team Team
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Executive
Steering
Committee

CEO

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Strategic Planning and the Baldrige Award

The Baldrige Award recognizes the importance of integrating total quality principles with overall
business planning. The Strategic Planning category addresses strategic business planning and deployment
of plans. It stresses tKat customer-driven quality and operational performance are key strategic business
issues that need to be an integral part of overall company planning, and emphasizes that improvement and
learning must be integral parts of company work processes. The special role of strategic planning is to
align work processes with the company strategic directions, thereby ensuring that improvement and
learning reinforce company priorities.

The Strategic Planning category examines how organizations:

Plan for the long term, and understand the key influences, risks, challenges, and other
requirements that might affect the organization‘s future opportunities and directions. This is to
help ensure that short-term action plans are aligned with the organization‘s longer-term strategic
directions.
Project the future competitive environment to help detect and reduce competitive threats, shorten
reaction time, and identify opportunities.
Develop action plans and deploy resources – particularly human resources – to achieve
alignment and consistency, and provide a basis for setting and communicating priorities for
ongoing improvement activities.
Ensure that deployment will be effective – that a measurement system enables tracking of action
plan achievement in all areas.

The integration of quality planning with business planning occurred in the 1995 criteria revision. Most
symbolic was the change in the category‘s title from ―Strategic Quality Planning‖ to ―Strategic
Planning.‖ This change signaled a ―major emphasis on business strategy as the most appropriate
viewof-the-future context for managing performance.‖ The integration of quality and operational issues
with business planning became a dominant theme, with a focus on ―Performance,‖ ―Competitive
position,‖
―Customer-related,‖ and ―Operational‖ themes.

The ISO-9001 model has still to work out ways how to incorporate strategic planning into business
planning; however, it does take good care of tactical and operational quality control.

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Lesson # 32
Big Q and Small q Leadership for Quality

Big Q and Small q:

Dr. Juran contrasted the difference between managing to achieve Quality across the Board, in all
functions of the organization, and for all the products and services (Big Q) with managing for quality on
a limited basis (Little or Small q). Quality Control and inspection activities are little or Small q. Quality
Assurance may be Big Q or Small q depending upon how it functions within an organization and Total
Quality efforts known as efforts for Big Q. Quality is strategic and requires leadership in all functions
and across organization.

Leadership for Quality:

Leadership is fundamental to management and organizational behavior and is on just about everyone‘s
short list of prerequisites for organizational success. Thus it is not surprising that leadership plays a
crucial role in the total quality organization. Virtually every article and book written about quality
emphasizes leadership. ―Teach and institute leadership‖ is one of W.E. Deming‘s 14 Points. Leadership
is the first category in the Malcolm Baldrige National Quality Award and is recognized as the ―driver‖
of successful quality systems.

Perspectives on Leadership

In practice, the notion of leadership can be as elusive as the notion of quality itself. Most definitions of
leadership reflect an assortment of behaviors, for example:

Vision that stimulates hope and mission that transforms hope into reality;
Radical servant hood that saturates the organization;
Stewardship that shepherds its resources;
Integration that drives its economy;
The courage to sacrifice personal or team goals for the greater community good;
Communication that coordinates its efforts;
Consensus that drives unity of purpose;
Empowerment that grants permission to make mistakes, encourages the honesty to admit
them, and gives the opportunity to learn from them; and
Conviction that provides the stamina to continually strive toward business excellence.

Although true leadership applies to everyone in an organization we generally think of executive

leadership, which focuses on the roles of senior managers in guiding an organization to fulfill its
mission and meet its goals, when we use the term.

Why is leadership so important to quality? Leaders establish plans and goals for the organization. If the
plans and goals d not include quality or, worse yet, are antithetical to quality, the quality effort will die.
Leaders help to shape the culture of the organization through key decisions and symbolic actions. If they
help to shape a culture that puts convenience or short-term benefits ahead of quality, it will die.
Leadership distributes resources. If resources are showered on programs that cut short-term costs while
quality is starved for resources, quality will die. This list could go on. Virtually everything that an
organization needs to succeed in meeting its customers‘ expectations – goals, plans, culture, resources –
can either be helped or hurt by leaders. With this in mind, let us examine in more detail the roles that
leaders play in a total quality company.
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The criteria for the Malcolm Baldrige National Quality Award also dwell heavily on leadership. Here is
the philosophy of leadership within the Baldrige criteria:
An organization‘s senior leaders should set directions and create a customer focus, clear and
visible values, and high expectations . . . The directions, values, and expectations should
balance the needs of all your stakeholders. Your leaders should ensure the creation of strategies,
systems, and methods for achieving excellence, stimulating innovation, and building knowledge
and capabilities. The values and strategies should help guide all activities and decisions of your
organization.
Senior leader should inspire and motivate your entire workforce and should encourage all
employees to contribute, to develop and learn, to be innovative, and t be creative. Senior leaders
should serve as role models through their ethical behavior and their personal involvement in
planning, communications, coaching, and development of future leaders, review o
organizational performance, and employee recognition. As role models; they can reinforce
values and expectations while building leadership, commitment, and initiative throughout your
organization.

The roles of a Quality Leader

Underlying the concept of quality leadership are some clear imperatives for managers who aspire to
quality leadership. First, they must establish a vision. Second, they must live the values. Third, they
must lead the improvement efforts. Let‘ examine each of these in turn.

Establish a Vision

A vision is a vivid concept of what an organization could be. It is a striking depiction of possibilities, of
potential. It is a dream, both in the sense of being desirable and in the sense of being a long ay from the
current reality, but it is not an ―impossible dream.‖ A vision should be clear and exciting to an
organization‘s employees. It should be linked to customers‘ needs and convey a general strategy for
achieving the mission.

To be quality leaders, managers must establish a vision for and in their organization. ―Establishing‖ a
vision implies both the intellectual and emotional work of conceiving the vision and the interpersonal
and managerial work of communicating the vision to the organization and leading employees to
embrace it. Jane Carroll, president of The Forum Corporation, Europe/Asia, emphasizes the visionary
role of leadership for quality, which she calls focus. She believes that most managers do not understand
the need for a quality vision and their personal involvement in establishing it:

In our experience, very few CEOs have a real sense of what their role is in the quality
improvement process. It goes far beyond simply being a cheerleader and handing out an
occasional award. Top management has to provide the proper focus for the
organization. This is not something that can be delegated.

Putting together a vision is hard work, but quality leaders do not have to do it alone. They can draw
upon the talents and imagination of all the members of their organizations in developing their vision. In
fact, in many organizations, people are walking around with ―mini-visions‖ of their own that sound like
―if only we could [do something they have been told can‘t be done], things would be so much better
around here.‖ The raw material for a vision may be all around leaders in the organization. The first step
may be simply listening for it. Leaders who are open to the ideas of people throughout the organization
will be much better prepared to develop a vision that people will accept.

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In the current competitive environment, if a given organization is not pursuing a customer-oriented

vision, competing organizations probably are and are planning to use their vision to win over the
competition‘s customers (or are already doing so). This is why a quality vision is such a crucial first step
in quality leadership. An organization with no vision about how to create long-term customer loyalty
has little chance of survival (unless, of course, it‘s a monopoly). The second part of establishing a vision

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is instilling it in all the members of the organization. This will be a lot easier if many people were
involved in the first part of the process, and the leader doesn‘t act like coming down the from the skies.

Live the Values

Pursuing the quality vision commits the organization to living by a set of values such as devotion to
customers, continuous improvement, and teamwork. A manager who hopes the organization will
embrace and live by these values must live them to the utmost.

Manager‘s actions can symbolize their commitment to quality-oriented values in many concrete ways.
For example, they can attend training programs on various aspects of quality, instead of just sending
others. They can practice continuous improvement in processes that they control, such as strategic
planning and capital budgeting. Perhaps most importantly, they can provide adequate funding for quality
efforts. So that TQ will not be the ―poor cousin‖ to other business issues.

Lead Continuous Improvement

Beyond establishing vision for the organization and expressing quality values through their decisions
and actions, quality-oriented leaders must lead the continuous process improvement efforts that are the
meat and potatoes of total quality management. All of the vision and values in the world are worthless if
the organization is not continuously making strides to improve its performance in the eyes of customers.
Visions of world-class quality and competitiveness can only be achieved if an organization keeps
finding ways to do things a little better and a little faster. Leaders must be at the center of these efforts.

Managers are sometime reluctant to take an active role in the organization‘s

improvement efforts for fear of dominating or undercutting their newly empowered
workers. Like many aspects of management, this is a question of balance, but it is
mistake for managers to remain uninvolved in process improvement efforts.

There are a number of ways for managers to lead continuous improvement, and which ones make the
most sense will depend on the specific organization. One option already mentioned is for leaders t lead
by example, by working continuously to improve the processes that they control. For some of these
processes, organizational members are among the customers, which gives management the opportunity
to model for them the behaviors associated with obtaining and acting upon customer input. If
management were to streamline the capital budgeting procedure by speeding up the process and
eliminating non-value-added activities, it would provide a powerful example for people to emulate.

A second way that managers can lead process improvement is to help organization members prioritize
processes to work on. Here managers can take advantage of their knowledge of the ―big picture‖ and
suggest avenues of improvement that are likely to have big payoffs in terms of quality improvement and
customer satisfaction.

Third way is to inspire people to do things they do not believe they can do. Motorola set aggressive
goals of reducing defects per unit of output in ever operation by 100-fold in four years and reducing
cycle time by 50 percent each year. One of Hewlett-Packard‘s goals is to reduce the interval between
product concept and investment payback by one-half in five years. The 3M Company seeks to generate
25 percent of sales from products les than two years old. To promote such ―stretch goals,‖ leaders
provide the resources and support necessary to meet them, especially training.

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Of course, managers leading process improvement bear some responsibility for educating al their
associates as to how the various processes within the company fit together. If this is done effectively,
organization members will be able eventually to set their own priorities for process improvement.

Managers can also lead this effort by removing barriers to success in process improvement. Barriers
may consist of a nettlesome standard operating procedure or a recalcitrant manager in a key position.
Without leadership from management, such barriers may undermine efforts at process improvement. Of
course, in dealing with such barriers managers must continue to operate in a manner consistent with
quality values. For example managers who balk at changes must be treated with respect and their
reservations considered seriously, even if they are eventually overruled.

One final way for managers to lead process improvement is to keep track of improvement efforts, to
encourage them, and to provide recognition when key milestones are reached.

Management and Leadership

A recent treatment of leadership by John Kotter compares the concept of leadership to the concept of
management. According to this view, management is needed to create order amid complexity, and
leadership is needed to stimulate the organizational change necessary to keep up with a changing
environment. This view avoids the simplistic ideas that management is some-how trivial, generally
unnecessary, and should be replaced by leadership, and that the same person cannot practice both
management and leadership.

Kotter differentiates leadership from management by contrasting the activities central to each. While
management begins with planning and budgeting, leadership begins with setting a direction.
Directionsetting involves creating a vision of the future, as well as a set of approaches for a achieving
the vision. To promote goal achievement, management practices organizes and staffing, while
leadership works on aligning people-communicating the vision and developing commitment to it.
Management achieves plans through controlling and problem solving, whereas leadership achieves its
vision through motivating and inspiring.

Kotter‘s view of leadership – similar to transformational theory – dovetails with our depiction of quality
leadership. Both focus on developing and communicating a vision. Kotter‘s view of inspiring resembles
our discussion of giving people values to embrace and then making sure that the leaders is practicing
them.

The idea of aligning people is consistent with the idea of empowerment, because it gives people a goal,
and then leaves them to move in that direction. Our description of the role of leaders in continuous
improvement is more hands-on than Kotter‘s description, perhaps suggesting that some management
behaviors will continue to be important to leaders in total quality organizations.
Lesson # 33
Strategic Planning for Quality and Advanced Quality Management Tools

A firm has many options in defining its long-terms goals and objectives, the customers it wants to serve,
the products and services it produces and delivers, and the design of the production and service system
to meet these objectives. Strategic planning is the process by which the members of an organization
envision its future and develop the necessary procedures and operations to carry out that vision. Strategy
– the result of strategic planning – is the patter of decisions that determines and reveals a company‘s
goals, polices, and plans to meet the needs of its stakeholders. An effective strategy allows a business to
create a sustainable competitive advantage.

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Total quality relates to strategic management in that it enhances an organization's ability to gain a
sustainable competitive advantage in the marketplace. Handled properly total quality can be the most
effective cost leadership and/or differentiation strategy an organization can adopt. This is because the
total quality approach is the best way to continually improve efficiency and cut costs throughout an
organization's activity-cost chain, while simultaneously continually improving the features of the
product or service that differentiates it in the marketplace. Total quality can also improve an
organization's chances of becoming a leader in a given market niche.

WHAT IS STRATEGIC MANAGEMENT?

To understand strategic management, one must first understand the concept of organizational strategy.
Strategies are defined as follows:

Organizational strategies are the approaches adopted by organizations to ensure successful

performance in the marketplace. These approaches are typically set forth in a comprehensive
document called the strategic plan.

Strategic management is management that bases all actions, activities, and decisions on what is most
likely-within an ethical framework to ensure successful performance in the marketplace. From the
strategic manager's perspective, resources are wasted unless they contribute to success in the
marketplace, and the more direct the contribution, the better.

Quality as a Strategy

The concept of strategy has different meanings to different people. James Brian Quinn characterizes
strategy as follows:

A strategy is a pattern or plan that integrates an organization‘s major goals, policies,

and action sequences into a cohesive whole. A well formulated strategy helps to
marshal and allocate an organization‘s resources into a unique and viable posture based
on its relative internal competencies and shortcomings, anticipated changes in the
environment, and contingent moves by intelligent opponents.

Formal strategies contain three elements:

1. Goals to be achieved,
2. Policies that guide or limit action, and
3. Action sequences, or programs, that accomplish the goals.

The traditional focus of business strategies has been on finance and marketing. These parallel two of the
principal sources of competitive advantage based on cost and differentiation. Total quality – with a
focus on people – leads to improvements in both areas. Therefore, quality can be viewed as a strategy in
itself.
The role of quality in business strategy has taken two significant steps since 1980. First, many firms
have recognized that a strategy driven by quality can lead to significant market advantages. Second, the
lines between quality strategy and generic business strategies have become blurred to the point where
TQ principles are integrated into most businesses‘ normal business planning; that is, TQ is a basic
operating philosophy that provides the foundation for effective management.

For most companies, integration of TQ into strategic business planning is the result of a natural
evolution. For most new companies – or those that have enjoyed a reasonable measure of success –
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quality takes a back seat to increasing sales, expanding capacity, or boosting production. Strategic
planning usually focuses on financial and marketing strategies.

COMPONENTS OF STRATEGIC MANAGEMENT

Strategic management consists of two interrelated activities: (a) strategic planning and (b) strategic
execution. These two primary components of strategic management are described in the following
sections.

STRATEGIC PLANNING

Strategic planning is the process by which an organization answers such questions as the following:
Who are we? Where are we going? How will we get there? What do we hope to accomplish? What are
our strengths and weaknesses? What are the opportunities and threats in our business environment?
Strategic planning involves developing a written plan following components: an organizational vision:
an organizational mission; guiding principles; broad strategic objectives; and specific tactics, projects, or
activities for achieving the broad objectives. Specific tactics, projects, and activities are often referred to
as the "action plan."

STRATEGIC EXECUTION

Strategic execution involves implementing strategies set forth in strategic planning, monitoring progress
toward their achievement, and adjusting as necessary. Strategic execution is implementation that
achieves maximum efficiency and effectiveness.

Monitoring involves constantly checking actual performance against performance benchmarks. Strategic
monitoring answers such questions as these: Are we achieving our objectives? This is the effectiveness
question. Are we performing as well as we needed to perform? This is the efficiency question. Adjusting
as necessary involves making corrections when the specific strategies or tactics adopted are not
producing the desired results. Such adjustments can involve a minor tweaking of plans finding ways to
overcome unexpected barriers that are encountered or even adopting a whole new set of specific
strategies.

STRATEGIC PLANNING OVERVIEW

Strategic planning, as described previously is the process whereby organizations develop a vision, a
mission, guiding principles, broad objectives, and specific strategies for achieving the broad objectives.
Before even beginning the planning process, an organization should conduct a SWOT analysis. SWOT
is the acronym for strengths, weaknesses, opportunities, and threats. A SWOT analysis answers the
following questions: What are this organization's strengths? What are this organization's weaknesses?
What opportunities exist in this organization's business environment? What threats exist in this
organization's business environment?

The steps in the strategic planning process (Following Figure) should be completed in order, because
each successive step grows out of the preceding one. The SWOT analysis provides a body of knowledge
that is needed to undertake strategic planning. The mission grows out of and supports the vision. The
guiding principles, which represent the organization's value system, guide the organization's behavior as
it pursues its mission. The broad objectives grow out of the mission and translate it into measurable
terms; Specific strategies tie directly to the broad objectives. Typically there will be two to five
strategies for; each objective but this is a general guideline, not a hard and fast rule.

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STRATEGIC PLANNING PROCESS

SWOT Analysis
(Environmental Assessment) Step 1

Develop the Vision

Step 2

Develop the Mission

Step 3

Develop the
Guiding Principles Step 4

Develop the
Broad Strategic Objectives Step 5

Develop the
Action Plans Step 6

Strategic Planning and the Baldrige Award

The Baldrige Award recognizes the importance of integrating total quality principles with overall
business planning. The Strategic Planning category addresses strategic business planning and
deployment of plans. It stresses that customer-driven quality and operational performance are key
strategic business issues that need to be an integral part of overall company planning, and emphasizes
that improvement and learning must be integral parts of company work processes. The special role of
strategic planning is to align work processes with the company strategic directions, thereby ensuring that
improvement and learning reinforce company priorities.

The Strategic Planning category examines how organizations;

Plan for the long term, and understand the key influences, risks, challenges, and other
requirements that might affect the organization‘s future opportunities and directions. This is to
help ensure that short-term action plans are aligned with the organization‘s longer-term strategic
directions.
Project the future competitive environment to help detect and reduce competitive threats,
shorten reaction time, and identify opportunities.
Develop action plans and deploy resources – particularly human resources – to achieve
alignment and consistency, and provide a basis for setting and communicating priorities for
ongoing improvement activities.
Ensure that deployment will be effective – that a measurement system enables tracking of action
plan achievement in all areas.

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The integration of quality planning with business planning occurred in the 1995 criteria revision. Most
symbolic was the change in the category‘s title from ―Strategic Quality Planning‖ to ―Strategic
Planning.‖ This change signaled a ―major emphasis on business strategy as the most appropriate
viewof-the-future context for managing performance.‖ The integration of quality and operational issues
with business planning became a dominant theme, with a focus on ―performance,‖ ―Competitive
position,‖
―customer-related,‖ and ―operational‖ themes.

CONDUCTING THE SWOT ANALYSIS

The rationale for conducting a SWOT analysis before proceeding with the development of the strategic
plan is that the organization's plan should produce a good fit between its internal situation and it external
situation. An organization's internal situation is defined by its strengths and weaknesses. An
organization's external situation is defined by the opportunities and threats that exist in its business
environment. The strategic plan should, be designed in such away that it exploits an organization's
strengths and opportunities, while simultaneously overcoming, accommodating, or circumventing
weaknesses and threats.

IDENTIFYING ORGANIZATIONAL STRENGTHS

An organizational strength is any characteristic or capability that gives the organization a competitive
advantage. The following are examples of common organizational strengths:

 Financial strength
 A good reputation in the marketplace
 Strategic focus
 High-quality products/services
 Proprietary products/services
 Cost leadership
 Strong management team
 Efficient technological processes
 Talented workforce
 Faster time to market

These are just some of the strengths an individual organization may have: many others are possible. The
key is accurately defining an organization's strengths before beginning to develop its strategic plan.

IDENTIFYING ORGANIZATIONAL WEAKNESSES

An organizational weakness is any characteristic or capability that is lacking to the extent that it puts the
organization at a competitive disadvantage. These are examples of common organizational weaknesses:

 Strategic confusion/lack of direction

 Obsolete facilities
 Obsolete processes
 Weak management team
 Insufficient skills/capabilities in the workforce
 Poorly defined operating procedures
 Too narrow a product line
 Products with decreasing demand
 Too diverse a product line
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 Poor image in the marketplace

 Weak distribution system
 Weak financial position
 High unit costs compared with those of competitors
 Poor quality in products/services

These are just a few of many weaknesses an organization may have. The main thing is to identify an
organization's weaknesses accurately before undertaking the strategic planning process.

IDENTIFYING EXTERNAL OPPORTUNITIES

External opportunities are opportunities in the organization's business environment that represent
potential avenues for growth and/or gaining a sustainable competitive advantage. The following are
examples of external opportunities that organizations may have:

 Availability of new customers

 An expanding market for .existing or potential/planned products
 Ability to diversify into related products/services
 Removal of barriers that inhibit growth
 Failures of competitors
 New on-line technologies that enhance productivity or quality

Of course, other external opportunities might be available to an organization besides these. You need to
identify all such opportunities accurately before undertaking the strategic planning process.

IDENTIFYING EXTERNAL THREATS

An external threat is a phenomenon in an organization's business environment that has the potential to
put the organization at a competitive disadvantage. Such external threats might include the following:

 Entry of lower cost competitors

 Entry of higher quality competitors
 Increased sales of substitute products/services
 Significant slowdown in market growth
 Introduction of costly new regulatory requirements
 Poor supplier relations
 Changing tastes and habits of consumers
 Potentially damaging demographic changes

Many other external threats might confront an organization. Accurately identifying every potential
external threat before you begin the strategic planning process is a must.

DEVELOPING THE VISION

An organization's guiding force, the dream of what it wants to become, and its reason for being should
be apparent in its vision. A vision is like a beacon in the distance toward which the organization is
always moving. Everything about the organization-its structure, policies, procedures, and allocation of
resources-should support the realization of the vision. In an organization with a clear vision, it is
relatively easy to stay appropriately focused. If a policy does not support the vision, why have it? If a
procedure does not support the vision, why adopt it? If the expenditure does not support the vision, why
make it? If a position or even a department doesn't support the vision, why keep it? An organization's
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vision must be established and articulated by executive management and understood by all employees.
The first step in articulating an organizational vision is writing it down. This is called the vision
statement.

DEVELOPING THE MISSION

We have just seen that the vision statement describes what an organization would like to be. It's a dream,
but it's not ―pie in the sky‖. The vision represents a dream that can come true. The mission takes the
next step and describes who the organization is, what it does and where it is going. In developing the
mission statement for any organization, one should apply the following rules of thumb:

 Describe what, and where of the organization, making sure the component describes the
organization and its customers.
 Be brief, but comprehensive. Typically one paragraph should be sufficient to describe an
organization‘s mission.
 Choose wording that is simple, easy to understand, and descriptive.
 Avoid how statements. How the mission will be accomplished is described in the ―Strategies‖
section of the strategic plan.

DEVELOPING THE GUIDING PRINCIPLES

An organization‘s guiding principles establish the framework within which it will pursue its mission.
Each guiding principle encompasses an important organizational value. Together, all of the guiding
principles represent the organization‘s value system—the foundation of its corporate culture.

DEVELOPING BROAD STRATEGIC OBJECTIVES

Broad strategic objectives translate an organization‘s mission into measurable terms. They represent
actual targets the organization aims at and will expend energy and resources trying to achieve. Broad
objectives are more specific than the mission, but they are still broad. They still fall into the realm of
what rather than how. The how aspects of strategic planning come in the next step: developing specific
tactics, projects, and activities for accomplishing broad objectives.

DEVELOPING SPECIFIC TACTICS (ACTION PLAN)

The action plan consists of specific tactics that are well-defined, finite projects and activities undertaken
for the purpose of achieving a specific desired outcome. They are undertaken for the purpose of
accomplishing an organization's broad strategic objectives. Tactics have the following characteristics.
They are SMART:

 Are specific in nature

 Are measurable
 Can be quantifiable
 Can be accomplished within a specified time frame
 Can be assigned to a specific individual or group
 Are tied directly to a broad objective

REVOLUTIONARY THINKING IN STRATEGIC PLANNING

Writing for the Harvard Business Review, Gary Hamel makes a case for revolutionary thinking as a
business strategy; He describes three types of companies that can be found in any industry:

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 Rule makers- These are the companies that built the industry in question. IBM, Sears, and
CocaCola are examples of rule makers.
 Rule takers- These are the companies that follow the rules made by the industry leaders. J. C.
Penney, Fujitsu, and U.S. Air exemplify rule takers.
 Rule breakers- These are the maverick companies that break the rules, ignore precedent, and
cast aside convention. IKEA, Charles Schwab, and Southwest Airlines are rule breakers.

Before beginning strategic planning, executives must decide which of these three types of companies
they want. Rule makers adopt one type of vision, rule takers adopt another and rule breakers, yet
another. Rule makers will adopt a vision in which they dominate and set the rules in a given market.
Rule takers will adapt a vision in which they are industry leaders but perennially less than first-place
finishers; their strategies will focus on continuous incremental improvement to work their way ever
closer to the market leader. Rule breakers will adopt a vision that focuses on carving out a market niche
that because of its characteristics may not be well served by the market leaders. Such companies will
then seek to dominate their niche market.

The Strategic Management Process Re-Cap:

Strategic planning helps leadership mold an organization‘s future and manage change by focusing on an
ideal vision of what the organization should and could be 10 to 20 years in the future. In contrast, the
term ―long range planning‖ may mean only one year in the future or the next budget submission in
many organizations. Strategic plans are developed at the highest level of an organization and deployed
throughout.

The strategic management process consists of two parts: formulation and implementation. Strategy
formulation consists of defining the mission of the organization – the concept of the business and the
vision of where it is headed; setting objectives – translating the mission into specific performance
objectives; and defining a strategy – determining specific actions to achieve the performance objectives.

Planning is good but implementation is difficult and requires various tools and skillets. Implementation
focuses on executing the strategy effectively and efficiently, as well as on evaluating performance and
making corrective adjustments when necessary.

Advanced Quality Management Tools:

To create added value for the customer and for Prevention rather than Correction, Japanese developed
the new tool set designed to address strategic issues in quality. These management planning tools are
known as Advanced Quality Tools and are as follows:

1. Matrix Diagram
2. Relations Diagram
3. Affinity Diagram
4. Systematic or Tree Diagram
5. Matrix data Analysis
6. Arrow Diagrams
7. Process Decision Program Chart

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Lesson # 34
Hoshin Kanri and Strategic Policy Deployment

Strategy Implementation:

Top management requires a method to ensure that their plans and strategies are successfully executed
(the term ―deployed‖ is frequently used) within the organization. The Japanese deploy strategy through
a process known as Hoshin Planning, or Policy Deployment. Hoshin means policy or policy
deployment. Policy deployment is a systems approach to managing change in critical business
processes. It emphasizes organization-wide planning and setting of priorities, providing resources to
meet objectives, and measuring performance as a basis for improving performance. Policy deployment
is essentially a TQ-based approach to executing a strategy. King describes it eloquently.

Imagine an organization that knows what customers will want five to ten years from
now and exactly what they will do to meet and exceed all expectations. Imagine a
planning system tat has integrated [Plan, Do, Check, Act] language and activity based
on clear, long-term thinking, a realistic measurement system with a focus on process
and results, identification of what‘s important, alignment of groups, decisions by people
who have the necessary information, planning integrated with daily activity, good
vertical communication, cross-functional communication, and everyone planning for
himself or herself, and the buy-in that results. That is Hoshin Planning.

With policy deployment, top management is responsible for developing and communicating a vision,
then building organization-wide commitment to its achievement. This vision is deployed through the
development and execution of annual policy statements (plans). All levels of employees actively
participate in generating a strategy and action plans to attain the vision.

At each level, progressively more detailed and concrete means to accomplish the annual plans are
determined. The plans are hierarchical, cascading downward from top management‘s plans. There
should be a clear link to common goals and activities throughout the organizational hierarchy. Policy
deployment provides frequent evaluation and modification based on feedback from regularly scheduled
audits of the process. Plans and actions are developed based on analysis of the root causes of a problem,
rather than only on the symptoms. Planning has a high degree of detail, including the anticipation of
possible problems during implementation. The emphasis is on the improvement of the process, as
opposed to a results-only orientation.

An example of policy deployment is provided by very well known Japanese, Mr. Imai:

To illustrate the need for policy deployment, let us consider the following case: The president
of an airline company proclaims that he believes in safety and that his corporate goals
are to make sure that safety is maintained throughout the company. This proclamation is
prominently featured in the company‘s quarterly report and its advertising. Let us
further suppose that the department managers also swear a firm belief in safety. The
catering manager says he believes in safety. The pilots say they believe in safety. The
flight crews say they believe in safety. Everyone in the company practices safety. True?
Or might everyone simply be paying lip service to the idea of safety?

On the other hand, if the president states that safety is company policy and works with his
division managers to develop a plan for safety that defines responsibilities, everyone
will have a very specific subject to discuss. Safety will become a real concern. For the

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manager in charge of catering services, safety might mean maintaining the quality of
food to avoid customer dissatisfaction or illness.
In that case, how does he ensure that the food is of top quality? What sorts of control
points and checkpoints does he establish? How does he ensure that there is no
deterioration of food quality in flight? Who checks the temperature of the refrigerators
or the condition of the oven while the plane is in the air?

Only when safety is translated into specific actions with specific control and checkpoints
established for each employee‘s jobs may safety be said to have been truly deployed as
a policy. Policy deployment calls for everyone to interpret policy in light of their own
responsibilities and for everyone to work out criteria to check their success in carrying
out the policy.

Policy deployment starts with the senior managers of the company. The senior managers establish the
vision and core objectives of the company. An example of an objective might be ―to improve delivery,‖
which supports the long-term vision of ―to be the industry leader in customer satisfaction. ―Middle
management negotiates with senior management regarding the goals that will achieve the objectives.
Goals specify numerically the degree of change that is expected.

Strategies specify the means to achieve the goals. They include more specific actions to be taken.
Middle managers are responsible for managing the resources to accomplish the goals. Middle
management then negotiates with the implementation teams regarding the performance measures that
are used to indicate progress toward accomplishing the strategies.

Measures are specific checkpoints to ensure the effectiveness of individual elements o the strategy. The
implementation teams are empowered to manage the actions and schedule their activities. Senior
management then uses a review process t understand both the progress of the implementation team sand
the success of their planning system.

Roles in Implementing a Quality Strategy

Senior management, middle management, and the workforce each have a critical role to play in the
implementation process. Senior managers must ensure that their plans and strategies are successfully
executed within the organization. Middle mangers provide the leadership by which the vision of senior
management is translated into the operation of the organization. In the end, it is the workforce that
delivers quality and must have not only empowerment, but also a true commitment to quality for TQ to
succeed.

Senior Management

Senior managers must ensure that the organization is focusing on the needs of the customer. They must
promote the mission, vision, and values of the company throughout the organization. Senior managers
must identify the critical processes that need attention and improvement and the resources and trade-offs
that must be made to fund the TQ activity. They must review progress and remove barriers to
implementation. Finally, they must improve the processes, in which they are involved (strategic
planning, for example), both to improve the performance of the process and to demonstrate their ability
to use quality tools for problem solving.

Middle Management

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Transforming middle managers into change agents requires a systematic process that dissolves
traditional management boundaries and replaces them with an empowered and team-oriented state of
accountability for organizational performance. This process involves the following:

1. Empowerment. Middle managers must be accountable for the performance of the organization
in meeting objectives.
2. Creating a common vision of excellence. This vision is then transformed into critical success
factors that describe key areas of performance that relate to internal and external customer
satisfaction.
3. New rules for playing the organizational game. Territorial wall must be broken, yielding a spirit
of teamwork. One new approach is interlocking accountability, in which all managers are
account able to one another for their performance. The second is team representation, in which
each manager is responsible for accurately representation, in which each manager is responsible
for accurately representing the ideas and decisions of the team to others outside the team.
4. Implementing a continuous improvement process. These projects should improve operational
systems and process.
5. Developing and retaining peak performers. Middle managers must identify and develop future
leaders of the organization.

The Workforce

The workforce must develop ownership of the quality process. Ownership and empowerment gives
employees the right to have a voice in deciding what needs to be done and how to do it. It is based on a
belief that what is good for the organization is also good for the individual and vice versa.

Training, recognition, and better communication are key success factors for transferring ownership in
the workforce. With increased ownership, however, come a flatter organization – and the elimination of
some middle managers. Increased ownership also requires increased sharing of information with the
workforce and a commitment to the workforce in good times and in bad. This might mean reducing
stock dividends and executive bonuses before lying of the workforce during economic downturns.

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Lesson # 35
Quality Function Deployment (QFD) and other Tools for Implementation

Tools for Quality Planning:

Customer‘s needs and expectations drive the planning process for products and the systems by which
they are produced. Marketing plays a key role in identifying customer expectations. That is what is
known Voice of Customer in QFD or WHAT in a simple Matrix Diagram. Once these are identifies,
managers must translate them into specific products and service specifications that manufacturing and
service delivery processes of the organizations (Voice of Process in QFD or HOW in Matrix Diagram)
must meet. In some cases the product or service that customers receive is quite different from what they
expect. It is management‘s responsibility to minimize such gaps. Firms use several tools and approaches
to help them focus on their external and internal customers.

Matrix Diagram: These are spreadsheets that graphically display relationships between
characteristics, functions, and tasks in such a way as to provide logical connecting points between
each item. QFD is one of many matrix diagrams now used for planning and quality improvements.

Relations Diagram: Purpose of this tool is taken a central idea and map out logical or sequential
links among related categories. Every idea can be logically linked with more than one idea at a time.
It allows lateral rather than linear thinking.

Affinity Diagram: This is a technique for gathering and organizing a large number of ideas,
opinions, and facts relating to a broad problem or subject area. It enables problem solvers to sift
through large volumes of information efficiently and to identify natural patterns or grouping among
information.

Tree Diagram: It maps out the paths and tasks that need to be accomplished to complete a specific
project or to reach a specific goal.

Arrows Diagram: These have been used by construction planners for years in the form of CPM and
PERT project planning techniques.

Process Decision Program Chart: This is a method for mapping out every conceivable event and
contingency that can occur when moving from a problem statement to possible solutions. It is used
to plan for each possible chain of events that could occur when a problem or goal is unfamiliar.

House of Quality or Quality Function Deployment: QFD is a methodology used to ensure that
customer‘s requirements are met throughout the product design process and in the design and
operation of production systems. QFD is both a philosophy and a set of planning and
communication tools that focuses on customer requirements in coordinating the design,
manufacturing, and marketing of goods. A major benefit of QFD is improved communication and
teamwork among all constituencies in the production process---- marketing and design, design and
manufacturing/production, and purchasing and suppliers. QFD allows companies to bring new
products into the market sooner and to gain competitive advantage.

QFD is an overall concept that provides a mean of translating customer requirements into
appropriate technical requirements for each stage of product development and production. Voice of
Customer is collection of all satisfiers, delighters/exciters and dissatisfiers i.e. WHAT part of a
matrix that customers want from a product.

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Under QFD, all operations of a company or Voice of Processes are driven by the voice of customer,
rather than by top management or design engineer‘s opinion. Technical features are the translation
of the voice of customer into technical language. These are the HOW part in the matrix.
A set of matrices is used to relate in every stage of production. The basic planning document is
called the customer requirement planning matrix. Because of its structure, it is often called as the
House of Quality. Building it requires WHAT/HOW or VOC/VOP relations:

Identifying customer attributes

Identifying technical features
Relate attribute to technical features
Evaluating the competing product design
Evaluating technical features and the development of the targets
Determine / Decide which feature to deploy in the production
process Produce, market and collect data on customer satisfaction
Compare the VOC for a Burger with attributes of burger being tasty, healthy, visually appealing,
and provide good value for money with VOP of company for Pricing of burger, its Size, and
Fat/Lean value etc for final customer satisfaction and then deploy and deliver for a sustainable
business of a fast food restaurant.

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Lesson # 36
Basic SQC Improvement Tools

Tools for Continuous Improvement:

Many tools have been created or adapted from other disciplines (such as: operations research and
industrial engineering) to facilitate the process of continuous improvement. Here we learn the most
common ones used in quality improvement applications.

One of the basic tenets of total quality is management by facts. Management by facts requires that each
decision, each solution to a problem, is based on relevant data and appropriate analysis. Problem solving
and decision making are fundamental to total quality. On the one hand, good decisions will decrease the
number of problems that occur. On the other hand, the workplace will never be completely problemfree.

Once we get beyond the very small business (in which the data are always resident in the few heads
involved, anyway), most decision points and problems will have many impacting factors, and the
problem's root cause or the best-course decision will remain obscure until valid data are studied and
analyzed. Collecting and analyzing data can be difficult. The total quality tools use will assure better
decision making, better solutions to problems, and even Improvement of productivity and products and
services.

Writing about the use of statistical methods in Japan, Dr. Ishikawa said:

The so-called seven indispensable tools . . . that are being used by everyone: company presidents,
company directors, middle management, foremen, and line workers. These tools are also used in a
variety of [departments], not only in the manufacturing [department] but also in the [departments] of
planning, design, marketing, purchasing, and technology.‖ No matter where you fit into your
organization today, you can use some or all of these tools to advantage, and they will serve you well for
your future prospects.

PROBLEM SOLVING FOR TOTAL QUALITY

If you ask the typical manager to describe his or her biggest problem in today's work-place, the response
will probably include one or more of the following:

We spend all our time in meetings trying to resolve problems.

We are constantly fighting problems, and that doesn't leave us time to do our real jobs, such
as planning, leading, and so forth.
As soon as we "put out one fire," another pops up.
We've got more problems than we can handle, and it bogs us down.

The actual words may vary, but the message is the same. The workplace can be so burdened with
problems that managers and others spend so much time trying to fix them that nothing gets done right.
With problem solutions leading to process or products/service improvement:

product or service quality improves

costs decrease (through less waste and warranty
action) customer satisfaction improves
competitiveness improves, and the probability for
success improves

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Clearly all of these outcomes are desirable. And they are all achievable by applying the total quality
principles to problem solving.

TOTAL QUALITY TOOLS DEFINED

Carpenters use a kit of tools designed for very specific functions. Their hammers, for example, are used
for the driving of nails, their saws for the cutting of wood. These and others enable a carpenter to build
houses. They are physical tools. Total quality tools also enable today's employees, whether engineers,
technologists, production workers, managers, or office staff, to do their jobs. Virtually no one can
function in an organization that has embraced total quality without some or all of these tools.

Unlike those in the carpenter's kit, these are intellectual tools: they are not wood and steel to be used
with muscle; they are tools for collecting and displaying information in ways to help the human brain
grasp thoughts and ideas. When thoughts and ideas are applied to physical processes, the processes yield
better results. When applied to problem solving or decision making, better solutions and decisions are
developed.

The seven tools discussed below represent those generally accepted as the basic total quality tools. A
case can be made that just-in-time, statistical process control, and quality function deployment are total
quality tools. But these are more than tools: they are complete systems under the total quality umbrella.
A tool, like a hammer, exists to help do a job. If the job includes continuous improvement, problem
solving, or decision making, then these seven tools fit the definition. Each of these tools is some form of
chart for the collection and display of specific kinds of data. Through the collection and display facility,
the data become useful information-information that can be used to solve problems, enhance decision
making, keep track of work being done, even predict future performance and problems. The beauty of
the charts is that they organize data so that we can immediately comprehend the message. This would be
all but impossible without the charts, given the mountains of data flooding today's workplace.

Tools for Data Collection and Analysis

Seven simple statistically based tools are used extensively to gather and analyze data. Unlike the seven
advanced management and planning tools, these tools are visual in nature and simple enough for anyone
to understand.

These seven basic tools of quality are:

1. Flow-charts,
2. Check sheets,
3. Histograms,
4. Pareto diagrams,
5. Cause-and-Effect diagrams,
6. Scatter diagrams, and
7. Control charts

Historically, these tools preceded the seven management and planning tools and often are called the
―seven QC (Quality Control) tools.‖ The seven management and planning tools have been referred to
as the ―new advanced seven.‖

Flowcharts:

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A flowchart is a picture of a process that shows the sequence of steps performed. Flowcharts are best
developed by the people involved in the process–employees, supervisors, managers, and customers. A
facilitator often is used to provide objectivity, to ask the right questions, and to resolve conflicts. The
facilitator can guide the discussion through questions such as ―What happens next?‖ ―Who makes the
decision at this point?‖ and ―what operation is performed here?‖
Example of a Flowchart for Training New Printing Press Operators

Hire Candidate

Training with operator checklist

Safety, quality, and procedures testing

Test passed? No

Yes

Four-week evaluation

Solo with lead operator support

90-day evaluation
Reevaluate
employee
Pass
Fail

Press-certifying

Flowcharts help the people involved in the process to understand it better. For example,
employees realize how they fit into a process–that is, who their suppliers and customers are. By
helping to develop a flowchart, workers begin to feel a sense of ownership in the process and
become more willing to work on improving it. Using flowcharts to train employees on standard
procedures leads to more consistent performance.

Once a flowchart is constructed, it can be used to identify quality problems as well as areas for
improvement. Questions such as: ―How does this operation affect the customer?‖ ―Can we
improve or element this operation?‖ or ―Should we control a critical quality characteristic at
this point?‖ help to identify such opportunities. Flowcharts help people to visualize simple but
important changes that could be made in a process.

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Check Sheets

These tools aid in data collection. When designing a process to collect data, one must first ask basic
questions such as:

What question are we trying to answer?

What type of data will we need to answer the question?
Where can we find the data?
Who can provide the data?
How can we collect the data with minimum effort and minimum chance of error?

Check sheets are data collection forms that facilitate the interpretation of data. Quality-related data are
of two general types–attribute and variable. Attribute data are obtained by counting or from some type
of visual inspection: the number of invoices that contain errors, the number of parts that conform to
specifications, and the number of surface defects on an automobile panel, for example. Variable data are
collected by numerical measurement on a continuous scale. Dimensional characteristics such as
distance, weight, volume, and time are common examples. Figure below is an example of an Attribute
data check sheet, and second Figure below shows a Variable data check sheet.

Example of a Check Sheet for Attribute Data: Airline Complaints

Type Week 1 Week 2 Week 3 Week 4

Lost baggage
Baggage delay
Missed connection
Poor cabin service
Ticketing error

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Example of a Check Sheet

for Variable Data

Frequency
20
19 X

X X

X X X

X X X

X X X X

X X X X

X X X X

X X X X X

X X X X X

X X X X X X X

X X X X X X X

X X X X X X X

X X X X X X X X X X

18
17
16
15
14
13
12
11
10 9
8
7
6
5
4
3
2
1
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

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Time to process loan request (days)

Pareto Diagram

The Pareto chart is a very useful tool wherever one needs to separate the important from the trivial. The
chart, first promoted by Dr. Joseph Juran, is named after Italian economist/sociologist Vilfredo Pareto
(1848-1923). He had the insight to recognize that in the real world a minority of causes lead to the
majority of problems. This is known as the Pareto principle. Pick a category, and the Pareto principle
will usually hold. For example, in a factory you will find that of all the kinds of problems you can name,
only about 20% of them will produce 80% of the product defects: 80% of the cost associated with the
defects will be assignable to only about 20% of the total number of defect types occurring. Examining
the elements of this cost will reveal that once again 80% of the total defect costs will spring from only
about 20% of the cost elements. Charts have shown that approximately 20% of the pros on the tennis
tour reap 80% of the prize money and that 80% of the money supporting churches in the United States
comes from 20% of the church membership.

Pareto analysis is a technique for prioritizing types or sources of problems. Pareto analysis separates the
―vital few‖ from the ―trivial many‖ and provides help in selecting directions for improvement. The
Pareto chart below labels a company's customers A. B. C, D, E. and All Others. The bars represent the
percentage of the company's sales going to the respective customers. Seventy-five percent of this
company's sales are the result of just two customers. If one adds customer C, 90% of its sales are
accounted for, all the other customers‘ together account for only 10% of the company's sales. Bear in
mind that ―Other" may include a very large number of small customers. Which customers are the ones
who should be kept happy? Obviously, A, B, and perhaps C are the most critical.

This would suggest that customers A, B, and Care the company's core market and all the other
customers represent a marginal business. Decisions on where to allocate resources should be made
accordingly.

45
40
% of Total Sales
35
30
25
20
15
10
5

0
A B C D E F

Customers

Pareto Chart: Percentage of Total Sales by Customer

It is often used to analyze the attribute data collected in check sheets. In a Pareto distribution the
characteristics are ordered from largest frequency to smallest. For example, if the airline attribute data in

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check sheet above is placed in order of decreasing frequency, the result below is shown as a Pareto in
descending order to focus on vital few is:

1. Baggage delay
2. Poor Cabin service
3. Missed connection
4. Lost baggage
5. Ticketing error

A Pareto diagram is a histogram of these data, as shown in above Figure. A cumulative frequency curve
is usually drawn on the histogram, as shown above. Such pictures clearly show the relative magnitude of
defects and can be used to identify the most promising opportunities for improvement (the few faults
which causing 80% of problems.) They can also show the results of improvement projects over time by
drawing Pareto after every project is complete.

Example of a Pareto Diagram

Frequency Percent
100

Cumulative Percent

50

23

14

4
2 Poor Missed
cabin service
connection
Ticketing error
Baggage delay Lost baggage

Lesson # 37
How Quality is implemented? A dialogue with a Quality Manager

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After listening to the discussion on quality in Pakistan, we are happy that Pakistani managers are as
concerned about quality in their companies as any country in the world. The globe is approachable by
every customer now and we need to understand that a competitor can emerge from any where in the
world over night.

Post WTO and internet based economy era put a lot of pressure on mangers to deal with customers of
21st century, who are more aware and are more demanding and want innovation their products or
services and also at lower price.

In other words, decreasing price should not lower the quality of offerings otherwise company may loose
their market to another local or multi-national supplier. One has to understand the demands of their
market and deliver them at a price which is acceptable to them with no sacrifice on quality, speed and
attributes.

This requires from future managers of Pakistan to be more innovative, more effective, more intelligent,
more enterprising and confident to face the globe with excellent leadership qualities. This is what the
message and the moral of the dialogue is from Mr. Abdul Hakim Chishti, (Chartered Accountant and
Quality Manager).

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Lesson # 38
Cause and Effect Diagram and other Tools of Quality

Histograms

Variation in a process always exists and generally displays a pattern that can be captured in a histogram.
A histogram is a graphical representation of the variation in a set of data. It shows the frequency or
number of observations of a particular value or within a specified group.

Histograms provide clues about the characteristics of the population from which a sample is taken.
Using a histogram, the shape of the distribution can be seen clearly, and inferences can be made about
the population. Patterns can be seen that would be difficult to see in an ordinary table of numbers. The
check sheet below was designed to provide the visual appeal of a histogram as the data are tallied. It is
easy to see how the output of the process varies and what proportion of output falls outside of any
specification limits.

Example of a Check Sheet for Variable Data

Frequency
20
19

X X

X X X

X X X

X X X X

X X X X

X X X X

X X X X X

X X X X X

X X X X X X X

X X X X X X X

X X X X X X X
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18
17
16
15
14
13
12
11
10 9
8
7
6
5
4
3
2
1
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Time to process loan request (days)

Cause-and-Effect Diagrams

The most useful tool for identifying the causes of problems is a cause-and-effect diagram, also known as
a fishbone or Ishikawa diagram, named after the Japanese quality expert who popularized the concept. A
cause-and-effect diagram is simply a graphical representation of an outline that presents a chain of
causes and effects. A team typically uses a cause-and-effect diagram to identify and isolate causes of a
problem. The technique was developed by the late Dr. Kaoru Ishikawa, a noted Japanese quality expert.

An example is shown in figure below. At the end of the horizontal line is the problem to be addressed.
Each branch pointing into the main stem represents a possible cause. Branches printing to the causes are
contributors to these causes. The diagram is sued to identity the most likely causes of a problem so that
further data collection and analysis can be carried out.

IDENTIFYING CAUSES
Identifying causes is a critical step in the process. It involves the pairing off of causes and effects.
Effects are the problems that have already been identified. Say that one such problem has been targeted
for solving. A fishbone diagram has six spines and represents the six major groupings of causes:
manpower (personnel), method, materials, machines (equipment), measurement, and environment.

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Manpower Method Materials

Environment Machines Measurement

Sample Cause-and-Effect Diagram

All causes of work-place problems fall into one of these major groupings, using the diagram, team
members‘ brainstorm causes under each grouping. For example, under the machine grouping, a cause
might be insufficient maintenance. Under the manpower grouping, a cause might be insufficient
training.

A Cause-and-Effect Diagram

Client Time

Unclear Overload
Overload
directions

Word
In attention processing
errors
Did not
understand
directions
No spell check
Typist
Training

Cause-and-effect diagrams are usually constructed in a brainstorming setting so that everyone can
contribute their ideas. Usually, small groups drawn from operations or management work with an
experienced facilitator. The facilitator guides the discussion to focus attention on the problem and its
causes, on facts, not opinions. This method requires significant interaction among group members. The
facilitator must listen carefully to the participants and capture the important ideas.
Free-Throwing Cause-And-Effect Diagram

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Materials People Measurement

Regulation
backboard Hit
and rim Player
Nothing but net
Miss
Short Coach Touch rim
Basketball Coach
Right Coach Low free-
throw
shooting
Video
Practice Shooting percentage
camera
position
Indoor Technique
Games Ritual
Focus point
Outdoor

Environment Equipment Method

Scatter Diagram

Scatter diagrams illustrate relationships between variables, such as the percentage of an ingredient in an
alloy and the hardness of the alloy, or the number of employee errors and overtime worked. Typically
the variables represent possible causes and an effect obtained from cause-and-effect diagrams. A general
trend of the points going up and to the right indicates that an increase in one variable corresponds to an
increase in the other. If the trend is down and to the right, an increase in one variable corresponds to a
decrease in the other. If no trend can be seen, then it would appear that the variables are not related. Of
course, any correspondence does not necessarily imply that a change in one variable causes a change in
the other. Both may be the result of something else. However, if there is reason to believe causation, the
scatter diagram may provide clues on how to improve the process.

Scatter Diagram

Number of
errors

Volume of work

Control Charts

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These tools are the backbone of statistical process control (SPC), and were first proposed by Walter
Shewhart in 1924. Shewhart was the first to distinguish between common causes and special causes in
process variation. He developed the control chart to identify the effects of special causes. Much of the
Deming philosophy is based on the use of control charts to understand variation.

A control chart displays the state of control of a process. Time is measured on the horizontal axis, and
the value of a variable on the vertical axis. A central horizontal line usually corresponds to the average
value of the quality characteristic being measured. Two other horizontal lines represent the upper and
lower control limits, chosen so that there is a high probability that sample values will fall within these
limits if the process is under control – that is, affected only by common causes of variation. If points fall
outside of the control limits or if unusual patterns such as shifts up or down, trends up or down, cycles,
and so forth exist, special causes may be present.

Two fundamental mistakes that can be made concerning variation are:

1. Treating special causes as common causes, and 2.

Treating common causes as special causes.

Control charts minimize the risk of making these two types of mistakes. As a problem-solving tool, they
allow workers to identify quality problems as they occur and base their conclusions on hard facts.

EXAMPLE OF A CONTROL CHART

Percent shipped
within 24 hours

Upper
97% Control
Limit

Average
93%

Lower
Control
89%
Limit

Day

1 2 2 4 5 6 7 8 9 10 11 12 13

Lesson # 39
Statistical Process Control (SPC) for Continual Quality Improvement

VARIATION AND PROCESS CONTROL

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In a total quality setting, consistency and predictability are important. When a process runs consistently,
efforts can begin to improve it by reducing process variations, of which there are two kinds:
Common-cause variation is the result of the sum of numerous small sources of natural variation
that are always part of the process.
Special-cause variation is the result of factors that are not part of the process and that occur only
in special circumstances, such as a shipment of faulty raw material or the involvement of anew,
untrained operator.
The performance of a process that operates consistently can be recorded and plotted on a control chart
such as the one in Figure below. The sources of the variation in this figure that fall within the control
limits are likely to be common causes. The sources of variation in this figure that fall outside the control
limits are likely to be special-causes sources. In making decisions about the process in question, it is
important to separate common and special causes of variation.

16
14
12
10
8

2
0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Control Chart

If you react to common-cause variation as if it were due to special causes, you will only make matters
worse and increase variation, defects, and mistakes. If you fail to notice the appearance of a special
cause, you will miss an opportunity to search out and eliminate a source of problems

Control charting in SPC utilizes in-process (sometimes called on-line) sampling techniques to help
monitor a process. The purpose is to indicate when the process is functioning as intended i.e. statistically
under control and when to take corrective action of some type is necessary. Hence SPC can be taken as a
proactive and preventive approach of quality improvement. An in-control process is considered stable
and out-of-control process is said to be un-stable. Improvement in stable system can occur only through
system changes, which are the responsibility of management and empowered employees. Instability is
created when a special cause or disturbance is present. Once an indication of a process shift is detected it
is up to the operators, engineers, and other technical people to locate the special cause/s and take
corrective action.
Lecture # 40
Statistical Process Control….Contd.

SPC learning through examples:

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Example # 1 Shooting for Quality:

Mr. Khan observed that in basketball games, his son Ali‘s free throw percentage averaged between 45
and 50 percent.
Ali‘s process was simple: Go to the free throw line, bounce the ball four times, aim, and shoot. To
confirm these observations, Ali shot five sets of 10 free throws with an average of 42 percent, showing
little variation among the five sets.
Mr. Khan developed a Cause-and-Effect Diagram to identify the principal cause/s.
After analyzing the diagram and observing his son‘s process, he believed that the main cause was not
standing in the same place on the free-throw line every time and having an inconsistent focal point.
They developed a new process in which Ali stood at the centre of the line and focused on the middle of
the front part of the rim. The new process resulted in a 36 percent improvement in practice.
Toward the end of the 2004 season, he improved his average to 69 percent in the last three games.
During the 2005 season, Ali averaged 60 percent.
A control chart showed that the process was quite stable.
In the end of 2005, Ali attended a basketball camp where he was advised to change his shooting
technique. This process reduced his shooting percentage during the 2006 season to 50 percent.
However, his father helped him to reinstall his old process, and his percentage returned to its former
level, also improving his confidence SP charting followed by drawing a fishbone helped to find the
special cause of variation and corrected it improved the performance and hence making playing process
under control limits.

Variation in the Outputs is a function of the variation in the Inputs

Y = f (X)
This idea provides some initial guidance for breaking down and understanding sources of variation.
Changes in desired characteristics of the output are a direct result of changes or variation within inputs
to that process. If there are inherent flaws or shortcomings within the process, they will result in
variation in the outputs of the process. We examine all variation within the important input parameters
in order to determine which factor plays the greatest role on variation within the output.
There is a distinct difference between the inherent failures of the system which are random. We will
describe these as common cause based on the fact that we can predict the general area of the outcomes.
However, these types of errors are very different than special cause problems which we can tie into
specific events of conditions. These errors are special cause problems.

Variation in Product (Y) = Function of Process (X) or (Variation in Process)

Y = f (X)

How do we find Variation?

 Typically we collect data and use basic TQ tools to view it:

 Run chart
 Histogram
 Pareto……………….OR
 We can also summarize this data using more advanced statistical methods:
 Averages of smaller groups
 Ranges, or dispersions, within these groups…….and
 By combining summary statistics like averages and ranges with Run Charts to
create a very powerful tool-----

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CONTROL CHARTS

Control charts examine information and data typically already collected as a metric or measurement of
process output. We will examine averages and the differences in groups over a period of time in order to
determine what is normal, what is expected, and what is predictable.

Here are some questions that might start the process: How do we currently analyze the problem area?
Could we make more effective use of control charts to learn about the process by looking at the same
information? Can we make the same pieces of data tell us more about the problem than they currently
do? In short, are we getting our money‘s worth out of our current analysis?

We are motivated to improve the outputs of the process. The big Y‘s however, we know that variation in
the outputs is a function of the variation in the inputs. As a result, we are draw to focus on these outputs.
This often causes us to concentrate solely on the changes in the outputs without looking at the changes
in the inputs and ―adjusting‖ the process to manipulate the output instead of making real
improvements. We concentrate primarily on the goals and not on how the system can truly perform. If
we instead examine where we expect to perform and driven changes to support where we want the
process to develop, the end result is improvement in the output.

When currently measure our process performance according to some standard. How will we quantify
improvement? How will we know when we are done? Are we operating within our normally expected
process limits? How do these relate to our specification limits? How do we measure the voice of the
customer compared to the voice of the process? These are important questions to ask and answer.

Special vs. Common Causes:

There are distinct differences between actions designed to eliminate special cause and common
cause variation:

 Special cause action eliminates a specific isolated event; does not involve a major process
change
 Common cause action makes a change in the process that results in a measurable change in the
normal process performance

Common cause variation is inherent to the system. It is the normal variation built into the process. There
is a distinct difference between the inherent failures of the system and those caused by specific
assignable events. We will describe these as common cause based on the fact that we can predict the
general area of the outcomes. However, these types of errors are very different than special cause
problems which we can tie into specific assignable events. These errors are special cause problems.
Common cause variation is inherent to the system. It is the normal variation built into the process. There
is a distinct difference between the inherent failures of the system and those caused by specific
assignable events. We will describe these as common cause based on the fact that we can predict the
general area of the outcomes. However, these types of errors are very different than special cause
problems which we can tie into specific assignable events. These errors are special cause problems.
Lesson # 41
Building Quality through SPC

Statistical Process Control

• Capable processes also must be controlled

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• SPC distinguishes 2 types of variability – Normal (Random) Variability

– Abnormal (Structural) Variability

SPC requires the use of Statistics

• Quality improvement efforts have their foundation in statistics.

• Statistical Process Control involves the:
– Collection
– Tabulation
– Analysis
– Interpretation
– Presentation Of numerical data

Types of Data

• Variables Data - quality characteristics that are measurable values.

– Measurable and normally continuous; may take on any value.
• Attribute Data - quality characteristics that are observed to be either present or absent,
conforming or nonconforming.
– Countable and normally discrete

Control Chart Functions

1. Control Charts are Decision-Making Tools - they provide an economic basis for deciding
whether to alter a process or leave it alone
2. Control Charts are Problem-Solving Tools - they provide a basis on which to formulate
improvement actions
3. SPC exposes Problems; it does not solve them!

• To monitor Output, we use a control chart

– we check things like the mean, range, standard deviation
• To monitor a Process, we typically use pair of control charts
– mean (or some other central tendency measure)
– variation (typically using range or standard deviation)
• Separate common and special causes of variation
• Determine whether a process is in a state of statistical control or out-of-control
• Estimate the process parameters (mean, variation) and assess the performance of a process
or its capability

Commonly Used Control Charts

• Variables data
– x-bar and R-charts
– x-bar and s-charts
– Charts for individuals (x-charts)
• Attribute data

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– For ―defectives‖ (p-chart, np-chart)

– For ―defects‖ (c-chart, u-chart)

Defining Process Capability

• Process capability refers to the ability of the process to meet the specifications set by the
customer or designer.

Process Capability Analysis

Objective is to determine how well the output from a process meets specification limits
Compare total process variation and tolerance

LSL USL

-3 +3
Target

Capability versus Control

A process is said to be in control or stable, if it is in statistical control. A process is in statistical control

when all special causes of variation have been removed and only common cause variation remains.

Control charts are used to determine whether a process is in statistical control or not. If there are no
points beyond the control limits, no trends up, down, above, or below the centerline, and no patterns, the
process is said to be in statistical control.

Capability is the ability of the process to produce output that meets specifications. A process is said to
be capable if nearly 100% of the output from the process is within the specifications. A process can be
in control, yet fail to meet specification requirements. In this situation, you would need to take steps to
improve or redesign the process.

Control

In Control Out of Control Capability

Capable IDEAL

Not
Capable

Lesson # 42

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An interview Session with Officers of a CMMI Level 5 Quality IT Pakistani Company

In this session you will meet the CEO of a Pakistani IT company. He will share how the policy decision
was taken to move on the journey of quality in the software development process. It took several years
of time, dedicated efforts of the team and leadership commitment along with financial investment. As
you will hear, they were confident of their return on the investment in improvement of quality of their
products and greater satisfaction of their customers with a confidence that they can do better and better
and Pakistani managers/engineers are no less than any other country when it comes to making it
possible.

You will also hear in this session from head of HR that to meet the challenges of the commercial
international market, internal competency market of staff has to be aligned and continually updated to
stay ahead of your competition. This was one of the reasons to join the band wagon of highest level of
quality in the global market.

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Lesson # 43
TEAMWORK CULTURE FOR TQM

The Importance of Teams in TQ

Teams are everywhere in TQ organizations: at the top and bottom and in ever function and department
in between. Why are there so many teams? The TQ philosophy recognizes the interdependence of
various parts of the organization and uses teams as a way to coordinate work. Teamwork enables
various parts of the organization work together in meeting customer needs that can seldom be fulfilled
by employees limited to one specialty. Teams promote equality among individuals, encouraging a
positive attitude and trust. The diversity inherent in tams often provides unique perspective on work,
spontaneous thought, and creativity. In addition, teams develop a greater sense of responsibility for
achieving goals and performing tasks. In short, teams provide a variety of benefits that are not derived
from individuals working alone. TQ organizations recognize that the potential contributions of
employees are much greater than in the traditional organization, and teams are an attempt to take
advantage this potential. Further, the competitive environment of modern business requires flexible, fast
reaction to changes in customer demands or technological capacity. Teams can provide the capacity for
rapid response.

Types of TQ Teams

TQ uses so many different types of teams that sometimes it is difficult to tell one from another. Some
common types of teams include:

Steering committees (or quality councils) – management teams that lead an organization and
provide direction and focus.
Problem-solving teams – teams of workers and supervisors that met to address workplace
problems involving quality and productivity, or ad-hoc teams with a specific mission such as
organizational design teams that act as architects of change as discussed in the previous chapter.
Natural work teams – people who work together every day to perform a complete unit
of work. Self-managed teams – Work teams that are empowered to make and control
their own decisions.
Virtual teams – teams whose member communicate by computer, take turns as leaders, and
jump in an out as necessary. Virtual teams are beginning to play an increasingly important role
because of the Internet and electronic communication.

Steering Committees

Most organizations practicing total quality have a steering committee, called a quality council by Juran
and a quality improvement team by Crosby. Steering committees are responsible for establishing policy
for TQ and for guiding the implementation and evolution f TQ throughout the organization. The top
manager of the organization is usually on the steering committee, as is the manager with overall
responsibility for quality- for example, the Vice President /Director of Total quality. The steering
committee may meet fairly often when a TQ effort is getting started, but usually meets only monthly or
quarterly once things are under way. This group makes key decisions about the quality process – how
quality should be measured and what structures and approaches should b used to improve quality. The
steering committee also periodically reviews the status of TQ and makes the adjustment necessary to
ensure customer satisfaction and continuous improvement. In general, the steering committee has
overall responsibility for the progress and success of the TQ effort.

Problem-Solving Teams
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The second, and probably most common, type o team used in TQ is the problem-solving team. As the
name implies, problem-solving teams work to improve quality by identifying and solving specific

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quality-related problems facing the organization. Such teams are sometime referred to as corrective
action teams, or quality circles, although many organizations have created their own names for them.
Two basic types of problem-solving teams are departmental and cross-functional.

Departmental Problem-Solving Teams

These teams are limited in membership to employees of a specific department and are limited in scope
to problems within that department. Such groups typically meet once a week for one to two hours and
progress through a standardized problem-solving methodology. First they identify a set of problems and
select one to work on. Then they collect data about the causes of the problem and determine the best
approach to solving it.

If the solution does not require any major changes in procedures or substantial resources, the group
frequently can implement its own solution. If this is not the case, group members will make a
presentation to some level of management, requesting approval for their solution and the resources to
implement it. These teams typically remain relatively intact as they address a number of problems in
succession.

Cross-Functional Teams

Cross-functional teams are not unique to total quality – they are commonly used in new product
development, for example – but are increasingly becoming a mainstay of quality programs. These teams
are similar in many ways to the departmental teams just discussed: they receive training in problem
solving, identify and solve problems, and either implement or recommended solutions.

The differences are that members of cross-functional teams come from several departments or functions,
deal with problems that involve a variety of functions, and typically dissolve after the problem is solved.
For example, a cross-functional team in a brokerage might deal with problems in handling questions
from clients. The issues raised would not be limited to stocks, bonds, or mutual funds, so people from
all of these areas would be involved.

Cross-functional teams make a great deal f sense in an organization devoted to process improvement,
because most processes do not respect functional boundaries. If a process is to be comprehensively
addressed, the team addressing it cannot be limited, by either membership or charter, to only one
function. To be effective, cross-functional teams should include people from several departments: those
who are feeling the effects of the problems, those who may be causing it, those who can provide
remedies, and those who can furnish data.

Natural Work Teams

Natural work teams are organized to perform a complete unit of work, such as assembling a motorcycle,
creating circuit plans for a television set, or performing a market research study from beginning to end.
Te ―unit of work‖ need not be the final product, but some intermediate component. Natural work teams
replace rather than complement the traditional organizational of work. What is different in this work
design structure is that work tasks are not narrowly defined as they would be on an assembly line, for
instance. Team members share responsibility for completing the job and are usually cross-trained to
perform all work tasks and often rotate among them.

Self-Managed Teams

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Self-managed teams (SMTs), also known as self-directed teams or autonomous work groups, are natural
work teams with broad responsibilities, including the responsibility to manage them selves. SMTs are
empowered to take corrective action and resolve day-to-day problems; they also have direct access to
information that allows them to plan, control, and improve their operations. Although self-managed
teams have been used for decades, (the SMT concept was developed in Britain and Sweden in the
1950s, and one of the early companies to adopt it was Volvo, the Swedish auto manufacturer), their
popularity has increased in recent years, due in part to their use in TQ. In the absence of a supervisor,
SMTs often handle budgeting, scheduling, setting goals, and ordering supplies. Some teams even
evaluate one another‘s performance and hire replacements for departing team members.

SMTs have resulted in improved quality and customer service, greater flexibility, reduced costs, faster
response, simpler job classifications, increased employee commitment to the organization, and the
ability to attract and retain the best people.

Virtual Teams

Virtual teams are groups of people who work closely together despite being geographically separated.
Virtual teams rarely meet face-to-face; their primary interaction is through technologies such as
telephone, fax, shared databases and collaborative software systems, the Internet, e-mail, and video
conferencing, In 1998, over 8 million workers were members of such teams, and this number has
undoubtedly grown as new technology has proliferated. Virtual teams are becoming important because
of increasing globalization, flatter organizational structures, an increasing shift to knowledge work, and
the need to bring diverse talents and expertise to complex projects and customize solutions to meet
market demands. For example, a product design team in the United States can hand off its work to
another team in Asia or Australia, resulting in an almost continuous work effort that speeds up
development time considerably.

Because of their physical separation, some have difficulty applying the team concept t virtual teams.
Virtual teams can face some unique challenges including language, culture, style differences, and the
lack of social relationships that can lessen team commitment. These require special efforts to ensure that
a team environment is truly realized, particularly paying attention to communication, strong
interpersonal relationships, and formal structures that support their work.

Effective Teamwork

Teams are the main structure of many TQ organizations. Thus, effective teamwork is critical to a
successful TQ effort. If teams are not effective, TQ processes will suffer. Steering committees will
choose poor directions and policies for the organization; departmental and cross-functional
problemsolving teams will choose inappropriate problems or won‘t be able to solve the problems they
identify; and self-managed teams will not be able to fulfill the promise of an empowered, creative
workforce.

Criteria for Team Effectiveness

There are several criteria for team effectiveness. First, the team must achieve its goals of quality
improvement. For example, a steering committee must move the TQ effort ahead, a problem-solving
team must identify and solve important problems, and a self-managed team must operate and improve a
set of production or service processes.

Second, teams that improve quality performance quickly are more effective than those that take a long
period of time to do so. One of the strengths of teams is their potential for rapid adaptation to changing
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conditions. A team that takes a long time to accomplish anything is losing the potential benefits of
having problems solved sooner and is consuming a greater-than-necessary amount of resources,
including the time devoted to team meetings. In short, it is inefficient.

Third, the team must maintain and increase its strength as a unit. Think of the team as representing as
asset-a quantity of human capital-beyond that represented by its individual members. This additional
human capital is based on the ability to understand and adjust to one another‘s work styles, the
development of an effective set of routines, the growth of trust among team members, and so on. A team
that remains intact over a period of time preserves and enhances this human capital and a team that
solves an important problem but has such miserable relations that it dissolves, reduces this human
capital. It may make a contribution to the TQ effort, but it squander a considerable amount of human
capital in the process.

Fourth, the team must preserve or strengthen its relationship with the rest of the organization. A team
that accomplishes its goals at the cost of alienating others in the organization violates the TQ spirit of
teamwork and compromises its ability to perform successfully in the future, when the collaboration of
others may well be needed. Peter Scholtes, a leading authority on teams for quality improvements, has
suggested 10 ingredients for a successful team:

1. Clarity in team goals. As a sound basis, a team agrees on a mission, purpose, and goals.
2. An improvement plan. A plan guides the team in determining schedules and mileposts by
helping the team decide what advice, assistance, training, materials, and other resources it may
need.
3. Clearly defined roles. All members must understand their duties and know who is responsible
for what issues and tasks.
4. Clear communication. Team members should speak with clarity, listen actively, and share
information.
5. Beneficial team behaviors. Teams should encourage members to use effective skills and
practices to facilitate discussions and meetings.
6. Well-defined decision procedures. Teams should use data as the basis for decisions and learn
to reach consensus on important issues.
7. Balanced participation. Everyone should participate, contribute their talents, and share
commitment to the team‘s success.
8. Established ground rules. The group outlines acceptable and unacceptable behaviors.
9. Awareness of group process. Team members exhibit sensitivity to nonverbal communication,
understand group dynamics, and work on group process issues.
10. Use of the scientific approach. With structured problem-solving processes, teams can more
easily find root causes of problems.

Team Processes

Many processes are undertaken within TQ teams, including quality planning, problem selection and
diagnosis, communication, data collection, and implementation of solutions. Team processes are not
fundamentally different from other processes, such as assembling an electronic device, or taking a
patient‘s vital signs. The customers of all these processes can be identified, their elements can be placed
in a flowchart, steps that do not add value can be removed, and their quality can be improved
continuously.

Problems Selection

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One of the processes undertaken at least occasionally by most teams and frequently by problem-solving
teams is the choice of problems or issues on which to work. This process can be particularly difficult for
newly empowered employees, who are more accustomed to being told what to do than they are to
establishing their own agenda. New teams generally are not skilled enough to solve massive problems,
and a failure to address such a visible problem successfully may be difficult for the team to overcome. It
makes more sense for a team initially to select a problem of moderate importance and difficulty and to
move on to more complex and difficult problems when the team is better established. This approach is
more likely to lead to successful solutions, which will build momentum for each team and for the quality
effort as a whole.

Problem Diagnosis

After problems to be addressed are identified, their causes must be ascertained. Thus a second critical
process in TQ groups is problem diagnosis, the process by which the team investigates potential causes
of problems to identify potential solutions. Juan refers to this step as the ―diagnostic journey‖ and
explains that it consists of three parts:

1. Understanding the symptoms (for example, a process out of control),

2. Theorizing as to causes (for example, preventive maintenance neglected), and
3. Testing the theories (for example, reviewing preventive maintenance records to see whether
they relate to the problems experienced).

Many teams want to bypass problem diagnosis and begin problem solving as soon as possible, usually
because they mistakenly believe that the problem‘s causes are obvious. Teams that spend more time
diagnosing problems have been shown to be much more effective than those that proceed immediately
to solutions.

Work Allocation

Another important process is the allocation of work within the team. Many teams approach this process
haphazardly, assigning tasks to the next in line or the first person who volunteers. Assigning tasks is one
of the keys to team effectiveness and should not be taken so lightly. Each team member has certain
skills and will perform well on tasks that use those skills and not o well on tasks that use other skills.
The team needs to assign people tasks that will utilize their skills to the greatest extent possible.

Communication

Communication is a key process for any team attempting to improve quality. Steering committees
communicate priorities to employees. Members of problem-solving teams communicate among
themselves and to their internal and external customers. For example, problem-solving teams often have
to present their recommendations to management. Self-managed teams have similar communication
needs and often must communicate effectively across shifts.

Communication within and across teams can also be enhanced by suing a variety of media. Many TQ
teams use electronic mail and fax machines, but also benefit from such low-tech media as posters and
graphs posted on the walls. As with many team processes, any specific recommendations are less
important than the general idea of recognizing communication as a process that consists of a series of
steps that can be improved.

Coordination

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Another key process is coordinating the team‘s work with other teams and departments in the
organization. Team cannot work in isolation, and maintaining good relationships outside the team is one
criterion of team effectiveness. New product teams, for example, depend on other parts of the
organization for resources, information, and support while also acting as primary internal suppliers.
Coordination often involves resolving issues of interdependent schedules, but may also include some
negotiation. Thus, teams often play a ―boundary spanner‖ role. The boundary-spanning literature shows
positive relationships between communication and performance. However, researchers have often found
a tendency among teams to turn inward, believing that their own needs, ideas, and plan are more valid
than those of ―outsider.‖ Ironically, the more cohesive the team becomes, the greater the likelihood of
this occurring.

In summary, team processes can be improved just like any other process. Several key processes that are
candidates for improvement are problem identification and diagnosis, work allocation, communication,
and coordination of work with other teams and departments.

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Organizational Support

However skillful the team, they will find it hard to be successful unless their efforts are supported by the
organization in general and by management in particular. Organizational support is the foundation for
effective teamwork. Management must provide the following if a TQ team is to be successful.

First, management must issue a clear charge to the group; that is, a description of what the group is and
is not expected to do. This is often called a team charter. Many teams have wasted a great deal of time
and energy on issues that they later found they were not authorized t pursue. Management‘s guidance as
to the quality priorities of the organization is crucial, especially in the early stages of a team‘s work.
Several organizational researchers have found that team performance improved for teams with charters
and clear expectations.

Second, human resource management (HRM) systems often must be adjusted. Conventional HRM
systems may be barriers to effective teamwork that will undermine TQ if not changed the need for
enhanced training is particularly acute, as team members must be brought up to speed on the various
types of skills necessary for effective teamwork.

Performance appraisal and reward systems are also a concern. Many of these systems are designed to
reward individual effort or the attainment of functional goals, rather than teamwork. Numerous research
studies over the past several decades have pointed out the problems and pitfalls of performance
appraisals many legitimate objections can be made:

They tend to foster mediocrity and discourage risk taking.

Thy focus on short-term and measurable results, thereby discouraging long-term planning
or thinking and ignoring important behaviors that are more difficult to measure.
They focus on the individual and therefore tend to discourage or destroy teamwork within and
between departments.
The process is detection-oriented rather than prevention-oriented.
They are often unfair, since manager frequently don‘t possess observational accuracy. They
fail to distinguish between factors that are within the employees‘ control and
systemdetermined factors that are beyond their control.

This can greatly undermine teamwork and can be fatal t the team if not addressed.
Lesson # 44
UNDERSTANDING EMPOWERMENT FOR TQ AND CUSTOMER-SUPPLIER
RELATIONSHIP

Introduction to Empowerment

Empowerment means giving someone power-granting the authority to do whatever is necessary to

satisfy customers, and trusting employees to make the right choices without waiting for management
approval. By empowering employees, organizations drive decision making down to its lowest possible
level. Empowerment allows organizations to flatten their organizational structure because fewer
managers are needed to ―direct and control‖ employees. Many companies have found that giving
people throughout the organization the power to make a difference contributes greatly to providing
quality products and services to their customers. The need to empower the entire workforce in order for
quality to succeed has long been recognized, even if it is only recently coming into practice. Five of
Deming‘s 14 Points relate directly to the nation of empowerment.

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Point 6: Institute training

Point 7: Teach and institute leadership
Point 8: Drive out fear. Create trust. Create a climate for innovation
Point 10: Eliminate exhortations for the workforce.
Point 13: Encourage education and self-improvement for everyone

Juran wrote that ―ideally, quality control should be delegated to the workforce to the maximum extent
possible.‖ Empowerment resembles Juran‘s concept of ―self-control.‖ For employees to practice
selfcontrol, they must know their unit‘s goals and their actual performance and have a means for
changing performance if the goals are not being met. Although it is a difficult struggle, organizations are
increasingly meeting these conditions. Empowerment is a natural extension of employee involvement
concepts such as worker participation in decision making. In some companies empowerment is used as
the umbrella term for increasing employee involvement in decision making. Empowerment is more than
another term for involvement, however. It represents a high degree of involvement in which employees
make decisions themselves and are responsible for their outcomes. This is a more radical change than
having employees merely participate in managers‘ decisions, even when they are given some influence.

For empowerment to occur, managers must undertake tow major initiatives:

Identify and change organizational conditions that make people powerless, and
Increase people‘s confidence that their efforts to accomplish something important will
be successful.

The need to do both of these implies that organizational system often creates powerless employees and
that these systems must be changed first. Examples of systems in need of change are those that specify
who can (and cannot) make certain types of decisions and systems of standard operating procedures
(and who can override them).

Continuum of Employee Involvement Practices

Participation Empowerment

Low Involvement High

Small Change from Traditional Organizational Style Large

Even when systems are changed to permit empowerment, individuals who have lived under those
systems are not readily able to operate in an empowered manner. The other need for empowering people
is to deal with the psychological aftereffects of powerlessness by convincing people that they are in fact
able to ―make a difference.‖

Empowerment is an application of the teamwork principle of total quality, embodying ―vertical‖

teamwork between managerial and non managerial personnel. If employees are given important
responsibilities – and the authority that goes along with them – it is more realistic to describe their
relationship with management as teamwork than it would be in hierarchical system. After all, people can
hardly be seen as team members if they only execute decisions made by others.

How Empowerment Leads To Quality

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Continuous
Improvement

Quality Products
Empowerment and Customer
Service

Job
Satisfaction

Everyone in organizations is an asset, albeit an asset whose value is not automatically realized. If money
is put into a closet instead of a bank, it will not gain interest. Employees who are put into jobs that are
like being in a closet (in the dark, isolated) similarly will not provide value to the organization. Giving
employees responsibility for their own work has led not only to improvements in motivation, customer
service, and morale, but also to improvements in quality, productivity, and the speed of decision
making.

Principles of Empowerment

Although many organizations have undertaken the journey toward empowerment, many have become
lost along the way. Semi empowerment just doesn‘t work. Senior managers need to ask three critical
questions:

1. How can I make fewer decisions, thereby letting others become more involved in managing the
business?
2. How can teach others how to make solid decisions once they‘re given the chance?
3. How can I recruit others to be more aware of changes that need to be made in order to keep our
company competitive – and then help them feel they can make these changes without begging
for permission each and every time?

This does not mean that there should be no limits. On the contrary, managers must be clear on exactly
what responsibility and authority rests with employees. Questions such as ―What procedures can we
change?‖ and ―how much money can we commit?‖ must be answered ahead of time. Finally, managers
must be willing to wait for results, as miracles do not happen overnight.
Establishment of Mutual Trust

As Juran has put it, ―The managers must trust the workforce enough to be willing to make the
delegation, and the workforce must have enough confidence in the managers to be willing to accept the
responsibility.‖ Trust is not created just by saying you trust someone; it must be backed up by actions.

Provide Employees with Business Information

For empowerment to succeed, it must focus on making the organization more competitive.
Empowerment can contribute to organizational performance only if employees have access to the

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necessary information about the business and its performance, such as their personnel files and
resources such as the quality improvement budget. Information about the employees‘ department or
other subunit is particularly necessary, as this is the level of performance that they can affect. Sharing
business information with employees relates directly to quality, customer service, and competitiveness.

In the absence of appropriate information, empowered employees may squander their power on
problems that are not very important. As Peter Senge has put it, ―empowering the individual where
there is a relatively low level of alignment [between organizational and employee goals] worsens the
chaos and makes managing . . . even more difficult.‖ The criticism of misplaced goals was often leveled
at earlier employee-involvement efforts, such as quality circles. Although managers formerly blamed
employees for having the wrong priorities, sophisticated managers today recognize that they are
responsible for providing employees with the information necessary to develop educated priorities.

Ensure That Employees Are Capable

―You can‘t empower incompetence,‖ says one manager. If employees are going to take on important
organizational responsibilities, they must be prepared t do so. To operate in an empowered, TQ
environment, employees must possess not only technical skills (including statistics) but also
interpersonal and problem-solving skills. Unfortunately, many people entering the workforce today lack
even the most basic skills in reading and math, let alone these relatively advanced skills.

Employee capability can be ensured through selection and training processes. Unless the human
resource processes are adapted to provide capable employees, empowerment cannot succeed, and
management‘s worst nightmares will be realized. Unfortunately, many employees are not trained in
these areas, which helps explain the mixed results many organizations have had with empowerment.
Empowerment also requires that employees understand their appropriate limits of discretion.

Don’t Ignore Middle Management

A well-known principle of organization theory popularized by Deming is that organizations are systems.
When changing one part of an organization, it is necessary to consider the effects of the change on other
parts of the system. Thus, managers must consider how empowering lower-level employees will affect
middle managers. If the needs and expectations of middle manager are ignored, empowerment will be
confusing at best and disastrous at worst. Among the roles for middle managers in organizations with
empowered workforces are:

Maintaining focus on the organization‘s values,

Managing solutions to system-level problems (those that involve many functions and
departments), and
Acting as teachers and coaches.

It‘s tempting to think of middle managers faced with empowerment efforts as dinosaurs, rapidly
becoming extinct because the world has changed too quickly for them. However, remember that most
middle managers are a product of their organizations and have attained their level of success in an
environment that rewarded different things than are needed from managers now. Given a new set of
instructions from top management, backed up by new performance appraisal criteria. Many (but far
from al) managers will be able to make the necessary transition.

Change the Reward System

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Rarely can substantial organizational change be created without changing the reward system. When
organizations ask employees to assume new challenges and responsibilities, the question ―What‘s init
for me?‖ ultimately gets asked. The reward system includes all of the rewards that employees receive, as
well as the criteria for distributing these rewards. An organization is to its reward system like a boat is to
its anchor: unless the reward system is changed, the organization may drift a little bit in one direction or
another, but it won‘t get very far.

It is hard to specify exactly what kind of reward systems will be needed to complement empowerment.
Some of the practices common to organizations utilizing employee involvement include pay-for-skills,
in which employees‘ pay increases as they learn new job-relevant skills, and profit sharing, in which
employees receive bonuses related to the profits of their organization.

Quality in Customer-Supplier Relationships

Businesses have recognized that supply chain management is crucial for effective operations and
meeting customer needs. A supply chain includes the materials and other inputs purchased from
suppliers, their use in the production of goods and services, and distribution and service to customers.
Quality should start with the customer, and extend back through the supply chain to the root sources of
procurement.

Customer-Supplier Relationship and Total Quality

From the TQ perspective, every company is part of a long chain (actually many long chains) of
customers and suppliers. Each company is a customer to its suppliers and a supplier to its customers, so
it does not make sense to think of a company as only one or the other. One implication of this concept is
that your customer‘s customers are, in a sense, your customers as well. Sometimes a company must
focus on both their immediate customers and those next in the chain. Procter & Gamble, for example,
works hard to satisfy the needs of both the people who use their products and the retail establishments
that sell them, labeling the former ―consumers‖ and the latter ―customers.‖

Companies should try to establish the same kinds of productive relationships with their suppliers that
they have with their customers. By developing partnerships, customers and suppliers can build
relationships that will help them satisfy their shared customers further along the customer-supplier
chain. The idea of creating mutually beneficial relationships with both customers and suppliers is a
major departure from the traditional approach to customer and supplier relationships (CSRs).

The Customer-Supplier Chain

Customer/

(SupplierCoal Mine ) Customer/ Supplier(Steel mill) Customer/ Supplier Customer/

Supplier

(Auto plant)
(Car rental agency)

Lesson # 45

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CSR, INNOVATION, KNOWLEDGE MANAGEMENT AND INTRODUCING LEARNING

ORGANIZATION

The Importance of Customers in CSR:

The importance of customers has evolved over the years, from a view of the customer as a buyer to
increase profitability, to a view of the customer as an active partner and the focus of all quality
activities. Customer satisfaction translates directly into increased profits. However, while satisfaction is
important, modern firms need to look further. Achieving strong profitability and market share requires
loyal customers-those who stay with a company and make positive referrals. Poor-quality products and
services, on the other hand, lead to customer dissatisfaction in the form of complaints, returns, and
unfavorable word-of-mouth publicity. Dissatisfied customers purchase from competitors. One study
found that customers are five times more likely to switch because of perceived service problems than for
price concerns or product quality issues. Studies have also shown that dissatisfied customers tell at least
twice as many friends about bad experiences than they tell about good ones. For many companies,
―The Customer Comes First‖ is a guiding principle. It is impossible to overstate the importance of
customers to TQ. Customers are at the very center of every TQ activity, and devotion to satisfying them
is the first principle of TQ. Customers are recognized as the guarantee of the organization‘s continued
existence. Therefore, a focus on customers, rather than internal issues, is the foundation of the TQ
approach to management.

The Importance of Suppliers

The quality of goods and services received from suppliers, the upstream potion of the supply chain, has
a significant effect on the quality of goods and services that downstream customers receive. Suppliers
are those companies that provide the organization with goods and services that help them to satisfy the
needs of their own customers. A manufacturing company assembling parts made by suppliers illustrates
this point: the final product cannot be any better than the parts that comprise it. If a supplier‘s
performance is of consistently high quality; its customer can decrease or eliminate costly incoming
inspections that add no value to the product. For these reasons, many organizations have increasingly
demanded tangible progress in quality from all their suppliers. Companies that do not accept this
requirement are dropped from supplier lists. The importance of suppliers is at least as great when they
provide training, software, or other goods or services that do not physically become part of the final
product; they will influence its quality nevertheless by shaping the quality of the processes used to
produce it. In business today, operations are often highly decentralized and dispersed around the world.
Consequently, managing a complex network of suppliers becomes a critical inter organizational issue.
Suppliers play a vital role throughout the product development process, from design through
distribution. Suppliers can provide technology or production processes not internally available, early
design advice, and increased capacity, which can result in lower costs, faster time-to-market, and
improved quality for their customers. In turn, they are assured of stable and long-term business.

Principles for Customer-Supplier Relationships

Three governing principles describe CSRs under total quality:

Recognition of the strategic importance of customers and suppliers,

Development of win-win relationships between customers and suppliers, and
Establishing relationships based on trust.

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Customer must be at the center of the organizational universe. Satisfying their needs leads to repeat
business and positive referrals, as opposed to one-shot business and negative referrals. Suppliers must
also be considered crucial to organizational success, because they make it possible to create customer

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satisfaction. Neither the quality nor the cost of the organization‘s product can be brought to competitive
levels and continuously improved without the contributions of suppliers.

The second principle of customer-supplier relationships is the need to develop mutually beneficial (often
called win-win) relationships between customers and suppliers. This was discussed previously as
working together to increase the size of the pie, rather than competing over how to divide it. The goal of
building partnerships with customers and suppliers can be seen as an extension of the teamwork
principle that applies to all TQ activities and as recognition that the needs of both partners must be
satisfied if productive long-term relationships are to be created.

The third principle of effective CSRs is that they must be based on trust rather than suspicion. Aside
from the obvious teamwork implications for relationships based on trust versus suspicion, monitoring
supplier or customer behavior does not add any value to the product. If a trusting relationship between
customers and suppliers can be developed so that, neither must check up on the behavior of the other,
the costs of monitoring, such as inspection and auditing, can be avoided. Many Japanese firms do not
inspect items purchased from other companies in Japan; they do, however, often inspect those purchased
from America.

Practices for Dealing with Customers

How can these principles be translated into specific practices? The most basic practices for dealing with
customers are (1) to collect information constantly on customer expectations, (2) to disseminate this
information widely within the organization, and (3) to use this information to design, produce, and
deliver the organization‘s products and services.

Collect Customer Information

Acquiring customer information is critical to understanding customer needs and identifying

opportunities for improvement. The Japanese auto industry is known for trying to understand customer
needs so thoroughly that it can incorporate design features that customers would never have asked for
but love once they experience them. Teams of automobile designers visit people at home and observe
how they live in order to anticipate their automotive needs.

Perhaps one of the best examples of understanding customer needs and using this information
to improve competitiveness is XYZ chicken business. XYZ Company learned what customers‘
key purchase criteria were; these included a yellow bird, high meat-to-bone ration, no
pinfeathers, freshness, availability, and brand image. He also determined the relative
importance of each criterion, and how well the company and its competitors were meting, each
of them. By systematically improving his ability to exceed customers‘ expectations relative to
the competition, XYZ gained market share even though his chickens were premium-priced.

In trying to understand customer needs, it is important to go beyond what customers say the need and
anticipate what will really excite them. It is a well-known principle of innovation that customers will
seldom express enthusiasm for a product that is different from anything they have experienced. Some of
the most popular ways to collect information about customers are surveys, service evaluation cards,
focus groups, and listening to what customers say during business transactions, especially when they
complain. Getting employees involved in collecting customer information improves worker skills and
learning, makes work more meaningful, and enhances motivation.

Disseminate Customer Information

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After people in the organization have gathered information about customer needs, the next step is to
broadcast this information within the organization. After all, if the people in the firm are going to work
as a team to meet customer expectations, they must all be ―signing from the same hymnbook,‖ as the
saying goes. Information does little good if it stays with the person or department that brought it into the
organization. Customer information must be translated into the features of the organization‘s products
and services. This is the bottom line of quality customer-supplier relations from the supplier‘s point of
view: giving the customers what they want. Translating customer needs into product features can be
done in a structured manner using quality function deployment (QFD).

Use Customer Information

Customer information is worthless unless it is used. Customer feedback should be integrated into
continuous improvement activities.

Manage Customer Relationships

A company builds customer loyalty by developing trust and effectively managing the interactions and
relationships with customers through customer-contact employees. Truly excellent companies foster
close and total relationships with customers. These companies also provide easy access to their
employee.

Practices for Dealing with Suppliers

In business today, operations are often highly decentralized and dispersed around the world.
Consequently, managing a complex network of suppliers becomes a critical inter-organizational issue.
Suppliers play a vital role throughout the product development process, from design through
distribution. Suppliers can provide technology or production processes not internally available, early
design advice, and increased capacity, which can result in lower costs, faster time-to-market, and
improved quality for their customers. In turn, they are assured of stable a long-term business.

Successful suppliers have a culture where employees and managers share in customers‘ goals,
commitments, and risks to promote such long-term relationships (recall one of Deming‘s 14 Points
about supplier relationships–not purchasing solely on the basis of price). Strong customer / supplier
relationships are based on three guiding principles:

1. recognizing the strategic importance of suppliers in accomplishing business objectives,

particularly minimizing the total cost of ownership,
2. developing win-win relationships through partnerships rather than as adversaries, and
3. establishing trust through openness and honesty, thus leading to mutual advantages

Although the principles of CSRs are the same in dealing with supplier as they are with customers, the
practices are somewhat different. In many companies, suppliers are treated as if they were actually a part
of the organization. For example, functions such as cafeteria service, mailroom operations, and
information processing are being performed by suppliers at their customers‘ facilities. As more and
more of this type of outsourcing are done, the lines between the customer and the supplier become
increasingly blurred.

Creativity and Innovation

Creativity is the ability to discover useful new relationships or ideas; innovation refers to the practical
implementation of such ideas. Research studies have suggested that the achievement of business
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excellence requires a change-oriented environment where creativity of employees is nurtured,

developed, and sustained.

From the perspective of total quality, creativity and innovation are needed to better respond to customer
needs, particularly the ―exciters / delighters‖ that customers cannot articulate, and to develop the
products and services that will position an organization strategically ahead of its competitors. Thus,
creativity and innovation are instrumental in achieving the principles of total quality.
Concepts of Knowledge Management:

Knowledge is the human capacity (Potential and Ability) to take effective decisions and action in varied
and uncertain conditions. Knowledge carried and possessed by a human being is of two types namely,
Explicit and Tacit. Knowledge Management involves transforming data into information and the
acquisition or creation or sharing of knowledge. The creation of knowledge from information requires
human intervention, and applying wisdom is strictly a human function.

With the change from silo/functional thinking to enterprise/system thinking, organizations of 21 st

century are realizing the collective values of the knowledge bases (both tacit and explicit) i.e. their
intellectual capital. It is being realized that knowledge can provide leverage to gain competitive
advantage in the net based market place.

The Learning Organization:

As individuals must continue to learn, so must organizations. Prof. Peter Senge of MIT portrays
organizational learning as going beyond the mere capture of knowledge to include gaining a deeper and
complete understanding of how things work, and involve five learning disciplines:

1. Personal Mastery---a continual drive for personal and organizational development.

2. Mental Models---understanding how our cognitive schema affects our view of the world, and
continually improving the accuracy of the model.
3. Shared Vision---working jointly toward a common view to which all aspire.
4. Team Learning---the use of dialogue to move beyond mere conversation to true joint
understanding.
5. Systems Thinking---understanding the multiple cause-and-effect relationships and how they are
interconnected in organizations, society and other systems.

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